<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 March 30, 1996 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 No.)
incorporation or organization)
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 March 30, 1996, there were outstanding 3,255,407 shares of the Registrant's
$.01 par value common stock.
1
<PAGE> 2
GANDER MOUNTAIN, INC.
FORM 10-Q
MARCH 30, 1996
REPORT INDEX
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION -----
<S> <C>
Consolidated Statements of Operations for the Thirteen
Weeks Ended March 30, 1996 and April 1, 1995................... 3
Consolidated Statements of Operations for the Thirty-Nine
Weeks Ended March 30, 1996 and April 1, 1995................... 4
Consolidated Balance Sheets at March 30, 1996
and July 1, 1995............................................... 5
Consolidated Statements of Cash Flows for the Thirty-Nine
Weeks Ended March 30, 1996 and April 1, 1995................... 6
Notes to Unaudited Consolidated Financial Statements............ 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 11
PART II - OTHER INFORMATION..................................... 17
Signatures...................................................... 18
</TABLE>
2
<PAGE> 3
GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Thirteen Weeks Ended
----------------------------------
March 30, April 1,
1996 1995
-------- --------
<S> <C> <C>
Net Sales $47,389 $43,355
Cost of goods sold 35,837 30,598
-------- --------
Gross profit 11,552 12,757
Selling, general and administrative expenses 19,613 19,605
Special charge 5,300 11,510
-------- --------
Loss from operations (13,361) (18,358)
-------- --------
Other expense:
Net interest expense 1,488 1,110
Other - net 139 343
-------- --------
1,627 1,453
-------- --------
Loss before income taxes (14,988) (19,811)
Income tax benefit (214) (7,689)
-------- --------
Net loss (14,774) (12,122)
Preferred redeemable stock dividends 278 278
-------- --------
Net loss to common shareholders ($15,052) ($12,400)
======== ========
Loss per share: (See Note 7)
Primary ($4.63) ($3.82)
======== ========
Fully diluted ($4.63) ($3.82)
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Thirty-Nine Weeks Ended
----------------------------
March 30, April 1,
1996 1995
-------- --------
<S> <C> <C>
Net Sales $264,486 $243,895
Cost of goods sold 186,014 164,515
-------- --------
Gross profit 78,472 79,380
Selling, general and administrative expenses 81,159 75,029
Special charge 5,300 11,510
-------- --------
Loss from operations (7,987) (7,159)
-------- --------
Other expense:
Net interest expense 5,006 2,928
Other - net 406 503
-------- --------
5,412 3,431
-------- --------
Loss before income taxes (13,399) (10,590)
Income tax provision (benefit) 408 (3,936)
-------- --------
Net loss (13,807) (6,654)
Preferred redeemable stock dividends 832 831
-------- --------
Net loss to common shareholders ($14,639) ($7,485)
======== ========
Loss per share: (See Note 7)
Primary ($4.51) ($2.32)
======== ========
Fully diluted ($4.51) ($2.32)
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
GANDER MOUNTAIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
----------------------------
March 30, July 1,
1996 1995
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $5,278 $2,818
Accounts receivable 5,076 7,802
Refundable income taxes - 1,420
Inventories 69,828 100,639
Prepaid catalog expenses 3,723 13,242
Other assets 136 1,165
--------- --------
84,041 127,086
--------- --------
Property and equipment:
Projects in progress 2,882 790
Land and building 23,362 23,388
Furniture and equipment 27,205 27,240
--------- --------
53,449 51,418
Less: Accumulated depreciation (19,752) (15,833)
--------- --------
33,697 35,585
--------- --------
Deferred Income Taxes - 154
--------- --------
Intangible assets - net 610 816
--------- --------
$118,348 $163,641
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 25,021 44,472
Notes payable to bank 47,459 9,500
Current portion of long-term obligations 19,500 1,400
Other current liabilities 10,478 8,877
--------- --------
102,458 64,249
--------- --------
Long-term obligations - 69,000
--------- --------
Preferred Redeemable Stock 20,000 20,000
--------- --------
Shareholders' Equity (Deficit):
Class B Preferred Stock - -
Common stock 33 32
Additional paid-in capital 12,650 12,564
Accumulated deficit (16,243) (1,604)
Less notes receivable from stockholders (550) (600)
--------- --------
(4,110) 10,392
--------- --------
$118,348 $163,641
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Thirty-Nine Weeks Ended
----------------------------------
March 30, April 1,
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($13,807) ($6,654)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 4,125 3,709
Deferred income taxes 154 (1,696)
Special Charge 5,300 11,510
Changes in operating assets and liabilities:
Accounts receivable 2,726 (2,284)
Refundable income taxes 1,420 1,089
Inventories 25,511 (21,399)
Prepaid catalog expenses 9,519 8,793
Accounts payable (19,451) (4,232)
Other 1,798 (959)
--------- --------
Cash provided by (used for) operating activities 17,295 (12,123)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (2,031) (7,475)
--------- --------
Cash used for investing activities (2,031) (7,475)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (net repayments on) line
of credit agreements (12,041) 20,882
Net repayments on long-term obligations (900) (400)
Net proceeds from issuance of common stock 137 278
Cash dividends on preferred stock - (825)
Notes receivable from stockholders - 250
--------- --------
Cash provided by (used for) financing activities (12,804) 20,185
--------- --------
INCREASE IN CASH 2,460 587
CASH BEGINNING OF PERIOD 2,818 2,337
--------- --------
CASH END OF PERIOD $5,278 $2,924
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
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 March 30, 1996.
NOTE 2 - SUBSEQUENT EVENT
In April 1996, the Company signed a definitive agreement to sell selected
catalog assets including the customer list, certain other intangible assets and
selected inventory with a gross book value of approximately $27 million to
Cabela's, Inc. for $35 million in cash. The sale is scheduled to close in May,
1996, subject to certain closing conditions. As a result of the sale, the
Company is exiting the catalog business and winding-down its catalog operations
during the fourth quarter of fiscal 1996. No additional catalogs are planned
to be mailed and no new catalog inventory is being purchased. Catalog sales
orders continue to be filled from the remaining catalog inventory although on a
significantly reduced and declining basis from historical levels.
The catalog business exit strategy will include liquidation of the remaining
catalog inventory not sold above (primarily through the retail stores), selling
the fixed assets of the catalog business and selling the Company's combined
headquarters, distribution and retail store facility in Wilmot, WI with the
intent of leasing back the portion needed to operate the retail business. As a
result of the sale and exit strategy, the Company will recognize a net charge
in the fourth quarter of fiscal 1996 as the gain on sale described above will
be offset by wind-down and transaction expenses which will include severance
and other employee termination benefits, investment banking and legal fees,
inventory liquidation charges, assets held for sale write-downs for catalog
fixed assets and the Wilmot facility, and other related costs. As many of
these costs are not fixed and determinable, and are subject to negotiations not
yet complete, a quantified estimate is not reasonably available at this time.
7
<PAGE> 8
GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SPECIAL CHARGE
In an effort to generate additional funds from existing inventory stocks to
reduce bank debt levels and provide short term liquidity, the Company
developed a large scale inventory liquidation plan in the third quarter of
fiscal 1996. Inventory which was discontinued from the standard merchandise
mix and primarily out of season is progressively marked down and aggressively
promoted at each of the stores. In addition, discontinued slower moving and
aged inventory was transferred from the catalog division into the retail stores
and included in the special liquidation plan which is expected to be
substantially complete by June, 1996. Historically the majority of such
inventory would have been sold above cost in the normal course throughout the
year in the appropriate seasons.
As a result of the liquidation plan, the Company recorded a $5.3 million
special charge to reduce this inventory to the estimated lower of cost or
market value. The components of this special charge are as follows ($ in
millions):
<TABLE>
<CAPTION>
Inventory Net
Value at Cost Charge Inventory
------------- ------- ---------
<S> <C> <C> <C>
Retail Inventory $8.5 $3.7 $4.8
Catalog Inventory 3.8 1.6 2.2
------- ------- ------
Total at Plan Inception $12.3 $5.3 $7.0
Reduction thru 3/30/96 (6.7) (1.7) (5.0)
------- ------- ------
Balance at 3/30/96 $5.6 $3.6 $2.0
======= ======= ======
</TABLE>
In fiscal 1995, the Company recorded an $11.5 million special charge comprised
of $5.0 million for the Company's abandonment of certain internally developed
software, $4.5 million for the write-down of certain aged inventory and $2.0
million for other catalog charges. At March 30, 1996, $1.4 million of this
charge remained, consisting of $0.6 million write-down of aged inventory and
$0.8 million for other catalog charges.
