EXHIBIT 10.13
LEASE GUARANTEE
THIS LEASE GUARANTEE is made and entered into this 30th day of December
1992 between PIER l IMPORTS, INC., a Delaware corporation (the "Guarantor"),
and PIER GROUP, INC., a Delaware corporation ("Lessor").
WHEREAS, Lessor has entered into and will continue to enter into lease
agreements (collectively, the "Lease Agreements," whether now or hereafter in
effect), from time to time with Pier 1 Imports (U.S.), Inc., a Delaware
corporation and wholly-owned subsidiary of Guarantor, and with Wolfe Nursery,
Inc., a Delaware corporation and an affiliate of Guarantor, (hereinafter
referred to as the "Lessee"); and
WHEREAS, the Lease Agreements have been and will be entered into by Lessor
and Lessee with respect to land and improvements which have been and are to
be financed or refinance pursuant to the terms of a certain Restated
Revolving Credit Agreement dated December 30, 1992 (the "Credit Agreement")
among Lessor, the Banks (as defined herein) and First Interstate Bank of
Texas, N.A., as agent; and
WHEREAS, in consideration of Lessor entering into Lease Agreements from
time to time with Lessee, Guarantor has agreed to guarantee the full payment
and performance when due of all rent, indebtedness, and obligations now or
hereafter existing or owing to Lestor by any Lessee pursuant to the Lease
Agreements.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, Lessor and Lessee hereby agree as follows
1. Guarantee. For value received, and in consideration of Lessor
entering into Lease Agreements from time to time (whether now or hereafter in
effect) with Lessee, Guarantor does hereby unconditionally guarantee the full
payment and performance when due, whether at the stated due date, by
acceleration or otherwise, of any and all rent, indebtedness, obligations and
other amounts of every kind, howsoever created, arising, or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing
or owing to Lessor by any Lessee pursuant to the Lease Agreements (all such
indebtedness and obligations being hereinafter collectively called the
"Obligations"). Guarantor hereby agrees that upon any default by the Lessee
in the payment or performance of any of the Obligations when and as due, the
Guarantor will forthwith pay and/or perform the same immediately upon demand
and without notice.
2. Guarantee Continuing, Absolute, Unlimited. This Guarantee is a
continuing, absolute and unlimited Guarantee of payment as primary obligor
and not as surety. This Guarantee shall apply to all Obligations pursuant to
the Lease Agreements, without limitation as to either amount or period of
time. The Obligations shall be conclusively presumed to have been created in
reliance on this Guarantee. Lessor shall not be required to proceed first
against the Lessee or any other person, firm or corporation or against any
property securing any of the Obligations before resorting to the Guarantor
for payment. This Guarantee shall be construed as a guarantee of payment and
performance without regard to the validity, regularity, or enforceability of
any of the Obligations or the rejection of the Lease Agreements in
bankruptcy, and notwithstanding any claim, defense (other than payment by the
Guarantor) or right of set-off which the Lessee or the Guarantor may have
against Lessor, including any such claim, defense or right of set-off based
on any present or future law or order of any government (de jure or de
facto), or of any agency thereof or court of law purporting to reduce, amend
or otherwise affect any obligations of the Lessee, or any other obligor, or
to vary any terms of payments, and without regard to any other circumstances
which might otherwise constitute a legal or equitable discharge of a surety
or a guarantor. The Guarantor agrees that this Guarantee shall continue to
be effective or be reinstated, as the case may be, if at any time payment to
Lessor of the Obligations or any part thereof is rescinded or must otherwise
be returned by Lessor upon the insolvency, bankruptcy or reorganization of
the Lessee, or otherwise, as though such payment to Lessor had not been made.
3. Definitions. Unless otherwise indicated, capitalized terms used
herein and not defined below shall have the respective meanings given to them
in the Lease Agreements. In addition to the definitions provided in the
Lease Agreements, the following words and terms shall have the meanings
indicated below:
"Affiliate" of any designated Person means any Person that has a
relationship with the designated Person whereby either of such Persons
directly or indirectly controls or is controlled by or is under common
control with the other, or holds or beneficially owns five percent (5%) or
more of any class of voting securities of the other. For this purpose,
"control" means the power, direct or indirect, of one Person to direct or
cause direction of the management and policies of another, whether by
contract, through voting securities or otherwise. Notwithstanding the
foregoing, no Person shall be deemed to be an Affiliate of another solely by
reason of such Person's being a participant in a joint operating group or
joint undivided ownership group.
"Agent" shall mean First Interstate Bank of Texas, N.A., a national
banking association, or any successor agent under the Credit Agreement.
"Banks" shall mean First Interstate Bank of Texas, N.A. and the other
banks named in Section 2.01 of the Credit Agreement, as such Credit Agreement
may be amended, modified or supplemented from time to time. "Bank" shall
mean any of such Banks.
"Capitalized Lease Obligations" shall mean any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the
Guarantor or any Subsidiary, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such principles.
"Cash Equivalents" shall mean any investments permitted under (i), (ii),
(iii), or (iv) of the definition of Restricted Investments and cash.
"Cash Flow Available for Fixed Charges" shall mean the sum of Consolidated
Net Income plus depreciation and amortization plus interest expense plus
taxes plus operating lease expense, as determined in accordance with GAAP,
less Maintenance Capital Expenditures for the Guarantor on a Consolidated
basis.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidated" shall mean the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to
a Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc., refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person
and its properly consolidated subsidiaries.
"Consolidated Current Assets" shall mean the current assets of the
Guarantor and its Subsidiaries as determined on a Consolidated basis in
accordance with GAAP.
"Consolidated Current Liabilities" shall mean the current liabilities of
the Guarantor and its Subsidiaries as determined on a Consolidated basis in
accordance with GAAP.
"Consolidated Funded Debt" shall mean Funded Debt of the Guarantor and its
Subsidiaries.
"Consolidated Net Income" shall mean (i) for purposes of calculating Cash
Flow Available for Fixed Charges, Consolidated gross revenues of the
Guarantor less all operating and non-operating expenses of the Guarantor,
including all write-downs of assets and other charges of a proper character
(including, without limitation, current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are included in
gross revenues, and current additions to reserves), but not including in
gross revenues any gains (net of expenses and taxes applicable thereto) in
excess of losses resulting from the sale, conversion or other disposition of
capital assets (i.e., assets other than current assets), any gains or losses
arising from the acquisition of outstanding debt securities of the Guarantor
or any Subsidiary, any gains resulting from the write-up of assets, any
equity of the Guarantor or any Subsidiary in the undistributed earnings of
any Perscn which is not a Subsidiary, or any portion of the net income of any
Subsidiary which for any reason is unavailable for payment of dividends to
the Guarantor or to another Subsidiary, or any earnings of any Person
acquired by the Guarantor or any Subsidiary through purchase, merger,
consolidation or otherwise for any year prior to the year of acquisition,
merger or consolidation, or any deferred credits representing the excess of
any equity in any Subsidiary at the date of acquisition over the cost of
investment in such Subsidiary, all determined in accordance with GAAP, and
(ii) for all other purposes, net income of the Guarantor and its Subsidiaries
as determined on a Consolidated basis in accordance with GAAP.
"Consolidated Net Tangible Assets" shall mean all of the assets of the
Guarantor and its Subsidiaries less Intangible Assets, Consolidated Current
Liabilities, long term liabilities (other than Funded Debt and Capitalized
Lease Obligations) and all deferrals of the Guarantor and its Subsidiaries.
"Consolidated Tangible Assets" shall mean all of the assets of Guarantor
and its Subsidiaries less Intangible Assets.
"Consolidated Tangible Net Worth" shall mean the sum of consolidated
capital, surplus, and retained earnings of the Guarantor less Intangible
Assets of the Guarantor, determined in accordance with GAAP.
"Credit Agreement" shall mean that certain Restated Revolving Credit
Agreement of even date herewith between Pier Group, Inc., Agent and the
Banks.
"Debt" shall mean with respect to any Person, (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) all obligations under leases which shall have been or should
be, in accordance with GAAP, recorded as Capitalized Lease Obligations in
respect of which such Person is liable as lessee, and (iii) any other
indebtedness required to be recorded on the Consolidated financial statements
of such Person in accordance with GAAP. Any changes in GAAP requiring
operating leases to be included as indebtedness in the Consolidated financial
statements of the Guarantor will be effective, for purposes of determining
Debt hereunder, only for leases entered into or renewed after the date of the
required implementation of such changes in GAAP.
"Default" means the occurrence of any event which, with the lapse of time,
notice or otherwise, would constitute an event specified under Section 14(a)
of this Guarantee or (ii) constitute a default or an event of default under
any instrument securing or evidencing any Debt of the Guarantor or any of its
Subsidiaries.
"Environmental Laws" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the
Recourse Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), and the Occupational Safety and Health
Act (29 U.S.C. Section 651 et seq.), as such laws have been or hereafter may
be amended or supplemented, and any and all analogous future federal, or
present and future state or local laws, and similar laws of jurisdictions
other than the United States, to which Guarantor or any of its Subsidiaries
or any of its or their properties are subject.
"ERISA" shall have the meaning given in Section 6(h) hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation (or any
successor).
"Fixed Charges" means the sum of payments under operating leases and
interest during the preceding 12-month period, as determined in accordance
with GAAP, for the Guarantor and its Subsidiaries on a Consolidated basis.
"Funded Debt" shall mean, for Guarantor on a Consolidated basis, Debt
(including Guaranteed Debt and current maturities of "Funded Debt," as
defined herein) which (i) matures more than one (1) year from the date of its
determination or matures within one year from such date but is renewable or
extendable, at the option of the debtor, to a date more than one year from
such date, or (ii) arises under a revolving credit or similar agreement which
obligates the lender or lenders to extend credit during a period of more than
one year from such date; provided, however, that merchandise letters of
credit and bankers acceptances and similar credit instruments shall not be
deemed to be "Funded Debt" unless they have a stated maturity of more than
one (1) year, notwithstanding that the debtor may have the option to renew or
extend such maturity.
"GAAP" shall mean generally accepted accounting principles 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 Account Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to circumstances as of the
date of determination.
"Guarantee" shall mean this Lease Guarantee and all amendments,
modification, substitutions, and ratifications hereto.
"Guaranteed Debt" shall mean, with respect to any Person, without
duplication, all Debt of another Person referred to in clause (i), (ii) or
(iii) of the definition of "Debt" guaranteed directly or indirectly in any
manner by such Person or in effect guaranteed directly or indirectly in any
manner by such Person.
"Guarantor" shall mean Pier 1 Imports, Inc., a Delaware corporation.
"Intangible Assets" shall mean goodwill, patents, trade names, trademarks,
copyrights, franchises, experimental expense, organizational expense,
unamortized debt discount and expense, the excess of cost of shares acquired
over book value of related assets and such other assets as are properly
classified as "intangible assets" in accordance with GAAP, but in no event
shall Intangible Assets include (i) current prepaid expenses of the Guarantor
or its Subsidiaries or (ii) receivables of any kind of the Guarantor or its
Subsidiaries.
