<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 30, 1995 Commission File Number
0-14579
Gander Mountain, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1742710
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
P.O. Box 128, Highway W, Wilmot, Wisconsin 53192
(Address of principal executive offices)
Registrant's telephone number, including area code: 414-862-2331
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
On December 30, 1995, there were outstanding 3,251,879 shares of the
Registrant's $.01 par value common stock.
1
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GANDER MOUNTAIN, INC.
FORM 10-Q
DECEMBER 30, 1995
REPORT INDEX
PAGE
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Statements of Operations for the Thirteen
Weeks Ended December 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Twenty-Six
Weeks Ended December 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Balance Sheets at December 30, 1995
and July 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Twenty-Six
Weeks Ended December 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
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GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Thirteen Weeks Ended
---------------------------
December 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
Net sales $ 120,818 $ 114,566
Cost of goods sold 82,773 75,952
----------- ------------
Gross profit 38,045 38,614
Selling, general and administrative expenses 32,759 31,290
----------- ------------
Income from operations 5,286 7,324
----------- ------------
Other expense:
Net interest expense 1,747 912
Other - net 166 53
----------- ------------
1,913 965
----------- ------------
Income before income taxes 3,373 6,359
Provision for income taxes 1,300 2,607
----------- ------------
Net income $ 2,073 $ 3,752
=========== ============
Earnings per share: (See Note 3)
Primary $ 0.55 $ 1.02
========== ===========
Fully diluted $ 0.44 $ 0.77
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Twenty-Six Weeks Ended
----------------------------------
December 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
Net sales $ 217,097 $200,539
Cost of goods sold 150,178 133,916
----------- ------------
Gross profit 66,919 66,623
Selling, general and administrative expenses 61,545 55,424
----------- ------------
Income from operations 5,374 11,199
----------- ------------
Other expense:
Net interest expense 3,518 1,818
Other - net 267 160
----------- ------------
3,785 1,978
------------ ------------
Income before income taxes 1,589 9,221
Provision for income taxes 622 3,752
----------- ------------
Net income $ 967 $ 5,469
============ ============
Earnings per share: (See Note 3)
Primary $ 0.13 $ 1.47
============ ============
Fully diluted $ 0.13 $ 1.12
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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GANDER MOUNTAIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
December 30, July 1,
1995 1995
--------------- ---------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash $ 6,729 $ 2,818
Accounts receivable 10,313 7,802
Refundable income taxes 142 1,420
Inventories 83,208 100,639
Prepaid catalog expenses 4,516 13,242
Other assets 198 1,165
----------- ----------
105,106 127,086
----------- ----------
Property and equipment:
Projects in progress 2,684 790
Land and building 23,388 23,388
Furniture and equipment 27,237 27,240
----------- ----------
53,309 51,418
Less: Accumulated depreciation ( 18,470) ( 15,833)
----------- -----------
34,839 35,585
----------- -----------
Deferred Income Taxes - 154
-------------- ------------
Intangible assets - net 679 816
------------ ------------
$ 140,624 $ 163,641
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 31,048 $ 44,472
Notes payable to bank 45,600 9,500
Current portion of long-term obligations 20,000 1,400
Other current liabilities 13,079 8,877
----------- ----------
109,727 64,249
----------- ----------
Long-term obligations - 69,000
----------- ----------
Preferred Redeemable Stock 20,000 20,000
----------- ----------
Shareholders' equity:
Class B preferred stock - -
Common stock 32 32
Additional paid-in capital 12,655 12,564
Accumulated deficit ( 1,190) ( 1,604)
Less notes receivable from stockholders ( 600) ( 600)
----------- -----------
10,897 10,392
------------ -----------
$ 140,624 $ 163,641
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Twenty-Six Weeks Ended
-----------------------------
December 30, December 31,
1995 1994
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 967 $ 5,469
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 2,774 2,469
Deferred income taxes 154 1,717
Changes in operating assets and liabilities:
Accounts receivable ( 2,511) (14,807)
Refundable income taxes 1,278 1,325
Inventories 17,431 ( 3,510)
Prepaid catalog expenses 8,726 8,736
Accounts payable (13,424) 6,349
Other 4,616 4,057
---------- ---------
Cash provided by operating activities $ 20,011 $ 11,805
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $ ( 1,891) $ ( 4,947)
---------- ---------
Cash used for investing activities $ ( 1,891) $ ( 4,947)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on line of credit agreements $ (13,900) $ ( 3,868)
Net repayments on long-term obligations ( 400) ( 400)
Cash dividends on preferred stock - ( 550)
Net proceeds from issuance of common stock 91 235
---------- ---------
Cash used for financing activities $ (14,209) $ ( 4,583)
----------- ---------
INCREASE IN CASH $ 3,911 $ 2,275
CASH BEGINNING OF PERIOD 2,818 2,337
---------- ---------
CASH END OF PERIOD $ 6,729 $ 4,612
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements for the interim periods are unaudited.
However, these consolidated financial statements reflect all adjustments,
consisting of only normal recurring accruals and disclosures which, in the
opinion of management, are necessary for a fair presentation. Changing
economic conditions and seasonality of the business may have a significant
impact on the operating results. As a consequence, the statements of
operations for any interim period are not necessarily indicative of the results
that can be expected for the entire year.
Certain reclassifications may have been made to the fiscal 1995 consolidated
financial statements presented herein to conform to the presentation for fiscal
1996. For more complete financial information, these consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the applicable notes that appear in the Company's 1995 Annual
Report on Form 10-K.
Certain of these notes are presented below to provide more current financial
information.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies as previously presented in the Company's
1995 Annual Report on Form 10-K are consistent with those policies in existence
as of December 30, 1995.
NOTE 2 - BORROWING ARRANGEMENTS
LINE OF CREDIT -
The Company maintains a revolving line of credit with a Bank Group (the
"Banks") whereby it may borrow up to $56.0 million subject to a borrowing base
formula as discussed below. This credit facility is used for working capital
needs and letters of credit. The agreement provides for future borrowings at
interest rates based on the prime rate. In accordance with an amendment dated
August 18, 1995, the revolving line matures on January 5, 1997. As of December
30, 1995, $45.6 million was outstanding at interest rates ranging from 7.05
percent to 8.75 percent. A commitment fee of 0.375 percent is payable
quarterly on the revolving line.
TERM LOAN -
In December 1992, the Company obtained a term loan for up to $20.0 million from
the banks participating in the line of credit facility. In accordance with the
terms of the amendment dated August 18, 1995, the term loan matures on January
5, 1997 and has quarterly principal payments of $0.5 million commencing on
March 1, 1996. The agreement provides for borrowings at interest rates based
on the prime rate. As of December 30, 1995, $20.0 million was outstanding
against the term loan.
See the discussion of financial covenant violations and waiver agreement below
for the current status of the line of credit and term loan.
7
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GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The line of credit and term facility ("credit facility") is secured by
substantially all assets of the Company. All borrowings are also subject to
various monthly covenants. On August 18, 1995, the Company signed an amendment
to its credit facility which contained updated covenants, and waived previous
covenant violations. The most restrictive of the new covenants require minimum
levels of tangible net worth and profitability and a minimum current ratio and
a maximum level of total liabilities to tangible net worth.
Due to the lower operating profit for the first half ended December 30, 1995,
the Company did not meet the new monthly covenants related to profitability,
current ratio and tangible net worth. The Company and its lenders signed
successive amendments, the most recent dated January 23, 1996, pursuant to
which the banks waived these financial covenant defaults until February 14,
1996. The waiver agreement limits the revolving line of credit to a maximum of
$56.0 million and subjects the revolving line of credit to a borrowing base
formula which could reduce this maximum as inventory and accounts receivable
levels decline.
The Company is currently negotiating with the banks to extend the waiver period
while the Company continues to pursue strategic and financial alternatives for
securing additional sources of debt or equity financing or selling all or part
of the Company. There can be no assurance that the waiver period will be
extended or that any sales or financing will be consummated. The line of
credit and term loan borrowings have been classified as short-term in the
accompanying balance sheet at December 30, 1995, as there is no assurance that
the banks will extend the waiver period beyond one year or amend the agreement
to cure the previous financial covenant violations.
NOTE 3 - EARNINGS PER SHARE
Primary earnings per share amounts are computed based on the weighted average
number of shares outstanding plus the shares that would be outstanding assuming
exercise of dilutive stock options. Net income has been adjusted for dividends
on the Series A Redeemable Preferred Stock. Fully diluted earnings per share
amounts reflect the maximum dilution that would result from conversion of the
Series A Redeemable Preferred Stock and exercise of stock options.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------- -----------------------------
December 30, December 31, December 30, December 31,
1995 1994 1995 1994
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net income as reported $ 2,073 $ 3,752 $ 967 $ 5,469
Preferred dividends ( 278) ( 275) ( 553) ( 553)
---------- --------- ----------- -----------
Primary income $ 1,795 $ 3,477 $ 414 $ 4,916
Assumed conversions:
Preferred dividends
eliminated 278 275 553 553
---------- --------- ----------- -----------
Fully diluted income $ 2,073 $ 3,752 $ 967 $ 5,469
=========== ========= =========== ===========
Average number of
common shares:
Primary 3,251 3,405 3,263 3,338
========== ========= =========== ===========
Fully diluted 4,708 4,860 4,717 4,865
========== ========= =========== ===========
</TABLE>
8
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GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF SECOND QUARTER FISCAL 1996 TO SECOND QUARTER FISCAL 1995
Total Company net sales increased $6.3 million or 5.5 percent to $120.8 million
for the thirteen weeks ended December 30, 1995 from $114.6 million for the same
quarter in the prior year. Catalog net sales decreased 15.0 percent to $68.2
million compared to $80.2 million during the prior year quarter. The decrease
is attributable to decreased catalog circulation, elimination of selected
promotions and lower than expected average order values.
