Exhibit 10.1
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
AMENDMENT NUMBER 1
This THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
AMENDMENT NUMBER 1 ("Amendment") is made as of the ___ day of February, 2005, by
and among PHOENIX FOOTWEAR GROUP, INC., a corporation formed under the laws of
the State of Delaware ("Borrower") and MANUFACTURERS AND TRADERS TRUST COMPANY,
a bank formed under the laws of the State of New York ("Bank").
This Amendment amends the Third Amended and Restated Revolving Credit and
Term Loan Agreement (the "Credit Agreement") dated as of July 19, 2004 made
between the Borrower and the Bank. All references in all notes, agreements, and
other documents to the Credit Agreement shall be deemed to be references to the
Credit Agreement as amended hereby, and all guarantees and collateral for the
Obligations shall continue to be guarantees and collateral for the Obligations
as amended hereby.
This Amendment evidences terms and conditions related to an Overline of
Credit Facility available between the date hereof and May 30, 2005. This
Amendment will remain in effect through and including May 30, 2005, but
thereafter will be of no further force and effect and at such time the Credit
Agreement shall revert to its original terms.
1. The following definitions are hereby added to Section 1.1 of the
Credit Agreement to read in their entirety:
"Overline Credit Facility" means the overline credit facility
established pursuant to Section 2.1 of this Agreement.
"Overline Credit Loan" means a loan made by the Bank to
Borrower under the Overline Credit Facility.
"Overline Credit Note" means the $4,000,000 Overline Credit
Note, as such note may be amended, modified or restated from time to time.
2. Subsection (b) of the definition of "Borrowing Base" in Section 1.1
of the Credit Agreement is hereby amended to read in its entirety as follows:
(b) plus 50% of the Eligible Inventories of Borrower and its
Subsidiaries that are used in their business, with a $3,500,000 inventory
cap for Borrower, $2,000,000 inventory cap for the Trask Business,
$2,000,000 inventory cap for the Royal Business, and $3,000,000 inventory
cap for the Altama Business, provided, however, that such inventory caps
for Borrower, the Trask Business, the Royal Business, and the Altama
Business shall not apply during the period commencing January 1, 2005 and
ending May 30, 2005,
3. The definition of "Commitment" in Section 1.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:
"Commitment" means the obligation of the Bank to make
Revolving Credit Loans to the Borrower, to make Overline Credit Loans to
the Borrower during the period described in Section 2.1, and to issue
Letters of Credit for the account of the Borrower pursuant to the
provisions of Section 2.1 and 4.1, respectively.
4. Subsection (b) of the definition of "Interest Period" in Section 1.1
of the Credit Agreement is hereby amended to read in its entirety as follows:
(b) No Interest Period may extend beyond the Termination Date, or
in the case of Overline Credit Loans, beyond May 30, 2005; and
5. The definition of "Loans" in Section 1.1 of the Credit Agreement is
hereby amended to read in its entirety as follows:
"Loan(s)" means, collectively, the Revolving Credit Loans, the
Overline Credit Loans, and the Term Loans, or the Revolving Credit Loans,
the Overline Credit Loans, or the Term Loans, as the context requires.
6. The definition of "Notes" in Section 1.1 of the Credit Agreement is
hereby amended to read in its entirety as follows:
"Notes" means, collectively, the Revolving Credit Note, the
Overline Credit Note, and the Term Notes, and "Note" means any of the
Notes.
7. The definition of "Obligations" in Section 1.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:
"Obligations" shall include all of the Borrower's obligations
related to the Agreement of any kind or nature, arising now or in the
future, including, without limitation, obligations under the Revolving
Credit Note, the Overline Credit Note, the Term Notes, and the
Reimbursement Agreements.
8. Sections 2.1 through and including 2.4 of the Credit Agreement are
hereby amended to read in their entirety as follows:
2.1 Commitment. The Bank agrees, subject to Section 2.2 and the
other terms and conditions hereinafter set forth, to make Revolving Credit
Loans to the Borrower from time to time during the period from the date of
this Agreement up to but not including the Termination Date in an
aggregate principal amount not to exceed at any time outstanding the
amount of $18,000,000, as such amount may be reduced pursuant to Section
2.3.
