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EXHIBIT 10.20
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated effective as
of January 16, 2001 (the "Effective Date") is by and between COLLEGIATE PACIFIC,
INC. ("Borrower"), and THE CHASE MANHATTAN BANK successor by merger to Chase
Bank of Texas, National Association, a New York state banking corporation
("Bank").
PRELIMINARY STATEMENT. Bank and Borrower entered into a Credit Agreement dated
effective as of June 30, 1999 as amended by a Waiver and First Amendment to
Credit Agreement dated effective as of January 20, 2000 and as amended by a
Waiver and Second Amendment to Credit Agreement dated effective as of September
7, 2000 and as amended by a Waiver Agreement And Third Amendment To Credit
Agreement dated effective October 31, 2000 ("Credit Agreement"). "Agreement", as
used in the Credit Agreement, shall also refer to the Credit Agreement as
amended by this Amendment. All capitalized terms defined in the Credit Agreement
and not otherwise defined herein shall have the same meanings herein as in the
Credit Agreement. Bank has agreed with Borrower to amend the Credit Agreement to
the extent set forth herein, in order to, among other things, modify the
Tangible Net Worth financial covenant required by Section 5.3 and to modify the
capital expenditures covenant required by Section 5.5 (each as further described
on Exhibit C of the Agreement).
NOW THEREFORE, in consideration of the premises as well as other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower agree as follows:
1. The Tangible Net Worth financial covenant required by Section 5.3 of the
Agreement and as described on Exhibit C of the Credit Agreement is modified by
decreasing the minimum amount from $3,750,000.00 plus 50% of Borrower's positive
Net Income to $3,200,000.00 plus 50% of Borrower's positive Net Income plus 100%
of new equity raised by Borrower. The required amount for the Tangible Net Worth
financial covenant is calculated as set forth on the Exhibit C attached to this
Amendment. The prior Exhibit C of the Agreement is replaced with the Exhibit C
attached hereto and hereby incorporated into this Amendment and the Credit
Agreement for all purposes.
2. Bank has agreed with Borrower to modify the maximum allowable capital
expenditures to $250,000.00 from the Effective Date of this Amendment through
Borrower's fiscal year end June 30, 2001. Thereafter, Borrower's capital
expenditures shall not exceed $100,000.00 during any fiscal year. In order to
reflect this agreement between Bank and Borrower, Section 5.5 of the Credit
Agreement is amended and restated to read as follows:
"RESTRICTED PAYMENTS 5.5 Unless otherwise permitted on Exhibit C, at any time:
(a) redeem, retire or otherwise acquire, directly or indirectly, any shares of
its capital stock or other equity interest in excess of 50% of Borrower's
positive Net Income (except (i) the repurchase by Borrower of up to $300,000.00
in shares of its capital stock on or before February 29, 2000, with shareholder
Indebtedness that is Subordinated Debt; and (ii) the reacquisition by Borrower
of 33,333 shares of its capital stock pursuant to that certain compromise
settlement agreement and mutual release executed by Funnets, Inc. and Borrower
as of September 27, 2000 and September 28, 2000, respectively); (b) declare or
pay any dividend in excess of 50% of Borrower's positive Net Income (except
stock dividends and dividends paid to Borrower); (c) make any other distribution
or contribution of any Property or cash or obligation to owners of an equity
interest or to a Subsidiary in their capacity as such; (d) make any capital
expenditures in excess of $250,000.00 for the Borrower's fiscal year ended June
30, 2001, and at all times thereafter, make any capital expenditures in excess
of $100,000.00 during any fiscal year of Borrower; or (e) make any payments on
shareholder Indebtedness after any Event of Default has occurred."
3. Borrower agrees with Bank that Borrower shall only make payments on
Subordinated Debt as agreed by Bank, subordinated creditors and Borrower.
Section 4.10 of the Credit Agreement is amended and restated to read as follows:
"SUBORDINATION OF SHAREHOLDER INDEBTEDNESS 4.10 All shareholder Indebtedness and
all Indebtedness of the Subordinated Convertible Notes will be subordinated to
Bank Indebtedness in Proper Form. Borrower will be permitted to make payments on
such shareholder Indebtedness and Indebtedness from the Subordinated Convertible
Notes as allowed by the terms of the written subordination agreements in Proper
Form among Bank, subordinated creditors and Borrower. No payments will be
permitted on shareholder Indebtedness or on Indebtedness of the Subordinated
Convertible Notes following any Event of Default."