"Interest Expense" of a Person means interest payable on Indebtedness for
each fiscal quarter.
"Investment" shall mean any direct or indirect purchase or other
acquisition of, or a beneficial interest in, capital stock or other
securities of any other Person, or any direct or indirect loan, advance
(other than advances to employees for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business) or
capital contribution to or investment in any other Person, including without
limitation the incurrence or sufferance of Debt or accounts receivable of any
other Person which are not current assets or do not arise from sales to that
other Person in the ordinary course of business.
"Investment Securities" shall mean (i) U.S. government obligations, (ii)
obligations, debentures, notes or other evidences of indebtedness issued or
guaranteed by any agency or instrumentality of the United States of America
acting pursuant to authority granted by the Congress of the United States of
America, (iii) Federal funds, unsecured certificates of deposit, time
deposits and banker's acceptances (in each case, having maturities not in
excess of one year) of any bank the short-term unsecured debt obligations of
which are rated by Standard & Poors Corporation in the highest category for
short-term obligations, and (iv) certificates of deposit and time deposits
which are fully insured as to principal and interest by the Federal Deposit
Insurance Corporation.
"Law" shall mean all statutes, laws, ordinances, rules, regulations,
orders, writs, injunctions or decrees of any Tribunal.
"Lease Agreements" shall have the meaning given in Section 1 hereof.
"Lessee" shall have the meaning given in Section 1 hereof.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including without limitation, any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement or other similar form of public notice under the
Laws of any jurisdiction.
"Maintenance Capital Expenditures" shall mean, for any fiscal quarter, an
amount equal to the greater of (i) the product of four thousand five hundred
($4,500.00) times the average number of retail stores of the Guarantor on a
Consolidated basis open during the four immediately preceding fiscal quarters
or (ii) actual capital expenditures incurred by the Guarantor on a
Consolidated basis during such fiscal quarter for the maintenance and
improvement of its retail stores (other than capital expenditures incurred in
connection with new store openings).
"Material Adverse Effect" shall mean any act, circumstance, or event that
(i) causes or reasonably could be expected to cause a Default under this
Guarantee or an Event of Default under the Credit Agreement, or (ii) is or
might be material and adverse to the financial condition or business
operations of the Guarantor and its Subsidiaries on a consolidated basis.
"Obligations" shall have the meaning given in Section 1 hereof.
"Officer's Certificate" shall mean a certificate signed in the name of
Guarantor by its Chief Executive Officer, President, one of its Executive
Vice Presidents, its Chief Financial Officer, or its Comptroller.
"Operating Cash Flow" of a Person means the Consolidated Net Income from
continuing operations of such Person, determined in accordance with GAAP, for
the four fiscal quarters immediately preceding the date of determination,
prior to the payment or provision for payment of state and federal taxes,
plus (i) depreciation, (ii) amortization, and (iii) interest payable on
Indebtedness for the four fiscal quarters immediately preceding the date of
determination.
"Operating Lease Expense" shall mean all rental expenses of the Guarantor
relating to real estate, but specifically excluding any rental expense of the
Guarantor relating to equipment.
"PBGC" shall have the meaning given in Section 6(i) hereof.
"Person" shall mean an individual, partnership, joint venture,
corporation, trust, Tribunal, unincorporated organization or government or
any department, agency or political subdivision thereof.
"Plan" shall have the meaning given in Section 6(i) hereof.
"Restricted Investments" shall mean any investments in or loans and
advances to, other Persons except (i) obligations of the United States
government due within one (1) year, (ii) certificates of deposit (including
Eurodollar deposits) and bankers' acceptances (from commercial banks having
capital resources in excess of $100 million) due within one (1) year and
payable in U.S. dollars, (iii) commercial paper rated P-l by Moody's or A-l
by Standard & Poor's, (iv) debt of any state or political subdivision that is
rated A or better by Moody's or Standard & Poor's and that matures within one
(1) year, (v) obligations or securities of a Subsidiary or a corporation
which immediately after such purchase or acquisition will be a Subsidiary,
(vi) stock or securities received in settlement of debts owing to the
Guarantor or any Subsidiary not exceeding $5,000,000.00, including
receivables arising from the sale of goods and services in the ordinary
course of business of the Guarantor and its Subsidiaries, (vii) travel or
like advances to officers and/or employees in the ordinary course of business
and loans to officers and/or employees made on or before May 24, 1991 for the
purchase of capital stock of the Guarantor (including the capitalization of
up to one-half of the accrued interest on such loans to officers and/or
employees), with all such travel or like advances and loans not exceeding
$10,000,000.00 in the aggregate, (viii) any stock or securities of Sunbelt
(but no permission is hereby granted for the acquisition by the Guarantor of
any additional stock or securities shares of Sunbelt), (ix) any loans made or
deemed to be made by the Guarantor to Sunbelt as a result of the Guarantor's
payment of any portion of the Guaranteed Debt of Sunbelt guaranteed by the
Sunbelt Debt Guarantee and (x) any loan participation program(s) for a period
not to exceed seven (7) days with credit risk to companies with long-term
debt rating by Standard Poor's of Moody's if not less than single A.
"Restricted Payment" shall have the meaning given ln Section 8(c) hereof.
"Secured Debt" shall mean all indebtedness for borrowed money, including
indebtedness evidenced by a bond, debenture, note or similar document, which
is secured by a lien on any assets of the Guarantor or any Subsidiary or any
shares of stock or Debt of any Subsidiary.
"Senior Funded Debt" shall mean the Notes and Funded Debt which by its
terms is not subordinated in right of payment to the Notes. For the purposes
of this definition of Senior Funded Debt, the term "Notes" shall have the
meaning ascribed to that term in the Teachers Agreement.
"Short Term Debt" means, for the Guarantor on a Consolidated basis, Debt
(including Guaranteed Debt) which matures within one (1) year from the date
of determination thereof. Short Term Debt shall not include current
maturities of Funded Debt.
"Significant Subsidiary" shall mean, at any time, any Subsidiary of the
Guarantor which either (i) contributed during the most recent fiscal year of
the Guarantor more than five percent (5%) of the Consolidated gross revenues
of the Guarantor for such period, (ii) contributed during the most recent
fiscal year of the Guarantor more than five percent (5%) of the Consolidated
Net Income of the Guarantor for such period or (iii) owns more than five
percent (5%) of the fair market value of the Consolidated Tangible Assets of
the Guarantor. Notwithstanding the foregoing, if at any time all
Subsidiaries of the Guarantor not meeting the above definition of
"Significant Subsidiary" and taken in the aggregate shall either (i)
contribute during the most recent fiscal year of the Guarantor more than
twenty-five percent (25%) of the Consolidated gross revenues of the Guarantor
for such period, (ii) contribute during the most recent fiscal year of the
Guarantor more than twenty-five (25%) of the Consolidated Net Income of the
Guarantor for such period or (iii) own more than twenty-five percent (25%) of
the fair market value of the Consolidated Tangible Assets of the Guarantor,
then so long as such situation continues all Subsidiaries of the Guarantor
shall be deemed to be "Significant Subsidiaries."
"Subsequent Holder" shall mean the Agent, for the benefit of Agent and
Banks, or any of the Agent's Subsidiaries or other Affiliates which is a
direct or indirect transferee of the rights, interests and/or benefits of the
Lessor under this Guarantee.
"Subsidiary" shall mean, as to any particular parent corporation, any
corporation more than fifty percent (by number of votes) of the Voting Stock
shall be owned by such parent corporation and/or one or more corporations
which themselves have more than fifty percent (by number of votes) of their
Voting Stock owned by such parent corporation. As used herein, the term
"Subsidiary" shall mean a "subsidiary" of Guarantor.
"Sunbelt" shall mean Sunbelt Nursery Group, Inc., a Delaware corporation.
"Taxes" shall mean all taxes, assessments, fees and other charges at any
time imposed by any Laws or Tribunal.
"Teachers Agreement" shall mean that certain Note Purchase Agreement dated
as of May 24, 1991 executed by and between the Guarantor and Teachers
Insurance Annuity Association of America, as amended from time to time,
pursuant to which the Guarantor has issued the Notes referred to in the
definition of Senior Funded Debt contained herein.
"Total Costs" shall mean the sum of the amounts paid by Lessor and not
reimbursed by Lessee, as of the applicable date as set forth in and defined
as "the Total Cost" in the Lease Agreements.
"Tribunal" shall mean any municipal, state, commonwealth, federal,
foreign, territorial or other court, governmental body, subdivision, agency,
department, commission, hoard or bureau or instrumentality.
"Voting Stock" shall mean, with respect to any Subsidiary, any shares of
any class of stock of such Subsidiary having general voting power under
ordinary circumstances to elect a majority of the Board of Directors of such
Subsidiary irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency.
"Wolfe" shall mean Wolfe Nursery, Inc., a Delaware corporation.
4. Guarantee Not Affected by Change in Security or Other Actions.
Lessor may, from time to time, without the consent of or notice to the
Guarantor, take any or all of the following actions without impairing or
affecting the Guarantors' obligations under this Guarantee or releasing or
exonerating the Guarantor from any liability hereunder:
(a) retain or obtain a security interest ln any property to secure any of
the Obligations or any obligation hereunder:
(b) retain or obtain the primary or secondary liability of any party or
parties, in addition to the undersigned Guarantor, with respect to any of the
Obligations;
(c) extend the time or change the manner, place or terms of payment of, or
renew or amend the Lease Agreements, any note or other instrument executed in
connection with or evidencing the Obligations or any part thereof, or amend
in any manner any agreement relating thereto;
(d) release or compromise, in whole or in part, or accept full or partial
payment for, any of the Obligations hereby guaranteed, or any liability of
any nature of any other party or parties with respect to the Obligations or
any security therefor;
(e) subordinate the payment of all or any part of the Obligations to the
payment of any liability of the Lessee to creditors of the Lessee other than
Lessor or the Guarantor;
(f) enforce Lessor's security interest, if any, in all or any properties
securing any of the Obligations or any obligations hereunder in order to
obtain full or partial payment of the Obligations then outstanding;
(g) release or fail to perfect, protect, or enforce Lessor's security
interest, if any, in all or any properties securing any of the Obligations or
any obligation hereunder, or permit any substitution or exchange for any such
property; and
(h) take or fail to take any other action of whatever kind or character
with respect to the Obligations, the Lease Agreements or any other document
or instrument, it being the intention of the Guarantor that it shall remain
liable as primary obligor for the Obligations notwithstanding any act,
omission or thing which might, but for the provisions hereof, otherwise
operate as a legal or equitable discharge of any guarantor.
