CREDIT AND SECURITY AGREEMENT
Dated as of February 10, 1997
ROYAL GRIP, INC., a Nevada corporation and ROXXI, INC., a
Nevada corporation (collectively, jointly and severally, the "Borrower"), and
NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby
agree as follows:
ARTICLE I
Definitions
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1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles.
"Accounts" means the aggregate unpaid obligations of
customers and other account debtors to the Borrower or either
of them arising out of the sale or lease of goods or rendition
of services by the Borrower or either of them on an open
account or deferred payment basis.
"Advance" means an advance to the Borrower by the
Lender under the Credit Facility.
"Affiliate" or "Affiliates" means any Person
controlled by, controlling or under common control with either
Borrower, including (without limitation) any Subsidiary of
either Borrower. For purposes of this definition, "control",
when used with respect to any specified Person, means the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Banking Day" means a day other than a Saturday on
which banks are generally open for business in Phoenix,
Arizona.
"Base Rate" means the rate of interest publicly
announced from time to time by Norwest Bank Minnesota,
National Association as its "base rate" or, if such bank
ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"Borrowing Base" means, at any time and subject to
change from time to time in the Lender's sole discretion, the
lesser of
(i) the Commitment, or
(ii) the sum of
(A) the lesser of (x) 80% of Eligible
Accounts, or (y) $1,750,000.00, plus
(B) the lesser of (x) 50% of Eligible
Royal Grip Inventory, or (y)
$500,000.00, plus
(C) the lesser of (x) 25% of Eligible
Roxxi Raw Materials Inventory, or
(y) $250,000.00, plus
(D) the lesser of (x) 50% of Eligible
Roxxi Inventory (exclusive of
Eligible Raw Materials Inventory),
or (y) $100,000.00.
"Capital Expenditures" means net tangible and
intangible expenditures of the applicable Person or Persons
for the lease, purchase or acquisition of capital assets, or
the lease of any other asset, plus gain or minus loss, as
applicable, on sales of assets during the period in question.
"Collateral" means all of the Equipment, General
Intangibles, Inventory, Receivables, and all sums on deposit
in the Collateral Accounts, together with all substitutions
and replacements for and products of any of the foregoing
Collateral and together with proceeds of any and all of the
foregoing Collateral and, in the case of all tangible
Collateral, together with all accessions and together with (i)
all accessories, attachments, parts, equipment and repairs now
or hereafter attached or affixed to or used in connection with
any such goods, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering
such goods.
"Collateral Accounts" has the meaning specified in
Section 4.1(d) hereof.
"Commitment" means $1,750,000.00, unless said amount
is reduced pursuant to Section 2.10(c) hereof, in which event
it means the amount to which said amount is reduced.
"Credit Facility" means the revolving credit facility
being made available to the Borrower by the Lender pursuant to
Article II hereof.
"Current Maturities Long-Term Debt" means contractual
debt amortization of long-term debt and capitalized leases of
the Borrower.
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"Default" means an event that, with giving of notice
or passage of time or both, would constitute an Event of
Default.
"Default Period" means the period following the
occurrence of a Default or Event of Default which period shall
continue until and unless the Lender shall thereafter waive
such Default or Event of Default in writing.
"Default Rate" means at any time 3% over the Floating
Rate and/or Incentive Rate, as applicable, which Default Rate
shall change when and as the Floating Rate or the Incentive
Rate change.
"Eligible Accounts" means all unpaid Accounts of
Royal Grip and Roxxi, as applicable, net of any credits,
except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts over 90 days
past invoice date;
(ii) That portion of Accounts that are
disputed or subject to a claim of offset or a contra
account;
(iii) That portion of Accounts not yet
earned by the final delivery of goods or rendition of
services, as applicable, by the Borrower to the
customer;
(iv) Accounts owed by any unit of
government, whether foreign or domestic (provided,
however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units
of government with respect to which the Borrower has
provided evidence satisfactory to the Lender that (A)
the Lender has a first priority perfected security
interest and (B) such Account may be enforced by the
Lender directly against such unit of government under
all applicable laws);
(v) Accounts owed by an account debtor
located outside the United States which are not
backed by a bank letter of credit assigned to the
Lender, in the possession of the Lender and
acceptable to the Lender in all respects, in its sole
discretion;
(vi) Accounts owed by an account debtor that
is the subject of bankruptcy proceedings or has gone
out of business;
(vii) Accounts owed by a shareholder,
subsidiary, Affiliate, officer or employee of the
Borrower;
(viii) Accounts not subject to a duly
perfected security interest in favor of the Lender or
which are subject to any lien, security interest or
claim in favor of any Person other than the Lender;
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(ix) That portion of Accounts that have been
restructured, extended, amended or modified;
(x) That portion of Accounts that
constitutes finance charges, service charges or sales
or excise taxes;
(xi) Accounts owed by an account debtor,
regardless of whether otherwise eligible, if 10% or
more of the total amount due under Accounts from such
debtor is ineligible under clauses (i), (ii) or (ix)
above;
(xii) Accounts consisting of tooling
charges; and
(xiii) Accounts, or portions thereof,
otherwise deemed ineligible by the Lender in its sole
discretion.
"Eligible Roxxi Inventory" means all inventory of
Roxxi valued at weighted average cost as determined in
accordance with generally accepted accounting principles;
provided, however, that the following shall not in any event
be deemed Eligible Roxxi Inventory:
(i) Inventory that is: in-transit; located
at any warehouse or other premises not approved by
the Lender in writing; located outside of the states,
or localities, as applicable, in which the Lender has
filed financing statements to perfect a first
priority security interest in such inventory; covered
by any negotiable or non-negotiable warehouse
receipt, xxxx of lading or other document of title;
on consignment to or from any other person or subject
to any bailment;
(ii) Packaging, label or irregular
inventory;
(iii) Work-in-process inventory;
(iv) Inventory that is damaged, obsolete or
not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has
returned, has attempted to return, is in the process
of returning or intends to return to the vendor
thereof;
(vi) Inventory that is subject to a security
interest in favor of any Person other than the
Lender;
(vii) Slow-Moving Inventory;
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(viii) Inventory that is subject to a
licensing agreement, which licensing agreement would
preclude or hinder the Lender from liquidating such
Inventory in the ordinary course of business; and
(ix) Inventory otherwise deemed ineligible
by the Lender in its sole discretion.
"Eligible Roxxi Raw Materials Inventory" means that
portion of Eligible Roxxi Inventory consisting of Raw
Materials.
"Eligible Royal Grip Inventory" means all inventory
of Royal Grip valued at weighted average cost as determined in
accordance with generally accepted accounting principles;
provided, however, that the following shall not in any event
be deemed Eligible Royal Grip Inventory:
(i) Inventory that is: in-transit; located
at any warehouse or other premises not approved by
the Lender in writing; located outside of the states,
or localities, as applicable, in which the Lender has
filed financing statements to perfect a first
priority security interest in such inventory; covered
by any negotiable or non-negotiable warehouse
receipt, xxxx of lading or other document of title;
on consignment to or from any other person or subject
to any bailment;
(ii) Packaging inventory;
(iii) Work-in-process inventory;
(iv) Inventory that is damaged, obsolete or
not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has
returned, has attempted to return, is in the process
of returning or intends to return to the vendor
thereof;
(vi) Inventory that is subject to a security
interest in favor of any Person other than the
Lender;
(vii) Inventory that does not consist of
finished grips;
(viii) Slow-Moving Inventory;
(ix) Inventory that is subject to a
licensing agreement, which licensing agreement would
preclude or hinder the Lender from liquidating such
Inventory in the ordinary course of business; and
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(x) Inventory otherwise deemed ineligible by
the Lender in its sole discretion.
"Environmental Laws" has the meaning specified in
Section 5.12 hereof.
"Equipment" means all of the Borrower's equipment, as
such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all present
and future machinery, vehicles, furniture, fixtures (whether
located upon the Premises or otherwise), manufacturing
equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without
limitation) the goods described in any equipment schedule or
list herewith or hereafter furnished to the Lender by the
Borrower.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Event of Default" has the meaning specified in
Section 8.1 hereof.
"Floating Rate" means an annual rate equal to the sum
of the Base Rate plus one and three quarters percent (1.75%),
which Floating Rate shall change when and as the Base Rate
changes.
"Funds from Operations" means after tax net income of
the Borrower for the applicable period or periods, adjusted to
exclude items of income or expense which are extraordinary
items or items not related to operations, plus depreciation
and amortization, deferred income taxes and other non-cash
items.
"General Intangibles" means all of the Borrower's
general intangibles, as such term is defined in the UCC,
whether now owned or hereafter acquired, including (without
limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals,
operating instructions, permits, franchises, the right to use
the Borrower's name, and the goodwill of the Borrower's
business.
"Incentive Rate" means an annual rate equal to the
sum of the Base Rate, plus 1%, which Incentive Rate shall
change when and as the Base Rate changes.
"Initial Advance" has the meaning specified in
Section 4.1(r) hereof.
"Interest Expense" means total gross interest expense
of the Borrower (cash and capitalized, including interest on
capitalized leases and not net of interest income).
"Inventory" means all of the Borrower's inventory, as
such term is defined in the UCC, whether now owned or
hereafter acquired, whether consisting of whole goods, spare
parts or components, supplies or materials, whether acquired,
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held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever
located.
"Issuer" means the issuer of any Letter of Credit.
"Loan Documents" means this Agreement, the Note and
the Security Documents.
"L/C Amount" means the sum of (i) the aggregate face
amount of any issued and outstanding Letters of Credit and
(ii) the unpaid amount of the Obligation of Reimbursement.
"L/C Application" means an application and agreement
for letters of credit in a form acceptable to the Issuer and
the Lender.
"Letter of Credit" has the meaning specified in
Section 2.4 hereof.
"Minimum Interest Charge" has the meaning specified
in Section 2.9(b) hereof.
"Net Income" means consolidated after tax net income
of both of the Borrowers from continuing operations, but
before extraordinary gains.
"Net Loss" means after tax net loss of the Borrower
from continuing operations.
"Net Worth" means the net worth of the Borrower
determined in accordance with generally accepted accounting
principles consistent with those used in preparing Borrower's
most recent consolidating and consolidated audited financial
statements.
"Note" means the Revolving and Term Note of the
Borrower payable to the order of the Lender in substantially
the form attached hereto as Exhibit A.
"Obligations" has the meaning specified in Section
3.1 hereof.
"Obligation of Reimbursement" has the meaning
specified in Section 2.5 hereof.
"Person" means any individual, corporation,
partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated
organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan
maintained for employees of the Borrower and covered by Title
IV of ERISA.
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"Premises" means all premises where the Borrower
conducts its business and has any rights of possession,
including (without limitation) the premises legally described
in Exhibit E attached hereto.
