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EXHIBIT 10.35
THIRD AMENDMENT TO
CREDIT AGREEMENT
This Third Amendment to Credit Agreement ("Third Amendment"),
dated as of March 24, 1998, is executed by and between XXXXX FARGO BANK, N.A.,
successor by merger to FIRST INTERSTATE BANK OF CALIFORNIA ("Bank") and DECKERS
OUTDOOR CORPORATION ("Borrower"), with respect to that certain Credit Agreement
dated as of July 27, 1995 (as heretofore amended, the "Credit Agreement")
between Bank and Borrower.
AGREEMENT
Borrower and Bank hereby agree as follows:
1. Section 1.1 (new definitions). Section 1.1 of the Credit
Agreement is amended by adding the following new definitions in alphabetic
order therein:
"EBITDA" means, for any fiscal period, (a) Net Income,
plus (b) Interest Charges of the Borrower and its Subsidiaries,
plus (c) income taxes charged against such Net Income, plus (d)
depreciation and amortization expense of the Borrower and its
Subsidiaries, in each case for that fiscal period to the extent
included in determining Net Income for that fiscal period, all
determined in accordance with Generally Accepted Accounting
Principles, consistently applied.
"Generally Accepted Accounting Principles" means, as of
any date of determination, accounting principles set forth as
generally accepted in then currently effective Statements of
the Auditing Standards Board of the American Institute of
Certified Public Accountants, or if such statements are not
then in effect, accounting principles that are then approved by
a significant segment of the accounting profession in the
United States of America. The term "consistently applied," as
used in connection therewith, means that the accounting
principles applied are consistent in all material respects to
those applied at prior dates or for prior periods.
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"Interest Charges" means, for any period, the sum of (a) all
interest, charges and related expenses payable with respect to that
fiscal period to a lender in connection with borrowed money or the
deferred purchase price of assets that is treated as interest in
accordance with Generally Accepted Accounting Principles, plus (b)
the portion of rent payable with respect to that fiscal period under
Capital Leases that should be treated as interest in accordance with
Generally Accepted Accounting Principles, plus (c) all charges paid
or payable (without duplication) during that period with respect to
any Swap Agreement, excluding in any event any original issue
discount associated with the Warrant.
"Net Income" means, with respect to any fiscal period, the
consolidated net income from continuing operations before
extraordinary or non-recurring items of the Borrower and its
Subsidiaries for that period, determined in accordance with Generally
Accepted Accounting Principles, consistently applied.
2. Section 1.1 (amended definition). Section 1.1 of the Credit Agreement
is further amended by deleting the definition of "Revolving Commitment" set
forth therein in its entirety and substituting therefor the following:
"Revolving Commitment": The amount of $25,000,000, as such
amount may be reduced pursuant to Section 2.1(d)(ii).
3. Section 2.1(d)(i). Section 2.1(d)(i) of the Credit Agreement is
deleted in its entirety.
4. Section 2.4(a). Section 2.4(a) of the Credit Agreement is amended by
(a) striking the figures "120" in clause (ii)(x) thereof and substituting
therefor the figures "180" and (b) striking the amount "$7,000,000" in clause
(iii) thereof and substituting therefor the amount "$10,000,000."
5. Section 2.5. Section 2.5 of the Credit Agreement is amended by
striking the amount "$1,500,000" in the nineteenth line thereof and
substituting therefor the amount "$2,000,000."
6. Section 6.1(a). Section 6.1(a) of the Credit Agreement is amended by
(a) deleting Subsection 6.1(a)(ii) in its entirety, (b) deleting the reference
to
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Subsection 6.1(a)(ii) in the second line of Subsection 6.1(a)(iv) and (c)
amending Subsection 6.1(a)(v) to read as follows:
(v) concurrently with the financial statements required under subdivision
(iii) above, an accounts receivable and accounts payable report and an
inventory composition and aging report, in each case in a form customarily
used by Borrower and acceptable to the Bank;
7. Section 6.1(o). Section 6.1 of the Credit Agreement is amended by
adding a new Subsection 6.1(o) to read as follows:
(o) Annual Clean Down. Cause the aggregate principal amount of
outstanding Revolving Loans to be less than $2,500,000 during a period of
at least thirty (30) consecutive days during the thirteen month period
ending each January 31.
8. Section 6.1(p). Section 6.1 of the Credit Agreement is amended by
adding a new Subsection 6.1(p) to read as follows:
(p) Follow Up Documentation: Promptly following the execution of the Third
Amendment (a) use its reasonable best efforts to obtain from Xxxx Xxxxxxxx
a written reaffirmation of the Xxxxxxxx Letter and (b) and, in any event
not later than 60 days after the execution of the Third Amendment, provide
to Bank certificates (together with executed stock powers) representing
100% of the capital stock of the following corporations:
(a) Deckers Outdoor Corporation International
(b) Simple Shoes, Inc.
(c) Heirlooms, Inc.
(d) Xxxxxxxx, Ltd.
(e) Phillipsburg, Limited
(f) Picante, S.A.
(g) Deckers Baja, S.A. de C.V.
; provided that the foregoing covenant shall supersede all prior covenants
of Borrower in favor of Bank on the subject matter hereof.
