<PAGE> 1
EXHIBIT 4.5
FLORSHEIM GROUP, INC.
200 North LaSalle Street, Suite 1500
Chicago, Illinois 60601-1014
November 15, 2000
Apollo Investment Fund LP
Artemis America Partnership
c/o 1301 Avenue of the Americas
38th Floor
New York, New York 10019
Gentlemen:
Reference is made to that certain Credit Agreement dated as of
August 23, 1999, as amended through the Third Amendment to Credit Agreement,
dated as of November 15, 2000 (the "Credit Agreement"), among Florsheim Group
Inc., The Florsheim Shoe Store Company-Northeast, The Florsheim Shoe Store
Company-West, Florsheim Occupational Footwear, Inc., and L.J. O'Neill Shoe Co.
(collectively, the "Borrowers"), the financial institutions from time to time
parties thereto (collectively, the "Lenders"), and BT Commercial Corporation,
individually and in its capacity as agent (the "Bank"). Unless otherwise defined
herein, capitalized terms shall have the meaning given to them in the Credit
Agreement.
On November 15, 2000, the Borrowers, the Bank and the Lenders
entered into the Third Amendment to Credit Agreement (the "Third Amendment"),
which, inter alia, (i) grants a waiver of the Borrowers' compliance with the
requirements of Sections 8.1.1 and 8.1.2 of the Credit Agreement for the twelve
fiscal month period ending with the third quarter of fiscal 2000 and (ii) amends
the requirements of Section 8.1.1 and 8.1.2 of the Credit Agreement with respect
to future quarterly test periods.
The effectiveness of the Third Amendment is conditioned upon
the Bank's receipt of those certain Contingent Purchase Agreements (each a
"Contingent Purchase Agreement" and together the "Contingent Purchase
Agreements") from Apollo Investment Fund LP ("AIF") and Artemis America
Partnership ("Artemis"), pursuant to Section 5.3 of the Third Amendment. Because
of the benefits to the Borrowers inherent in the Third Amendment, the Borrowers
have requested that AIF and Artemis furnish the Lenders with the Contingent
Purchase Agreements. As an inducement to AIF and Artemis to furnish the
requisite Contingent Purchase Agreements, the Borrowers are willing to agree, on
the terms and conditions set forth with specificity below, to voluntary,
periodic reductions of the Line of Credit so long as the Borrowers are
maintaining a "reserve" of $4,000,000 in excess borrowing availability. The
Borrowers believe that such a "reserve" will afford a sufficient surplus of
borrowing availability to provide for normal working capital requirements and
funding of the operation of the businesses of the Borrowers, as presently
contemplated and in light of current projections.
Accordingly, in consideration of the execution, delivery and
performance of the Contingent Purchase Agreements, to be dated as of November
15, 2000, and to be entered into among the Lenders and AIF and Artemis (AIF and
Artemis hereafter collectively, the "Contingent Purchasers"), the Borrowers
agree as follows:
<PAGE> 2
1. From and after the date hereof until the Expiration Date or,
if sooner, the date upon which the Contingent Purchasers shall
be released of further obligation under the Contingent
Purchase Agreements, the Borrowers shall submit to each of the
Contingent Purchasers duplicate copies of each weekly and
monthly Borrowing Base Certificate delivered to the Bank
pursuant to Section 7.2(a) of the Credit Agreement,
concurrently with the delivery of the same to the Bank.
2. Commencing February 15, 2001, and on the fifteenth day of each
successive calendar month thereafter (February 15, 2001 and
each such successive fifteenth day, a "Measurement Date")
until the Expiration Date or, if sooner, the date upon which
the Contingent Purchasers shall be released of further
obligation with respect to the purchase of any participation
under the Contingent Purchase Agreements, if Excess Capacity
(as hereafter defined) shown on each of the four weekly
Measurement Date (including any weekly Borrowing Base
Certificate submitted on such Measurement Date) is greater
than $4,000,000, then the Borrowers shall, on or before the
last Business Day of the calendar month in which such
Measurement Date shall have occurred, submit to the Bank a
request for a voluntary reduction in the Line of Credit
pursuant to Section 4.6(c) of the Credit Agreement in the
Reduction Amount (as hereinafter defined); provided, however,
that the aggregate sum of all such reductions in the Line of
Credit required under the provisions of this section 2 of this
letter shall not exceed $15,000,000.
