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Exhibit 4.4
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Second
Amendment") is made and entered into as of August 27, 1999, by and among Gantos,
Inc., a corporation formed under the laws of the State of Michigan (the
"Borrower"), 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 Second 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 a certain First Amendment to
Loan and Security Agreement dated as of February 28, 1999 by and among the
Borrower and Foothill as Agent and the Lenders, as further amended by and
through the date of this Second 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 to provide for, among other
things, a temporary change in the Borrowing Base, an amendment to the monthly
servicing fee provided for in the Loan Agreement and an amendment to the Retail
Performance Covenants set forth on Schedule 7.21 of the Loan Agreement, and to
amend 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 2.1(a)(i) of the Loan Agreement (Revolving
Advances). Subsection 2.1(a)(i) of the Loan Agreement is hereby amended by
deleting the existing clauses (x), (y) and (z) of such subsection and inserting
in lieu thereof the following:
"(w) the lesser of (i) 90% of Eligible Accounts, less the
amount, if any, of the Dilution Reserve, and (ii) $20,000,000 plus
(x) the lesser of (i) 65% of the Cost value of Eligible
Inventory, and (ii) 80% of the most recently determined Net Retail
Liquidation Value of the Eligible Inventory, minus
(y) the aggregate amount of reserves, if any, established by
Agent under Sections 2.1(b), 6.14 and 10; plus
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(z) solely for the period commencing on August 27, 1999 and
terminating on the earlier to occur of (i) the closing of the sale of
the Borrower's private label credit portfolio, and (ii) September 30,
1999, the sum of $1,500,000."
(b) Amendment to Subsection 2.12(e) of the Loan Agreement (Fees).
Subsection 2.12(e) of the Loan Agreement is amended by deleting such subsection
in its entirety and inserting in lieu thereof the following:
"(e) Servicing Fee. On the first day of each month during the
term of this Agreement, a servicing fee in the amount of $4,000 per
month, provided, that if the Borrower requested a Special Sub-Line
Advance during the immediately preceding month, the servicing fee shall
be automatically increased to $12,000 per month (the "Increased
Servicing Fee"), unless, prior to the date any such increased fee is
due, the Borrower has received an equity contribution in an amount
determined by the Lenders, in their reasonable discretion, to resolve
or substantially reduce the Borrower's need for additional capital, in
which event the Increased Servicing Fee instead shall equal $9,000 per
month."
(c) Amended Schedule 7.21 (Retail Performance Covenants). The Loan
Agreement is amended by deleting the existing Schedule 7.21 attached thereto and
replacing it with the Amended Schedule 7.21 attached to this Second Amendment.
2. Representations and Warranties; Confirmation of Representations,
Warranties.
This Second 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
Second 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 Second 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 Second Amendment shall become a part of the Loan Agreement and shall be a
Loan Document.
3. Release of Claims. The Agent, the Lenders and the Borrower agree to
eliminate any possibility that any of the conditions, acts, omissions, events or
circumstances described or referred to in the March 23, 1999 letter from Xx.
Xxxxxx Xxxxx, acting on behalf of the Borrower, addressed to the Oversight Agent
and the Agent (the "March 23 Letter"), would impair or otherwise adversely
affect any of the Agent's or the Lenders' rights, interests, security and/or
remedies. For and in consideration of the agreements contained in this Amendment
and other good and valuable consideration, the Borrower unconditionally and
irrevocably releases, waives and forever discharges the Agent and the Lenders
together with their successors, assigns,
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subsidiaries, affiliates, agents and attorneys, from: (x) any and all
liabilities, obligations, duties, promises or indebtedness of any kind of the
Agent or the Lenders to the Borrower which have arisen on or prior to the date
hereof as a result of any of the conditions, acts, omissions, events or
circumstances described or referred to in the March 23 Letter, and (y) all
claims, offsets, causes of action, suits or defenses of any kind whatsoever (if
any), whether known or unknown, which the Borrower might otherwise have against
the Agent or the Lenders, their successors, assigns or agents or any of them
with respect to any of the conditions, acts, omissions, events or circumstances
described or referred to in the March 23 Letter.
