EXHIBIT 10.27
NOTE MODIFICATION AGREEMENT
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THIS NOTE MODIFICATION AGREEMENT ("Agreement") is made and entered into
this 31st day of January, 1997 by PIER 1 IMPORTS, INC. ("Pier 1"), SUNBELT
NURSERY GROUP, INC. ("Sunbelt"), XXXXX NURSERY, INC. ("Xxxxx") and XXXXXXX X.
XXXXX ("Xxxxx").
RECITALS
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1. Pier 1 and Sunbelt entered into that certain Agreement of
Settlement dated July 31, 1995 ("Agreement of Settlement") pursuant to which
Sunbelt agreed to allowance of a Pier 1 earn out claim in the amount of
$8,000,000 ("Earn-Out Claim") to be paid or discharged pursuant to the terms of
a Promissory Note dated July 31, 1995 in the original principal amount of
$8,000,000 ("Earn-Out Note") and secured pursuant to the terms of a Security
Agreement dated July 31, 1995 ("Security Agreement"). The Security Agreement is
subject to the terms of a Subordination Agreement dated July 31, 1995 between
American National Bank and Trust of Chicago ("ANB") and Pier 1 ("Subordination
Agreement").
2. Sunbelt is not in Default under the Agreement of Settlement as
of the date of execution of this Agreement.
3. Xxxxx owns 49.5% of the issued and outstanding common stock of
Sunbelt ("Xxxxx Stock"). Xxxxx pledged and delivered the Xxxxx Stock to ANB to
secure payment of certain obligations which remain outstanding.
4. By Letter Agreement dated October 1, 1994 Xxxxx committed,
subject to conditions stated therein, to make certain payments to Pier 1 upon
the sale of some or all of the Xxxxx Stock ("Letter Agreement"). Pursuant to
Paragraph 8 of the Agreement of Settlement the Letter Agreement was amended to
provide for expiration of all Xxxxx obligations thereunder as of July 1, 1998.
(The Letter Agreement, as amended, is hereinafter referred to as the "Letter
Agreement")
5. Pursuant to Paragraph 4 of the Agreement of Settlement and the
Lease Guarantee Indemnification Agreement incorporated as Exhibit D thereto
Sunbelt committed to reduce and in no event increase Pier 1's exposure as an
assignor or guarantor of certain Sunbelt real estate leases and subleases.
Xxxxx also executed the Xxxxx Indemnification dated July 31, 1995 under which
he agreed to indemnify Pier 1 for Claims and Liabilities arising out of any
Extended Lease, as defined therein ("Xxxxx Indemnification").
6. Sunbelt and Xxxxx have proposed and Pier 1 has agreed to amend
the Agreement of Settlement and to amend and restate or provide for
satisfaction of the Earn-Out Note according to the terms and provisions of this
Note Modification Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Pier 1, Sunbelt, Xxxxx and Xxxxx agree as follows:
1. Satisfaction of the Earn-Out Note. Notwithstanding anything in the
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Agreement of Settlement or Earn-Out Note to the contrary, Sunbelt, at its
option, may satisfy the Earn-Out Claim and satisfy and discharge all obligations
under the Earn-Out Note by making a cash payment of $1,500,000, in immediately
available funds, after March 2, but not later than March 17, 1997, provided
Xxxxx has discharged his obligations under the Letter Agreement and Xxxxx
Indemnification as provided in Paragraph 2 herein. If Xxxxx sells 500,000 or
more shares of the Xxxxx Stock on or before March 17, 1997, then Sunbelt shall
satisfy the Earn-Out Note as provided in this Paragraph 1. Upon receipt of the
cash payment as provided herein Pier 1 shall immediately deliver the Earn-Out
Note to Sunbelt.