Retail net sales increased 53.1 percent to $52.6 million compared to $34.4
million reported in the second quarter of fiscal year 1995. The increase in
sales resulted partially from the addition of six new retail stores in
LaCrosse, Wisconsin, Grand Rapids, Saginaw, Taylor and Pontiac, Michigan and
Maple Grove, Minnesota. On a comparable basis, Gander Mountain's retail stores
in business more than one year had a sales decrease of 4.5 percent versus an
increase of 5.8 percent in the year-earlier quarter. Gander Mountain had 17
retail stores in operation at the end of the current quarter versus 11 at the
end of the year-ago quarter.
During the quarter, gross profit decreased $0.6 million or 1.5 percent from the
same period last year. Catalog gross profit decreased $5.4 million to $22.0
million while retail gross profit increased $4.8 million to $16.1 million. The
Company's gross profit margin for the thirteen weeks ended December 30, 1995
was 31.5 percent compared to 33.7 percent for the prior year quarter. Catalog
gross profit margins decreased to 32.2 percent of sales in the second quarter
of fiscal year 1996 from 34.1 percent in fiscal year 1995 while retail gross
profit margins decreased to 30.5 percent in the second quarter of fiscal year
1996 from 32.7 percent in fiscal year 1995. The decreases in gross margin rate
reflects increased promotional activity and, to a lesser extent, unfavorable
merchandise mix.
Operating expenses for the quarter were $32.8 million or 27.1 percent of sales
compared to $31.3 million or 27.3 percent of sales in the second quarter of
fiscal year 1995. Increases in operating expenses resulted principally from
increased labor and advertising expense associated with the six new retail
stores opened, offset slightly by reduced catalog expenses associated with
reduced circulation.
Other expense for the quarter was $1.9 million compared to $1.0 million in the
prior year. The increase is due to higher interest costs associated with the
increased borrowings against the Company's short term line of credit and term
loan. The increase in borrowings is due to higher financing required for the
retail store expansion and higher average inventory levels.
Net income for the thirteen weeks ended December 30, 1995 was $2.1 million
compared to $3.8 million reported in the second quarter of fiscal year 1995.
The fully diluted earnings per share was 44 cents per share compared to 77
cents per share reported in the prior year quarter.
9
<PAGE> 10
GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF FIRST TWENTY-SIX WEEKS OF FISCAL 1996 TO FIRST TWENTY-SIX WEEKS
OF FISCAL 1995
Total Company net sales increased $16.6 million or 8.3 percent to
$217.1 million for the twenty-six weeks ended December 30, 1995 from $200.5
million for the same period in the prior year. Catalog net sales decreased
12.6 percent to $127.7 million compared to $146.1 million during the prior
year. The decrease is attributable to decreased catalog circulation,
elimination of selected promotions and lower than expected average order
values.
Retail net sales increased 64.2 percent to $89.4 million compared to $54.5
million reported in the first twenty-six weeks of fiscal year 1995. The
increase in sales resulted primarily from the addition of new retail stores in
LaCrosse, Wisconsin, Grand Rapids, Saginaw, Taylor and Pontiac, Michigan and
Maple Grove, Minnesota. Also, on a comparable basis, Gander Mountain's retail
stores in business more than one year had sales decreases of 3.1 percent versus
an increase of 7.5 percent in fiscal year 1995. The decrease is attributable
to an overall sluggish retail environment.
During the first twenty-six weeks of fiscal year 1996, gross profit increased
$0.3 million or 0.4 percent over the same period last year. The gross profit
increase is attributable to the higher sales volume, offset by a lower gross
margin rate. Catalog gross profit decreased $9.0 million to $40.1 million
while retail gross profit increased $9.3 million to $26.9 million. The
Company's gross profit margin for the twenty-six weeks ended December 30, 1995
decreased to 30.8 percent compared to 33.2 percent in the same period last
year. Catalog gross profit margins decreased to 31.4 percent for the first
half of fiscal year 1996 from 33.6 percent in the first half of fiscal year
1995 and retail gross profit decreased to 30.0 percent in the first half of
fiscal year 1996 from 32.3 percent in fiscal year 1995. The decrease in gross
margin rate reflects increased promotional activity and, to a lesser extent,
unfavorable merchandise mix.
Operating expenses for the first half of fiscal year 1996 were $61.5 million or
28.3 percent of sales compared to $55.4 million or 27.6 percent of sales in the
first half of fiscal year 1995. Increases in operating expenses resulted
principally from labor expenses associated with the higher retail sales volume
associated with six additional stores, offset by reduced catalog expenses
associated with the decrease in catalog circulation.
Other expense was $3.8 million compared to $2.0 million in the first half of
the prior year. The increase is due to higher interest costs associated with
the increased borrowings against the Company's short term line of credit and
term loan. The increase in borrowings is due to higher financing required for
the retail store expansion and higher average inventory levels.
Net income for the twenty-six weeks ended December 30, 1995 was $1.0 million
compared to $5.5 million reported in the first half of fiscal year 1995. The
fully diluted earnings per share was $0.13 per share compared to $1.12 per
share reported in the prior year period.
10
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GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary on-going cash requirements are for inventory purchases,
catalog expenses and capital expenditures. The Company meets these cash
requirements through borrowings against a revolving line of credit. In
accordance with an amendment dated August 18, 1995, the revolving line matures
on January 5, 1997 and the Company is currently prohibited from paying any
preferred or common dividends or exchanging the Series A Redeemable Preferred
Stock for subordinated notes. The Company also has a term loan of $20 million
and utilizes vendor financing through trade payables to service ongoing
financial obligations. Additionally, the Company leases its retail facilities
and certain other equipment.
The line of credit and term facility ("credit facility") is secured by
substantially all assets of the Company. All borrowings are subject to various
monthly covenants. On August 18, 1995, the Company signed an amendment to its
credit facility which contained updated financial covenants and waived previous
covenant violations. The most restrictive of the new monthly covenants require
minimum levels of tangible net worth and profitability and a minimum current
ratio and a maximum level of total liabilities to tangible net worth as well as
a monthly borrowing base formula to determine overall borrowing availability.
Due to the lower operating profit for the first half ended December 30, 1995,
the Company did not meet the new monthly covenants related to profitability,
current ratio and tangible net worth. The Company and its lenders signed
successive amendments, the most recent dated January 23, 1996, pursuant to
which the banks waived these financial covenant defaults until February 14,
1996. The waiver agreement limits the revolving line of credit to a maximum of
$56.0 million and subjects the revolving line of credit to a borrowing base
formula which could reduce this maximum as inventory and accounts receivable
levels decline.
The Company is currently negotiating with the banks to extend the waiver period
while the Company continues to pursue strategic and financial alternatives for
securing additional sources of debt or equity financing or selling all or part
of the Company. There can be no assurance that the waiver period will be
extended or that any sales or financing will be consummated. The line of
credit and term loan borrowings have been classified as short-term in the
accompanying balance sheet at December 30, 1995, as there is no assurance that
the banks will extend the waiver period beyond one year or amend the agreement
to cure the previous financial covenant violations.
The Company's accounts receivable decreased from $21.9 million at December 31,
1994 to $10.3 million at December 30, 1995 due to a reduction in the receivable
balance associated with the Company's deferred payment plan as a result of a
decrease in catalog's sales volume and not offering the deferred payment plan
on some catalogs.
The Company's inventories rose from $72.5 million at December 31, 1994 to $83.2
million at December 30, 1995 due primarily to the stocking of six new stores.
11
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GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's accounts payable increased slightly from $29.6 million at
December 31, 1994 to $31.0 million at December 30, 1995 due primarily to the
increase in inventory levels.
Capital expenditures for the twenty-six weeks ended December 30, 1995 were $1.9
million compared with $5.0 million for the twenty-six weeks ended December 30,
1995. The decrease is a result of higher infrastructure expenditures in the
first half of fiscal year 1995. The current year expenditures are primarily
the result of leasehold improvements associated with the openings of two retail
stores in the Company's first quarter and on-going development of computer
software systems and acquisition of related computer hardware.
SEASONALITY
The Company's business is seasonal with greater revenues historically being
generated during the first half of the fiscal year. As a result, revenues for
the twenty-six week period ending December 30, 1995 should not be considered to
be indicative of results to be reported for the balance of the fiscal year.
