EXHIBIT 10.10
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "FIRST
AMENDMENT") is made and entered into as of February __, 1999, by and among
Gantos, Inc., a corporation formed under the laws of the State of Michigan
(the "BORROWER"), and Foothill Capital Corporation, as Agent ("FOOTHILL") and
the financial institutions listed on the signature page of the Loan Agreement
referred to below (such financial institutions, together with their
respective successors and assigns, are collectively referred to herein as the
"LENDERS"). This First Amendment amends certain provisions of that certain
Loan and Security Agreement dated as of November 18, 1998 by and among the
Borrower and Foothill, as Agent, and the Lenders (as amended by and through
the date of this First Amendment, and as hereafter amended and/or restated
from time to time, the "LOAN AGREEMENT"). Capitalized terms used herein and
not otherwise defined shall have the same meanings herein as in the Loan
Agreement.
BACKGROUND
In accordance with the Loan Agreement, the Borrower, Foothill and the
Lenders have agreed to amend the Loan Agreement by, among other things,
amending, or adding, thereto certain financial covenants and retail
performance covenants and establishing the dates upon which such covenants
will be tested under the Loan Agreement, and amending certain other
provisions of the Loan Agreement, in each instance subject to the terms and
conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT.
(a) AMENDMENT TO SUBSECTION 1.1. Subsection 1.1 of the Loan Agreement is
hereby amended by adding the following definition alphabetically therein:
"NET WORTH" means, as of any date of determination, Borrower's total
shareholder's equity."
(b) AMENDMENT TO SUBSECTION 7.20. Subsection 7.20 of the Loan Agreement
is hereby amended by deleting such existing subsection in its entirety and
inserting in lieu thereof the following:
A7.20 FINANCIAL COVENANTS
(a) MINIMUM NET WORTH. Permit its Net Worth as of the last day
of any month indicated below to be less than the corresponding amount
indicated for such month:
MONTH MINIMUM NET WORTH
----- -----------------
January, 1999 $9,000,000
February, 1999 $7,400,000
March, 1999 $7,900,000
April, 1999 $8,400,000
May, 1999 $7,400,000
June, 1999 $5,900,000
July, 1999 $4,000,000
August, 1999 $2,300,000
September, 1999 $3,400,000
October, 1999 $2,800,000
November, 1999 $3,200,000
December, 1999 $5,500,000
January, 2000 and
each subsequent calendar
month during the term
of this Agreement $2,500,000
(b) MINIMUM EBITDA - ROLLING TWELVE MONTH PERIODS. Permit its
EBITDA for the period of the trailing twelve (12) consecutive months ending
on each date indicated below to be less than the amount indicated for such
period:
TWELVE MONTHS ENDING MINIMUM EBITDA
-------------------- ---------------
February 28, 1999 ($2,650,000)
March 31, 1999 ($2,500,000)
April 30, 1999 ($2,950,000)
May 31, 1999 ($2,850,000)
June 30, 1999 ($2,400,000)
(c) MINIMUM EBITDA - ROLLING SIX MONTH PERIODS. Permit its EBITDA
for the period of the trailing six (6) consecutive months ending on each date
indicated below to be less than the amount indicated for such period:
SIX MONTHS ENDING MINIMUM EBITDA
----------------- --------------
July 31, 1999 ($1,700,000)
August 31, 1999 ($1,900,000)
September 30, 1999 ($1,450,000)
October 31, 1999 ($2,900,000)
November 30, 1999 ($1,400,000)
December 31, 1999 $2,700,000
January 31, 2000 and the last day
of each subsequent calendar
month during the term
of this Agreement $1,400,000"
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(c) AMENDMENT TO SUBSECTION 7.21. Subsection 7.21 of the Loan Agreement
is hereby amended by adding the following sentences to the end of such
existing subsection:
"Notwithstanding anything to the contrary contained in this Agreement:
(a) the Borrower's compliance with the covenants set forth on SCHEDULE 7.21
shall be tested for the first time on the respective dates indicated on such
Schedule; (b) any failure of the Borrower to comply with such covenants on
or after such dates shall not be a Default or Event of Default hereunder.
Nothing in the preceding sentence shall limit or impair Agent's rights under
Section 2.1 of this Agreement, including, without limitation, the Agent's
right to create additional reserves against the Borrowing Base or reduce its
advance rates against Eligible Inventory as determined in accordance with
SCHEDULE 7.21 based on the Borrower's noncompliance with the covenants set
forth therein."