2. Discharge of Xxxxx Obligations. Notwithstanding anything in the
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Agreement of Settlement, Letter Agreement or Xxxxx Indemnification to the
contrary, Xxxxx, at his option, may satisfy, discharge and obtain an
unconditional release from Pier 1 of all obligations, if any, arising under the
Letter Agreement and Xxxxx Indemnification, except as provided herein ("Pier 1
Release"), by making a cash payment to Pier 1 of $500,000, in immediately
available funds, after March 2, 1997, but not later than March 17, 1997
provided Sunbelt has satisfied the Earn-Out Note as provided in Paragraph 1
herein. Xxxxx liability, if any, under the Xxxxx Indemnification for Claims
and Liabilities, as defined therein, arising out of any Extended Lease the
lease term of which was renewed or extended after October 19, 1994 and before
execution of this Agreement (excluding that certain lease, dated August 17,
1978 between Xxxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxxxxx and Xxxxx X. Xxxx, as
lessor, and Xxxxx Nurseries of Texas, Inc. for Store Xx. 000, 0000 XX Xxxx 000,
Xxx Xxxxxxx, Xxxxx) shall survive execution of the Pier 1 Release.
3. Earn-Out Claim and Earn-Out Note Modification. In the event
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Sunbelt does not satisfy the Earn-Out Claim and discharge all obligations under
the Earn-Out Note as provided in Paragraph 1 herein, the Earn-Out Claim and the
principal amount of the Earn-Out Note shall be fixed at $800,000 and the Earn-
Out Note amended and restated provided that:
a) On March 3, 1997 Sunbelt pays Pier 1, in cash or certified
funds, the sum of $200,000 ("Cash Payment");
b) On March 3, 1997 Sunbelt delivers an Amended Promissory Note
in the original principal amount of $800,000 which, subject to
termination as provided in subparagraph 3(c) herein, shall amend
and restate the Earn-Out Note and which shall thereinafter
constitute the Earn-Out Note for all purposes under the Agreement
of Settlement, Security Agreement and Subordination Agreement
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("Amended Earn-Out Note"), provided in the Event of Default under
the Agreement of Settlement or Security Agreement the Earn-Out
Claim shall be $6,800,000 less payments received under the Amended
Earn-Out Note notwithstanding anything in this Agreement to the
contrary. The Amended Earn-Out Note shall be payable in four equal
annual installments of $200,000 commencing May 1, 1998 together
with interest on the unpaid principal balance at the rate of six
percent (6%) per annum through May 1, 2001 at which time the
entire principal balance and any accrued interest shall be due and
payable in full ("Maturity Date"). All past due principal payments
under the Amended Earn-Out Note shall bear interest at the rate of
ten percent (10%) per annum until the Maturity Date after which
all delinquent principal shall bear interest at a default rate of
eighteen percent (18%) per annum. Interest shall accrue as of
March 3, 1997 and be payable monthly commencing on the first day
of the first month following delivery of the Amended Earn-Out Note
to Pier 1. All past due interest payments shall bear interest at
the rate of eighteen percent (18%) per annum. The Amended Earn-Out
Note may be prepaid without penalty. The Amended Earn-Out Note
shall continue to be secured by the Security Agreement and subject
to the terms of the Subordination Agreement. The lien of the
Security Agreement shall be subordinate to the Xxxxx Security
Interest, as defined in Paragraph 4 herein. Failure to timely pay
interest on the Amended Earn-Out Note shall constitute an Event of
Default under the Agreement of Settlement and the Security
Agreement. Notwithstanding the provisions of Paragraph 7 of the
Agreement of Settlement or Paragraph 7 of the Security Agreement,
failure to make timely payment of principal under the Amended
Earn-Out Note shall not constitute an Event of Default under the
Agreement of Settlement or the Security Agreement until the
Maturity Date, at which time Pier 1, in the event of nonpayment of
principal, may exercise all of its rights under the Amended Earn-
Out Note, Agreement of Settlement and Security Agreement, subject
to the terms of the Subordination Agreement and the Xxxxx
Subordination, as defined herein; and
c) Xxxxx delivers the Shares, as defined herein and with respect
to which a registration statement becomes effective ("Delivery
Date") to a securities brokerage firm ("Broker") acceptable to
Pier 1 with irrevocable instructions, in a form acceptable to Pier
1, to sell the Shares and deliver the proceeds of sale, net of
sales commissions and other cost of sale, to Pier 1. Sunbelt shall
file a registration statement with the Securities and Exchange
Commission relating to the Shares as soon as practicable but not
later than March 17, 1997. Sunbelt shall use its best efforts to
cause the registration statement to become effective as soon as
possible after the filing thereof. The number of shares of Xxxxx
Stock delivered by Xxxxx to the Broker shall equal the quotient of
1,000,000 divided by the closing price of Sunbelt common stock on
the last trading day immediately preceding the Delivery Date
("Closing Price") not to exceed 1,000,000 shares (the "Shares").