NOTE 4 - CASH
Included in cash at March 30, 1996 is a $1.6 million cash reserve held on
deposit by the Company's credit card transaction processing bank for potential
future credit card charge chargebacks. The Company believes that the amount of
future chargebacks will not be material and is fully reserved for in other
liabilities. Substantially all remaining cash, as such funds are collected and
available, is applied directly each day against the outstanding revolving line
of credit balance by the bank lenders as is their right under the current
credit agreement. All cash outflows are advances against the revolving line of
credit and subject to prior approval by the bank lenders.
8
<PAGE> 9
GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - BORROWING ARRANGEMENTS
The Company maintains a revolving line of credit with a Bank Group (the
"Banks") whereby it may borrow up to $56.0 million at March 30, 1996, subject
to a borrowing base formula as discussed below. In an amendment dated April
18, 1996, the $56.0 million was reduced to $47.0 million. This credit facility
is used for working capital needs and letters of credit and provides for
borrowings at the prime rate of interest. As of March 30, 1996, $47.5 million
was outstanding at an interest rate of 8.25 percent. A commitment fee of 0.375
percent is payable quarterly on the revolving line.
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. The term loan has
quarterly principal payments of $0.5 million commencing on March 1, 1996. The
term loan bears interest at the prime rate. As of March 30, 1996, $19.5
million was outstanding against the term loan.
The revolving line of credit and term loan are secured by substantially all
assets of the Company. In accordance with an amendment dated August 18, 1995,
the Company's revolving line of credit and $20 million term loan mature on
January 5, 1997. However, the Company is not in compliance with certain of the
financial covenants related to these borrowings. The Company and the lenders
have signed successive amendments waiving these defaults until the earlier of
May 25, 1996 or the closing of the pending sale of the selected catalog
division assets to Cabela's, Inc. as discussed in Note 2.
The current waiver agreement limits the revolving line of credit to a maximum
of $47.0 million (a reduction from the previous $56.0 million), of which not
more than $20.9 million can be post-April 15, 1996 borrowings. In addition to
complying with a borrowing base formula (which could reduce the amount
available as inventory and accounts receivable levels decline), additional
borrowings after April 15, 1996 may not exceed the Company's cumulative net
cash flows plus $1.0 million from that date. The waiver provides that proceeds
from the sale of assets to Cabela's, Inc. must be used to reduce obligations to
the lenders.
The Company is currently negotiating with the banks to extend the waiver period
beyond the closing of the sale of assets to Cabela's, Inc. and increase the
amount available for borrowing. Unless the waiver is further extended and the
amount available is increased, the Company does not expect to be able to meet
its current and projected cash needs over the near-term. There can be no
assurance that the amount available will be increased or that the waiver will
be extended. Accordingly, the revolving line of credit and term loan
borrowings have been classified as short-term in the accompanying balance sheet
at March 30, 1996.
9
<PAGE> 10
GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
During the third quarter of fiscal 1996, the Company recorded a valuation
allowance of $5.6 million to write down deferred tax assets to zero due to the
level of uncertainty surrounding the Company's ability to generate sufficient
future taxable earnings in order to utilize tax benefits.
NOTE 7 - 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 Thirty-Nine Weeks Ended
---------------------- --------------------------
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Average number of
common shares:
Primary 3,252 3,243 3,247 3,229
========== ========== ============ ============
Fully diluted 3,252 3,243 3,247 3,229
========== ========== ============ ============
</TABLE>
10
<PAGE> 11
GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THIRD QUARTER FISCAL 1996 TO THIRD QUARTER FISCAL 1995
Total Company net sales increased $4.0 million or 9.3 percent to $47.4 million
for the thirteen weeks ended March 30, 1996 from $43.4 million for the same
quarter in the prior year.
Catalog net sales decreased 14.3 percent to $23.4 million compared to $27.3
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. As discussed in Note 2, the Company signed
a definitive agreement in April, 1996 to sell selected catalog assets including
the customer list, certain other intangible assets and selected inventory with
a gross book value of approximately $27 million to Cabela's, Inc., for $35
million in cash. The sale is scheduled to close in May, 1996, subject to
certain closing conditions. As a result of the sale, the Company is exiting
the catalog business and winding-down its catalog operations during the fourth
quarter of fiscal 1996. No additional catalogs are planned to be mailed and no
new catalog inventory is being purchased. Catalog sales orders continue to be
filled from the remaining catalog inventory although on a significantly reduced
and declining basis from historical levels.
Retail net sales increased 49.6 percent to $24.0 million compared to $16.0
million reported in the third quarter of fiscal year 1995. The increase in
sales resulted from the addition of six new retail stores in LaCrosse,
Wisconsin, Grand Rapids, Saginaw, Taylor and Pontiac, Michigan and Maple Grove,
Minnesota and a large scale inventory liquidation plan where inventory which
was discontinued from the standard merchandise mix and primarily out of season
is progressively marked down and aggressively promoted at each of the stores.
In addition, discontinued slower moving and aged inventory was transferred from
the catalog division into the retail stores and included in the special
liquidation plan which began in late February and is expected to be
substantially complete by June, 1996. On a comparable basis, Gander Mountain's
retail stores in business more than thirteen months had a sales increase of 0.2
percent versus an increase of 3.0 percent in the year-earlier quarter.
Excluding the sales impact of the special inventory liquidation plan noted
above, the Company believes comparable sales would have declined significantly.
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.
The Company believes its sales during the third quarter of fiscal 1996 were
adversely affected by the Company's inability to obtain inventory on open
account with many vendors and the cancellation of merchandise shipments by
several vendors for the spring season which began in late February. As
discussed more fully in the liquidity and capital resources section, these
conditions and the related adverse impact on sales have worsened in the fourth
quarter with comparable store sales running significantly below the prior year
levels.
11
<PAGE> 12
GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THIRD QUARTER FISCAL 1996 TO THIRD QUARTER FISCAL 1995
During the quarter, gross profit decreased $1.2 million or 9.4 percent from the
same period last year. Catalog gross profit decreased $1.7 million to $6.3
million while retail gross profit increased $0.5 million to $5.3 million. The
Company's gross profit margin for the thirteen weeks ended March 30, 1996 was
24.4 percent compared to 29.4 percent for the prior year quarter. Catalog
gross profit margins decreased to 26.7 percent of sales in the third quarter of
fiscal year 1996 from 28.9 percent in fiscal year 1995 reflecting primarily
increased promotional activity. Retail gross profit margins decreased to 22.1
percent in the third quarter of fiscal year 1996 from 30.3 percent in fiscal
year 1995 primarily due to the effect of the special inventory liquidation plan
sales at cost and, to a lesser extent, increased promotional activity.
Selling, general and administrative expenses for the quarter were $19.6 million
or 41.4 percent of sales compared to $19.6 million or 45.2 percent of sales in
the third quarter 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.
The Company incurred special charges of $5.3 million and $11.5 million during
the third quarters of fiscal 1996 and fiscal 1995, respectively. The 1996
charge was recorded to reduce the inventory included in the liquidation plan
noted above to its estimated lower of cost or market value as discussed in Note
3. The fiscal 1995 charge is comprised of $5.0 million for the Company's
abandonment of certain internally developed software, $4.5 million for the
write-down of certain aged inventory and $2.0 million for other catalog
charges.
Other expense for the quarter was $1.6 million compared to $1.5 million in the
prior year. The increase is due to higher interest costs associated with the
higher average borrowings against the Company's revolving line of credit and
term loan and increased interest rates.
The income tax benefit of $0.2 million in the quarter decreased from $7.7
million in the prior year. The income tax benefit rate was significantly
reduced by a $5.6 million valuation allowance recorded to write down deferred
tax assets to zero due to the level of uncertainty surrounding the Company's
ability to generate sufficient future taxable earnings in order to utilize tax
benefits.
Net loss for the thirteen weeks ended March 30, 1996 was $14.8 million compared
to $12.1 million reported in the third quarter of fiscal year 1995. The fully
diluted loss per share was 4.63 cents per share compared to 3.82 cents per
share reported in the prior year quarter.
