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GANTOS, INC.
AND
STATE STREET BANK AND TRUST COMPANY
-----------------------------------------
SUPPLEMENTAL INDENTURE NO. 2 TO INDENTURE
DATED AS OF APRIL 1, 1995
-----------------------------------------
SERIES A PROMISSORY NOTES
SERIES B PROMISSORY NOTES
DATED AS OF JUNE 30, 1998
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SUPPLEMENTAL INDENTURE NO. 2
Supplemental Indenture No. 2 (the "Supplemental Indenture"), dated as of
June 30, 1998, between Gantos, Inc., a Michigan corporation (the "Company"),
and State Street Bank and Trust Company, a Massachusetts trust company and
successor to Fleet Bank N.A. (successor to Shawmut Bank Connecticut, National
Association, a national banking association) (the "Trustee").
RECITALS
A. The Company and the Trustee are the parties to the Indenture, dated
as of April 1, 1995 between Company and Trustee, as successor trustee, as
amended by Supplemental Indenture No. 1, dated as of December 15, 1997
("Supplemental Indenture No. 1" and, together with the initial Indenture, the
"Indenture").
B. The Company has entered into an Agreement and Plan of Merger, dated
as of May 12, 1998 (the "Merger Agreement"), with HOM Holding, Inc., a
Delaware corporation ("Holding"), and Hit or Miss Inc., a Delaware
corporation wholly owned by Holding, pursuant to which Holding will merge
(the "Merger") with and into the Company with the Company being the surviving
corporation, and an aggregate of 7,415,450 of the Company's common shares
("Gantos Common Shares") and warrants ("Warrants") to purchase an aggregate
of 1,250,000 Gantos Common Shares will be issued to Holding's stockholders
and certain affiliated entities, which will represent approximately 49.5% of
the outstanding Gantos Common Shares immediately after the Merger (and
approximately 53.3% of the outstanding Gantos Common Shares, assuming full
exercise of the Warrants).
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, for and in
consideration of the premises, it is mutually agreed and consented, for the
equal and proportionate benefit of the respective Holders from time to time
of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used in this Supplemental
Indenture No. 2 and not defined in this Supplemental Indenture No. 2 have the
meanings given them in the Indenture.
2. ELIMINATION OF COVENANTS. Effective on the Effective Date (as
defined in Section 21 hereof), Sections 6.12(a), (c), (d) and (f) and Section
6.16 of the Indenture are eliminated from, and shall not apply to, the
Indenture or the Notes.
3. ELIMINATION OF DEFINITIONS. Effective on the Effective Date, the
definitions of the following terms are eliminated from Section 1.01 of the
Indenture and shall not apply to the Indenture or the Notes:
"Adjusted Interest Expense";
"Alternative Payment";
"Availability";
"Capital Expenditures";
"Capitalized Lease Obligation";
"Cases";
"Disclosure Statement";
"EBITDA";
"Fiscal Period";
"Interest Coverage Ratio";
"Interest Expense"; and
"Trigger Date".
4. AMENDMENT TO DEFINITION OF FREE CASH FLOW. Effective on the
Effective Date, the definition of "Free Cash Flow" in Section 1.01 of the
Indenture is amended and restated to read as follows:
"The term "Free Cash Flow" means, for any year (i) Net Income,
PLUS (ii) the sum of amortization expense and depreciation expense,
MINUS (iii) actual principal payments (including sinking fund
payments) and voluntary principal payments, but not Excess Cash Flow
payments, made with respect to indebtedness for borrowed money (which
does not include the Revolving Credit Agreement or Replacement Credit
Agreement), PLUS OR MINUS (iv) extraordinary cash items (provided that
such items are not taken into account in determining Net Income)."
5. AMENDMENT TO DEFINITION OF SENIOR DEBT OBLIGATIONS. Effective on
the Effective Date, the definition of "Senior Debt Obligations" in Section
1.01 of the Indenture is amended as follows:
(a) The phrase "up to $40,000,000" in clause (ii) of the definition
is amended to read "up to $60,000,000;"
(b) The phrase "not exceeding $500,000" in clauses (iii)(b), (iii)(d)
and (iii)(f)(8) of the definition is amended to read "not exceeding
$1,000,000;" and
(c) The phrase "(A) which do not exceed $350,000 in the aggregate or
(B) securing the repayment of up to $500,000 aggregate outstanding
principal amount of landlord constructions loans" in clause (iii)(f)(9) of
the definition is amended to read "(A) which do not exceed $750,000 in the
aggregate or (B) securing the repayment of up to $1,000,000 aggregate
outstanding principal amount of landlord constructions loans."
