SECOND AMENDMENT AGREEMENT
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THIS SECOND AMENDMENT AGREEMENT (this "Second Amendment") is entered into
as of October 7, 2005 by and between Factory Card Outlet of America Ltd., an
Illinois corporation ("Borrower"), the lenders signatory hereto ("Lenders") and
Xxxxx Fargo Retail Finance II, LLC (formerly known as Xxxxx Fargo Retail
Finance, LLC), as agent for the Lenders (in such capacity, "Agent").
Introduction
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Borrower, Agent and Lenders are parties to a Loan and Security Agreement
dated as of April 9, 2002 (the "LSA") and the First Amendment Agreement dated as
of April 9, 2004 (the "First Amendment," and, together with the LSA, and each as
amended hereby and as further amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement") pursuant to which the Lenders
have agreed to make certain revolving credit advances and to provide certain
other financial accommodations to Borrower.
Borrower and Agent are also parties to a Fee Letter dated as of April 9,
2002 (the "Fee Letter") pursuant to which Borrower has agreed to pay the Agent
certain fees in connection with the transactions contemplated by the Loan
Agreement.
Borrower has requested certain amendments to the Loan Agreement and the Fee
Letter. Agent and Lenders are willing to so amend the Loan Agreement and the Fee
Letter, but only on the terms and conditions set forth herein.
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 signatory hereto agree
as follows.
1. Amendments to the Loan Agreement.
(a) Section 1.1 of the Loan Agreement is hereby amended as follows:
(i) The definition of "Applicable Prepayment Premium" is hereby
amended and restated in its entirety as follows:
"Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from
and including the date of the execution and delivery of this Second
Amendment up to and including October 31, 2006, 0.25% times the sum of
(i) the Maximum Revolver Amount, plus (ii) 102% of the aggregate
amount of all undrawn Letters of Credit on the date immediately prior
to the date of determination, (b) during the period of time from
November 1, 2006 up to and including March 30, 2007, 0.15% times the
sum of (i) the Maximum Revolver Amount, plus (ii) 102% of the
aggregate amount of all undrawn Letters of Credit on the date
immediately prior to the date of determination, and (c) after April 1,
2007, $0.
(ii) The definition of "LIBO Rate Margin" is hereby amended and
restated in its entirety as follows:
"LIBO Rate Margin," at any date of determination, shall be
determined by reference to the Borrower's average daily Test
Availability during the three full calendar months ending before such
date as follows:
Average Test Availability LIBO Rate Margin
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Greater than or equal to $15,000,000 1.25%
Greater than or equal to $5,000,000 1.50%
but less than $15,000,000
Less than $5,000,000 1.75%
For purposes of determining the applicable LIBO Rate Margin, if
Borrower's Test Availability drops below the applicable Test
Availability tier set forth in the table above for up to three (3)
consecutive calendar days in any given month, the Test Availability on
such calendar day(s) will not be included in calculating the average
Test Availability; provided, however, that should the Test
Availability drop below the applicable Test Availability tier set
forth in the table above for up to three (3) consecutive calendar days
on more than one occasion in any given month, only one such occasion
(as selected by the Agent in its Permitted Discretion) will be
eliminated from the calculation of Test Availability during such
month."
(iii) The definition of "Loan Documents" is hereby amended by
inserting the words "the Second Amendment," after the words "the First
Amendment," in such definition.
(iv) The definition of "Maximum Revolver Amount" is hereby
amended and restated in its entirety as follows:
"Maximum Revolver Amount" means $30,000,000, subject to increase
(to a maximum amount of $45,000,000) pursuant to Section 2.1(e)
hereof."
(v) The following new definitions are hereby inserted in the
appropriate alphabetical order as follows:
"Availability Block" means $3,000,000 at all times.
"Second Amendment" means the Second Amendment to Loan and
Security Agreement dated as of October 7, 2005 by and between Borrower
and the Lender.
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"Test Availability" means the sum of Availability (without regard
to any limit imposed by the Maximum Revolver Amount) plus the
Availability Block."
(b) Section 2.1(a) of the Loan Agreement is hereby amended by deleting
the existing definition of "Borrowing Base" and replacing it with the following:
"(A) the lesser of
(I) $2,000,000, or
(II) 85% of the amount of Eligible Credit Card Accounts less
the amount if any, of the Dilution Reserve
plus
----
(B) during the Seasonal Period, the lesser of (i) 70% of the Cost
value of Eligible Inventory plus 50% of the Cost value of
Eligible In-Transit Inventory or (ii) 90% of the then-extant Net
Retail Liquidation Value of Eligible Inventory, or (2) at all
other times during the term of this Agreement, the lesser of (i)
65% of the Cost value of Eligible Inventory plus 65% of the Cost
value of Eligible In-Transit Inventory or (ii) 85% of the
then-extant Net Retail Liquidation Value of Eligible Inventory
plus 85% of the then-extant Net Retail Liquidation Value of
Eligible In-Transit Inventory
minus
-----
(C) the sum of the Availability Block plus the aggregate amount
of any other Reserves, if any, established by Agent."