4. Borrower has requested that Indebtedness in the amount of $75,000.00 as
evidenced by an increase in that amount on or about February 14, 2001 to that
certain $536,000.00 Subordinated Note executed by Borrower made payable to
Xxxxxxx Xxxxxxxxxx be permitted under the terms of the Agreement. Bank consents
to such new Indebtedness in the amount of $75,000.00 being permitted under the
Agreement so long as the following conditions precedent are met:
(a) the Indebtedness in the amount of $75,000.00 evidenced by the
increased and modified $536,000.00 Subordinated Note is defined as and
included within the definition of Subordinated Debt;
(b) the $536,000.00 Subordinated Note (as increased and modified) is in
Proper Form; and
(c) Borrower and Xxxxxxx Xxxxxxxxxx acknowledge and agree that the
Indebtedness in the amount of $75,000.00 evidenced by the $536,000.00
Subordinated Note (as increased and modified) is subject to that
certain subordination agreement dated effective as of January 20, 2000
(as amended) in Proper Form executed by the appropriate parties and
delivered to Bank.
Bank agrees that the Indebtedness in the amount of $75,000.00 evidenced by the
$536,000.00 Subordinated Note (as increased and modified) is excluded from
consideration as additional Indebtedness for Borrower and its Subsidiaries
pursuant to Section 5.1 of the Agreement. Section 5.1 of the Agreement (as
reflected on Exhibit C) limits additional indebtedness for Borrower and its
Subsidiaries to no more than $100,000.00 in the aggregate during the term of the
Agreement. In order to reflect that the Indebtedness in the amount of $75,000.00
evidenced by the $536,000.00 Subordinated Note (as increased and modified) is
excluded from consideration as additional Indebtedness for Borrower and its
Subsidiaries pursuant to Section 5.1 of the Agreement, Section 5.1 of the
Agreement is hereby amended to read as follows:
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Fourth Amendment to Credit Agreement
Collegiate Pacific, Inc.
January 16, 2001
"INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee,
directly or indirectly, or become or remain liable with respect to, any
Indebtedness, contingent or otherwise unless there is a permitted amount set
forth in Exhibit C, except: (a) Indebtedness to Bank, or secured by Liens
permitted by this Agreement, or otherwise approved in writing by Bank, and
renewals and extensions (but not increases) thereof; (b) current accounts
payable and unsecured current liabilities, not the result of borrowing, to
vendors, suppliers and Persons providing services, for expenditures for goods
and services normally required by it in the ordinary course of business and on
ordinary trade terms; and (c) Indebtedness evidenced by each of the following:
(i) that certain subordinated convertible promissory note dated February 29,
2000 in the amount of $26,000.00 executed by Borrower and payable to the order
of Xxxxxx X. Xxxxxxx; (ii) that certain subordinated convertible promissory note
dated February 29, 2000 in the amount of $20,000.00 executed by Borrower and
payable to the order of Xxxxxx X. Xxxxxxx, XXX, by Southwest Securities, Inc.,
Custodian; (iii) that certain subordinated convertible promissory note dated
February 29, 2000 in the amount of $4,000.00 executed by Borrower and payable to
the order of Xxxxxxx X. Xxxxxxx, XXX, by Southwest Securities, Inc., Custodian;
(iv) that certain subordinated convertible promissory note dated February 29,
2000 in the amount of $100,000.00 executed by Borrower and payable to the order
of Xxxxxxx Xxxxxxxxxx; (v) that certain subordinated convertible promissory note
dated February 29, 2000 in the amount of $50,000.00 executed by Borrower and
payable to the order of Xxxxxxxxxx Foundation (Federal ID# 00-0000000); (vi)
that certain subordinated convertible promissory note dated February 29, 2000 in
the amount of $50,000.00 executed by Borrower and payable to the order of JIBS
Equities, L.P. (Federal ID# 00-0000000); (vii) that certain subordinated
convertible promissory note dated February 29, 2000 in the amount of $50,000.00
executed by Borrower and payable to the order of Penn Footwear Retirement Trust
(Federal ID# 00-0000000); (viii) that certain subordinated convertible
promissory note dated February 29, 2000 in the amount of $50,000.00 executed by
Borrower and payable to the order of Xxxxxx X. Xxxxxx or Xxxxxx X. Xxxxxx, Joint
Tenants with Right of Survivorship; (ix) that certain subordinated convertible
promissory note dated February 29, 2000 in the amount of $100,000.00 executed by
Borrower and payable to the order of Xxxxx X. Xxxx; (x) that certain
subordinated convertible promissory note dated February 29, 2000 in the amount
of $1,500,000.00 executed by Borrower and payable to the order of Xxxxxxx X.
