FOURTH AMENDMENT TO DEBTOR IN POSSESSION
LOAN AND SECURITY AGREEMENT
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THIS FOURTH AMENDMENT TO DEBTOR IN POSSESSION LOAN AND SECURITY
AGREEMENT (this "Fourth Amendment") is entered into and effective as of December
__, 1999, by and among Factory Card Outlet of America Ltd., an Illinois
corporation and a debtor and debtor in possession (the "Borrower"), on the one
hand, and Foothill Capital Corporation, as Agent ("Foothill") and the financial
institutions listed on the signature page of the Loan Agreement referred to
below (such financial institutions, together with their respective successors
and assigns, are collectively referred to herein as the "Lenders"), on the other
hand. This Fourth Amendment amends certain provisions of the Debtor in
Possession Loan and Security Agreement dated as of March 23, 1999 by and among
the Borrower and Foothill, as Agent, and the Lenders (as amended by and through
the date of this Fourth Amendment, and as hereafter amended and/or restated from
time to time, the "Loan Agreement"). Capitalized terms used herein and not
otherwise defined shall have the same meanings herein as in the Loan Agreement.
BACKGROUND
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This Fourth Amendment is entered into to amend certain of the
provisions governing certain of the covenants described in the Loan Agreement
and Schedule 7.21 thereto, increasing the interest payable on the Obligations,
and amending certain other provisions, all in accordance with the terms and
conditions hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:
1. Amendments to Loan Agreement.
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(a) Amendment to Section 2.7. Section 2.7 of the Loan Agreement is
hereby amended by deleting the table of interest rate margins appearing therein,
deleting references to the Adjusted Eurodollar Rate Margin appearing therein,
and inserting in lieu thereof the following table:
Borrower's EBITDA, determined using the Borrower's
Audited Financial Statements for the Immediately Preceding Reference Rate Margin
Fiscal Year ---------------------
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greater than or equal to $15,000,001 +.25%
greater than or equal to $11,000,001, but less than +.25%
$15,000,001
less than $11,000,001, but greater than $9,000,000 +.50%
$9,000,000 or less +1.00%
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NY2:\3073942v3\44336.0003
The Borrower acknowledges that the Eurodollar Rate interest rate option has been
deleted from the Loan Agreement, and that accordingly the Borrower's right to
request that Eurodollar Rate Loans accrue interest at the Adjusted Eurodollar
Rate Margin is terminated.
(b) Amendment to Subsection 3.6. Subsection 3.6 is hereby amended by
deleting such subsection in its entirety and inserting in lieu thereof the
following:
"3.6 EARLY TERMINATION BY BORROWER. The Borrower has
the option, at any time upon 90 days prior written notice to
Agent, to terminate this Agreement by paying to Agent (for the
ratable benefit of the Lender Group), in cash, the Obligations
(including an amount equal to 102% of the undrawn amount of
the Letters of Credit), in full, together with a premium (the
"Early Termination Premium") equal to (x) 2% of the Maximum
Revolving Amount during the period from December 17, 1999
through December 17, 2000, and (y) 1% of the Maximum Revolving
Amount during the period from December 18, 2000 through the
Maturity Date, provided, however, that no Early Termination
Premium payment shall be due in connection with payment in
full of the Obligations on the Maturity Date."
(c) Amendment to Subsection 7.20(a). Subsection 7.20(a) of the Loan
Agreement is hereby amended by deleting the term "85%" in the two places where
it appears in such subsection and inserting in lieu thereof (in each of those
two places) the term "90%."
(d) Amendment to Section 7.21. Section 7.21 of the Loan Agreement is
amended by deleting the existing Schedule 7.21 to the Loan Agreement and
replacing same with the Schedule 7.21 attached to this Fourth Amendment as
Exhibit A.
2. Representations and Warranties; Confirmation of
Representations, Warranties.
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This Fourth Amendment has been duly authorized, executed and delivered
by the Borrower. The Loan Agreement, as amended hereby, and each of the other
Loan Documents, as amended by and through the date hereof, constitute legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms. The Borrower, by execution of this
Fourth Amendment, certifies to the Agent and each of the Lenders that each of
the representations and warranties set forth in the Loan Agreement and the other
Loan Documents is true and correct as of the date hereof, except to the extent
such representations and warranties expressly relate to an earlier date, as if
fully set forth in this Fourth Amendment, and that, as of the date hereof, no
Default or Event of Default has occurred and is continuing under the Loan
Agreement or any other Loan Document. The Borrower acknowledges and agrees that
this Fourth Amendment shall become a part of the Loan
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Agreement and shall be a Loan Document. The Borrower further acknowledges and
agrees that the Agent and the Lenders have acted in good faith in entering into
this Fourth Amendment.