"Receivables" means each and every right of the
Borrower to the payment of money, whether such right to
payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease or other disposition of
goods or other property, out of a rendering of services, out
of a loan, out of the overpayment of taxes or other
liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated
or earned by the Borrower or by some other person who
subsequently transfers such person's interest to the Borrower,
whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests
(including all liens and security interests) which the
Borrower may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such
payment or against any property of such account debtor or
other obligor; all including but not limited to all present
and future accounts, contract rights, loans and obligations
receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature
of general intangibles.
"Reportable Event" shall have the meaning assigned to
that term in Title IV of ERISA.
"Roxxi" means Roxxi, Inc., a Nevada corporation.
"Royal Grip" means Royal Grip, Inc., a Nevada
corporation.
"Security Documents" means the Collateral Account
Agreements, the Assignment of Security Agreements and UCCs,
the Assignment of Capital Lease Agreement, the Assignment of
Patents, the Collateral Assignment of Trademarks, the Patent
Mortgage, the Assignment of Trademarks, each as described in
Section 4.1 hereof.
"Security Interest" has the meaning specified in
Section 3.1 hereof.
"Slow-Moving Inventory" means any inventory where
100% of the like inventory has not turned in the previous
twelve (12) months.
"Special Account" means a specified cash collateral
account maintained by a financial institution acceptable to
the Lender in connection with Letters of Credit, as
contemplated by Sections 2.6 and 3.6 hereof.
"Subsidiary" means any corporation of which more than
50% of the outstanding shares of capital stock having general
voting power under ordinary circumstances to elect a majority
of the board of directors of such corporation,
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irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by
reason of the happening of any contingency, is at the time
directly or indirectly owned by either Borrower, by either
Borrower and one or more other Subsidiaries, or by one or more
other Subsidiaries.
"Term Loan" has the meaning specified in Section 2.2
hereof.
"Termination Date" means February 28, 2000.
"UCC" means the Uniform Commercial Code as in effect
from time to time in the state designated in Section 9.12
hereof as the state whose laws shall govern this Agreement, or
in any other state whose laws are held to govern this
Agreement or any portion hereof.
ARTICLE II
Amount and Terms of the Credit Facility and Term Loan
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2.1 Advances. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make Advances to the Borrower from time to
time during the period from the date hereof to and including the Termination
Date, or the earlier date of termination in whole of the Credit Facility
pursuant to Sections 2.10(a) or 8.2 hereof, in an aggregate amount at any time
outstanding not to exceed the Borrowing Base less the L/C Amount, which Advances
shall be secured by the Collateral as provided in Article III hereof. The Credit
Facility shall be a revolving facility and it is contemplated that the Borrower
will request Advances, make prepayments and request additional Advances. The
Borrower agrees to comply with the following procedures in requesting Advances
under this Section 2.1:
(a) The Borrower will not request any Advance under
this Section 2.1 if, after giving effect to such requested Advance, the sum of
the outstanding and unpaid Advances under this Section 2.1 or otherwise would
exceed the Borrowing Base less the L/C Amount.
(b) Each request for an Advance under this Section
2.1 shall be made to the Lender prior to 11:00 a.m. (Phoenix time) of the day of
the requested Advance by the Borrower. Each request for an Advance may be made
in writing or by telephone, specifying the date of the requested Advance and the
amount thereof, and shall be by (i) any officer of either Royal Grip or Roxxi;
or (ii) any person designated as the Borrower's agent by any officer of either
Borrower in a writing delivered to the Lender; or (iii) any person reasonably
believed by the Lender to be an officer of either Royal Grip or Roxxi or such a
designated agent.
(c) Upon fulfillment of the applicable conditions set
forth in Article IV hereof, the Lender shall disburse loan proceeds by crediting
the same to the Borrower's demand deposit operating account maintained with
Norwest Bank Arizona, N.A. unless the Lender and either Royal Grip or Roxxi
shall agree in writing to another manner of disbursement. Upon request of the
Lender, the Borrower shall promptly confirm each telephonic request for an
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Advance by executing and delivering an appropriate confirmation certificate to
the Lender. The Borrower shall be obligated to repay all Advances under this
Section 2.1 notwithstanding the failure of the Lender to receive such
confirmation and notwithstanding the fact that the person requesting the same
was not in fact authorized to do so. Any request for an Advance under this
Section 2.1, whether written or telephonic, shall be deemed to be a
representation by the Borrower that (i) the condition set forth in Section
2.1(a) hereof has been met, and (ii) the conditions set forth in Section 4.2
hereof have been met as of the time of the request.
2.2 Term Loan. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make a one time advance of a term loan (the
"Term Loan") in the aggregate principal amount of $700,000.00, which Term Loan
shall be secured by the Collateral as provided in Article III hereof. Upon the
Borrower's request and fulfillment of the applicable conditions set forth in
Article IV hereof, the Lender shall make a one time disbursement of loan
proceeds to payoff indebtedness owed by Royal Grip to Biltmore Investors Bank.
2.3 Note. All Advances and the Term Loan, if any, made by the
Lender under this Article II shall be evidenced by and repayable with interest
in accordance with the Note. The principal of the Note shall be payable as
provided herein and on the earlier of the Termination Date or acceleration by
the Lender pursuant to Section 8.2 hereof, and shall bear interest as provided
herein. The portion of the Note which evidences principal of the Term Loan, if
any, shall be payable beginning on April 1, 1997 and continuing on the 1st day
of each month thereafter by payment of principal payments each in the amount of
$12,000.00; provided, however, that notwithstanding such amortization
calculation, the entire amount of such unpaid principal shall be due on the
earlier of the Termination Date, or acceleration by the Lender pursuant to
Section 8.2 hereof.
2.4 Issuance of Letters of Credit.
(a) Upon the request of either Borrower, the Lender
may, in its sole discretion, on the terms and subject to the conditions herein
set forth, cause to be issued by an Issuer one or more letters of credit for the
account of the Borrower (each a "Letter of Credit") from time to time. In the
event Lender elects to issue one or more Letters of Credit, the aggregate amount
at any time outstanding all of such Letters of Credit shall not exceed the
Borrowing Base less the sum of (i) all outstanding and unpaid Advances hereunder
and (ii) the unpaid amount of the Obligation of Reimbursement. Each Letter of
Credit, if any, shall be issued pursuant to a separate L/C Application entered
into by the Borrower and the Lender as co-applicants for the benefit of the
Issuer, completed in a manner satisfactory to the Lender and the Issuer. The
terms and conditions set forth in each such L/C Application shall supplement the
terms and conditions hereof, but in the event of inconsistency between the terms
of any such L/C Application and the terms hereof, the terms hereof shall
control.
(b) Any request for the issuance of a Letter of
Credit under this Section 2.4 shall be deemed to be a representation by the
Borrower that (i) the condition set forth in Section 2.4(a) hereof has been met,
and (ii) the statements set forth in Section 4.2 hereof are correct as of the
time of the request.
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2.5 Payment of Amounts Drawn Under Letters of Credit. The
Borrower acknowledges that the Lender, as co-applicant, will be liable to the
Issuer of any Letter of Credit for reimbursement of any and all draws thereunder
and all other amounts required to be paid under the applicable L/C Application.
Accordingly, the Borrower agrees to pay to the Lender any and all amounts
required to be paid under the applicable L/C Application, when and as required
to be paid thereby, and the amounts designated below, when and as designated:
(a) The Borrower hereby agrees to pay the Lender on
the day a draft is honored under any Letter of Credit a sum equal to all amounts
drawn under such Letter of Credit plus any and all reasonable charges and
expenses that the Issuer or the Lender may pay or incur relative to such draw,
plus interest on all such amounts, charges and expenses as set forth below (all
such amounts are hereinafter referred to, collectively, as the "Obligation of
Reimbursement").
(b) The Borrower hereby agrees to pay the Lender on
demand interest on all amounts, charges and expenses payable by the Borrower to
the Lender under this Section 2.5, accrued from the date any such draft, charge
or expense is paid by the Issuer until payment in full by the Borrower at the
Default Rate.
If the Borrower fails to pay to the Lender promptly the amount
of its Obligation of Reimbursement in accordance with the terms hereof and the
L/C Application pursuant to which such Letter of Credit was issued, the Lender
is hereby irrevocably authorized and directed, in its sole discretion, to make
an Advance in an amount sufficient to discharge the Obligation of Reimbursement,
including all interest accrued thereon but unpaid at the time of such Advance,
and such Advance shall be evidenced by the Note and shall bear interest as
provided in Section 2.9 hereof.
2.6 Special Account. If the Credit Facility is terminated for
any reason whatsoever, while any Letter of Credit is outstanding, the Borrower
shall thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the maximum aggregate amount available to be
drawn under all Letters of Credit then outstanding, assuming compliance with all
conditions for drawing thereunder. The Special Account shall be maintained for
the Lender by any financial institution acceptable to the Lender. Any interest
earned on amounts deposited in the Special Account shall be credited to the
Special Account. Amounts on deposit in the Special Account may be applied by the
Lender at any time or from time to time to the Borrower's Obligation of
Reimbursement or any other Obligations, in the Lender's sole discretion, and
shall not be subject to withdrawal by the Borrower so long as the Lender
maintains a security interest therein. The Lender agrees to transfer any balance
in the Special Account to the Borrower at such time as the Lender is required to
release its security interest in the Special Account under applicable law.
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2.7 Increased Costs and Reduced Return.
(a) If the Lender shall determine that, after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Issuer or the
Lender or its parent corporation with any requirement or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency:
(i) shall subject the Issuer or the Lender
or its parent corporation to any tax, duty or other similar charge with respect
to any Letter of Credit, the Advances or the Note or shall change the basis of
taxation of payments to the Issuer or the Lender or its parent corporation of
the Reimbursement Obligation, of the principal of or interest on the Advances or
of any other amounts due under this Agreement in respect of any Letter of
Credit, the Advances or the Note (except for any change in respect of any tax
imposed on the overall income of the Issuer or the Lender or its parent
corporation); or
(ii) shall impose, modify or deem applicable
any reserve, special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System) against assets of, deposits with or for the account of,
or credit extended by, the Issuer or the Lender or its parent corporation or
shall impose on the Issuer or the Lender or its parent corporation any other
condition affecting any Letter of Credit, the Advances or the Note;
and the result of any of the foregoing is to increase the cost to the Issuer or
the Lender or its parent corporation of issuing or maintaining any Letter of
Credit or of making or maintaining any Advances, or to reduce the amount of any
sum received or receivable by the Issuer or the Lender or its parent corporation
under the application and agreement pursuant to which the Letter of Credit was
issued, this Agreement or the Note with respect thereto, by an amount deemed by
the Lender or its parent corporation to be material, then upon demand by the
Lender, the Borrower shall pay to the Lender such additional amount or amounts
as will compensate the Issuer or the Lender or its parent corporation for such
increased cost or reduction.