5. Waivers. The Guarantor hereby expressly waives:
(a) notice of acceptance of this Guarantee;
(b) notice of the existence or incurrence of any or all of the
Obligations;
(c) presentment, demand, notice of dishonor, notice of intent to
accelerate, notice of acceleration, protest, and all other notices
whatsoever;
(d) any requirement that proceedings first be instituted by Lessor against
the Lessee;
(e) all diligence in collection or protection of or realization upon the
Obligations or any part thereof, or any obligation hereunder, or any
collateral for any of the foregoing;
(f) any rights or defenses based on the Lessor's election of remedies,
including any defense to the Lessor's action to recover any deficiency after
a non-judicial sale;
(g) the occurrence of every other condition precedent to which the
undersigned Guarantor might otherwise be entitled; and
(h) any right to require Lessor to marshal assets.
6. Representations, Warranties and Agreements of the Guarantor. The
Guarantor represents and warrants to Lessor and any Subsequent Holder that:
(a) The Guarantor (i) has been duly incorporated and are validly existing
as a corporation in good standing under the laws of the State of Delaware,
(ii) has full corporate power and authority to own and operate its properties
and to conduct its business as presently conducted, and full corporate power,
authority and legal right to execute, deliver and perform its obligations
under this Guarantee and any consent executed in connection herewith, (iii)
is duly qualified to do business as a foreign corporation in good standing in
each jurisdiction, including, without limitation, the State of Texas, in
which its ownership or leasing of properties or the conduct of its business
requires such qualification and where non-qualification, singly or in the
aggregate, would materially adversely affect the financial condition or
creditworthiness of the Guarantor, or would impair the ability of the
Guarantor to perform its obligations under this Guarantee, and (iv) all of
the issued and outstanding voting stock of Pier 1 Imports (U.S.), Inc. is
owned by CMEI, Inc., a Georgia corporation, all the issued and outstanding
stock of which is owned by Guarantor.
(b) This Guarantee has been duly authorized, executed and delivered by the
Guarantor and is a legal, valid and binding obligation of the Guarantor,
enforceable according to its terms.
(c) The execution, delivery and performance by the Guarantor of this
Guarantee will not result in any violation of any term of the certificate of
incorporation or the bylaws of the Guarantor, do not require stockholder
approval or the approval or consent of any trustee or holders of Debt of the
Guarantor except such as have been obtained prior to the date hereof, and
will not conflict with or result in a breach of any terms or provisions of,
or constitute a default under, or result in the creation or imposition of any
Lien upon, any property or assets of the Guarantor under, any indenture,
mortgage or other agreement or instrument to which the Guarantor is a party
or by which it or any of its property is bound where breach or default,
singly or in the aggregate, could have a Material Adverse Effect or violate
any existing applicable Law, or any judgment, order or decree of any Tribunal
having jurisdiction over the Guarantor or any of its activities or
properties.
(d) There are no consents, licenses, orders, authorizations or approvals
of, or notices to or registrations with any Tribunal or other Person which
are required in connection with the valid execution, delivery and performance
of, this Guarantee that have not been obtained or made, and any such
consents, licenses, orders, authorizations, approvals, notices and
registrations that have been obtained or made are in full force and effect.
(e) Except as disclosed in writing to Lessor by the Guarantor concurrently
herewith, there is no action, suit, proceeding or investigation at law or in
equity by or before any court, governmental body, agency, commission or other
Tribunal now pending or, to the best knowledge of the Guarantor after due
inquiry, threatened against or affecting the Guarantor or any property or
rights of the Guarantor as to which there is a significant possibility of an
adverse determination, and which if adversely determined, may have a Material
Adverse Effect or which, if adversely determined could materially impair the
ability of the Guarantor to perform its obligations under this Guarantee, and
there is no action, suit, proceeding or investigation at law or in equity by
or before any court, governmental body, agency, commission or other Tribunal
now pending or, to the best knowledge of the Guarantor after due inquiry,
threatened which questions or would question the validity of this Guarantee.
(f) The consolidated balance sheets of the Guarantor and its Subsidiaries
as of February 28, 1992 and the related consolidated statements of income and
retained earnings of the Guarantor and its Subsidiaries for the fiscal year
then ended, reported on by its independent public accountants, and the
consolidated balance sheets of the Guarantor and its Subsidiaries for the
three-month period ending August 29, 1992 and related consolidated statements
of income and retained earnings of the Guarantor and its Subsidiaries for the
period then ended fairly present the consolidated financial condition and the
results of operations of the Guarantor and its Subsidiaries for the periods
ending on such date all in accordance with GAAP, and since the dates thereof
there has been no material adverse change in such condition or operations.
(g) The Guarantor is not in default under or with respect to any agreement
or other instrument to which it is party or by which it or its assets may be
bound which could have a Material Adverse Effect. The Guarantor is not
subject to or in default under any order, award or decree of any court,
arbitrator, or other governmental authority binding upon or affecting it or
by which any of its assets may be bound or affected which could have a
Material Adverse Effect.
(h) The Guarantor has filed or caused to be filed all tax returns which to
the knowledge of the Guarantor is required to be filed, and have paid all
Taxes shown to be due and payable on said returns or on any assessments made
against it, except for (i) returns which have been appropriately extended and
(ii) Taxes, the amount or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Guarantor, as the
case may be.
(i) The Guarantor and each of its Subsidiaries are in compliance in all
material respects with the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code, and the rules and regulations thereunder
insofar as ERISA, the Code and such rules and regulations relate to any
employee benefit plan as defined in Section 3(3) of ERISA. No employee
benefit plan (as defined in Section 3(2) of ERISA) maintained by the
Guarantor or any of its Subsidiaries for its employees and covered by ERISA
(a "Plan") had an "accumulated funding deficiency," within the meaning of
said term under Section 302 of ERISA, as of the last day of the most recent
fiscal year of such Plan, and neither the Guarantor nor any Subsidiary has
incurred with respect to any Plan any liability to the Pension Benefit
Guaranty Corporation ("PBGC") which is material to the consolidated financial
condition of the Guarantor or any Subsidiary. For the purpose of this
paragraph, the term "Subsidiary" shall include a Controlled Group of
Corporations as that term is defined in Section 1563 of the Code or Section
4.001 of ERISA.
(j) The financial statements of the Guarantor and its Subsidiaries
furnished to the Lessor on or before the date hereof have been prepared in
accordance with GAAP and fairly present the financial condition of the
Guarantor as of the date thereof. Since the date of such financial
statements there has been no material adverse change in the financial
condition or business of the Guarantor which-would impair the ability of the
Guarantor to perform its obligations hereunder.
7. Affirmative Covenants. The Guarantor covenants and agrees that, so
long as any part of the Obligations shall remain unpaid or the Lessee shall
have any commitment or obligation under the Lease Agreements, the Guarantor
will, unless Lessor shall otherwise consent in writing:
(a) Financial Statements. Deliver to the Lessor or any Subsequent Holder,
as appropriate, in duplicate:
(i) Quarterly Statements: as soon as practicable and in any event
within 60 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, a Consolidated statement of
operations, a Consolidated statement of changes in financial position of the
Guarantor, and a Consolidated balance sheet of the Guarantor as at the end of
such quarterly period, setting forth in each case in comparative form figures
for the corresponding period in the preceding fiscal year, all in reasonable
detail and prepared by an authorized financial officer of the Guarantor.
(ii) Annual Statements: as soon as practicable and in any event within
100 days after the end of each fiscal year, a Consolidated statement of
operations, and a Consolidated statement of changes in financial position of
the Guarantor for such year, and a Consolidated balance sheet of the
Guarantor as at the end of such year, setting forth in each case in
comparative form corresponding Consolidated figures from the preceding year,
all in reasonable detail and satisfactory in scope to Lessor or any
Subsequent Holder, together with an opinion by independent public accountants
of recognized standing selected by the Guarantor, whose opinion shall (a)
state that such financial statements have been prepared in accordance with
GAAP and fairly present the Consolidated financial position of the Guarantor
as of the date thereof and the Consolidated results of their operations for
the period thereof, (b) state that their audit examination has included a
review of the terms of this Guarantee as it relates to accounting matters,
and (c) state whether, in the course of their audit examination, they
obtained knowledge (and state whether they have knowledge of the existence as
of the date of such written statement) of any condition or event which
constitutes a Default, and if so, specifying the nature and period of
existence thereof (notwithstanding the foregoing, the opinion of the
Guarantor's independent public accountants need not contain the statements
otherwise required by clauses (b) and (c) of this subparagraph (ii) so long
as the Guarantor is a reporting company under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended);
(iii)SEC and Other Reports: promptly upon transmission thereof, copies
of all such financial statements, proxy statements, notices and reports as
Guarantor shall send to its public security holders and copies of all
registration statements (without exhibits) and all reports which it files
with the Securities and Exchange Commission (or any governmental body or
agency succeeding to the functions of the Securities and Exchange
Commission);
(iv) Audit Reports: promptly upon receipt thereof, a copy of each other
report submitted to the Guarantor or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Guarantor or any Subsidiary (other than any
"management letters" delivered to the Guarantor by such accountants, which
management letters shall only be delivered to Lessor or any Subsequent Holder
upon such Person's prior request);
(v) Other Notices: promptly upon the occurrence thereof, notice of any
of the following: (a) the occurrence of any condition or event which
constitutes a Default or an Event of Default, specifying the nature and
period of existence thereof, (b) that any Person has given any notice to the
Guarantor or any Subsidiary or taken any action with respect to a claimed
Default, or (c) that any Person has given any notice to the Guarantor or any
Subsidiary or taken any other action with respect to a claimed default or
event of default with respect to any other indebtedness which in the
aggregate exceeds the sum of three million dollars ($3,000,000) and, with
respect to any of such events specified in subdivisions (a), (b) or (c) above
of this clause (v), what action the Guarantor or such Subsidiary has taken,
is taking or proposes to take;
(vi) ERISA Events: promptly upon any officer of the Guarantor obtaining
knowledge of the occurrence thereof, notice of the occurrence of any (a)
"reportable event," as such term is defined in section 4043 of ERISA, or (b)
"prohibited transaction," as such term is defined in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, specifying
the nature thereof, what action the Guarantor or its Subsidiary has taken, is
taking or proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect thereto; provided that with respect to the
occurrence of any "reportable event" as to which the Pension Benefit Guaranty
Corporation has waived the 30-day reporting requirement, such written notice
need be given only at such time as notice is given to the Pension Benefit
Guaranty Corporation; and with reasonable promptness, such other financial
data or other data or information related to the business or operations of
the Guarantor or its Subsidiaries as the Lessor or any Subsequent Holder may
reasonably request. The Lessor agrees that Lessor or any Subsequent Holder
will not intentionally disclose any information given to Lessor by the
Guarantor or any of its Subsidiaries which is either proprietary or
confidential and which is prominently marked as such; provided, however, that
this restriction shall not apply to information which has at the time in
question entered the public domain, nor will this restriction prohibit Lessor
or any Subsequent Holder from disclosing such information (a) as is required
to be disclosed by Law or by any order, rule or regulation (whether valid or
invalid) of any Tribunal, (b) to Lessor's or any Subsequent Holder's
auditors, examiners, attorneys, or agents, or (c) to purchasers or
prospective purchasers or assignees of interests in the Obligations.
