Exhibit 10.23
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED FINANCING AGREEMENT
This First Amendment to Second Amended and Restated Financing Agreement
("Amendment") is entered into as of January 30, 2004, by and among FACTORY 2-U
STORES, INC., a Delaware corporation, the debtor and debtor in possession in the
Bankruptcy Case ("Company"), THE CIT GROUP/BUSINESS CREDIT, INC., a New York
corporation ("CITBC"), in its capacity as Agent for Lenders under the Financing
Agreement ("Agent"); CITBC in its capacity as Tranche A Lender (together with
any other Persons who may subsequently become a Tranche A Lender, "Tranche A
Lenders"); and GB RETAIL FUNDING, LLC, a Massachusetts limited liability company
in its capacity as Tranche B Lender (together with any other Persons who may
subsequently become a Tranche B Lender, "Tranche B Lenders" and together with
the Tranche A Lenders, "Lenders").
A. Agent, Company and Lenders have previously entered into that certain
Second Amended and Restated Financing Agreement dated as of January 12, 2004
(the "Financing Agreement"), pursuant to which Lenders have provided Company
with certain loans and other financial accommodations.
B. Company has requested that Agent and Lenders amend the Financing
Agreement pursuant to the terms and subject to the conditions set forth in this
Amendment.
C. Agent and Lenders are willing to amend the Financing Agreement on the
terms and subject to the conditions set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the terms and
conditions hereof, the parties do hereto agree as follows, effective as of the
date set forth above:
1. Definitions. Terms used herein, unless otherwise defined herein, shall
have the meanings set forth in the Financing Agreement.
2. Amendments to Financing Agreement.
(a) Section 1 of the Financing Agreement is hereby amended by adding
the following definition in such Section:
"Springing Junior Liens shall have the meaning given to such term in
the Final Financing Order."
(b) Section 1 of the Financing Agreement is hereby amended by deleting
each of the following definitions in such Section in each of their
entirety and replacing such definition in such Section with the
following:
"Permitted Encumbrances shall mean: (a) liens existing on the
date hereof on specific items of Equipment and listed on Schedule 1
hereto and other liens expressly permitted, or consented to, by the
Agent; (b) Permitted Purchase Money Liens; (c) Customarily Permitted
Liens; (d) liens created in connection with sale leasebacks or loans
secured by the Company's equipment to the extent that such
transactions constitute Permitted Indebtedness hereunder; (e) liens
granted the Agent by the Company; (f) liens of judgment creditors
provided such liens do not exceed, in the aggregate, at any time, Two
Hundred Thousand Dollars ($200,000) (other than liens bonded or
insured to the reasonable satisfaction of the Agent); (g) Springing
Junior Liens; (h) liens for taxes not yet due and payable or which are
being diligently contested in good faith by the Company by appropriate
proceedings for which the Company has posted a bond in the required
amount or otherwise has taken action necessary to stay enforcement of
such lien. In no event shall any Collateral be subject to foreclosure
proceedings or, in the Agent's discretion, subject to any loss of
perfection or priority in favor of the Agent and/or the Lenders; and
(i) liens to secure indebtedness that would (1) result in the
indefeasible and permanent satisfaction of the Obligations in full in
cash, and (2) being effective, arising and existing only upon such
indefeasible and permanent satisfaction of the Obligations in full in
cash."
"Permitted Indebtedness shall mean (a) current indebtedness
maturing in less than one (1) year and incurred in the ordinary course
of business for raw materials, supplies, equipment, services, taxes or
labor; (b) the indebtedness secured by the Permitted Purchase Money
Liens; (c) indebtedness arising under the Letters of Credit, this
Financing Agreement, and the Loan Documents; (d) deferred taxes and
other expenses incurred in the ordinary course of business; (e)
Subordinated Debt, if unsecured and subject to a subordination
agreement in form and substance satisfactory to the Agent; (f)
indebtedness arising from sale leaseback transactions or loans secured
by the Company's equipment, but only if (i) the Company gives prior
written notice to the Agent of each such transaction, (ii) an Event of
Default has not occurred and is continuing at the time any such
transaction is entered into, (iii) such indebtedness does not exceed
the cost of the Company's equipment being given as collateral for such
indebtedness, (iv) the transaction does not involve the Company's
intangible assets (including, but not limited to, trademarks, trade
names and trade styles), and (v) the net cash proceeds from such
sale/leaseback or loan transaction shall be paid to the Agent for
distribution to the Lenders to the extent required under Section 8.15
of the Financing Agreement; (g) other indebtedness existing on the
Petition Date or otherwise disclosed to the Agent in writing; (h)
indebtedness secured by liens on real estate acquired after the date
of the Prior Agreement, provided that (i) each such lien shall attach
only to the real estate acquired, (ii) the aggregate amount of such
real estate debt shall not, at any time, exceed Ten Million Dollars
($10,000,000), (iii) the Company shall give the Agent prior written
notice before incurring any such real estate indebtedness, and (iv) no
Event of Default shall have occurred and be continuing at the time the
Company incurs any such indebtedness; (i) all indebtedness secured by
a Permitted Encumbrance; and (j) indebtedness that would (1) result in
the indefeasible and permanent satisfaction of the Obligations in full
in cash, and (2) being effective, arising and existing only upon such
indefeasible and permanent satisfaction of the Obligations in full in
cash."