(b) If the Lender shall determine that the adoption
after the date hereof of any applicable law, rule or regulation regarding
capital adequacy, or any change therein after the date hereof, any change after
the date hereof in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender or its
parent corporation with any guideline or request issued after the date hereof
regarding capital adequacy (whether nor not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's or the Lender's parent corporation's
capital as a consequence of any Letters of Credit, Advances or the Lender's
obligations hereunder to a level below that which the Lender or its parent
corporation could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's policies with respect to capital
adequacy and those of the Lender's parent corporation) by an amount deemed to
the Lender or its parent corporation to be material, then from time to time
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on demand by the Lender, the Borrower shall pay to the Lender such additional
amount or amounts as will compensate the Lender or its parent corporation for
such reduction.
(c) Certificates of the Lender sent to the Borrower
from time to time claiming compensation under this Section, stating the reason
therefor and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to the Lender hereunder shall be
conclusive absent manifest error. In determining such amounts, the Lender or its
parent corporation may use any reasonable averaging and attribution methods.
2.8 Obligations Absolute. The obligations of the Borrower
arising under this Agreement shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement, under
all circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any
Letter of Credit or any other agreement or instrument relating to any Letter of
Credit (collectively the "Related Documents");
(b) any amendment or waiver of or any consent to
departure from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or
other right which the Borrower may have at any time, against any beneficiary or
any transferee of any Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), or other person or
entity, whether in connection with this Agreement, the transactions contemplated
herein or in the Related Documents or any unrelated transactions;
(d) any statement or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect whatsoever;
(e) payment by or on behalf of the Issuer or the
Lender under any Letter of Credit against presentation of a draft or certificate
which does not strictly comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
2.9 Interest.
(a) The principal of the Advances and the Term Loan
outstanding from time to time during any month shall bear interest (computed on
the basis of actual days elapsed in a 360-day year) at the Floating Rate;
provided, however, that, assuming there is not a then existing Event of Default
or Default Period from the first day of the first month following the receipt by
the Lender of the fiscal year end audited financial statements of the Borrower
complying with the provisions of Section 6.1(a) for the fiscal year ending
December 31, 1997,
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the principal of the Advances and the Term Loan outstanding from time to time
shall bear interest at the Incentive Rate but only if such financial statements
show a Net Income of $500,000.00 or more; and provided, further, however, that
from the first day of any month during which any Default Period or Event of
Default occurs or exists at any time, in the Lender's discretion and without
waiving any of its other rights and remedies, the principal of the Advances and
the Term Loan outstanding from time to time shall bear interest at the Default
Rate during the entire Default Period; and provided, further, however, that in
any event no rate change shall be put into effect which would result in a rate
greater than the highest rate permitted by law. Interest accruing on the
principal balance of the Advances and the Term Loan outstanding from time to
time shall be payable on the first day of each succeeding month and on the
Termination Date or earlier demand or prepayment in full. The Borrower agrees
that the interest rate contracted for includes the interest rate set forth
herein plus any other charges or fees set forth herein and costs and expenses
incident to this transaction paid by the Borrower to the extent same are deemed
interest under applicable law.
(b) Notwithstanding the interest payable pursuant to
Section 2.9(a) hereof or the unused fee payable pursuant to Section 2.16(a)
hereof, the Borrower shall be liable to the Lender for interest and the unused
fee hereunder at such rate as may be necessary to result in interest and unused
fee payments in the aggregate of not less than $6,500.00 per full calendar month
(the "Minimum Interest Charge") during the term of this Agreement, and the
Borrower shall pay any deficiency between the Minimum Interest Charge and the
amount of interest and unused fee otherwise calculated under Section 2.9(a) and
Section 2.16(a) on the first day of each calendar month for the immediate
preceding full calendar month elapsing after the date of this Agreement.
(c) If any Person shall acquire a participation in
the Advances or the Term Loan under this Agreement, the Borrower shall be
obligated to the Lender to pay the full amount of all interest calculated under
Sections 2.9(a) and 2.9(b) hereof, along with all other fees, charges and other
amounts due under this Agreement, regardless if such Person elects to accept
interest with respect to its participation at a lower rate than the Floating
Rate, or otherwise elects to accept less than its pro rata share of such fees,
charges and other amounts due under this Agreement.
2.10 Voluntary Prepayment; Termination of Agreement by the
Borrower; Permanent Reduction of the Commitment.
(a) Except as otherwise provided herein, the Borrower
may, in its discretion, prepay the Advances and the Term Loan in whole at any
time. The Borrower may terminate this Agreement at any time so long as no Letter
of Credit has been issued and is outstanding with an expiration date after such
date and, subject to payment and performance of all the Borrower's Obligations
to the Lender, may obtain any release or termination of the Security Interest to
which the Borrower is otherwise entitled by law by (A) giving at least 30 days'
prior written notice to the Lender of the Borrower's intention to terminate this
Agreement; and (B) paying the Lender a termination fee of (i) 3% of the
aggregate amount of the Commitment and the outstanding principal balance of the
Term Loan immediately preceding such termination if such termination occurs
during the period from the date of this Agreement
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through January 31, 1998, or (ii) 2% of the aggregate amount of the Commitment
and the outstanding principal balance of the Term Loan immediately preceding
such termination if such termination occurs during the period from February 1,
1998 through January 31, 1999, or (iii) 1% of the aggregate amount of the
Commitment and the outstanding principal balance of the Term Loan immediately
preceding such termination if such termination occurs during the period from
February 1, 1999 until the Termination Date, provided, however, no such fee
shall be payable if and to the extent such termination represents a refinancing
of the Obligations by Norwest Bank, Arizona, N.A.
(b) Except as otherwise provided herein, the Borrower
may, in its discretion, prepay the Term Loan from time to time in part by (1)
giving at least 30 days' prior written notice to the Lender of the Borrower's
intent to so prepay; and (2) paying the Lender a prepayment fee of (i) 3% of the
amounts so prepaid if such prepayment occurs during the period from the date of
this Agreement through January 31, 1998, or (ii) 2% of the amounts so prepaid if
such prepayment occurs during the period from February 1, 1988 through January
31, 1999, or (iii) 1% of the amounts so prepaid if such prepayment occurs during
the period from February 1, 1999 until the Termination Date, provided, however,
no such fee shall be payable if and to the extent such prepayment represents a
refinancing of the Obligations by Norwest Bank, Arizona, N.A. Any prepayments of
the Term Loan shall be applied to principal installments of the Term Loan in
inverse order of maturity.
(c) The Borrower may at any time and from time to
time, upon at least 30 days' prior written notice to the Lender, permanently
reduce in part the Commitment; provided, however, that no reduction shall reduce
the Commitment to an amount less than the then-aggregate amount of the Advances;
and provided, further, that if the Borrower shall elect permanently to reduce in
part the Commitment at any time other than the Termination Date, the Borrower
shall pay to the Lender a premium in an amount equal to (i) 3% of the reduction
from the date of this Agreement through January 31, 1998, or (ii) 2% of the
reduction from February 1, 1998 through January 31, 1999, or (iii) 1% of the
reduction from February 1, 1999 until the Termination Date.
2.11 Mandatory Prepayment. Without notice or demand, if the
sum of the outstanding principal balance of the Advances plus the L/C Amount
shall at any time exceed the Borrowing Base, the Borrower shall (i) first,
immediately prepay the Advances to the extent necessary to eliminate such
excess; and (ii) if prepayment in full of the Advances is insufficient to
eliminate such excess, pay to the Lender in immediately available funds for
deposit in the Special Account an amount equal to the remaining excess. Any
payment received by the Lender under this Section 2.11 or under Section 2.10 may
be applied to the Obligation of Reimbursement or the Advances, including
interest thereon and any fees, commissions, costs and expenses hereunder and
under the Security Documents, in such order and in such amounts as the Lender,
in its discretion, may from time to time determine. For each day or portion
thereof that the Advances shall exceed the Borrowing Base, the Borrower shall
pay to the Lender an overadvance charge in the amount of $100.00; provided,
however, that if any such day occurs during a Default Period, the overadvance
charge for such day shall be $200.00.
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2.12 Payment. All payments of principal and interest on the
Advances, the Term Loan, the Obligation of Reimbursement, the commissions and
fees hereunder and amounts required to be paid to the Lender for deposit in the
Special Account shall be made to the Lender in immediately available funds. The
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time and without request by the Borrower, to make an Advance or Advances
in such amount as shall be necessary to pay any interest, fees, costs or
expenses hereunder or under the Loan Documents.
2.13 Payment on Non-Banking Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances and the Term Loan or the fees hereunder, as the case may be.
2.14 Use of Proceeds. The proceeds of Advances, the Term Loan
and each Letter of Credit issued shall be used by the Borrower (i) to repay all
outstanding indebtedness of the Borrower owed to Biltmore Investors Bank, and
(ii) to refinance indebtedness secured by Equipment currently owned by the
Borrower, and (iii) for ordinary working capital purposes.
2.15 Liability Records. The Lender may maintain from time to
time, at its discretion, liability records as to any and all Advances and the
Term Loan made or repaid, interest accrued or paid under this Agreement,
outstanding Letters of Credit and fees thereon and the Borrower's Obligation of
Reimbursement. All entries made on any such record shall be presumed correct
until the Borrower establishes the contrary. On demand by the Lender, the
Borrower will admit and certify in writing the exact principal balance that the
Borrower then asserts to be outstanding to the Lender for Advances and the Term
Loan under this Agreement and the amount of any Letters of Credit outstanding.
Any billing statement or accounting rendered by the Lender shall be conclusive
and fully binding on the Borrower unless specific written notice of exception is
given to the Lender by the Borrower within 30 days after its receipt by the
Borrower.
2.16 Fees.
(a) The Borrower agrees to pay to the Lender an
unused fee each month at the annual rate of .5% on the average daily unused
amount of the Commitment from the date hereof to and including the date on which
such facility is terminated, due and payable monthly in arrears on the first day
of each month, commencing March 1, 1997, provided that any such unused fee
remaining unpaid upon termination of the Credit Facility or acceleration of the
Note by the Lender pursuant to Section 8.2 hereof shall be due and payable on
the date of such termination or acceleration. Such fee shall be calculated on
the basis of actual days elapsed in a 360-day year.