Together with each delivery of financial statements required by clause (i)
above, the Guarantor will deliver to Lessor or any Subsequent Holder an
Officer's Certificate demonstrating (with computations in reasonable detail)
compliance by the Guarantor and its Subsidiaries with the provisions of
Sections 8(a), 8(b), 8(c), 8(d)(i)(g), 8(d)(ii), 8(d)(iii), 8(d)(iv) 8(d)(v),
8(d)(vi), and 8(d)(vii) and stating that there exists no Default with respect
to such covenants or otherwise under this Guarantee or, if any Default exists
with respect to such covenants or under this Guarantee, specifying the nature
and period of existence thereof and what action the Guarantor promises to
take with respect thereto. Together with each delivery of financial
statements required by clause (ii) above, the Guarantor will deliver to the
Lessor or any Subsequent Holder an Officer's Certificate of the Treasurer or
Chief Financial Officer of Guarantor demonstrating (with computations in
reasonable detail) compliance by the Guarantor and its Subsidiaries with the
provisions of Sections 8(a), 8(b), 8(c), 8(d)(i)(g), 8(d)(ii), 8(d)(iii),
8(d)(iv) 8(d)(v), 8(d)(vi), and 8(d)(vii) and stating that there exists no
Default with respect thereto or otherwise under this Guarantee or, if any
Default exists with respect thereto or under this Guarantee, specifying the
nature and period of existence thereof and what action the Guarantor proposes
to take with respect thereto. By delivery of such Officer's Certificate, the
officer executing such certificate represents and warrants that the
statements made therein are based upon the level of investigation normally
and customarily taken by Treasurers or Chief Financial Officers of similarly
situated corporations of established reputation in performing their regular
duties. In the event that a change(s) in GAAP related to the accounting for
leases requires the Guarantor to use accounting principles for purposes of
determinations or computations under this Guarantee different than the
Guarantor uses in its quarterly and annual financial statements, the
Guarantor will, together with the delivery of financial statements required
by clause (ii) above with respect to the fiscal year in which such change(s)
in GAAP become applicable, deliver to the Lessor and any Subsequent Holder a
certificate of such accountants stating that, in making the audit necessary
to the certification of such financial statements, they have obtained no
knowledge of any Default, or, if they have obtained knowledge of any Default,
specifying the nature and period of existence thereof.
(b) Payment of Obligations; Maintain Books and Reserves. Duly and
punctually pay the Obligations and duly and punctually perform all of its
covenants, agreements, debts, duties and obligations in accordance with the
terms of this Guarantee. Guarantor will, and will cause each of its
Subsidiaries to, keep proper books of record and account and set aside
appropriate reserves, all in accordance with GAAP.
(c) Inspection of Property. Permit any Person designated by Lessor or any
Subsequent Holder, at the Lessor's or such Subsequent Holder's expense and
with reasonable notice to the Guarantor, to visit and inspect any of the
properties of the Guarantor and its Subsidiaries, to examine the corporate
books and financial records of the Guarantor and its Subsidiaries and make
copies thereof or extracts therefrom and to discuss the affairs, finances and
accounts of any such corporations with officers and employees of the
Guarantor and its independent public accountants, all at such reasonable
times and as often as Lessor or any Subsequent Holder may reasonably request.
Lessor agrees that Lessor will keep confidential any proprietary or
confidential information given to Lessor by the Guarantor or its Subsidiaries
upon the same terms and conditions as agreed to with respect to information
Lessor has obtained pursuant to Section 7(a)(vii) hereof.
(d) Compliance with Laws, Etc. Comply and cause each of its Subsidiaries
to comply, in all material respects with all applicable laws, rules,
regulations and orders applicable to its business, such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments, and governmental charges imposed upon it or upon its
property, except to the extent contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP, and provided that Guarantor or its Subsidiary, as the
case may be, retains good and marketable title to and the right to use and
enjoyment of its properties or other assets which may be affected by any such
contest. Guarantor will timely pay and will cause its Subsidiaries to timely
pay, all payments due for labor, services and materials rendered or furnished
in -he ordinary course of business which are secured by inchoate statutory
Liens, except to the extent contested in good faith by appropriate
proceedings, and provided that the Guarantor or its Subsidiary, as the case
may be, retains good and marketable title to and the right to the use and
enjoyment of its properties or other assets which may be affected by any such
contest. Guarantor will promptly notify the Lessor or any Subsequent Holder
if the Guarantor receives any notice, claim or demand from any governmental
agency which alleges that the Guarantor is in violation of any Laws or has
failed to comply with any order issued pursuant to any federal, state or
local statute regulating its operation and business, the result of which may
have a Material Adverse Effect.
(e) Maintenance of Existence and Qualifications. Maintain and preserve
and cause each of its Subsidiaries to maintain and preserve its corporate
existence and its rights and franchises in full force and effect and obtain
and maintain and cause its Subsidiaries to obtain and maintain all permits
and licenses necessary to the proper conduct of its business, including
without limitation qualifying to do business as a foreign corporation in all
states or jurisdictions where required by applicable Law. Notwithstanding
the foregoing, this Section 7(e) shall not prohibit any transaction expressly
permitted by Section 8(d)(vi) and Section 8(d)(vii) of this Guarantee.
(f) Maintenance of Properties; Insurance. Maintain, preserve, protect,
and keep and cause each of its Subsidiaries to maintain, preserve, protect
and keep, all property used or useful in the conduct of its business in good
condition and in compliance with all applicable Laws, and will from time to
time make all repairs, renewal's and replacements needed to enable the
business and operations carried on in connection therewith to be promptly and
advantageously conducted at all times. Guarantor will, and will cause each
of its Subsidiaries, to carry and maintain in full force and effect at all
times with financially sound and reputable insurers (or, in an insurance fund
or by self-insurance authorized by the jurisdiction in which its operations
are carried on) insurance in such amounts (and with co-insurance and
deductibles) as such insurance is usually carried by corporations of
established reputation engaged in the same or similar businesses and
similarly situated, and the Guarantor and its Subsidiaries shall maintain
self-insurance only to the extent that a prudent corporation of established
reputation engaged in the same or similar businesses and similarly situated
would rely upon self-insurance.
(g) Primary Business. Continue to conduct, and cause each of its
Subsidiaries to continue to conduct, substantially all of their respective
operations in the same primary businesses as those in which they currently
operate (i.e., developing, owning and operating, in the United States and
Canada and in territories of the United States and Canada, (i) specialty
retail stores offering primarily imported decorative home furnishings,
accessories and other specialty items for the home and casual clothing and
fashion accessories and (ii) retail stores offering primarily nursery and
garden products).
(h) Transactions With Affiliates. Conduct and cause each Subsidiary to
conduct all of their respective transactions with any Affiliate on an arm's
length basis and pursuant to the reasonable requirements of Guarantor's
and/or such Subsidiary's business.
(i) Compliance with Material Agreements. Guarantor will comply with all
material agreements, indentures, mortgages or documents binding on it or
affecting its properties or business where the failure to so comply would
have a Material Advertise Effect.
(j) Operations and Properties. Guarantor will act prudently and in
accordance with customary industry standards in managing or operating its
respective assets, properties, business and investments; Guarantor will keep
in good working order and condition, ordinary wear and tear excepted, all of
its respective assets and properties which are necessary to the conduct of
its business.
(k) Books and Records; Access. Upon prior written notice, Guarantor will
give any representative of Lessor access during all business hours to, and
permit such representative to examine, copy or make excerpts from, any and
all books, records and documents in the possession of the Guarantor and
relating to its affairs, and to inspect any of the properties of the
Guarantor. Guarantor will maintain complete and accurate books and records
of its transactions in accordance with good accounting practices.
(l) Additional Guaranty Agreement. If the Guarantor merges or
consolidates with any entity which is owned or controlled by a corporation
organized or incorporated in a jurisdiction outside of the United States of
America (an "Offshore Company") or becomes a Subsidiary of an Offshore
Company as a result of a reorganization or acquisition, Guarantor shall cause
such Offshore Company to execute and deliver to Lessor and any Subsequent
Holder, at the expense of the Guarantor, a lease guarantee in the form of
this Lease Guarantee and an opinion of counsel in form satisfactory to Lessor
or any Subsequent Holder at the time of such merger, consolidation,
reorganization or acquisition.
(m) Additional Information. Guarantor shall promptly furnish to Lessor
and any Subsequent Holder, at Lessor's request, such additional financial or
other information concerning assets, liabilities, operations and transactions
of Guarantor or any Subsidiary as Lessor or any Subsequent Holder may from
time to time reasonably request.
(n) Further Assurances. Upon request of the Lessor, promptly cure upon
request of Lessor any defects in the creation, issuance, execution and
delivery of this Guarantee or in the Lease Agreements. Guarantor, at its
expense, will further promptly execute and deliver to Lessor upon request all
such other and further documents, agreements and instruments in compliance
with or accomplishment of the covenants and agreements of Guarantor
hereunder, or to further evidence and more fully describe the obligations of
the Guarantor for the Obligations as primary obligor or to correct any
omissions herein, or to more fully state the obligations set out herein.
8. Negative Covenants.The Guarantor covenants and agrees that, so long
as any part of the Obligations shall remain unpaid or the Lessee shall have
any commitment or obligation under the Lease Agreements, neither the
Guarantor nor any of its Subsidiaries will, unless Lessor or any Subsequent
Holder otherwise consents in writing:
(a) Current Ratio. Permit the ratio of its Consolidated Current Assets to
its Consolidated Current Liabilities at any time thereafter to be less than
2.0:1.
(b) Consolidated Tangible Net Worth. Permit its Consolidated Tangible Net
Worth at any time to be less than an amount equal to the sum of (i) one
hundred sixty million dollars ($160,000,000) plus (ii) 50% of the aggregate
Consolidated Net Income of the Guarantor for the period commencing on
February 29, 1992 (without deduction for any net loss in any fiscal year
ending after February 29, 1992) and terminating at the end of the last fiscal
quarter preceding the date of any determination of Consolidated Tangible Net
Worth.