12
<PAGE> 13
GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF FIRST THIRTY-NINE WEEKS OF FISCAL 1996 TO FIRST THIRTY-NINE WEEKS
OF FISCAL 1995
Total Company net sales increased $20.6 million or 8.4 percent to $264.5
million for the thirty-nine weeks ended March 30, 1996 from $243.9 million for
the same period in the prior year.
Catalog net sales decreased 12.9 percent to $151.1 million compared to $173.4
million during the prior year. The decrease is attributable to decreased
catalog circulation, elimination of selected promotions and lower than expected
average order values. As discussed in Note 2 and the third quarter comparison,
the Company signed a definitive agreement in April, 1996 to sell selected
catalog assets to Cabela's, Inc. which is scheduled to close in May, 1996,
subject to certain closing conditions. As a result of the sale, the Company is
exiting the catalog business and winding-down its catalog operations during the
fourth quarter of fiscal 1996. No additional catalogs are planned to be mailed
and no new catalog inventory is being purchased. Catalog sales orders continue
to be filled from the remaining catalog inventory although on a significantly
reduced and declining basis from historical levels.
Retail net sales increased 60.9 percent to $113.4 million compared to $70.5
million reported in the first thirty-nine 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 and to a lesser extent a large scale inventory
liquidation plan which began in late February and is expected to be
substantially complete by June, 1996 as discussed above in the third quarter
comparison. On a comparable basis, Gander Mountain's retail stores in business
more than thirteen months had sales decreases of 2.3 percent versus an increase
of 6.5 percent in fiscal year 1995. Excluding the sales impact of the special
inventory liquidation plan noted above, the Company believes comparable sales
would have declined further. The decrease is attributable to an overall
sluggish retail environment and poor in-stock positions. See discussions on
page 11 regarding the Company's inability to obtain inventory on open account.
During the first thirty-nine weeks of fiscal year 1996, gross profit decreased
$0.9 million or 1.1 percent over the same period last year. Catalog gross
profit decreased $10.6 million to $46.3 million while retail gross profit
increased $9.7 million to $32.2 million. The Company's gross profit margin for
the thirty-nine weeks ended March 30, 1996 decreased to 29.7 percent compared
to 32.5 percent in the same period last year. Catalog gross profit margins
decreased to 30.7 percent for the first three quarters of fiscal year 1996 from
32.8 percent in the first three quarters of fiscal year 1995 reflecting
primarily increased promotional activity. Retail gross profit decreased to
28.4 percent in the first half of fiscal year 1996 from 31.8 percent in fiscal
year 1995 reflecting primarily increased promotional activity and, to a lesser
extent, due to the effect of the special inventory liquidation plan sales at
cost.
13
<PAGE> 14
GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF FIRST THIRTY-NINE WEEKS OF FISCAL 1996 TO FIRST THIRTY-NINE WEEKS
OF FISCAL 1995
Selling, general and administrative expenses for the first three quarters of
fiscal year 1996 were $81.2 million or 30.7 percent of sales compared to $75.0
million or 30.8 percent of sales in the first three quarters 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.
The Company incurred special charges of $5.3 million and $11.5 million during
the third quarters of fiscal 1996 and fiscal 1995, respectively. The 1996
charge was recorded to reduce the inventory included in the liquidation plan
noted above to its estimated lower of cost or market value as discussed in Note
3. The fiscal 1995 charge is comprised of $5.0 million for the Company's
abandonment of certain internally developed software, $4.5 million for the
write-down of certain aged inventory and $2.0 million for other catalog
charges.
Other expense was $5.4 million compared to $3.4 million in the first three
quarters of the prior year. The increase is due to higher costs associated
with the higher average borrowings against the Company's revolving line of
credit and term loan and increased interest rates.
The income tax provision of $0.4 million compares unfavorably to an income
benefit of $3.9 million in the prior year. The income tax benefit rate was
significantly reduced by a $5.6 million valuation allowance recorded to write
down deferred tax assets to zero due to the level of uncertainty surrounding
the Company's ability to generate sufficient future taxable earnings in order
to utilize tax benefits.
Net loss for the thirty-nine weeks ended March 30, 1996 was $13.8 million
compared to $6.7 million reported in the first thirty-nine weeks of fiscal year
1995. The fully diluted loss per share was $4.51 per share compared to $2.32
per share reported in the prior year period.
14
<PAGE> 15
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
and capital expenditures which are funded through borrowings against a
revolving line of credit and $20 million term loan. Additionally, the Company
leases its retail facilities and certain other equipment.
The revolving line of credit and term loan are secured by substantially all
assets of the Company. In accordance with an amendment dated August 18, 1995,
the Company's revolving line of credit and $20 million term loan mature on
January 5, 1997. However, the Company is not in compliance with certain of the
financial covenants related to these borrowings. The Company and the lenders
have signed successive amendments waiving these defaults until the earlier of
May 25, 1996 or the closing of the pending sale of the selected catalog
division assets to Cabela's, Inc. as discussed in Note 2. The amendment dated
August 18, 1995 also prohibits paying any preferred or common dividends or
exchanging the Series A Redeemable Preferred Stock for subordinated notes.
The current waiver agreement limits the revolving line of credit to a maximum
of $47.0 million (a reduction from the previous $56.0 million), of which not
more than $20.9 million can be post-April 15, 1996 borrowings. In addition to
complying with a borrowing base formula (which could reduce the amount
available as inventory and accounts receivable levels decline), additional
borrowings after April 15, 1996 may not exceed the Company's cumulative net
cash flows plus $1.0 million from that date. The waiver provides that proceeds
from the sale of assets to Cabela's, Inc. must be used to reduce obligations to
the lenders. Substantially all cash, as such funds are collected and
available, is applied directly each day against the outstanding revolving line
of credit balance by the bank lenders as is their right under the current
credit agreement. All cash outflows are advances against the revolving line of
credit and subject to prior approval by the bank lenders.
The Company is currently negotiating with the banks to extend the waiver period
beyond the closing of the sale of assets to Cabela's, Inc. and increase the
amount available for borrowing. Unless the waiver is further extended and the
amount available is increased, the Company does not expect to be able to meet
its current and projected cash needs over the near-term. There can be no
assurance that the amount available will be increased or that the waiver will
be extended. Accordingly, the revolving line of credit and term loan
borrowings have been classified as short-term in the accompanying balance sheet
at March 30, 1996.
An increase in availability and an extension of the waiver period are only
interim solutions to the Company's cash needs. The Company requires additional
equity to establish a capital structure that will permit the Company to be
financially viable or, in the absence of such equity, will need to take other
action, which may include selling the assets of its remaining retail business.
There can be no assurance that any additional equity will be raised or that any
asset sales will occur.
15
<PAGE> 16
GANDER MOUNTAIN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 30, 1996, the majority of the Company's $25.0 million of accounts
payable were overdue. As a result, the Company has not been able to purchase
inventory on open account and instead is generally purchasing inventory on a
payment-on-delivery basis from selected vendors. The Company's inability to
obtain trade credit has further constrained the Company's liquidity. The
Company does not anticipate being able to make payments on trade payables until
such time as proceeds from the sale of equity or additional assets are
received.
The Company's accounts receivable decreased from $8.9 million at April 1, 1995
to $5.1 million at March 30, 1996 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 discontinuing the deferred payment plan on most
catalogs.
The Company's inventories fell from $85.9 million at April 1, 1995 to $69.8
million at March 30, 1996 due primarily to the Company's diminished borrowing
availability, the inability to purchase on open account which increased as the
quarter progressed, the large scale inventory liquidation plan through the
retail stores and the cancellation of shipments for the spring season beginning
in late February as discussed above.
The Company's accounts payable increased from $19.0 million at April 1, 1995 to
$25.0 million at March 30, 1996 due primarily to the increased level of overdue
trade payables as discussed above.
Capital expenditures for the thirty-nine weeks ended March 30, 1996 were $2.0
million compared with $7.5 million for the thirty-nine weeks ended April 1,
1995. The decrease is a result of higher new store and infrastructure
expenditures in the first three quarters of fiscal year 1995 and limited
capital resources in fiscal 1996. 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 development of computer software
systems and acquisition of related computer hardware in the first half of the
year. Capital expenditures in the third quarter of fiscal 1996 were only $0.1
million reflecting the Company's limited capital resources. The Company's
capital expenditures will continue to be extremely limited until the liquidity
concerns discussed above are resolved.