(b) The Borrower hereby agrees to pay the Lender a
commission with respect to each Letter of Credit, if any, accruing on a daily
basis and computed at the annual rate of three percent (3%) of the available
amount of such Letter of Credit (as it may be changed from time to time) from
and including the date of issuance of such Letter of Credit until such
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date as such Letter of Credit shall terminate by its terms, payable annually in
arrears, and prorated for any part of a full calendar year in which such Letter
of Credit remains outstanding. The foregoing commission shall be in addition to
any and all fees, commissions and charges of any Issuer of a Letter of Credit
with respect to or in connection with such Letter of Credit.
(c) The Borrower agrees to pay the Lender, on written
demand, the administrative fees charged by the Issuer in connection with the
honoring of drafts under any Letter of Credit, amendments thereto, transfers
thereof and all other activity with respect to the Letters of Credit.
(d) The Borrower hereby agrees to pay the Lender, on
demand, audit fees of $50.00 per hour (or Lender's then applicable rate) per
auditor in connection with any audits or inspections by the Lender of any
collateral or the operations or business of the Borrower, together with all
actual out-of-pocket costs and expenses incurred in conducting any such audit or
inspection. So long as there is not any then existing Event of Default or
Default Period, such audit fees shall not exceed $2,500.00 per audit and audits
shall be performed not more frequently than quarterly. Lender shall send to
Borrower an invoice applicable to such audit fees, out-of-pocket costs and
expenses, provided, however, any failure of Lender to send such invoices shall
not relieve Borrower of its obligations under this Section 2.16(d).
2.17 Setoff. The Borrower agrees that the Lender may at any
time or from time to time, at is sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due, against any indebtedness owed to the Lender by the Borrower
(for Advances, the Term Loan or for any other transaction or event), whether or
not due. In addition, each other Person holding a participating interest in any
Advances or the Term Loan made to the Borrower by the Lender shall have the
right to appropriate or setoff any deposit or other liability then owed by such
Person to the Borrower, whether or not due, and apply the same to the payment of
said participating interest, as fully as if such Person had lent directly to the
Borrower the amount of such participating interest.
2.18 Capital Adequacy. If the Lender shall determine that the
adoption after the date hereof of any applicable law, rule or regulation
regarding capital adequacy, or any change therein after the date hereof, any
change after the date hereof in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender or its
parent corporation with any guideline or request issued after the date hereof
regarding capital adequacy (whether nor not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's or the Lender's parent corporation's
capital as a consequence of the Lender's obligations hereunder to a level below
that which the Lender or its parent corporation could have achieved but for such
adoption, change or compliance (taking into consideration the Lender's policies
with respect to capital adequacy and those of the Lender's parent corporation)
by an amount deemed to the Lender or its parent corporation to be material, then
from time to time on demand by the Lender, the Borrower shall pay to the Lender
such additional amount or amounts as will compensate the Lender or its parent
corporation for such reduction. Certificates of the Lender sent to the Borrower
from time to time claiming compensation under this Section, stating the
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reason therefor and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to the Lender hereunder shall be
conclusive absent manifest error. In determining such amounts, the Lender or its
parent corporation may use any reasonable averaging and attribution methods.
ARTICLE III
Security Interest
-----------------
3.1 Grant of Security Interest. The Borrower hereby assigns
and grants to the Lender a security interest (collectively referred to as the
"Security Interests") in the Collateral, as security for the payment and
performance of each and every debt, liability and obligation of every type and
description which the Borrower may now or at any time hereafter owe to the
Lender (whether such debt, liability or obligation now exists or is hereafter
created or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower, and whether
it is direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or sole, joint, several or joint and
several, and including specifically, but not limited to, the Obligation of
Reimbursement and all indebtedness of the Borrower arising under this Agreement,
the Note, any L/C Application completed by the Borrower or any other loan or
credit agreement or guaranty between the Borrower and the Lender, whether now in
effect or hereafter entered into; all such debts, liabilities and obligations
are herein collectively referred to as the "Obligations").
3.2 Notification of Account Debtors and Other Obligors. In
addition to the rights of the Lender under Section 6.10 hereof, with respect to
any and all rights to payment constituting Collateral, the Lender may at any
time (either before or after the occurrence of an Event of Default) notify any
account debtor or other person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and shall
be paid directly to the Lender. The Borrower will join in giving such notice if
the Lender so requests. At any time after the Borrower or the Lender gives such
notice to an account debtor or other obligor, the Lender may, but need not, in
the Lender's name or in the Borrower's name, (a) demand, xxx for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (b) as agent and attorney in fact of the Borrower,
notify the United States Postal Service to change the address for delivery of
the Borrower's mail to any address designated by the Lender, otherwise intercept
the Borrower's mail, and receive, open and otherwise handle the Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for the Borrower's account or forwarding such mail to the Borrower's last
known address.
3.3 Assignment of Insurance. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, any and all policies of insurance now or
at any time hereafter covering the Collateral or any evidence thereof or any
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business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether before or after the occurrence of any Event of
Default, the Lender may (but need not), in the Lender's name or in the
Borrower's name, execute and deliver proof of claim, receive all such monies,
endorse checks and other instruments representing payment of such monies, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.
3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the
Lender the right to take possession of the Premises at any time after the
occurrence and during the continuance of an Event of Default.
(b) The Lender may use the Premises only to hold,
process, manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the Lender may
in good xxxxx xxxx to be related or incidental purposes.
(c) The right of the Lender to hold the Premises
shall cease and terminate upon the earlier of (A) payment in full and discharge
of all Obligations, and (B) final sale or disposition of all goods constituting
Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or
account for any rent or other compensation for the possession, occupancy or use
of any of the Premises; provided, however, in the event that the Lender does pay
or account for any rent or other compensation for the possession, occupancy or
use of any of the Premises, the Borrower shall reimburse the Lender promptly for
the full amount thereof. In addition, the Borrower will pay, or reimburse the
Lender for, all taxes, fees, duties, imposts, charges and expenses at any time
incurred by or imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or the
provisions of this Section 3.4.
3.5 License. The Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral following an Event of Default.
3.6 Security Interest in Special Account and Collateral
Accounts. The Borrower hereby pledges, and grants to the Lender a security
interest in, all funds held in the Special Account and in the Collateral
Accounts from time to time and all proceeds thereof, as security for the payment
of all present and future Obligations of Reimbursement and all other
Obligations.
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ARTICLE IV
Conditions of Lending
---------------------
4.1 Conditions Precedent to the Initial Advance and the Term
Loan. The obligation of the Lender to make the initial Advance under the Credit
Facility or the one time disbursement of the Term Loan, shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed on behalf of
the Borrower.
(b) The Note, properly executed on behalf of the
Borrower.
(c) A true and correct copy of any and all leases
pursuant to which the Borrower is leasing the Premises, together with a
landlord's disclaimer and consent with respect to each such lease; and with
respect to any and all of the Premises owned by Borrower a mortgagee's
disclaimer as to all such Premises which are subject to a mortgage, deed of
trust or other lien.
(d) Collateral Account Agreements, duly executed by
both Borrowers and Norwest Bank Arizona, N.A. pursuant to which the Borrowers
and Norwest Bank Arizona, N.A. establish a depository accounts (the "Collateral
Accounts") in the name of and under the sole and exclusive control of the
Lender, from which such institution agrees to transfer finally collected funds
to the Lender for application to the Advances.
(e) Current searches of appropriate filing offices
showing that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements have been filed and
remain in effect against the Borrower, except those financing statements
relating to liens permitted pursuant to Section 7.1 hereof and those financing
statements filed by the Lender, and (iii) the Lender has duly filed all
financing statements necessary to perfect the Security Interests granted
hereunder, to the extent the Security Interests are capable of being perfected
by filing.
(f) A certificate of the Secretary or an Assistant
Secretary of each of Royal Grip and Roxxi, certifying as to (i) the resolutions
of the directors and, if required, the shareholders of each of Royal Grip and
Roxxi, authorizing the execution, delivery and performance of this Agreement and
the Security Documents, (ii) the articles of incorporation and bylaws of each of
Royal Grip and Roxxi, and (iii) the signatures of the officers or agents of each
of Royal Grip and Roxxi authorized to execute and deliver this Agreement, the
Loan Documents and other instruments, agreements and certificates, including
Advance requests, on behalf of each of Royal Grip and Roxxi.
(g) A current certificate issued by the Corporation
Commission of the state of each of Royal Grip's and Roxxi's incorporation,
certifying that they are in compliance with all corporate organizational
requirements of such state.
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(h) Evidence that each of Royal Grip and Roxxi is
duly licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary.
(i) A certificate of an officer of each of Royal Grip
and Roxxi confirming, in his official capacity, the representations and
warranties set forth in Article V hereof.
(j) An opinion of counsel to each of Royal Grip and
Roxxi, addressed to the Lender, together with the results of a litigation search
or searches showing all actions and proceedings where each of Royal Grip and
Roxxi is a defendant or involving a claim against the Borrower.
(k) Certificates of the insurance required hereunder,
with all hazard insurance containing a loss payee endorsement in favor of the
Lender and with all liability insurance naming the Lender as an additional
insured.
(l) Assignments of all Security Agreements and UCC-1
financing statements listing either Royal Grip or Roxxi as Secured Party and
Acushnet Rubber Company, Inc. ("Acushnet") as Debtor properly executed by Royal
Grip and Acushnet (the "Assignments of Security Agreements and UCCs").
(m) An Assignment of Capital Lease Agreement (the
"Capital Lease Agreement") dated December 21, 1996 entered into by and between
Royal Grip and Acushnet, properly executed by Royal Grip and Acushnet (the
"Assignment of Capital Lease Agreement").
(n) An Assignment of Patents, properly executed on
behalf of Borrower (the "Assignment of Patents").
(o) A Collateral Assignment of Trademarks, properly
executed on behalf of Borrower (the "Collateral Assignment of Trademarks").
(p) A Patent Mortgage, Assignment and Security
Agreement, properly executed on behalf of Borrower (the "Patent Mortgage").
(q) An Assignment of Trademarks, properly executed on
behalf of Borrower (the "Assignment of Trademarks").
(r) Evidence from the Borrower satisfactory to the
Lender establishing the amount of the Borrowing Base and a request for Advance
from the Borrower in an amount such that the minimum excess loan availability of
the Borrower after such Advance (the "Initial Advance") and payment of all fees
of the Lender required hereunder shall be $500,000.00.
(s) Management Support Agreements in favor of the
Lender properly executed by Xxxxx Xxxxxxx, Xxxxxx X.X. Xxxx XX and Xxx
Xxxxxxxxx.
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(t) Payment of the fees and commissions due through
the date of the Initial Advance, Term Loan, or Letter of Credit under Section
2.16 hereof and expenses incurred by the Lender through such date and required
to be paid by the Borrower under Section 9.7 hereof.
(u) Such other documents as the Lender in its sole
discretion may require.