6. ELIMINATION OF ELECTION TO APPLY REVISIONS TO REVOLVING CREDIT
AGREEMENT COVENANTS. Effective on the Effective Date, Section 5 of
Supplemental Indenture No. 1 is eliminated from, and shall not apply to, the
Indenture or the Notes.
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7. AMENDMENT TO REDEMPTION PROVISIONS. Effective on the Effective
Date, Section 3.01(c) of the Indenture is amended and restated to read as
follows:
"(c) The Notes shall be subject to special mandatory redemption
at the Redemption Price on the next succeeding Interest Payment Date
after which notice can be given following payment of an Excess Cash
Flow payment (made pursuant to Section 6.12(e) hereof) in an amount
for each Series of Notes equal to its Pro-Rata share of the Excess
Cash Flow payment. The amount of any redemptions made pursuant to
this subsection 3.01(c) shall decrease the aggregate amount of sinking
fund redemptions in the reverse order of the dates upon which such
sinking fund payments are to be made."
8. ELIMINATION OF SPECIAL MANDATORY REDEMPTION RIGHTS FOR SALES OF
EQUITY SECURITIES. Effective on the Effective Date, Section 3.01(f) of the
Indenture is deleted from the Indenture and shall no longer apply to the
Indenture or the Notes.
9. WAIVER OF RIGHT TO TENDER NOTES. Any rights that the Holders may
have to tender the Notes for purchase by the Company pursuant to Section 3.06
of the Indenture are hereby waived to the extent that any such rights would
be triggered by the Merger or the following transactions contemplated
thereby: (i) the issuance of the Gantos Common Shares and Warrants in the
Merger, (ii) the exercise of the Warrants, (iii) the purchase and sale of the
Gantos Common Shares underlying the Warrants and (iv) the resale of Gantos
Common Shares and Warrants to employees of Holding or Hit or Miss Inc. as
described in the Company's registration statement.
10. AMENDMENT TO MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS
PROVISIONS. Effective on the Effective Date, Section 6.05, line 6 of the
Indenture is amended by the insertion of the parenthetical, "(I.E., the sale
of women's clothing)", following the phrase "maintain and operate the same
general businesses which it is presently conducting" and before the
semi-colon.
11. WAIVER OF NET WORTH COVENANT. The Company shall not be in default
of or be deemed to have breached the covenant regarding net worth of the
Company and its Subsidiaries set forth in Section 6.12(b) of the Indenture as
a result of the consummation of the Merger and the transactions contemplated
thereby. Further, effective on the Effective Date, Section 6.12(b) of the
Indenture is amended to read as follows:
"(b) MINIMUM NET WORTH. Not permit the Net Worth of the Company and
its Subsidiaries, on a Consolidated basis, at the end of any fiscal quarter
of the Company specified below to be less than the respective amounts set
forth below:
3
Period Minimum
------ -----------
Second Fiscal Quarter - 1998
Through Third Fiscal Quarter - 2000" $ 7,500,000
Fourth Fiscal Quarter - 2000 and
Thereafter $10,000,000;
provided, however, that if the Company is required under applicable
purchase accounting rules to revise its financial statements in a material
manner from and after the Effective Date, the Company and the Trustee shall
endeavor in good faith to amend this Section 6.12(b) to revise the Net
Worth numbers set forth above."
12. AMENDMENT TO COVENANTS REGARDING THE POLICY SECTION. Effective on
the Effective Date, the first two lines of Section 6.13 of the Indenture
beginning "The Company will," and ending "of the Company," are amended to
read as follows:
"The Company will, for so long as L. Xxxxxxx Xxxxxx ("Xx.
Xxxxxx") remains an officer, director or consultant of the Company,"
13. WAIVER OF RESTRICTION REGARDING FUTURE DEBT OBLIGATIONS. The
Company shall not be in default of or be deemed to have breached the
restrictions on future debt obligations of the Company set forth in Section
6.14(a) of the Indenture as a result of the consummation of the Merger and
the transactions expressly contemplated thereby. Further, effective on the
Effective Date, Sections 6.14(b) and (c) are deleted from the Indenture and
shall no longer apply to the Indenture or the Notes. Moreover, effective on
the Effective Date, Section 6.14(a) of the Indenture is amended to read as
follows:
"(a) Notwithstanding anything herein to the contrary, the Company and
its Subsidiaries may issue Senior Debt Obligations only if the Company has
fulfilled the obligations of Section 3.06 regarding purchases of the Notes.