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 thirty-nine week period ending March 30, 1996 should not be considered to
be indicative of results to be reported for the balance of the fiscal year.
16
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable to the Company at March 30, 1996
ITEM 2. CHANGES IN SECURITIES
Not applicable to the Company at March 30, 1996
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 the
earlier of May 25, 1996 or the closing of the pending sale of
catalog division assets to Cabela's, Incorporated.
(b) As of March 15, 1996 (the last dividend payment date prior to
the date of this report), $1.1 million 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 March 30, 1996
ITEM 5. OTHER INFORMATION
Not applicable to the Company at March 30, 1996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.13 Fifth Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
10.14 Sixth Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
10.15 Seventh Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
10.16 Eighth Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
10.17 Ninth Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
10.18 Tenth Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
</TABLE>
(b) Form 8-K
Not applicable to the Company at March 30, 1996
17
<PAGE> 18
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: By: /s/ Kenneth C. Bloom
---------------------------
Executive Vice President
and Chief Financial Officer
18
<PAGE> 1
FIFTH 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
February 14, 1996
<PAGE> 2
FIFTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Fifth Amendment") is made as of the
14th day of February, 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, Third Amendment (the "Third Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated December 5, 1995 and
Fourth Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated January 23, 1996 (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 23, 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), 7.1(l) and 7.1(n) through March
1, 1996; and
WHEREAS, Borrower is not meeting the time deadlines in section 5 of
the Third Amendment, as amended, relating to sale of
<PAGE> 3
the catalog division, including that Borrower does not expect to close on the
sale of the catalog division and pay the Loans and all other Obligations in
full on or before February 14, 1996; and
WHEREAS, Borrower has requested that the February 14, 1996 deadline
for payment of the Loans and other Obligations be extended to March 1, 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
Fifth Amendment; and
WHEREAS, Banks desire to adjust their respective percentages of the
credit facilities evidenced by the Loan Agreement pursuant to the terms of this
Fifth 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.
a. Notes. Section 1.63 of the Loan Agreement is amended in
its entirety to read as follows:
"1.63 Notes. "Notes" shall mean the Promissory Notes and the
Revolving Credit Notes and any other promissory note from the Borrower
to one or more of the Agent and the Banks evidencing the Revolving
Credit Facility and the $20,000,000 Loan, together with all
extensions, renewals, substitutions, replacements and refinancings
thereof."
b. Revolving Credit Commitment. Section 1.86 of the Loan
Agreement is amended in its entirety to read as follows:
"1.86 Revolving Credit Commitment. "Revolving Credit Commitment
shall mean the commitment of the Banks to make Revolving Credit
Loans pursuant to this Agreement up to a maximum principal amount
outstanding of $56,000,000. Bank One's Revolving Credit Commitment
shall be equal to 30.11141% of the Revolving Credit Commitment less
the face amount of all unexpired letters of credit issued by Bank One
under the Revolving Credit Facility. LaSalle's Revolving Credit
Commitment shall be equal to 21.00269% of the Revolving Credit
Commitment. Firstar's Revolving Credit Commitment shall be equal to
14.77718% of the Revolving
- 2 -
<PAGE> 4
Credit Commitment. NBD's Revolving Credit Commitment shall be equal
to 19.33154% of the Revolving Credit Commitment less the face amount
of all unexpired letters of credit issued by NBD under the Revolving
Credit Facility. Harris' Revolving Credit Commitment shall be equal
to 14.77718% of the Revolving Credit Commitment."
c. Revolving Credit Commitment Termination Date. Section
1.87 of the Loan Agreement is amended in its entirety to read as follows:
"1.87 Revolving Credit Commitment Termination Date. Revolving
Credit Commitment Termination Date "shall mean the earlier of
(a) the date of an Automatic Event of Default, (b) the date of an
Other Event of Default not expressly waived in writing by the Banks,
or (c) March 1, 1996."
d. Revolving Credit Notes. Section 1.90 of the Loan
Agreement is amended in its entirety to read as follows:
"1.90 Revolving Credit Notes. "Revolving Credit Notes"
shall mean the five notes dated February 14, 1996 and executed by
Borrower in favor of the respective Banks evidencing the Revolving
Credit Loans, together with all extensions, renewals, substitutions,
replacements and refinancings thereof, the terms of which are
incorporated herein by reference."
e. Term Loans. Section 1.100 of the Loan Agreement is
amended in its entirety to read as follows:
"1.100 "Term Loans" or "$20,000,000 Loan" shall mean any Loans
made by the Banks to the Borrower pursuant to section 2.1 of this
Agreement."
f. Term Notes. Section 1.101 of the Loan Agreement is
amended in its entirety to read as follows:
"1.101 Promissory Notes. "Promissory Notes" or "Term Notes"
shall mean the five notes dated February 14, 1996 and executed
by Borrower in favor of the respective Banks evidencing the
$20,000,000 Loan, together with all extensions, renewals,
substitutions, replacements and refinancings thereof, the terms of
which are incorporated herein by reference."
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, as amended, for the period from
the date hereof until March 1, 1996 and temporarily waive the default caused by
- 3 -
<PAGE> 5
Borrower's failure to deliver the Onalaska Waiver for the period from the date
hereof until February 23, 1996. The waiver does not extend beyond February 23,
1996 for the Onalaska Waiver or beyond March 1, 1996 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, as amended, 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, as
amended. 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, as amended, 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 March 1, 1996.
3. Term Loan. Section 2.1 of the Loan Agreement is amended in its
entirety to read as follows:
"2.1 $20,000,000 Loan. The Banks and Borrower hereby acknowledge
that the Banks have made a loan to Borrower in the aggregate amount of
Twenty Million Dollars ($20,000,000). The $20,000,000 Loan is divided
among the Banks as follows ("Bank's Term Loan Percentage" or "Banks'
$20,000,000 Loan Percentage"): Bank One, 30.11141%; Firstar,
14.77718%; LaSalle, 21.00269%; NBD, 19.33154%; Harris 14.77718. Each
Bank's share of the $20,000,000 Loan shall be equal to such Bank s
$20,000,000 Loan Percentage."
4. Payments. Section 2.1.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.1.2 Payments. Interest on the $20,000,000 Loan shall be paid
to Bank One as Agent in arrears on the first day of each month.
Borrower shall pay the entire principal balance of the $20,000,000
Loan plus all accrued but unpaid interest on March 1, 1996."
5. Notes. Section 2.2.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.2.2 Note. The Revolving Loans are evidenced by five Revolving
Credit Notes dated February 14, 1996 in the original aggregate
principal amount of $56,000,000 payable to the order of the respective
Banks."
- 4 -
<PAGE> 6
6. Application of Payments. The following is added to the end of
section 2.4.4:
"This section shall not be construed to require any particular
allocation among the Notes and other obligations so long as the
payments are shared by the Banks on a pro rata basis."
7. Appointment and Authorization. Clause (vii) of section 4.1 of the
Loan Agreement is amended to read as follows:
"(vii) upon the occurrence and during the continuance of an Event of
Default, at the direction of the Required Banks, exercise and enforce
any and all rights and remedies available to it, whether arising under
this Agreement, the Notes, the Collateral Documents or under
applicable law, in any manner deemed appropriate by the Required
Banks."
8. Indemnification. Effective as of February 14, 1996, the
percentages set forth in section 4.6 of the Loan Agreement are amended to equal
the following:
Bank One 30.11141%
Firstar 14.77718%
LaSalle 21.00269%
NBD 19.33154%
Harris 14.77718%
For any indemnification relating to or arising from events occurring prior to
February 14, 1996, the percentages set forth in section 4.6 of the Loan
Agreement shall apply without giving effect to the amendment contained in this
section 8.
9. Daily Financial Reports. Section 7.1(a)(9) and (10) are amended to
add "Receivables aging" to section 7.1(a)(9) and delete it from section
7.1(a)(10), the effect of which is to require Borrower to deliver a Receivables
aging to Bank One prior to 3:00 p.m. on each Business Day.
10. Conditions to Amendment. This Fifth 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) Revolving Credit Notes;
(b) Promissory Notes;
(c) Reaffirmation of Corporate Guaranty of GRS;
(d) Reaffirmation of Corporate Guaranty of GMO;
- 5 -
<PAGE> 7
(e) Closing Certificates with Corporate Resolutions for Borrower,
GRS and GMO; and
(f) Legal opinion of Borrower's counsel as to the enforceability
of this Fifth Amendment and the Reaffirmations of Corporate
Guaranty delivered herewith.