4.2 Conditions Precedent to All Advances and The Term Loan.
The obligation of the Lender to make each Advance or the Term Loan shall be
subject to the further conditions precedent that on such date:
(a) the representations and warranties contained in
Article V hereof are correct on and as of the date of such Advance or Term Loan
as though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would
result from such Advance or Term Loan, as the case may be, which constitutes a
Default or an Event of Default.
ARTICLE V
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lender as follows:
5.1 Corporate Existence and Power; Name; Chief Executive
Office; Inventory and Equipment Locations. Royal Grip is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary. Roxxi is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada, and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. The Borrower has all requisite power
and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its corporate existence, the Borrower has done
business solely under the names set forth in Exhibit B hereto. The chief
executive office and principal place of business of the Borrower is located at
the address set forth in Exhibit B hereto, and all of the Borrower's records
relating to its business or the Collateral are kept at that location. All
Inventory and Equipment is located at that location or at one of the other
locations set forth in Exhibit B hereto. The Borrower's tax identification
number is correctly set forth in Section 9.4.
5.2 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the Loan
Documents and the
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borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (a) require any consent or
approval of the stockholders of either Royal Grip or Roxxi, (b) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof, (c) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
either Royal Grip or Roxxi or of the Articles of Incorporation or Bylaws of
either Royal Grip or Roxxi, (d) to the best of both of the Borrower's knowledge
after due inquiry, result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other material agreement, lease or
instrument to which either Royal Grip or Roxxi is a party or by which it or its
properties may be bound or affected, or (e) result in, or require, the creation
or imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature (other than the Security Interests)
upon or with respect to any of the properties now owned or hereafter acquired by
either Royal Grip or Roxxi.
5.3 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of Royal Grip and Roxxi, enforceable against Royal
Grip and Roxxi in accordance with their respective terms.
5.4 Subsidiaries. Except as set forth in Exhibit B attached
hereto, neither Borrower has any Subsidiaries.
5.5 Financial Condition; No Adverse Change. The Borrower has
heretofore furnished to the Lender consolidated audited financial statements of
Royal Grip and Roxxi for their fiscal year ended December 31, 1995, and
consolidated unaudited financial statements of Royal Grip and Roxxi for the
months ended October 31, 1996, and those statements fairly present the financial
condition of the Borrower on the dates thereof and the results of its operations
and cash flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles. Except as specifically set forth in
that certain Commitment Letter dated December 30, 1996, since the date of the
most recent financial statements, there has been no material adverse change in
the business, properties or condition (financial or otherwise) of the Borrower.
5.6 Litigation. To the best of both of the Borrower's
knowledge after due inquiry, there are no actions, suits or proceedings pending
or, to the knowledge of the Borrower, threatened against or affecting either
Borrower or any of their Affiliates or the properties of either Borrower or any
of their Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to the Borrower or any of its Affiliates, would have a
material adverse effect on the financial condition, properties or operations of
the Borrower or any of its Affiliates.
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5.7 Regulation U. Neither Borrower is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance or Term Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
5.8 Taxes. To the best of both of the Borrower's knowledge
after due inquiry, the Borrower and its Affiliates have paid or caused to be
paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them. The Borrower and its Affiliates have
filed all federal, state and local tax returns which to the knowledge of the
officers of the Borrower or any Affiliate, as the case may be, are required to
be filed, and the Borrower and its Affiliates have paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.
5.9 Titles and Liens. The Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest balance
sheet referred to in Section 5.5 hereof and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances, except for (i)
mortgages, security interests and liens permitted by Section 7.1 hereof, (ii)
liens in favor of Biltmore Investors Bank, securing the repayment of
indebtedness which will be fully repaid with the proceeds of the Initial
Advance, and (iii) in the case of any such property which is not Collateral or
other collateral described in the Security Documents, covenants, restrictions,
rights, easements and minor irregularities in title which do not materially
interfere with the business or operations of the Borrower as presently
conducted. No financing statement naming the Borrower as debtor is on file in
any office except to perfect only security interests permitted by Section 7.1
hereof and clause (ii) above.
5.10 Plans. Except as disclosed to the Lender in writing prior
to the date hereof, neither Borrower nor any of their Affiliates maintains or
has maintained any Plan. Neither Borrower nor any Affiliate has received any
notice or has any knowledge to the effect that it is not in full compliance with
any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists in connection with any Plan. Neither Borrower nor any of their Affiliates
has:
(a) Any accumulated funding deficiency within the
meaning of ERISA; or
(b) Any liability or knows of any fact or
circumstances which could result in any liability to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued benefits which
or which may become payable to participants or beneficiaries of any such Plan).
5.11 Default. To the best of both of the Borrower's knowledge
after due inquiry, each Borrower is in compliance with all provisions of all
agreements, instruments, decrees and orders to which it is a party or by which
it or its property is bound or affected, the
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breach or default of which could have a material adverse effect on the financial
condition, properties or operations of the Borrower.
5.12 Environmental Protection. To the best of both of the
Borrower's knowledge after due inquiry, the Borrower has obtained all permits,
licenses and other authorizations which are required under federal, state and
local laws and regulations relating to emissions, discharges, releases of
pollutants, contaminants, hazardous or toxic materials, or wastes into ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes ("Environmental Laws") at the Borrower's facilities or in
connection with the operation of its facilities. The Borrower shall provide
copies of all such permits, licenses and other authorizations to the Lender upon
the Lender's request. The Borrower also shall provide to the Lender copies of
all environmental investigation and inspection reports available to the Borrower
that pertain to the Borrower's facilities, upon the Lender's request. Except as
previously disclosed to the Lender in writing, to the best of both of the
Borrower's knowledge after due inquiry, the Borrower and all activities of the
Borrower at its facilities comply with all Environmental Laws and with all terms
and conditions of any required permits, licenses and authorizations applicable
to the Borrower with respect thereto. Except as previously disclosed to the
Lender in writing, the Borrower is also in compliance with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in Environmental Laws or contained in any
plan, order, decree, judgment or notice of which the Borrower is aware. Except
as previously disclosed to the Lender in writing, the Borrower is not aware of,
nor has the Borrower received notice of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent continued compliance with, or which may give rise to any liability
under, any Environmental Laws. Except as previously disclosed to the Lender in
writing, the Borrower has received no inquiry from any federal, state or local
agency concerning the Borrower's facilities or any adjacent properties involving
possible environmental contamination or violations of any Environmental Laws,
and has no knowledge of any such inquiry to any party concerning the Borrower's
facilities or any adjacent properties. The Borrower agrees to notify Lender
promptly in writing of any inquiries by third parties or regulatory agencies
concerning the possible presence of environmental contamination on the
Borrower's facilities or any adjacent properties or concerning any possible
violations of Environmental Laws involving the Borrower's facilities or any
adjacent properties. The Lender shall have the right to enter the Borrower's
facilities for the purpose of conducting environmental investigations, including
taking soil and water samples, during the Borrower's normal business hours of
operation.
5.13 Submissions to the Lender. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
5.14 Financing Statements. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the Security
Interests and the other security
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interests created by the Security Documents. When such financing statements are
filed in the offices noted therein, the Lender will have a valid and perfected
security interest in all Collateral and all other collateral described in the
Security Documents which is capable of being perfected by filing financing
statements. None of the Collateral or other collateral covered by the Security
Documents is or will become a fixture on real estate, unless a sufficient
fixture filing is in effect with respect thereto.
5.15 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
ARTICLE VI
Affirmative Covenants of the Borrower
-------------------------------------
So long as the Note shall remain unpaid, the Credit Facility
or any Letter of Credit shall be outstanding, the Borrower will comply with the
following requirements, unless the Lender shall otherwise consent in writing:
6.1 Reporting Requirements. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90
days after the end of each fiscal year of the Borrower, consolidated audited
financial statements of Royal Grip and Roxxi with the unqualified opinion of
independent certified public accountants selected by the Borrower and acceptable
to the Lender, which annual financial statements shall include the balance sheet
of the Borrower as at the end of such fiscal year and the related statements of
income, retained earnings and cash flows of the Borrower for the fiscal year
then ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any other Affiliates, all in reasonable detail and
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the accounting practices applied in the financial
statements referred to in Section 5.5 hereof, together with (i) a report signed
by such accountants stating that in making the investigations necessary for said
opinion they obtained no knowledge, except as specifically stated, of any
Default or Event of Default hereunder and all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the Borrower is
in compliance with the requirements set forth in Sections 6.12 through 6.14 and
Section 7.10 hereof; and (ii) a certificate of the Vice President of Finance or
any other officer of each of Royal Grip and Roxxi stating that such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the accounting practices reflected
in the annual financial statements referred to in Section 5.5 hereof and whether
or not such officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts with
respect thereto;
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(b) as soon as available and in any event within 20
days after the end of each month, a consolidated unaudited/internal balance
sheet and statements of income and retained earnings of Royal Grip and Roxxi as
at the end of and for such month and for the year to date period then ended,
prepared, if the Lender so requests, on a consolidating and consolidated basis
to include any other Affiliates, in reasonable detail and stating in comparative
form the figures for the corresponding date and periods in the previous year,
all prepared in accordance with generally accepted accounting principles applied
on a basis consistent with the accounting practices reflected in the financial
statements referred to in Section 5.5 hereof, subject to year-end audit
adjustments; and accompanied by a certificate of the Vice President of Finance
or any other officer of each of Royal Grip and Roxxi, substantially in the form
of Exhibit D hereto stating (i) that such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the accounting practices reflected in the financial
statements referred to in Section 5.5 hereof, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the occurrence of
any Default or Event of Default hereunder not theretofore reported and remedied
and, if so, stating in reasonable detail the facts with respect thereto, and
(iii) all relevant facts in reasonable detail to evidence, and the computations
as to, whether or not the Borrower is in compliance with the requirements set
forth in Sections 6.12 through 6.14 and Section 7.10 hereof;
(c) within 15 days after the end of each month,
agings of the Borrower's accounts receivable and its accounts payable and an
inventory certification report as at the end of such month;
(d) at least 30 days before the beginning of each
fiscal year of the Borrower, the projected balance sheets and income statements
for each month of such year, each in reasonable detail, representing the good
faith projections of the Borrower and certified by the Borrower's Vice President
of Finance or any other officer as being the most accurate projections available
and identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as the Lender
may in its discretion require;
(e) immediately after the commencement thereof,
notice in writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type described
in Section 5.6 hereof or which seek a monetary recovery against the Borrower in
excess of $50,000.00;
(f) as promptly as practicable (but in any event not
later than five business days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default under any
Security Document or any event which constitutes a Default or Event of Default
hereunder, notice of such occurrence, together with a detailed statement by a
responsible officer of the Borrower of the steps being taken by the Borrower to
cure the effect of such breach, default or event;
(g) as soon as possible and in any event within 30
days after the Borrower knows or has reason to know that any Reportable Event
with respect to any Plan has occurred, the statement of the Vice President of
Finance or any other officer of the Borrower
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setting forth details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10
days after the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code of 1986,
as amended, the statement of the Vice President of Finance or any other officer
of the Borrower setting forth details as to such failure and the action which
the Borrower proposes to take with respect thereto, together with a copy of any
notice of such failure required to be provided to the Pension Benefit Guaranty
Corporation;
(i) promptly upon knowledge thereof, notice of (i)
any disputes or claims by customers of the Borrower in excess of $10,000.00;
(ii) any goods returned to or recovered by the Borrower valued in excess of
$10,000.00; and (iii) any change in the persons constituting the officers and
directors of the Borrower;
(j) promptly upon knowledge thereof, notice of any
loss of or material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any Collateral or
such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all
financial statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(l) promptly after the sending or filing thereof,
copies of all regular and periodic financial reports which the Borrower shall
file with the Securities and Exchange Commission or any national securities
exchange;
(m) promptly upon knowledge thereof, notice of the
violation by the Borrower of any law, rule or regulation, the non-compliance
with which could materially and adversely affect its business or its financial
condition; and
(n) from time to time, with reasonable promptness,
any and all receivables schedules, collection reports, deposit records,
equipment schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports, records
or information as the Lender may request.