Notwithstanding the preceding sentence or anything herein to the contrary,
and without compliance with Section 3.06, the Company and its Subsidiaries
may (i) issue debt that is secured by any assets of the Company, provided
that the Company's and its Subsidiaries' aggregate secured debt, including
pursuant to the Revolving Credit Agreement, any Replacement Credit
Agreement and any other secured debt, shall not exceed $60,000,000 in
principal amount or (ii) issue Senior Debt Obligations, provided that the
aggregate amount of the Company's and its Subsidiaries' secured debt and
Senior Debt Obligations may not exceed $60,000,000 in principal amount."
14. WAIVER OF RESTRICTION REGARDING MULTIEMPLOYER PLANS. The Company
shall not be in default of or be deemed to have breached the restrictions on
adopting, maintaining or contributing to a Pension Plan or Multiemployer Plan
of the Company set forth in Section 6.15(f) of the Indenture as a result of
the consummation of the Merger and the transactions contemplated thereby,
including
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without limitation the assumption of and future performance under Hit or
Miss' current multiemployer plan.
15. AMENDMENT TO ADDITIONAL COVENANTS.
(a) Effective on the Effective Date, Section 6.15(c), line 7 of the
Indenture is amended by the insertion of the phrase "or any substantially
similar provision of a Replacement Credit Agreement" following the phrase
"Section 7.06 of the Revolving Credit Agreement" and before the semi-colon.
Further, effective on the Effective Date, Sections 6.15(d) and 6.15(e)(i)
of the Indenture are deleted in their entireties.
(b) Effective as of the Effective Date, Section 6.15(e)(ii), line 1
of the Indenture, is amended by the insertion of the phrase "or acquire"
following the phrase "The Company may form."
(c) Effective on the Effective Date, Section 6.15(g) of the Indenture
is amended and restated to read as follows:
"The Company shall not alter the nature of its business
(I.E., the sale of women's clothing) as operated on the date
of this Indenture in any material respect."
(d) Effective on the Effective Date, Section 6.15(h) of the Indenture
is amended by the insertion of the phrase "Subject to Article XI," at the
beginning of the section and the insertion of the phrase "or any
substantially similar provision of a Replacement Credit Agreement" at the
end of the section prior to the period.
16. AMENDMENTS TO EVENTS OF DEFAULT SECTION.
(a) Effective on the Effective Date, Section 8.01(a)(ii), line 1 of
the Indenture is amended by the deletion of the words "or 3.06".
(b) Effective on the Effective Date, Section 8.01(a)(vii), line 4 of
the Indenture is amended by the deletion of the word "or" after the
semicolon.
(c) Effective on the Effective Date, Section 8.01(a)(viii), line 6 of
the Indenture is amended by the deletion of the period and the addition of
a semicolon after the word "days".
(d) Effective on the Effective Date, new Sections 8.01(a)(ix) and
8.01(a)(x) shall be added to read as follows:
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"(ix) an Event of Default as such term is defined
under the Senior Subordinated Note due October 1, 2004 (the
"TJX Note") issued by Hit or Miss Inc. to The TJX Companies,
Inc. shall occur under such TJX Note; or
(x) any holder of any portion of the TJX Note shall
elect to have all or any portion of such holder's portion of
the TJX Note redeemed pursuant to the terms of Section 3.7
of the TJX Note."
17. AMENDMENT TO UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL
AND INTEREST SECTION. Effective on the Effective Date, Section 8.09, lines
6-8 of the Indenture is amended by the deletion of the words "or in the case
of a tender in accordance with Section 3.06 of this Indenture, on such
Purchase Date" from the parenthetical.
18. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants (which representations and warranties shall survive the execution
and delivery of this Supplemental Indenture) as of the date hereof that:
(a) All representations and warranties contained in the Indenture are
true and correct in all material respects as of the date of this
Supplemental Indenture with the same force and effect as if made on such
date (except to the extent that any such representation or warranty relates
expressly to an earlier date).
(b) The Company has the corporate power and authority to execute,
deliver and carry out the terms and provisions of this Supplemental
Indenture and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Supplemental Indenture.
(c) This Supplemental Indenture has been duly executed and delivered
and constitutes the legal, valid and binding obligation of the Company, and
is enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, reorganization, insolvency,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally and by general equity principles.
