EXHIBIT 9(b)
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of August 24, 1999
between
BANK OF AMERICA, N.A.
and
GARDEN RIDGE CORPORATION
TABLE OF CONTENTS PAGE
SECTION 1. DEFINITIONS....................................................-1-
1.1 Terms Defined Above............................................-1-
1.2 Certain Definitions............................................-1-
1.3 Type of Advances...............................................-9-
1.4 Accounting Principles.........................................-10-
SECTION 2. THE ADVANCES AND THE LETTERS OF CREDIT........................-10-
2.1 The Advances..................................................-10-
2.2 Procedure.....................................................-10-
2.3 Fees..........................................................-12-
2.4 Reduction of the Commitment...................................-12-
2.5 Repayment.....................................................-13-
2.6 Interest......................................................-13-
2.7 Prepayments...................................................-14-
2.8 Breakage Costs................................................-15-
2.9 Increased Costs...............................................-15-
2.10 Payments and Computations.....................................-15-
2.11 No Deduction for Certain Taxes................................-16-
2.12 Letters of Credit.............................................-16-
SECTION 3. CONDITIONS PRECEDENT..........................................-17-
3.1 Representations and Warranties................................-17-
3.2 Event of Default..............................................-17-
3.3 Material Adverse Change.......................................-17-
SECTION 4. REPRESENTATIONS AND WARRANTIES................................-18-
4.1 Organization..................................................-18-
4.2 Authorization.................................................-18-
4.3 Enforceability................................................-18-
4.4 Financial Condition...........................................-18-
4.5 Subsidiaries..................................................-18-
4.6 Debt..........................................................-19-
4.7 Ownership and Liens...........................................-19-
4.8 Litigation....................................................-19-
4.9 Other Agreements..............................................-19-
4.10 Permits.......................................................-19-
4.11 Compliance with Laws..........................................-19-
4.12 Taxes.........................................................-20-
4.13 ERISA.........................................................-20-
SECTION 5. COVENANTS.....................................................-20-
5.1 Organization..................................................-20-
5.2 Reporting.....................................................-21-
5.3 Inspection....................................................-22-
5.4 Financial Covenants...........................................-23-
5.5 Debt..........................................................-23-
5.6 Liens.........................................................-24-
5.7 Corporate Transactions........................................-24-
5.8 Asset Sales...................................................-24-
5.9 Distributions, etc............................................-25-
5.10 Transactions with Affiliates..................................-25-
5.11 Investments and Capital Expenditures..........................-25-
5.12 Maintenance of Property.......................................-25-
5.13 Compliance with Laws..........................................-25-
5.14 Taxes.........................................................-26-
5.15 ERISA.........................................................-26-
5.16 Lines of Business; Inventory Accounting Method................-26-
5.17 Insurance.....................................................-26-
5.18 Environmental Law Compliance..................................-26-
SECTION 6. EVENTS OF DEFAULT.............................................-27-
6.1 Payment Failure...............................................-27-
6.2 False Representation..........................................-27-
6.3 Breach of Covenant............................................-27-
6.4 Bankruptcy and Insolvency.....................................-27-
6.5 Adverse Judgment..............................................-27-
6.6 Cross Default.................................................-28-
6.7 Ownership.....................................................-28-
6.8 Guaranties....................................................-28-
SECTION 7. REMEDIES......................................................-28-
7.1 Terminate Commitments.........................................-28-
7.2 Acceleration..................................................-28-
7.3 Setoff........................................................-28-
7.4 Credit Documents..............................................-29-
7.5 Default Interest..............................................-29-
7.6 Remedies Cumulative and Not Waived............................-29-
7.7 Application of Payments.......................................-29-
SECTION 8. MISCELLANEOUS.................................................-29-
8.1 Expenses......................................................-29-
8.2 Indemnification of Bank.......................................-29-
8.3 Usury Savings.................................................-30-
8.4 Notice........................................................-30-
8.5 Timing........................................................-31-
8.6 Amendments and Waivers........................................-31-
8.7 Invalidity....................................................-31-
8.8 Survival of Agreements........................................-31-
8.9 Successors and Assigns........................................-31-
8.10 Arbitration...................................................-31-
8.11 Counterparts..................................................-32-
8.12 Choice of Law.................................................-32-
8.13 No Further Agreements.........................................-32-
Exhibit A - Form of Borrowing Base and Compliance Certificate
Exhibit B - Form of Guaranty
Exhibit C - Form of Letter of Credit Application
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Notice of Conversion or Continuation
Exhibit F - Form of Closing Document Checklist
Schedule 4.4 - Liabilities
Schedule 4.5 - Subsidiaries
Schedule 4.6 - Debt
Schedule 4.8 - Litigation
Schedule 5.6 - Liens
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amended and Restated Credit Agreement dated as of August 24,
1999 is between Garden Ridge Corporation, a Delaware corporation ("Borrower"),
and Bank of America, N.A.
("Bank").
A. The Borrower and the Bank are parties to the Second Amended and
Restated Credit Agreement dated as of October 26, 1995, as amended by Amendment
No. 1 dated as of November 15, 1996 and Amendment No. 2 dated as of June 4, 1998
(as amended, the "Original Loan Agreement").
B. The Borrower and the Bank wish to amend and restate the Original Loan
Agreement.
Therefore, the Borrower and the Bank agree as follows:
SECTION 1. DEFINITIONS.
1.1 TERMS DEFINED ABOVE. As used in this Agreement, the terms "Original
Loan Agreement," "Borrower," and "Bank" shall have the meanings indicated above.
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the terms below shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"ADVANCE" means any revolving credit advance made pursuant to Section 2.1.
"AFFILIATE" means, with respect to any Person, any other Person (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person; (b) which
beneficially owns or holds of record 5 percent or more of any class of Voting
Securities of the Person; or (c) in which 5 percent or more of any class of
Voting Securities is beneficially owned or held of record by the Person. The
term "control" (including the terms "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Securities, by contract, or otherwise.
"AGREEMENT" means this Third Amended and Restated Credit Agreement dated
as of August 24, 1999 between the Borrower and the Bank, as it may be amended,
modified, or supplemented from time-to-time.
"APPLICABLE LENDING OFFICE" means the Bank's Domestic Lending Office in
the case of a Prime Rate Advance and the Bank's Eurodollar Lending Office in the
case of a Eurodollar Rate Advance.
"APPLICABLE MARGIN" means, at any time with respect to any Eurodollar Rate
Advance, 1.50%.
"BORROWING BASE" means, at any date of its determination, 40% of the value
of the Borrower's and its Subsidiaries' inventory as determined in accordance
with GAAP.
"BORROWING BASE AND COMPLIANCE CERTIFICATE" means a borrowing base and
compliance certificate in the form of the Borrowing Base and Compliance
Certificate attached as EXHIBIT A.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Houston, Texas and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings are carried on by
banks in the London interbank market.
"CAPITAL LEASES" means, for any Person and time, any lease of any Property
by such Person as lessee which would, in accordance with GAAP consistently
applied, be required to be classified and accounted for as a capital lease on
the balance sheet of such Person.
"CLEAN-UP PERIOD" means a period of time selected by the Borrower
beginning no earlier than November 15 of each year and no later than January 2
of the following year and lasting 60 consecutive days during which there shall
be no outstanding Advances.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereof.
"COMMITMENT" means the obligation of the Bank to make the Advances and
issue the Letters of Credit in an amount not to exceed (a) from the date hereof
until November 15, 1999, $30,000,000, and (b) thereafter, $25,000,000, as each
such amount may be reduced pursuant to Section 2.4 or terminated pursuant to
Section 7.
"COMMONLY CONTROLLED ENTITY" means a Person which is under common control
with the Borrower within the meaning of Section 414(b) or 414(c) of the Code.
"CONVERT", "CONVERSION", and "CONVERTED" each refers to a conversion of an
Advance of one Type into an Advance of another Type pursuant to Section 2.2(b).
"CREDIT DOCUMENTS" means this Agreement, the Note, the Guaranties, and
each other agreement, document, or instrument now or hereafter executed in
connection with this Agreement.
"DEBT" means (a) indebtedness for borrowed money; (b) obligations
evidenced by bonds, debentures, notes, or other similar instruments; (c)
obligations to pay the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under Capital Leases;
(e) obligations under guaranties, endorsements, letters of credit and
reimbursements for draws thereunder, performance bonds, assurances of payment,
required investments, assurances against loss, and all other contingent
obligations relating to the assurance of another Person against loss; (f) any
obligation secured by any Lien; and (g) all liabilities of such Person in
respect of unfunded vested benefits under any Plan.
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"DEFAULT" means the occurrence of any event which with notice or lapse of
time or both would become an Event of Default.
"DEFAULT RATE" means a fluctuating interest rate per annum equal to the
Prime Rate plus 5 percent, but in no event to exceed the Highest Lawful Rate.
"DOLLAR EQUIVALENT" means the equivalent in another currency of an amount
in Dollars to be determined by reference to the rate of exchange quoted by the
Bank on the date of determination, to prime banks in New York City for the spot
purchase in the New York City foreign exchange market of such amount of Dollars
with such other currency.
"DOLLARS" and "$" means lawful money of the United States of America.
"DOMESTIC LENDING OFFICE" means the office of the Bank at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other office of the Bank as it may from
time-to-time specify to the Borrower.
"EBIT" means, for any period, (a) Net Income for such period PLUS (b) to
the extent deducted in determining Net Income, Interest Expense and taxes for
such period.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time-to-time.
"EURODOLLAR LENDING OFFICE" means the office of the Bank at ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other office of the Bank as it may
from time-to-time specify to the Borrower.
"EURODOLLAR RATE" means, for the Interest Period for each Eurodollar Rate
Advance, an interest rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on display page 3750 (or any successor page) of
the Dow ▇▇▇▇▇ Markets Service (formerly known as Telerate) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period. If for any reason such rate is
not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Rate
Advance for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.6(b).
"EURODOLLAR RATE RESERVE PERCENTAGE" of the Bank for the Interest Period
for any Eurodollar Rate Advance means the reserve percentage applicable during
such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in
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such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time-to-time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for the Bank with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period and in an amount
substantially equal to such Eurodollar Rate Advance.
"EVENT OF DEFAULT" means the occurrence of any of the events specified in
Section 6.
