EXHIBIT 13
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Agreement"), dated as of March 19, 2002 between
ROYAL PRECISION, INC., a Delaware corporation (the "Company"), and XXXXXXX X.
XXXXXXXX AND XXXXX X XXXXXXXX, TRUSTEES OF THE XXXXXXXX FAMILY LIVING TRUST U/A
DTD 4/11/94 (the "Trust").
WHEREAS, the Company will be meeting with its lender, Xxxxx Fargo Business
Credit, Inc. ("Xxxxx Fargo"), and the Company believes that the Company's cash
flow position will be materially improved if its lender would extend the
repayment schedule of its overadvance line as follows (in 000s):
2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1 10/1
--- --- --- --- --- --- --- --- ----
Old Availability Schedule: $500 $400 $300 $200 -0- -0- -0- -0- -0-
New Availability Schedule $500 $400 $400 $400 $400 $300 $200 $100 -0-;
and
WHEREAS, Xxxxx Fargo may be induced to provide such financial benefits to the
Company if the Trust were to guarantee to Xxxxx Fargo the additional amounts
extended by Xxxxx Fargo, if borrowed, as follows: up to $100,000 from April 1 to
April 30, 2002; up to $200,000 from May 1 to May 31, 2002; up to $400,000 from
June 1 to June 30, 2002; up to $300,000 from July 1 to July 31, 2002; up to
$200,000 from August 1 to August 31, 2002; and up to $100,000 from September 1
to September 30, 2002 (the "Guarantied Amounts"); and
WHEREAS, the Trust is willing, at the request of the Company's lender, to
guarantee the repayment of the Guarantied Amounts.
NOW THEREFORE, in consideration of the undertakings hereinafter contained, the
parties hereto, intending to be legally bound, do hereby agree as follows:
SECTION 1. GUARANTY. Upon receipt by the Trust prior to June 1, 2002 of a
written guaranty (the "WF Guaranty") in form reasonably acceptable to the Trust,
solely with respect to the Guarantied Amounts, the Trust agrees to execute and
deliver such WF Guaranty to Xxxxx Fargo.
SECTION 2. WARRANT. As consideration for the Trust agreeing to execute and
deliver such WF Guaranty, and to execute any other guaranties reasonably
requested by the board of directors of the Company prior to June 30, 2002
(collectively, the "Guaranties" and individually a "Guaranty"), the Company
hereby issues to the Trust a warrant in the form attached hereto as Exhibit A.
SECTION 3. OPTION. Upon the Trust being required to satisfy a Guaranty, the
Trust shall have the option (the "Option") to convert all or any part of the
funds it is required to provide under such Guaranties into shares of Common
Stock of the Company (the "Shares") at the rate of one Share for each $0.25 of
funds provided (the "Exercise Price"). Exercise of the Option shall be
considered payment by the Company and thus reduce any outstanding balance owed
by the Company by the amount of Shares received by the Trust. In lieu of
exercising the Option, at each time that the Trust is required to satisfy a
Guaranty, the Trust may, subject to execution of an acceptable subordination
agreement between the Trust and the then lender to the Company, elect to require
the Company to issue a Subordinated Convertible Promissory Note in the principal
amount of any funds provided by the Trust under a Guaranty, bearing interest at
an annual rate of 13% and due on demand, and having such other terms and
conditions as are contained in the Subordinated Convertible Promissory Note
issued by the Company to the Trust dated February 28, 2002.
3.1. EXERCISE. The Option may be exercised at one or more times by the
Trust sending a written notice to the Company indicating the number of shares to
be acquired, which must be in minimum amounts of 25,000 shares, unless it is an
exercise of the remaining shares subject to the Option, and the amount of funds
being converted.
3.2. ISSUANCE. As soon as practicable after each such exercise, the
Company shall issue to the Trust a certificate for the number of Shares to which
the Trust is entitled.
3.3. ADJUSTMENT FOR INCREASE. If, after the date of this Agreement,
the number of outstanding Shares is increased by a share dividend payable in
Shares or by a split of Shares or other similar event, then, on the date
following the date fixed for the determination of holders of Shares entitled to
receive such share dividend or split, the number of Shares issuable on exercise
of the Option shall be increased in proportion to such increase in outstanding
Shares and the then applicable Exercise Price shall be correspondingly
decreased.
3.4. ADJUSTMENT FOR DECREASE. If, after the date of this Agreement,
the number of outstanding Shares is decreased by a consolidation, combination or
reclassification of Shares or other similar event, then, after the effective
date of such consolidation, combination or reclassification, the number of
Shares issuable on exercise of the Option shall be decreased in proportion to
such decrease in outstanding Shares and the then applicable Exercise Price shall
be correspondingly increased.