12
<PAGE> 13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable to the Company at December 30, 1995
ITEM 2. CHANGES IN SECURITIES
Not applicable to the Company at December 30, 1995
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) As described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital resources," the
waiver of the financial covenant defaults under the credit facility expires on
February 14, 1996.
(b) As of December 15, 1995 (the last dividend payment date prior to the
date of this report) $818 thousand of accrued dividends on the Company's
Series A Redeemable Preferred Stock are unpaid. Dividends on such Preferred
Stock accrue at the rate of $275 thousand for each three month dividend period.
The terms of the credit facility prohibit the payment of dividends on such
Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable to the Company at December 30, 1995
ITEM 5. OTHER INFORMATION
Not applicable to the Company at December 30, 1995
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
- ------- -----------
10.10 Second Amendment to Third Amended and Restated Revolving Credit and
Term Loan Agreement
10.11 Third Amendment to Third Amended and Restated Revolving Credit and
Term Loan Agreement
10.12 Fourth Amendment to Third Amended and Restated Revolving Credit and
Term Loan Agreement
(b) Form 8-K
Not applicable to the Company at December 30, 1995
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gander Mountain, Inc.
Date: February 13, 1996 By: /s/ Kenneth C. Bloom
----------------- ----------------------------
Executive Vice President
and Chief Financial Officer
14
<PAGE> 1
SECOND AMENDMENT TO
THIRD AMENDED
AND RESTATED
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
BY AND BETWEEN
GANDER MOUNTAIN, INC.,
as Borrower
AND
BANK ONE, MILWAUKEE, NA
FIRSTAR BANK MILWAUKEE, N.A.
LASALLE NATIONAL BANK,
NBD BANK (formerly known as NBD BANK, N.A.), and
HARRIS TRUST AND SAVINGS BANK
as Banks
AND
BANK ONE, MILWAUKEE, NA,
as Agent
November 17, 1995
<PAGE> 2
EXHIBIT 10.10
SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT AND
TERM LOAN AGREEMENT (this "Second Amendment") is made as of the 17th day of
November, 1995, by and between BANK ONE, MILWAUKEE, NA, as Bank and agent for
the Banks, FIRSTAR BANK MILWAUKEE, N.A., LASALLE NATIONAL BANK, NBD BANK,
formerly known as NBD BANK, N.A. and HARRIS TRUST AND SAVINGS BANK, as Banks,
and GANDER MOUNTAIN, INC., a Wisconsin corporation, as Borrower.
R E C I T A L S
WHEREAS, pursuant to a Third Amended and Restated Revolving Credit and
Term Loan Agreement (the "Third Amended Agreement") dated as of November 22,
1994 and amended by First Amendment to Third Amended and Restated Revolving
Credit and Term Loan Agreement (the "First Amendment") dated August 18, 1995
(collectively, the "Loan Agreement"), the Banks made available to Borrower
credit facilities aggregating up to a maximum amount of One Hundred Million
Dollars ($100,000,000.00); and
WHEREAS, Borrower is in default under section 8.1(m) of the Loan
Agreement requiring that prior to opening a new retail store Borrower and its
Subsidiaries shall have delivered to Banks (i) a copy of the executed lease for
the retail store, (ii) an executed Collateral Assignment of the Lease and an
executed Landlord Waiver, Consent, Agreement and Certificate ("Landlord
Waiver"), (iii) a certificate of insurance, and (iv) financing statements; and
WHEREAS, Borrower is in default under section 7.1(a)(5) of the Loan
Agreement requiring that Borrower deliver an Officer's Certificate in that
Borrower has failed to deliver the Officer's Certificate required to be
delivered with Borrower's quarterly financial statements for Borrower's fiscal
quarter ending on September 30, 1995; and
WHEREAS, Borrower has agreed to cure the foregoing defaults by delivering
the Leases, Collateral Assignments, insurance certificates, financing
statements and Officer's Certificate on the date hereof and by delivering the
Landlord Waivers on or before December 15, 1995; and
WHEREAS, Borrower is in default under sections 7.1(i) (Consolidated
Tangible Net Worth) and 7.1(n) (Profitability) of the Loan Agreement and
Borrower believes that as of the end of its fiscal month for November 1995,
Borrower may be in default under section 7.1(k) (Consolidated Leverage Ratio)
of the Loan Agreement; and
WHEREAS, Borrower has requested that Banks provide a waiver
<PAGE> 3
of the defaults under sections 7.1(i), 7.1(k) and 7.1(n) described above in
order to allow Borrower to further analyze its financial condition and provide
additional information to the Banks to serve as a basis for further discussion;
and
WHEREAS, Banks are willing to give such waiver but only if Borrower
reduces its outstanding loan balances and otherwise complies with the terms of
this Second Amendment; and
WHEREAS, this Second Amendment restates, amends and supersedes the waiver
letters between Borrower and the Banks dated October 30, 1995 and November 8,
1995.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein and in the Loan Agreement and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. (a) Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms in the Loan Agreement.
(b) The term "Customer" as used in the Loan Agreement and this
Second Amendment shall include purchasers of goods from the retail stores and
the catalog business of Borrower, GRS or GMO.
2. Waiver. (a) Banks temporarily waive the defaults under sections
7.1(i), 7.1(k) and 7.1(n) of the Loan Agreement previously disclosed to Banks
for the period from the date hereof until December 15, 1995 (the "Waiver
Period") and temporarily waive the default caused by Borrower's failure to
deliver Landlord Waivers for the period from the date hereof until December 15,
1995. The waiver does not extend beyond December 15, 1995 and Banks do not
waive any other default or any increase in the level of noncompliance with
sections 7.1(i), 7.1(k) and 7.1(n) of the Loan Agreement. The Banks reserve
the right to exercise any rights and remedies available to Agent or any Bank
prior to December 15, 1995 if any other default comes to the attention of Banks
or if any information comes to the Banks' attention showing that Borrower's
level of noncompliance with section 7.1(i), 7.1(k) or 7.1(n) is greater than
that previously disclosed to Banks.
(b) Borrower shall pay a waiver fee to Banks in the amount of Two
Hundred and Fifty Thousand Dollars ($250,000), which fee shall be earned upon
execution of this Second Amendment. Such fee shall be due and payable in full
on the earliest of (i) the date that Borrower, GRS or GMO closes or receives
any payment or
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<PAGE> 4
other consideration or benefit by reason of a sale of all or part of GRS, GMO
or the assets of Borrower, GRS or GMO (other than the sale of inventory in the
ordinary course of business or the sale of obsolete equipment that is replaced
with similar equipment in the ordinary course of business), (ii) the date
Borrower, GRS or GMO closes or receives any payment or other consideration or
benefit by reason of the sale of stock of Borrower by Borrower or any other
provision of capital to the Borrower, whether by subordinated loan, equity
investment or otherwise (collectively, the "Injection of Capital"), or (iii)
the date Borrower pays any of the Loans, other than payments on the Revolving
Credit Loans in the ordinary course of business and other than the scheduled
payments due on the Term Loans on March 1, 1996, June 1, 1996, September 1,
1996 and December 1, 1996.
3. LIBOR Based Borrowings. The option of Borrower to elect that any
portion of the outstanding balance of the Loans bear interest at a LIBOR rate
of interest is no longer available. All existing LIBOR Based Borrowings shall
continue to bear interest at the existing LIBOR rate until the end of the
applicable LIBOR Interest Periods. As to all other outstanding balances, and
as to all outstanding balances after the end of any applicable LIBOR Interest
Period:
(a) Deletion of Libor Definitions. The following sections of the
Loan Agreement are deleted: 1.51, 1.56 and 1.57.
(b) Term Loan Interest Rate. Section 2.1.1 of the Loan Agreement
is amended in its entirety to read as follows:
"2.1.1 Interest Rate. The Term Loans shall bear interest in the
case of Bank One at the Reference Rate, floating daily, and in the case
of Harris, LaSalle, Firstar and NBD at the Prime Rate, floating daily,
until maturity."
(c) Term Loan Payments. The first sentence of Section 2.1.2 of the
Loan Agreement is deleted and replaced with the following:
"Interest on all Term Loans shall be paid to Bank One as Agent in
arrears on the first day of each month commencing December 1, 1995."
(d) Revolving Loan Interest Rate. Section 2.2.3 of the Loan
Agreement is amended in its entirety to read as follows:
"2.2.3 Interest Rate. All principal outstanding on the
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<PAGE> 5
Revolving Credit Facility shall bear interest, for each day from the date
such Loan is made until it becomes due, at a rate equal to:
(a) for Index Borrowings, (i) in the case of Bank One
Revolving Credit Loans, at the Reference Rate, floating daily; and
(ii) in the case of Harris, LaSalle, Firstar and NBD Revolving
Credit Loans at the Prime Rate, floating daily; and
(b) for Overadvance Borrowings, (i) in the case of Bank One
Revolving Credit Loans, at the Reference Rate plus one-half of one
percent (0.5%), floating daily; and (ii) in the case of Harris,
LaSalle, Firstar and NBD Revolving Credit Loans at the Prime Rate
plus one-half of one percent (0.5%), floating daily.
Interest on all Revolving Credit Loans shall be paid to Bank One as Agent
in arrears on the first day of each month commencing December 1, 1995.