(d) AMENDMENTS TO SCHEDULE 7.21 AND EXHIBIT B-1. The Loan Agreement is
hereby amended by deleting in their entireties the existing SCHEDULE 7.21 and
EXHIBIT B-2 thereto and substituting therefor the forms of SCHEDULE 7.21 and
EXHIBIT B-2 attached to this First Amendment.
2. REPRESENTATIONS AND WARRANTIES; CONFIRMATION OF REPRESENTATIONS,
WARRANTIES.
This First Amendment has been duly authorized, executed and delivered by
the Borrower. The Loan Agreement, as amended hereby, and each of the other
Loan Documents, as amended by and through the date hereof, constitute legal,
valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms. The Borrower, by
execution of this First Amendment, certifies to the Agent and each of the
Lenders that each of the representations and warranties set forth in the Loan
Agreement and the other Loan Documents is true and correct as of the date
hereof, except to the extent such representations and warranties expressly
relate to an earlier date, as if fully set forth in this First Amendment, and
that, as of the date hereof, no Default or Event of Default has occurred and
is continuing under the Loan Agreement or any other Loan Document. The
Borrower acknowledges and agrees that this First Amendment shall become a
part of the Loan Agreement and shall be a Loan Document.
3. CONDITIONS PRECEDENT.
Prior to or concurrently with the execution by the Agent and the Lenders
of this First Amendment, and as a condition to the obligation of the Lenders
to execute this First Amendment and make Advances for the account of the
Borrower on and after the date hereof:
(a) This First Amendment and all other agreements, instruments and
certificates reasonably required by the Lenders in connection herewith and
therewith, shall have been executed and delivered by each of the parties
thereto; and
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(b) The Borrower shall have delivered or caused to be delivered to the
Agent such other instruments, certificates or documents as the Agent or any
Lender shall reasonably request, each of which shall be in form and substance
satisfactory to the Agent and the Lenders, for the purposes of implementing
or effectuating the provisions of the Loan Agreement and the other Loan
Documents, each as amended hereby; and
(c) The Borrower shall have delivered to the Agent a pro-forma covenant
compliance certificate demonstrating the Borrower's ongoing compliance with
the covenants set forth in the Loan Agreement, as amended hereby.
4. CONDITIONS TO LENDING; COMPLIANCE WITH LOAN DOCUMENTS, ETC.
The Borrower hereby represents and warrants to the Agent and the Lenders
that all of the conditions precedent to lending specified in Section 3.2 of
the Loan Agreement have been and continue to be satisfied as of the date
hereof. Without limiting the generality of the foregoing, the Borrower
hereby confirms that it is in compliance with all of the terms and provisions
set forth in the Loan Agreement and each of the other Loan Documents, as
amended hereby, on its part to be observed or performed on or prior to the
date hereof.
5. NO NOVATION; EFFECT; COUNTERPARTS; GOVERNING LAW.
Except to the extent specifically amended hereby, the Loan Agreement and
each of the other Loan Documents shall be unaffected hereby and shall remain
in full force and effect; this First Amendment shall not be deemed a
novation of the Loan Agreement or any other Loan Document. The Borrower
hereby acknowledges, confirms and ratifies its obligations under the Loan
Agreement and each of the other Loan Documents. This First Amendment may be
executed in any number of counterparts, and by the different parties on
separate counterparts, each of which, when so executed and delivered, shall
be an original, but all the counterparts shall together constitute one
instrument. This First Amendment shall be governed by the internal laws of
The Commonwealth of Massachusetts (without reference to conflicts of law
principles) and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. The Borrower
shall pay all reasonable out-of-pocket expenses of the Agent and the Lenders
in connection with the preparation, execution and delivery of this First
Amendment.
6. CONSTRUCTION.
The Borrower, by execution hereof, acknowledges and confirms that for all
purposes of the Loan Agreement and the other Loan Documents, the term "Loan
Agreement" shall mean the Loan Agreement as amended by and through the date
of this First Amendment and as further amended and/or restated from time to
time hereafter.
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IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Loan and Security Agreement as a sealed instrument as of the date first
above written.
GANTOS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
FOOTHILL CAPITAL CORPORATION, for itself
and as Agent for the Lenders
By: ________________________________
(Title)
PARAGON CAPITAL, LLC, as a Lender
By: ________________________________
(Title)
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