(c) 7.21(i) of the Financing Agreement is hereby amended by
deleting such Section in its entirety and replacing such Section with
the following:
"(i) as of the Petition Date the Prepetition Obligations
were due and outstanding pursuant to the Prepetition Loan
Documents in the principal amount of not more than $17,000,000 in
the aggregate, all of which Prepetition Obligations are
unconditionally owing by the Company to the Prepetition Lender
Parties, without offset, defense or counterclaim of any kind
nature and description whatsoever;"
(d) Section 10.1(o) of the Financing Agreement is hereby amended
by deleting such Section in its entirety and replacing such Section
with the following:
"(o) any challenge by the Company or any guarantor of the
Obligation to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in
accordance with the subject Loan Document's terms or which seeks
to void, avoid, limit, or otherwise adversely affect any security
interest created by or in any Loan Document or any payment made
pursuant thereto;"
(e) Section 10.1(r)(1) of the Financing Agreement is hereby
amended by deleting such Section in its entirety and replacing such
Section with the following: "(1) authorizing the Company in the
Bankruptcy Case to obtain additional financing under section 364(c) or
(d) of the Bankruptcy Code unless such relief shall result in the
Obligations owed to Lenders being indefeasibly satisfied in full;"
(f) Section 10.1(r)(3) of the Financing Agreement is hereby
amended by deleting such Section in its entirety and replacing such
Section with the following:
"(1) authorizing the use of cash collateral without each
Lender's prior written consent under section 363(c) of the
Bankruptcy Code unless such relief shall result in the
Obligations owed to Lenders being indefeasibly satisfied in full
(except as provided in the Interim Financing Order or the Final
Financing Order);"
3. Conditions Precedent. The effectiveness of this Amendment shall be, and
hereby is, subject to the fulfillment to Agent's satisfaction of the Conditions
Precedent. The "Conditions Precedent" shall mean each of the following:
(a) No objection to this Amendment is filed or served pursuant to
Section 1.3.3 of the Interim Financing Order or the Final Financing Order;
and
(b) As of the date hereof, the representations and warranties
contained in Section 7 of the Financing Agreement are (before and after
giving effect to this Amendment) true and correct in all material respects
(except to the extent any such representation and warranty is expressly
stated to have been made as of a specific date, in which case it shall be
true and correct as of such specific date) and no Default or Event of
Default shall be existing or have occurred and be continuing.
5. Miscellaneous.
(a) Reference to and Effect on the Financing Agreement.
(i) Except as specifically amended by this Amendment and the
documents executed and delivered in connection herewith, the Financing
Agreement shall remain in full force and effect and is hereby ratified
and confirmed.
(ii) The execution and delivery of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Agent or any Lender under the Financing Agreement or any agreement or
document executed in connection therewith.
(iii) Upon the Conditions Precedent being satisfied, this
Amendment shall be construed as one with the existing Financing
Agreement, and the existing Financing Agreement shall, where the
context requires, be read and construed throughout so as to
incorporate this Amendment.
(b) Fees and Expenses. Company acknowledges that all costs, fees and
expenses incurred in connection with this Amendment will be paid in
accordance with Section 8.5 of the Financing Agreement and the Final
Financing Order.
(c) Headings. Section and subsection headings in this Amendment are
included for convenience of reference only and shall not constitute a part
of this Amendment for any other purpose or be given any substantive effect.
(d) Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(e) Governing Law. This Amendment shall be governed by and construed
according to the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
Company:
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FACTORY 2-U STORES, INC.
By:/s/Xxxxxx X. Xxxxxxx
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Name:Xxxxxx X. Xxxxxxx
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Title: Chief Executive Officer
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Agent and Tranche A Lender:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
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Title: Vice President
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Tranche B Lender:
GB RETAIL FUNDING, LLC
By:/s/Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: Managing Director
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