(d) No registration or filing with, consent or approval of, or other
action by, any Federal, State or other governmental agency, authority or
regulatory body is or will be required on behalf of the Company in
connection with the execution, delivery, performance, validity or
enforcement of this Supplemental Indenture, other than any such
registration or filing which has been made or any such consent, approval or
other action which has been obtained and remains in full force and effect
and other than the filing of Form 10-Q or a Form 10-K with the Securities
and Exchange Commission.
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(e) The execution, delivery and performance of this Supplemental
Indenture by the Company will not violate any provision of the certificate
or articles of incorporation or bylaws of the Company (before or
immediately after the Effective Date) or any of its subsidiaries or any
law, statute, rule or regulation, or any order or decree of any court or
governmental instrumentality applicable to the Company or any of its
subsidiaries, or, after the Effective Date, violate, result in the breach
of or constitute a default under any indenture, agreement or other
instrument to which the Company or any of its subsidiaries or any of their
respective properties or assets are or may be bound.
(f) After giving effect to this Supplemental Indenture after the
Effective Date, the Company is in compliance with all of the various
covenants and agreements applicable to it set forth in the Indenture.
(g) After giving effect to this Supplemental Indenture after the
Effective Date, no event has occurred and is continuing which constitutes
or would constitute, with the giving of notice or the lapse of time or
both, an Event of Default under the Indenture.
(h) The Company has no defense to or setoff, counterclaim or claim
against payment of the Notes or enforcement of the Indenture or the Notes
based upon a fact or circumstance existing or occurring on or prior to the
date of this Supplemental Indenture.
19. CONDITIONS PRECEDENT. Notwithstanding any term or provision of
this Supplemental Indenture to the contrary, no amendment set forth in this
Supplemental Indenture shall become effective until the Trustee shall have
determined that each of the following conditions precedent shall have been
satisfied, such determination to be conclusively evidenced by the Trustee's
execution and delivery of this Supplemental Indenture:
(a) The Company shall have delivered to the Trustee a copy of the
resolution of the Company, certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such
certification, that this Supplemental Indenture has been authorized by the
Company. The Company shall have also delivered to the Trustee a
certification of an officer of the Company that all of the conditions
precedent to the effectiveness of this Indenture Supplement shall have been
met as of the date of such certificate and that the representations and
warranties set forth in Section 18 of this Supplemental Indenture are true
as of the Effective Date.
(b) The Trustee shall have received an Opinion of Counsel stating
that the execution of this Supplemental Indenture is authorized or
permitted by the Indenture.
(c) Counterparts of the separate letter agreements, dated the date of
this Supplemental Indenture, between the Company and holders representing
85% or more of the Outstanding Notes, pursuant to which each such holder
has consented to the amendments
7
contained in this Supplemental Indenture, shall have been duly executed
and delivered on behalf of the Company and each such holder, and such
agreements shall be in full force and effect.
(d) The Trustee or its counsel shall have been provided true and
accurate copies of the Merger Agreement and such other documents relating
to the Merger, the Company or Holding as either of them may reasonably
request from the Company.
(e) Counterparts of this Supplemental Indenture shall have been duly
executed and delivered on behalf of the Company and the Trustee.
(f) Counterparts of (i) the Subordination Agreement, dated as of the
Effective Date, made by The TJX Companies, Inc. in favor of the Trustee for
the benefit of each holder of the Notes and (ii) the Guaranty Agreement,
dated as of the Effective Date, made by Hit or Miss Inc. in favor of the
Trustee for the benefit of each holder of the Notes shall have been duly
executed and delivered on behalf of the Trustee.
(g) The Company shall have obtained the consent of Fleet Bank, N.A.
under the Revolving Credit Agreement to this Supplemental Indenture.
20. CONDITION SUBSEQUENT. In the event that the Merger shall not be
consummated as contemplated by the Merger Agreement, as such Merger Agreement
may be amended from time to time after the date of this Supplemental
Indenture, by September 30, 1998, no amendment set forth in this Supplemental
Indenture shall be effective and the terms of the Indenture shall be enforced
without giving effect to the terms of this Supplemental Indenture.
21. EFFECTIVE DATE. Subject to Section 20, the Effective Date shall be
the date this Supplemental Indenture is executed and delivered by the parties
to this Supplemental Indenture.
