Exhibit 10.5

 

[LOGO]

 

MEMORANDUM

 

TO:    Footstar Syndicate Members FROM:   

Keith Vercauteren

Fleet Retail Finance Inc.

DATE:    May 29, 2003 RE:    Credit Agreement dated as of October 18, 2002 by
and among Footstar, Inc. (the “Lead Borrower”) and Footstar Corporation
(collectively, with the Lead Borrower, the “Borrowers”), the financial
institutions named as parties thereto as lenders (the “Lenders”), Fleet National
Bank, as swingline lender and as administrative agent (in such capacity, the
“Administrative Agent”), Fleet Retail Finance Inc., as collateral agent,
Congress Financial Corporation and Wells Fargo Retail Finance, LLC, as
syndication agents, and JPMorgan Chase Bank, as documentation agent, as amended
by that certain Amendment No. 1 to Credit Agreement dated as of January 3, 2003,
that certain Amendment No. 2 to Credit Agreement dated as of March 21, 2003 and
that certain letter agreement dated April 30, 2003 (as the same has been and may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”) with capitalized terms being defined therein and
not defined but used herein having the meanings assigned to them in the Credit
Agreement

 

As you know, the Borrowers, together with their independent auditors, are in the
process of conducting a review of their financial statements, resulting in the
restatement of the accounts payable, the retained earnings and net income of the
Lead Borrower and its Subsidiaries for prior fiscal periods through September
28, 2002 (the “Accounting Restatement Matter”). Due to the Accounting
Restatement Matter, the Required Lenders have previously agreed to extend the
time by which the Borrowers have to deliver to the Administrative Agent and the
Lenders their quarterly and annual financial statements and corresponding
Compliance Certificates for the fiscal quarters ended September 28, 2002 and
December 28, 2002, until June 2, 2003.

 

The Borrowers have informed the Administrative Agent that the auditors have not
completed their work in connection with the Accounting Restatement Matter. Due
to this, the Borrowers are requesting a further extension of time by which they
will be required to deliver to the Administrative Agent (A)(i) their annual
financial statements for the fiscal year ended

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December 28, 2002, (ii) their quarterly financial statements for the fiscal
quarter ended September 28, 2002, and (iii) the corresponding Compliance
Certificates for the fiscal quarters ended September 28, 2002 and December
28,2002, respectively, until the earlier of: (i) the date by which the Lead
Borrower files with the Securities and Exchange Commission its Form 10K report
for the fiscal year ended December 28, 2002, or (ii) September 2, 2003; and (B)
their quarterly financial statements for the fiscal quarters ended March 29,2003
and June 28, 2003, respectively, and the corresponding Compliance Certificates
for the fiscal quarters ended March 29, 2003 and June 28, 2003, respectively,
until September 2,2003.

 

In conjunction with this further extension of time for delivery of the
above-referenced financial statements and Compliance Certificates, the
Administrative Agent is recommending that the definition of Cash Control Event
contained in the Credit Agreement be revised as set forth below, with the result
that the Agents gain additional controls over the deposits, cash and accounts of
the Borrowers and their Subsidiaries and other Affiliates as provided more fully
in Section 5 of the respective Security Agreements, each dated as of October 18,
2002, entered into by the Borrowers and by each of the Subsidiaries and other
Affiliates of the Borrowers in favor of Fleet Retail Finance Inc., as Collateral
Agent for the Secured Parties named therein, and in the other Loan Documents.
The Administrative Agent is recommending that such Cash Control Event definition
be redefined as follows:

 

“Cash Control Event” means (a) the period from May 30, 2003 until the occurrence
of the following events: (i) delivery to the Administrative Agent of the
Borrowers’ (A) annual financial statements for the fiscal year ended December
28, 2002; (B) quarterly financial statements for the fiscal quarters ended
September 28, 2002, March 29, 2003 and June 28, 2003; and (C) corresponding
Compliance Certificates for each of the above-referenced fiscal periods; and
(ii) maintenance by Borrowers of Excess Availability in excess of $40,000,000
for 90 consecutive days, and (b) thereafter, that Excess Availability is less
than (i) $30,000,000 at any time for five consecutive Business Days, or (ii)
$25,000,000 at any time. For purposes of Section 5.l(h) of the Security
Agreements, the occurrence of a Cash Control Event pursuant to clause (b) above
shall be deemed permanently continuing notwithstanding that Excess Availability
may thereafter exceed the thresholds specified in such clause (b).

