Exhibit 10.1
Factory Card Outlet Corp. The Official Committee of Unsecured
and Factory Card Outlet of America Ltd. Creditors
0000 Xxxxx Xxxx c/o Otterbourg, Stiendler, Houston &
Xxxxxxxxxx, Xxxxxxxx 00000 Xxxxx, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
August 1, 2001
Xx. Xxxx X. Xxxxxxxx
Mr. Xxxxx Xxxxxx
Factory Card Holdings, Inc.
000 Xxxx Xxxx., Xxxxx 00-000
Xxxxxxx Xxxxxxx, Xxxxxx 00000
Dear Messrs. Xxxxxxxx and Xxxxxx:
Reference is made to that certain Agreement on Plan of
Reorganization of Factory Card Outlet Corp., among Factory Card Outlet Corp. and
Factory Card Outlet of America Ltd. (collectively, the "Debtors"), Factory Card
Holdings, Inc. ("FCH") and the Official Committee of Unsecured Creditors (the
"Creditors' Committee"), dated March 26, 2001 (the "FCH Agreement"), and the
related Joint Amended Plan of Reorganization, dated May 31, 2001, proposed by
the Debtors, FCH and the Creditors Committee (the "Plan").
Pursuant to the terms of the FCH Agreement and the Plan,
FCH was required to provide the Debtors with, among other things, an equity
investment of at least $6 million in connection with the funding of the Plan.
While the FCH Agreement anticipated that confirmation and consummation of the
Plan would take place no later than June 29, 2001, by mutual agreement of all
parties, that date was extended to on or about July 18, 2001, the date of the
noticed confirmation hearing. On July 13, 2001, FCH informed the Debtors and the
Creditors' Committee that, notwithstanding the commitment letter that it
received from Ingenium Capital Group ("Ingenium"), FCH was not then able to
fulfill its obligation to provide the Debtors with such equity investment,
either from Ingenium or any other party. We were further informed that, while
FCH desired to proceed with an equity investment from the Xxxxxxx Company
("Xxxxxxx") rather than Ingenium, FCH did not then have an agreement with
Xxxxxxx and a letter of intent between Xxxxxxx and either FCH or yourselves as
individuals was to expire by its terms on July 16, 2001. Under the
circumstances, the Debtors were compelled to request an adjournment of the
confirmation hearing.
It is our understanding that, as of the date hereof, FCH
still does not have any commitments for the $6 million equity investment
required to consummate the FCH Agreement and the Plan. Moreover, we have been
provided with a copy of a letter from Xxxxxxx to each of you dated July 23, 2001
which reflects that you have either failed or refused to enter into definitive
transactional documents with Xxxxxxx or his designee prior to the expiration of
the aforesaid letter of intent and, as a result, there is no binding commitment
from Xxxxxxx to enter into a transaction providing for an equity investment in
the Debtors.
In view of the foregoing, FCH has failed to take reasonable
and timely steps to insure that the conditions to closing would be satisfied.
For that reason, among others, FCH is in breach of the FCH Agreement and the
Plan. As a consequence, the Debtors and the Creditors' Committee have no further
obligations to FCH thereunder. FCH's breach has caused substantial damage to the
Debtors' business, its estates and creditors. Accordingly, the Debtors and the
Creditors' Committee reserve any and all rights and claims that either or both
have or may have against FCH or any other party. Very truly yours,
FACTORY CARD OUTLET CORP. AND
FACTORY CARD OUTLET OF AMERICA LTD.
By: /s/ Mr. Xxxxxxx Xxxxxxx
------------------------------------------
Name: Mr. Xxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Representative
cc: Xxxxxx Xxxxx, Esq.
Xxxx Xxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxx, Esq.
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