"EXPIRATION DATE" means, with respect to any Letter of Credit, the date on
which such Letter of Credit will expire or terminate in accordance with its
terms.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
"FIXED CHARGE COVERAGE RATIO" means, for any Person for any fiscal
quarter, the ratio of such Person's (a) EBIT PLUS Lease Expense, each for the
four-fiscal quarter period then ended to (b) Interest Expense PLUS Restricted
Payments, excluding stock repurchases permitted or consented to hereunder, PLUS
Lease Expense, each for the four-fiscal quarter period then ended, PLUS current
maturities of long-term Debt as of the end of such period.
"FUNDING LOSS" means, with respect to (a) any payment of principal of any
Eurodollar Rate Advance by the Borrower on a day other than the last day of the
Interest Period for such Advance as a result of any prepayment pursuant to
Section 2.7, the acceleration of the maturity of the Note pursuant to Section 7,
or for any other reason, (b) the Borrower's failure to make a principal or
interest payment or prepayment with respect to any Eurodollar Rate Advance on
the date such payment or prepayment is due and payable, or (c) the Borrower's
failure to borrow as a result of its failure to satisfy the conditions described
in Section 3 on or before the date specified in the applicable Notice of
Borrowing or Notice of Conversion or Continuation for a Eurodollar Rate Advance
as described in Section 2.2(d), any loss or reasonable expense reasonably
incurred by the Bank (including but not limited to any loss or reasonable
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Bank to fund or maintain such Advance) and shall be
limited to the amount equal to the discounted present value of the difference
between (i) the Bank's cost of obtaining the funds for the amount prepaid, the
amount which the Borrower failed to prepay, or the amount the Borrower failed to
borrow in accordance with a Notice of Borrowing or a Notice of Conversion or
Continuation, MINUS (ii) any lesser amount received by the Bank in redeploying
such amount during the "Applicable Period." The Applicable Period (A) for a
prepayment is from the date of such prepayment to the end of the then current
Interest Period, and (B) for a failure to borrow or prepay, is from the intended
date of the borrowing or prepayment to the end of the Interest Period for such
borrowing or prepayment. Notwithstanding the foregoing, Funding Loss shall
include reasonable administrative and other losses or expenses (other than loss
of anticipated profits) incurred by the Bank in redeploying or obtaining the
funds loaned to the Borrower. The Bank shall promptly provide a statement,
supported where applicable and possible by documentary evidence, explaining the
amount of such loss or expense (which statement shall be conclusive absent
manifest error).
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"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
the Bank, the Borrower or any of their respective Properties.
"GRPI" means Garden Ridge Pottery, Inc., a Texas corporation.
"GUARANTORS" means (a) Garden Ridge Finance Corporation, (b) Garden Ridge
Management, Inc., (c) Garden Ridge Investments, Inc., (d) Garden Ridge, L.P.,
and (e) any other Subsidiary of the Borrower.
"GUARANTY" means a guaranty executed by a Subsidiary of the Borrower in
the form of the Guaranty attached as EXHIBIT B.
"HAZARDOUS MATERIALS" has the meaning set forth in Section 5.18.
"HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that
at any time or from time-to-time may be contracted for, charged, or received
under the laws applicable to the Bank which are presently in effect or, to the
extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. On each day, if any, that Chapter 303 of the Texas
Finance Code, as amended, establishes the Highest Lawful Rate, the Highest
Lawful Rate shall be the weekly ceiling for that day as provided for in Chapter
303 of the Texas Finance Code, as amended (formerly known as the indicated
(weekly) rate ceiling in Article 5069-1.04 of the Revised Civil Statutes of
Texas). Chapter 346 of the Texas Finance Code (which regulates certain revolving
credit loan accounts and revolving tri-party accounts) shall not apply to this
Agreement or the Notes.
"INTEREST EXPENSE" means, for any period, total interest expense for such
period, whether paid or accrued (including that attributable to obligations
which have been or should be, in accordance with GAAP, recorded as Capital
Leases), including, without limitation, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under any cap, swap, collar or other interest rate hedge
agreement, all as determined in conformity with GAAP.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance, the period
commencing on the date of such Eurodollar Rate Advance or the date of the
Conversion of any Prime Rate Advance into a Eurodollar Rate Advance and ending
on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.2 and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.2. The duration of each such Interest Period
shall be in the case of Eurodollar Rate Advances one, two, three, or six months
(a "month" being, subject to clause (c) below, the period of time extending from
any calendar date in a calendar month to and including the numerically
corresponding calendar date in the next succeeding calendar month), as the
Borrower may, upon notice received by the Bank not
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later than 1:00 p.m. (Houston, Texas time) on the third Business Day prior to
the first day of such Interest Period, select; PROVIDED, HOWEVER, that:
(a) the Borrower may not select any Interest Period for any Advance
which ends after the Maturity Date;
(b) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day, PROVIDED that if
such extension would cause the last day of such Interest Period for any
Eurodollar Rate Advance to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding Business Day; and
(c) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month.
"INVESTMENT AGREEMENT" means the Investment Agreement dated as of December
17, 1993 among Allied Capital Corporation, Allied Capital Corporation II, Allied
Technology Partnership, Equus Capital Partners, L.P., Equus II Incorporated, and
Triad Ventures Limited II, L.P., as amended by Amendment No. 1 to the Investment
Agreement dated as of October 21, 1994 and Amendment No. 2 to the Investment
Agreement dated as of November 15, 1994.
"INVESTMENT" has the meaning set forth in Section 5.11.
"LEASE EXPENSE" means, for any period, all amounts payable by a Person
during such period under any lease, sublease, or other instrument (other than a
Capital Lease) pursuant to which such Person is entitled to use any real
Property of another Person or any personal Property of another Person (to the
extent the amounts owing under such personal Property leases, subleases or other
instruments exceed $150,000 in the aggregate).
"LETTER OF CREDIT" means, individually, any irrevocable documentary or
standby letter of credit issued by the Bank for the account of the Borrower or
any of its Subsidiaries which is subject to this Agreement, and "LETTERS OF
CREDIT" means all such letters of credit collectively.
"LETTER OF CREDIT APPLICATION" means a letter of credit application on the
Bank's form and attached as EXHIBIT C.
"LETTER OF CREDIT EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn maximum face amount of each Letter of Credit at such time and
(b) the aggregate unpaid amount of all Reimbursement Obligations at such time.
"LIEN" means with respect to any asset (a) any claim, pledge, mortgage,
lien, security interest, or encumbrance of any kind or (b) the interest of a
vendor or lessor under any conditional sale agreement or other title retention
agreement.
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"LIQUID INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States maturing
within 180 days from the date of any acquisition thereof;
(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days from
the date of acquisition thereof ("bank debt securities"), issued by (A) the Bank
or (B) any other bank or trust company which has primary capital of not less
than $500,000,000 or the Dollar Equivalent thereof, if at the time of deposit or
purchase, such bank debt securities are rated not less than "AA" (or the then
equivalent) by the rating service of Standard & Poor's Corporation or of ▇▇▇▇▇'▇
Investors Service, Inc., and (ii) commercial paper issued by (A) any Bank or (B)
any other Person if at the time of purchase such commercial paper is rated not
less than "A-1" (or the then equivalent) by the rating service of Standard &
Poor's Corporation or not less than "P-1" (or the then equivalent) by the rating
service of ▇▇▇▇▇'▇ Investors Service, Inc., or upon the discontinuance of both
of such services, such other nationally recognized rating service or services,
as the case may be, as shall be selected by the Borrower with the consent of the
Bank;
(c) repurchase agreements relating to investments described in
clauses (a) and (b) above with a market value at least equal to the
consideration paid in connection therewith, with any Person who regularly
engages in the business of entering into repurchase agreements and has a
combined capital surplus and undivided profit of not less than $500,000,000 or
the Dollar Equivalent thereof, if at the time of entering into such agreement
the debt securities of such Person are rated not less than "AA" (or the then
equivalent) by the rating service of Standard & Poor's Corporation or of ▇▇▇▇▇'▇
Investors Service, Inc.; and
(d) such other instruments (within the meaning of Article 9 of the
Texas Business and Commerce Code) as the Borrower may request and the Bank may
approve in writing, which approval will not be unreasonably withheld.
"MATURITY DATE" means the earlier of (A) June 30, 2001, and (B) the
earlier termination in whole of the Commitment pursuant to Section 2.4 or
Section 7.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA.
"NET INCOME" means, for any period, the Borrower's consolidated net income
for such period after taxes, as determined in accordance with GAAP.
"NET WORTH" means, for any Person and time, the sum of the assets of the
Person less the total liabilities of the Person except any preferred stock of
such Person to the extent such preferred stock is classified as a "liability" on
such Person's financial statements, as set forth on its consolidated balance
sheet as of such date and determined in accordance with GAAP consistently
applied.
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"NOTE" means the $30,000,000 Promissory Note dated as of August 24, 1999
by the Borrower payable to the order of the Bank, as the same may be increased,
extended, rearranged or otherwise amended from time-to-time.
"NOTICE OF BORROWING" means a notice of borrowing in the form of the
attached EXHIBIT D signed by a Responsible Officer of the Borrower.
"NOTICE OF CONVERSION OR CONTINUATION" means a notice of conversion or
continuation in the form of the attached EXHIBIT E signed by a Responsible
Officer of the Borrower.
"OBLIGATIONS" means any and all amounts now or hereafter owed by the
Borrower to the Bank in connection with this Agreement and any other Credit
Document, including any increases, extensions, rearrangements, and other
amendments thereof, whether for principal, interest, fees, reimbursement,
indemnification, or otherwise.
"PBGC" means the Pension Benefit Guaranty Corporation or its successor.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof (including government
corporations), or any other form of entity, or any trustee, receiver, custodian
or similar official.
"PLAN" means pension plan which is covered by Title IV of ERISA and in
respect of which the Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA.
"PRIME RATE" means the rate of interest established by the Bank from time
to time as its "prime rate," whether the Borrower has notice thereof. Such rate
is set by the Bank as a general reference rate of interest, taking into account
such factors as the Bank may deem appropriate, it being understood that many of
the Bank's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate actually charged to any customer
and that the Bank may make various commercial or other loans at rates of
interest having no relationship to such rate.
"PRIME RATE ADVANCE" means an Advance which bears interest as provided in
Section 2.6(a).
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"REIMBURSEMENT OBLIGATIONS" means, with respect to any Letter of Credit,
all of the reimbursement and other payment obligations of the Borrower set forth
in the Letter of Credit Application applicable to such Letter of Credit.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
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"RESPONSIBLE OFFICER" means the Chief Executive Officer or Chief Financial
Officer of the Person to whom reference is made.