 

Such an extension and amendment requires the consent and approval of Required
Lenders under the Credit Agreement. As noted above, Fleet supports this request.

 

Nothing contained herein shall be deemed or construed as a waiver of any Default
or Event of Default under Section 7.11 of the Credit Agreement or otherwise.

 

In connection with the foregoing, the Borrowers are agreeing to pay certain fees
to the Revolving Lenders and to the Term Lender pursuant to a letter agreement
dated as of May 29, 2003.

 

If you have any issues with the matters described herein, please contact me by
e-mail at keith_vercaurteren@fleetretailfinance.com, by facsimile at (617)
434-4339 or by phone at (617) 434-4045.

 

-2-

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Please indicate your consent by signing in the space below provided for your
signature and returning your executed fax signature pages to the attention of
Jan Wenning Egan, Esq. at Edwards & Angell, LLP, 101 Federal Street, Boston, MA
02110, fax: (617) 439-4170, e-mail: jegan@ealaw.com, by 4:00 p.m. (EST)
TOMORROW, Friday, May 30, 2003, with five originals thereof to follow by
overnight courier for delivery on Monday, June 2, 2003. The signatures of the
Required Lenders and the Borrowers hereto shall be sufficient to extend the time
for delivery of the financial statements described herein and amend the
definition of Cash Control Event effective as of May 30, 2003. Thank you for
your prompt attention and cooperation on.

 

** The next pages are the signature pages **

 

-3-

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Agreed to and acknowledged as of May 30, 2003 by:

 

FOOTSTAR, INC., as a Borrower

By:

 

/s/     SHEAMUS TOAL        

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Name:

  Sheamus Toal                  

Title:

  Vice President & Controller              

 

FOOTSTAR CORPORATION, as a Borrower

By:

 

/s/     SHEAMUS TOAL        

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Name:

  Sheamus Toal                  

Title:

  Vice President & Controller              

 

FLEET NATIONAL BANK, as Administrative Agent and as Lender

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

FLEET RETAIL FINANCE INC. as Collateral Agent

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

BACK BAY CAPITAL FUNDING LLC

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

 

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Agreed to and acknowledged as of May 30, 2003 by:

 

FOOTSTAR, INC., as a Borrower

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

FOOTSTAR CORPORATION, as a Borrower

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

FLEET NATIONAL BANK, as Administrative Agent and as Lender

By:

 

/s/    KEITH VERCAUTEREN

--------------------------------------------------------------------------------

   

Name:

  Keith Vercauteren              

Title:

  Vice President              

 

FLEET RETAIL FINANCE INC. as Collateral Agent

By:

 

/s/    KEITH VERCAUTEREN      

--------------------------------------------------------------------------------

   

Name:

  Keith Vercauteren    

Title:

  Vice President              

 

BACK BAY CAPITAL FUNDING LLC

By:

 

/s/    KRISTAN M. O’CONNOR        

--------------------------------------------------------------------------------

   

Name:

  Kristan M. O’Connor                  

Title:

  Director              

 

Signature Page to Second Request for Extension

 

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CONGRESS FINANCIAL CORPORATION

By:

 

/s/    THOMAS GRABOSKY

--------------------------------------------------------------------------------

   

Name:

  Thomas Grabosky    

Title:

  First Vice President WELLS FARGO RETAIL FINANCE, LLC

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    JPMORGAN CHASE BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    UPS CAPITAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    AMSOUTH BANK

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

--------------------------------------------------------------------------------

CONGRESS FINANCIAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    WELLS FARGO RETAIL FINANCE, LLC

By:

 

/s/    EUNNIE KIM

--------------------------------------------------------------------------------

   

Name:

  Eunnie Kim    

Title:

  Asst. Vice President JPMORGAN CHASE BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    UPS CAPITAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    AMSOUTH BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