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9. Section 6.2(a). Section 6.2(a) of the Credit Agreement is amended by
deleting such Subsection in its entirety and substituting therefor the
following:
(a) Quick Ratio. As at the end of any fiscal quarter of the
Borrower, permit the ratio of the sum for Borrower and all its
Subsidiaries of Cash and Cash Equivalents and accounts receivable to
Consolidated Current Liabilities to be less than (i) 0.90 to 1.00 for
the fiscal quarter ending on Xxxxx 00, 0000, (xx) 0.90 to 1.00 for any
fiscal quarter ending on December 31, or (iii) 1.00 to 1.00 for any
other fiscal quarter.
10. Section 6.2(b). Section 6.2(b) of the Credit Agreement is amended by
deleting such Subsection in its entirety and substituting therefor the
following:
(b) Leverage Ratio. As at the end of any fiscal quarter of the
Borrower, permit the ratio of Consolidated Liabilities to Consolidated
Tangible Net Worth to be more than the ratio set forth below opposite
the period during which such fiscal quarter ends:
Period Maximum Ratio
Closing Date through September 30, 1996 1.75 to 1.00
Thereafter 1.50 to 1.00
11. Section 6.2(c). Section 6.2(c) of the Credit Agreement is amended by
deleting such Subsection in its entirety and substituting therefor the
following:
(c) Minimum EBITDA Coverage Ratio. As at the end of any fiscal
quarter of the Borrower, permit the ratio of EBITDA to Debt Service
for the four (4) fiscal quarter period then ended to be less than 2.50
to 1.00.
12. Section 6.2(d). Section 6.2(d) of the Credit Agreement is amended by
deleting such Subsection in its entirety and substituting therefor the
following:
(d) Consolidated Tangible Net Worth. As of the Closing Date,
permit Consolidated Tangible Net Worth to be less than $32,000,000,
and as of the end of each fiscal quarter of the Borrower thereafter,
permit Consolidated Tangible Net Worth to be less than the
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sum of (1) the TNW Base Amount, plus (2) 75% of the Consolidated Net
Income for each fiscal quarter of the Borrower ending after December
31, 1996 (but only to the extent that Consolidated Net Income for any
such fiscal quarter is greater than zero dollars ($0)), plus (3) 100%
of the net proceeds to Borrower from the issuance and sale of equity
securities of Borrower subsequent to the Closing Date. As used herein,
"TNW Base Amount" means (i) before May 31, 1998, $29,900,000; (ii) on
and after May 31, 1998 and before May 31, 1999, $30,400,000; (iii) on
and after May 31, 1999 and before May 31, 2000, $30,900,000; (iv) on
and after May 31, 2000, $31,400,000.
13. Waiver of Certain Sections. Bank hereby waives compliance by the
Borrower with Sections 6.2(f), 6.2(i), 6.2(j) and any other applicable Sections
of the Credit Agreement with respect to the sale by the Company of its
interests in Trukke Winter Sports Products, Inc. substantially on the terms
described in the Borrower's January 28, 1998 letter to the Bank.
14. Representations and Warranties. Borrower hereby represents and
warrants to Bank that all representations and warranties contained in the Loan
Documents are true and correct as of the date of this Third Amendment.
15. Conditions Precedent. The effectiveness of this Amendment is subject
to the conditions precedent that:
(a) this Third Amendment shall have been executed and delivered
by the Company and the Bank; and
(b) the Bank shall have received the Consent in the form of
Exhibit A executed by all of the Domestic Subsidiaries.
16. Confirmation. In all other respects, the Loan Documents are hereby
confirmed.
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IN WITNESS WHEREOF, Bank and Borrower have executed this Amendment
as of the date set forth in the preamble.
"Borrower": "Bank":
XXXXXX OUTDOOR XXXXX FARGO BANK, N.A.
CORPORATION
By: /s/ XXXXX XXX By: /s/ XXXX X XXXXXX
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Name: Xxxxx Xxx Name: Xxxx X. Xxxxxx
Title: CFO Title: Vice President
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EXHIBIT A
CONSENT OF GUARANTORS AND PLEDGORS
Reference is hereby made to the Third Amendment to Credit Agreement
("Amendment") dated as of March 24, 1998, by and between Deckers Outdoor
Corporation ("Borrower") and Xxxxx Fargo Bank, National Association ("Bank").
Each of the undersigned hereby consents to the execution and delivery and
reaffirms its liability under its Continuing Guaranty, Security Agreement and
any and all security agreements, pledge agreements, deeds of trust, mortgages
and other collateral documents, heretofore executed and delivered by the
undersigned from time to time in favor of Bank.
IN WITNESS WHEREOF, each of the undersigned, intending to be legally bound
hereby, has caused this Consent to be executed as of March 24, 1998
DECKERS MEXICO, INC. SENSI, U.S.A., INC.
By: /s/ XXXXXXX X. XXXX By: /s/ XXXXXXX X. XXXX
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Title: Title:
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SIMPLE SHOES, INC. DECKERS OUTDOOR
CORPORATION INTERNATIONAL
By: /s/ XXXXXXX X. XXXX By: /s/ XXXXXXX X. XXXX
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Title: Title:
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HEIRLOOMS, INC. UGG HOLDINGS, INC.
By: /s/ XXXXXXX X. XXXX By: /s/ XXXXXXX X. XXXX
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Title: Title:
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ORIGINAL AMERICAN
UGHS CO.
By: /s/ XXXXXXX X. XXXX
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Title:
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