"RESTRICTED PAYMENT" means the making by any Person of any dividends or
other distributions (in cash, Property, or otherwise) on, or any payment for the
purchase, redemption or other acquisition of, any shares of any capital stock of
such Person, other than dividends payable in such Person's stock.
"SIGNAL SECURITY DOCUMENTS" means (a) the Leasehold Deeds of Trust (With
Security Agreement and Assignment of Rents and Leases) each dated November 4,
1988 by Garden Ridge Pottery and World Imports, Inc. ("World Imports"), as
grantor, to ▇▇▇▇▇▇ ▇▇▇▇, as trustee, for the benefit of Signal Capital
Corporation ("Signal"), (b) the Leasehold Deed of Trust (With Security Agreement
and Assignment of Rents and Leases) dated November 4, 1988 by GRPI, as grantor,
to ▇▇▇▇▇▇ ▇▇▇▇, as trustee, for the benefit of Signal, (c) the Landlord's
Agreements each dated as of May 12, 1992 by ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
as lessors and World Imports, as lessee, for the benefit of Signal, (d) the
Amended and Restated Loan and Security Agreement dated as of August 13, 1992
("Amended Agreement") between GRPI and the Borrower, (e) the Renewal Note, the
Revolving Credit Note, Term Note A and Term Note B (each as defined in the
Amended Agreement) (f) the Guaranty dated as of November 4, 1988 by World
Imports for the benefit of Signal; (g) the Security Agreement dated as of
November 4, 1988 between World Imports and Signal; (h) the Pledge Agreement
dated as of November 4, 1988 by GRPI in favor of Signal; and (i) any other
agreement executed in connection with the Amended Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, any other Person, a
majority of whose outstanding Voting Securities (other than directors'
qualifying shares) shall at any time be owned by such Person or one or more
Subsidiaries of such Person.
"TANGIBLE NET WORTH" means, for any Person and time, such Person's Net
Worth minus the amount of any such Net Worth attributable to goodwill, patents,
trademarks, copyrights, non-competition covenants, deferred charges, consulting
agreements and all other intangible assets (as determined in accordance with
GAAP).
"TCR ADVISORY AGREEMENT" means the TCR Advisory Agreement dated as of July
8, 1992 between the Borrower and Three Cities Research, Inc.
"TYPE" has the meaning set forth in Section 1.3.
"VOTING SECURITIES" means (a) capital stock of a corporation having
general voting power under ordinary circumstances to elect directors of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have special voting power or rights by reason of the
happening of any contingency), and (b) any partnership interest or other
ownership interest having general voting power to elect the general partner or
other management of a partnership or other Person.
1.3 TYPE OF ADVANCES. Advances are classified by "Type." The "Type" of an
Advance refers to whether such Advance is a Prime Rate Advance or a Eurodollar
Rate Advance.
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1.4 ACCOUNTING PRINCIPLES. When this Agreement requires the determination
of a Person's assets, liabilities, items of income, items of expense, or any
other commonly used accounting term, then that determination shall be made in
accordance with GAAP applied on a basis consistent with the application
reflected in the financial statements of the Person whose assets, liabilities,
items of income, or items of expense are being calculated.
SECTION 2. THE ADVANCES AND THE LETTERS OF CREDIT
2.1 THE ADVANCES. The Bank agrees, on the terms and conditions set forth
in this Agreement, to make Advances to the Borrower from time-to-time on any
Business Day during the period from the date of this Agreement until the
Maturity Date in an aggregate outstanding amount not to exceed at any time the
lesser of (i) the Commitment LESS the aggregate outstanding principal amount of
the Advances and the Letter of Credit Exposure at such time and (ii) the
Borrowing Base LESS the aggregate outstanding principal amount of the Advances
and the Letter of Credit Exposure at such time. Each Advance shall be in an
aggregate amount not less than (A) with respect to Prime Rate Advances, $25,000
and in integral multiples of $25,000 in excess thereof and (B) with respect to
Eurodollar Rate Advances, $100,000 and in integral multiples of $100,000 in
excess thereof. Within the limits of the Bank's Commitment, the Borrower may
from time-to-time borrow, prepay pursuant to Section 2.7 and reborrow under this
Section 2.1.
2.2 PROCEDURE.
(a) NOTICE. Each Advance shall be made pursuant to a Notice of
Borrowing (or by telephone notice promptly confirmed in writing by a Notice of
Borrowing), given not later than 1:00 p.m. (Houston, Texas time) (i) on the
third Business Day before the date of the proposed Advance, in the case of a
Eurodollar Rate Advance, or (ii) on the Business Day of the proposed Advance, in
the case of a Prime Rate Advance, by the Borrower to the Bank. Each Notice of a
Borrowing shall be in writing or by telecopier or telex, confirmed immediately
in writing, specifying the requested date of such Advance, Type of Advance,
aggregate amount of such Advance, and if such Advance is to be a Eurodollar Rate
Advance, the Interest Period for such Advance. The Bank shall, before 1:00 p.m.
(Houston, Texas time) on the date of the Advance, make such funds available to
the Borrower at its account at the Bank.
(b) CONVERSIONS AND CONTINUATIONS. In order to elect to Convert or
continue an Advance under this Section, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Bank (or give telephone
notice promptly confirmed in writing by a Notice of Conversion or Continuation)
at its office no later than 1:00 p.m. (Houston, Texas time) (i) on the Business
Day of the proposed conversion date in the case of a Conversion to a Prime Rate
Advance, and (ii) at least three Business Days in advance of the proposed
Conversion or continuation date in the case of a Conversion to, or a
continuation of, a Eurodollar Rate Advance. Each such Notice of Conversion or
Continuation shall be in writing or by telex or telecopier confirmed immediately
in writing, stating (A) the requested Conversion or continuation date (which
shall be a Business Day), (B) the amount and Type of the Advance to be Converted
or continued, (C) whether a Conversion or continuation is requested, and if a
Conversion, into what Type of Advance, and (D) in the case of a Conversion to,
or a continuation of, a Eurodollar Rate Advance, the requested Interest Period.
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(c) CERTAIN LIMITATIONS. Notwithstanding anything in paragraphs (a)
and (b) above:
(i) at no time shall there be more than five outstanding
Eurodollar Rate Advances;
(ii) if the Bank shall, at least one Business Day before the
date of any requested Advance, reasonably conclude that the passage
of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other
Governmental Authority asserts that it is unlawful, for the Bank or
its Eurodollar Lending Office to perform its obligations under this
Agreement to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances, the right of the Borrower to select
Eurodollar Rate Advances shall be suspended until the Bank shall
reasonably determine that the circumstances causing such suspension
no longer exist (which the Bank agrees promptly to provide notice of
to Borrower), and each subsequent Advance during such period shall
be a Prime Rate Advance;
(iii) if the Bank is unable, after the exercise of reasonable
diligence, to determine the Eurodollar Rate for Eurodollar Rate
Advances, the right of the Borrower to select Eurodollar Rate
Advances shall be suspended until the Bank shall reasonably
determine that the circumstances causing such suspension no longer
exist (which the Bank agrees promptly to provide notice of to
Borrower), and each subsequent Advance during such period shall be a
Prime Rate Advance; provided, however, the Bank agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would permit the
Bank to determine the Eurodollar Rate for Eurodollar Rate Advances
and would not, in the Bank's reasonable judgment, be otherwise
disadvantageous;
(iv) if the Bank shall, at least one Business Day before the
date of any requested Advance, reasonably conclude that the
Eurodollar Rate for Eurodollar Rate Advances will not adequately
reflect the cost to the Bank of making or funding Eurodollar Rate
Advances, as the case may be, the right of the Borrower to select
Eurodollar Rate Advances shall be suspended until the Bank shall
reasonably determine that the circumstances causing such suspension
no longer exist (which the Bank agrees promptly to provide notice of
to Borrower), and each subsequent Advance during such period shall
be a Prime Rate Advance;
(v) if the Borrower fails to select the duration or
continuation of any Interest Period for any Eurodollar Rate Advance
in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.2 and paragraphs (a) and (b) above,
the Bank will forthwith so notify the Borrower and such Advance will
be made available to the Borrower on the date of such Borrowing with
a one-month Interest Period and if an existing Eurodollar Rate
Advance, continue with a one-month Interest Period; and
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(vi) if the Borrower fails to deliver a Notice of Conversion
or Continuation prior to the end of an Interest Period for any
existing Eurodollar Rate Advance which is to be refinanced, then the
Borrower shall (unless such Advance is repaid at the end of an
Interest Period) be deemed to have given notice of an election to
refinance such Advance with a Prime Rate Advance.
(d) NOTICES IRREVOCABLE. Each Notice of Borrowing pursuant to which
the Borrower requests a Eurodollar Rate Advance and Notice of Conversion or
Continuation pursuant to which the Borrower elects to Convert to or continue a
Eurodollar Rate Advance shall be irrevocable and binding on the Borrower. In the
case of any Advance designated in the related Notice of Borrowing or Notice of
Conversion or Continuation specifies that the Proposed Borrowing (as defined in
such Notice of Conversion or Continuation) shall be a Eurodollar Rate Advance,
the Borrower shall indemnify the Bank against any Funding Loss reasonably
incurred by the Bank as a result of any failure of the Borrower to borrow the
Advance described therein due to the Borrower's failure to fulfill on or before
the date specified in such Notice of Borrowing or Notice of Conversion or
Continuation for such Advance the applicable conditions set forth in Section 3.
(e) NOTE. The indebtedness of the Borrower to the Bank resulting
from Advances owing to the Bank shall be evidenced by the Note from the Borrower
payable to the order of the Bank.
2.3 FEES.
(a) COMMITMENT FEES. The Borrower agrees to pay to the Bank a
commitment fee on the average daily amount by which the Commitment exceeds the
sum of the outstanding Advances and the Letter of Credit Exposure from the date
of this Agreement until the Maturity Date at the rate of 0.30% per annum. The
fees payable pursuant to this clause (a) are due quarterly in arrears on the
last day of each March, June, September, and December commencing September 30,
1999 and on the Maturity Date.
(b) LETTER OF CREDIT FEES. The Borrower agrees to pay to the Bank a
fee for each Letter of Credit equal to 1.5% per annum on the face amount of such
Letter of Credit. The foregoing fee shall be based on the maximum amount
available to be drawn under such Letter of Credit from the date of issuance of
the Letter of Credit until its Expiration Date and be payable quarterly in
advance on the date of the issuance of the Letter of Credit and for the period
from such date until the end of the calendar quarter in which such Letter of
Credit is issued and on the last day of each March, June, September and December
thereafter until its Expiration Date; provided that, in no event shall the total
fee payable pursuant to this Section 2.3(b) be in amount less than $250 for any
Letter of Credit.