3.5. OTHER ADJUSTMENT. If, after the date of this Agreement, any
capital reorganization or reclassification of the Shares, or consolidation or
merger of the Company with another corporation for a consideration other than
cash or the assumption of debt, or the sale of all or substantially all of its
assets to another corporation for a consideration other than cash or the
assumption of debt or other similar event shall be effected, then, as a
condition of such reorganization, reclassification, consolidation, merger, or
sale, lawful and fair provision shall be made whereby the Trust shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Agreement and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares, securities, or assets as may be issued or
payable with respect to or in exchange for a number of outstanding Shares equal
to the number of Shares immediately theretofore purchasable and receivable upon
the exercise of the Option had such reorganization, reclassification,
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consolidation, merger, or sale not taken place, and in such event appropriate
provision shall be made with respect to the rights and interests of the Trust to
the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Exercise Price and of the number of Shares purchasable
upon the exercise of the Option) shall thereafter be applicable, as nearly as
may be in relation to any share, securities, or assets thereafter deliverable
upon the exercise hereof.
3.6. NOTICE. Upon the occurrence of any event specified in this
Section 3, the Company shall give written notice of the record date for such
dividend, distribution, or subscription rights, or the effective date of such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Such notice shall also specify the date as
of which the holders of Shares of record shall participate in such dividend,
distribution, or subscription rights, or shall be entitled to exchange their
Shares for shares, securities, or other assets deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Failure to give such notice, or any defect
therein shall not affect the legality or validity of such event.
SECTION 4. MISCELLANEOUS.
4.1. WAIVER. No purported waiver by either party or any default by the
other party of any term or provision contained herein shall be deemed to be a
waiver of such term or provision unless the waiver is in writing and signed by
the waiving party. No such waiver shall, in any event, be deemed a waiver of any
subsequent default under the same or any other term or provision contained
herein.
4.2. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties concerning the subject matter of this
Agreement and incorporates all prior negotiations and understandings. There are
no covenants, promises, agreements, conditions or understandings, either oral or
written, between them relating to the subject matter of this Agreement other
than those set forth herein. No representation or warranty has been made by or
on behalf of either party to this Agreement (or any officer, director, employee
or agent thereof) to induce the other party to enter into this Agreement or to
abide by or consummate any transactions contemplated by any terms of this
Agreement, except representations and warranties expressly set forth herein. No
alteration, amendment, change or addition to this Agreement shall be binding
upon either party unless in writing and signed by the parties to be charged.
4.3. JOINT PREPARATION. This Agreement is to be deemed to have been
prepared jointly by the parties hereto and any uncertainty or ambiguity existing
herein shall be interpreted according to the application of the rules of
interpretation for arms' length agreements.
4.4. NO PARTNERSHIP. Nothing contained in this Agreement shall be
deemed or construed by the parties hereto or by any third person to create the
relationship of principal and agent or of partnership.
4.5. SUCCESSORS. Each and all of the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and, except
as otherwise specifically provided in this Agreement, their respective
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successors and permitted assigns; provided, however, that neither this
Agreement, nor any rights herein granted may be assigned, transferred or
encumbered except as specifically otherwise permitted herein.
4.6. NOTICE PROCEDURE. Any consent, waiver, notice, demand, request or
other instrument required or permitted to be given under this Agreement shall be
in writing and be deemed to have been properly given only when delivered in
person or by telecopy or other facsimile transmission (followed with hard copy
sent by prepaid courier service), addressed to the following:
If to the Trust
x/x Xxxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxx Telephone: (000) 000-0000
Xxxxxx, XX 00000 Fax: (000) 000-0000
If to the Company
X.X. Xxx 000
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000 Telephone: (000) 000-0000
Attn: President Fax: (000) 000-0000
Notice of change of address will be effective only upon receipt.
4.7. CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of this
Agreement.
4.8. PARTIAL INVALIDITY. If any term or provision of this Agreement,
or the application thereof to any person, firm, corporation or other entity or
circumstance, shall be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to persons, firms,
corporations or other entities or circumstances other than those as to which it
is held invalid, shall be unaffected thereby and each remaining term or
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
4.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and the
parties hereto may execute this Agreement by signing one or more counterparts.
4.10. THIRD PARTIES. Nothing herein express or implied is intended or
shall be construed to confer upon or give any person, other than the parties
hereto and their respective heirs, successors or permitted assigns, any rights
or remedies under or by reason of this Agreement.
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4.11. GOVERNING LAW. This Agreement shall be governed and construed by
the provisions hereof and in accordance with the laws of the State of Delaware
applicable to agreements to be performed in the State of Delaware.
4.12. FURTHER ASSURANCES. If, at any time, either of the parties
hereto shall consider or be advised that any further documents are necessary or
desirable to carry out the provisions hereof, the appropriate party or parties
hereto shall execute and deliver, or cause to be executed and delivered, any and
all such other documents and do, or cause to be done, all things necessary or
proper to fully carry out the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
ROYAL PRECISION, INC.
By /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx, President
XXXXXXX X. XXXXXXXX AND XXXXX X XXXXXXXX,
TRUSTEES OF THE XXXXXXXX FAMILY LIVING
TRUST U/A DTD 4/11/94
By: /s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, Trustee
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