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EXHIBIT 10.20
FIRST AMENDMENT TO AMENDED
AND RESTATED SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SUBORDINATION AGREEMENT
(this "Amendment"), dated as of December 15, 1999, is entered into by and
between CONGRESS FINANCIAL CORPORATION (WESTERN), a California corporation
("Senior Lender"), and XXXXXX'X FURNITURE, INC., a Delaware corporation
("Subordinating Lender").
RECITALS
A. Subordinating Lender and Senior Lender have previously entered into
that certain Amended and Restated Subordination Agreement dated as of August 26,
1996 (the "Subordination Agreement"). Terms used herein without definition shall
have the meanings ascribed to them in the Subordination Agreement.
B. Subordinating Lender and Borrower have informed Senior Lender that
they intend to amend, restate and replace all existing Junior Debt Documents
with a new promissory note. In accordance with the terms of the Subordination
Agreement, Subordinating Lender and Borrower hereby requests that Senior Lender
(i) consent to the issuance of such new promissory note to replace the existing
Junior Debt Documents and (ii) amend the Subordination Agreement to reflect
certain terms of such new promissory note.
C. Senior Lender is willing to agree to give such consent and make such
amendments to the Subordination Agreement under the terms and conditions set
forth in this Amendment. Subordinating Lender is entering into this Amendment
with the understanding and agreement that none of Senior Lender's rights or
remedies as set forth in the Subordination Agreement is being waived or modified
by the terms of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Amendments to Subordination Agreement.
(a) The definition of "Junior Debt" set forth in Section 1 of the
Subordination Agreement is hereby amended and restated in its entirety
to read as follows:
"'Junior Debt' means all present and future indebtedness
and other obligations (direct and indirect) owing by Borrower to
Subordinating Lender including, but not limited to, indebtedness
owed under the Junior Debt Documents."
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(b) The definition of "Junior Debt Documents" set forth in
Section 1 of the Subordination Agreement is hereby amended and restated
in its entirety to read as follows:
"`Junior Debt Documents' means all instruments and
agreements evidencing the Junior Debt, including, but not limited
to, that certain Subordinated Promissory Note, dated December 15,
1999 in the original principal amount of Forty One Million One
Hundred Forty One Thousand Eight Hundred Thirty Five Dollars
($41,141,835) executed by Borrower to the order of Subordinating
Lender, a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference."
(c) Section 3(b) of the Subordination Agreement (entitled
"Payments to Subordinating Lender") is hereby amended and restated in
its entirety to read as follows:
"b. Payments to Subordinating Lender. If no default or
event of default by Borrower under any present or future
instrument or agreement (including the Senior Loan Agreement)
between Borrower and Senior Lender shall have occurred, Borrower
may make the following payments against the Junior Debt:
(i) quarterly payments of interest at a rate per
annum equal to one percent (1.0%) in excess of the rate
announced publicly from time to time by Bank of America
National Trust and Savings Association at its San
Francisco executive offices as its "prime rate", but in
any event not to exceed a maximum rate of ten percent
(10%) per annum; and
(ii) semi-annual payments of principal, in an
amount not to exceed fifty percent (50%) of Excess Cash
Flow for the applicable semi-annual period, if any (for
the purposes of this Section 3(b)(ii), `Excess Cash Flow'
shall mean, for any applicable semi-annual period, net
income after taxes of Borrower, exclusive of extraordinary
gains, plus depreciation and any other non-cash items to
the extent deducted from the revenues of Borrower in the
calculation of net income or loss, and less any capital
expenditures that are actually made and not financed
during such period); provided however, that (A) principal
payments shall not be permitted, unless, notwithstanding
the availability of Excess Cash Flow, after giving effect
to such principal payment, Borrower has a minimum of One
Million Dollars ($1,000,000) of Excess Availability (as
defined under the Senior Loan Agreement) as of the last
day of the applicable semi-annual period and (B) Borrower
shall only be permitted to pay the semi-annual principal
payments upon receipt and review by Lender of Borrower's
financial statements for the semi-annual period to which
the requested payment relates, which financial statements
shall be prepared in accordance with GAAP consistently
applied subject to normal year-end audit adjustments and
shall show sufficient Excess Cash Flow to permit the
principal payment and the required minimum Excess
Availability;
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provided further however, that after giving effect to any such
payment to Subordinating Lender, no default or event of default
by Borrower under any present or future instrument or agreement
(including the Senior Loan Agreement between Borrower and Senior
Lender) shall have occurred and prior to such payment, Borrower
and Subordinating Lender shall have provided notice to Senior
Lender of such intended payment or any demand for such payment.
Except as provided in this Agreement, Borrower and Subordinating
Lender agree and (Subordinating Lender acknowledges such
agreement) that Borrower shall neither: (i) make any payments to
Subordinating Lender in respect of the Junior Debt; nor (ii)
without Senior Lender's prior written consent, execute or deliver
any negotiable instruments as evidence of the Junior Debt."
