Exhibit 10.35
SEVENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of May 30, 2001, is made by and between FM
PRECISION GOLF MANUFACTURING CORP., a Delaware corporation, and FM PRECISION
GOLF SALES CORP., a Delaware corporation (collectively, jointly and severally,
the "Borrower"), and XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender").
RECITALS
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of October 9, 1998, as amended by that certain Amendment to
Credit and Security Agreement and Waiver of Defaults dated April 13, 1999, as
amended by that certain Second Amendment to Credit and Security Agreement dated
November 10, 1999, as amended by that certain Third Amendment to Credit and
Security Agreement dated March 24, 2000, as amended by that certain Fourth
Amendment to Credit and Security Agreement dated August 3, 2000, as amended by
that certain Fifth Amendment to Credit and Security Agreement dated November 8,
2000 and as amended by that certain Sixth Amendment to Credit and Security
Agreement dated March 9, 2001 (collectively, the "Credit Agreement").
Capitalized terms used in these recitals have the meanings given to them in the
Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the Credit
Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
2. AMENDMENTS. The Credit Agreement is hereby amended as follows:
(a) The definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(A) the lesser of (x) 85% of Eligible Accounts, or (y)
$6,500,000.00, plus
(B) the lesser of (x) 60% of Eligible Inventory (exclusive of
Eligible Raw Materials Inventory), or (y) $2,500,000.00 from
March 1 through September 30 of each year and $3,500,000.00
from October 1 of each year through February 28 of each
subsequent year, plus
(C) the lesser of (x) 50% of Eligible Raw Materials Inventory,
or (y) $2,500,000.00 from March 1 through September 30 of
each year and $3,500,000.00 from October 1 of each year
through February 28 of each subsequent year, plus
(D) If but only if Lender, in its sole and absolute discretion,
elects to make overadvance Revolving Advances, in any given
fiscal year, commencing on November 1 of each year, an
overadvance in the amount not to exceed $500,000.00 (the
"Overadvance Limit"), which Overadvance Limit shall be
automatically reduced to $400,000.00 on March 1 of the
immediately following year, to $300,000.00 on April 1 of the
immediately following year, to $200,000.00 on May 1 of the
immediately following year and to $0.00 on June 1 of the
immediately following year. No Overadvance Limit shall exist
at any time from June 1 through October 31 in any year,
minus
(E) $35,000.00, which amount shall be automatically increased by
$6,000.00 on June 1, 2001 and by $6,000.00 on the first day
of each month thereafter until either the payment in full to
the Lender of the Accrued Default Interest or the waiver of
said payment on the Trigger Date (defined below) as a result
of none of the Interest Rate Criteria (defined below) having
occurred. Upon the payment in full of the Accrued Default
Interest to the Lender or the waiver of said payment
requirement, said amount shall automatically be reduced to
$0.00.