--------------------------------------------------------------------------------

CONGRESS FINANCIAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    WELLS FARGO RETAIL FINANCE, LLC

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    JPMORGAN CHASE BANK

By:

 

/s/    DALE A. PENSGEN

--------------------------------------------------------------------------------

   

Name:

  Dale A. Pensgen    

Title:

  Vice President THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    UPS CAPITAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    AMSOUTH BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

--------------------------------------------------------------------------------

CONGRESS FINANCIAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    WELLS FARGO RETAIL FINANCE, LLC

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    JPMORGAN CHASE BANK

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

/s/    MICHAEL FORTE

--------------------------------------------------------------------------------

   

Name:

  Michael Forte    

Title:

  Assistant Vice President UPS CAPITAL CORPORATION

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    AMSOUTH BANK

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

--------------------------------------------------------------------------------

CONGRESS FINANCIAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    WELLS FARGO RETAIL FINANCE, LLC

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    JPMORGAN CHASE BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    UPS CAPITAL CORPORATION

By:

 

/s/    CHARLES JOHNSON

--------------------------------------------------------------------------------

   

Name:

  Charles Johnson    

Title:

  Senior Vice President AMSOUTH BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

 

--------------------------------------------------------------------------------

CONGRESS FINANCIAL CORPORATION

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    WELLS FARGO RETAIL FINANCE, LLC

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    JPMORGAN CHASE BANK

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    UPS CAPITAL CORPORATION

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    AMSOUTH BANK

By:

 

KEVIN R. ROGERS

--------------------------------------------------------------------------------

   

Name:

  Kevin R. Rogers    

Title:

  Attorney-In-Fact

 

Signature Page to Second Request for Extension

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NATIONAL CITY BANK

By:

 

/s/    THOMAS J. McDONNELL

 

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Name:

  Thomas J. McDonnell    

Title:

  Senior Vice President ORIX FINANCIAL SERVICES, INC.

By:

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

    SIEMENS FINANCIAL SERVICES, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

       

Title:

   

 

Signature Page to Second Request for Extension

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NATIONAL CITY BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

ORIX FINANCIAL SERVICES, INC.

By:

 

/s/     ANDREW KOSOWSKY

--------------------------------------------------------------------------------

   

Name:

  Andrew Kosowsky            

Title:

  Vice President        

 

SIEMENS FINANCIAL SERVICES, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

Signature Page to Second Request for Extension

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NATIONAL CITY BANK

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

ORIX FINANCIAL SERVICES, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

SIEMENS FINANCIAL SERVICES, INC.

By:

 

/s/     MICHAEL COILEY

--------------------------------------------------------------------------------

   

Name:

  Michael Coiley            

Title:

  Senior Vice President        

 

Signature Page to Second Request for Extension

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ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS

 

Each of the undersigned Guarantors does hereby acknowledge and consent to the
execution, delivery and performance of the within foregoing Second Request for
Extension, confirms the continuing effect of such Guarantor’s guarantee of the
Obligations after giving effect to the foregoing Second Request for Extension,
and agrees to the provisions of the within and foregoing Second Request for
Extension.

 

Accepted and agreed to as of May 30, 2003 by the Facility Guarantors:

 

FOOTSTAR CENTER, INC.

FOOTACTION CENTER, INC.

ATHLETIC CENTER, INC.

FA HC, INC.

FEET HC, INC.

FWS I, INC.

FWS II, INC.

STELLAR WHOLESALING, INC.

FEET CENTER, INC.

MELDISCO H.C., INC.

APACHE-MINNESOTA THOM MCAN, INC.

MILES SHOES MELDISCO LAKEWOOD, COLORADO, INC.

MALL OF AMERICA FAN CLUB, INC.

NEVADA FEET, INC.

FEET OF COLORADO, INC.

LFD I, INC.

LFD II, INC.

LFD OPERATING, INC.

FOOTSTAR HQ, LLC

SHOE ZONE CENTER, INC.

LFD TODAY, INC.

ATHLETIC ATTIC OF TEXAS, INC.

and each of the other Facility Guarantors

By:

 

Authorized Signatory

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Duly Authorized Signatory as to all