The Borrowing Base Certificates received hereunder shall be used to
determine the interest rate applicable for the Revolving Credit Loans and
to test compliance with this section 2.2."
4. The Revolving Credit Loans. The following is added to the end of
section 2.2 (added before section 2.2.1) of the Loan Agreement:
"Limitations on Borrowing during the Waiver Period. In addition to
complying with all other provisions of this section 2.2:
(a) Borrower shall not permit the outstanding balance of the
Revolving Credit Facility (including the undrawn amount of unexpired
letters of credit) to exceed (i) prior to November 29, 1995,
$67,700,000 (ii) on and after November 29, 1995 and prior to
December 6, 1995, $63,300,000, (iii) on and after December 6, 1995
and prior to December 11, 1995, $58,900,000, and (iv) on and after
December 11, 1995 and through and including December 15, 1995,
$54,400,000; and
(b) Borrower shall not permit the outstanding balance of
the Revolving Credit Facility (including the undrawn amount of
unexpired letters of credit) to exceed (i) prior to November 29,
1995, 68.5% of Eligible Inventory, (ii) on and after November 29,
1995
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<PAGE> 6
and prior to December 6, 1995, 67% of Eligible Inventory, (iii) on
and after December 6, 1995 and prior to December 11, 1995, 66% of
Eligible Inventory, and (iv) on and after December 11, 1995 and
through and including December 15, 1995, 65% of Eligible Inventory.
In addition to all other remedies available to Banks upon the occurrence
of an Event of Default, the Banks shall not be obligated to make any
advance or issue any letter of credit if after such advance or issuance
Borrower would not be in compliance with section 2.2(a) or 2.2(b) above.
Effect of Harris Reserve. Harris is reserving amounts under the
Charge It Card Plan Merchant Agreement between Borrower and Harris (the
"Merchant Agreement"). Harris and Banks intend to attempt to negotiate,
and if agreement is reached enter into, an Intercreditor Agreement
pursuant to which Harris will transfer the funds that would otherwise
have been held in such reserve for application to the Revolving Credit
Loans and the Banks will grant to Harris an indemnity acceptable to
Harris against credit card chargebacks and other obligations of Borrower,
GRS and GMO. In such event, the amounts contained in section 2.2(a)
above shall be reduced from time to time by the maximum amount payable by
Banks under such indemnity. The provisions contained in this paragraph
shall be applicable regardless of whether the credit card purchases
processed by Harris arise from sales of Borrower, GRS or GMO. Neither
Harris nor any Bank shall have any obligations under this paragraph
unless and until a written agreement, satisfactory to them in their sole
discretion, has been executed and delivered; provided, however, that
Harris is and shall remain the agent of Banks to the extent of any funds
in the reserve held by Harris exceeding the amount needed to pay amounts
owing to Harris under the Merchant Agreement."
5. Proceeds of Collateral. The following is added after section 2.4 of
the Loan Agreement:
"2.5 Proceeds of Collateral.
2.5.1 Receipt and Credit for Collections. Until their
authority to do so is terminated by Banks at Bank's option, which option
shall be available to Banks at any time after an Event of Default that is
continuing, Borrower, GRS and GMO shall, at their own expense, collect
all amounts unpaid on Receivables and all receipts from the sale or other
disposition of Inventory (other than credit card transactions settled
through Harris) and deliver in accordance with section 2.5.2 hereof
immediately upon receipt, all checks,
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<PAGE> 7
drafts, cash, notes, money orders, acceptances and other remittances,
including payments on amounts owing to Borrower from GRS and GMO
(collectively, "Receipts") received in part or full payment of or with
respect to the Collateral or the Subsidiary Collateral in precisely the
form received (but endorsed by Borrower, GRS or GMO, as applicable, if
necessary for collection). Until such delivery Borrower, GRS and GMO
shall not commingle any Receipts with their own funds or any of their
property or use the Receipts in any way except to pay the Obligations (as
defined in the Security Agreement) but shall hold the Receipts in trust
for Banks. With respect to credit card transactions settled through
Harris, all amounts otherwise payable to or for the account of Borrower,
GRS or GMO pursuant to the Merchant Agreement shall be transferred by
Harris to Bank One for application to the Obligations.
2.5.2 Transfer of Receipts. All Receipts received by Borrower, GRS
or GMO shall be transferred daily to one of the Local Deposit Accounts
described in Exhibit 11 to the Second Amendment, and each day the
available funds in each such account, including the LaSalle Account
described on such Exhibit 11, shall be transferred to Agent, except that
the available funds in the Local Deposit Accounts may be transferred to
the LaSalle Account and then retransferred to Agent and except that money
paid to GRS for hunting and fishing licenses shall be paid to the state
governmental entity entitled to such money. LaSalle and each bank at
which Borrower, GRS or GMO has a Local Account shall enter into an
agreement pursuant to which each day all available funds from Receipts
deposited in such account (less any returned items or reversed ACH
deposits) will be transferred to Agent for application to the Loans or
will be transferred to the LaSalle Account for transfer to Agent for
application to the Loans. LaSalle shall enter into an agreement pursuant
to which all Receipts and all transfers from Local Banks are transferred
to Agent for application to the Loans.
2.5.3 Credit for Receipts. If any Receipts are transferred to
Agent in a form other than cash, the amount of such Receipts will be
applied by Agent against the Obligations on the date such amounts become
collected funds. In the event that (a) any such item, the amount of
which has been credited against the Obligations, is subsequently
dishonored or otherwise returned unpaid to any Bank, or (b) any Bank
makes any payment or grants any credit to any other bank by reason of or
on account of (i) any check being dishonored or otherwise returned
unpaid, (ii) any credit card charge being charged back, (iii) the
reversal of any deposit
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<PAGE> 8
made via ACH, or (iv) any other liability of Borrower, GMO or GRS, then
Agent may retroactively debit the Borrower's Revolving Credit Loan for
the amount of such item, or debit any commercial demand account of
Borrower, GRS or GMO maintained with Bank for the amount of such item.
2.5.4 Verification and Notification. Banks may confirm and verify
all Receivables in any reasonable manner, and Borrower, GRS and GMO shall
assist Banks in so doing. Banks may terminate Borrower's, GRS's and
GMO's authority to collect Receipts at any time after an Event of Default
that is continuing. Banks may at any time after an Event of Default that
is continuing notify, or require the Borrower, GRS or GMO to notify, all
of their respective Customers or any of them to make payment directly to
Agent and the Agent may enforce collection of, settle, compromise, extend
or renew the indebtedness of any or all of Borrower's, GRS's or GMO's
Customers without liability of any kind except for the willful misconduct
of Banks.
2.5.5 Authority to Perform for Borrower. To the fullest extent
permitted by law Borrower, GRS and GMO appoint each and every agent of
Banks as attorney-in-fact for each of them to endorse the name of
Borrower, GRS or GMO on any notes, acceptances, checks, drafts, money
orders or other instruments for the payment of money or any security
interest that may come into Banks' possession. This power, because it is
coupled with an interest, is irrevocable while any Obligation remains
unpaid. All acts of Banks or their appointee are hereby ratified and
approved, and Banks or their appointee shall not be liable for any acts
of commission or omission, nor for any error of judgment or mistake of
fact or law, except for the willful misconduct of Banks."
6. Trademarks. Exhibit 6.10 is deleted from the Third Amended Agreement
and replaced with the attached Exhibit 6.10.
7. Financial Statements; Budgets. Section 7.1(a)(9) of the Loan
Agreement is deleted and replaced with the following:
"(9) Daily Financial Reports. Prior to 3:00 o'clock on each
Business Day (except that the Retail Daily Flash Sales Report and the
Compliance Certification shall be delivered prior to 5:00 on each
Business Day and except that the reports that would otherwise be
delivered on Friday, November 24, 1995 shall be delivered at the required
time on November 27, 1995), each of the following reports, current as of
the end of the previous Business Day:
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<PAGE> 9
(a) Daily Receiving Report covering shipments of inventory to Borrower's
warehouse in Wilmot, Wisconsin;
(b) Mail Order Sales Report;
(c) Retail Daily Flash Sales;
(d) Daily Line of Credit Forecast, including Borrower's daily cash flow
model and projecting Borrower's bank balance;
(e) Outstanding Check Analysis; and
(f) A certification (the "Compliance Certification") by an authorized
officer of Borrower that Borrower is in compliance with sections
2.2(a) and (b) hereof, which certificate shall be accompanied by a
summary of the information used to calculate compliance and the
detail of such calculation.
with all of the foregoing to be in form and substance satisfactory to
Banks and consistent with past reports delivered to the Agent.