(c) Section 2.1 of the Agreement is hereby amended by inserting the
following new Section 2.1(e):
"(e) Increase in Revolving Credit Commitment.
(i) At any time prior to the date that is one calendar year
before the Maturity Date, Borrower may request increases in the Revolver
Commitment and the Maximum Revolver Amount (each, a "Requested Commitment
Increase"); provided that (i) in no event shall the aggregate amount of the
Requested Commitment Increases exceed $15,000,000, (ii) each such Requested
Commitment Increase shall be in a minimum principal amount of $5,000,000,
(iii) no Default or Event of Default shall have occurred and be continuing
or would result from the proposed Requested Commitment Increase, (iv) each
such Requested Commitment Increase shall be in writing and shall be
delivered to the Agent no fewer than ten (10) Business Days prior to the
requested effective date of the Requested Commitment Increase, (v) Borrower
shall have delivered to Agent such documents, instruments and/or legal
opinions as reasonably requested by the Agent, and (vi) the Borrower shall
have demonstrated pro forma compliance with all financial covenants set
forth in Section 6 before and after giving effect to such Requested
Commitment Increase. The Agent shall promptly give notice of such requested
increase to the Lenders. The Agent shall determine, in its Permitted
Discretion, whether the Borrower has satisfied the conditions to a
Requested Commitment Increase and shall promptly notify the Borrower and
Lenders of the Agent's determination.
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(ii) Immediately upon the completion of each Requested Commitment
Increase, (A) the amount designated as the Maximum Revolver Amount in
Section 1.1 hereof shall be deemed to be increased by the amount of the
Requested Commitment Increase for all purposes of this Agreement and the
other Loan Documents, and (B) the outstanding Advances will be reallocated
on the effective date of such Requested Commitment Increase among the
Lenders in accordance with their revised Commitments (and the Lenders
having a Revolver Commitment agree to make all payments and adjustments
necessary to effect such reallocation).
(d) Section 2.3(a) of the Agreement is hereby amended and restated as
follows:
"(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent by
electronic mail, which notice must be received by Agent no later than 1:00
p.m. (Boston, Massachusetts time) on the Business Day prior to the date
that is the requested Funding Date in the case of a request for an Advance
specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day; provided, however, that in the case of
a request for Swing Loan in an amount of $250,000, or less, such notice
will be timely received if it is received by Agent no later than 1:00 p.m.
(Boston, Massachusetts time) on the Business Day that is the requested
Funding Date. At Agent's election, in lieu of delivering the
above-described written request, any Authorized Person may give Agent
telephonic notice of such request by the required time, with such
telephonic notice to be confirmed in writing within 24 hours of the giving
of such notice."
(e) Section 2.6(b) of the Loan Agreement is hereby amended and
restated as follows:
"(b) Letter of Credit Fee. Borrower shall pay Agent (for the ratable
benefit of the Lenders with a Revolver Commitment, subject to any letter
agreement between Agent and individual Lenders), a Letter of Credit fee (in
addition to the charges, commissions, fees, and costs set forth in Section
2.12) which shall accrue at a rate equal to (x) the Base LIBO Rate Margin
times the Daily Balance of the undrawn amount of all outstanding standby
Letters of Credit and (y) the applicable LIBO Rate Margin less 0.25% times
the Daily Balance of the undrawn amount of all outstanding documentary
Letters of Credit."
(f) Section 2.12(e) of the Loan Agreement is hereby amended and
restated as follows:
"(e) Any and all charges, commissions, fees, and costs incurred by the
Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrower to Agent for the account of the Issuing Lender."
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(g) Section 3.4 of the Loan Agreement is hereby amended by deleting
the words "April 9, 2007 (the "Maturity Date")" and inserting in lieu thereof
the words "October 31, 2008 (the "Maturity Date")."