Xxxxxxxxxx; (xi) that certain subordinated convertible promissory note dated
February 29, 2000 in the amount of $10,000.00 executed by Borrower and payable
to the order of Xxxxxx X. Xxxxxxxxxx, XXX, by Southwest Securities, Inc.,
Custodian; (xii) that certain subordinated convertible promissory note dated
February 29, 2000 in the amount of $5,000.00 executed by Borrower and payable to
the order of Xxxxxx Xxxxxxxxxx and Xxxxxxxxx Xxxxxxxxxx; (xiii) that certain
subordinated convertible promissory note dated February 29, 2000 in the amount
of $50,000.00 executed by Borrower and payable to the order of H. I. Xxxxxxxx
XXX Rollover; (xiv) that certain subordinated convertible promissory note dated
February 29, 2000 in the amount of $100,000.00 executed by Borrower and payable
to the order of Xxxxxxx Brothers Trust 00-0000000; (xv) that certain
subordinated convertible promissory note dated February 29, 2000 in the amount
of $120,000.00 executed by Borrower and payable to the order of The Xxxx X.
Xxxxx GST Trust; (each of the aforementioned subordinated convertible promissory
notes collectively referred to as "Subordinated Convertible Notes"); (xvi) that
certain subordinated promissory note dated September 6, 2000 in the original
amount of $536,000.00 executed by Borrower and payable to the order of Xxxxxxx
Xxxxxxxxxx which was modified and increased in the amount of $75,000.00 on or
about February 14, 2001 (as increased, modified, and amended, the "$536,000
Subordinated Note"); and (xvii) that certain subordinated promissory note dated
September 6, 2000 in the original amount of $45,000.00 executed by Borrower and
payable to the order of Xxx Xxxxxxxxxx (the "$45,000 Subordinated Note")."
5. Borrower hereby represents and warrants to Bank that after giving effect to
the execution and delivery of this Amendment: (a) the representations and
warranties set forth in the Credit Agreement are true and correct on the date
hereof as though made on and as of such date; and (b) no Event of Default, or
event which with passage of time, the giving of notice or both would become an
Event of Default, has occurred and is continuing as of the date hereof.
6. This Amendment shall become effective as of the Effective Date upon its
execution and delivery by each of the parties named in the signature lines
below.
7. Borrower further acknowledges that each of the other Loan Documents is in all
other respects ratified and confirmed, and all of the rights, powers and
privileges created thereby or thereunder are ratified, extended, carried forward
and remain in full force and effect except as the Credit Agreement is amended by
this Amendment.
8. This Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed an original and all of which taken together shall constitute but one and
the same agreement.
9. This Amendment shall be included within the definition of "Loan Documents" as
used in the Agreement.
10. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND AS APPLICABLE, THE LAWS OF THE UNITED STATES OF
AMERICA.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE,
AND REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF BANK AND THE PARTIES.
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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the Effective Date.
BORROWER: COLLEGIATE PACIFIC, INC.
By: /s/
---------------------------------------
Name:
Title:
Address:
BANK: THE CHASE MANHATTAN BANK successor by
merger to Chase Bank of Texas, National
Association
By: /s/
---------------------------------------
Name:
Title:
Address:
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EXHIBIT C to Credit Agreement between
Collegiate Pacific, Inc. ("Borrower") and The Chase Manhattan Bank successor
by merger to Chase Bank of Texas, National Association ("Bank")
dated the Agreement Effective Date (as same may be amended, restated and
supplemented in writing the "Agreement")
REPORTING REQUIREMENTS, FINANCIAL COVENANTS
AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD
ENDING ______, 200__ ("END DATE")
A. REPORTING PERIOD. THIS EXHIBIT WILL BE IN PROPER FORM AND SUBMITTED WITHIN
30 DAYS OF THE END OF EACH CALENDAR MONTH
BORROWER'S FISCAL YEAR ENDS ON JUNE 30, 2000.