(b) In the event that Borrower's 2001 fiscal year audited financial
statements complying with Section 6.1(a) indicate that (i) the Borrower and the
Covenant Entities achieved an aggregate Net Loss in excess of $200,000.00 for
the 2001 fiscal year (ii) the Borrower and the Covenant Entities aggregate
consolidated Net Worth decreased by more than $200,000.00 during the 2001 fiscal
year, or (iii) the Borrower was in default of any provision of the Credit
Agreement (collectively the "Interest Rate Increase Criteria"), then effective
on the first day of the first full month following the earlier of (i) that date
which Borrower is required to deliver to Lender Borrower's 2001 fiscal year
audited financial statements pursuant to Section 6.1(a) or (ii) Lender's receipt
of Borrower's 2001 fiscal year audited financial statements (the "Trigger
Date"), the definitions of "Capital Expenditures Floating Rate", "Overadvance
Rate", "Revolving Floating Rate" and Term Floating Rate" contained in Section
1.1 of the Credit Agreement shall be deleted and replaced as follows:
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"Capital Expenditures Floating Rate" means an annual rate equal to the sum
of the Prime Rate plus two and one-quarter of one percent (2.25%). The
Capital Expenditures Floating Rate shall automatically be reduced to an
annual rate equal to the sum of the Prime Rate plus one-quarter of one
percent (0.25%) on the first day of the first full month following Lender's
receipt of Borrower's 2002 fiscal year audited financial statements
complying with Section 6.1(a) below, if but only if (i) said financial
statements indicate that the Borrower and the Covenant Entities have
achieved a Net Income for the Borrower's 2002 fiscal year of not less than
$600,000.00, (ii) said financial statements indicate that the Borrower and
the Covenant Entities increased their aggregate Net Worth during Borrower's
2002 fiscal year by not less than $600,000.00, and (iii) there is not a
then existing Event of Default or Default Period. If but only if said
reduction is not achieved as provided above, the Capital Expenditures
Floating Rate shall automatically be adjusted on the first day of the first
full month following Lender's receipt of Borrower's audited financial
statements complying with Section 6.1(a) below in any year subsequent to
Borrower's 2002 fiscal year, to an annual rate equal to the sum of the
Prime Rate plus one-quarter of one percent (0.25%) in the event that (i)
said financial statements indicate that the Borrower and the Covenant
Entities have achieved a Net Income for any such fiscal year of not less
than $600,000.00, (ii) said financial statements indicate that the Borrower
and the Covenant Entities increased their aggregate Net Worth during any
such fiscal year by not less than $600,000.00, and (iii) there is not a
then existing Event of Default or Default Period. The Capital Expenditures
Floating Rate shall change when and as the Prime Rate changes.
"Overadvance Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus four and one-quarter of one percent (4.25%). The
Overadvance Floating Rate shall automatically be reduced to an annual rate
equal to the sum of the Prime Rate plus two and one-quarter of one percent
(2.25%) on the first day of the first full month following Lender's receipt
of Borrower's 2002 fiscal year audited financial statements complying with
Section 6.1(a) below, if but only if (i) said financial statements indicate
that the Borrower and the Covenant Entities have achieved a Net Income for
the Borrower's 2002 fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during Borrower's 2002 fiscal year by
not less than $600,000.00, and (iii) there is not a then existing Event of
Default or Default Period. If but only if said reduction is not achieved as
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provided above, the Overadvance Floating Rate shall automatically be
adjusted on the first day of the first full month following Lender's
receipt of Borrower's audited financial statements complying with Section
6.1(a) below in any year subsequent to Borrower's 2002 fiscal year, to an
annual rate equal to the sum of the Prime Rate plus two and one-quarter of
one percent (2.25%) in the event that (i) said financial statements
indicate that the Borrower and the Covenant Entities have achieved a Net
Income for any such fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during any such fiscal year by not less
than $600,000.00, and (iii) there is not a then existing Event of Default
or Default Period. The Overadvance Floating Rate shall change when and as
the Prime Rate changes.
"Revolving Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus two and one-quarter of one percent (2.25%). The Revolving
Floating Rate shall automatically be reduced to an annual rate equal to the
sum of the Prime Rate plus one-quarter of one percent (.25%) on the first
day of the first full month following Lender's receipt of Borrower's 2002
fiscal year audited financial statements complying with Section 6.1(a)
below, if but only if (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for the
Borrower's 2002 fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during Borrower's 2002 fiscal year by
not less than $600,000.00, and (iii) there is not a then existing Event of
Default or Default Period. If but only if said reduction is not achieved as
provided above, the Revolving Floating Rate shall automatically be adjusted
on the first day of the first full month following Lender's receipt of
Borrower's audited financial statements complying with Section 6.1(a) below
in any year subsequent to Borrower's 2002 fiscal year, to an annual rate
equal to the sum of the Prime Rate plus one-quarter of one percent (0.25%)
in the event that (i) said financial statements indicate that the Borrower
and the Covenant Entities have achieved a Net Income for any such fiscal
year of not less than $600,000.00, (ii) said financial statements indicate
that the Borrower and the Covenant Entities increased their aggregate Net
Worth during any such fiscal year by not less than $600,000.00, and (iii)
there is not a then existing Event of Default or Default Period. The
Revolving Floating Rate shall change when and as the Prime Rate changes.