(h) Section 4.8 of the Loan Agreement is hereby amended and restated
as follows:
"4.8 Right to Inspect; Inventories, Appraisals and Audits. Agent and
each Lender (through any of their respective officers, employees, or Agent)
shall have the right, from time to time hereafter and upon reasonable
notice to Borrower, to inspect the Books and to check, test, and appraise
the Collateral in order to verify Borrower's financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral. Without limiting the generality of the foregoing:
(a) At Borrower's expense, third parties acceptable to Agent
shall conduct physical inventories at all of Borrower's store locations
once per fiscal year and at its distribution center from time to time
consistent with existing practices on the Closing Date. Agent, at the
expense of Borrower, may participate in and/or observe each physical count
and/or inventory of so much of the Collateral as consists of Inventory
which is undertaken on behalf of Borrower. Without limiting any provision
of this Agreement, Agent may establish or expand the Availability Reserves
and Inventory Reserves based on the results of such physical inventories.
(b) Agent from time to time, but not more often than three times
per fiscal year if no Event of Default has occurred and is continuing, may
obtain or conduct (in all events, at Borrower's expense) appraisals
conducted by such appraisers as are satisfactory to Agent.
(c) Agent from time to time, but not more often than three times
per fiscal year if no Event of Default has occurred and is continuing, may
conduct (at Borrower's expense) a commercial financial audit of Borrower's
Books; provided, however, that such audits may occur more frequently if an
Event of Default has occurred and is continuing and; and further provided,
however, that so long as no Event of Default exists and Borrower's Test
Availability is greater than or equal to $10,000,000 at all times, Agent
and each Lender (through any of their respective officers, employees, or
Agent) shall have the right, no more than once per fiscal year and upon
reasonable notice to Borrower, to conduct a commercial finance audit (at
Borrower's expense) of Borrower's Books.
(d) Agent from time to time (in all events, at Borrower's expense
up to an aggregate maximum of $5,000 per fiscal year unless an Event of
Default occurs and is continuing, in which event there shall be no such
expense cap) may undertake "merchant visits" to all or any of Borrower's
business premises and shall provide seven days prior notice of each such
visit to Borrower. Agent shall provide Borrower with a copy of any
non-company confidential results of such merchant visits upon Borrower's
written request."
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(i) Schedule 6.2 of the Loan Agreement is hereby amended by deleting
such Schedule 6.2 in its entirety and substituting therefor the Schedule 6.2
attached to this Second Amendment.
(j) Schedule 7.21 to the Loan Agreement is hereby amended by deleting
such Schedule 7.21 in its entirety and substituting therefor the Schedule 7.21
attached to this Second Amendment.
(k) Schedule 7.22 to the Loan Agreement is hereby amended by deleting
such Schedule 7.22 in its entirety and substituting therefor the Schedule 7.22
attached to this Second Amendment.
(l) Schedule C-1 to the Loan Agreement is hereby amended by deleting
such Schedule C-1 in its entirety and substituting therefor the Schedule C-1
attached to this Second Amendment.
2. Amendments to Fee Letter.
(a) The Fee Letter is hereby amended by deleting numbered paragraph 3
thereof and inserting in lieu thereof the following new numbered paragraph 3:
"3. Standard Collateral Management Fee. The Borrower shall pay
the Agent on the first day of each month during the term of the
Agreement a monthly standard collateral management fee of $2,000,
which fee shall be earned and payable monthly in arrears."
(b) The Fee Letter is hereby amended by inserting the following new
numbered paragraph 5:
"5. Requested Commitment Increase Fee. Upon the completion of a
Requested Commitment Increase pursuant to Section 2.1(e) of the Loan
Agreement, the Borrower shall pay to the Agent a fee in an amount
equal to .10% of the principal amount of such Requested Commitment
Increase."
3. Conditions Precedent to Second Amendment. The satisfaction of each of
the following, unless waived or deferred by Agent, in its sole discretion, shall
constitute conditions precedent to the effectiveness of this Second Amendment
and each and every provision hereof:
(a) Agent shall have received this Second Amendment fully executed by
each of the parties hereto;
(b) The representations and warranties in this Second Amendment, the
Loan Agreement as amended hereby and the other Loan Documents shall be true and
correct in all respects on and as of the date hereof, as though made on such
date (except to the extent that such representations and warranties relate
solely to an earlier date);
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(c) No Event of Default shall have occurred and be continuing on the
date hereof, nor shall any Default or Event of Default result from the
consummation of the transactions contemplated herein;
(d) No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any court or
other governmental authority against Borrower, Agent or any Lender; and
(e) Agent shall have received payment in full of its out-of-pocket
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the Loan Agreement and this Second Amendment.