B. Reporting
Financial Reporting. Borrower will provide the following financial information within the times indicated: Compliance
Certificate
========================================================++==========================================================================
WHO WHEN DUE WHAT Compliance
--- -------- ---- (Circle)
Yes No
BORROWER (i) Within 90 days of fiscal year Consolidated annual financial Yes No
end (including last reporting statements (balance sheet, income
period of the fiscal year) statement, cash flow statement)
Audited with unqualified opinion
by independent certified public
accountants satisfactory to Bank,
accompanied by Compliance
Certificate
--------------------------------------- ----------------------------------- -------------
(ii) Within 30 days of each Reporting Consolidated and consolidating Yes No
Period End Date (including last unaudited interim financial
reporting period of the fiscal year) statements, Borrowing Base Report
(Exhibit A) along with accounts
receivable aging and listing,
accounts payable aging
accompanied by Compliance
Certificate
------------------------------------------ --------------------------------------- ----------------------------------- -------------
(iii) Within 30 days of each Accounts receivable aging and Yes No
PRODUCT MERCHANDISING, INC. Reporting Period End Date accounts payable aging
------------------------------------------ --------------------------------------- ----------------------------------- -------------
BORROWER AND SUBSIDIARIES (iv) Upon request of Bank Inventory Reports in Proper Form Yes No
------------------------------------------ --------------------------------------- ----------------------------------- -------------
INDIVIDUAL GUARANTOR (v) Within 120 days of each calendar Annual personal financial Yes No
year until Bank releases Guaranty statement (including cash flow
and contingent liability
information) of the Guarantor:
Xxxxxxx Xxxxxxxxxx
C.
FINANCIAL COVENANTS. Borrower will comply with the following
financial covenants, defined in accordance with GAAP and the COMPLIANCE CERTIFICATE
definitions in Section 8 and prepared on a consolidated basis as ----------------------
in Section 5.3 of the Agreement, and incorporating the
calculation adjustments indicated on the Compliance
Certificate. (Except as noted in the calculation of the "Step
Up" in C.1. below, for all other calculations and reporting
purposes herein and throughout the Agreement, Borrower's
calculation of Net Income is cumulative fiscal year to date):
------------------------------------------------------------------ ------------------------------------------ --------------
REQUIRED ACTUAL REPORTED Compliance
-------- --------------- (Circle)
Except as specified otherwise, each covenant will be maintained For Current Period/as of the End Date Yes No
at all times and reported for each Period or as of each
Reporting Period End Date, as appropriate:
------------------------------------------------------------------ ------------------------------------------ --------------
1. Maintain a Tangible Net Worth of at least $3,200,000.00 Yes No
plus 50% of Positive Net Income ("Step Up Amount") plus Total Stockholders' Equity $
100% of new equity raised by Borrower. ---------
Minus: Goodwill $
---------
Other Intangible Assets $
---------
Loans/Advances to $
---------
Positive Net Income Equity holders $
(For current reporting period) ---------
Loans to Affiliates $
---------
$ License Agreements $
------- ---------
Plus: Subordinated Debt $
Multiplied by 50% ---------
= Step Up Amount (For current reporting
period) $ = Tangible Net Worth $
------- ---------
$ $ $ $
-------- --------- -------------- ----------
Required + Step Up + 100% new = Required
Amount Amount equity raised Amount
As of Prior by Borrower As of Current
Reporting Period Reporting Period
Page 1 of 3
5
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2. Maintain a ratio of total Indebtedness as adjusted to Total Liabilities
Tangible Net Worth no greater than 1.0 to 1.0. (GAAP) $ Yes No
---------
Plus: Contingent obligations $
Liens on Borrower's ---------
Property not included
in Borrower's
liabilities $
---------
Minus: Subordinated Debt $
---------
Equals: Indebtedness as adjusted $
---------
Total
Stockholders' Equity $
---------
Minus: Goodwill $
---------
Other Intangible Assets $
---------
Loans/Advances to
Equity holders $
---------
Loans to Affiliates $
---------
License Agreements $
---------
Plus: Subordinated Debt $
---------
= Tangible Net Worth $
---------
$ / $ =
-------- ------------------- ----------------
Indebtedness (adjusted) TNW Ratio o
D.
Other Required Covenants to be maintained and to be certified.
COMPLIANCE CERTIFICATE
REQUIRED ACTUAL REPORTED COMPLIANCE
-------- --------------- (CIRCLE)
------------------------------------------------------------------ ------------------------------------------ --------------
(i) Pursuant to Section 1.1.C, L/C Obligations may not exceed L/C Obligations are: $ Yes No
Letter of Credit Sublimit -----------
Letter of Credit Sublimit is: $ 200,000.00
------------------------------------------------------------------ ------------------------------------------ --------------
(ii) Pursuant to Section 5.1, Borrower's additional Indebtedness Additional Indebtedness is: $ Yes No
shall not be permitted to exceed $100,000.00 in the aggregate -----------
during the term of this Agreement. Borrower's Subordinated
Convertible Promissory Notes, the $536,000.00 Subordinated Note
(as modified and increased in the amount of $75,000.00 on or
about February 14, 2001) and the $45,000.00 Subordinated Note
are excluded from consideration of the $100,000.00 in additional
Indebtedness to which Borrower is limited during the term of
this Agreement.