"Term Floating Rate" means an annual rate equal to the sum of the Prime
Rate plus two and three-quarters of one percent (2.75%). The Term Floating
Rate shall automatically be reduced to an annual rate equal to the sum of
the Prime Rate plus three-quarters of one percent (.75%) on the first day
of the first full month following Lender's receipt of Borrower's 2002
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fiscal year audited financial statements complying with Section 6.1(a)
below, if but only if (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for the
Borrower's 2002 fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during Borrower's 2002 fiscal year by
not less than $600,000.00, and (iii) there is not a then existing Event of
Default or Default Period. If but only if said reduction is not achieved as
provided above, the Term Floating Rate shall automatically be adjusted on
the first day of the first full month following Lender's receipt of
Borrower's audited financial statements complying with Section 6.1(a) below
in any year subsequent to Borrower's 2002 fiscal year, to an annual rate
equal to the sum of the Prime Rate plus three-quarters of one percent
(0.75%) in the event that (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for any such
fiscal year of not less than $600,000.00, (ii) said financial statements
indicate that the Borrower and the Covenant Entities increased their
aggregate Net Worth during any such fiscal year by not less than
$600,000.00, and (iii) there is not a then existing Event of Default or
Default Period. The Term Floating Rate shall change when and as the Prime
Rate changes.
In the event that none of the Interest Rate Increase Criteria occurs, the
definitions of "Capital Expenditures Floating Rate", "Overadvance Floating
Rate", Revolving Floating Rate" and "Term Floating Rate" shall remain as defined
in the Sixth Amendment to the Credit Agreement.
(c) Section 6.13 of the Credit Agreement is hereby deleted and
replaced as follows:
Section 6.13 NET WORTH. The Borrower covenants that as of May 31, 2000, the
aggregate consolidated Net Worth of FMM, FMS and the Covenant Entities was
$14,411,226.36. The Borrower covenants that said aggregate consolidated Net
Worth as of the end of each future fiscal quarter end shall increase by not
less than (or in the event a decrease is allowed, decrease by not more
than) the amounts set forth below as measured from the immediately
preceding fiscal year ending aggregate consolidated Net Worth.
QUARTER ENDING NET WORTH INCREASE (DECREASE)
-------------- -----------------------------
May 31, 2001 $(650,000.00)
August 31, 2001 and each August 31 thereafter $ 0.00
November 30, 2001 and each November 30 thereafter $(300,000.00)
February 28, 2002 and each February 28 thereafter $(100,000.00)
May 31, 2002 and each May 31 thereafter $ 600,000.00
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(d) Section 6.14 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
Section 6.14 NET INCOME. The Borrower covenants that FMM, FMS and the
Covenant Entities shall achieve an aggregate consolidated 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 as measured from the immediately preceding fiscal year end.
QUARTER ENDING NET INCOME (LOSS)
-------------- -----------------
May 31, 2001 $(650,000.00)
August 31, 2001 and each August 31 thereafter $ 0.00
November 30, 2001 and each November 30 thereafter $(300,000.00)
February 28, 2002 and each February 28 thereafter $(100,000.00)
May 31, 2002 and each May 31 thereafter $ 600,000.00
(e) Section 6.15 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
Section 6.15 MONTHLY NET INCOME/NET LOSS. The Borrower covenants that
beginning with January 1, 2001, and continuing for each month thereafter,
FMM, FMS and the Covenant Entities shall achieve an aggregate consolidated
Net Income of not less than (or in the event a Net Loss is allowed for such
month, a Net Loss of not more than) the amounts set forth below for each
month as measured from the last day of the immediately preceding month.
