Exhibit 10.31

 

SECOND AMENDMENT TO

CREDIT AGREEMENT

 

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (“Second Amendment”) is dated as of
April 14, 2004 by and among Hancock Fabrics, Inc. (“Borrower”); and Hancock
Fabrics of Mi, Inc., HF Merchandising, Inc., HF Resources, Inc., HF Enterprises,
Inc., Hancock Fabrics, LLC and HancockFabrics.com, Inc. (“Guarantors”); Union
Planters Bank, National Association (“Union Planters”); and BancorpSouth Bank
(“Bancorp”).

 

RECITALS

 

The parties hereto, along with Wachovia Bank, N.A. (“Wachovia”), executed that
certain Credit Agreement (“Credit Agreement”) dated as of April 16, 1999.

 

The Credit Agreement provided for a revolving credit facility in the principal
amount of Sixty Million and No/100 Dollars ($60,000,000.00).

 

The Credit Agreement was amended by that certain First Amendment to Credit
Agreement dated March 26, 2002, by and among Borrower, Union Planters and
Bancorp (the “First Amendment”).

 

Pursuant to the First Amendment, Union Planters agreed to serve as Agent under
the terms of the Credit Agreement, the amount of the revolving credit facility
was reduced to $25,000,000.00 and South Trust Bank and Wachovia ceased
participation in the credit facility.

 

Section 2.05(b) of the Credit Agreement permits the Borrower to request an
extension of the revolving credit facility.

 

Borrower has made the foregoing request to Union Planters, as Agent.

 

Union Planters and Bancorp have agreed to grant the extension request provided
that the Guarantors hereinabove named jointly and severally unconditionally
guarantee the indebtedness of Borrower to Union Planters and Bancorp.

 

The parties have agreed to execute this Second Amendment to set forth their
understandings with respect to the extension of the revolving credit facility.

 

NOW, THEREFORE, the parties do mutually covenant and agree as follows:

 

1.

Section 1.01 Definitions, of the Credit Agreement is hereby amended as follows:

 

 

 

 

 

a.

Two new definitions shall be added to read as follows:

 

“Guarantors” means Hancock Fabrics of Mi, Inc., HF Merchandising, Inc., HF
Resources, Inc., HF Enterprises, Inc., Hancock Fabrics, LLC and
HancockFabrics.com, Inc. Each of the Guarantors shall also be included in the
definition of “Subsidiaries”.

 

“Guaranty Agreements” means the agreements to be executed by the Guarantors
unconditionally guaranteeing the obligations of Borrower to the Banks.

 

b.              The definition “Termination Date”, as previously amended
pursuant to the First Amendment, is stricken in its entirety and the following
substituted therefore:

 

“Termination Date” means March 26, 2007.

 

2.              Section 2.05. Maturity of Loans, is amended by striking
subsection (b) therefore in its entirety.

 

3.              Section 3.02. Conditions to All Borrowings, is hereby amended by
adding a new subsection “(e)” to read as follows:

 

“(e) Guarantors shall have each executed Guaranty Agreements in the form
attached hereto as Exhibit “A” unconditionally guaranteeing the obligations of
Borrower to Banks.”

 

4. Article IV REPRESENTATION AND WARRANTIES is hereby amended by adding two new
sections to read as follows:

 

Section 4.21. Subsidiary Corporate and Governmental Authorization; No  

Contravention.

This execution, delivery and performance by each of the Subsidiaries of the
Second Amendment to the Agreement and the Guaranty Agreements (i) are within the
Subsidiaries’ corporate powers or authority, (ii) has been duly authorized by
all necessary corporate or membership action, (iii) requires no action by or in
respect of, or filing with, any governmental body, agency or official, (iv) does
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation, articles of organization,
operating agreement or by-laws of the Subsidiaries or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Subsidiaries, and (v) does not result in the creation or imposition of any Lien
on any asset of the Subsidiaries.

 

Section 4.22. Binding Effect. The Second Amendment to the Agreement and the
Guaranty Agreements constitute valid and binding agreement of each of the
Subsidiaries enforceable in accordance with their terms, and when executed and
delivered, will constitute valid and binding obligations of the Subsidiaries

 

 

enforceable in accordance with their respective terms provided that the
enforceability hereof and thereof is subject in each case to general principles
of equity and to bankruptcy, insolvency and similar laws affecting the
enforcement of creditors’ rights generally.