(c) Limitation on Dividends, Acquisition of Stock and Restricted
Investments. Declare any dividend on any class of its stock (other than
stock dividends) or any other distribution on account of any class of its
stock (other than dividends or distributions payable solely in shares of its
stock) which is payable more than 60 days after the date such declaration is
made, unless, at the time of such declaration, such dividend complied with
this Section 8(c). Guarantor covenants that it will not, and will not permit
any of its Subsidiaries to, pay or declare any dividend on any class of its
stock (other than stock dividends) or make any other distribution on account
of any class of its stock (other than dividends or distributions payable
solely in shares of its stock), or redeem, purchase or otherwise acquire,
directly or indirectly, any shares of its stock, or make any Restricted
Investments (all of the foregoing being herein called "Restricted Payments")
if the aggregate amount of all such Restricted Payments, from and after
February 29, 1992, shall exceed the sum of (i) fifty percent (50%) of the
aggregate Consolidated Net Income of the Guarantor for the period (taken as
one accounting period) commencing on February 29, 1992 and terminating at the
end of the last fiscal quarter preceding the date of such Restricted Payment
(provided, however, that in the case of any deficit in Consolidated Net
Income in any financial reporting period occurring either fully or partly
within such period, 100% of the amount of such deficit shall be subtracted
from the amount described in clause (i) above) plus (ii) the aggregate net
cash proceeds received from the issuance or sale, after February 29, 1992, of
capital stock of the Guarantor (provided, however, that for purposes of
clause (ii), such net cash proceeds shall be considered only for a period of
one calendar year commencing on the date such proceeds are received by the
Guarantor) plus (iii) ten million dollars ($10,000,000). Notwithstanding the
foregoing, no Restricted Payment shall be made unless, after giving effect
thereto, no Default shall have occurred and be continuing. There shall not
be included in the limitation upon Restricted Payments (a) any dividends paid
by any Subsidiary of the Guarantor to its corporate parent which is also a
Subsidiary of the Guarantor or (b) to the Guarantor.
(d) Lien, Debt and Other Restrictions. Guarantor covenants that it will
not, and will not permit any Subsidiary to:
(i) Liens. Create, assume or suffer to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired, except without
double-counting, any of the following (the "Permitted Liens"):
(a) Liens for Taxes, not yet due and delinquent or which are being
actively contested in good faith by appropriate proceedings, provided that
the existence of such Liens does not affect the Guarantor's or its
Subsidiaries' good and marketable title to or use or enjoyment of the
property or assets burdened by such Liens,
(b) other Liens arising in the ordinary course of its business or the
ownership of its property and assets (including easements and similar
encumbrances) which were not incurred in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the deferred
purchase price of property or assets, and which do not in the aggregate
materially interfere with the operation of its business and will not cause a
Material Adverse Effect,
(c) any Lien existing on any property of any corporation at the time it
becomes a Subsidiary, provided that (a) any such Lien shall not encumber any
other property of the Guarantor or such Subsidiary, and (b) the aggregate
amount of Debt secured by such Lien shall not at any time exceed 75 of the
fair market value of such property,
(d) any Lien on any property acquired, constructed or improved by the
Guarantor or a Subsidiary after the date hereof and created contemporaneously
with or within 12 months of such acquisition, completion of construction or
improvement to secure Debt assumed or incurred to finance up to 75% of the
purchase price or cost of construction or improvement of such property, but
such Lien shall cover only the property so acquired or constructed and any
improvements thereto, and
(e) Liens existing on the date hereof and disclosed in the most recent
financial statements described in Section 6(f) hereof,
(f) Liens arising in connection with court proceedings, provided the
execution of such Liens is effectively stayed and such Liens are contested in
good faith by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP, and provided further that the
existence of such Liens does not affect the Guarantor's or its Subsidiaries'
title to or use or enjoyment of the property or assets burdened by such
Liens,
(g) any Lien described in clauses (c), (d) or (e) above resulting from
renewing, extending or refunding outstanding Secured Debt provided that the
principal amount of the Secured Debt secured thereby is not increased and the
Lien is not extended to any other property, and
(h) any other Liens incurred in connection with the borrowing of money or
any other Liens, provided that immediately thereafter the aggregate amount of
Debt secured by Liens incurred pursuant to this clause (h) does not at any
time exceed five percent (5.0%) of Consolidated Net Tangible Assets.
(ii) Funded Debt -- Other than for the Guaranteed Debt by the Guarantor
of Sunbelt's Debt to (i) Standard Chartered Bank under a line of credit in
the amount of $5,OO0,000 and (ii) Texas Commerce Bank, National Association
under a line of credit in the amount of $5,000,000 (the "Sunbelt Debt
Guarantee"), create, incur, assume or suffer to come into existence any
additional Funded Debt unless after giving effect thereto (i) Senior Funded
Debt is less than 50% of Consolidated Net Tangible Assets and (ii) all Funded
Debt in the aggregate is less than sixty percent (60%) of Consolidated Net
Tangible Assets. With respect to Subsidiaries which are not Guarantor,
create, incur, assume or suffer to come into existence any additional Funded
Debt by such Subsidiaries unless after giving effect thereto all Funded Debt
by such Subsidiaries in the aggregate is less than 70% of Consolidated Net
Tangible Assets of such Subsidiaries. As used in this paragraph 8(ii), (A)
prior to demand being made upon the Guarantor to pay its obligations under
the Sunbelt Debt Guarantee, the term Funded Debt (individually and as used in
the definition of Senior Funded Debt) shall only include the Guaranteed Debt
of Sunbelt to the extent the aggregate amount of such Guaranteed Debt of
Sunbelt exceeds the sum of Sunbelt's Cash Equivalents, and (B) from and after
demand being made upon the Guarantor to pay its obligations under the Sunbelt
Debt Guarantee, the term Funded Debt (individually and as used in the
definition of Senior Funded Debt) shall include such Guaranteed Debt of
Sunbelt.
(iii) Short-Term Debt -- Other than for the Sunbelt Debt Guarantee,
create, incur, assume or suffer to exist any Short-Term Debt, other than any
Short-Term Debt which is incurred in the ordinary course of business,
provided that there shall be a period of at least 45 consecutive days during
each fiscal year in which such Short-Term Debt is paid down to an amount that
would have been permitted under Section 8(d)(ii) were such Short-Term Debt to
be treated as Funded Debt; provided, however, that as used in this paragraph
8(d)(iii), (A) prior to demand being made upon the Guarantor to pay its
obligations under the Sunbelt Debt Guarantee, the term Funded Debt
(individually and as used in the definition of Short-Term Debt) shall only
include the Guaranteed Debt of Sunbelt to the extent the aggregate amount of
such Guaranteed Debt of Sunbelt exceeds the sum of Sunbelt's Cash
Equivalents, and (B) from and after demand being made upon the Guarantor to
pay its obligations under the Sunbelt Debt Guarantee, the term Funded Debt
(individually and as used in the definition of Short-Term Debt) shall include
such Guaranteed Debt of Sunbelt.
(iv) Subsidiaries' Debt -- Create, incur, assume or suffer to exist any
additional Debt unless after giving effect thereto, the aggregate amount of
outstanding Debt of the Guarantor's Subsidiaries is less than 10% of
Consolidated Net Tangible Assets.
(v) Maintenance of Fixed Charge Coverage -Permit the ratio of Cash Flow
Available for Fixed Charges to Fixed Charges, to be determined on the last
day of each fiscal quarter for the preceding 12 months, to be less than (i)
1.3 to 1 for each of the fiscal quarters ending during the period from the
date of this Guarantee through February 27, 1993, and (ii) 1.4 to 1 for each
fiscal quarter ending thereafter.
(vi) Limitation on Sale of Assets -- Other than (i) sales in the
ordinary course of business, and (ii) the sale by the Guarantor and/or
Sunbelt Nursery Group, Inc. of any of the capital stock of Sunbelt (provided
the net proceeds of any such sale of stock owned by the Guarantor are used to
pay down the Guarantor's bank debt which is pari passu in terms of right to
payment with the Obligations), sell or otherwise dispose of in any fiscal
year more than 10% of its Consolidated Tangible Assets or sell or otherwise
dispose of any of its Consolidated Tangible Assets for less than fair market
value.
(vii) Merger and Consolidation -- Merge or consolidate, provided,
however, that:
(a) the Guarantor may merge or consolidate with or into any other
corporation so long as (A) the successor corporation is a United States
entity which expressly assumes the Obligation in writing or the Guarantor
shall be the continuing or surviving entity, (B) no Default shall have
occurred after giving effect to such merger or consolidation, and (C)
immediately after giving effect to such merger or consolidation the Guarantor
could have incurred an additional $1.00 of Funded Debt pursuant to the
provisions of Section 8(d)(ii) hereof, and
(b) any Subsidiary may merge or consolidate with or into any other
corporation so long as, upon such merger or consolidation, (A) the successor
corporation becomes a Subsidiary of the Guarantor, (B) no Default shall have
occurred after giving effect to such merger or consolidation, and (C)
immediately after giving effect to such merger or consolidation such
Subsidiary could have incurred an additional $1.00 of Funded Debt pursuant to
the provisions of Section 8(d)(ii) hereof, and
(c) any Subsidiary may merge or consolidate with or into the
Guarantor or any other Subsidiary so long as, in any such merger or
consolidation involving the Guarantor, the Guarantor shall be the surviving
or continuing corporation.
(e) Investments. Make or permit any of its Subsidiaries to make any
Investment, except (i) purchases of majority of the outstanding stock of any
corporation, (ii) Investments in Guarantor, any of its Subsidiaries, or any
Person that is wholly-owned by Guarantor and/or its Subsidiaries, not to
exceed in the aggregate twenty-five million dollars ($25,000,000) (iii)
Investments in Cash Equivalents or readily marketable securities having a
quoted market value, (iv) Investments in Persons to the extent permitted by
Section 8(c) hereof, (v) Investments in any partnership, corporation or joint
venture the sole purpose of which is to obtain land and improvements used in
the ordinary course of business of Guarantor or any of its Subsidiaries,
which Investments under this subsection (v) shall not exceed $75,000,000 in
the aggregate (vi) loans or advances to employees in the ordinary course of
business that do not exceed $5,000,000 in the aggregate, (vii) Investments in
Sunbelt capital stock or which are loans made by the Guarantor to Sunbelt as
a result of the Guarantor's payment of the Guaranteed Debt permitted under
Section 8(g) hereof or are intercompany advances, not exceeding
$1,000,000.00, made by the Guarantor to Sunbelt in the ordinary course of
business, which advances are promptly repaid by Sunbelt, and (viii) loan
participation programs for a period not to exceed seven days with credit risk
to companies with long-term debt rating by Standard & Poor's or Moody's of
not less than single A.
(f) Chance in Nature of Business. Make, or permit any of its Subsidiaries
to make, any material change in the nature of its business as conducted on
the date hereof.
(g) Guaranteed Debt. Create, assume or suffer to exist or permit any of
its Subsidiaries to create, suffer or exist any Guaranteed Debt except (i)
Guaranteed Debt in existence on the date hereof, (ii) Guaranteed Debt that is
secured by assets of the primary obligor having a fair market value at least
equal to the amount of such Guaranteed Debt, as determined by an independent
qualified appraiser selected by Guarantor (which appraisal, at Lessor's or
any Subsequent Holder's reasonable request and at Lessor's expense, shall be
promptly updated, but such request shall not be made more often than once
every 12 months), and (iii) Guaranteed Debt of Guarantor or a Subsidiary on
the consolidated balance sheet of Guarantor and its Subsidiaries; Provided,
however, that in no event shall the aggregate amount of all consolidated
Guaranteed Debt (other than the Guaranteed Debt described in (iii) above) of
Guarantor and its Subsidiaries exceed the Consolidated Tangible Net Worth,
and (iv) the Sunbelt Debt Guarantee.