(c) UPFRONT FEES. The Borrower agrees to pay to the Bank an upfront
fee equal to $97,500 on the date hereof.
2.4 REDUCTION OF THE COMMITMENT. The Borrower shall have the right, upon
at least five Business Days' irrevocable notice to the Bank, to terminate in
whole or reduce ratably in part the unused portion of the Commitment; PROVIDED
that each partial reduction shall be in the minimum
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aggregate amount of $500,000 and in integral multiples of $500,000 in excess
thereof. Any reduction and termination of the Commitment pursuant to this
Section 2.4 shall be permanent, with no obligation of the Bank to reinstate such
Commitment and the commitment fees provided for in Section 2.3(a) shall
thereafter be computed on the basis of the Commitment, as so reduced.
2.5 REPAYMENT. The Borrower shall repay the outstanding principal amount
of each Advance on the first day of each Clean-Up Period and on the Maturity
Date.
2.6 INTEREST. The Borrower shall pay interest on the unpaid principal
amount of each Advance made by the Bank from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(a) PRIME RATE ADVANCES. If such Advance is a Prime Rate Advance, a
rate per annum equal at all times to the Prime Rate in effect from time-to-time
and payable in arrears on the last day of each calendar month and on the date
such Prime Rate Advance shall be paid in full, PROVIDED that any amount of
principal which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the Default Rate pursuant to Section 7.5.
(b) EURODOLLAR RATE ADVANCES. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during the Interest Period for such
Advance to the Eurodollar Rate for such Interest Period PLUS the Applicable
Margin, payable on each monthly anniversary date of the beginning of such
Interest Period and on the last day of such Interest Period; PROVIDED that any
amount of principal which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the Default Rate pursuant to Section 7.5.
(c) ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES. The Borrower
shall pay to the Bank, so long as it shall be required under regulations of the
Federal Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate Advance, from the effective date
of such Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the Interest Period for such Advance from (ii) the rate
obtained by dividing such Eurodollar Rate by a percentage equal to 100% MINUS
the Eurodollar Rate Reserve Percentage of the Bank for such Interest Period,
payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by the Bank and notified to the Borrower
(such notice to include the calculation of such additional interest, which
calculation shall be conclusive in the absence of manifest error) and shall be
due and payable within five Business Days after the giving of such notice.
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2.7 PREPAYMENTS.
(a) RIGHT TO PREPAY. The Borrower shall have no right to prepay any
principal amount of any Advance except as provided in this Section 2.7.
(b) OPTIONAL. The Borrower may elect to prepay any of the Advances,
after giving by 1:00 p.m. (Houston, Texas time) (i) in the case of Eurodollar
Rate Advances, at least three Business Days' or (ii) in the case of Prime Rate
Advances, same day prior written notice to the Bank stating the proposed date
and aggregate principal amount of such prepayment. Any such notice may also
specify the Advances to which such prepayments are to be applied, in which event
the Bank shall apply the prepayments as so specified. If any such notice is
given, the Borrower shall prepay such Advance in whole or ratably in part in an
aggregate principal amount equal to the amount specified in such notice,
together with accrued interest to the date of such prepayment on the principal
amount prepaid and, within five Business Days after receipt of notice from the
Bank specifying the aggregate amount, the amount, if any, required to be paid
pursuant to Section 2.8 as a result of such prepayment being made on such date;
PROVIDED, however, that each partial prepayment of principal shall be in a
minimum amount of (A) in the case of a prepayment of Prime Rate Advances,
$25,000 and in integral multiples of $25,000 in excess thereof and (B) in the
case of Eurodollar Rate Advances, $100,000 and in integral multiples of $100,000
in excess thereof.
(c) MANDATORY. If at any time during the term of this Agreement, the
aggregate outstanding amount of the Advances PLUS the Letter of Credit Exposure
exceeds either (i) the Commitment or (ii) the Borrowing Base, the Borrower shall
immediately without notice or demand pay the Bank an amount equal to the amount
of such excess, including any unpaid accrued interest on the principal amount
prepaid. Additionally, on the date of each reduction of the Commitment pursuant
to Section 2.4 and on the date of the issuance, increase, or extension of any
Letter of Credit made pursuant to Section 2.12, the Borrower agrees to make a
prepayment in respect of the outstanding amount of Advances to the extent, if
any, that the aggregate unpaid principal amount of all the Advances PLUS the
Letter of Credit Exposure exceeds the Commitment, as so reduced. Each such
mandatory prepayment may be accompanied by a notice from the Borrower indicating
the amount of such prepayment and the Advances to which such prepayment is to be
applied, in which event the Bank shall apply the prepayments as so specified.
(d) ILLEGALITY. If the Bank shall notify the Borrower that the
passage of or any change in or in the interpretation of any law or regulation
makes it unlawful, or that any central bank or other Governmental Authority
asserts that it is unlawful for the Bank or its Eurodollar Lending Office to
perform its obligations under this Agreement to maintain any Eurodollar Rate
Advances then outstanding hereunder, (i) the Borrower shall, no later than 1:00
p.m. (Houston, Texas time) (A) if not prohibited by law, on the last day of the
Interest Period for each outstanding Eurodollar Rate Advance or (B) if required
by such passage of or change in or in interpretation of such law or regulation,
on the fifth Business Day following its receipt of notice thereof from the Bank
prepay all of the Eurodollar Rate Advances then outstanding, together with
accrued interest on the principal amount prepaid to the date of such prepayment
and, within five Business Days after receipt of notice from the Bank specifying
the aggregate amount, the amount, if any, required to be paid pursuant to
Section 2.8 as a result of such prepayment being made on such date (provided,
that, before giving any such notice to the Borrower to prepay all of the
Eurodollar Rate Advances then outstanding, the
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Bank agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for prepayment
of such Advance, or reduce the amount of cost associated with the prepayment of
such Advance (and the Bank is lawfully permitted to make such Advance), and
would not, in the Bank's reasonable judgment, be otherwise disadvantageous, (ii)
the Bank shall simultaneously make a Prime Rate Advance to the Borrower on such
date in an amount equal to the aggregate principal amount of the Eurodollar Rate
Advances prepaid and the amount, if any, required to be paid pursuant to Section
2.8, and (iii) the right of the Borrower to select Eurodollar Rate Advances for
any subsequent Borrowing shall be suspended until the Bank reasonably determines
that the circumstances causing such suspension no longer exist (which the Bank
agrees promptly to provide notice of to Borrower).
(e) NOTICE. All notices given pursuant to this Section 2.7 shall be
irrevocable and binding upon the Borrower.
2.8 BREAKAGE COSTS. If (a) any payment of principal of any Eurodollar Rate
Advance is made other than on the last day of the Interest Period for such
Advance as a result of any payment pursuant to Section 2.7, the acceleration of
the maturity of the Note pursuant to Section 7, or for any other reason or (b)
the Borrower fails to make a principal or interest payment with respect to any
Eurodollar Rate Advance on the date such payment is due and payable, the
Borrower shall, within 10 days of any written demand sent by the Bank to the
Borrower, pay to the Bank any Funding Loss which it may reasonably incur as a
result of such payment or nonpayment. The Bank agrees to promptly give notice of
any circumstance it is aware of that will result in increased costs of the type
set forth above; PROVIDED that, the failure to give such notice shall not
relieve the Borrower of its obligations to pay such increased amounts pursuant
to this Section.
2.9 INCREASED COSTS. If, due to either (a) the passage of or any change
(other than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in or in the interpretation
of any law or regulation or (b) the compliance with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to the Bank of agreeing
to make or making, funding or maintaining Eurodollar Rate Advances, then the
Borrower shall from time-to-time, within five Business Days after demand by the
Bank, immediately pay to the Bank additional amounts sufficient to compensate it
for such increased cost; PROVIDED, that, before making any such demand, the Bank
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in its reasonable judgment, be
otherwise disadvantageous.
2.10 PAYMENTS AND COMPUTATIONS.
(a) PAYMENT PROCEDURES. The Borrower shall make each payment under
this Agreement and under the Note not later than 1:00 p.m. (Houston, Texas time)
on the day when due in Dollars to the Bank at ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ (or such other location as the Bank shall designate in writing to the
Borrower) in same day funds.
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(b) COMPUTATIONS. All computations of interest and of fees shall be
made by the Bank on the basis of a year of 360 days, in each case for the actual
number of days (including the first day, but excluding the last day) occurring
in the period for which such interest or fees are payable. Each determination by
the Bank of an interest rate shall be conclusive and binding for all purposes,
absent manifest error.
(c) NON-BUSINESS DAY PAYMENTS. Whenever any payment shall be stated
to be due on a day other than a Business Day, such payment shall be made on or
before the next succeeding Business Day, and, if made on such succeeding
Business Day, such extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be; PROVIDED,
however, that if such extension would cause payment of interest on or principal
of Eurodollar Rate Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
2.11 NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by the Borrower
of Eurodollar Rate Advances shall be made, in accordance with Section 2.10, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on the Bank's income, and franchise
taxes imposed on it, by the jurisdiction under the laws of which the Bank is
organized or any political subdivision of the jurisdiction (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes") and Taxes by the jurisdiction of the Bank's
Applicable Lending Office or any political subdivision of such jurisdiction. If
the Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable to the Bank, 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 2.11), the Bank
receives an amount equal to the sum it would have received had no such
deductions been made. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Note, or the other Credit Documents.
2.12 LETTERS OF CREDIT.
(a) ISSUANCE. From time-to-time from the date of this Agreement
until the Maturity Date, at the request of the Borrower, the Bank shall, on the
terms and conditions hereinafter set forth, issue, increase, or extend the
expiration date of Letters of Credit for the account of the Borrower or any of
its Subsidiaries on any Business Day.
(b) CERTAIN LIMITATIONS. No Letter of Credit will be issued,
increased, or extended:
(i) if such issuance, increase, or extension would cause the
Letter of Credit Exposure to exceed the lesser of (A) $5,000,000 and
(B) the lesser of (1) the Commitment LESS the aggregate outstanding
principal amount of all Advances or (2) the Borrowing Base LESS the
aggregate outstanding principal amount of all Advances;
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(ii) unless such Letter of Credit has an Expiration Date not
later than the earlier of (A) one year after the date of issuance or
(B) 90 days after the Maturity Date;
(iii) unless such Letter of Credit is in form and substance
reasonably acceptable to the Bank; and
(iv) unless the Borrower has delivered to the Bank, by 1:00
p.m. at least five Business Days before the date of the proposed
issuance of the Letter of Credit, a completed and executed Letter of
Credit Application in the form of the attached EXHIBIT C together
with all exhibits, schedules and other attachments reasonably
necessary to draft and issue such Letter of Credit.