3. Conditions Precedent. Prior to or concurrently with the execution by
the Agent and the Lenders of this Fourth Amendment, and as a condition to the
obligation of the Lenders to execute this Fourth Amendment and make the
accommodations to the Borrower described herein:
(a) This Fourth Amendment shall have been executed and delivered by
each of the parties hereto; and
(b) The Borrower shall have paid to the Agent for the ratable benefit
of the Lenders an amendment fee of $100,000. Such fee shall be fully earned when
paid to the Agent and shall not be refunded to the Borrower under any
circumstances.
4. No Novation; Effect; Counterparts; Governing Law.
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Except to the extent specifically amended hereby, the Loan Agreement
and each of the other Loan Documents shall be unaffected hereby and shall remain
in full force and effect; this Fourth Amendment shall not be deemed a novation
of the Loan Agreement or any other Loan Document. The Borrower hereby
acknowledges, confirms and ratifies its obligations under the Loan Agreement and
each of the other Loan Documents. This Fourth Amendment may be executed in any
number of counterparts, and by the different parties on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all the
counterparts shall together constitute one instrument. This Fourth Amendment
shall be governed by the internal laws of The Commonwealth of Massachusetts
(without reference to conflicts of law principles) and the United States
Bankruptcy Code and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
Borrower acknowledges that the reasonable out-of-pocket expenses of the Agent
and the Lenders incurred in connection with the preparation, execution and
delivery of this Fourth Amendment shall be "Lender Group Expenses," as such term
is defined in the Loan Agreement.
4. Construction.
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The Borrower, by execution hereof, acknowledges and confirms that for
all purposes of the Loan Agreement and the other Loan Documents, the term "Loan
Agreement" shall mean the Loan Agreement as amended by and through the date of
this Fourth Amendment and as further amended and/or restated from time to time
hereafter.
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IN WITNESS WHEREOF, the parties hereto have executed this Fourth
Amendment to Loan and Security Agreement as a sealed instrument as of the date
first above written.
FACTORY CARD OUTLET OF AMERICA,
LTD.
By:
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Name:
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Title:
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FOOTHILL CAPITAL CORPORATION, for
itself and as Agent for the Lenders
By:
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(Title)
PARAGON CAPITAL, LLC, as a Lender
By:
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(Title)
EXHIBIT A
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RETAIL COVENANTS
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Min / Max Inventory Measured monthly, on a rolling 3
month basis. Average EOM inventory AT COST
shall be at least 90.0% of plan and not more
than 105.0% of plan.
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Minimum Purchases Measured monthly on a rolling 3 month basis.
Total purchases AT COST , shall not be less
than 93.0% of Planned Purchases in any one
fiscal month.
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Minimum Gross Margin Measured monthly on a rolling 3 month basis.
Actual Gross Margin Dollars shall be at
least 95.0% of Planned Gross Margin Dollars.
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Trade A/P to Inventory Measured monthly. EOM Post-petition Trade
Accounts Payable as a percentage of EOM
Inventory AT COST shall not vary negatively
from plan by more than 2.25 percentage
points.
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COMPOSITION GUIDELINES
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Seasonal Carry-Over Measured monthly. "Seasonal Carry-Over"
shall not exceed the lesser of $9.8MM
(Actual $ Amount at closing) or, 7.0%
(Actual % at closing) of total RETAIL
inventory.
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Basic Party Measured monthly. "Basic Party" EOM RETAIL
inventory cannot fall below 32.0% of total
RETAIL inventory.
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Cards Measured monthly. "Cards" EOM RETAIL
inventory cannot fall below 20.5% of total
RETAIL inventory.
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FINANCIAL COVENANTS
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CAPEX Not to exceed $5MM per annum
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EBITDA (i) For the period from the beginning of the
Borrower's current fiscal year to the end of
each month (each a "Test Period") through
January 2000, commencing with the Test
Period ending July 3, 1999, maintain EBITDA
of at least 90.0% of projected EBITDA for
the Test Period as set forth in the Business
Plan; and (ii) commencing February 2000 and
as of the last day of each month thereafter,
maintain EBITDA for the rolling period of 12
consecutive months then ended of at least
90.0% of projected EBITDA for such period of
12 consecutive months as set forth in the
applicable Business Plan(s).
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