------------------------------------------------------------------ ------------------------------------------ --------------
(iii) Pursuant to Section 5.4, Borrower shall not permit any As of _____________________, Borrower is Yes No
merger, acquisition, consolidation or sale of assets outside of in compliance with Section 5.4___________
the ordinary course of business.
------------------------------------------------------------------ ------------------------------------------ --------------
(iv) Pursuant to Section 5.5, Borrower shall not permit any As of _____________________, Borrower is in Yes No
capital expenditure in excess of (a) $250,000.00 for Borrower's compliance with Section 5.5_________
fiscal year ended June 30, 2001; and (b) $100,000.00 for any
fiscal year of Borrower after June 30, 2001.
------------------------------------------------------------------ ------------------------------------------ --------------
(v) Pursuant to Section 5.5, Borrower shall not permit dividend As of ___________________, Borrower is in Yes No
payments in excess of 50% of Borrower's Net Income. compliance with Section 5.5___________
------------------------------------------------------------------ ------------------------------------------ --------------
(vi) Pursuant to Section 5.5, Borrower shall not permit any As of _________________, Borrower is in Yes No
treasury stock purchases in excess of 50% of Borrower's Net compliance with Section 5.5___________
Income (except 1) the repurchase by Borrower of up to
$300,000.00 in shares of its capital stock on or before
February 29, 2000 with shareholder Indebtedness that is
Subordinated Debt; and 2) the reacquisition by Borrower of
33,333 shares of its capital stock pursuant to that certain
compromise settlement agreement and mutual release executed by
Funnets, Inc. and Borrower as of September 27, 2000 and
September 28, 2000, respectively).
------------------------------------------------------------------ ------------------------------------------ --------------
(vii) Pursuant to Section 5.6, Borrower shall not permit any As of __________________, Borrower is in Yes No
change in the nature of Borrower's business or material change compliance with Section 5.6___________
in Borrower's management.
------------------------------------------------------------------ ------------------------------------------ --------------
(viii) Pursuant to Sections 5.7 and 5.9, Borrower shall not As of _________________, Borrower is in
permit loans or advances to Affiliates or any loans, advances or compliance with
extensions of credit to officers, directors or shareholders of Section 5.7___________ Yes No
Borrower. Section 5.9___________ Yes No
------------------------------------------------------------------ ------------------------------------------ --------------
(ix) Borrower will provide to Bank Exhibit A of the Liquidity As of _______________________ the terms and Yes No
Maintenance Agreement executed by Xxxxxxx Xxxxxxxxxx dated June 30, agreements of that certain Liquidity
1999 on a quarterly basis and ensure that the terms of such Maintenance Agreement executed by Xxxxxxx
agreement are maintained and reported quarterly. Xxxxxxxxxx dated June 30, 1999 are in
compliance. Exhibit A of the Liquidity
Maintenance Agreement last provided to
Bank on: _______________________________
------------------------------------------------------------------ ------------------------------------------ --------------
(x) Borrower agrees that it will not make any payments on As of_____________________, Borrower is in Yes No
Subordinated Debt, except as permitted by Section 4.10 of the compliance with Section 4.10 ___________
Agreement and the written subordination agreements among Bank,
subordinated creditors and Borrower.
Page 2 of 3 Pages
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THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED IN
THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR MODIFY THE TERMS AND
CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT C AND THE
AGREEMENT, THE AGREEMENT SHALL CONTROL
The undersigned hereby certifies that the above information and computations are
true and correct and not misleading as of the date hereof, and that since the
date of the Borrower's most recent Compliance Certificate (if any):
[ ] No default or Event of Default has occurred under the Agreement
during the current Reporting Period, or been discovered from a
prior period, and not reported.
[ ] A default or Event of Default (as described below) has occurred
during the current Reporting Period or has been discovered from
a prior period and is being reported for the first time and:
[ ] was cured on .
-------------------
[ ] was waived by Bank in writing on .
-------------------
[ ] is continuing.
Description of Event of Default:
-------------------------------------
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Executed this day of , 20 .
------------------ ------------------------- ------
BORROWER: COLLEGIATE PACIFIC, INC.
SIGNATURE:
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NAME:
--------------------------------------------------------------------------
TITLE: (Chief Financial Officer or President)
-------------------------------------------------------------------------
ADDRESS:
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