22. ADDITIONAL EVENT OF DEFAULT. It shall constitute an Event of
Default under the Indenture if any of the representations and warranties of
the Company under this Supplemental Indenture shall prove to have been
incorrect in any material respect when made.
23. NO OTHER CHANGE. Except as modified by this Supplemental
Indenture, the Indenture shall continue in full force according to its terms
and is hereby ratified.
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IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, all as of the day and year first
above written.
GANTOS, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Its: President and CEO
---------------------------------
Attest:
/s/ Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxx
------------------------------
Title: Senior V.P. Operations
-----------------------------
STATE STREET BANK AND TRUST COMPANY
By: Xxxxx X. Xxxxxx
----------------------------------
Its: Vice President
---------------------------------
9
STATE OF )
) ss.:
COUNTY OF )
Before me, a Notary Public, in and for said State and County, duly
commissioned and qualified, personally appeared __________________________,
with whom I am personally acquainted and who, upon oath, acknowledged
him/herself to be the ____________________ of ___________________________,
and that as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by him/herself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand on this ________ day
of _________________, 199 .
-----------------------------
Notary Public
My Commission Expires:
STATE OF CONNECTICUT)
) ss.:
COUNTY OF HARTFORD )
Before me, a Notary Public, in and for said State and County, duly
commissioned and qualified, personally appeared Xxxxx X. Xxxxxx, with whom I
am personally acquainted and who, upon oath, acknowledged him/herself to be
the Vice President of State Street Bank and Trust Co., and that such
officer, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by
him/herself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand on this __________
day of ___________________, 199 .
/s/ Xxxx X. Xxxxxx
----------------------------
Notary Public
My Commission Expires: Xxxx X. Xxxxxx
Notary Public [SEAL]
My commission expires May 31, 2002
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XXXXXXX ASSOCIATES, L.P.
000 XXXXX XXXXXX
XXX XXXX, XXX XXXX 00000
As of June 30, 1998
Gantos, Inc.
0000 Xxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
State Street Bank and Trust Company
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Ladies and Gentlemen:
This letter hereby confirms the consent of the undersigned, in
accordance with Section 10.02 of the Indenture, dated as of April 1, 1995
between Company and Trustee, as successor trustee, as amended by Supplemental
Indenture No. 1, dated as of December 15, 1997 ("Supplemental Indenture No.
1" and, together with the Indenture, the "Indenture"), to the terms of
Supplemental Indenture No. 2, dated as of the date hereof ("Supplemental
Indenture No. 2").
In addition, this letter hereby confirms the consent of the undersigned
that payment of the Pro-Rata share of the principal amount of the Notes (as
defined in the Indenture) due to be paid on the July 1, 1998 sinking fund
redemption date ($774,725.87), as set forth in Section 3.01(b) of the
Indenture, may be postponed until such time as the Merger (as defined in
Supplemental Indenture No. 2) has been consummated; PROVIDED, HOWEVER, that
in no event shall the payment of such amount be postponed beyond September
25, 1998. Interest shall accrue on the principal amount of the Notes
postponed hereby at the rate of 12.75% per annum until payment is made.
Within five (5) days after the date of this letter, the Company shall
issue to the undersigned warrants (substantially in the form annexed hereto)
exercisable until June 30, 2003 to purchase the undersigned's pro rata
portion (based on the principal amount of the Notes which sign letters
consenting to the postponement of the July 1, 1998 payment of principal under
the Notes) of 150,000 Gantos Common Shares at an exercise price of $1.625 per
share as consideration for postponing the July 1, 1998 payment of principal
under the Notes. The payment of such consideration shall not change the
amount of principal and interest due with respect to the outstanding Notes.
The Company shall use its reasonable good faith efforts to register the
Gantos Common Shares underlying the warrants on the Company's currently filed
registration statement on Form S-4. If the Company is unable to register the
Gantos Common Shares thereon, the Company shall register the Gantos Common
Shares underlying the warrants within sixty (60) days after the consummation
of the Merger. The Company shall use its best efforts to keep the
registration statement registering
1
such Gantos Common Shares (the "Registration Statement") continuously
effective until the earlier of (x) the date when all shares covered by the
Registration Statement have been sold or (y) the date the warrants cease to
be exercisable. The Company shall use its best efforts to list the Gantos
Common Shares underlying the warrants on any national securities exchange or
Nasdaq market, if any, on which the Gantos Common Shares are then listed or
quoted. The Company shall use its best efforts to register or qualify, no
later than the effective date of the Registration Statement under the
Securities Act of 1933, all shares covered by the Registration Statement
under the blue sky laws of such jurisdictions as any holder of the warrants
shall reasonably request, and do any and all other acts and things which may
be necessary or advisable to enable such holder to consummate the disposition
of the shares owned by such holder in such jurisdictions, provided that the
Company will not be required to register or qualify any shares in any
jurisdiction where such registration or qualification would (i) require it to
qualify generally to do business in such jurisdiction, (ii) subject it to
taxation in such jurisdiction, (iii) require it to consent to service of
process in any such jurisdiction, provided it has not already so consented,
or (iv) require it to amend the terms of the warrants or of any other class
of the Company's securities.