 

5.

Section 4.08. Subsidiaries, of the Credit Agreement is amended by striking

the language contained therein in its entirety and substituting the following:

 

Section 4.08. Subsidiaries. Each of the Borrower’s Subsidiaries is a corporation
or limited liability company duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation, is
duly qualified to transact business in every jurisdiction where, by the nature
of its business, such qualification is necessary (except where the failure to be
so qualified could not reasonably be expected to have or cause a Material
Adverse Effect), and has all corporate powers or authority and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Borrower has no Subsidiaries except those
Subsidiaries listed on Schedule 4.08, which accurately sets forth each such
Subsidiary’s complete name and jurisdiction of incorporation or organization.

 

 

6.

Section 9.04. Set-Offs; Sharing of Set-Offs. Is hereby amended by striking

the language contained in subsection (a) and substituting the following:

 

Section 9.04. Set-Offs; Sharing of Set-Offs. (a) The Borrower and each of the
Guarantors hereby grant to each Bank, as security for the full and punctual
payment and performance of the obligations of the Borrower under this Agreement,
as amended, a continuing lien on and security interest in all deposits and other
sums credited by or due from such Bank to the Borrower or any Guarantor or
subject to withdrawal by the Borrower or any Guarantor; and regardless of the
adequacy of any collateral or other means of obtaining repayment of such
obligations, each Bank may at any time upon or after the occurrence of any Event
of Default, and without notice to the Borrower or any Guarantor, set off the
whole or any portion or portions of any or all such deposits and other sums
against such obligations, whether or not any other Person or Persons could also
withdraw money therefrom.

 

7. All terms under the Credit Agreement, as previously amended, and related loan
documents not herein specifically modified or amended shall remain in full force
and affect and are hereby reaffirmed by Borrower and incorporated herein by
reference as if fully set forth. Borrower specifically affirms that all
representations and warranties made pursuant to Article IV of the Credit
Agreement as well as all covenants made pursuant to Article V of the Credit
Agreement, not herein amended, or previously amended are true and accurate as if
made as of the date hereof.

 

 

 

 

8. Except as otherwise set forth herein, all capitalized terms shall have the
meanings as set forth in the Credit Agreement, as amended.

 

9.              The Second Amendment to the Credit Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs,
next of kin, successors, permitted assigns, transferees and grantees.

 

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the
Credit Agreement to be duly executed by their respective authorized officers as
of the day and year first above written.

 

 

 

 

 

HANCOCK FABRICS, INC.

 

By: /s/ Bruce D. Smith_________

 

Title: Senior V P and_CFO_____

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

 

HANCOCK FABRIC OF MI, INC.

 

By: _Bruce D. Smith____________

 

Title:_Vice President____________

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

 

HF MERCHANDISING, INC.

 

By: __Bruce D. Smith____________

 

Title:_Vice President____________

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

 

HF RESOURCES, INC.

 

By: __Bobby G. Langford________

 

Title:__President________________

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

HF ENTERPRISES, INC.

 

By: __Bobby G. Langford________

 

Title:_President_________________

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

HANCOCK FABRICS, L.L.C.

 

By: _Bruce D. Smith____________

 

Title:Vice President_____________

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

 

HancockFabrics.com,INC.

 

By: _B. Linwood Landreth________

 

Title:_President_________________

 

One Fashion Way

 

Baldwyn, MS 38824

 

Attention: Bruce D. Smith

 

Telecopy number 662-365-6025

 

Telephone number 662-365-6112

 

 

 

 

Commitment

UNION PLANTERS BANK,

 

$20,000,000.00

NATIONAL ASSOCIATION

 

By:_Coney Burgess____________

 

Title:Vice President_____________

 

Lending Office

 

6200 Poplar Avenue

 

HQ4

 

Memphis, Tennessee 38119

 

Attention: Coney Burgess

 

Telecopy number: (901)580-5507

 

Telephone number (901)580-5481

 

 

 

 

 

Commitment

BANCORPSOUTH BANK

 

$5,000,000.00

By:__Coy Livingston____________

 

Title:__EVP___________________

 

 

Lending Office

 

One Mississippi Plaza

 

Tupelo, Mississippi 38802

 

Attention: _Coy Livingston_______

 

Telecopy number:_______________

Telephone number:______________