(10) Weekly Financial Reports. Prior to 3:00 on each Friday (except
that the reports that would otherwise be delivered on Friday, November
24, 1995 shall be delivered prior to 3:00 on Monday November 27, 1995),
each of the following reports, based on Borrower's reasonable good faith
estimates, current as of the end of the previous week:
(a) Receivables aging;
(b) Payables aging identifying the amount of any held checks and the
amount due to Banks (float) and showing the information used to
calculate the payables aging and the detail of such calculation; and
(c) a report in the form required by Agent and attached hereto as
Exhibit 10 ("Borrowing Base Certificate") showing the current status
and value of the Borrowing Base and reflecting the amount of
Eligible Accounts Receivable and Eligible Inventory as of the end of
the prior month, certified by an officer of Borrower. The report
shall also (i) certify that no Event of Default has occurred and
that no condition exists which, with notice or the lapse of time or
both, would constitute an Event of Default, and (ii) be accompanied
by a summary of the information used to calculate the
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<PAGE> 10
Borrowing Base and the detail of such calculation;
with all of the foregoing to be in form and substance satisfactory to
Banks and consistent with past reports delivered to the Agent. In
addition, Borrower shall provide to the Agent any other information
regarding Eligible Inventory and Eligible Accounts Receivable upon the
reasonable request of the Agent. Banks may rely on all Borrowing Base
Certificates and other information provided by Borrower for interest rate
calculations and Overadvance Limits."
8. Bank Accounts. Section 7.1(m) of the Loan Agreement is amended in
its entirety to read as follows:
"(m) Bank Accounts. Except as otherwise permitted by this section
7.1(m), until such time as the Loans are repaid in full and all other
Obligations are satisfied in full, Borrower and each of its Subsidiaries
shall maintain all bank accounts (including but not limited to savings,
checking, depository, payroll, disbursements and cash management services
and accounts) at the Banks, in compliance with section 2.5.2 hereof.
Borrower may maintain a payroll and refund account with the Bank of
Richmond provided that the balance in said account is only the amount
reasonably necessary to pay current payroll and refunds and does not
exceed One Million Dollars ($1,000,000.00) on the date payroll checks are
issued and Seven Hundred Fifty Thousand Dollars ($750,000.00) at all
other times. Borrower and GRS may maintain the Local Depository Accounts
identified on Exhibit 11 to the Second Amendment. Neither Borrower nor
its Subsidiaries shall open any bank accounts other than those identified
on Exhibit 11 without the consent of Banks. Sweeps of the cash in all
bank accounts for retail stores shall be made for transfer to Agent or to
LaSalle for retransfer to Agent, at least once each day that the
transferor bank and transferee bank are open for business, to be applied
to the Loans."
9. Prepayment of Revolving Credit Loans. Section 7.1(r) of the Loan
Agreement is amended to read as follows:
"(r) Prepayment of the Revolving Credit Loans. If the Revolving
Credit Loans shall ever exceed the lesser of (i) the Revolving
Credit Commitment, (ii) the sum of the Borrowing Base plus the
applicable Overadvance Limit, or (iii) the amount permitted by
sections 2.2(a) and (b) hereof, the Borrower shall immediately repay
the Revolving Credit Loans so that the outstanding Revolving Credit
Loans are
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<PAGE> 11
equal to or less than the lesser of (i) the Revolving Credit
Commitment, (ii) the sum of the Borrowing Base plus the applicable
Overadvance Limit, or (iii) the amount permitted by sections 2.2(a)
and (b) hereof."
10. Exhibit 9. The list of retail stores attached as Exhibit 9 hereto
is substituted for Exhibit 9 to the Loan Agreement.
11. Conditions to Amendment. This Second Amendment shall not be
effective until it shall have been fully executed and delivered and all of the
following have been delivered to Banks, executed as appropriate, in form and
substance satisfactory to Banks:
(a) Reaffirmation of Corporate Guaranty and Acknowledgment of GRS;
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<PAGE> 12
(b) Reaffirmation of Corporate Guaranty and Acknowledgment of GMO;
(c) Amended Credit Operating Agreement of GMO;
(d) Amended Credit Operating Agreement of GRS;
(e) Collateral Assignments of Leases for all retail store locations not
previously subject to a Collateral Assignment, together with copies
of the assigned leases and related certificates of insurance;
(f) Closing Certificates with Corporate Resolutions for Borrower, GRS
and GMO;
(g) Opinion of Borrower's Counsel;
(h) Amended and Restated General Intangibles Mortgage; and
(i) UCC financing statements to perfect the security interests of Banks
and Borrower (a) against the personal property of GRS at the Kenosha
outlet store and against the personal property and fixtures of GRS
at each retail store location, (b) against the personal property of
GMO at each store location and against the personal property and
fixtures of GMO at the Wilmot location and the Kenosha outlet store,
and (c) against the personal property of Borrower at each store
location, including the Kenosha outlet mall, and the public
warehouse, and against the personal property and fixtures of
Borrower at the Wilmot location and the Racine Telephone Center.
12. Post Closing Deliveries. Borrower shall deliver all of the
following to Banks, executed as appropriate, on or before December 15, 1995, in
form and substance satisfactory to Banks:
(a) Title update reflecting the recording of the Third Amendment to
Mortgage and showing no additional liens or encumbrances against the
real estate encumbered by such Mortgage;
(b) Agreement with LaSalle and other depository banks and the indemnity
of LaSalle by the Banks, including LaSalle, for any returned items
and/or reversed ACH deposits;
(c) Landlord Waivers with consents of mortgagees for all
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<PAGE> 13
retail stores for which a Consent of Lessor was not previously delivered,
including but not limited to the Kenosha outlet store, and for the Racine
Telephone Center; and
(d) A warehouseman letter from the Kenosha, Wisconsin warehouse used by
Borrower.
Failure of Borrower to deliver any of the foregoing to Banks on or before
December 15, 1995 shall constitute an Other Event of Default.
13. Certifications. Borrower hereby certifies and agrees as follows:
(a) Borrower owns the Customer List free and clear of all security
interests, liens and encumbrances other than security interests in
favor of Banks;
(b) All tangible property owned by Borrower is and shall remain located
at the real estate of Borrower in Wilmot, Wisconsin, except: (a)
inventory in transit to Borrower from Borrower's suppliers, (b)
inventory sold by Borrower in the ordinary course of business, (c)
personal property and fixtures stored or used at the Kenosha,
Wisconsin outlet store as necessary or appropriate for operation of
the store, (d) inventory located at the public warehouse used by
Borrower in Kenosha, Wisconsin, and (e) fixed assets and supplies of
Borrower located at the Telephone Center in Racine, Wisconsin as
necessary or appropriate for operation of the Telephone Center.
(c) The letter agreement among Borrower, GRS and GMO dated April 3, 1994
(providing that title to goods purchased by GRS and GMO from
Borrower shall transfer to the respective purchaser based on F.O.B.
Borrower's dock (shipping point)) has remained in full force and
effect since the date thereof and is currently in full force and
effect.
14. Collateral Monitoring and Business and Collateral Reports.
(a) Collateral Agent. Borrower will permit a collateral agent
selected by Banks to inspect the Collateral and report to Banks regarding
the amount and status of the Collateral. The permitted inspections shall
include but not be limited to (a) the right to inspect daily the
Borrower's
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<PAGE> 14
and its Subsidiaries' inventory, wherever located, (b) the right to
review and monitor all of Borrower's and its Subsidiaries' practices and
procedures with respect to the monitoring of amounts and types of
inventory, and (c) the right to inspect and make copies of all of
Borrower's and its Subsidiaries' books and records, including books and
records stored electronically and including Deloitte Touche and other
consultants' reports and other information relating to the Collateral.
All fees, charges and expenses of the collateral agent shall be paid by
Borrower. The Borrower shall also provide assistance to the collateral
agent by the provision of office space and knowledgeable employees to
operate data processing equipment and provide and explain available
information; and
(b) Business and Collateral Reports. Borrower shall provide to
Banks upon request copies of all analyses of Borrower's business and
assets, including but not limited to all collateral reports, evaluations
and all reports, analyses and recommendations relating to the partial or
full sale of Borrower or any Subsidiary or any of their assets.
15. Continuation of Agreements. Except as expressly amended and modified
herein, the Loan Agreement shall remain in full force and effect and except as
expressly amended and modified herein, the Notes shall remain in full force and
effect. All of the Collateral Documents, including but not limited to the
Security Agreement, the Mortgage, the Collateral Pledge Agreement and
Assignment of Security Interest, the Amended and Restated General Intangibles
Mortgage, the Subsidiary Guaranties and the Subsidiary Security Documents shall
remain in full force and effect as security for the Obligations and all of the
Collateral and Subsidiary Collateral as defined in the Loan Agreement, the real
estate encumbered by the Mortgage, the Subsidiary Notes, and the Stock of GRS
and GMO, shall secure all of the Obligations.
16. Expenses. Borrower shall pay the reasonable legal fees and expenses
of counsel for Bank One and, in addition, the reasonable legal fees and
expenses, not exceeding Five Thousand Dollars ($5,000) per Bank, for each of
NBD, Harris, LaSalle and Firstar.