11. 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, including but
not limited to the Revolving Credit Notes dated February 14, 1996 and the
Promissory Notes dated February 14, 1996, 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, including but not limited to the Revolving
Credit Notes dated February 14, 1996 and the Promissory Notes dated February
14, 1996.
12. Release of Secured Party. Each of Borrower, GRS and GMO hereby:
(a) acknowledges that its obligations under the documents listed in section 11
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 11 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.
13. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Fifth Amendment and all
related documentation 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.
14. Entire Agreement This Fifth 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,
- 6 -
<PAGE> 8
other than the Loan Agreement, in connection therewith. This Fifth Amendment
may be amended or modified only in writing, executed by all of the parties.
This Fifth 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 Fifth
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
---------------------------
- 7 -
<PAGE> 9
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.
By
---------------------------
- 8 -
<PAGE> 1
SIXTH 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
March 1, 1996
<PAGE> 2
SIXTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS SIXTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Sixth Amendment") is made as of the
1st day of March, 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, Third Amendment (the "Third Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated December 5, 1995,
Fourth Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated January 23, 1996 and Fifth Amendment ("Fifth Amendment") to
Third Amended and Restated Revolving Credit and Term Loan Agreement dated
February 14, 1996 (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 March 18, 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), 7.1(l) and 7.1(n) through March
18, 1996; and
<PAGE> 3
WHEREAS, Borrower did not meet the time deadlines in section 5 of the
Third Amendment, as amended, relating to sale of the catalog division,
including that Borrower did not close on the sale of the catalog division and
pay the Loans and all other Obligations in full on or before March 1, 1996; and
WHEREAS, Borrower has requested that the March 1, 1996 deadline for
payment of the Loans and other Obligations be extended to facilitate its
efforts to sell the catalog division and/or restructure its capital structure;
and
WHEREAS, Banks are willing to grant an extension of waivers and
extension of the payment deadline to March 18, 1996 on the terms set forth
herein, but only if Borrower complies with the terms of the Sixth 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.
a. Revolving Credit Commitment Termination Date. Section
1.87 of the Loan Agreement is amended in its entirety to read as follows:
"1.87 Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Termination Date" shall mean the earlier
of (a) the date of an Automatic Event of Default, (b) the date of an
Other Event of Default not expressly waived in writing by the Banks,
or (c) March 18, 1996."
b. Revolving Credit Notes. Section 1.90 of the Loan
Agreement is amended in its entirety to read as follows:
"1.90 Revolving Credit Notes. "Revolving Credit Notes" shall
mean the five notes dated March 1, 1996 and executed by Borrower in
favor of the respective Banks evidencing the Revolving Credit Loans,
together with all extensions, renewals, substitutions, replacements
and refinancings thereof, the terms of which are incorporated herein
by reference."
c. Term Loans. Section 1.100 of the Loan Agreement is
- 2 -
<PAGE> 4
amended in its entirety to read as follows:
"1.100 "Term Loans" or "$20,000,000 Loan" or "$19,500,000
Loan" shall mean any Loans made by the Banks to the Borrower pursuant
to section 2.1 of this Agreement."
d. Term Notes. Section 1.101 of the Loan Agreement is
amended in its entirety to read as follows:
"1.101 Promissory Notes. "Promissory Notes" or "Term Notes"
shall mean the five notes dated March 1, 1996 and executed by Borrower
in favor of the respective Banks evidencing the $19,500,000 Loan,
together with all extensions, renewals, substitutions, replacements
and refinancings thereof, the terms of which are incorporated herein
by reference."
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, as amended, for the period from
the date hereof until March 18, 1996 and temporarily waive the default caused
by Borrower's failure to deliver the Onalaska Waiver for the period from the
date hereof until March 18, 1996. The waiver does not extend beyond March 18,
1996 for the Onalaska Waiver or beyond March 18, 1996 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, as amended, 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, as
amended. 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, as amended, 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 March 18, 1996.
3. Payments. Section 2.1.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.1.2 Payments. Interest on the $19,500,000 Loan shall be
paid to Bank One as Agent in arrears on the first day of each month.
Borrower shall pay the entire principal balance of the $19,500,000
Loan plus all accrued but unpaid interest on March 18, 1996."
- 3 -
<PAGE> 5
4. Notes. Section 2.2.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.2.2 Note. The Revolving Loans are evidenced by five
Revolving Credit Notes dated March 1, 1996 in the original aggregate
principal amount of $56,000,000 payable to the order of the respective
Banks."
5. Conditions to Amendment. This Sixth 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) Revolving Credit Notes;
(b) Promissory Notes;
(c) Reaffirmation of Corporate Guaranty of GRS;
(d) Reaffirmation of Corporate Guaranty of GMO;
(e) Closing Certificates with Corporate Resolutions for Borrower,
GRS and GMO; and
(f) Legal opinion of Borrower's counsel as to the enforceability
of this Sixth 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, including but
not limited to the Revolving Credit Notes dated March 1, 1996 and the
Promissory Notes dated March 1, 1996, 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, including but not limited to the Revolving Credit Notes
dated March 1, 1996 and the Promissory Notes dated March 1, 1996.
7. Bank Not Obligated to Continue Financing. Borrower acknowledges
that subject to the terms hereof, Banks have agreed to allow Borrower until
March 18, 1996 to pursue sale of the catalog division and/or begin other
financial restructuring, but
- 4 -
<PAGE> 6
in any event, Banks have not agreed to continue to provide financing to
Borrower after March 18, 1996 regardless of Borrower's favorable progress, if
any, toward sale of the catalog division.
8. Release of Secured Party. Each of Borrower, GRS and GMO hereby:
(a) acknowledges that its obligation 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 11 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.
9. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Sixth Amendment and all
related documentation 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.
10. Entire Agreement This Sixth 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 Sixth Amendment
may be amended or modified only in writing, executed by all of the parties.
This Sixth 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 Sixth
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
- 5 -
<PAGE> 7
(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
---------------------------
- 6 -
<PAGE> 8
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.
By
---------------------------
- 7 -
<PAGE> 1
SEVENTH 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
March 18, 1996
<PAGE> 2
SEVENTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS SEVENTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Seventh Amendment") is made as of
the 18th day of March, 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, Third Amendment (the "Third Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated December 5, 1995,
Fourth Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated January 23, 1996, Fifth Amendment to Third Amended and Restated
Revolving Credit and Term Loan Agreement dated February 14, 1996, and Sixth
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated March 1, 1996 (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 April 1, 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), 7.1(l) and 7.1(n) through April
1, 1996; and
<PAGE> 3
WHEREAS, Borrower did not meet the time deadlines in section 5 of the
Third Amendment, as amended, relating to sale of the catalog division,
including that Borrower did not close on the sale of the catalog division and
pay the Loans and all other Obligations in full on or before March 18, 1996;
and
WHEREAS, Borrower has requested that Banks extend the March 18, 1996
deadline to April 1, 1996 to allow Borrower additional time to conclude
negotiations for the sale of the catalog division and enter into a binding
agreement with the proposed purchaser; and
WHEREAS, Borrower has represented to Banks that Borrower expects to
enter into such agreement on or before April 1, 1996 which agreement shall
provide for a closing on the sale on or before June 30, 1996; and
WHEREAS, Borrower is aware that the Banks would not agree to such
extension absent the expectation that an agreement will be signed on or before
April 1, 1996 and a closing will take place on or before June 30, 1996; and
WHEREAS, Based on the foregoing, and subject to Borrower's compliance
with all of the terms and conditions of the Loan Agreement as amended hereby,
Banks are willing to grant an extension of waivers and extension of the payment
deadline to April 1, 1996.
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.
a. Revolving Credit Commitment Termination Date. Section
1.87 of the Loan Agreement is amended in its entirety to read as follows:
"1.87 Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Termination Date" shall mean the earlier
of (a) the date of an Automatic Event of Default, (b) the date of an
Other Event of Default not expressly waived in writing by the Banks,
or (c) April 1, 1996."