(h) Management and Control. Permit any material change in the Guarantor's
management or control of any of its Subsidiaries.
9. Payments. Each payment by the Guarantor to Lessor under this
Guarantee shall be made by transferring the amount thereof in immediately
available U.S. funds without set-off or counterclaim. Any and all payments
by the Guarantor hereunder shall be made free and clear and without deduction
for any and all present or future Taxes, excluding, in the case of Lessor,
any Subsequent Holder and each Bank, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which
Lessor, any Subsequent Holder, or such Bank (as the case may be) is organized
or is or should be qualified to do business or any subdivision thereof, and
in the case of each Subsequent Holder and each Bank, Taxes imposed on such
Subsequent Holder's or such Bank's income by the jurisdiction of such
Subsequent Holder's or Bank's lending office or any political subdivision
thereof. If Guarantor shall be required to deduct any Taxes (i.e., Taxes for
which Guarantor is responsible under the preceding sentence) from or in
respect of any sum hereunder (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 9) such Subsequent
Holder and each such Bank receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Guarantor shall make such
deductions and (iii) Guarantor shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
10. Costs and Expenses. The Guarantor hereby agrees to pay all
reasonable legal and other costs and expenses incurred by Lessor in seeking
to protect or enforce any of Lessor's rights or remedies with respect to the
Obligations or this Guarantee.
11. Subrogation. The Guarantor shall not be subrogated, in whole or in
part, to Lessor's rights or those of any subsequent assignee or transferee of
any of the Obligations until 367 days after all the Obligations to Lessor and
every such subsequent assignee or transferee shall have been paid in full and
all obligations and commitments of whatever kind or character of the Lessee
under the Lease Agreements have been fully discharged and satisfied.
12. No Waiver. No delay on Lessor's part in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial
exercise by Lessor of any right or remedy shall preclude the other or further
exercise thereof or the exercise of any other right or remedy.
13. Parties; Successors and Assigns. This Guarantee shall inure to the
benefit of Lessor and Lessor's successors, assigns or transferees, and shall
be binding upon the Guarantor and its successors and assigns. The Guarantor
may not delegate any of its duties under this Guarantee without the prior
written consent of Lessor or any Person to whom Lessor has assigned this
Guarantee. Lessor may assign Lessor's rights and benefits under this
Guarantee to any Person, including, without limitation, to any financial
institution providing financing to Lessor. Upon any assignment by Lessor of
this Guarantee, and upon any subsequent assignment or assignments by Lessor's
assignee or future assignees, such assignee or future assignee shall succeed
to all of the rights, benefits, remedies and privileges of this Guarantee and
shall for all purposes hereof be deemed to be "Lessor" hereunder to the
exclusion of the assigning Lessor. Guarantor agrees to make such disclosures
and to take such action and execute such instruments as any such assignee or
future assignee may reasonably require to more fully protect, preserve and
assure to such assignee or future assignee all of the rights, benefits,
remedies and privileges provided hereby. In the event that Lessor or any
assignee hereof sells participations in any obligation secured by the Lease
Agreements to other lenders, each such other lender shall have rights,
benefits, remedies and privileges to the same extent as are available to
Lessor hereunder.
14. Acceleration Events.
(a) If any one or more of the following events shall occur:
(i) If an Event of Default shall occur under any Lease Agreement; or
(ii) If an Event of Default shall occur under the Credit Agreement; or
(iii) If Guarantor shall fail to pay any part of the Obligations when
due; or
(iv) If any representations or warranties made by Guarantor herein
shall be false or misleading in any material respect on the date made; or
(v) If there shall be a default in the performance or observance of any
other term, covenant or condition contained in this Guarantee (other than a
default described in subparagraph (iii) above), which default shall continue
for more than thirty (30) days; or
(vi) If an "Event of Default," as defined and provided in (a) the
Teachers Agreement, or (b) that certain Revolving Credit Loan Agreement dated
as of July 7, 1992 between Guarantor and First Interstate Bank of Texas,
N.A., or (c) that certain Revolving Credit Loan Agreement dated July 7, 1992
between Guarantor and Texas Commerce Bank, National Association, (d) that
certain Revolving Credit Loan Agreement dated July 7, 1992, between Guarantor
and National Westminster Bank, Plc, or (e) in any renewals, extensions,
amendments, modifications, replacements, and substitutions of any of the
foregoing, shall occur and be continuing for any reason whatsoever;
(vii) Guarantor or any Subsidiary defaults in any payment on any other
obligation for money borrowed (or any Capitalized Lease Obligation, any
obligation under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for property whether
or not secured by a purchase money mortgage or any obligation under notes
payable or drafts accepted representing extensions of credit) beyond any
period of grace provided with respect thereto, or Guarantor or any Subsidiary
fails to perform or observe any other agreement, term or condition contained
in any agreement under which any such obligation is created (or if any other
event thereunder or under any such agreement shall occur and be continuing)
and the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to any stated
maturity, provided that the aggregate amount of all obligations as to which
such a default shall occur and be continuing or such a failure or other event
causing or permitting acceleration shall occur and be continuing exceeds five
million dollars ($5,000,000); then, and in any such event, and in addition to
all other rights and remedies at law and in equity available to Lessor and
the Agent and Banks (as defined in the Credit Agreement) as a result of such
event, Guarantor shall at the election of the Agent or Majority Banks (as
defined in the Credit Agreement) immediately pay to the Agent, for the
account of Banks, without notice or demand, an amount equal to the sum of (a)
the Total Costs outstanding and not reimbursed with respect to all properties
covered by all Lease Agreements then in effect, (b) accrued and unpaid
interest thereon at the Applicable Rate as set forth in the Lease Agreements,
and (c) all other amounts not included within the term Total Cost (as defined
in the Lease Agreements) which are then due and payable under the Lease
Agreements. All amounts paid by Guarantor to the Agent under this Section 14
shall be immediately deposited in the Collection Account established pursuant
to Section 2.02 of the Absolute Assignment of Rents, Income and Leases, dated
December 30, 1992 (the "Absolute Assignment") executed by Lessor to the
Agent, and shall be invested, withdrawn and paid in accordance with the
provisions of such Absolute Assignment. It is understood that any payments
made by Guarantor to Lessor under this Guarantee shall not release or
discharge Guarantor from its obligations hereunder until all of the
Obligations have been fully and finally paid to Lessor. All amounts payable
by Guarantor hereunder shall be credited against amounts otherwise payable by
Lessee under the Lease Agreements for the remainder of their respective
terms, provided that if any of the Lease Agreements have been terminated or
if for any other reason sufficient credits cannot be given to Lessee, then
such payments shall nevertheless be retained and applied pursuant to the
Absolute Assignment and no further credits shall be given to Lessee.
(b) Guarantor acknowledges that the execution and delivery of this
Guarantee was an express condition to the extension by the Banks of the
credit facility to Lessor pursuant to the Credit Agreement, and that such
credit facility has enabled Guarantor to open additional stores and expand
its business in furtherance of its business plan. Guarantor further
acknowledges that this Guarantee has been pledged as additional collateral to
the Agent, for the benefit of Agent and Banks, pursuant to the Credit
Agreement and that the covenants of Guarantor contained in this Section 14
have been required by the Banks as separate and distinct covenants in
addition to the guarantee of the Lease Agreements contained herein.
Accordingly, any payment made by Guarantor under this Section 14 shall be
deemed to be an agreed guarantee payment without regard to the status of any
Lease Agreement or Lessee's rights or obligations thereunder; and in no event
and under no circumstance shall any such payment be repayable or refundable
to Guarantor for any reason or under any circumstance, and Guarantor agrees
to look solely to Lessee under its limited right to subrogation for the
recovery of any such sum.
(c) ALL AMOUNTS PAYABLE BY GUARANTOR UNDER THIS LEASE GUARANTEE ARE
PAYABLE WITHOUT OFFSET, COUNTERCLAIM OR DEDUCTION OF WHATEVER KIND AND ARE
NOT CONDITIONED UPON, AND CANNOT BE AFFECTED IN ANY WAY BY ANY FUTURE EVENT,
OCCURRENCE OR ACTION BY ANY PARTY, AND GUARANTOR UNDERSTANDS AND AGREES THAT
ALL SUCH AMOUNTS SHALL BE PAYABLE NOTWITHSTANDING ANY FACT OR CIRCUMSTANCE
(INCLUDING WITHOUT LIMITATION THE BANKRUPTCY OF OR A SIMILAR EVENT AFFECTING
LESSEE) AT ANY TIME AFFECTING LESSEE OR ANY LEASE AGREEMENT, WHETHER CAUSED
OR CONTRIBUTED TO BY LESSEE, LESSOR OR ANY OTHER PARTY.
15. Arbitration Program.
(a) Binding Arbitration. Upon the demand of any party, whether made
before or after the institution of any judicial proceeding, any Dispute (as
defined below) shall be resolved by binding arbitration in accordance with
the terms of this Arbitration Program. A "Dispute" shall include any action,
dispute, claim, or controversy of any kind (e.g., whether in contract or in
tort, statutory or common law, legal or equitable, or otherwise) now existing
or hereafter arising between the parties in any way arising out of,
pertaining to or in connection with (1) the agreement, document or instrument
to which this Arbitration Program is attached or in which it is referred to
or any related agreements, documents, or instruments (the "Documents"), (2)
all past, present or future loans, notes instruments, drafts, credits,
accounts, deposit accounts, safe deposit boxes, safekeeping agreements,
guarantees, letters of credit, goods or services, or other transactions,
contracts or agreements of any kind whatsoever, (3) any past, present or
future incidents, omissions, acts, practices, or occurrences causing injury
to either party whereby the other party or its agents, employees, or
representatives may be liable, in whole or in part, or (4) any aspect of the
past, present or future relationships of the parties including any agency,
independent contractor or employment relationship but excluding claims for
workers' compensation and unemployment benefits ("Relationship"), Any party
to this Arbitration Program may, by summary proceedings (e.g., a plea in
abatement or motion to stay further proceedings), bring any action in court
to compel arbitration of any Disputes. Any party who fails or refuses to
submit to binding arbitration following a lawful demand by the opposing party
shall bear all costs and expenses incurred by the opposing party in
compelling arbitration of any Dispute. The parties agree that by engaging in
activities with or involving each other as described above, they are
participating in transactions involving interstate commerce.
(b) Governing Rules. All Disputes between the parties shall be resolved
by binding arbitration administered by the American Arbitration Association
(the "AAA") in accordance with, and in the following priority: (1) the terms
of this Arbitration Program, (2) the Commercial Arbitration Rules of the AAA,
(3) the Federal Arbitration Act (Title 9 of the United States Code) and (4)
to the extent the foregoing are inapplicable, unenforceable or invalid, the
laws of the State of Texas. The validity and enforceability of this
Arbitration Program shall be determined in accordance with this same order of
priority. In the event of any inconsistency between this Arbitration Program
and such rules and statutes, this Arbitration Program shall control.