Subject to Section 2.2 and the other terms and conditions
hereinafter set forth, the Bank agrees to make Overline Credit Loans to
the Borrower from time to time during the period from January 1, 2005 up
to but not including May 30, 2005 in an aggregate principal amount not to
exceed at any time outstanding the amount of $4,000,000, as such amount
may be reduced pursuant to Section 2.3.
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Each Revolving Credit Loan and Overline Credit Loan which shall not
utilize the Commitment in full shall be in an amount not less than Fifty
Thousand Dollars ($50,000), provided that each LIBOR Loan shall be in an
amount not less than Five Hundred Thousand Dollars ($500,000). During the
period from the Closing Date to the Termination Date and within the limits
of the Commitment and subject to Section 2.2, the Borrower may borrow,
prepay pursuant to Section 2.8, and reborrow under the Revolving Credit
Facility under this Section 2.1. During the period commencing January 1,
2005 and ending May 30, 2005 and within the limits of the Commitment and
subject to Section 2.2, the Borrower may borrow, prepay pursuant to
Section 2.8, and reborrow under the Overline Credit Facility under this
Section 2.1. On such terms and conditions, the Revolving Credit Loans may
be outstanding as Prime Loans or LIBOR Loans, and Overline Credit Loans
may be outstanding only as Prime Loans. Each type of Revolving Credit Loan
and Overline Credit Loan shall be made and maintained at the Bank's
Principal Office.
2.2 Borrowing Base. Notwithstanding the provisions of Section 2.1,
the aggregate principal amount of all outstanding Revolving Credit Loans,
Overline Credit Loans, and all Letter of Credit Obligations shall not
exceed the lesser of the Borrowing Base and the Commitment. At any time
that the aggregate principal amount of all outstanding Revolving Credit
Loans, Overline Credit Loans, and all Letter of Credit Obligations exceeds
the lesser of the Borrowing Base and the Commitment, the Borrower shall
immediate prepay first the Overline Credit Loans and then the Revolving
Credit Loans pursuant to Section 2.8 hereof.
2.3 Reduction of Commitment. The Borrower shall have the right,
upon at least three (3) Business Days' notice to the Bank, to terminate in
whole or reduce in part the unused portion of the Commitment on the
following terms and conditions;
(a) each partial reduction in the Commitment shall be in the
amount of at least One Million Dollars ($1,000,000);
(b) unless financed from a Non-Premium Event, a reduction in
the Commitment requires concurrent payment to Bank of a Reduction Fee.
(c) no reduction in the Commitment shall be permitted if,
after giving effect thereto, and to any prepayment made therewith, the
outstanding and unpaid principal amount of the Revolving Credit Loans, the
Overline Credit Loans, and the Letter of Credit Obligations shall exceed
the lesser of Commitment or the Borrowing Base; and
(d) the Commitment, once reduced or terminated, may not be
reinstated.
2.4 Notice and Manner of Borrowing. Borrower agrees to give the
Bank notice of any Revolving Credit Loan under this Agreement, at least
one (1) Business Day before each Prime Loan, and at least three (3)
Business Days before each LIBOR Loan, specifying: (a) the date of such
Loan; (b) the amount of such Loan; (c) the type of Loan;
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and (d) in the case of a LIBOR Loan, the duration of the Interest Period
applicable thereto. Not later than 3:00 P.M. (eastern standard time) on
the date of such Revolving Credit Loan and upon fulfillment of the
applicable conditions set forth in Article VII, the Bank will make such
Revolving Credit Loan available to the Borrower in immediately available
funds by crediting the amount thereof to the Borrower's account with the
Bank.
Borrower agrees to give the Bank notice of any Overline Credit Loan
under this Agreement, at least one (1) Business Day before each Prime
Loan. Not later than 3:00 P.M. (eastern standard time) on the date of such
Overline Credit Loan and upon fulfillment of the applicable conditions set
forth in Article VII, the Bank will make such Overline Credit Loan
available to the Borrower in immediately available funds by crediting the
amount thereof to the Borrower's account with the Bank.