- 2 -
<PAGE> 4
b. Revolving Credit Notes. Section 1.90 of the Loan
Agreement is amended in its entirety to read as follows:
"1.90 Revolving Credit Notes. "Revolving Credit Notes" shall
mean the five notes dated March 18, 1996 and executed by Borrower in
favor of the respective Banks evidencing the Revolving Credit Loans,
together with all extensions, renewals, substitutions, replacements
and refinancings thereof, the terms of which are incorporated herein
by reference."
c. Term Notes. Section 1.101 of the Loan Agreement is
amended in its entirety to read as follows:
"1.101 Promissory Notes. "Promissory Notes" or "Term Notes"
shall mean the five notes dated March 18, 1996 and executed by
Borrower in favor of the respective Banks evidencing the $19,500,000
Loan, together with all extensions, renewals, substitutions,
replacements and refinancings thereof, the terms of which are
incorporated herein by reference."
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, as amended, for the period from
the date hereof until April 1, 1996 and temporarily waive the default caused by
Borrower's failure to deliver the Onalaska Waiver for the period from the date
hereof until April 1, 1996. The waiver does not extend beyond April 1, 1996
for the Onalaska Waiver or beyond April 1, 1996 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, as amended, 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, as amended.
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, as amended, 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 April 1, 1996.
3. Payments. Section 2.1.2 of the Loan Agreement is amended in its
entirety to read as follows:
- 3 -
<PAGE> 5
"2.1.2 Payments. Interest on the $19,500,000 Loan shall be
paid to Bank One as Agent in arrears on the first day of each month.
Borrower shall pay the entire principal balance of the $19,500,000
Loan plus all accrued but unpaid interest on April 1, 1996."
4. Notes. Section 2.2.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.2.2 Note. The Revolving Loans are evidenced by five
Revolving Credit Notes dated March 18, 1996 in the original aggregate
principal amount of $56,000,000 payable to the order of the respective
Banks."
5. Conditions to Amendment. This Seventh 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) Revolving Credit Notes;
(b) Promissory Notes;
(c) Reaffirmation of Corporate Guaranty of GRS;
(d) Reaffirmation of Corporate Guaranty of GMO;
(e) Closing Certificates with Corporate Resolutions for Borrower,
GRS and GMO; and
(f) Legal opinion of Borrower s counsel as to the enforceability
of this Seventh 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, including but
not limited to the Revolving Credit Notes dated March 18, 1996 and the
Promissory Notes dated March 18, 1996, 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
- 4 -
<PAGE> 6
the Stock of GRS and GMO, shall secure all of the Obligations, including but
not limited to the Revolving Credit Notes dated March 18, 1996 and the
Promissory Notes dated March 18, 1996.
7. Bank Not Obligated to Continue Financing. Borrower acknowledges
that subject to the terms hereof, Banks have agreed to allow Borrower until
April 1, 1996 to pursue sale of the catalog division and/or begin other
financial restructuring, but in any event, Banks have not agreed and are not
obligated (a) to continue to provide financing to Borrower after April 1, 1996
regardless of Borrower's favorable progress, if any, toward sale of the catalog
division, or (b) to consent to a sale of the catalog division on terms
previously disclosed to Banks.
8. 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.
9. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Seventh Amendment and all
related documentation 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.
10. Entire Agreement This Seventh 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 Seventh Amendment
may be amended or modified only in writing, executed by all of the parties.
This Seventh 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 Seventh
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;
- 5 -
<PAGE> 7
(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
By
---------------------------
NBD BANK
By
---------------------------
- 6 -
<PAGE> 8
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
---------------------------
- 7 -
<PAGE> 1
EIGHTH 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
April 1, 1996
<PAGE> 2
EIGHTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS EIGHTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Eighth Amendment") is made as of
the 1st day of April, 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, Third Amendment (the "Third Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated December 5, 1995,
Fourth Amendment (the "Fourth Amendment") to Third Amended and Restated
Revolving Credit and Term Loan Agreement dated January 23, 1996, Fifth
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated February 14, 1996, Sixth Amendment to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated March 1, 1996, and
Seventh Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated March 18, 1996 (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 April 15, 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
<PAGE> 3
WHEREAS, Borrower is negotiating an agreement for the sale of
Borrower's catalog division; and
WHEREAS, Borrower has represented to Banks that Borrower expects to
enter into such agreement on or before April 15, 1996, which agreement shall
provide for a closing on or before June 30, 1996; and
WHEREAS, the Borrower has engaged new financial advisors which have
requested additional time to evaluate the Borrower's financial
performance and future operations; and
WHEREAS, Borrower and its financial advisors have prepared and
provided to Banks a projection of Borrower's borrowing requirements during the
period from the date hereof until April 12, 1996; and
WHEREAS, Borrower has requested that Banks extend the existing waiver
of the defaults under sections 7.1(i), 7.1(k), 7.1(l) and 7.1(n) through April
15, 1996; and
WHEREAS, Based on the foregoing, and subject to Borrower's compliance
with all of the terms and conditions of the Loan Agreement as amended hereby,
Banks are willing to grant an extension of waivers and extension of the payment
deadline to April 15, 1996.
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.
a. Revolving Credit Commitment Termination Date. Section
1.87 of the Loan Agreement is amended in its entirety to read as follows:
"1.87 Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Termination Date" shall mean the earlier
of (a) the date of an Automatic Event of Default, (b) the date of an
Other Event of Default not expressly waived in writing by the Banks,
or (c) April 15, 1996."
b. Revolving Credit Notes. Section 1.90 of the Loan
Agreement is amended in its entirety to read as follows:
- 2 -
<PAGE> 4
"1.90 Revolving Credit Notes. "Revolving Credit Notes" shall
mean the five notes dated April 1, 1996 and executed by Borrower in
favor of the respective Banks evidencing the Revolving Credit Loans,
together with all extensions, renewals, substitutions, replacements
and refinancings thereof, the terms of which are incorporated herein
by reference."
c. Term Notes. Section 1.101 of the Loan Agreement is
amended in its entirety to read as follows:
"1.101 Promissory Notes. "Promissory Notes" or "Term Notes"
shall mean the five notes dated April 1, 1996 and executed by Borrower
in favor of the respective Banks evidencing the $19,500,000 Loan,
together with all extensions, renewals, substitutions, replacements
and refinancings thereof, the terms of which are incorporated herein
by reference."
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, as amended, for the period from
the date hereof until April 15, 1996 and temporarily waive the default caused
by Borrower's failure to deliver the Onalaska Waiver for the period from the
date hereof until April 15, 1996. The waiver does not extend beyond April 15,
1996 for the Onalaska Waiver or beyond April 15, 1996 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, as amended, 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, as
amended. 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, as amended, 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 April 15, 1996.
3. Payments. Section 2.1.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.1.2 Payments. Interest on the $19,500,000 Loan shall be
paid to Bank One as Agent in arrears on the first day of each month.
Borrower shall pay the entire principal
- 3 -
<PAGE> 5
balance of the $19,500,000 Loan plus all accrued but unpaid interest
on April 15, 1996."
4. 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 and section 3 of the Fourth Amendment, is
further amended in its entirety to read as follows:
"Limitations on Borrowing. 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
$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.
(d) During the period from and after April 1, 1996,
all Receipts and other proceeds of Collateral or Subsidiary
Collateral shall be paid to Agent to reduce the outstanding
balance of the Revolving Credit Facility, and (i) the amount
advanced from time to time under the Revolving Credit Facility
shall not be greater than the projections of borrowing
requirements made by the Borrower and previously delivered to
the Agent, and (ii) in no event shall the aggregate advances
during such period exceed $4,150,000.
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),
2.2(b) or 2.2(d) above."
The paragraph in section 3 of the Third Amendment captioned "Effect of Harris
Reserve" remains in full force and effect and
- 4 -
<PAGE> 6
is not amended hereby.
5. Notes. Section 2.2.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.2.2 Note. The Revolving Loans are evidenced by five
Revolving Credit Notes dated April 1, 1996 in the original aggregate
principal amount of $56,000,000 payable to the order of the respective
Banks."
6. Conditions to Amendment. This Eighth 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) Revolving Credit Notes;
(b) Promissory Notes;
(c) Reaffirmation of Corporate Guaranty of GRS;
(d) Reaffirmation of Corporate Guaranty of GMO;
(e) Closing Certificates with Corporate Resolutions for Borrower,
GRS and GMO; and
(f) Legal opinion of Borrower s counsel as to the enforceability
of this Eighth Amendment and the Reaffirmations of Corporate
Guaranty delivered herewith.
