EXHIBIT 26
AMENDMENT NUMBER 1
TO
GUARANTY AGREEMENT
THIS AMENDMENT NUMBER 1 TO GUARANTY AGREEMENT (the "Agreement"), dated as of
April 10, 2002 between ROYAL PRECISION, INC., a Delaware corporation (the
"Company"), and XXXXXXX X. XXXXXXXX AND XXXXX X XXXXXXXX, TRUSTEES OF THE
XXXXXXXX FAMILY LIVING TRUST U/A DTD 4/11/94 (the "Trust").
WHEREAS, the Company and the Trust entered into a Guaranty Agreement dated as of
March 19, 2002 (the "Agreement") which provided, part, that the Trust would
provide a guaranty to Xxxxx Fargo Business Credit, Inc. ("Xxxxx Fargo") based on
certain outstanding amounts under the Company's over-advance line through
certain months, and
WHEREAS, the Company and the Trust desire to amend the Agreement as the guaranty
accepted by Xxxxx Fargo is based solely on the amount outstanding under the
over-advance line at October 1, 2002 up to $400,000 (the "Guarantied Amount");
NOW THEREFORE, in consideration of the undertakings hereinafter contained, the
parties hereto, intending to be legally bound, do hereby agree to amend and
restate in its entirety the Agreement as follows:
SECTION 1. GUARANTY. The Trust agrees to execute and deliver a Guaranty to Xxxxx
Fargo in the form attached here as Exhibit A.
SECTION 2. WARRANT. As consideration for the Trust agreeing to execute and
deliver such Guaranty, and to execute any other guaranties reasonably requested
by the board of directors of the Company prior to June 30, 2002 (collectively,
the "Guaranties" and individually a "Guaranty"), the Company hereby issues to
the Trust a warrant in the form attached hereto as Exhibit B.
SECTION 3. OPTION. Upon the Trust being required to satisfy a Guaranty, the
Trust shall have the option (the "Option") to convert all or any part of the
funds it is required to provide under such Guaranties into shares of Common
Stock of the Company (the "Shares") at the rate of one Share for each $0.25 of
funds provided (the "Exercise Price"). Exercise of the Option shall be
considered payment by the Company and thus reduce any outstanding balance owed
by the Company by the amount of Shares received by the Trust. In lieu of
exercising the Option, at each time that the Trust is required to satisfy a
Guaranty, the Trust may, subject to execution of an acceptable subordination
agreement between the Trust and the then lender to the Company, elect to require
the Company to issue a Subordinated Convertible Promissory Note in the principal
amount of any funds provided by the Trust under a Guaranty, bearing interest at
an annual rate of 13% and due on demand, and having such other terms and
conditions as are contained in the Subordinated Convertible Promissory Note
issued by the Company to the Trust dated February 28, 2002.
3.1. EXERCISE. The Option may be exercised at one or more times by the
Trust sending a written notice to the Company indicating the number of shares to
be acquired, which must be in minimum amounts of 25,000 shares, unless it is an
exercise of the remaining shares subject to the Option, and the amount of funds
being converted.
3.2. ISSUANCE. As soon as practicable after each such exercise, the Company
shall issue to the Trust a certificate for the number of Shares to which the
Trust is entitled.
3.3. ADJUSTMENT FOR INCREASE. If, after the date of this Agreement, the
number of outstanding Shares is increased by a share dividend payable in Shares
or by a split of Shares or other similar event, then, on the date following the
date fixed for the determination of holders of Shares entitled to receive such
share dividend or split, the number of Shares issuable on exercise of the Option
shall be increased in proportion to such increase in outstanding Shares and the
then applicable Exercise Price shall be correspondingly decreased.
3.4. ADJUSTMENT FOR DECREASE. If, after the date of this Agreement, the
number of outstanding Shares is decreased by a consolidation, combination or
reclassification of Shares or other similar event, then, after the effective
date of such consolidation, combination or reclassification, the number of
Shares issuable on exercise of the Option shall be decreased in proportion to
such decrease in outstanding Shares and the then applicable Exercise Price shall
be correspondingly increased.
3.5. OTHER ADJUSTMENT. If, after the date of this Agreement, any capital
reorganization or reclassification of the Shares, or consolidation or merger of
the Company with another corporation for a consideration other than cash or the
assumption of debt, or the sale of all or substantially all of its assets to
another corporation for a consideration other than cash or the assumption of
debt or other similar event shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful and
fair provision shall be made whereby the Trust shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in this Agreement and in lieu of the Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares, securities, or assets as may be issued or payable with respect to
or in exchange for a number of outstanding Shares equal to the number of Shares
immediately theretofore purchasable and receivable upon the exercise of the
Option had such reorganization, reclassification, consolidation, merger, or sale
not taken place, and in such event appropriate provision shall be made with
respect to the rights and interests of the Trust to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Exercise Price and of the number of Shares purchasable upon the exercise of the
Option) shall thereafter be applicable, as nearly as may be in relation to any
share, securities, or assets thereafter deliverable upon the exercise hereof.