Judgment upon any award rendered hereunder may be entered in any court having
jurisdiction; provided, however, that nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded
to it under 12 U.S.C. 91 or Texas Banking Code Art. 342-609.
(c) No Waiver; Preservation of Remedies; Multiple Parties. No provision
of, nor the exercise of any rights under, this Arbitration Program shall
limit the right of any party, during any Dispute to seek, use, and employ
ancillary or preliminary remedies, judicial or otherwise, for the purpose of
realizing upon, preserving, protecting, foreclosing or proceeding under
forcible entry and detainer for possession of any real or personal property,
and any such action shall not be deemed an election of remedies. Such rights
shall include, without limitation, rights and remedies relating to (1)
foreclosing against any real or personal property collateral or other
security by the exercise of a power of sale under a deed of trust, mortgage,
or other security agreement or instrument, or applicable law, (2) exercising
self-help remedies (including setoff rights) or (3) obtaining provisional or
ancillary remedies such as injunctive relief, sequestration, attachment,
garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the extent
such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action for judicial relief
or pursuit of provisional or ancillary remedies or exercise of self-help
remedies shall not constitute a waiver of the right of any party, including
the plaintiff, to submit the Dispute to arbitration nor render inapplicable
the compulsory arbitration provisions hereof. In Disputes involving
indebtedness or other monetary obligations, each party agrees that the other
party may proceed against all liable persons, jointly and severally, or
against one or more of them, less than all, without impairing rights against
other liable persons. Nor shall a party be required to join the principal
obligor or any other liable persons (e.g., sureties or guarantors) in any
proceeding against a particular person. A party may release or settle with
one or more liable persons as the party deems fit without releasing or
impairing rights to proceed against any persons not so released.
(d) Statute of Limitations. All statutes of limitation shall apply to any
proceeding in accordance with this Arbitration Program.
(e) Arbitrator Powers and Qualifications; Awards; Modification or Vacation
of Award. Arbitrators are empowered to resolve Disputes by summary rulings
substantially similar to summary judgments and motions to dismiss.
Arbitrators shall resolve all Disputes in accordance with the applicable
substantive law. Any arbitrator selected shall be required to be a
practicing attorney licensed to practice law in the State of Texas and shall
be required to be experienced and knowledgeable in the substantive laws
applicable to the subject matter of the Dispute. With respect to a Dispute
in which the claims or amounts in controversy do not exceed $1,000,000, a
single arbitrator shall be chosen and shall resolve the Dispute. In such
case, the arbitrator shall be required to make specific, written findings of
fact, and shall have authority to render an award up to but not to exceed
$1,000,000, including all damages of any kind whatsoever, including costs,
fees and expenses. A Dispute involving claims or amounts in controversy
exceeding $1,000,000 shall be decided by a majority vote of a panel of three
arbitrators (an "Arbitration Panel"), the determination of any two of the
three arbitrators constituting the determination of the Arbitration Panel,
provided, however, that all three Arbitrators on the Arbitration Panel must
actively participate in all hearings and deliberations. Arbitrators,
including any Arbitration Panel, may grant any remedy or relief deemed just
and equitable and within the scope of this Arbitration Program and may also
grant such ancillary relief as is necessary to make effective any award.
Arbitration Panels shall be required to make specific, written findings of
fact and conclusions of law, and in such proceedings before an Arbitration
Panel only, the parties shall have the additional right to seek vacation or
modification of any award of an Arbitration Panel that is based in whole, or
in part, on an incorrect or erroneous ruling of law by appeal to a Federal or
State Court of Appeals, following the entry of judgment on the award in
Federal or State District Court, as appropriate. For these purposes, the
award and judgment entered by the Federal or State District Court shall be
considered to be the same as the award and judgment of the Arbitration Panel.
All requirements applicable to appeals from any Federal or State District
Court judgment shall be applicable to appeals from judgments entered on
decisions rendered by Arbitration Panels. The Appellate Courts shall have
the power and authority to vacate or modify an award based upon a
determination that there has been an incorrect or erroneous ruling of law.
The Appellate Court shall also have the power to reverse and/or remand the
decision of an Arbitration Panel. Subject to the foregoing, the
determination of an Arbitrator or Arbitration Panel shall be binding on all
parties and shall not be subject to further review or appeal except as
otherwise allowed by applicable law.
(f) Other Matters and Miscellaneous. To the maximum extent practicable,
the AAA, the Arbitrator (or the Arbitration Panel, as appropriate) and the
parties shall take any action necessary to require that an arbitration
proceeding hereunder be concluded within 180 days of the filing of the
Dispute with the AAA. Arbitration proceedings hereunder shall be conducted
at one of the following locations in the State of Texas agreed to in writing
by the parties or, in the absence of such agreement, selected by the AAA: (1)
Austin; (2) Dallas; (3) Fort Worth; (4) Houston; or (5) San Antonio.
Arbitrators shall be empowered to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge could do pursuant
to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure
and applicable law. With respect to any Dispute, each party agrees that all
discovery activities shall be expressly limited to matters directly relevant
to the Dispute and any Arbitrator, Arbitration Panel and the AAA shall be
required to fully enforce this requirement. This Arbitration Program
constitutes the entire agreement of the parties with respect to its subject
matter and supersedes all prior discussions, arrangements, negotiations, and
other communications on dispute resolution. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration
of the Documents or the Relationship, unless the parties otherwise expressly
agree in writing. To the extent permitted by applicable law, Arbitrators,
including any Arbitration Panel, shall have the power to award recovery of
all costs and fees (including attorneys' fees, administrative fees, and
arbitrators' fees) to the prevailing party. This Arbitration Program may be
amended, changed, or modified only by the express provisions of a writing
which specifically refers to this Arbitration Program and which is signed by
all the parties hereto. If any term, covenant, condition, or provision of
this Arbitration Program is found to be unlawful, invalid or unenforceable,
such illegality or invalidity or unenforceability shall not affect the
legality, validity, or enforceability of the remaining parts of this
Arbitration Program, and all such remaining parts hereof shall be valid and
enforceable and have full force and effect as if the illegal, invalid, or
unenforceable part had not been included. The captions or headings in this
Arbitration Program are for convenience of reference only and are not
intended to constitute any part of the body or text of this Arbitration
Program. Each party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business of the parties or by applicable law or
regulation. To the maximum extent permitted by law, this Arbitration Program
modifies and supersedes any and all prior agreements for arbitration between
the parties.
16. Notices. All notices, demands and other communications between
Lessor and the Guarantor under this Guarantee shall be in writing, which may
include cable, telex or telecopy) and shall be delivered or sent to the
address or telex number shown below, or to such other address, telex or
telecopy number as either of us may be written notice to the other have
designated for such purpose. Any such notice, demand or other communication
shall not be effective until actually received.
If to Lessee: Pier Group, Inc.
c/o Bear Stearns
245 Park Avenue
New York, New York 10167
Attention: James D. Price
If to the Guarantor: Pier 1 Imports, Inc.
301 Commerce Street, Suite 600
Fort Worth, Texas 76102
Attention: Robert G. Herndon,
Executive Vice President and CFO
Telex: 203955
Telecopier: 817-332-5727
Telephone: 817-878-8000
17. Term. This Guarantee is not limited to any particular period of
time but shall continue in full force and effect until all of the Obligations
have been fully and finally paid or have been otherwise discharged by Lessor,
and the Guarantor shall not be released from any obligations or liability
hereunder until such full payment or discharge shall have occurred.
18. Governing Law. This Guarantee shall be governed by and construed in
accordance with the laws of the State of Texas. This Guarantee is
performable in Tarrant County, Texas, and the Guarantor hereby waive the
right to be sued elsewhere.
19. FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER THEREOF AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
GUARANTOR:
PIER 1 IMPORTS, INC.
By:____________________
Robert G. Herndon,
Executive Vice President
LESSOR:
PIER GROUP, INC.
By:____________________
Robert G. Herndon,
President
Agreed and Accepted as of
the date first above written:
ASSIGNEE:
FIRST INTERSTATE BANK OF
TEXAS, N.A., as Agent
By:____________________
Terry R. Dallas,
Senior Vice President
FIRST AMENDMENT
TO
LEASE GUARANTEE
This First Amendment to Lease Guarantee is made effective as of April 28,
1993 by and between Pier 1 Imports, Inc., a Delaware corporation, (the
"Guarantor"), and Pier Group, Inc., a Delaware corporation ("Lessor").
WHEREAS, the Guarantor and Lessor entered into that certain Lease
Guarantee dated December 30, 1992 (the "Lease Guarantee") relating to leases
between Lessor and Pier Imports (U.S.), Inc., and leases between Lessor and
Wolfe Nursery, Inc.; and
WHEREAS, Guarantor has sold (the "Sale") all of its capital stock in
Sunbelt Nursery Group, Inc. to a wholly-owned subsidiary of General Host
Corporation, a New York corporation ("General Host") in exchange for
1,940,000 shares of common stock of General Host; and
WHEREAS, the parties desire to amend the Lease Guarantee in certain
respects to take into account the terms of the Sale and the Credit Facilities
Agreement dated April 28, 1993 between Pier 1 Imports, Inc. and Sunbelt
Nursery Group, Inc. executed in connection therewith.
NOW, THEREFORE, for and in consideration of and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor and Lessor hereby agree as follows:
1.
Unless otherwise specified herein, terms defined in the Lease Guarantee
shall have the same meaning when used herein and all section references refer
to sections in the Lease Guarantee.
2.
The first paragraph on the first page of the Lease Guarantee is amended to
read in its entirety as follows:
WHEREAS, Lessor has entered into and will continue to enter into
lease agreements (collectively, the "Lease Agreements," whether now or
hereafter in effect), from time to time with Pier 1 Import (U.S.), Inc.,
a Delaware corporation and wholly-owned subsidiary of Guarantor and with
Pier Lease, Inc., a Delaware corporation and an affiliate of Guarantor
(each of which is hereinafter referred to as the "Lessee"); and
3.
The definitions of "Lessee" and "Restricted Investments" in Section 3 of
the Lease Guarantee are amended to read in their entirety as follows:
"Lessee" shall mean Pier 1 Imports (U.S.), Inc., a Delaware
corporation, or Pier Lease, Inc., a Delaware corporation.
