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Amendment No. 3 To Forbearance Agreement

This is an actual contract by Archibald Candy.

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Sectors: Food, Beverages and Tobacco
Governing Law: Illinois, View Illinois State Laws
Effective Date: April 30, 2002
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EXHIBIT 10.1


[CONFORMED COPY]


AMENDMENT NO. 3 TO FORBEARANCE AGREEMENT


This AMENDMENT NO. 3 TO FORBEARANCE AGREEMENT, dated as of April 30, 2002 (this "AMENDMENT"), is entered into among ARCHIBALD CANDY CORPORATION, an Illinois corporation ("BORROWER"), FANNIE MAY HOLDINGS, INC., a Delaware corporation ("PARENT"), ARCHIBALD CANDY (CANADA) CORPORATION, a corporation incorporated under the federal laws of Canada ("CANADIAN SUBSIDIARY" and together with Borrower and Parent, collectively, the "CONTINUING CREDIT PARTIES"), the lending institutions parties to the Forbearance Agreement (the "LENDERS"), and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as Agent for the Lenders ("AGENT").


PRELIMINARY STATEMENTS:


(1) Borrower, Agent and the Lenders are parties to the Financing Agreement, dated as of June 28, 2001 (as amended and as the same may from time to time be further amended, restated or otherwise modified, the "FINANCING AGREEMENT").


(2) As a result of certain defaults and events of default that occurred under the Financing Agreement, the Continuing Credit Parties, the Lenders and Agent entered into the Forbearance Agreement, dated as of December 31, 2001 (as amended and as the same may from time to time be further amended, restated or otherwise modified, the "FORBEARANCE AGREEMENT"; unless otherwise defined herein the terms defined therein are used herein as so defined).


(3) Borrower and the Holders, as defined in the Indenture (as defined in the Financing Agreement), of more than $140,000,000 of the aggregate outstanding principal amount of Notes, as defined in the Financing Agreement (the "REQUIRED NOTEHOLDERS"), have entered into the Forbearance Agreement, dated as of March 1, 2002 (as the same may from time to time be amended, restated or otherwise modified, the "NOTEHOLDER FORBEARANCE AGREEMENT").


(4) The Continuing Credit Parties, Agent and the Lenders desire to modify certain terms and provisions of the Forbearance Agreement, including, without limitation, extending the Forbearance Period.


NOW, THEREFORE, the parties hereby agree as follows:


SECTION 1. AMENDMENTS.


1.1. EXTENSION OF FORBEARANCE PERIOD. Section 2.1(a) of the Forbearance Agreement is hereby amended to replace the date of "April 30, 2002" with "May 31, 2002".


1.2. AMENDMENT TO MAXIMUM OUTSTANDING REVOLVING LOANS AND LETTERS OF CREDIT. Section 2.4(a)(vii) of the Forbearance Agreement is hereby amended and restated in its entirety as follows:


and (vii) $15,000,000 on March 2, 2002 through May 31, 2002;


1.3. AMENDMENT TO COVENANT DEFAULTS. Section 1.3 of the Forbearance Agreement is hereby amended and restated in its entirety as follows:


1.3 COVENANT DEFAULTS. The Continuing Credit Parties acknowledge and
agree that the Existing Defaults resulting under Section 10.1(e) of the
Financing Agreement relate only to the violations that occurred and/or will
occur under Sections 7.3, 7.10(j), 7.12(b),(c),(d), and (e) and 7.23 of the
Financing Agreement.


1.4. AMENDMENT TO BORROWING BASE CALCULATION. Section 2.4(b) of the Forbearance Agreement is hereby amended and restated in its entirety as follows:


(b) in calculating the Borrowing Base, (i) the advance rate with
respect to Eligible Special Inventory shall be the lesser of (A) 62% of the
aggregate value of Eligible Special Inventory (as determined in accordance
with the terms of the Financing Agreement) and (B) 85% of the net orderly
liquidation value of Eligible Special Inventory as set forth in the most
recently completed appraisal of Borrower's Inventory that has been
delivered to Agent, which appraisal shall be in form and detail
satisfactory to Agent and prepared by Hilco or such other appraiser
acceptable to Agent, (ii) notwithstanding the foregoing, Eligible Special
Inventory shall not at any time account for more than $13,000,000 of the
aggregate amount of the Borrowing Base, (iii) the Real Estate Sublimit
shall be deleted from such calculation, (iv) on and after the date on which
the Cash Collateralization occurs, the Overadvance, as defined in the
Post-Petition Credit Agreement (as defined in the Financing Agreement),
shall be deleted from such calculation, and (v) if the Cash
Collateralization occurs on or before the Cash Collateral Date, as defined
below, $1,000,000 shall be added to the Borrowing Base as an overadvance;
and


1.5. AMENDMENT TO ADD NEW CONDITIONS TO LENDING. Section 2.4 of the Forbearance Agreement is hereby amended to add the following new subsections (d), (e), and (f) thereto:


(d) on or before May 15, 2002 (the "CASH COLLATERAL DATE"), (i)
Borrower shall have deposited $1,000,000 into a deposit account maintained
at LaSalle Bank National Association, in the name of Agent and under the
exclusive control of Agent (the "CASH COLLATERAL ACCOUNT"), and (ii)
Borrower shall have obtained all necessary consents and approvals,
including, without limitation, any required consent under the Indenture, to
permit the security interest provided for in the Cash Collateral Account
and all cash, monies, checks, and other deposits, if any, contained therein
and delivered to Agent evidence, satisfactory to Agent, of such consent
and/or approval (the foregoing subparts


2


(i) and (ii) are collectively referred to herein as the "CASH
COLLATERALIZATION"); PROVIDED, HOWEVER, that if the Cash Collateralization
fails to occur on or before the Cash Collateral Date such failure shall not
constitute a Termination Event (or an Event of Default, as defined in the
Financing Agreement, u
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