All notice given under this Section 2.4 shall be irrevocable and
shall be given not later than 11:00 A.M. (eastern standard time) on the
day which is not less than the number of Business Days specified above for
such notice.
9. Sections 2.6 through and including 2.10 of the Credit Agreement are
hereby amended to read in their entirety as follows:
2.6 Interest. Borrower shall pay interest to the Bank on the
outstanding and unpaid principal amount of the Revolving Credit Loans made
under this Agreement at a rate per annum of LIBOR plus 250 basis points or
Prime plus .25% through December 31, 2004, and thereafter, at a rate per
annum selected by Borrower, at the appropriate level, from the two
Revolver columns of the pricing grid attached as Exhibit B to this
Agreement. Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of the Overline Credit Loans made under this
Agreement at a rate per annum of Prime plus .50%. Any change in the
interest rate resulting from a change in the Prime Rate shall be effective
as of the opening of business on the day on which such change in the Prime
Rate becomes effective. Interest on each Loan shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed.
Interest on the Loans shall be paid in immediately available funds to the
Bank at its Principal Office, in the case of Prime Loans on the first day
of each month and in the case of LIBOR Loans, on the last day of the
Interest Period with respect thereto. All accrued and unpaid interest
shall be due and payable on the Termination Date, or in the case of
Overline Credit Loans, on May 30, 2005.
2.7 Notes. Borrower's obligation to repay the Revolving Credit
Loan shall be evidenced by the Revolving Credit Note in substantially the
form of Exhibit D to this Agreement, with blanks appropriately completed.
All Revolving Credit Loans shall be repaid on the Termination Date.
Borrower's obligation to repay the Overline Credit Loan shall be
evidenced by the Overline Credit Note in substantially the form of Exhibit
D-2 to this Agreement, with blanks appropriately completed. All Overline
Credit Loans shall be repaid on May 30, 2005.
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2.8 Prepayments. Borrower may prepay the Revolving Credit Note and
the Overline Credit Note in whole or in part with accrued interest to the
date of such prepayment on the amount prepaid, but without premium or
penalty, provided that (a) each partial payment shall be in a principal
amount of not less then Fifty Thousand Dollars ($50,000); and (b) LIBOR
Loans may be prepaid only on the last day of the Interest Period for such
Loans. In addition, at any time that the Borrower becomes aware or receive
notice (oral or written) that the aggregate outstanding principal amount
of all Revolving Credit Loans and Overline Credit Loans exceeds the
Borrowing Base, Borrower shall immediately prepay first the Overline
Credit Loans and then the Revolving Credit Loans by the amount necessary
to comply with the provisions of Section 2.2.
2.9 Method of Payment. Borrower shall make each payment under this
Agreement and under the Notes not later than 12:00 P.M. (eastern standard
time) on the date when due in lawful money of the United States to the
Bank at its Principal Office in immediately available funds. Borrower
hereby authorizes the Bank, if and to the extent payment is not made when
due under this Agreement or under the Notes, to change from time to time
against any account of Borrower with the Bank any amount as due. Whenever
any payment to be made under this Agreement or under the Notes shall be
stated to be due on a day other than a Business Day, such payments shall
be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of the payment of interest and the
commitment fee, as the case may be, except, in the case of a LIBOR Loan,
if the result of such extension would be to extend such payment into
another calendar month, such payment shall be made on the immediately
preceding Business Day.
2.10 Use of Proceeds. The proceeds of the Revolving Credit Loans
and the Overline Credit Loans hereunder shall be used to finance the
working capital requirements of the Borrower. Borrower will not, directly
or indirectly, use any part of such proceeds for the purpose of purchasing
or carrying any margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System or to extend credit to
any person for the purpose of purchasing or carrying any such margin
stock, or for any purpose which violates, or is inconsistent with,
Regulation X of such Board of Governors.