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MONTH NET INCOME/(NET LOSS)
----- ---------------------
January, 2001 $ 0.00
February, 2001 $ 50,000.00
March, 2001 $ 100,000.00
April, 2001 $ 150,000.00
May, 2001 $ 100,000.00
June of each year $ 0.00
July of each year $ 0.00
August of each year $(300,000.00)
September of each year $(150,000.00)
October of each year $(200,000.00)
November of each year $(100,000.00)
December of each year $(350,000.00)
January, 2002 and each January thereafter $ (50,000.00)
February, 2002 and each February thereafter $ 0.00
March, 2002 and each March thereafter $ 0.00
April, 2002 and each April thereafter $ 0.00
May, 2002 and each May thereafter $ 0.00
3. NO OTHER CHANGES. Except as explicitly amended by this Amendment, all of
the terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance or letter of credit thereunder.
4. THE INVENTORY APPRAISAL. The Borrower, at its sole cost and expense,
shall cause its Inventory to be appraised by an Inventory appraiser who is
satisfactory to the Lender (the "Appraisal"). The Appraisal shall be completed
and delivered to the Lender on or before July 31, 2001. Any failure on the part
of the Borrower to strictly comply with the terms of this Section 4 shall
constitute an Event of Default under the Credit Agreement.
5. ORIGINATION FEE/ACCRUED DEFAULT INTEREST.
(a) The Borrower shall pay the Lender as of the date hereof a fully
earned, non-refundable amendment fee in the amount of $2,500.00 in consideration
of the Lender's execution of this Amendment.
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(b) In the event that any one of the Interest Rate Criteria occurs,
the Borrower shall pay the Lender, on the Trigger Date, all Accrued Default
Interest (which is continuing to accrue), as defined in the Sixth Amendment to
the Credit Agreement, which is unpaid as of the Trigger Date. The Borrower
acknowledges that as of April 30, 2001, the amount of Accrued Default Interest
was $35,763.01. In the event that none of the Interest Rate Increase Criteria
occurs, the Lender shall waive the payment of the Accrued Default Interest.
6. CONDITIONS PRECEDENT. This Amendment shall be effective when the Lender
shall have received an executed original hereof, together with each of the
following, each in substance and form acceptable to the Lender in its sole
discretion:
(a) The Acknowledgment and Agreement of Guarantor set forth at the end
of this Amendment, duly executed by the Guarantor.
(b) A Certificate of the Secretary of the Borrower certifying as to
(i) the resolutions of the board of directors of the Borrower approving the
execution and delivery of this Amendment, (ii) the fact that the certificate of
incorporation and bylaws of the Borrower, which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower's secretary
or assistant secretary dated as of October 9, 1998 in connection with the
execution and delivery of the Credit Agreement continue in full force and effect
and have not been amended or otherwise modified except as set forth in the
Certificate to be delivered, and (iii) certifying that the officers and agents
of the Borrower who have been certified to the Lender, pursuant to the
Certificate of Authority of the Borrower's secretary or assistant secretary
dated as of November 10, 1999, as being authorized to sign and to act on behalf
of the Borrower continue to be so authorized or setting forth the sample
signatures of each of the officers and agents of the Borrower authorized to
execute and deliver this Amendment and all other documents, agreements and
certificates on behalf of the Borrower.
(c) An opinion of the Borrower's counsel as to the matters set forth
in paragraphs 7(a) and 7(b) hereof and as to such other matters as the Lender
shall require.
(d) Payment of the amendment fee described in Paragraph 5.
(e) Such other matters as the Lender may require.
7. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute this
Amendment and to perform all of its obligations hereunder, and this Amendment
has been duly executed and delivered by the Borrower and constitutes the legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment has been duly authorized by all necessary corporate action and does
not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or of any
order, writ, injunction or decree presently in effect, having applicability to
the Borrower, or the certificate of incorporation or bylaws of the Borrower, or
(iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.
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(c) Except with respect to (i) the receipt by Borrower of a Notice of
Violation dated October 24, 2000 from the State of Connecticut Department of
Environmental Protection and (ii) the inclusion of the Torrington, Connecticut
Premises on the Comprehensive Environmental Response, Compensation and Liability
Information System, all of the representations and warranties contained in
Article V of the Credit Agreement are correct on and as of the date hereof as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
8. REFERENCES. All references in the Credit Agreement to "this Agreement"
shall be deemed to refer to the Credit Agreement as amended hereby; and any and
all references in the Security Documents to the Credit Agreement shall be deemed
to refer to the Credit Agreement as amended hereby.
9. NO WAIVER. The execution of this Amendment and any documents related
hereto shall not be deemed to be a waiver of any Default or Event of Default or
Default Period under the Credit Agreement or breach, default or event of default
under any Security Document or other document held by the Lender, whether or not
known to the Lender and whether or not existing on the date of this Amendment.
10. RELEASE. The Borrower, and the Guarantor by signing the Acknowledgment
and Agreement of Guarantor set forth below, each hereby absolutely and
unconditionally releases and forever discharges the Lender, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
11. PAYMENTS ON THE SUBORDINATED DEBT. Notwithstanding anything in (i) that
certain Subordination Agreement dated December 7, 2000 (the "Subordination
Agreement"), or (ii) the Sixth Amendment to the Credit Agreement to the
contrary, the Borrower agrees that it shall only make payments on the
Subordinated Indebtedness in strict accordance with the following:
(a) A payment may only be made on May 31, 2001.
(b) The amount of the payment may not exceed the lesser of (i) the
amount equal to the aggregate Availability under the Credit Agreement and the RG
Credit Agreement minus Accounts more than 30 days past respective due date minus
$500,000.00 or (ii) $500,000.00 plus accrued interest.
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(c) The average aggregate excess Availability under the Credit
Agreement and the RG Credit Agreement for the 60 days immediately preceding May
31, 2001 was not less than $1,000,000.00, and
(d) no Event of Default or Default Period has occurred and is
continuing or will occur as a result of or immediately following any such
payment.
12. COSTS AND EXPENSES. The Borrower hereby reaffirms its agreement under
the Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses, the fee
required under paragraph 5 hereof and the Accrued Default Interest which is due
and payable under Paragraph 5 hereof.
13. MISCELLANEOUS. This Amendment and the Acknowledgment and Agreement of
Guarantor may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
XXXXX FARGO BUSINESS CREDIT, INC.
By /s/ Xxxxxxx Xxxxxxxx
-------------------------------------
Its Assistant Vice President
FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Its President
FM PRECISION GOLF SALES CORP.,
a Delaware corporation
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Its President
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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of FM Precision Golf
Manufacturing Corp., and FM Precision Golf Sales Corp., each Delaware
corporations (collectively, jointly and severally, the "Borrowers") to Xxxxx
Fargo Business Credit, Inc., (the "Lender") pursuant to a Guaranty dated as of
October 9, 1998 (the "Guaranty"), hereby (i) acknowledges receipt of the
foregoing Amendment; (ii) consents to the terms (including without limitation
the release set forth in paragraph 10 of the Amendment) and execution thereof;
(iii) reaffirms its obligations to the Lender pursuant to the terms of its
Guaranty; and (iv) acknowledges that the Lender may amend, restate, extend,
renew or otherwise modify the Credit Agreement and any indebtedness or agreement
of the Borrower, or enter into any agreement or extend additional or other
credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the
Guaranty for all of the Borrowers' present and future indebtedness to the
Lender.
ROYAL PRECISION, INC.,
a Delaware corporation
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Its President
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