17. Entire Agreement This Second Amendment, together with the Loan
Agreement, as amended hereby, constitutes the entire agreement of the Banks and
Borrower pertaining to the subject matter hereof and supersedes all prior or
contemporaneous agreements of the Banks and Borrower, whether oral or written,
other than the Loan Agreement, in connection therewith. This Second Amendment
may be amended or modified only in writing,
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<PAGE> 15
executed by all of the parties. This Second Amendment shall not constitute,
nor shall it be deemed to constitute:
(a) The commitment or agreement of Banks to extend credit in any amount
in the future, except as provided in this Second Amendment or in the
Loan Agreement as amended hereby;
(b) an obligation on the part of any Bank to enter into any future
amendment of the Loan Agreement;
(c) except as expressly set forth herein and for the period provided
herein, the waiver of any existing Event of Default or of any
subsequent Event of Default under the Loan Agreement as amended
hereby;
(d) the waiver of any right or remedy available to Bank under the Loan
Agreement or any of the Collateral Documents; or
(e) the commitment, agreement or obligation of any Bank to delay the
exercise of any right or remedy available to a Bank in the future.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BANK ONE, MILWAUKEE, NA
By ___________________________
LASALLE NATIONAL BANK
By ___________________________
FIRSTAR BANK MILWAUKEE, N.A.
By ___________________________
HARRIS TRUST AND SAVINGS BANK
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<PAGE> 16
By ___________________________
NBD BANK
By ___________________________
GANDER MOUNTAIN, INC.
By ___________________________
The undersigned have read the foregoing and agree to be bound by all of
the terms and conditions contained therein except that the undersigned shall
not be directly obligated on any of the Loans except as otherwise provided in
the Loan Agreement as amended hereby, the Subsidiary Documents, the Subsidiary
Guaranties or any other agreement to which Borrower, GRS or GMO is a party.
GMO, INC.
By ___________________________
GRS, INC.
By ___________________________
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<PAGE> 1
THIRD AMENDMENT TO
THIRD AMENDED
AND RESTATED
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
BY AND BETWEEN
GANDER MOUNTAIN, INC.,
as Borrower
AND
BANK ONE, MILWAUKEE, NA
FIRSTAR BANK MILWAUKEE, N.A.
LASALLE NATIONAL BANK,
NBD BANK (formerly known as NBD BANK, N.A.), and
HARRIS TRUST AND SAVINGS BANK
as Banks
AND
BANK ONE, MILWAUKEE, NA,
as Agent
December 5, 1995
<PAGE> 2
EXHIBIT 10.11
THIRD AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Third Amendment") is made as of the 5th day of
December, 1995, by and between BANK ONE, MILWAUKEE, NA, as Bank and agent for
the Banks, FIRSTAR BANK MILWAUKEE, N.A., LASALLE NATIONAL BANK, NBD BANK,
formerly known as NBD BANK, N.A. and HARRIS TRUST AND SAVINGS BANK, as Banks,
and GANDER MOUNTAIN, INC., a Wisconsin corporation, as Borrower.
R E C I T A L S
WHEREAS, pursuant to a Third Amended and Restated Revolving Credit and
Term Loan Agreement dated as of November 22, 1994 and amended by First
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated August 18, 1995 and Second Amendment (the "Second Amendment")
to Third Amended and Restated Revolving Credit and Term Loan Agreement dated
November 17, 1995 (collectively, the "Loan Agreement"), the Banks made
available to Borrower credit facilities aggregating up to a maximum amount of
One Hundred Million Dollars ($100,000,000.00); and
WHEREAS, Borrower is in default under section 8.1(m) of the Loan
Agreement requiring that prior to opening a new retail store Borrower and its
Subsidiaries shall have delivered to Banks (i) a copy of the executed lease for
the retail store, (ii) an executed Collateral Assignment of the Lease and an
executed Landlord Waiver, Consent, Agreement and Certificate ("Landlord
Waiver"), (iii) a certificate of insurance, and (iv) financing statements; and
WHEREAS, Borrower has agreed to cure the foregoing defaults by
delivering the Leases, Collateral Assignments, insurance certificates and
financing statements prior to the date hereof and by delivering the Landlord
Waivers on or before December 31, 1995; and
WHEREAS, Borrower is in default under sections 7.1(i) (Consolidated
Tangible Net Worth), 7.1(k) (Consolidated Leverage Ratio) and 7.1(n)
(Profitability) of the Loan Agreement; and
WHEREAS, Borrower has requested that Banks extend the existing waiver
of the defaults under sections 7.1(i), 7.1(k) and 7.1(n) through January 31,
1996 in order to allow Borrower to further pursue sale of GMO's catalog
business; and
WHEREAS, Banks are willing to extend such waiver but only if Borrower
complies with the terms of this Third Amendment.
NOW, THEREFORE, in consideration of the mutual covenants,
<PAGE> 3
conditions and agreements set forth herein and in the Loan Agreement and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
2. Waiver. (a) Banks temporarily waive the defaults under sections
7.1(i), 7.1(k) and 7.1(n) of the Loan Agreement previously disclosed to Banks
for the period from the date hereof until January 31, 1996 (the "Waiver
Period") and temporarily waive the default caused by Borrower's failure to
deliver Landlord Waivers for the period from the date hereof until December 31,
1995. The waiver does not extend beyond December 31, 1995 for the Landlord
Waivers or beyond January 31, 1996 for the defaults under sections 7.1(i),
7.1(k) and 7.1(n), and Banks do not waive any other default or any increase in
the level of noncompliance with sections 7.1(i), 7.1(k) and 7.1(n) of the Loan
Agreement. The Banks reserve the right to exercise any rights and remedies
available to Agent or any Bank prior to the end of any waiver period if any
other default comes to the attention of Banks or if any information comes to
the Banks' attention showing that Borrower's level of noncompliance with
section 7.1(i), 7.1(k) or 7.1(n) is greater than that previously disclosed to
Banks.
(b) Borrower shall pay the waiver fee described in section
2(b) of the Second Amendment to Banks as provided in the Second Amendment but
if not paid sooner, such fee shall be paid together with the payment of the
Obligations on January 31, 1996.
3. The Revolving Credit Loans. The language added to section 2.2 of
the Loan Agreement pursuant to section 4 of the Second Amendment is amended in
its entirety to read as follows:
"Limitations on Borrowing during the Waiver Period. In
addition to complying with all other provisions of this section 2.2:
(a) Borrower shall not permit the outstanding balance
of the Revolving Credit Facility (including the undrawn amount
of unexpired letters of credit) to exceed (i) on or after
December 5, 1995 through and including December 8, 1995,
$63,300,000, (ii) after December 8, 1995 through and including
December 28, 1995, $60,000,000, (iii) after December 28, 1995
through and including January 12, 1996, $62,000,000, and (iv)
after January 12, 1996 through and including
- 2 -
<PAGE> 4
January 31, 1996, $60,000,000. Banks waive any noncompliance
with section 7.1(t) of the Loan Agreement that may occur as a
result of borrowings within the limits imposed by this section
2.2(a).
(b) Borrower shall not permit the outstanding balance
of the Revolving Credit Facility (including the undrawn amount
of unexpired letters of credit) to exceed (i) on or before
December 19, 1995, 70% of Eligible Inventory, (ii) after
December 19, 1995 through and including December 28, 1995, 75%
of Eligible Inventory, (iii) after December 28, 1995 and
through and including January 12, 1996, 80% of Eligible
Inventory, and (iv) after January 12, 1996 through and
including January 31, 1996, 78% of Eligible Inventory.
(c) If Eligible Accounts Receivable are less than
the following amounts (the "Projected Eligible Accounts
Receivable"): (a) on or before December 31, 1995, $9,900,000,
or (b) on or after January 1, 1996, $7,500,000, then an amount
equal to the difference between Projected Eligible Accounts
Receivable and actual Eligible Accounts Receivable shall be
deducted from the amount that would otherwise be available for
borrowing under paragraphs 2.2(a) and 2.2(b) above.
In addition to all other remedies available to Banks upon the
occurrence of an Event of Default, the Banks shall not be obligated to
make any advance or issue any letter of credit if after such advance
or issuance Borrower would not be in compliance with section 2.2(a) or
2.2(b) above.
Effect of Harris Reserve. Harris is reserving amounts under
the Charge It Card Plan Merchant Agreement between Borrower and Harris
(the "Merchant Agreement"). Harris and Banks intend to attempt to
negotiate, and if agreement is reached enter into, an Intercreditor
Agreement pursuant to which Harris will transfer the funds that would
otherwise have been held in such reserve for application to the
Revolving Credit Loans and the Banks will grant to Harris an indemnity
acceptable to Harris against credit card chargebacks and other
obligations of Borrower, GRS and GMO. In such event, the amounts
contained in section 2.2(a) above shall be reduced from time to time
by the maximum amount payable by Banks under such indemnity. The
provisions contained in this paragraph shall be applicable regardless
of whether the credit card purchases processed by Harris arise from
sales of Borrower, GRS or GMO. Neither Harris nor any Bank shall have
any obligations under this paragraph unless
- 3 -
<PAGE> 5
and until a written agreement, satisfactory to them in their sole
discretion, has been executed and delivered; provided, however, that
(a) Borrower, GRS and GMO agree that Banks have and are hereby granted
a security interest in all amounts held by Harris, and all rights of
Borrower, GRS or GMO against Harris, and (b) Harris agrees that (i)
Harris is and shall remain the agent and bailee of Banks to the extent
of any funds in the reserve held by Harris exceeding the amount needed
to pay amounts owing to Harris under the Merchant Agreement, (ii)
Harris is not acting as agent or bailee for any party other than
Banks, and (iii) Harris will not pay any such excess amounts to any
party other than Agent unless such other party has a legal right to
such excess amounts prior to the rights of Banks."