(o) on each Banking Day assignment of Receivables,
collections and deposit information of the Borrower.
6.2 Books and Records; Inspection and Examination. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to the Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with generally accepted
accounting principles consistently applied and, upon request of the Lender, will
permit
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any officer, employee, attorney or accountant for the Lender to audit, review,
make extracts from or copy any and all corporate and financial books and records
of the Borrower at all times during ordinary business hours, to send and discuss
with account debtors and other obligors requests for verification of amounts
owed to the Borrower, and to discuss the affairs of the Borrower with any of its
directors, officers, employees or agents. The Borrower will permit the Lender,
or its employees, accountants, attorneys or agents, to examine and inspect any
Collateral, other collateral covered by the Security Documents or any other
property of the Borrower at any time during ordinary business hours.
6.3 Account Verification. The Borrower will at any time and
from time to time upon request of the Lender send requests for verification of
accounts or notices of assignment to account debtors and other obligors.
6.4 Compliance with Laws; Environmental Indemnity. The
Borrower will (a) comply with the requirements of applicable laws and
regulations, the non-compliance with which would materially and adversely affect
its business or its financial condition, (b) comply with all applicable
Environmental Laws and obtain any permits, licenses or similar approvals
required by any such Environmental Laws, and (c) use and keep the Collateral,
and will require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or
ordinance. Each Borrower will, jointly and severally, indemnify, defend and hold
the Lender harmless from and against any claims, loss or damage to which the
Lender may be subjected as a result of any past, present or future existence,
use, handling, storage, transportation or disposal of any hazardous waste or
substance or toxic substance by either Borrower or on property owned, leased or
controlled by either Borrower. This indemnification agreement shall survive the
termination of this Agreement and payment of the indebtedness hereunder.
6.5 Payment of Taxes and Other Claims. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interests, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower; provided, that the Borrower shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and so long as the Collateral and Lender's lien thereon is not in
any manner impaired by any enforcement remedy available to the tax levying
entity during the period of such contest.
6.6 Maintenance of Properties.
(a) The Borrower will keep and maintain the
Collateral, the other collateral covered by the Security Documents and all of
its other properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided, however,
that nothing in this Section 6.6 shall prevent the Borrower from discontinuing
the operation and
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maintenance of any of its properties if such discontinuance is, in the judgment
of the Lender, desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against
all claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other
collateral covered by the Security Documents free and clear of all security
interests, liens and encumbrances except the Security Interests and other
security interests permitted by Section 7.1 hereof.
6.7 Insurance. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may reasonably
request, with any loss payable to the Lender to the extent of its interest, and
all policies of such insurance shall contain a lender's loss payable endorsement
for the benefit of the Lender. All policies of liability insurance required
hereunder shall name the Lender as an additional insured.
6.8 Preservation of Corporate Existence. Each Borrower will
preserve and maintain its corporate existence and all of its rights, privileges
and franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
6.9 Delivery of Instruments, etc. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by the Borrower.
6.10 Collateral Accounts.
(a) Each Borrower agrees to deposit in its respective
Collateral Account or, at the Lender's option, to deliver to the Lender all
collections on Accounts, contract rights, chattel paper and other rights to
payment constituting Collateral (but not the proceeds of any loan to Borrower as
a borrower made by any party other than Lender and permitted under the terms of
this Agreement), and all other cash proceeds of Collateral, which the Borrower
may receive immediately upon receipt thereof, in the form received, except for
the Borrower's endorsement when deemed necessary. Until delivered to the Lender
or deposited in the Collateral Accounts, all proceeds or collections of
Collateral shall be held in trust by the Borrower for and as the property of the
Lender and shall not be commingled with any funds or property of the Borrower.
Amounts deposited in the Collateral Accounts shall not bear interest and shall
not be subject to withdrawal by the Borrower, except after full payment and
discharge of all Obligations. All
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such collections shall constitute proceeds of Collateral and shall not
constitute payment of any Obligation. Collected funds from the Collateral
Accounts shall be transferred to the Lender's general account, and the Lender
may deposit in its general account or in the Collateral Accounts any and all
collections received by it directly from the Borrower. The Lender may commingle
such funds with other property of the Lender or any other person. The Lender
from time to time at its discretion shall, after allowing (i) two Banking Days
after deposit in the Collateral Accounts and/or (ii) one Banking Day after
direct deposit in Lender's Account Xx. 00-00-000 xx Xxxxxxx Xxxx Xxxxxxxxx, XX,
xxx/xx (xxx) such later date as may be required for collection, apply such funds
to the payment of any and all Obligations, in any order or manner of application
satisfactory to the Lender. All items delivered to the Lender or deposited in
the Collateral Accounts shall be subject to final payment. If any such item is
returned uncollected, the Borrower will immediately pay the Lender, or, for
items deposited in the Collateral Accounts, the bank maintaining such account,
the amount of that item, or such bank at its discretion may charge any
uncollected item to the Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the Collateral
Accounts, whether or not in fact endorsed by the Borrower.
(b) If a Default or Default Period exists and upon
demand of the Lender, the Borrower shall establish one or more lockbox accounts
as directed by the Lender with such banks or depository institutions as shall be
satisfactory to the Lender and shall irrevocably direct all present and future
Account Debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to such lockbox account. All of the
Borrower's invoices, account statements and other written or oral communications
directing, instructing, demanding or requesting payment of any Account or any
other amount constituting Collateral shall conspicuously direct that all
payments be made to such lockbox and shall include such lockbox address or
addresses. All payments received in such lockbox accounts shall be processed to
the Collateral Accounts.
6.11 Performance by the Lender. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives the Borrower written notice thereof
(or in the case of the agreements contained in Sections 6.5, 6.7 and 6.10
hereof, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrower (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate or the Incentive Rate, if then applicable to the Credit Facility.
To facilitate the performance or observance by the Lender of
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such covenants of the Borrower, the Borrower hereby irrevocably appoints the
Lender, or the delegate of the Lender, acting alone, as the attorney in fact of
the Borrower (which appointment is coupled with an interest) with the right (but
not the duty) from time to time to create, prepare, complete, execute, deliver,
endorse or file in the name and on behalf of the Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by the Borrower under this Section
6.11.
6.12 Debt Service Coverage Ratio. The Borrower agrees that it
shall, as of the last day of each fiscal quarter, on and after June 30, 1997,
maintain an average minimum debt service coverage ratio (based upon the period
set forth below) as follows:
Quarter Ending Debt Service Coverage Ratio
-------------- ---------------------------
June 30, 1997 1.0 to 1 based upon the immediately
preceding five month period
December 31, 1997 1.25 to 1 based upon the immediately
preceding eleven month period
March 31, 1998 and on the last day of 1.25 to 1 based upon the immediately
each fiscal quarter thereafter preceding twelve month period
The debt service coverage ratio shall be calculated according
to the following formula:
Funds from Operations + Interest Expense - Unfinanced Portion of Capital Expenditures
-------------------------------------------------------------------------------------
Current Maturities Long-Term Debt (actually paid during the period) + Interest Expense
6.13 Net Worth. The Borrower warrants that, as of December 31,
1996 Borrower has a minimum Net Worth of not less than $6,300,000.00. The
Borrower covenants that the minimum Net Worth as of the end of each future
fiscal quarter end shall be not less than the amounts set forth below as
measured from the immediately preceding fiscal quarter ending Net Worth.
Net Worth Increase
Quarter Ending (Decrease)
-------------- ----------------
March 31 ($300,000.00)
June 30 $400,000.00
September 30 $150,000.00
December 31 ($250,000.00)
Notwithstanding anything to the contrary, beginning with the fiscal year ending
December 31, 1997, and continuing each fiscal year thereafter, the Borrower's
minimum Net Worth as of the end of each fiscal year end shall increase by not
less than $300,000.00 over the Borrower's Net Worth as of the end of the
immediately preceding fiscal year end.
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6.14 Net Income. The Borrower covenants that beginning with
the fiscal quarter ending March 31, 1997, and continuing each fiscal quarter
thereafter, it shall achieve a Net Income of at least (or, in the event a Net
Loss is allowed for such fiscal quarter, a Net Loss of not more than) the amount
set forth below for each fiscal quarter of each fiscal year.
Quarter Ending Net Income (Loss)
-------------- -----------------
March 31 ($300,000.00)
June 30 $400,000.00
September 30 $150,000.00
December 31 ($250,000.00)
Notwithstanding anything to the contrary, beginning with April of 1997, and
continuing for each month thereafter, the Borrower shall not suffer a Net Loss
in excess of $100,000.00 in any one month. Notwithstanding anything to the
contrary, beginning with the fiscal year ending December 31, 1997, and
continuing each fiscal year thereafter, the Borrower shall achieve a Net Income
of not less than $300,000.00.
ARTICLE VII
Negative Covenants
------------------
So long as the Note shall remain unpaid, the Credit Facility
shall be outstanding or any Letter of Credit shall be outstanding, the Borrower
agrees that, without the prior written consent of the Lender:
7.1 Liens. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; excluding, however, from the operation of the
foregoing:
(a) mortgages, deeds of trust, pledges, liens,
security interests and assignments in existence on the date hereof and listed in
Exhibit C hereto, securing indebtedness for borrowed money permitted under
Section 7.2(b) hereof;
(b) the Security Interests; and
(c) purchase money security interests relating to
Capital Expenditures (and which attach only to the assets acquired by such
Capital Expenditures) made after the date of this Agreement by the Borrower or
any Affiliate so long as the Borrower is in, and maintains, compliance with
every other provision of this Agreement.