3A. No Knowledge of Additional Claims. The Agent and the Lenders hereby
acknowledge that they have no knowledge of any debts or liabilities of the
Borrower to the Agent or the Lenders other than the Obligations of the Borrower
to the Agent and the Lenders under and pursuant to the Loan Agreement and the
other Loan Documents. The foregoing acknowledgment shall in no way impair the
validity or enforceability of such Obligations or the Agent's and Lenders'
rights and remedies under the Loan Documents, all of which are hereby reserved.
4. Conditions Precedent.
Prior to or concurrently with the execution by the Agent and the
Lenders of this Second Amendment, and as a condition to the obligation of the
Lenders to execute this Second Amendment and make Advances for the account of
the Borrower on and after the date hereof:
(a) This Second 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;
(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;
(c) The Borrower shall have delivered to the Agent a covenant
compliance certificate for the immediately preceding month demonstrating the
Borrower's ongoing compliance with the covenants set forth in the Loan
Agreement, as of the date hereof; and
(d) The Borrower shall have paid the Agent for the ratable benefit of
the Lenders an amendment fee in the amount of $20,000.
5. Conditions to Lending; Compliance with Loan Documents, Borrower's
Covenant.
The Borrower hereby represents and warrants to the Agent and the
Lenders that all of the conditions precedent to lending specified in Section 4.2
of the Loan Agreement have been and continue to be satisfied as of the date
hereof. Without limiting the generality of the foregoing, the
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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.
The Borrower hereby covenants and agrees that it shall provide to the
Agent on or before September 3, 1999 a detailed, pro forma weekly cash flow
projection for the period September 6, 1999 through March 31, 2000, in form and
substance satisfactory to the Agent. The Borrower acknowledges that the failure
to deliver such projection to the Agent on or before September 3, 1999 shall
constitute an Event of Default under the Loan Agreement.
6. 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 Second 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 Second 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 Second 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 Second Amendment.
7. 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 Second 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 Second
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
By:
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(Title)
PARAGON CAPITAL, LLC, as a Lender
By:
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(Title)
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AMENDED
SCHEDULE 7.21
INVENTORY COMPOSITION AND IMBALANCE GUIDELINES:
Total EOM Dress Inventory at Cost (including Department # 500, 1300, 1500) shall
not be less than 25% of total EOM Inventory at Cost.
MIN/MAX INVENTORY
Measured monthly, on a rolling three-month basis, commencing EOM February 1999,
average EOM inventory at cost shall be at least 85.0% of plan, and not more than
115.0% of plan.
MINIMUM PURCHASES TEST (MONTHLY):
Measured monthly on a rolling two month basis, Total Actual Purchases, as a
percentage of Planned Purchases at cost, shall not vary negatively from plan in
any one fiscal month by more than 10.0%.
MINIMUM PURCHASE TEST (WEEKLY): Measured weekly during the period August 30,
1999 through September 30, 1999, Total Actual Purchases, as a percentage of
Planned Purchases at cost, shall not vary negatively from plan in any week by
more than 20.0%. The first measurement date will commence on September 17, 1999.
SALES:
Measured weekly on a rolling three-week basis, commencing with the third fiscal
week of February 1999, Sales shall not vary negatively from plan by more than
10%. If Sales vary negatively from plan by more than 10%, the advance rate will
be decreased by 1.5 ppts the first week and 0.5 ppt each week until such time as
Sales are within 90% of plan as measured on a rolling three-week basis. In the
event that weekly plan sales figures are not provided by the Company, weekly
plan sales shall be calculated based upon the monthly plan sales figure per the
Company's business plan divided by 4.3 average weeks.
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