4. Update Regarding Sale. On Tuesday and Friday of each week,
and at other times upon request, Borrower shall provide Agent with a report
regarding the progress of (a) Borrower's efforts to sell all or a portion of
the assets of Borrower, GRS and/or GMO, (b) any efforts to obtain a
contribution of capital to Borrower, and (c) any actual, potential or proposed
change of ownership or control of Borrower, GRS or GMO, which report shall be
in writing upon the request of Agent and shall be supplemented from time to
time with additional updated reports or other information upon the request of
Agent.
5. Sale of Catalog Division. Borrower shall continue to pursue the
sale of the catalog business (the "Catalog Business") of Borrower and GMO as
proposed by Borrower and in accordance with the schedule prepared by Borrower,
and the failure of Borrower to achieve any of the following shall be an Other
Event of Default:
(a) On or before December 18, 1995, Borrower shall receive
one or more offers to purchase the Catalog Business, choose among the
offers it has received, and provide to Agent all of the terms of the
offer chosen by Borrower.
(b) On or before December 19, 1995, Borrower shall deliver to
Agent a written term sheet, letter of intent, accepted offer or other
preliminary document describing the terms of the proposed sale of the
Catalog Business, which document (i) shall be on terms acceptable to
Banks in their sole discretion, including that it shall provide for a
sale of the Catalog Business at a price that is acceptable to Banks
taking into account the assets to be included in the sale, the
liabilities to be assumed by the buyer and the other terms and
conditions of sale, (ii) shall provide for a cash sale to close on or
before January 31, 1996, (iii) shall contain no financing contingency
or a financing contingency
- 4 -
<PAGE> 6
which must be waived on or before December 26, 1995, (iv) shall be
from a buyer reasonably acceptable to Banks, and (v) shall be accepted
and signed by Borrower, GMO and the buyer.
(c) If the document delivered pursuant to section 5(b) above
provides for a financing contingency, such contingency shall be waived
on or before December 26, 1995.
(d) Borrower shall deliver to Agent on or before January 12,
1996 a fully executed definitive agreement for sale of the Catalog
Business in form and substance reasonably acceptable to Banks.
(e) On or before January 31, 1996, (i) Borrower shall close
the sale of the Catalog Business, (ii) Borrower shall pay the Loans
and all other Obligations in full and (1) cause all outstanding
letters of credit issued or confirmed by Banks to be replaced and
canceled or (2) provide Agent with cash or equivalent security
acceptable to Banks to ensure that Banks will be reimbursed for any
amounts paid by reason of a draw on any outstanding letter of credit
or otherwise owing by reason of any outstanding letter of credit, and
(iii) Borrower shall provide Harris with any reserve or other security
required by Harris as a result of the termination of the indemnity, if
any, entered into in accordance with section 2.2 of the Loan
Agreement.
6. Conditions to Amendment. This Third Amendment shall not be
effective until it shall have been fully executed and delivered and all of the
following have been delivered to Banks, executed as appropriate, in form and
substance satisfactory to Banks:
(a) The Second Amendment; and
(b) All documents required to be delivered upon execution of the
Second Amendment, which documents shall also cover and include
this Third Amendment.
7. Continuation of Agreements. Except as expressly amended and
modified herein, the Loan Agreement shall remain in full force and effect and
except as expressly amended and modified herein, the Notes shall remain in full
force and effect. All of the Collateral Documents, including but not limited
to the Security Agreement, the Mortgage, the Collateral Pledge Agreement and
Assignment of Security Interest, the Amended and Restated General Intangibles
Mortgage, the Subsidiary Guaranties and the Subsidiary Security Documents shall
remain in full force and effect as security for the Obligations and all of the
Collateral and Subsidiary Collateral as defined in the Loan Agreement, the real
- 5 -
<PAGE> 7
estate encumbered by the Mortgage, the Subsidiary Notes, and the Stock of GRS
and GMO, shall secure all of the Obligations.
8. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One and, in addition, the reasonable legal fees
and expenses, not exceeding Five Thousand Dollars ($5,000) per Bank, for each
of NBD, Harris, LaSalle and Firstar.
9. Entire Agreement This Third Amendment, together with the Loan
Agreement, as amended hereby, constitutes the entire agreement of the Banks and
Borrower pertaining to the subject matter hereof and supersedes all prior or
contemporaneous agreements of the Banks and Borrower, whether oral or written,
other than the Loan Agreement, in connection therewith. This Third Amendment
may be amended or modified only in writing, executed by all of the parties.
This Third Amendment shall not constitute, nor shall it be deemed to
constitute:
(a) The commitment or agreement of Banks to extend credit in any
amount in the future, except as provided in this Third
Amendment or in the Loan Agreement as amended hereby;
(b) an obligation on the part of any Bank to enter into any future
amendment of the Loan Agreement;
(c) except as expressly set forth herein and for the period
provided herein, the waiver of any existing Event of Default
or of any subsequent Event of Default under the Loan Agreement
as amended hereby;
(d) the waiver of any right or remedy available to Bank under the
Loan Agreement or any of the Collateral Documents; or
(e) the commitment, agreement or obligation of any Bank to delay
the exercise of any right or remedy available to a Bank in the
future.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BANK ONE, MILWAUKEE, NA
By ___________________________
- 6 -
<PAGE> 8
LASALLE NATIONAL BANK
By ___________________________
- 7 -
<PAGE> 9
FIRSTAR BANK MILWAUKEE, N.A.
By ___________________________
HARRIS TRUST AND SAVINGS BANK
By ___________________________
NBD BANK
By ___________________________
GANDER MOUNTAIN, INC.
By ___________________________
The undersigned have read the foregoing and agree to be bound by all
of the terms and conditions contained therein except that the undersigned shall
not be directly obligated on any of the Loans except as otherwise provided in
the Loan Agreement as amended hereby, the Subsidiary Documents, the Subsidiary
Guaranties or any other agreement to which Borrower, GRS or GMO is a party.
GMO, INC.
By ___________________________
GRS, INC.
- 8 -
<PAGE> 10
By ___________________________
- 9 -
<PAGE> 1
FOURTH AMENDMENT TO
THIRD AMENDED
AND RESTATED
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
BY AND BETWEEN
GANDER MOUNTAIN, INC.,
as Borrower
AND
BANK ONE, MILWAUKEE, NA
FIRSTAR BANK MILWAUKEE, N.A.
LASALLE NATIONAL BANK,
NBD BANK (formerly known as NBD BANK, N.A.), and
HARRIS TRUST AND SAVINGS BANK
as Banks
AND
BANK ONE, MILWAUKEE, NA,
as Agent
January 23, 1996
<PAGE> 2
EXHIBIT 10.12
FOURTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Fourth Amendment") is made as of the 23rd day of
January, 1996, by and between BANK ONE, MILWAUKEE, NA, as Bank and agent for
the Banks, FIRSTAR BANK MILWAUKEE, N.A., LASALLE NATIONAL BANK, NBD BANK,
formerly known as NBD BANK, N.A. and HARRIS TRUST AND SAVINGS BANK, as Banks,
and GANDER MOUNTAIN, INC., a Wisconsin corporation, as Borrower.
R E C I T A L S
WHEREAS, pursuant to a Third Amended and Restated Revolving Credit and
Term Loan Agreement dated as of November 22, 1994 and amended by First
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated August 18, 1995, Second Amendment (the "Second Amendment") to
Third Amended and Restated Revolving Credit and Term Loan Agreement dated
November 17, 1995 and Third Amendment (the "Third Amendment") to Third Amended
and Restated Revolving Credit and Term Loan Agreement dated December 5, 1995
(collectively, the "Loan Agreement"), the Banks made available to Borrower
credit facilities aggregating up to a maximum amount of One Hundred Million
Dollars ($100,000,000.00); and
WHEREAS, Borrower is in default under section 8.1(m) of the Loan
Agreement requiring that prior to opening a new retail store Borrower and its
Subsidiaries shall have delivered to Banks an executed Landlord Waiver,
Consent, Agreement and Certificate in that Borrower has not delivered such
document for the Onalaska Store (such missing document being referred to herein
as the "Onalaska Waiver"); and
WHEREAS, Borrower has agreed to cure the foregoing default by
delivering the Onalaska Waiver on or before February 14, 1996; and
WHEREAS, Borrower is in default under sections 7.1(i) (Consolidated
Tangible Net Worth), 7.1(k) (Consolidated Leverage Ratio), 7.1(l) (Consolidated
Current Ratio) and 7.1(n) (Profitability) of the Loan Agreement; and
WHEREAS, Borrower has requested that Banks extend the existing waiver
of the defaults under sections 7.1(i), 7.1(k), and 7.1(n) through February 14,
1996 and include the default under section 7.1(l) in such waiver; and
WHEREAS, Borrower is not meeting the time deadlines in section 5 of
the Third Amendment relating to sale of the catalog division, including that
Borrower does not expect to close on the
<PAGE> 3
sale of the catalog division and pay the Loans and all other Obligations in
full on or before January 31, 1996; and
WHEREAS, Borrower has requested that the January 31, 1996 deadline for
payment of the Loans and other Obligations be extended to February 14, 1996;
and
WHEREAS, Banks are willing to grant the foregoing requests on the
terms set forth herein but only if Borrower complies with the terms of this
Fourth Amendment.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein and in the Loan Agreement and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
2. Waiver. (a) Banks temporarily waive the defaults previously
disclosed to Banks under sections 7.1(i), 7.1(k), 7.1(l) and 7.1(n) of the Loan
Agreement and section 5 of the Third Amendment for the period from the date
hereof until February 14, 1996 and temporarily waive the default caused by
Borrower's failure to deliver the Onalaska Waiver for the period from the date
hereof until February 14, 1996. The waiver does not extend beyond February 14,
1996 for the Onalaska Waiver or for the defaults under sections 7.1(i), 7.1(k),
7.1(l) and 7.1(n) of the Loan Agreement or section 5 of the Third Amendment,
and Banks do not waive any other default or any increase in the level of
noncompliance with sections 7.1(i), 7.1(k), 7.1(l) and 7.1(n) of the Loan
Agreement or section 5 of the Third Amendment. The Banks reserve the right to
exercise any rights and remedies available to Agent or any Bank prior to the
end of any waiver period if any other default comes to the attention of Banks
or if any information comes to the Banks' attention showing that Borrower's
level of noncompliance with section 7.1(i), 7.1(k), 7.1(l) or 7.1(n) of the
Loan Agreement or section 5 of the Third Amendment is greater than that
previously disclosed to Banks.