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, including but
not limited to the Revolving Credit Notes dated April 1, 1996 and the
Promissory Notes dated April 1, 1996, 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, including but not limited to the Revolving Credit Notes
dated April 1, 1996 and the Promissory Notes dated April 1, 1996.
8. Bank Not Obligated to Continue Financing. Borrower acknowledges
that subject to the terms hereof, Banks have agreed
- 5 -
<PAGE> 7
to allow Borrower until April 15, 1996 to pursue sale of the catalog division
and/or begin other financial restructuring, but in any event, Banks have not
agreed and are not obligated (a) to continue to provide financing to Borrower
after April 15, 1996 regardless of Borrower's favorable progress, if any,
toward sale of the catalog division, or (b) to consent to a sale of the catalog
division on terms previously disclosed to Banks.
9. Release of Secured Party. Each of Borrower, GRS and GMO hereby:
(a) acknowledges that its obligations under the documents listed in section 7
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 7 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.
10. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Eighth Amendment and all
related documentation 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.
11. Entire Agreement This Eighth 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 Eighth Amendment
may be amended or modified only in writing, executed by all of the parties.
This Eighth 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 Eighth
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 Banks
- 6 -
<PAGE> 8
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
By
---------------------------
NBD BANK
By
---------------------------
GANDER MOUNTAIN, INC.
By
---------------------------
- 7 -
<PAGE> 9
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
---------------------------
- 8 -
<PAGE> 1
NINTH 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
April 15, 1996
<PAGE> 2
NINTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS NINTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Ninth Amendment") is made as of the
15th day of April, 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, Third Amendment (the "Third Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated December 5, 1995,
Fourth Amendment (the "Fourth Amendment") to Third Amended and Restated
Revolving Credit and Term Loan Agreement dated January 23, 1996, Fifth
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated February 14, 1996, Sixth Amendment to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated March 1, 1996, Seventh
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated March 18, 1996, and an Eighth Amendment to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated April 1, 1996
(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 April 25, 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
<PAGE> 3
WHEREAS, Borrower has entered into an agreement for the sale of
Borrower's catalog division; and
WHEREAS, Borrower has represented to Banks that Borrower expects to
close such sale on or before May 25, 1996; and
WHEREAS, Borrower and its financial advisors have prepared and
provided to Banks a projection of Borrower's borrowing requirements during the
period from the date hereof until June 29, 1996; and
WHEREAS, Borrower has requested that Banks extend the existing waiver
of the defaults under sections 7.1(i), 7.1(k), 7.1(l) and 7.1(n) through May
25, 1996; and
WHEREAS, Based on the foregoing, and subject to Borrower's compliance
with all of the terms and conditions of the Loan Agreement as amended hereby,
Banks are willing to grant an extension of waivers and extension of the payment
deadline as provided herein.
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.
a. Revolving Credit Commitment. Section 1.86 of the Loan
Agreement is amended by deleting "$56,000,000" therefrom and inserting
"$47,000,000" in its place.
b. Revolving Credit Commitment Termination Date. Section
1.87 of the Loan Agreement is amended in its entirety to read as follows:
"1.87 Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Termination Date" shall mean the earlier
of (a) the date of an Automatic Event of Default, (b) the date of an
Other Event of Default not expressly waived in writing by the Banks,
(c) the closing of the sale of the catalog division, (d) a default
under or termination or repudiation of the contract for sale of the
catalog division (other than a termination or repudiation occurring
after Banks approve and Borrower enters into an alternative agreement
for sale of the catalog division), or (e) May 25, 1996."
- 2 -
<PAGE> 4
c. Revolving Credit Notes. Section 1.90 of the Loan
Agreement is amended in its entirety to read as follows:
"1.90 Revolving Credit Notes. "Revolving Credit Notes" shall
mean the five notes dated April 15, 1996 and executed by Borrower in
favor of the respective Banks evidencing the Revolving Credit Loans,
together with all extensions, renewals, substitutions, replacements
and refinancings thereof, the terms of which are incorporated herein
by reference."
d. Term Notes. Section 1.101 of the Loan Agreement is
amended in its entirety to read as follows:
"1.101 Promissory Notes. "Promissory Notes" or "Term Notes"
shall mean the five notes dated April 15, 1996 and executed by
Borrower in favor of the respective Banks evidencing the $19,500,000
Loan, together with all extensions, renewals, substitutions,
replacements and refinancings thereof, the terms of which are
incorporated herein by reference."
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 for the period from the date hereof until May 25, 1996 and
temporarily waive the default caused by Borrower's failure to deliver the
Onalaska Waiver for the period from the date hereof until April 25, 1996. The
waiver does not extend beyond April 25, 1996 for the Onalaska Waiver or beyond
May 25, 1996 for the defaults under sections 7.1(i), 7.1(k), 7.1(l) and 7.1(n)
of the Loan Agreement, 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, as amended. 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 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 May 25, 1996.
3. Payments. Section 2.1.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.1.2 Payments. Interest on the $19,500,000 Loan shall be
paid to Bank One as Agent in arrears on the first day of each month.
Borrower shall pay the entire principal
- 3 -
<PAGE> 5
balance of the $19,500,000 Loan plus all accrued but unpaid interest
on the Revolving Credit Termination Date."
4. 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,
is further amended in its entirety to read as follows:
"Limitations on Borrowing. 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 $47,000,000.
(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) During the period from and after April 15, 1996,
all Receipts and other proceeds of Collateral or Subsidiary
Collateral shall be paid to Agent to reduce the outstanding
balance of the Revolving Credit Facility, and (i) the amount
advanced from time to time under the Revolving Credit
Facility shall not be greater than the projections of
borrowing requirements made by the Borrower and previously
delivered to the Agent, and (ii) in no event shall the
aggregate advances during such period exceed $20,900,000.
(d) During the period from and after April 15, 1996,
Borrower shall not receive any advance of proceeds of
the Revolving Credit Facility to pay Expenses (as defined
hereinafter) if Expenses exceed Borrower's Collections (as
defined hereinafter) on a cumulative basis commencing on April
15, 1996. For purposes of this section (d), "Expenses" shall
mean Retail Direct Expenses, Retail Allocated Charges, Catalog
Direct Expenses, Catalog Allocated Charges, Interest Expense
and Principal Repayment, all as such terms are used in
Borrower's Operating Cashflow Forecast previous delivered to
Agent, plus all other expenses of Borrower. For purposes of
this section (d), "Collections" shall mean Total Collections
from Operations, as such term is used in Borrower's Operating
Cashflow Forecast previously delivered to Agent.
In addition to all other remedies available to Banks upon the
occurrence of an Event of Default, the Banks shall not
- 4 -
<PAGE> 6
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), 2.2(b), 2.2(c) or 2.2(d) 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.
5. Notes. Section 2.2.2 of the Loan Agreement is amended in its
entirety to read as follows:
"2.2.2 Note. The Revolving Loans are evidenced by five
Revolving Credit Notes dated April 15, 1996 in the original aggregate
principal amount of $47,000,000 payable to the order of the respective
Banks."
6. Sale of Catalog Division. Borrower shall proceed with due
diligence and use best efforts to conclude the sale of the catalog division
pursuant to the agreement approved by Banks. All proceeds of such sale shall
be paid directly to Agent to be applied as follows: first, to all interest,
fees and expenses owing by Borrower to Banks under the Loan Agreement as
amended hereby; second, to the outstanding principal of the $19,500,000 Loan;
and third, to the outstanding principal of the Revolving Credit Loan.
7. Assignment of Letter of Credit. Borrower agrees that the Letter of
Credit Number 16192 dated April 10, 1996 and issued by National Bank of
Commerce (the "$7,000,000 Letter of Credit," and together with all replacements
and substitutions therefor and all other letters of credit issued in connection
with the sale of the catalog agreement or pursuant to the agreement for such
sale, the "Letters of Credit") are Collateral and Banks hold a perfected first
priority security interest in and an assignment of the proceeds of the Letters
of Credit. All proceeds of all Letters of Credit shall be paid directly to
Agent. Each Letter of Credit shall be delivered by the issuer thereof directly
to Agent or to a bailee satisfactory to Banks who prior to such delivery has
executed an Acknowledgment and Agreement of Bailee satisfactory to Banks.