7.2 Indebtedness. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations, except:
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(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the
date hereof and listed in Exhibit C hereto; and
(c) indebtedness relating to liens permitted in
accordance with Section 7.1(c) hereof.
7.3 Guaranties. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the
Borrower for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or
contingent liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Exhibit C hereto.
7.4 Investments and Subsidiaries. (a) The Borrower will not
purchase or hold beneficially any stock or other securities or evidences of
indebtedness of, make or permit to exist any loans or advances to, or make any
investment or acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture, except:
(i) investments in direct obligations of the
United States of America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued by U.S.
corporations rated "A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by Xxxxx'x Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by the Federal
Deposit Insurance Corporation);
(ii) travel advances or loans to officers
and employees of the Borrower not exceeding at any one time an aggregate of
$20,000.00; and
(iii) advances in the form of progress
payments, prepaid rent or security deposits.
(b) The Borrower will not create or permit to exist
any Subsidiary, other than any Subsidiary in existence on the date hereof and
listed in Exhibit B hereto.
7.5 Dividends. The Borrower will not declare or pay any
dividends (other than dividends payable solely in stock of the Borrower) on any
class of its stock or make any payment on account of the purchase, redemption or
other retirement of any shares of such stock
-34-
or make any distribution in respect thereof, either directly or indirectly;
provided, however, that if the Borrower is an S Corporation within the meaning
of the Internal Revenue Code of 1986, as amended, or shall become such an S
Corporation with the Lender's consent under Section 7.16 hereof, and after first
providing such supporting documentation as the Lender may request, the Borrower
may pay dividends in an amount equal to the amount of state and federal income
tax which would be due by each shareholder with respect to income deemed to be
received by such shareholder from the Borrower as a result of the Borrower's
status as an S Corporation at the highest marginal income tax rate for federal
and state (for the state or states in which each shareholder is liable for
income taxes with respect to such income) income tax purposes, after taking into
account any deduction for state income taxes in calculating the federal income
tax liability.
7.6 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
7.7 Consolidation and Merger; Asset Acquisitions. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
7.8 Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
7.9 Restrictions on Nature of Business. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
7.10 Capital Expenditures. The Borrower will not expend or
contract to make unfinanced Capital Expenditure greater than $800,000.00 in the
aggregate during any fiscal year for the lease, purchase or other acquisition of
any capital asset, or for the lease of any other asset, whether payable
currently or in the future.
7.11 Accounting. The Borrower will not adopt any material
change in accounting principles other than as required by generally accepted
accounting principles. The Borrower will not adopt, permit or consent to any
change in its fiscal year.
-35-
7.12 Discounts, etc. The Borrower will not, after notice from
the Lender, grant any discount, credit or allowance to any customer of the
Borrower or accept any return of goods sold, or at any time (whether before
after notice from the Lender) modify, amend, subordinate, cancel or terminate
the obligation of any account debtor or other obligor of the Borrower.
7.13 Defined Benefit Pension Plans. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10 hereof.
7.14 Other Defaults. The Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon the Borrower.
7.15 Place of Business; Name. The Borrower will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interests. The Borrower will not change
its name.
7.16 Organizational Documents; S Corporation Status. The
Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrower will not become an S Corporation within
the meaning of the Internal Revenue Code of 1986, as amended, or, if the
Borrower already is such an S Corporation, it shall not change or rescind its
status as an S Corporation.
7.17 Salaries. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 10% or as recommended by Borrower's Board of
Directors in any one year, either individually or for all such persons in the
aggregate, or pay any such increase from any source other than profits earned in
the year of payment.
7.18 Issuance of Stock/Loss of Voting Control. Except as
required in order for the Borrower to comply with its contractual obligations
contained in that certain Manufacturing Supply Agreement dated December 21, 1996
entered into by and between Royal Grip and Acushnet (the "Manufacturing
Agreement"), the Borrower will not issue or sell any stock of the Borrower. The
Borrower shall not permit or suffer to occur any transfer, assignment, pledge or
other disposition of any or all of the issued and outstanding stock of the
Borrower so as to materially change the voting control of the Borrower.
7.19 Payments to Affiliates. Royal Grip shall not, without the
express written consent of Lender, which consent may be granted or withheld in
Lender's sole discretion, make any transfer, conveyance, loan or payment of any
kind to Roxxi or any other Affiliates in excess of $500,000.00 per fiscal year.
Roxxi shall not, without the express written consent of Lender,
-36-
which consent may be granted or withheld in Lender's sole discretion, make any
transfer, conveyance, loan or payment of any kind to any Affiliate other than
Royal Grip.
7.20 Management Control. The Borrower shall not permit or
suffer to occur any change in its current executive management structure.
ARTICLE VIII
Events of Default, Rights and Remedies
--------------------------------------
8.1 Events of Default. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of any interest on or
principal of the Note when it becomes due and payable; or
(b) Failure to pay when due any amount specified in
Section 2.5 hereof relating to the Borrower's Obligation of Reimbursement, or
failure to pay immediately when due or upon termination of the Credit Facility
any amounts required to be paid for deposit in the Special Account under Section
2.6 or 2.11 hereof; or
(c) Default in the payment of any fees, commissions,
costs or expenses required to be paid by the Borrower under this Agreement; or
(d) Default in the performance, or breach, of any
covenant or agreement of the Borrower contained in this Agreement other than a
covenant or agreement which is specifically dealt with in this Section 8.1 and
the continuance thereof for a period of 5 days after the actual knowledge
thereof by an executive officer of either Borrower or receipt of written notice
thereof from the Lender; or
(e) Either Royal Grip or Roxxi shall be or become
insolvent, or admit in writing its inability to pay its or his debts as they
mature, or make an assignment for the benefit of creditors; or either Royal Grip
or Roxxi shall apply for or consent to the appointment of any receiver, trustee,
or similar officer for it or for all or any substantial part of its property; or
such receiver, trustee or similar officer shall be appointed without the
application or consent of Royal Grip or Roxxi, as the case may be; or either
Royal Grip or Roxxi shall institute (by petition, application, answer, consent
or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against Royal Grip or Roxxi
and shall not be dismissed within 60 calendar days; or any judgment, writ,
warrant of attachment, garnishment or execution or similar process shall be
issued or levied against a substantial part of the property of Royal Grip or
Roxxi; or
-37-
(f) A petition shall be filed by or against (which
when filed against shall not be dismissed within 60 calendar days) either Royal
Grip or Roxxi under the United States Bankruptcy Code naming Royal Grip or Roxxi
as debtor; or
(g) Any representation or warranty made by the
Borrower in this Agreement or by the Borrower (or any of its officers) in any
agreement, certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement shall prove to have been incorrect in any material respect when deemed
to be effective; or
(h) The rendering against either Royal Grip or Roxxi
of a final judgment, decree or order for the payment of money in excess of
$50,000.00 and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of 30 consecutive days without a stay of execution; or
(i) A default under any bond, debenture, note or
other evidence of indebtedness of either Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any such
evidence of indebtedness has been issued or by which it is governed, or under
any lease of any of the Premises, and the expiration of the applicable period of
grace, if any, specified in such evidence of indebtedness, indenture, other
instrument or lease; or
(j) Any Reportable Event, which the Lender determines
in good faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to the Borrower by the Lender; or a
trustee shall have been appointed by an appropriate United States District Court
to administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed to make
any quarterly contribution required with respect to any Plan under Section
412(m) of the Internal Revenue Code of 1986, as amended, which the Lender
determines in good faith may by itself, or in combination with any such failures
that the Lender may determine are likely to occur in the future, result in the
imposition of a lien on the assets of the Borrower in favor of the Plan; or
(k) An event of default shall occur under any
Security Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any obligations of
the Borrower hereunder or under any note; or
(l) Either Borrower shall liquidate, dissolve,
terminate or suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of its assets,
without the prior written consent of the Lender; or
(m) Either Borrower shall fail to pay, withhold,
collect or remit any tax or tax deficiency when assessed or due (other than any
tax deficiency which is being contested
-38-
in good faith and by proper proceedings and for which it shall have set aside on
its books adequate reserves therefor) or notice of any state or federal tax
liens shall be filed or issued; or
(n) Default in the payment of any amount owed by
either Borrower to the Lender other than any indebtedness arising hereunder; or
(o) Any event of default shall occur (and not be
cured within the prescribed cure period) under the Manufacturing Agreement or
the Capital Lease Agreement; or
(p) Any breach, default or event of default by or
attributable to any Affiliate under any agreement between such Affiliate and the
Lender.
8.2 Rights and Remedies. Upon the occurrence of an Event of
Default or at any time thereafter during the resulting Default Period, the
Lender may exercise any or all of the following rights and remedies:
(a) The Lender may, by notice to the Borrower,
declare the Credit Facility to be terminated, whereupon the same shall forthwith
terminate;
(b) The Lender may, by notice to the Borrower,
declare to be forthwith due and payable the entire unpaid principal amount of
the Note then outstanding, all interest accrued and unpaid thereon, all amounts
payable under this Agreement and any other Obligations, whereupon the Note, all
such accrued interest and all such amounts and Obligations shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower;
(c) The Lender may, without notice to the Borrower
and without further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Advances and the Term Loan, including interest
accrued thereon, and of all other sums then owing by the Borrower hereunder,
including, without limitation, the Obligation of Reimbursement;
(d) The Lender may make demand upon the Borrower and,
forthwith upon such demand, the Borrower will pay to the Lender in immediately
available funds for deposit in the Special Account pursuant to Sections 2.11 and
3.6 hereof an amount equal to the maximum aggregate amount available to be drawn
under all Letters of Credit then outstanding, assuming compliance with all
conditions for drawing thereunder;
(e) The Lender may exercise and enforce any and all
rights and remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of Collateral, or
any evidence thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Borrower hereby expressly
waives) and the right to sell, lease or otherwise dispose of any or all of the
Collateral, and, in connection therewith, the Borrower will on demand assemble
the Collateral
-39-
and make it available to the Lender at a place to be designated by the Lender
which is reasonably convenient to both parties;
(f) the Lender may exercise and enforce its rights
and remedies under the Loan Documents; and
(g) the Lender may exercise any other rights and
remedies available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 8.1(f) hereof, the entire unpaid principal amount of the
Note and the Obligation of Reimbursement (whether contingent or funded), all
interest accrued and unpaid thereon, all other amounts payable under this
Agreement and any other Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.