3.6. NOTICE. Upon the occurrence of any event specified in this Section 3,
the Company shall give written notice of the record date for such dividend,
distribution, or subscription rights, or the effective date of such
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reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Such notice shall also specify the date as
of which the holders of Shares of record shall participate in such dividend,
distribution, or subscription rights, or shall be entitled to exchange their
Shares for shares, securities, or other assets deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Failure to give such notice, or any defect
therein shall not affect the legality or validity of such event.
3.7. REGISTRATION RIGHTS. The Company agrees that the Trust shall have the
same registration rights as are contained in that certain Registration Rights
Agreement governing shares received upon exercise of the Warrant issued on
February 28, 2002 with respect to any shares received by the Trust as a result
of exercise of the Warrant or conversion of debt as herein above provided for.
SECTION 4. MISCELLANEOUS.
4.1. WAIVER. No purported waiver by either party or any default by the
other party of any term or provision contained herein shall be deemed to be a
waiver of such term or provision unless the waiver is in writing and signed by
the waiving party. No such waiver shall, in any event, be deemed a waiver of any
subsequent default under the same or any other term or provision contained
herein.
4.2. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties concerning the subject matter of this Agreement and
incorporates all prior negotiations and understandings. There are no covenants,
promises, agreements, conditions or understandings, either oral or written,
between them relating to the subject matter of this Agreement other than those
set forth herein. No representation or warranty has been made by or on behalf of
either party to this Agreement (or any officer, director, employee or agent
thereof) to induce the other party to enter into this Agreement or to abide by
or consummate any transactions contemplated by any terms of this Agreement,
except representations and warranties expressly set forth herein. No alteration,
amendment, change or addition to this Agreement shall be binding upon either
party unless in writing and signed by the parties to be charged.
4.3. JOINT PREPARATION. This Agreement is to be deemed to have been
prepared jointly by the parties hereto and any uncertainty or ambiguity existing
herein shall be interpreted according to the application of the rules of
interpretation for arms' length agreements.
4.4. NO PARTNERSHIP. Nothing contained in this Agreement shall be deemed or
construed by the parties hereto or by any third person to create the
relationship of principal and agent or of partnership.
4.5. SUCCESSORS. Each and all of the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and, except as
otherwise specifically provided in this Agreement, their respective successors
and permitted assigns; provided, however, that neither this Agreement, nor any
rights herein granted may be assigned, transferred or encumbered except as
specifically otherwise permitted herein.
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4.6. NOTICE PROCEDURE. Any consent, waiver, notice, demand, request or
other instrument required or permitted to be given under this Agreement shall be
in writing and be deemed to have been properly given only when delivered in
person or by telecopy or other facsimile transmission (followed with hard copy
sent by prepaid courier service), addressed to the following:
If to the Trust
x/x Xxxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxx Telephone: (000) 000-0000
Xxxxxx, XX 00000 Fax: (000) 000-0000
If to the Company
X.X. Xxx 000
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000 Telephone: (000) 000-0000
Attn: President Fax: (000) 000-0000
Notice of change of address will be effective only upon receipt.
4.7. CAPTIONS. The captions and section numbers appearing in this Agreement
are inserted only as a matter of convenience. They do not define, limit,
construe or describe the scope or intent of the provisions of this Agreement.
4.8. PARTIAL INVALIDITY. If any term or provision of this Agreement, or the
application thereof to any person, firm, corporation or other entity or
circumstance, shall be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to persons, firms,
corporations or other entities or circumstances other than those as to which it
is held invalid, shall be unaffected thereby and each remaining term or
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
4.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and the
parties hereto may execute this Agreement by signing one or more counterparts.
4.10. THIRD PARTIES. Nothing herein express or implied is intended or shall
be construed to confer upon or give any person, other than the parties hereto
and their respective heirs, successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
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4.11. GOVERNING LAW. This Agreement shall be governed and construed by the
provisions hereof and in accordance with the laws of the State of Delaware
applicable to agreements to be performed in the State of Delaware.
4.12. FURTHER ASSURANCES. If, at any time, either of the parties hereto
shall consider or be advised that any further documents are necessary or
desirable to carry out the provisions hereof, the appropriate party or parties
hereto shall execute and deliver, or cause to be executed and delivered, any and
all such other documents and do, or cause to be done, all things necessary or
proper to fully carry out the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
ROYAL PRECISION, INC.
By /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx, President
XXXXXXX X. XXXXXXXX AND XXXXX X XXXXXXXX,
TRUSTEES OF THE XXXXXXXX FAMILY LIVING
TRUST U/A DTD 4/11/94
By: /s/ Xxxxxxx X. Xxxxxxxx, Trustee
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Xxxxxxx X. Xxxxxxxx, Trustee
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