Enhanced Retail Funding, LLC
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Dated as of: July 8, 1998
Gantos, Inc.
0000 Xxxx Xxxx Xxxxxx
0xx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, President and CEO
Dear Xxxxxx:
Reference is made to the Revolving Credit Agreement between Gantos, Inc.
("Gantos"), as Borrower and Fleet Bank, N.A. ("Fleet"), as Agent and Lender,
dated as of March 10, 1995, as amended, supplemented, and/or modified from time
to time in accordance with the provisions thereof, (as so amended and in effect,
the "Loan Agreement"). Terms defined in the Loan Agreement and not otherwise
defined herein have the same meanings herein as specified therein.
The undersigned is pleased to advise Gantos of its agreement to provide Fleet
with an irrevocable standby letter of credit in the face amount of $3,350,000
and with an expiration date of October 20, 1998 (the "Letter of Credit"). This
Letter of Credit is a condition precedent to Fleet's further amendment of the
Loan Agreement to, INTER ALIA, increase Availability of Loans under the
Borrowing Base for the period through October 12, 1998, as more fully set forth
in Amendment No. 9 to the Credit Agreement of even date herewith ("Amendment
No. 9"). The terms and conditions for the issuance of the Letter of Credit are
contained in the Junior Participation Agreement of even date herewith (the
"Participation Agreement") entered into between Fleet and the undersigned.
In consideration for the undersigned's provision of the Letter of Credit and its
commitments, obligations and agreements which will allow Gantos increased
liquidity from its asset base, which will, in turn, enhance Gantos' ability to
consummate a merger with Hit or Miss, Inc., and for other valuable
consideration, the receipt and sufficiency of which are acknowledged, by its
signature below, Gantos hereby agrees with the undersigned as follows:
-1-
1. Gantos agrees that on the date of and as a condition to the issuance of the
Letter of Credit it will pay to the undersigned in immediately available funds a
fee equal to $167,500. In addition, Gantos agrees that on the 30th calendar day
after the issuance of the Letter of Credit it will pay to the undersigned in
immediately available funds a fee equal to $33,500. In addition, Gantos agrees
that on each of the 60th calendar day and the 90th calendar day after the
issuance of the Letter of Credit it will pay to the undersigned in immediately
available funds a fee equal to $33,500, PROVIDED, HOWEVER, that this fee due on
each of the 60th day and the 90th day after the issuance of the Letter of Credit
will not be payable if, on or before the date such fee payment is due, all of
the Obligations under the Loan Agreement have been paid in full as a result of
the merger between Gantos and Hit or Miss, Inc.
2. Gantos agrees that on the date of and as a condition to the issuance of the
Letter of Credit, it will pay to the undersigned all of the issuer's costs of
issuance for the Letter of Credit (presently calculated at 1% per year,
prorated), in addition to any and all other sums due hereunder.
3. Gantos agrees to pay to the undersigned during the term of the Letter of
Credit a monthly monitoring fee of $1,500. The first $1,500 monthly monitoring
fee shall be due and payable on the date of the issuance of the Letter of
Credit. Subsequent $1,500 monthly monitoring fees will be due and payable on
the first business day of each subsequent calendar month during the term of the
Letter of Credit or, if Fleet draws on the Letter of Credit in any amount, until
all Obligations under the Loan Agreement, including, without limitation, amounts
payable to the undersigned under the Junior Participation Agreement, are paid in
full.
4. Gantos agrees to pay all of the undersigned's expenses (including
out-of-pocket expenses) for due diligence and for all other expenses related
to this transaction, including, without limitation, legal fees and expenses,
accountants fees and expenses, costs of appraisals and inspections, filing
fees, credit check fees, recording fees, and similar fees and expenses up to
$50,000. The undersigned acknowledges that it has already received a $20,000
deposit towards the expenses outlined in this Paragraph 4. On the date of
and as a condition to the issuance of the Letter of Credit, Gantos agrees to
pay to the undersigned in immediately available funds the remaining $30,000
payable on account of the expenses outlined in this Paragraph 4. Any
remaining unused funds will be returned to Gantos after a final accounting of
all the expenses incurred in connection with this transaction.
5. Gantos acknowledges that Fleet has agreed in the Participation Agreement,
and under the latest amendment to the Loan Agreement, to make available from the
line of credit under the Loan Agreement the amounts necessary to pay the above
fees and expenses, provided, in all instances, that there is adequate
Availability under the terms and conditions of the Loan Agreement (as amended by
Amendment No. 9) to advance such funds. Gantos agrees to request such funds
under its line of credit under the Loan Agreement (as amended by Amendment
No. 9) to pay all of the fees and expenses owed
-2-
to the undersigned. The failure of Gantos to have adequate Availability
under its line of credit will not excuse Gantos from its obligation to pay
the fees and expenses owed to the undersigned, and nothing herein shall be
construed as a waiver, in whole or in part, by the undersigned of its right
to any of the fees and expenses due from Gantos to the undersigned under this
letter agreement.
If you are in agreement with the above, please indicate such agreement by your
signature below. Upon your execution below, this letter will become a binding
agreement between the parties hereto.
Sincerely,
ENHANCED RETAIL FUNDING, LLC
By:_____________________________
Name:
Title:
AGREED AND ACCEPTED this _____________ day of _____________, 1998.
GANTOS, INC.
By:________________________________
Xxxxxx X. Xxxxx
President and Chief Executive Officer
-3-