SECTION 3. CONDITIONS PRECEDENT. This Agreement shall become effective and the
Original Loan Agreement shall be amended and restated as provided in this
Agreement on the date the Borrower shall have received written confirmation from
the Bank indicating it has received the documents set forth on the Closing
Document Checklist attached as Exhibit F, each such document dated on or before
such day, duly executed by all the parties thereto, and in form and substance
satisfactory to the Bank. The making of the initial Advance or the issuance of
the initial Letter of Credit shall constitute an acknowledgment by the Bank that
all conditions precedent in this Section 3 relating to the effectiveness of the
Agreement have either been met or waived. Prior to the making of each Advance or
the issuance of each Letter of Credit, the following conditions precedent shall
have been met.
3.1 REPRESENTATIONS AND WARRANTIES. As of the date of the making of any
Advance or the issuance of any Letter of Credit, the representations contained
in this Agreement and in each other Credit Document shall have been made and
shall be true and correct and no warranty made in this Agreement or any other
Credit Document shall be breached, and the Borrower's request for the making of
any Advance or the issuance of any Letter of Credit shall be deemed to be a
representation and additional warranty of the representations and warranties
contained in the Agreement and each other Credit Document.
3.2 EVENT OF DEFAULT. As of the date of the making of any Advance or the
issuance of any Letter of Credit there shall exist no Default or Event of
Default, and the making of the Advance or the issuance of any Letter of Credit
would not cause or be reasonably expected to cause a Default or Event of
Default.
3.3 MATERIAL ADVERSE CHANGE. As of the date of this Agreement and prior to
the making of any Advance or the issuance of any Letter of Credit, no event or
events which individually or in the aggregate could reasonably be expected to
cause a material adverse change in the Borrower's or any of its Subsidiaries'
ability to perform its duties under this Agreement shall have occurred since
January 31, 1999 and be continuing.
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SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Bank, and with each request for an Advance or the issuance of a Letter of
Credit again represents and warrants to the Bank, as follows:
4.1 ORGANIZATION. Each of the Borrower and its Subsidiaries is a
corporation duly and validly organized and existing and in good standing under
the laws of its state of incorporation, and is authorized to do business and is
in good standing in all jurisdictions in which such qualification or
authorization is necessary.
4.2 AUTHORIZATION. The execution, delivery, and performance by the
Borrower and its Subsidiaries of the Credit Documents to which each such Person
is a party and the consummation of the transactions contemplated hereby and
thereby (a) are within the Borrower's and its Subsidiaries' corporate powers,
(b) have been duly authorized by all necessary corporate action, (c) do not
contravene the Borrower's or its Subsidiaries' organizational documents or any
law or any contractual restriction binding on or affecting the Borrower and its
Subsidiaries, and (d) will not result in or require the creation or imposition
of any Lien prohibited by this Agreement.
4.3 ENFORCEABILITY. The Credit Documents have each been duly executed and
delivered and constitute legal, valid, and binding obligations of the Borrower
and its Subsidiaries, enforceable in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws at the time in effect affecting the rights of
creditors generally. Without limiting the generality of the foregoing, none of
the Borrower or any of its Subsidiaries is (a) an investment company within the
meaning of the Investment Company Act of 1940, as amended, nor is, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act, or (b) a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company," or a "subsidiary company" of an "affiliate" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
4.4 FINANCIAL CONDITION. The Borrower has delivered to the Bank its
audited consolidated financial statements dated as of January 31, 1999 and its
unaudited consolidated financial statements for the quarter ended May 2, 1999.
These financial statements are true and correct in all material respects and
present fairly the financial condition of the Borrower and its Subsidiaries as
of each such date, subject, in the case of such financial statements for the
quarter ended May 2, 1999, to year-end audit adjustments. Except as disclosed in
SCHEDULE 4.4 (Liabilities) or in such financial statements or notes thereto,
there are no material contingent obligations, liabilities for taxes, unusual
forward or long-term commitments, or material unrealized or anticipated losses
of the Borrower and its Subsidiaries which are not reserved against. Since
January 31, 1999, no event has occurred and is continuing that could reasonably
be expected to have a material adverse effect on the Borrower's and its
Subsidiaries' ability to perform their duties under any Credit Document.
4.5 SUBSIDIARIES. Set forth in SCHEDULE 4.5 (Subsidiaries) is a complete
and accurate list of the Subsidiaries of the Borrower, showing the correct legal
name and jurisdiction of incorporation of each and showing the ownership of the
outstanding stock of each Subsidiary. All of the outstanding capital stock of
each Subsidiary has been validly issued, is fully paid and nonassessable,
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and is owned by the Borrower or a Subsidiary of the Borrower free and clear of
all Liens, other than Liens permitted in Section 5.6 of this Agreement.
4.6 DEBT. SCHEDULE 4.6 (Debt) is a complete and correct list of all
arrangements presently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of letters of
credit or for acceptance financing) in respect of which the Borrower or any of
its Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding or to
be outstanding, are correctly stated.
4.7 OWNERSHIP AND LIENS. Each of the Borrower and its Subsidiaries has
title to, or a valid leasehold interest in, all of the material Property used in
its business, both real and personal, including the Property reflected in the
financial statements referred to in Section 4.4 (other than any properties or
assets disposed of in the ordinary course of business), and the Property owned
by the Borrower and its Subsidiaries and their leasehold interests are not
subject to any Lien, except such as may be otherwise permitted under this
Agreement or by SCHEDULE 5.6.
4.8 LITIGATION. Except as disclosed in SCHEDULE 4.8 (Litigation), there
are no material actions, suits, or proceedings pending or, to the knowledge of
the Borrower, threatened against the Borrower or any Subsidiary at law, in
equity, or in admiralty, or by or before any governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign, or
any arbitrator, which could reasonably be expected to result in a liability
(after giving effect to any insurance covering such liability) in excess of
$100,000.
4.9 OTHER AGREEMENTS. The Borrower and its Subsidiaries are not in
violation of any material provision of any other indenture, loan, or credit
agreement to which any of them is a party, and the execution and delivery of
this Agreement, the consummation of the transactions and the execution and
delivery of the instruments contemplated hereby, and fulfillment of the terms
and compliance with the provisions hereof and thereof, will not result in any
violation or breach of any material provisions of, or constitute a material
default under, any other indenture, loan, or credit agreement to which any of
them is a party. None of the Borrower or any of its Subsidiaries is a party to
or bound by any contract except the Signal Security Documents and the Investment
Agreement which at the date hereof materially and adversely affects the
business, operations, or financial condition of the Borrower.
4.10 PERMITS. To the knowledge of the Borrower and its Subsidiaries, each
of the Borrower and its Subsidiaries possesses all material licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or has rights
thereto, necessary to conduct its business substantially as now conducted and as
presently proposed to be conducted, and, to the knowledge of the Borrower and
its Subsidiaries, neither the Borrower nor any of its Subsidiaries is in any
material violation of any valid rights of others with respect to any of the
foregoing.
4.11 COMPLIANCE WITH LAWS. Each of the Borrower and its Subsidiaries is in
compliance, in all material respects, with all federal, state, and local laws
and regulations which are applicable to the operations and Property of the
Borrower and its Subsidiaries.
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4.12 TAXES. Each of the Borrower and its Subsidiaries has filed all tax
returns and reports required to be filed and has paid all taxes, assessments,
fees, and other governmental charges levied upon the Borrower's or any of its
Subsidiaries' Property or income which are due and payable, including interest
and penalties, except those taxes, assessments, fees, and other governmental
charges which are being contested in good faith and by appropriate proceedings,
and with respect to which reserves in conformity with GAAP have been provided.
4.13 ERISA. Each of the Borrower and its Subsidiaries is in compliance in
all material respects with all applicable provisions of ERISA. With respect to
the Borrower, neither a Reportable Event nor a Prohibited Transaction has
occurred and is continuing with respect to any Plan; no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; no Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; the Borrower and
each Commonly Controlled Entity have met their minimum funding requirements
under ERISA with respect to all of their Plans and the present value of all
vested benefits under each Plan does not exceed the fair market value of all
Plan assets allocable to such benefits, as determined on the most recent
valuation date of such Plan and in accordance with the provisions of ERISA; and
neither the Borrower nor any Commonly Controlled Entity has incurred any
liability to the PBGC under ERISA.
4.14 YEAR 2000 COMPLIANCE.
(a) The Borrower has (i) begun analyzing its business and operations
and each of its subsidiaries and affiliates' business and operations that could
be adversely affected by failure to become Year 2000 compliant (that is, the
risk that computer applications, imbedded microchips and other systems used by
the Borrower or any of its subsidiaries or affiliates will be able to perform
properly date sensitive functions prior to and after December 31, 1999), (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects and (iii) to
date, implemented that plan in accordance with that timetable. The Borrower
reasonably believes that it will become Year 2000 compliant for its operations
and those of its subsidiaries and affiliates on a timely basis except to the
extent that a failure to do so could not reasonably be expected to have a
material adverse effect upon the financial condition of the Borrower.
(b) The Borrower reasonably believes any suppliers and vendors that
are material to its operations or the operations of its subsidiaries and
affiliates will be Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be expected to
have a material adverse effect upon the financial condition of the Borrower.
SECTION 5. COVENANTS. Until the Bank receives full payment of the Obligations
and has no further obligations under this Agreement or any other Credit
Document, the Borrower covenants as follows:
5.1 ORGANIZATION. Each of the Borrower and its Subsidiaries shall maintain
(a) its organization and good standing under the laws of its state of
incorporation, and (b) its authorization
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to do business and good standing in all jurisdictions in which such
qualification or authorization is necessary.
5.2 REPORTING. The Borrower shall furnish to the Bank all of the
following:
(a) ANNUAL FINANCIAL REPORTS. As soon as available and in any event
not later than 120 days after the end of each fiscal year of the Borrower, a
copy of the annual audit report for such year for the Borrower, including
therein the consolidated balance sheet of the Borrower and its Subsidiaries as
of the end of such fiscal year and consolidated statements of income, retained
earnings, and cash flow for the Borrower and its Subsidiaries for such fiscal
year, in each case certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. or other independent
certified public accountants approved by the Bank. The Borrower shall also
provide, if specifically requested by the Bank, its corresponding internally
prepared statements of income for each store. The above financial reports shall
be accompanied by a duly completed Borrowing Base and Compliance Certificate.