8.3 Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten calendar days prior
to the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
-------------
9.1 No Waiver; Cumulative Remedies. No failure or delay on the
part of the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
9.2 Amendments, Etc. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any departure by
the Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
9.3 Addresses for Notices, Etc. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy,
-40-
in each case addressed to the party to whom notice is being given at its address
as set forth below and, if telecopied, transmitted to that party at its
telecopier number set forth below:
If to Royal Grip or Roxxi:
Royal Grip, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxx Xxxxxxxxx
If to the Lender:
Norwest Business Credit, Inc.
Norwest Tower, Mail Station 9025
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II hereof shall not
be effective until received by the Lender.
9.4 Financing Statement. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtors:
Royal Grip, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Federal Tax Identification No. 00-0000000
Roxxi, Inc.
0000 XX 00xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Federal Tax Identification No. 00-0000000
-41-
Name and address of Secured Party:
Norwest Business Credit, Inc.
Norwest Tower, Mail Station 9025
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxxx
9.5 Further Documents. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interests or the rights of the Lender under this
Agreement (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of this Agreement and the Security Interests,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
9.6 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
9.7 Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses, including (without limitation) reasonable attorneys'
fees, incurred by the Lender in connection with the Obligations, this Agreement,
the Loan Documents, any Letters of Credit, and any other document or agreement
related hereto or thereto, and the transactions contemplated hereby, including
without limitation all such costs, expenses and fees incurred in connection with
the negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interests.
9.8 Indemnity. In addition to the payment of expenses pursuant
to Section 9.7 hereof and the environmental indemnity pursuant to Section 6.4
hereof, Royal Grip and Roxxi, jointly and severally agree to indemnify, defend
and hold harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees and agents of the
foregoing (the "Indemnitees"), from and against (i) any and all transfer taxes,
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution
-42-
and delivery of this Agreement and the other Loan Documents or the making of the
Advances, Term Loan or issuance of any Letter of Credit, and (ii) any and all
liabilities, losses, damages, penalties, judgments, suits, claims, costs and
expenses of any kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection with any
investigative, administrative or judicial proceedings, whether or not such
Indemnitee shall be designated a party thereto, which may be imposed on,
incurred by or asserted against such Indemnitee, in any manner relating to or
arising out of or in connection with the making of the Advances, Term Loan, or
the issuance of any Letter of Credit, this Agreement and all other Loan
Documents or the use or intended use of the proceeds of the Advances or any
Letter of Credit (the "Indemnified Liabilities"). If any investigative, judicial
or administrative proceeding arising from any of the foregoing is brought
against any Indemnitee, upon request of such Indemnitee, Royal Grip and Roxxi,
or counsel designated by either one and satisfactory to the Indemnitee, will
resist and defend such action, suit or proceeding to the extent and in the
manner directed by the Indemnitee, at the Borrower's sole cost and expense. Each
Indemnitee will use its best efforts to cooperate in the defense of any such
action, suit or proceeding. If the foregoing undertaking to indemnify, defend
and hold harmless may be held to be unenforceable because it violates any law or
public policy, the Borrower shall nevertheless make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The obligation of the Borrower under this
Section 9.8 shall survive the termination of this Agreement and the discharge of
the Borrower's other Obligations.
9.9 Participants. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the participants, successors or assigns of the Lender.
9.10 Execution in Counterparts. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
9.11 Binding Effect; Assignment; Complete Agreement; Sharing
of Information. The Loan Documents shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the prior written consent of the
Lender. This Agreement, together with the Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof and
supersedes all prior agreements, written or oral, on the subject matter hereof.
Without limitation of the Lender's right to share information regarding the
Borrower and its Affiliates with Lender's participants, accountants, lawyers and
other advisors, the Lender may share at any time with Norwest Corporation, and
all direct and indirect subsidiaries of Norwest Corporation, any and all
information the Lender may have in its possession regarding the Borrower and its
Affiliates, and the Borrower waives any right of confidentiality it may have
with respect to such sharing of such information.
-43-
9.12 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona. Each party
consents to the personal jurisdiction of the state and federal courts located in
the State of Arizona in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient
and agrees that any litigation initiated by any of them in connection with this
Agreement shall be venued in either the Superior Court of Maricopa County,
Arizona, or the United States District Court, District of Arizona. The parties
waive any right to trial by jury in any action or proceeding based on or
pertaining to this Agreement.
9.13 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
9.14 Headings. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS
-44-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
ROYAL GRIP, INC., a Nevada corporation
By /s/ Xxx Xxxxxxxxx
----------------------------------
Its Secretary
------------------------------
ROXXI, INC., a Nevada corporation
By /s/ Xxx Xxxxxxxxx
----------------------------------
Its Secretary
------------------------------
NORWEST BUSINESS CREDIT, INC., a
Minnesota corporation
By /s/ Xxxx Xxxxxx
----------------------------------
Its Vice President
------------------------------
-45-
Exhibit A to Credit and
Security Agreement
REVOLVING AND TERM NOTE
$2,450,000.00 Phoenix, Arizona
_________, 1997
For value received, the undersigned, ROYAL GRIP, INC., a
Nevada corporation and ROXXI, INC., a Nevada corporation (collectively, the
"Borrower"), hereby jointly and severally promise to pay on January 31, 2000 to
the order of Norwest Business Credit, Inc., a Minnesota corporation (the
"Lender"), at its office in Phoenix, Arizona, or at any other place designated
at any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of TWO MILLION
FOUR HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($2,450,000.00) or, if less, the
aggregate unpaid principal amount of all Advances and the Term Loan made by the
Lender to the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to time,
computed on the basis of the actual number of days elapsed and a 360-day year,
from the date hereof until this Note is fully paid at the rate from time to time
in effect under the Credit and Security Agreement of even date herewith (the
"Credit Agreement") by and between the Lender and the Borrower. The principal
hereof and interest accruing thereon shall be due and payable as provided in the
Credit Agreement. This Note may be prepaid only in accordance with the Credit
Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the
Credit Agreement and the Security Documents as therein defined, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements.
Both entities constituting the Borrower hereby, jointly and
severally, agree to pay all costs of collection, including attorneys' fees and
legal expenses in the event this Note is not paid when due, whether or not legal
proceedings are commenced.
The Borrower agrees that the interest rate contracted for
includes the interest rate set forth herein plus any other charges or fees set
forth herein and costs and expenses incident to this transaction paid by the
Borrower to the extent the same are deemed interest under applicable law.
A-1
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
ROYAL GRIP, INC., a Nevada corporation
By __________________________________
Its ________________________________
ROXXI, INC., a Nevada corporation
By __________________________________
Its ________________________________
A-2
Exhibit B to Credit and
Security Agreement
Names
-----
None
Chief Executive Office/Principal Place of Business
--------------------------------------------------
Royal Grip: 000 Xxxx Xxxxxx Xxxxx, Xxxxx, XX 00000
Roxxi: 0000 XX 00xx Xxxxxx, Xxxxxxxx Xxxx, XX 00000
Other Inventory and Equipment Locations
---------------------------------------
ACUSHNET LOCATION
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
Subsidiaries
------------
Roxxi is a subsidiary of Royal Grip
B-1
Exhibit C to Credit and
Security Agreement
Permitted Liens, Indebtedness and Guaranties
--------------------------------------------
Liens
-----
NONE
Indebtedness
------------
$6,000,000.00 owed by Roxxi to Royal Grip
Guaranties
----------
NONE
C-1
Exhibit D to Credit and
Security Agreement
Compliance Certificate
----------------------
To: ______________________
Norwest Business Credit, Inc.
Date: ____________________
Subject: ______________________________
Financial Statements
In accordance with our Credit and Security Agreement dated as
of ____________________ (the "Credit Agreement"), attached are the financial
statements of Royal Grip, Inc. and/or Roxxi, Inc., as applicable (the
"Borrower") and the year-to-date period then ended (the "Current Financials").
All terms in this certificate have the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the financial condition of the Borrower as of the date thereof.
Events of Default. (Check one):
___ The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under the Credit
Agreement.
___ The undersigned has knowledge of the occurrence
of a Default or Event of Default under the Credit Agreement
and attached hereto is a statement of the facts with respect
to thereto.
Financial Covenants. I further hereby certify as follows:
___ The Reporting Date does not correspond to the end
of the Borrower's fiscal quarters, hence I am completing only
paragraphs ___ below.
___ The Reporting Date corresponds to the end of one
of the Borrower's fiscal quarters, hence I am completing all
paragraphs below.
1. Minimum Debt Service Coverage Ratio. Pursuant to
Section 6.12 of the Credit Agreement, for the applicable
period ending on the Reporting Date, the Borrower's Debt
Service Coverage Ratio was ___ to 1.00, which
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____ satisfies ____ does not satisfy the requirement that such
ratio be no less than ____ to 1.00.
2. Minimum Net Worth. Pursuant to Section 6.13 of the
Credit Agreement, as of the Reporting Date, the Borrower's
Book Net Worth was $_______________, which ____ satisfies ____
does not satisfy the requirement that such amounts be not less
than $_______________ on the Reporting Date.
3. Minimum Net Income. Pursuant to Section 6.14 of
the Credit Agreement, as of the Reporting Date, the Borrower's
Net Income for the applicable period was $___________, which
___ satisfies ___ does not satisfy the requirement that such
amounts be not less than $______ on the Reporting Date.
4. Capital Expenditures. Pursuant to Section 7.10 of
the Credit Agreement, for the year-to-date period ending on
the Reporting Date, the Borrower has expended or contracted to
expend during the fiscal year ending December 31, 199_, for
Capital Expenditures, $__________ in the aggregate which ____
satisfies ____ does not satisfy the requirement that such
expenditures not exceed $800,000.00 in the aggregate during
the fiscal year ended December 31, 199_, and each fiscal year
thereafter.
5. Salaries. As of the Reporting Date, the Borrower
____ is ____ is not in compliance with Section 7.17 of the
Credit Agreement concerning salary increases.
Officers Percentage Increase
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(To be completed within 30 days of any officer salary
increase)
6. Payments to Affiliates. Pursuant to Section 7.19
of the Credit Agreement, for the year-to-date period ending on
the Reporting Date, Royal Grip has in the aggregate made
transfers, conveyances, loans and payments to Affiliates in
the amount of $_________ which ____ satisfies ____ does not
satisfy the requirement that such amount not exceed
$500,000.00 in the aggregate during the fiscal year ended
December 31, 199__, and each fiscal year thereafter, and Roxxi
has in the aggregate made transfers, conveyances, loans and
payments to Affiliates other than Royal Grip in the amount of
$_________ which ____ satisfies ____ does not satisfy the
requirement that no such transfers be made.
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Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
ROYAL GRIP, INC., a Nevada corporation
By __________________________________
Its ________________________________
ROXXI, INC., a Nevada corporation
By __________________________________
Its ________________________________
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Exhibit E to Credit and Security
Agreement
Premises
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The Premises referred to in the Credit and Security Agreement
are legally described as follows:
E-1