The Company hereby agrees that it shall not voluntarily prepay all or
part of the principal amount due under the TJX Note prior to the payment in
full of the Notes.
In addition, as additional consideration for postponing the July 1, 1998
payment of principal under the Notes, the Company shall pay the legal fees
and expenses of Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C. on behalf of the
undersigned incurred in connection with (i) the negotiation of Supplemental
Indenture No. 2 and this letter, (ii) any waivers or agreements with the
Company related thereto and (iii) any related due diligence, including
without limitation the review of the Company's Registration Statement on Form
S-4, the Subordination Agreement, the Guaranty Agreement and the form of
warrant.
The undersigned shall be provided true and accurate copies of the Merger
Agreement and such other documents relating to the Merger, the Company or
Holding as the undersigned may reasonably request from the Company.
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If this letter is acceptable, please so indicate by countersigning this
letter in the places indicated.
XXXXXXX ASSOCIATES, L.P.
By: Xxxxxxx Associates, L.P., as general partner
By: Xxxxxxx Associates, Inc., as general partner
By:
-------------------------------------
An Authorized Signator
Accepted:
GANTOS, INC.
By:
--------------------------------
Its:
--------------------------
Accepted:
STATE STREET BANK AND TRUST COMPANY
By:
--------------------------------
Its:
--------------------------
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[LETTERHEAD]
June 30, 1998
Gantos, Inc.
0000 Xxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
State Street Bank and Trust Company
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Ladies and Gentlemen:
This letter hereby confirms the consent of the undersigned, in accordance
with Section 10.02 of the Indenture, dated as of April 1, 1995 between Company
and Trustee, as successor trustee, as amended by Supplemental Indenture No. 1,
dated as of December 15, 1997 ("Supplemental Indenture No. 1" and, together with
the Indenture, the "Indenture"), to the terms of Supplemental Indenture No. 2,
dated as of the date hereof ("Supplemental Indenture No. 2").
In addition, this letter hereby confirms the consent of the undersigned
that payment of the Pro-Rata share of the principal amount of the Notes due to
be paid on the July 1, 1998 sinking fund redemption date ($774,725.87), as set
forth in Section 3.01(b) of the Indenture, may be postponed until such time as
the Merger (as defined in Supplemental Indenture No. 2) has been consummated;
PROVIDED, HOWEVER, that in no event shall the payment of such amount be
postponed beyond September 25, 1998. Interest shall accrue on the principal
amount of the Notes postponed hereby at the rate of 12.75% per annum until
payment is made.
Within five (5) days after the date of this letter, the Company shall issue
to the undersigned warrants exercisable until June 30, 2003 to purchase the
undersigned's pro rata portion (based on the principal amount of the Notes which
sign letters consenting to the postponement of the July 1, 1998 payment of
principal under the Notes) of 150,000 Gantos Common Shares at an exercise price
of $1.625 per share as consideration for postponing the July 1, 1998 payment of
principal under the Notes. The payment of such consideration shall not change
the amount of principal and interest due with respect to the outstanding Notes.
The Company shall use its reasonable good faith efforts to register the Gantos
Common Shares underlying the warrants on the Company's currently filed
registration statement on Form S-4. If the Company is unable to register the
Gantos Common Shares thereon, the Company shall use its reasonable good faith
efforts to register the Gantos Common Shares underlying the warrants within
sixty (60) days after the consummation of the Merger.
1
If this letter is acceptable, please so indicate by countersigning this
letter in the places indicated.
[NAME OF HOLDER]
By: ____________________________
Its: __________________________
Accepted:
GANTOS, INC.
By: ______________________________
Its: ___________________________
Accepted:
STATE STREET BANK AND TRUST COMPANY
By: ______________________________
Its: ___________________________
2