(b) QUARTERLY FINANCIAL REPORTS. As soon as available and in any
event not later than 45 days after the end of each fiscal quarter, the
consolidated balance sheet of Borrower and its Subsidiaries as of the end of
such quarter and the consolidated statements of income, retained earnings, and
cash flow for the Borrower and its Subsidiaries as of the end of such quarter,
all in reasonable detail and duly certified by the chief financial officer of
the Borrower as having been prepared in accordance with GAAP. The above
financial reports shall be accompanied by a duly completed Borrowing Base and
Compliance Certificate and shall also include same store sales information.
(c) MONTHLY BORROWING BASE REPORTS. If any Advances are outstanding,
as soon as available and in any event not later than 15 days after the end of
each fiscal month, Section 1 of the Borrowing Base and Compliance Certificate
duly completed.
(d) ERISA. Promptly, and in any event within 30 days after the
Borrower knows that any circumstances exist that constitute grounds entitling
the PBGC to institute proceedings to terminate a Plan subject to ERISA with the
respect to the Borrower or any Commonly Controlled Entity; and promptly, but in
any event within two Business Days of receipt by the Borrower or any Commonly
Controlled Entity of notice that the PBGC intends to terminate a Plan or appoint
a trustee to administer the same; and promptly, but in any event within five
Business Days of the receipt of notice concerning the imposition of withdrawal
liability with respect to the Borrower or any Commonly Controlled Entity; the
Borrower will deliver to the Bank a certificate of the chief financial officer
of the Borrower setting forth all relevant details and the action which the
Borrower proposes to take with respect thereto.
(e) LITIGATION. Promptly after the commencement thereof, (i) to the
extent each of the following is not covered by insurance and could reasonably be
expected to result in a liability of the Borrower or any of its Subsidiaries in
excess of $100,000, notice of all actions, suits, and proceedings before any
court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower or any Subsidiary
and (ii) notice of any adverse development in pending actions, suits and
proceedings which, if determined adversely, could
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reasonably be expected to have a material adverse effect on the ability of the
Borrower to perform its duties under the Credit Documents.
(f) MATERIAL CHANGES. Prompt written notice of any condition or
event of which the Borrower has knowledge, which condition or event has resulted
or may reasonably be expected to result in a material adverse effect on the
ability of the Borrower to perform its duties under this Agreement or any other
Credit Document.
(g) SEC AND OTHER REPORTS. Promptly after the same become publicly
available, copies of all Forms 10-K, 10-Q, 8-K, annual reports, tender offer
documentation, proxy statements and any other information which the Bank may
reasonably request or which relates to events or circumstances which could
reasonably be expected to have a material adverse effect on the Borrower's and
its Subsidiaries' ability to perform their respective obligations under this
Agreement and the other Credit Documents, filed by the Borrower with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934 or filed with any national securities exchange
or distributed to the Borrower's shareholders.
(h) CHANGES IN MANAGEMENT. Promptly, but in any event within five
days after the occurrence thereof, a notice detailing any material changes in
the Chief Executive Officer, the Chief Financial Officer or the President of the
Borrower or its Subsidiaries.
(i) OTHER INFORMATION. Such other information respecting the
business operations or Property of the Borrower or its Subsidiaries, financial
or otherwise, as the Bank may from time-to-time reasonably request.
(j) DEFAULTS. Promptly, but in any event within five days after the
occurrence thereof, a notice of each Default known to the Borrower, together
with a statement of the chief financial officer of the Borrower setting forth
the details of such Default and the actions which the Borrower has taken and
proposes to take with respect thereto.
(k) YEAR 2000 COMPLIANCE. Prompt written notice in the event the
Borrower determines that any computer application which is material to its
operations or the operations of any of its subsidiaries, affiliates, material
vendors, suppliers or customers will not be fully Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a material adverse effect upon the financial condition of the
Borrower.
5.3 INSPECTION. From time-to-time upon reasonable notice, the Borrower
shall (a) permit the Bank to examine and copy the books and records of, and
visit, inspect, and conduct field audits of the Property of the Borrower and
each of its Subsidiaries and to discuss the business operations and Property of
the Borrower and each of its Subsidiaries with any of their respective officers
or directors, and (b) if reasonably requested by the Bank, furnish the Bank with
a report prepared by a qualified independent consultant, the first two of each
such reports in any fiscal year being provided at the expense of the Borrower
and all subsequent reports for such fiscal year being provided at the expense of
the Bank.
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5.4 FINANCIAL COVENANTS.
(a) LEVERAGE RATIO. The Borrower shall not permit, at the end of any
fiscal month, the ratio of its (i) total consolidated liabilities to its (ii)
Tangible Net Worth to exceed 1.0 to 1.0.
(b) FIXED CHARGE COVERAGE RATIO. The Borrower shall not permit its
Fixed Charge Coverage Ratio to be less than 1.25 to 1.00 at the end of any
fiscal quarter for the four-fiscal quarter period then ended.
(c) TANGIBLE NET WORTH. The Borrower shall not permit, at the end of
any fiscal quarter, its Tangible Net Worth to be less than for each fiscal
quarter, an amount equal to (A) $110,700,000 PLUS (B) an amount equal to 75% of
the cumulative amount of positive Net Income of the Borrower and its
Subsidiaries since May 2, 1999 PLUS (C) an amount equal to the net proceeds
received after giving effect to any associated transaction costs (including,
without limitation, underwriting discount, brokerage fees, attorney fees and
financial advisory fees) from the issuance by the Borrower or any of its
Subsidiaries of any equity to the extent that such issuance would be included
in, and therefore increase, the Borrower's Net Worth LESS (D) the amount of any
capital stock repurchases made and permitted under Section 5.9(b) after the date
hereof.
5.5 DEBT. None of the Borrower or any of its Subsidiaries shall create,
assume, incur, suffer to exist, or in any manner become liable, directly or
indirectly, or contingently in respect to, any Debt other than all of the
following:
(a) Debt owed to the Bank, including the Obligations;
(b) Debt existing on the date of this Agreement that is listed in
Schedule 4.6 (Debt), and any rearrangments, extensions, or refinancing thereof
which do not increase the amount thereof;
(c) Debt in the form of accounts payable to trade creditors for
goods or services which are not aged more than 60 days from the date due and
current operating liabilities (other than for borrowed money) which are not more
than 60 days past due, in each case incurred in the ordinary course of business,
as presently conducted, and paid within the specified time, unless contested in
good faith and by appropriate proceedings;
(d) Debt not otherwise permitted by this Section 5.5 in an aggregate
amount not to exceed 10% of the Borrower's Net Worth;
(e) Debt secured by Liens described in Section 5.6 (c), (d) or (e);
and
(f) Debt arising as a result of any guaranty of any operating leases
by the Borrower or any Subsidiary.
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5.6 LIENS. None of the Borrower or any of its Subsidiaries shall create,
assume, incur, or suffer to exist any Lien on any of its Property whether now
owned or hereafter acquired, or assign any right to receive income, except all
of the following:
(a) Liens securing Debt owed to the Bank, including, without
limitation, the Obligations and the Equipment Loan;
(b) Liens disclosed to the Bank in SCHEDULE 5.6 (Liens) provided
that the indebtedness secured by such Liens shall not be increased so that the
amount of such Debt becomes greater than the outstanding amount of such Debt on
the date of this Agreement;
(c) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens, landlord's liens (whether statutory
or contractual), and other similar liens arising in the ordinary course of
business securing obligations which are not overdue for a period of more than 30
days;
(d) Liens arising in the ordinary course of business out of pledges
or deposits under workers compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits, or similar
legislation to secure public or statutory obligations;
(e) Liens for taxes, assessment or other governmental charges and
which are not yet due or which are being actively contested in good faith by
appropriate proceedings;
(f) Liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit and which do not materially detract from the value of the Borrower's
or its Subsidiaries' Property or assets or materially interfere with their
business; and
(g) Liens securing purchase money indebtedness (including Capital
Lease obligations) to the extent such Debt is permitted to be incurred pursuant
to Section 5.5(d); PROVIDED that, Liens on accounts receivable and inventory of
the Borrower and its Subsidiaries (other than Liens securing the Obligations)
are expressly prohibited.
5.7 CORPORATE TRANSACTIONS. The Borrower shall not, without the prior
written consent of the Bank, alter its current corporate structure as disclosed
in SCHEDULE 4.5 (Subsidiaries). Without limiting the foregoing, the Borrower
will not, without the prior written consent of the Bank: (a) merge with or into
any other Person, (b) change its name or the names of its Subsidiaries or
reincorporate in another jurisdiction, (c) create or suffer to exist any
Subsidiary not existing on the date of this Agreement, or (d) sell or otherwise
dispose of any shares of capital stock of any Subsidiary except (i) as permitted
under the Investment Agreement or (ii) the issuance by the Borrower of shares of
its capital stock (whether common or preferred). Notwithstanding any of the
foregoing, the Bank shall not unreasonably withhold its consent to any of the
actions restricted by this Section 5.7.
5.8 ASSET SALES. None of the Borrower or any of its Subsidiaries shall
sell, transfer, or convey any of its assets outside the ordinary course of
business, except that the Borrower and its
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Subsidiaries may (a) make intercompany loans and advances, and (b) if no Default
has occurred and is continuing, enter into sale and leaseback transactions
involving real Property if the proceeds realized from the assets being sold in
such transactions are at least equal to the net book value of such assets.
5.9 DISTRIBUTIONS, ETC. Without the prior approval of the Bank, the
Borrower and its Subsidiaries shall not make any Restricted Payments; PROVIDED
that so long as no Default has occurred and is continuing or would occur after
giving effect thereto (a) the Borrower may pay dividends on its capital stock
(whether common or preferred) and (b) the Borrower may purchase up to 3,000,000
shares of its capital stock (as adjusted for stock splits, stock dividends or
any other similar adjustment) from the date of this Agreement until January 31,
2000 for consideration not to exceed $21,000,000. Additionally, the Bank
consents to the Borrower's purchases made before the Effective Date of 1,090,000
shares of the Borrower's common stock.