If, based upon the calculations required to be made on any
Measurement Date, the Borrowers shall be required to submit to
the Bank a request for a voluntary reduction in the Reduction
Amount pursuant to the preceding sentence, but the Borrowers
shall fail to comply with such requirement, then the
Contingent Purchasers may notify the Borrowers in writing of
such non-compliance (delivered to the attention of the Chief
Financial Officer, Florsheim Group, Inc.) and unless the
Borrowers shall notify the Contingent Purchasers in writing
that the Borrowers contest the same (accompanied by
computations supporting the contest) within three Business
Days of receipt of such written notification of
non-compliance, then (but only then) the Contingent Purchasers
shall be authorized to submit to the Bank such request for
such voluntary reduction in such Reduction Amount in the name
of the Borrowers, accompanied by a certification that the
Contingent Purchasers are entitled to do so (with a copy of
such request and certification to be delivered concurrently to
the Borrowers).
The "Excess Capacity" shall equal the excess availability for
Borrowings of Revolving Loans and issuance of Letters of
Credit, calculated by reference to each of the four weekly
Borrowing Base Certificates most recently submitted as set
forth in section 1 of this letter, as (a) the lesser of (i)
the Line of Credit or (ii) the Borrowing Base, minus (b) the
sum of (i) the Letter of Credit Obligations and (ii) the
outstanding principal balance
2
<PAGE> 3
of the Revolving Loans. The "Reduction Amount" shall equal (x)
the least amount of such Excess Capacity determined by
reference to any of the four weekly Borrowing Base
Certificates most recently submitted as of the applicable
Measurement Date (including any weekly Borrowing Base
Certificate submitted on such Measurement Date), minus (y)
$4,000,000; provided, however, that to the extent any
Reduction Amount determined on any Measurement Date would
cause the aggregate sum of all reductions in the Line of
Credit required under the provisions of this section 2 of this
letter to exceed $15,000,000, then such Reduction Amount shall
be adjusted by reducing the same by such excess over
$15,000,000.
The Contingent Purchasers may, however, choose to waive the
benefits of this agreement. Any such waiver shall be express and in writing; and
upon receipt of any such written waiver from either of the Contingent
Purchasers, the Borrowers may rely conclusively upon the same, and the same
shall be binding on both of the Contingent Purchasers.
Please acknowledge these understandings and confirm your
agreement with the terms and conditions of sections 1 and 2 of this letter set
forth above by signing and returning to us the copy of this letter provided for
such purpose, whereupon such agreement shall be become binding upon, and shall
inure to the benefit of, the Borrowers and the Contingent Purchasers and their
respective successors and assigns.
Very truly yours,
FLORSHEIM GROUP INC.
By: /s/ Thomas P. Polke
----------------------------------
Name: Thomas P. Polke
Title: Executive Vice President,
Chief Financial Officer
THE FLORSHEIM SHOE STORE COMPANY -
NORTHEAST
By: /s/ Thomas P. Polke
----------------------------------
Name: Thomas P. Polke
Title: Executive Vice President,
Chief Financial Officer
3
<PAGE> 4
THE FLORSHEIM SHOE STORE COMPANY -
WEST
By: /s/ Thomas P. Polke
----------------------------------
Name: Thomas P. Polke
Title: Executive Vice President,
Chief Financial Officer
FLORSHEIM OCCUPATIONAL FOOTWEAR, INC.
By: /s/ Thomas P. Polke
----------------------------------
Name: Thomas P. Polke
Title: Executive Vice President,
Chief Financial Officer
L.J. O'NEILL SHOE CO.
By: /s/ Thomas P. Polke
----------------------------------
Name: Thomas P. Polke
Title: Executive Vice President,
Chief Financial Officer
Confirmed, acknowledged and agreed to this
15th day of November, 2000
APOLLO INVESTMENT FUND, LP
By: Apollo Advisors, LP
Its General Partner
By: /s/ Josh Harris
--------------------------------------------------
Name: Josh Harris
-------------------------------------------
Title: Vice President
------------------------------------------
ARTEMIS AMERICA PARTNERSHIP
By: Artemis S.A.
Its Managing Partner
By: /s/ Emmanuel Cueff
----------------------------------------
Name: Emmanuel Cueff
----------------------------------
Title:
--------------------------------
4