Borrower shall make any draw on a Letter of Credit that Borrower has the legal
right to make upon demand of Banks.
8. Conditions to Amendment. This Ninth 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:
- 5 -
<PAGE> 7
(a) Revolving Credit Notes;
(b) Promissory Notes;
(c) Reaffirmation of Corporate Guaranty of GRS;
(d) Reaffirmation of Corporate Guaranty of GMO;
(e) Closing Certificates with Corporate Resolutions for Borrower,
GRS and GMO;
(f) Acknowledgment and Agreement of Bailee relating to $7,000,000
Letter of Credit;
(g) Copy of agreement for sale of catalog division in form and
substance satisfactory to Banks; and
(h) Legal opinion of Borrower s counsel as to the enforceability
of this Ninth Amendment and the Reaffirmations of Corporate
Guaranty delivered herewith.
9. 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, including but
not limited to the Revolving Credit Notes dated April 15, 1996 and the
Promissory Notes dated April 15, 1996, 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, including but not limited to the Revolving Credit Notes
dated April 15, 1996 and the Promissory Notes dated April 15, 1996.
10. Bank Not Obligated to Continue Financing. Borrower acknowledges
that subject to the terms hereof, Banks have agreed to allow Borrower until May
25, 1996 to close the sale of the catalog division and begin other financial
restructuring, but in any event, Banks have not agreed and are not obligated to
continue to provide financing to Borrower after May 25, 1996 regardless of
Borrower's success, if any, in closing the sale of the catalog division or in
accomplishing financial restructuring.
- 6 -
<PAGE> 8
11. Release of Secured Party. Each of Borrower, GRS and GMO hereby:
(a) acknowledges that its obligations under the documents listed in section 9
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 9 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.
12. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Ninth Amendment and all
related documentation 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.
13. Entire Agreement This Ninth 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 Ninth Amendment
may be amended or modified only in writing, executed by all of the parties.
This Ninth 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 Ninth
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 Banks under the
Loan Agreement or any of the Collateral Documents; or
- 7 -
<PAGE> 9
(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
By
---------------------------
NBD BANK
By
---------------------------
GANDER MOUNTAIN, INC.
By
---------------------------
- 8 -
<PAGE> 10
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
---------------------------
- 9 -
<PAGE> 1
TENTH 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
May 1, 1996
<PAGE> 2
TENTH AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS TENTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Tenth Amendment") is made as of the
1st day of May, 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, Third Amendment (the "Third Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated December 5, 1995,
Fourth Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated January 23, 1996, Fifth Amendment to Third Amended and Restated
Revolving Credit and Term Loan Agreement dated February 14, 1996, Sixth
Amendment to Third Amended and Restated Revolving Credit and Term Loan
Agreement dated March 1, 1996, Seventh Amendment to Third Amended and Restated
Revolving Credit and Term Loan Agreement dated March 18, 1996, Eighth Amendment
to Third Amended and Restated Revolving Credit and Term Loan Agreement dated
April 1, 1996 and Ninth Amendment (the "Ninth Amendment") to Third Amended and
Restated Revolving Credit and Term Loan Agreement dated April 15, 1996
(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 has entered into an agreement for the sale of
Borrower's catalog division pursuant to an Asset Purchase Agreement (the "Sales
Contract") dated April 10, 1996 among Cabela's Incorporated ("Cabela's"),
Borrower and GMO, Inc. ("GMO"); and
WHEREAS, Borrower has represented to Banks that Borrower expects to
close such sale on or before May 25, 1996; and
WHEREAS, Borrower is in default under certain provisions of the Loan
Agreement; and
<PAGE> 3
WHEREAS, Banks have waived Borrower's known defaults for a period of
time pursuant to the Ninth Amendment, subject to certain limitations on
borrowing; and
WHEREAS, the Banks have a first priority security interest in and
assignment of the Sales Contract, and all proceeds of such contract will be
paid to Banks to be applied to the Obligations; and
WHEREAS, the Banks have a first priority security interest in and
assignment of the proceeds of a $10,000,000 Letter of Credit (the "Letter of
Credit") provided to Borrower by Cabela's to guaranty Cabela's compliance with
the Sales Contract, and the proceeds of any draw on such Letter of Credit will
be paid to Banks to be applied to the Obligations; and
WHEREAS, Borrower has requested that Banks amend one of the
limitations on borrowing contained in the Ninth 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. 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,
is further amended in its entirety to read as follows:
"Limitations on Borrowing. 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
$47,000,000 less any amounts applied to permanently reduce the
Revolving Credit Facility pursuant to (c)(A)(ii) below.
(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.
- 2 -
<PAGE> 4
(c) During the period from and after April 15, 1996,
(A) all Receipts and other proceeds of Collateral or
Subsidiary Collateral shall be paid to Agent (i) in the case
of inventory sold or accounts paid in the ordinary course of
business, first to reduce the outstanding balance of the
Revolving Credit Facility and second to pay the Term Loan, and
(ii) in the case of any other proceeds of Collateral, first to
pay the Term Loan and second to permanently reduce the
outstanding balance of the Revolving Credit Facility, (B) the
amount advanced from time to time under the Revolving Credit
Facility shall not be greater than the projections of
borrowing requirements made by the Borrower and previously
delivered to the Agent, (C) in no event shall the aggregate
advances during such period exceed $20,900,000, and (D)
outstanding letters of credit issued on behalf of Borrower
shall not exceed an aggregate amount outstanding at any time
of $500,000.
(d) During the period from and after April 15, 1996,
Borrower shall not receive any advance of proceeds of the
Revolving Credit Facility to pay Expenses (as defined
hereinafter) if Expenses exceed the sum of (i) Borrower s
Collections (as defined hereinafter) on a cumulative basis
commencing on April 15, 1996, and (ii) $1,000,000. For
purposes of this section (d), "Expenses" shall mean Retail
Direct Expenses, Retail Allocated Charges, Catalog Direct
Expenses, Catalog Allocated Charges, Interest Expense and
Principal Repayment, all as such terms are used in Borrower's
Operating Cashflow Forecast previously delivered to Agent,
plus all other expenses and expenditures of Borrower. For
purposes of this section (d), "Collections" shall mean Total
Collections from Operations, as such term is used in
Borrower's Operating Cashflow Forecast previously delivered
to Agent.
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),
2.2(b), 2.2(c) or 2.2(d) 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.
- 3 -
<PAGE> 5
3. Conditions to Amendment. This Tenth Amendment shall not be
effective until it shall have been fully executed and delivered and Borrower's
counsel's legal opinion covering the Ninth Amendment and this Amendment and the
attachment and perfection of the Banks' security interests in the Sales
Contract and the Letter of Credit shall have been delivered to Banks in form
and substance satisfactory to Banks.
4. 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, including but
not limited to the Revolving Credit Notes dated April 15, 1996 and the
Promissory Notes dated April 15, 1996, 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, including but not limited to the Revolving Credit Notes
dated April 15, 1996 and the Promissory Notes dated April 15, 1996.
5. Bank Not Obligated to Continue Financing. Borrower acknowledges
that subject to the terms of the Loan Agreement as amended hereby, Banks have
agreed to allow Borrower until May 25, 1996 to close the sale of the catalog
division and begin other financial restructuring, but in any event, Banks have
not agreed and are not obligated to continue to provide financing to Borrower
after the earlier of the closing of the sale of the catalog division or after
May 25, 1996 regardless of Borrower's success, if any, in closing the sale of
the catalog division or in accomplishing financial restructuring.
6. Release of Secured Party. Each of Borrower, GRS and GMO hereby:
(a) acknowledges that its obligations under the documents listed in section 4
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 4 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.
7. Expenses. Borrower shall pay the reasonable legal fees and
expenses of counsel for Bank One with respect to this Tenth
- 4 -
<PAGE> 6
Amendment and all related documentation 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.
- 5 -
<PAGE> 7
8. Entire Agreement This Tenth 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 Tenth Amendment
may be amended or modified only in writing, executed by all of the parties.
This Tenth 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 Tenth
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 Banks 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
---------------------------
- 6 -
<PAGE> 8
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.
The undersigned reaffirm their respective guaranties of the Obligations.
GMO, INC.
By
---------------------------
GRS, INC.
By
---------------------------
- 7 -
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<ARTICLE> 5
<CIK> 0000789598
<NAME> GANDER MOUNTAIN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> MAR-30-1996
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20,000
0
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