10. Section 4.1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
4.1 Letter of Credit Subfacility. Subject to the terms and
conditions of this Agreement and provided the Borrower complies with all
application requirements of the Bank for issuing letters of credit, prior
to the Termination Date, the Bank agrees to issue and extend standby and
commercial letters of credit (individually, a "Letter of Credit") for the
account of Borrower: provided, however, that (a) no Letter of Credit
(other than the Earn-Out Letter of Credit) shall have an expiration date
that is later than the earlier of one year after the date of issuance
thereof or the Termination Date (provided that a Letter of Credit may
provide that it is extendable for consecutive one year periods if such
period does not end after the Termination Date); (b) Borrower shall not
request that the Bank
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issue any Letter of Credit, if, after giving effect to such issuance, the
sum of the aggregate Letter of Credit Obligations plus the aggregate
outstanding principal amount of all outstanding Revolving Credit Loans and
Overline Credit Loans would exceed the Commitment; and (c) Borrower shall
not request that the Bank issue any Letter of Credit if after giving
effect to such issuance, the aggregate Letter of Credit Obligations would
exceed $6,000,000.
11. The introductory paragraph of Section 7.2 is hereby amended to read
in its entirety as follows:
7.2 Subsequent Loans and Letters of Credit. The obligation of the
Bank to make any Revolving Credit Loan or issue any Letters of Credit, and
the making of any Overline Credit Loan, shall at all times be subject to
the following continuing conditions:
12. Section 10.1 is amended to read in its entirety as follows:
10.1 Average Borrowed Funds to EBITDA. Maintain an Average Borrowed
Funds to EBITDA Ratio, on a consolidated basis, measured at the end of
each Fiscal Quarter, as follows:
(a) On March 31, 2005: no greater than 3.8 to 1.0;
(b) On June 30, 2005: no greater than 3.8 to 1.0;
(c) On September 30, 2005: no greater than 3.5 to 1.0; and
(i) From and after October 1, 2005: no greater than 3.0 to
1.0.
13. Section 10.3 is amended to read in its entirety as follows:
10.3 Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage Ratio,
on a consolidated basis, equal to or greater than (i) .6 to 1.0 on March
31, 2005 (ii) 1.2 to 1 .0 from April 1, 2005 until the Termination Date,
and (ii) thereafter, a ratio set by the Bank by giving ninety (90) days
prior written notice thereof to Borrower, each measured at the end of each
Fiscal Quarter.
14. Exhibit A to the Credit Agreement is amended to read in its entirety
in the Form Attached hereto as Exhibit A.
15. A new Exhibit D-2 is hereby added to the Credit Agreement to read in
its entirety in the form attached hereto as Exhibit D-2.
16. As a condition of this Amendment becoming effective, the Borrower
shall pay to the Bank a fee of $20,000.
17. The terms and conditions of the Credit Agreement except as amended
hereby shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
MANUFACTURERS AND TRADERS TRUST COMPANY
By: /s/ Kevin Wilmot
__________________________________
Name: Kevin Wilmot
Title: Assistant Vice President
PHOENIX FOOTWEAR GROUP, INC.
By: /s/ James R. Riedman
__________________________
Name: James R. Riedman
Title: Chairman
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Exhibit A
Form of Quarterly Covenant Compliance Sheet
PHOENIX FOOTWEAR GROUP
FINANCIAL COVENANT CALCULATION
As of ______________:
Credit Agreement Calculation as of Compliance
Section Covenant Above Date (Yes/No) Requirement
- ---------------- -------------------------------- ----------------- ---------- ----------------------------------------
Section 10.1 Average Borrowed Funds to EBITDA ____ to 1.0 On March 31, 2005 and June 30, 2005, no
greater than 3.8 to 1.0
On September 30, 2005, no greater than
3.5 to 1.0
From and after October 1, 2005, no
greater than 3.00:1.00
Section 10.2 Minimum Current Ratio ____ to 1.0 On March 31, 2005, at least .6 to 1.0
From April 1, 2005 to the Termination
Date, at least 1.35:1.00
After the Termination Date, as set by
the Bank
Section 10.3 Cash Flow Coverage Ratio ___ to 1.0 At least 1.20:1.00
Section 10.4 Net Income Last 2 Quarters: No negative income for two consecutive
$____________ quarters
and
$____________