4. Representations and Warranties. Borrower hereby represents and
warrants to Agent and Lenders that:
(a) The execution, delivery, and performance of this Second Amendment
and the Loan Agreement are within Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not, and will not,
contravene in any material respect any provision of any material Requirement of
Law or material obligation of Borrower;
(b) This Second Amendment has been duly executed and delivered by
Borrower;
(c) This Second Amendment and the Loan Agreement constitute Borrower's
legal, valid, and binding obligation, enforceable against Borrower in accordance
with its terms;
(d) Borrower is in compliance with all of the terms and provisions set
forth in the Loan Agreement and each of the other Loan Documents, as amended
hereby, on its part to be observed or performed on or prior to the date hereof;
(e) No Default or Event of Default has occurred and is continuing; and
(f) Since January 31, 2005, no Material Adverse Change has occurred.
5. Reaffirmation. Borrower further reaffirms all of its obligations, as
amended hereby, under the Loan Agreement, as amended hereby, and each of the
other Loan Documents.
6. Effect on Loan Agreement. The Loan Agreement and the Fee Letter, each
as amended hereby, shall be and remain in full force and effect in accordance
with their respective terms and hereby are ratified and confirmed in all
respects. The execution, delivery, and performance of this Second Amendment
shall not operate as a waiver of or, except as expressly set forth herein, as an
amendment of, any right, power, or remedy of the Agent or the Lenders under the
Loan Agreement or the Fee Letter, each as in effect prior to the date hereof.
7. Further Assurances. Borrower shall execute and deliver all agreements,
documents, and instruments, each in form and substance satisfactory to the
Agent, and take all actions as the Lender may reasonably request from time to
time, to perfect and maintain the perfection and priority of the security
interest in the Collateral held by the Agent, for the benefit of Lenders, and to
fully consummate the transactions contemplated under this Second Amendment and
the Loan Agreement, as amended hereby.
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8. No Novation; Entire Agreement. This Second Amendment evidences solely
the amendment of the terms and provisions of Borrower's obligations under the
Loan Agreement and the Fee Letter and is not a novation or discharge thereof.
There are no other understandings, express or implied, between the Lender Group
and Borrower regarding the subject matter hereof.
9. Choice of Law. The validity of this Second 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 Commonwealth of Massachusetts without regard to conflicts
of laws principles.
10. Counterparts; Telefacsimile Execution. This Second Amendment may be
executed in any number of counterparts and by different parties and separate
counterparts, each of which when so executed and delivered shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Second Amendment by telefacsimile shall be as effective as delivery of a
manually executed counterpart of this Second Amendment. Any party delivering an
executed counterpart of this Second Amendment by telefacsimile also shall
deliver a manually executed counterpart of this Second Amendment but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Second Amendment.
11. Definitions and Construction.
(a) Capitalized terms used but not otherwise defined herein shall have
the respective meanings given to such terms in the Loan Agreement, as amended
hereby.
(b) This Second Amendment is a Loan Document. This Second Amendment
shall be construed collectively with each of the Loan Agreement and the Fee
Letter, and if any term, provision or condition of any of such documents is
inconsistent with or contradictory to any term, provision or condition of any
other such document, the terms, provisions and conditions of this Second
Amendment shall supersede and control the terms, provisions and conditions of
the Loan Agreement and the Fee Letter, as applicable. Upon and after the
effectiveness of this Second Amendment, (a) each reference in the Loan Agreement
to "this Agreement", "hereunder", "herein", "hereof" or words of like import
referring to the Loan Agreement, and each reference in the other Loan Documents
to "the Loan Agreement", "thereunder", "therein", "thereof" or words of like
import referring to the Loan Agreement, shall mean and be a reference to the
Loan Agreement as modified and amended hereby and (b) each reference in the Fee
Letter to "the Fee Letter", "this Fee Letter", "hereunder", "herein", "hereof"
or words of like import referring to the Fee Letter, and each reference in the
other Loan Documents to "the Fee Letter", "thereunder", "therein", "thereof" or
words of like import referring to the Fee Letter, shall mean and be a reference
to the Fee Letter as modified and amended hereby.
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(c) Except to the extent expressly amended hereby, the Loan Agreement,
the Fee Letter and all other Loan Documents shall be unaffected hereby, shall
continue in full force and effect and are hereby in all respects ratified and
confirmed. The Loan Agreement, the Fee Letter and all other Loan documents, as
amended hereby shall constitute the legal, valid, binding and enforceable
obligations of Borrower to Agent and/ or Lenders, as applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment Agreement to be executed as of the date first above written.
BORROWERS:
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FACTORY CARD OUTLET OF
AMERICA LTD.
By: /s/ Xxxxx X. Xxxxxxxxxxx
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Xxxxx X. Xxxxxxxxxxx,
Executive Vice President and
Chief Financial Officer
AGENT AND LENDER:
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XXXXX FARGO RETAIL
FINANCE II, LLC, as Agent and Lender
By: /s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx,
Vice President
[Signature Page to Second Amendment]