Pier 1 shall
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have the unilateral right to terminate this Agreement if the
Delivery Date does not occur (i) by May 30, 1997 or (ii) the
Closing Price is less than one dollar per Share in which case this
Agreement shall not amend or otherwise affect enforceability of
the Earn-Out Note. Xxxxx and Sunbelt shall cause an registration
statement to be effective for sale of the Shares from the Delivery
Date through the earlier of (i) the date of sale of the last
Shares or (ii) ninety (90) days following the Delivery Date. In
consideration for the delivery of the Shares Pier 1 shall (i)
unconditionally release Xxxxx from all obligations under the
Letter Agreement arising from delivery and sale of the Shares and
(ii) subordinate the lien of the Security Agreement to the lien of
the Xxxxx Security Agreement according to the terms of a
subordination agreement in the form of the Subordination Agreement
("Xxxxx Subordination").
4. Escrow. Sunbelt shall deposit the Cash Payment and the Amended
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Earn-Out Note into an escrow to be established by Sunbelt and Pier 1 which shall
provide for delivery of the Cash Payment and the Amended Earn-Out Note to (i)
Pier 1 on the Delivery Date or (ii) Sunbelt upon receipt of written confirmation
from Pier 1 of termination of this Agreement.
5. Sunbelt Note. In consideration for Xxxxx delivery of the Shares,
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Sunbelt and Xxxxx shall make a promissory note payable to Xxxxx in the
principal amount of $1,000,000 ("Sunbelt Note") in a form acceptable to
Sunbelt, Xxxxx and ANB which shall be secured by a security interest in the
Collateral, as defined in the Security Agreement ("Xxxxx Security Agreement").
The Xxxxx Security Agreement shall be junior and subordinate to the Senior
Liens, as defined in the Subordination Agreement, but senior and superior to
the lien of the Security Agreement. Xxxxx shall pledge the Sunbelt Note to ANB
and enter into a subordination agreement with ANB in a form acceptable to ANB.
6. Attorneys' Fees. Each party shall bear its own costs with respect
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to the negotiation, preparation and execution of this Agreement and the
agreements, instruments and other documents related hereto.
7. Amendments, Etc. No amendment or waiver of any provision of this
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Agreement nor consent to any departure herefrom by Pier 1, Sunbelt, Xxxxx or
Xxxxx, shall in any event be effective unless the same shall be in writing and
signed by Pier 1, Sunbelt, Xxxxx and Xxxxx in all cases, and then, in any case,
such waiver or consent shall be effective only in the specific instances and
for the specific instance and for the specific purpose for which given.
8. Governing Law. This Agreement and all other documents executed in
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connection herewith, shall be deemed to be contracts and agreements executed by
the parties hereto under the Laws of the State of Texas and for all purposes
shall be construed in accordance with, and governed by, the Laws of the State
of Texas without reference to the principles of conflicts of laws.
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9. Entire Agreement. This Agreement represents the final and entire
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agreement and understanding among Pier 1, Sunbelt, Xxxxx and Xxxxx relating to
the subject matter hereof, supersedes all prior proposals, agreements and
understandings relating to such subject matter and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements among the parties.
10. Execution in Counterparts. This Agreement may be executed in any
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number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Note
Modification Agreement to be executed as of the day and year first above
written.
PIER 1 IMPORTS, INC.
By: /s/Xxxxx X. Xxxxxxx
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Its Chairman
SUNBELT NURSERY GROUP, INC.
By: /s/Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
President
XXXXX NURSERY GROUP, INC.
By: /s/Xxxxxxx X. Xxxxx
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Its President
/s/Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
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ACKNOWLEDGMENT
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The foregoing Note Modification Agreement is hereby acknowledged and
agreed to this 31st day of January, 1997.
AMERICAN NATIONAL BANK AND
TRUST OF CHICAGO
By: /s/Xxxxxxxxx X. Xxxxxxx
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Its First Vice President
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