(b) Borrower shall pay the waiver fee described in section
2(b) of the Second Amendment to Banks as provided in the Second Amendment, but
if not paid sooner, such fee and all Loans and other Obligations shall be paid
in full on February 14, 1996.
- 2 -
<PAGE> 4
3. The Revolving Credit Loans. The language added to section 2.2 of
the Loan Agreement pursuant to section 4 of the Second Amendment as amended in
section 3 of the Third Amendment (excluding the paragraph captioned "Effect of
Harris Reserve") is further amended in its entirety to read as follows:
"Limitations on Borrowing during the Waiver Period. In
addition to complying with all other provisions of this section 2.2:
(a) Borrower shall not permit the outstanding balance
of the Revolving Credit Facility (including the undrawn amount
of unexpired letters of credit) to exceed (i) on or before
February 6, 1996, $55,000,000, and (ii) on or after February
7, 1996, $56,000,000. Banks waive any noncompliance with
section 7.1(t) of the Loan Agreement that may occur as a
result of borrowings within the limits imposed by this section
2.2(a).
(b) Borrower shall not permit the outstanding balance
of the Revolving Credit Facility (including the undrawn amount
of unexpired letters of credit) to exceed 69% of Eligible
Inventory.
(c) If Eligible Accounts Receivable are less than
$6,000,000, then an amount equal to the difference between
$6,000,000 and actual Eligible Accounts Receivable shall be
deducted from the amount that would otherwise be available for
borrowing under paragraphs 2.2(a) and 2.2(b) above.
In addition to all other remedies available to Banks upon the
occurrence of an Event of Default, the Banks shall not be obligated to
make any advance or issue any letter of credit if after such advance
or issuance Borrower would not be in compliance with section 2.2(a) or
2.2(b) above."
The paragraph in section 3 of the Third Amendment captioned "Effect of Harris
Reserve" remains in full force and effect and is not amended hereby.
4. Method of Borrowing. Section 2.2.1(b) of the Loan Agreement is
amended by deleting therefrom "Any Notice of Borrowing received by Bank One
before 11:00 a.m. on any Business Day shall be honored on the next succeeding
Business Day" and replacing it with "Any Notice of Borrowing received by Bank
One before 11:00 a.m. on any Business Day may or may not be honored on the same
Business Day and in any event shall be honored on the
- 3 -
<PAGE> 5
next succeeding Business Day."
5. Conditions to Amendment. This Fourth Amendment shall not be
effective until it shall have been fully executed and delivered and all of the
following have been delivered to Banks, executed as appropriate, in form and
substance satisfactory to Banks:
(a) Reaffirmation of Corporate Guaranty of GRS;
(b) Reaffirmation of Corporate Guaranty of GMO;
(c) Closing Certificates with Corporate Resolutions for Borrower,
GRS and GMO; and
(d) Legal opinion of Borrower's counsel as to the enforceability
of this Fourth Amendment and the Reaffirmations of Corporate
Guaranty delivered herewith.
6. Continuation of Agreements. Except as expressly amended and
modified herein, the Loan Agreement shall remain in full force and effect and
except as expressly amended and modified herein, the Notes shall remain in full
force and effect. All of the Collateral Documents, including but not limited
to the Security Agreement, the Mortgage, the Collateral Pledge Agreement and
Assignment of Security Interest, the Amended and Restated General Intangibles
Mortgage, the Subsidiary Guaranties and the Subsidiary Security Documents shall
remain in full force and effect as security for the Obligations and all of the
Collateral and Subsidiary Collateral as defined in the Loan Agreement, the real
estate encumbered by the Mortgage, the Subsidiary Notes, and the Stock of GRS
and GMO, shall secure all of the Obligations.
7. Release of Secured Party. Each of Borrower, GRS and GMO hereby:
(a) acknowledges that its obligations under the documents listed in section 6
hereof exist and are enforceable in accordance with their terms; and (b)
releases and waives any and all existing claims, counterclaims and causes of
action against Banks under the Loan Agreement, under any of the documents
listed in section 6 hereof, or otherwise relating to the Borrower as borrower,
GRS and GMO as subsidiaries of Borrower and guarantors, and Banks as lenders,
and which (i) are known to Borrower, GRS or GMO on the date hereof, or (ii)
exist on the date hereof based upon facts existing and known to Borrower, GRS
or GMO on the date hereof.
8. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Fourth Amendment and all
related documentation and, in addition, the
- 4 -
<PAGE> 6
reasonable legal fees and expenses, not exceeding Five Thousand Dollars
($5,000) per Bank, for each of NBD, Harris, LaSalle and Firstar.
9. Entire Agreement This Fourth Amendment, together with the Loan
Agreement, as amended hereby, constitutes the entire agreement of the Banks and
Borrower pertaining to the subject matter hereof and supersedes all prior or
contemporaneous agreements of the Banks and Borrower, whether oral or written,
other than the Loan Agreement, in connection therewith. This Fourth Amendment
may be amended or modified only in writing, executed by all of the parties.
This Fourth Amendment shall not constitute, nor shall it be deemed to
constitute:
(a) The commitment or agreement of Banks to extend credit in any
amount in the future, except as provided in this Fourth
Amendment or in the Loan Agreement as amended hereby;
(b) an obligation on the part of any Bank to enter into any future
amendment of the Loan Agreement;
(c) except as expressly set forth herein and for the period
provided herein, the waiver of any existing Event of Default
or of any subsequent Event of Default under the Loan Agreement
as amended hereby;
(d) the waiver of any right or remedy available to Bank under the
Loan Agreement or any of the Collateral Documents; or
(e) the commitment, agreement or obligation of any Bank to delay
the exercise of any right or remedy available to a Bank in the
future.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BANK ONE, MILWAUKEE, NA
By ___________________________
LASALLE NATIONAL BANK
- 5 -
<PAGE> 7
By ___________________________
FIRSTAR BANK MILWAUKEE, N.A.
By ___________________________
HARRIS TRUST AND SAVINGS BANK
By ___________________________
NBD BANK
By ___________________________
GANDER MOUNTAIN, INC.
By ___________________________
The undersigned have read the foregoing and agree to be bound by all
of the terms and conditions contained therein except that the undersigned shall
not be directly obligated on any of the Loans except as otherwise provided in
the Loan Agreement as amended hereby, the Subsidiary Documents, the Subsidiary
Guaranties or any other agreement to which Borrower, GRS or GMO is a party.
GMO, INC.
By ___________________________
GRS, INC.
- 6 -
<PAGE> 8
By ___________________________
- 7 -
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<CIK> 0000789598
<NAME> GRANDER MOUNTAIN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> DEC-30-1995
<CASH> 6,729
<SECURITIES> 0
<RECEIVABLES> 11,179
<ALLOWANCES> 866
<INVENTORY> 83,208
<CURRENT-ASSETS> 105,106
<PP&E> 53,309
<DEPRECIATION> 18,470
<TOTAL-ASSETS> 140,624
<CURRENT-LIABILITIES> 109,727
<BONDS> 0
<COMMON> 32
20,000
0
<OTHER-SE> 10,865
<TOTAL-LIABILITY-AND-EQUITY> 140,624
<SALES> 217,097
<TOTAL-REVENUES> 0
<CGS> 150,178
<TOTAL-COSTS> 61,545
<OTHER-EXPENSES> 267
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<INTEREST-EXPENSE> 3,518
<INCOME-PRETAX> 1,589
<INCOME-TAX> 622
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