"Restricted Investments" shall mean any investments in or loans and
advances to, other Persons except (i) obligations of the United States
government due within one (1) year, (ii) certificates of deposit
(including Eurodollar deposits) and bankers' acceptances (from commercial
banks having capital resources in excess of $100 million) due within one
(1) year and payable in U.S. dollars, (iii) commercial paper rated P-l by
Moody's or A-l by Standard & Poor's, (iv) debt of any state or political
subdivision that is rated A or better by Moody's or Standard' & Poor's and
that matures within one (1) year, (v) obligations or securities of a
Subsidiary or a corporation which immediately after such purchase or
acquisition will be a Subsidiary, (vi) stock or securities received in
settlement of debts owing to the Guarantor or any Subsidiary not exceeding
$5,000,000.00, including receivables arising from the sale of goods and
services in the ordinary course of business of the Guarantor and its
Subsidiaries, (vii) travel or like advances to officers and/or employees
in the ordinary course of business and loans to officers and/or employees
made on or before May 24, 1991 for the purchase of capital stock of the
Guarantor (including the capitalization of up to one-half of the accrued
interest on such loans to officers and/or employees), with all such travel
or like advances and loans not exceeding $10,000,000.00 in the aggregate,
(viii) not more than 1,940,000 shares of the common stock of General Host
Corporation, a New York corporation, plus any additional shares which are
received as a result of stock dividends, stock split or combination of
shares, recapitalization, reclassification, merger or similar capital or
corporate structure change, (ix) any loans or guaranties made by the
Guarantor or any of its Subsidiaries to or for the benefit of Sunbelt or
any of its Subsidiaries not exceeding an aggregate principal amount of
$12,000,000 at any one time outstanding, (x) any loan participation
program(s) for a period not to exceed seven (7) days with credit risk to
companies with long-term debt rating by Standard & Poor's or Moody's of
not less than single A, (xi) any loans or guaranties made by the Guarantor
or any of its Subsidiaries to or for the benefit of Pier Retail Group
Limited, a company organized under the laws of the United Kingdom, not
exceeding an aggregate principal amount of $6,500,000 at any one time
outstanding, and (xii) any stock or securities of Sunbelt which the
Guarantor or any of its Subsidiaries acquires through the exercise of its
remedies with respect to any lien or security interest held by Guarantor
or any of its Subsidiaries on such stock or securities.
4.
Section 8(d)(ii) of the Lease Guarantee is amended to read in its entirety
as follows:
(ii) Funded Debt -- Other than for the Guaranteed Debt by the
Guarantor or any of its Subsidiaries described in subsection (ix) of the
definition of "Restricted Investments" in Section 3 hereof (the "Sunbelt
Debt Guarantee"), create, incur, assume or suffer to come into existence
any additional Funded Debt unless after giving effect thereto (i) Senior
Funded Debt is less than 50% of Consolidated Net Tangible Assets and
(ii) all Funded Debt in the aggregate is less than sixty percent (60%)
of Consolidated Net Tangible Assets. With respect to Subsidiaries which
are not Guarantors, create, incur, assume or suffer to come into
existence any additional Funded Debt by such Subsidiaries unless after
giving effect thereto all Funded Debt by such Subsidiaries in the
aggregate is less than 70% of Consolidated Net Tangible Assets of such
Subsidiaries. As used in this paragraph 8(ii), (A) prior to demand being
made upon the Guarantor to pay its obligations under the Sunbelt Debt
Guarantee, the term Funded Debt (individually and as used in the
definition of Senior Funded Debt) shall only include the Guaranteed Debt
of Sunbelt to the extent the aggregate amount of such Guaranteed Debt of
Sunbelt exceeds the sum of Sunbelt's Cash Equivalents, and (B) from and
after demand being made upon the Guarantor to pay its obligations under
the Sunbelt Debt Guarantee, the term Funded Debt (individually and as
used in the definition of Senior Funded Debt) shall include such
Guaranteed Debt of Sunbelt.
5.
Section 8(e) of the Lease Guarantee is amended to read in its entirety as
follows:
(e) Investments. Make or permit any of its Subsidiaries to make any
Investment, except (i) purchases of majority of the outstanding stock of
any corporation, (ii) Investments in Guarantor, any of its Subsidiaries,
or any Person that is wholly-owned by Guarantor and/or its Subsidiaries,
not to exceed in the aggregate twenty-five million dollars ($25,000,000)
(iii) Investments in Cash Equivalents or readily marketable securities
having a quoted market value, (iv) Investments in Persons to the extent
permitted by Section 8(c) hereof, (v) Investments in any partnership,
corporation or joint venture the sole purpose of which is to obtain land
and improvements used in the ordinary course of business of Guarantor or
any of its Subsidiaries, which Investments under this subsection (v)
shall not exceed $75,000,000 in the aggregate, (vi) loans or advances to
employees in the ordinary course of business that do not exceed
$5,000,000 in the aggregate, (vii) any loan or guaranties made by
Guarantor or any of its Subsidiaries to or for the benefit of Sunbelt or
any of its Subsidiaries not exceeding an aggregate principal amount of
$12,000,000 at any one time outstanding, (viii) any loans or guaranties
made by Guarantor or any of its Subsidiaries to or for the benefit of
Pier Retail Group Limited not exceeding an aggregate principal amount of
$6,500,000 at any one time outstanding, (ix) any stock or securities of
Sunbelt which Guarantor or any of it Subsidiaries acquires through
foreclosure of any lien or security interest held by Guarantor or any of
its Subsidiaries on such stock or securities, and (x) loan participation
programs for a period not to exceed seven days with credit risk to
companies with long-term debt rating by Standard Poor's or Moody's of
not less than single A.
6.
Section 8(g) of the Lease Guarantee is amended to read in its entirety as
follows:
(g) Guaranteed Debt. Create, assume or suffer to exist or permit any
of its Subsidiaries to create, suffer or exist any Guaranteed Debt
except (i) Guaranteed Debt in existence on the date hereof, (ii)
Guaranteed Debt that is secured by assets of the primary obligor having
a fair market value at least equal to the amount of such Guaranteed
Debt, as determined by an independent qualified appraiser selected by
Guarantor (which appraisal, at Lessor's or any Subsequent Holder's
reasonable request and at Lessor's expense, shall be promptly updated,
but such request shall not be made more often than once every 12
months), and (iii) Guaranteed Debt of Guarantor or a Subsidiary on the
consolidated balance sheet of Guarantor and its Subsidiaries; provided,
however, that in no event shall the aggregate amount of all consolidated
Guaranteed Debt (other than the Guaranteed Debt described in (iii)
above) of Guarantor and its Subsidiaries exceed the Consolidated
Tangible Net Worth, (iv) the Sunbelt Debt Guarantee and (v) any
Guaranteed Debt by Guarantor or any of its Subsidiaries described in
subsection (xi) of the definition of "Restricted Investments" in Section
3 hereof.
7.
The effectiveness of this First Amendment is subject to the conditions
precedent that the Lessor shall have received Officers' Certificates, dated
the date hereof, certifying inter alia:
(a) a true and correct copy of the resolutions adopted by the
Board of Directors or Executive Committees of Guarantor;
(b) the incumbency and specimen signatures of the Persons
executing any documents on behalf of each of the Guarantors;
(c) the truth as of the date first written above of the
representations and warranties made by Guarantors in the Lease
Guarantee, as amended hereby; and
(d) the absence of the occurrence and continuance of any Default
or Event of Default after giving effect to this First Amendment.
8.
Except as amended above, the Lease Guarantee is ratified and confirmed and
shall remain in full force and effect.
9.
This First Amendment to Lease Guarantee shall be binding upon and inure to
the benefit of the parties and their successors and assigns.
10.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
RELATING TO THE SUBJECT MATTER THEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Lease Guarantee to be executed by their respective officers thereunto duly
authorized, as of the date first written above.
GUARANTOR:
PIER 1 IMPORTS, INC.
By:_____________________
Robert G. Herndon,
Executive Vice President
Agreed and Accepted as of
the date first above written:
ASSIGNEE:
FIRST INTERSTATE BANK OF
TEXAS, N.A., as Agent
By:_______________________
Terry R. Dallas,
Senior Vice President
SECOND AMENDMENT TO LEASE GUARANTEE
This Second Amendment to Lease Guarantee (hereinafter referred to as "this
Amendment") is entered into as of the 25th day of February, 1994, among PIER
1 IMPORTS, INC., a Delaware corporation (the "Guarantor") and PIER GROUP,
INC., a Delaware corporation ("Lessor").
WHEREAS, Guarantor and Lessor previously entered into a Lease Guarantee
(the "Lease Guarantee") dated December 30, 1992, whereby Guarantor guaranteed
the full payment and performance when due of all rent, indebtedness, and
obligations now or hereafter existing or owing to Lessor pursuant to lease
agreements from time to time entered into by Pier Lease, Inc., a Delaware
corporation, and by Pier 1 Imports (U.S.), Inc., a Delaware corporation;
WHEREAS, the Lease Guarantee was amended by a First Amendment to Lease
Guarantee dated as of April 28, 1993 (the "First Amendment");
WHEREAS, Guarantor and Lessor have agreed to amend the Lease Guarantee as
more fully set forth hereinafter;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Guarantor and the Lessor agree as follows:
1. Subsection (v) of Section 8(d) of the Lease Guarantee is hereby
amended to read as follows:
(v) Maintenance of Fixed Charge Coverage -- Permit the ratio of
Cash Flow Available for Fixed Charges to Fixed Charges, to be determined on the
last day of each fiscal quarter for the preceding 12 months, to be less than
(i) 1.3 to 1 for each of the fiscal quarters ending during the period from
the date of this Guarantee through February 27, 1993, (ii) 1.4 to 1 for each
of the fiscal quarters ending during the period from February 28, 1993,
through February 25, 1994, (iii) 1.2 to 1 for each of the fiscal quarters
ending during the period from February 26, 1994, to November 30, 1994, and
(iv) 1.25 to 1 for each fiscal quarter ending thereafter.
2. Except as herein specifically amended and modified the Lease
Guarantee and First Amendment is unchanged and continues in full force and
effect.
3. Guarantor hereby consents and agrees to this Amendment and the
Guarantor hereby confirms and ratifies the Lease Guarantee's and First
Amendment's existence and each and every term, condition, and covenant
therein contained, to the same extent and as though the same were set forth
herein in full.
4. This Amendment may be executed in a number of identical
counterparts, each of which shall be deemed an original. In making proof of
this instrument, it shall not be necessary for any party to account for all
counterparts, and it shall be sufficient for any party to produce but one
such counterpart.
5. The Lease Guarantee, First Amendment and this Amendment constitute
a "Loan Agreement" as defined in Section 26.02(a) of the Texas Business and
Commerce Code, represent the final and entire agreement and understanding
among the Guarantor and the Lessor relating to the subject matter hereof and
thereof, supersede all prior proposals, agreements and understandings
relating to the subject matter and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. There
are no unwritten oral agreements among the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first written above.
GUARANTOR:
PIER 1 IMPORTS, INC.
By:___________________________
Robert G. Herndon,
Executive Vice President
LESSOR:
PIER GROUP, INC.
By:___________________________
George R. Mihalko, President
AGREED AND ACCEPTED as of the date first above written:
ASSIGNEE:
FIRST INTERSTATE BANK OF TEXAS, N.A.,
as Agent
By:___________________________
Name:_________________________
Title:________________________