5.10 TRANSACTIONS WITH AFFILIATES. None of the Borrower or any of its
Subsidiaries shall enter into any transaction directly or indirectly with or for
the benefit of an Affiliate except transactions with an Affiliate in the
ordinary course of business for which the monetary or business consideration
arising from such a transaction would be substantially as advantageous to the
Borrower or such Subsidiary as the monetary or business consideration which it
would obtain in a comparable arm's length transaction. Nothing in this Section
shall prohibit the Borrower or any of its Subsidiaries from engaging in the
transactions arising under the TCR Advisory Agreement.
5.11 INVESTMENTS AND CAPITAL EXPENDITURES. None of the Borrower or any of
its Subsidiaries shall make or hold any investment in any Person, including
capital contributions to the Person, investments in the debt or equity
securities of the Person, loans, guaranties, or other extensions of credit to
the Person (including trade credit), or make any capital expenditures or capital
investments (each of the foregoing investments or capital expenditures being
referred to as an "Investment") except:
(a) intercompany loans or advances among the Borrower and its
Subsidiaries;
(b) Liquid Investments;
(c) capital expenditures during any fiscal year in an amount not to
exceed 20% of the Borrower's Net Worth determined as of the last day of the
preceding fiscal year; and
(d) as permitted by the Bank.
5.12 MAINTENANCE OF PROPERTY. Each of the Borrower and its Subsidiaries
shall maintain its owned, leased, or operated property, equipment, buildings,
and fixtures in good condition and repair, and not permit the commission of
material waste or other injury, destruction, or loss thereto.
5.13 COMPLIANCE WITH LAWS. Each of the Borrower and its Subsidiaries shall
comply, in all material respects with all federal, state, and local laws and
regulations which are applicable to the operations and Property of the Borrower
and its Subsidiaries, PROVIDED that this Section shall not prevent the Borrower
and its Subsidiaries from, in good faith and with reasonable diligence,
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contesting the validity or application of any such laws or regulations by
appropriate legal proceedings for which reserves in conformity with GAAP have
been provided.
5.14 TAXES. The Borrower and its Subsidiaries shall pay and discharge all
taxes, assessments, and other charges and claims imposed on the Borrower and its
Subsidiaries, PROVIDED that nothing in this Section shall require the Borrower
or any of its Subsidiaries to pay any tax, assessment, or charge which is being
contested in good faith and by appropriate proceedings, and with respect to
which reserves in conformity with GAAP have been provided.
5.15 ERISA. The Borrower and its Subsidiaries shall prevent, as they
relate to the Borrower: any Reportable Event, complete or partial withdrawal
from any Multiemployer Plan, any Prohibited Transaction, the filing of a notice
of intent to terminate a Plan, the termination of a Plan that is not fully
funded, or circumstances to exist which constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan, or the PBGC from instituting such
proceedings, and any other events or conditions which could subject the Borrower
to any tax, penalty, lien, or other liability under ERISA.
5.16 LINES OF BUSINESS; INVENTORY ACCOUNTING METHOD. None of the Borrower
or any of its Subsidiaries will (a) change the character of its business as
conducted on the date of this Agreement, (b) engage in any type of business not
reasonably related to its business as presently and normally conducted, or (c)
change its method of accounting for inventory.
5.17 INSURANCE.
(a) Each of the Borrower and its Subsidiaries will maintain
insurance with its current carrier or other responsible and reputable insurance
companies or associations consented to by the Bank in such amounts and covering
such risks as are usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower and
its Subsidiaries operate. Without limiting the generality of the foregoing, the
Borrower and its Subsidiaries will not terminate any type of insurance coverage
now in force except to replace an existing insurance carrier, or directly or
indirectly decrease the level of such coverage.
(b) The Borrower and its Subsidiaries will deliver to the Bank, at
the Bank's request, copies of such policies and certificates evidencing such
policies.
(c) The Borrower and its Subsidiaries will not engage in any self
insurance plan established after the date of this Agreement that is not
consented to in writing by the Bank.
5.18 ENVIRONMENTAL LAW COMPLIANCE. The Borrower and its Subsidiaries will
not violate any federal laws, rules or ordinances for environmental protection,
including, but not limited to, the following: Clean Air Act, 42 U.S.C. ss. 7401
ET. SEq.; Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 ET. SEq.;
Solid Waste Disposal Act, 42 U.S.C. ss. 6901 ET. seq.; Comprehensive
Environmental Response, Compensation Liability Act ("CERCLA" or "SUPERFUND"), 42
U.S.C. ss. 9601 ET. SEq.; National Environmental Policy Act, 42 U.S.C. ss. 4321
ET. SEq.; regulations of the Environmental Protection Agency and any applicable
local or state law, rule, regulation or rule of common law and any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials (as
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defined herein), which the failure to comply with could have a material adverse
effect on the Borrower, any Subsidiary or any Guarantor. "Hazardous Materials"
include all materials defined as hazardous wastes or substances under any local,
state or federal environmental laws, rules or regulations, and petroleum,
petroleum products and oil.
SECTION 6. EVENTS OF DEFAULT. Each of the following shall be an "Event of
Default" for the purposes of this Agreement and for each of the Credit
Documents:
6.1 PAYMENT FAILURE. The Borrower defaults in the payment when due of any
amount due under this Agreement or any other Credit Document, including payments
of principal, interest, fees, reimbursements, and indemnifications, except that
a Default arising from the failure to pay any such amount (other than principal)
when due shall not be an Event of Default if such Default is cured within three
days of the occurrence thereof; provided that, with respect to fees and expenses
for which there is no requirement that the Bank give notice of the date such
amounts are due (but excluding fees and expenses for which the due dates are set
forth in this Agreement), the three day grace period contemplated herein shall
not begin running prior to the date that the Borrower receives notice from the
Bank detailing the amount of such fees or expenses owing to it);
6.2 FALSE REPRESENTATION. Any representation or warranty made by the
Borrower or any of its Subsidiaries or any officer thereof in this Agreement or
in any other Credit Document proves to have been materially false or erroneous
at the time it was made or deemed made;
6.3 BREACH OF COVENANT. (a) Any breach by the Borrower or any Subsidiary
of any of the covenants in Sections 5.3, 5.5 through 5.9, 5.11, 5.17 (a), and
5.17 (c), or (b) any breach by the Borrower or any Subsidiary of Section 5.17(b)
or any other covenant contained in this Agreement or any other Credit Document,
and such breach if curable, is not cured within 30 days of the occurrence
thereof;
6.4 BANKRUPTCY AND INSOLVENCY. The Borrower or any Subsidiary or any
Guarantor (a) admits in writing its inability to pay its debts generally as they
become due; makes an assignment for the benefit of its creditors; consents to or
acquiesces in the appointment of a receiver, liquidator, fiscal agent, or
trustee of itself or any of its Property; files a petition under bankruptcy or
other laws for the relief of debtors; or consents to any reorganization,
arrangement, workout, liquidation, dissolution, or similar relief; or (b) shall
have had, without its consent: any court enter an order, judgment, or decree
appointing a receiver, liquidator, fiscal agent, or trustee of itself or any of
its Property; any court approve a petition filed against it seeking
reorganization, arrangement, workout, liquidation, dissolution, or similar
relief under bankruptcy or other laws for the relief of debtors; or any court
adjudicate the Borrower, any Subsidiary, or any Guarantor as bankrupt and any of
the foregoing in clause (b) shall remain unvacated, not set aside, or unstayed
for an aggregate of 60 days, whether or not consecutive;
6.5 ADVERSE JUDGMENT. The Borrower or any Subsidiary suffers a final
judgment against it which, within 30 days from the date such judgment is
entered, shall not have been satisfied or execution thereof stayed pending
appeal, unless the aggregate amount of all such judgments, less any insurance
proceeds covering such judgments, is less than $100,000 in the aggregate;
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6.6 CROSS DEFAULT. (a) Any breach by the Borrower or any Subsidiary of any
contract related to any Debt (except intercompany loans and advances) of the
Borrower in excess of $100,000 and such breach is not cured within any
applicable grace period; (b) any breach by the Borrower or any Subsidiary of any
contract related to any Lien securing any Debt (except intercompany loans and
advances) in excess of $100,000 on the Borrower's or any Subsidiary's Property
and such breach is not cured within any applicable grace period; or (c) any
breach by the Borrower or any Subsidiary of any contract where such breach could
have a material adverse effect on the ability of the Borrower to perform its
duties under this Agreement or any other Credit Document and such breach is not
cured within any applicable grace period;
6.7 OWNERSHIP. The Borrower or any of its Subsidiaries shall cease to own
100% of the Voting Securities of its Subsidiaries; or
6.8 GUARANTIES. Any of the guaranty provisions in the Guaranties shall for
any reason cease to be valid and binding on the Guarantors or any Guarantor
shall so state in writing.
SECTION 7. REMEDIES.
7.1 TERMINATE COMMITMENTS. Upon the occurrence of any Event of Default
relating to bankruptcy or insolvency under Section 6.4, all of the commitments
of the Bank hereunder shall immediately and automatically terminate. During the
continuation of any Event of Default other than a bankruptcy or insolvency Event
of Default under Section 6.4, the Bank may declare all of the commitments of the
Bank hereunder terminated, whereupon the same shall immediately terminate.
7.2 ACCELERATION. Upon the occurrence of any Event of Default relating to
bankruptcy or insolvency under Section 6.4, the aggregate outstanding amount of
all loans made hereunder, all accrued interest thereon, and all other amounts
payable by the Borrower under this Agreement and any other Credit Document shall
immediately and automatically become due and payable. During the continuation of
any Event of Default other than a bankruptcy or insolvency Event of Default
under Section 6.4, the Bank may declare the aggregate outstanding amount of all
loans made hereunder, all accrued interest thereon, and all other amounts
payable by the Borrower under this Agreement and any other Credit Document to be
immediately due and payable. Except as expressly provided herein, the Borrower
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration, and all other notices in connection with any action under this
paragraph.
7.3 SETOFF. During the continuance of any Event of Default, the Bank may
from time-to-time, without notice to the Borrower or any of its Subsidiaries
(any such notice being expressly waived by the Borrower), set-off and apply any
and all deposits of the Borrower or any of its Subsidiaries (general or special,
time or demand, provisional or final) at any time held by the Bank, and may
set-off and apply all amounts owed by the Bank to or for the account of the
Borrower or any of its Subsidiaries, against the Obligations. The Bank agrees to
promptly notify the Borrower after any such set-off or application; PROVIDED
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Bank under this Section are in
addition to
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other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
7.4 CREDIT DOCUMENTS. Following the occurrence and during the continuance
of an Event of Default, the Bank may take any and all actions permitted under
the Credit Documents and the Guaranties.