(d) The addresses set forth in Section 12 of the Loan Agreement
to which notices are to be delivered to Senior Lender are hereby changed
to the following:
Senior Lender: CONGRESS FINANCIAL CORPORATION (WESTERN)
000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Account Executive
With a copy to: XXXXXX XXXX & XXXXXX LLP
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx, Xx., Esq.
2. New Exhibit A. The existing Exhibit A to the Subordination Agreement
is hereby replaced in its entirety with the Exhibit A attached hereto.
3. Consent to New Junior Debt Documents. Subject to the terms and
conditions set forth herein, Senior Lender hereby consents to the issuance of a
new promissory note by Borrower to the order of Subordinating Lender to replace
all existing Junior Debt Documents; provided that, such new promissory note
shall be in form and substance satisfactory to Senior Lender.
4. Effectiveness of this Amendment. Senior Lender must have received the
following items, in form and substance acceptable to Senior Lender, or evidence
of the occurrence thereof, before this Amendment is effective.
(a) Amendment. This Amendment fully executed in a sufficient
number of counterparts for distribution to Senior Lender and Subordinating
Lender.
(b) Authorizations. Evidence that the execution, delivery and
performance by Subordinating Lender of this Amendment and any instrument or
agreement required under this Amendment have been duly authorized.
(c) Representations and Warranties. The representations and
warranties of Subordinating Lender set forth herein must be true and correct.
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(d) Eighth Amendment to Senior Loan Agreement. The Eighth
Amendment to the Senior Loan Agreement duly executed by Borrower.
(e) Other Required Documentation. All other documents and legal
matters in connection with the transactions contemplated by this Amendment shall
have been delivered or executed or recorded and shall be in form and substance
satisfactory to Senior Lender.
5. Representations and Warranties. Subordinating Lender and Borrower
represent and warrant (jointly and severally) to Senior Lender that:
(a) Amount of Junior Debt. As of the date of this Amendment, the
aggregate outstanding principal balance (principal plus interest) of this Junior
Debt is Forty One Million One Hundred Forty One Thousand Eight Hundred Thirty
Five Dollars ($41,141,835).
(b) No Default. After giving effect to the transactions
contemplated by this Amendment, Borrower is not in default under any Junior Debt
Document.
6. Choice of Law. The validity of this Amendment, its construction,
interpretation and enforcement, and the rights of the parties hereunder, shall
be determined under, governed by, and construed in accordance with the laws of
the State of California governing contracts wholly to be performed in that
State.
7. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered, shall be deemed an original, and all of which,
when taken together, shall constitute but one and the same instrument.
8. Due Execution. The execution, delivery and performance of this
Amendment are within the powers of the Subordinating Lender, have been duly
authorized by all necessary corporate action, have received all necessary
governmental approval, if any, and do not contravene any law or any contractual
restrictions binding on Subordinating Lender.
9. Otherwise Not Affected. In the event of any conflict or inconsistency
between the Subordination Agreement and the provisions of this Amendment, the
provisions of this Amendment shall govern. Except to the extent set forth
herein, the Subordination Agreement shall remain in full force and effect.
10. Ratification. Subordinating Lender hereby restates, ratifies and
reaffirms each and every term and condition set forth in the Subordination
Agreement, as amended hereby, effective as of the date hereof.
11. Estoppel. To induce Senior Lender to enter into this Amendment and
to continue to make advances to Borrower under the Senior Loan Agreement,
Subordinating Lender hereby acknowledges and agrees that, after giving effect to
this Amendment, as of the date hereof, there exists no default by Subordinating
Lender and no right of offset, defense, counterclaim or objection in favor of
Subordinating Lender as against Senior Lender with respect to the obligations of
Subordinating Lender under the Subordination Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
XXXXXX'X FURNITURE, INC.,
a Delaware corporation
By:_____________________________
Name:___________________________
Title:__________________________
CONGRESS FINANCIAL
CORPORATION (WESTERN),
a California corporation
By:_____________________________
Name:___________________________
Title:__________________________
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ACKNOWLEDGMENT
The undersigned Borrower hereby approves of, and agrees and consents to
the foregoing Amendment. Borrower further agrees to be bound by the
Subordination Agreement, as amended by such Amendment. Although Senior Lender
and Subordinating Lender have informed Borrower of such Amendment and the
matters set forth above, and Borrower has acknowledged the same, Borrower
understands and agrees that neither Senior Lender nor Subordinating Lender has a
duty under the Subordination Agreement, the Senior Loan Agreement or any other
agreement with Borrower, to so notify Borrower or to seek such an
acknowledgment, for such Amendment to be effective, and nothing contained herein
is intended to or shall create such a duty as to any amendments hereafter.
Dated: December 15, 1999 XXXXXX'X CUSTOM CRAFTED
FURNITURE CORP.,
a California corporation
By:_____________________________
Name:___________________________
Title:__________________________
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