7.5 DEFAULT INTEREST. If the Borrower fails to pay when due any amount
payable under this Agreement or any other Credit Document, including principal,
interest, fees, reimbursements, and indemnifications, the amount not paid when
due shall bear interest beginning on the date due until paid in full at the
Default Rate. If a due date for an amount payable is not specified in this
Agreement or any other Credit Document, the due date shall be the date on which
the Bank demands payment therefor. The Borrower shall pay interest (or
additional interest) due under this Section when the amount payable is paid in
full.
7.6 REMEDIES CUMULATIVE AND NOT WAIVED. No right, power, or remedy
conferred to the Bank in the Credit Documents, or now or hereafter existing at
law or in equity, by statute or otherwise, shall be exclusive, and each such
right, power, or remedy shall, to the full extent permitted by law, be
cumulative and in addition to every other such right, power or remedy. No course
of dealing and no delay in exercising any right, power, or remedy conferred to
the Bank in any Credit Document or now or hereafter existing at law, in equity,
or admiralty, or by statute or otherwise, shall operate as a waiver of or
otherwise prejudice any such right, power, or remedy.
7.7 APPLICATION OF PAYMENTS. Prior to an Event of Default, all payments
made hereunder shall be applied as elsewhere provided for hereunder, but if not
elsewhere provided for hereunder, as directed by the Borrower or in absence of
such direction, as determined by the Bank. Following and during the continuance
of an Event of Default, all payment and collections shall be applied in the
order determined by the Bank.
SECTION 8. MISCELLANEOUS.
8.1 EXPENSES. The Borrower shall pay directly or reimburse the Bank for
the reasonable out-of-pocket expenses associated with the creation of the credit
facility contemplated by this Agreement and the other Credit Documents,
including reasonable legal fees of outside counsel. Following the execution of
this Agreement, the Borrower shall pay directly or reimburse the Bank for all
reasonable charges and disbursements of legal counsel for the Bank in connection
with (a) the creation, amendment, modification, waiver, or interpretation of any
Credit Document, and (b) the preservation or enforcement of any rights of the
Bank under the Credit Documents.
8.2 INDEMNIFICATION OF BANK. THE BORROWER HEREBY AGREES TO INDEMNIFY THE
BANK AGAINST ALL CLAIMS, LIABILITIES, DAMAGES, AND REASONABLE OUT-OF-POCKET
EXPENSES IN CONNECTION WITH (A) ACTUAL OR THREATENED DAMAGE TO THE ENVIRONMENT,
AGENCY COSTS OF INVESTIGATION, PERSONAL INJURY OR DEATH, OR ANY DAMAGE TO THE
BORROWER'S OR ANY SUBSIDIARY'S PROPERTY DUE TO A RELEASE OR ALLEGED RELEASE OF
HAZARDOUS MATERIALS ON OR UNDER THE BORROWER'S OR ANY SUBSIDIARY'S PROPERTY OR
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IN THE SURFACE OR GROUND WATER LOCATED ON OR UNDER THE BORROWER'S OR ANY
SUBSIDIARY'S PROPERTY, OR GASEOUS EMISSIONS FROM THE BORROWER'S OR ANY
SUBSIDIARY'S PROPERTY OR ANY OTHER CONDITION EXISTING ON THE BORROWER'S OR ANY
SUBSIDIARY'S PROPERTY RESULTING FROM THE USE OR EXISTENCE OF HAZARDOUS
MATERIALS, WHETHER SUCH CLAIM PROVES TO BE TRUE OR FALSE, AND (B) ANY LITIGATION
OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY OTHER CREDIT DOCUMENT,
INCLUDING CLAIMS CAUSED BY THE BANK'S OWN NEGLIGENCE, EXCEPT AS A RESULT OF THE
BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE BORROWER AGREES TO INDEMNIFY
THE BANK FROM ANY CLAIMS, LIABILITIES, DAMAGES, AND REASONABLE OUT-OF-POCKET
EXPENSES WHICH ARISE OUT OF THE BANK'S GOOD FAITH RELIANCE UPON INSTRUCTIONS
FROM THE BORROWER, AS PROVIDED FOR HEREIN, INCLUDING CLAIMS CAUSED BY THE BANK'S
OWN NEGLIGENCE, EXCEPT AS A RESULT OF THE BANK'S GROSS NEGLIGENCE AND WILLFUL
MISCONDUCT. THE BORROWER FURTHER AGREES THAT ITS INDEMNITY OBLIGATIONS SHALL
INCLUDE, BUT ARE NOT LIMITED TO, LIABILITY FOR DAMAGES RESULTING FROM THE
PERSONAL INJURY OR DEATH OF AN EMPLOYEE OF THE BORROWER, REGARDLESS OF WHETHER
THE BORROWER HAS PAID SUCH EMPLOYEE UNDER THE WORKERS' COMPENSATION LAWS OF ANY
STATE OR OTHER SIMILAR FEDERAL OR STATE LEGISLATION FOR THE PROTECTION OF
EMPLOYEES.
8.3 USURY SAVINGS.
(a) If the rate of interest under this Agreement at any time exceeds
the Highest Lawful Rate, the outstanding amount of the loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect. In addition, if when loans made hereunder are repaid in
full, the total interest due hereunder (taking into account the increase
provided for above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect, then the Borrower shall pay to the Bank an
amount equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged if the Highest Lawful Rate had at all
times been in effect and (B) the amount of interest which would have accrued if
the stated rates of interest set forth in this Agreement had at all times been
in effect and (ii) the amount of interest actually paid and accrued under this
Agreement on the Note.
(b) Notwithstanding the foregoing, it is the intention of the Bank
and the Borrower to conform strictly to any applicable usury laws. Accordingly,
if the Bank contracts for, charges, or receives any consideration which
constitutes interest in excess of the Highest Lawful Rate, then any such excess
shall be canceled automatically and, if previously paid, shall at the Bank's
option be applied to the outstanding amount of the loans made hereunder or be
refunded to the Borrower.
8.4 NOTICE. Unless otherwise specified, all notices and other
communications provided for in this Agreement shall be in writing, including
telecopy, and delivered or transmitted to the addresses set forth next to the
signatures below, or to such other address as shall be designated by the
Borrower or the Bank in written notice to the other party. Notice sent by
telecopy shall be deemed to be given when receipt of such transmission is
acknowledged, and delivered notice shall
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be deemed to be given when receipted for by, or actually received by, an
authorized officer of the Borrower or the Bank, as the case may be.
8.5 TIMING. Time is of the essence in this Agreement and in all other
Credit Documents.
8.6 AMENDMENTS AND WAIVERS. Any provision of this Agreement or any other
Credit Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Bank. No course of
dealing on the part of the Bank, its officers, employees, consultants, or
agents, nor any failure or delay by the Bank with respect to exercising any
right, power, or privilege of the Bank under this Agreement or any other Credit
Document shall operate as a waiver thereof.
8.7 INVALIDITY. If any provision of this Agreement or the other Credit
Documents are held to be illegal, invalid, or unenforceable, such provision
shall be fully severable and this Agreement and the other Credit Documents shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of the Credit Documents, and the remaining
provisions shall remain in full force and effect.
8.8 SURVIVAL OF AGREEMENTS. All representations, warranties, and covenants
of the Borrower in this Agreement or any other Credit Document shall survive the
execution of this Agreement or any other Credit Document.
8.9 SUCCESSORS AND ASSIGNS. This Agreement and each other Credit Document
shall bind the Borrower and its successors and assigns and shall inure to the
benefit of the Bank and its successors and assigns. The Bank shall not assign
its rights or delegate its duties hereunder without the consent of the Borrower
(which consent shall not be unreasonably withheld) and shall give the Borrower
notice of any such assignment. The Borrower may not assign its rights or
delegate its duties under this Agreement or any other Credit Document.
8.10 ARBITRATION.
(a) Any controversy or claim between or among the parties hereto,
including those arising out of or relating to this Agreement or the Credit
Documents, including any claim based on or arising from an alleged tort, shall
be determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law), the rules of practice and
procedure for the arbitration of commercial disputes of Judicial Arbitration and
Mediation Services, Inc. ("JAMS"), and the "special rules" set forth in
paragraph (b) below. In the event of any inconsistency, the special rules shall
control. Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Agreement or any of the Credit Documents applies in any
court having jurisdiction over such action.
(b) The arbitration shall be conducted in Houston, Texas, and
administered by JAMS, who shall appoint an arbitrator; if JAMS is unable or
legally precluded from administering the arbitration, then the American
Arbitration Association shall serve. All arbitration hearings shall
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be commenced within 90 days of the demand for arbitration; further, the
arbitrator shall only be permitted to extend the commencement of such hearing
for up to an additional 60 days and only after showing cause. The payment of
costs and fees associated with the arbitration shall be allocated between the
parties by the arbitrator.
(c) Nothing in this Agreement shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitation or repose and
any waivers contained in this Agreement or the Credit Documents; or (ii) be a
waiver by the Bank of the protection afforded to it by 12 U.S.C. Sec. 91 or any
substantially equivalent state law; or (iii) limit the right of the Bank hereto
(A) to exercise self help remedies such as setoff, or (B) to take action to
enforce rights under any security or support for the Obligations, including
foreclosing on collateral and making claims under guaranties, to the extent
permitted under the Credit Documents, or (C) to obtain from a court provisional
or ancillary remedies such as injunctive relief, writ of possession, or the
appointment of a receiver. The Bank may, to the extent permitted under the
Credit Documents, exercise such self help rights, enforce rights related to
security or support, or obtain such provisional or ancillary remedies before,
during, or after the pendency of any arbitration proceeding brought pursuant to
this Agreement. Neither this exercise of self help remedies nor the institution
or maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the controversy or claim occasioning
resort to such remedies.
8.11 COUNTERPARTS. This Agreement and any other Credit Document may be
executed in multiple counterparts which together shall constitute one and the
same instrument.
8.12 CHOICE OF LAW. This Agreement and the other Credit Documents have
been prepared, are being executed and delivered, and are intended to be
performed in the State of Texas, and the substantive laws of such state and the
applicable federal laws of the United States of America shall govern the
validity, construction, enforcement, and interpretation of this Agreement.
8.13 NO FURTHER AGREEMENTS. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES 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.
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EXECUTED as of the date first above written.
GARDEN RIDGE CORPORATION
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chief Financial Officer
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
BANK OF AMERICA, N.A.
By:/s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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