EXHIBIT 10.2
TENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT AND
WAIVER OF DEFAULTS
This Amendment, dated as of April 10, 2002, is made by and between ROYAL
GRIP, INC., a Nevada corporation, and ROYAL GRIP HEADWEAR COMPANY, a Nevada
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 that certain Amended and
Restated Credit and Security Agreement dated as of October 9, 1998, as amended
by that certain Amendment to Amended and Restated Credit and Security Agreement
and Waiver of Defaults dated March 16, 1999, as amended by that certain Second
Amendment to Amended and Restated Credit and Security Agreement and Waiver of
Defaults dated April 13, 1999 as amended by that certain Third Amendment to
Credit and Security Agreement dated November 10, 1999, as amended by that
certain Fourth Amendment to Amended and Restated Credit Agreement dated March
24, 2000, and as amended by that certain Fifth Amendment to Credit and Security
Agreement dated August 3, 2000, as amended by that certain Sixth Amendment to
Amended and Restated Credit and Security Agreement dated November 8, 2000, as
amended by that certain Seventh Amendment to Amended and Restated Credit and
Security Agreement dated March 9, 2001, as amended by that certain Eighth
Amendment to Amended and Restated Credit and Security Agreement dated May 30,
2001 and as amended by that certain Ninth Amendment to Credit and Security
Agreement and Waiver of Defaults dated November 13, 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 "Revolving Floating Rate" contained in Section
1.1 of the Credit Agreement are hereby deleted and replaced as follows:
"Revolving 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
Revolving Floating Rate shall automatically be reduced to an annual
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rate equal to the sum of the Prime Rate plus one and one-quarter
percent (1.25%) on the first day of the first full month following
Lender's receipt of Borrower's 2003 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 2003 fiscal
year of not less than $600,000.00 (exclusive of non-cash expenses
resulting from the conversion in Borrower's 2003 fiscal year of an
amount, which when added to the amount of debt converted to equity in
Borrower's 2002 fiscal year, is not more than $1,675,000 of
subordinated debt to equity at the rate of $.25 of debt per share of
Common Stock of the Guarantor, the "Non-Cash Expenses"), (ii) said
financial statements indicate that the Borrower and the Covenant
Entities increased their aggregate Net Worth during Borrower's 2003
fiscal year by not less than $600,000.00 (exclusive of the Non-Cash
Expenses), 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.
(b) There is hereby added a new Section 2.8(h) to the Credit Agreement
which provides as follows:
(h) DEFAULT PERIOD INTEREST. In the event any event of default
occurs under Sections 6.12, 6.13, 6.14, 6.15 or 7.10 applicable
to any fiscal quarter or year end of Borrower through and
including May 31, 2002 then, in addition to the interest payable
pursuant to Sections 2.8(a), 2.8(b), 2.8(c), 2.8(d), 2.8(f), and
2.8(g) above, effective retroactively to February 1, 2002, the
outstanding principal balances of the Revolving Note and the Term
Notes shall automatically additionally bear interest at an annual
rate equal to one percent (1.0%). The interest accruing pursuant
to this Section 2.8(h) is collectively referred to as the
"Default Period Interest".
(c) Section 5.12 of the Credit Agreement is hereby deleted and
replaced as follows:
Section 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state, local
or other governmental statute, regulation, law or ordinance
dealing with the protection of human health and the environment.
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(ii) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and
materials listed in, regulated by or identified in any
Environmental Law.
(b) The Premises were acquired by Borrower from Brunswick
Corporation. In accordance with the provisions of the Connecticut
Transfer Act, Brunswick Corporation accepted responsibility for
environmental remediation of the site. Other than Hazardous
Substances for which Brunswick has assumed responsibility and
except for the information in subparagraph 5.12(f) below, to the
Borrower's best knowledge, there are not present in, on or under
the Premises any Hazardous Substances in such form or quantity as
to create any liability or obligation for either the Borrower or
the Lender under common law of any jurisdiction or under any
Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released
in, on or under the Premises in such a way as to create any such
liability, except for those Hazardous Substances identified in
the April 1996 Phase II Environmental Site Assessment of the
Premises by GZA GeoEnvironmental, Inc. with respect to which
Brunswick Corporation is contractually obligated to remediate.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create
any liability under any Environmental Law.
(d) Except for the ongoing actions by Brunswick Corporation
under the Connecticut Transfer Act and except as noted in the
concluding three sentences of this subparagraph 5.12(d), there
are no requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in
any way to the Premises or the Borrower, alleging liability
under, violation of, or noncompliance with any Environmental Law
or any license, permit or other authorization issued pursuant
thereto that have not been appropriately resolved to the
satisfaction of the administrative agency having jurisdiction
over the matter. Provided, however, there is an outstanding
Notice of Violation for noncompliance with a State of Connecticut
water discharge permit. The Borrower has taken appropriate steps
to resolve this issue with the State of Connecticut and had made
changes in its discharge system to prevent further violations.
The Borrower's financial statements make provisions for cost of
the system and the fine that might be imposed.
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(e) Except as set forth in Section 5.12(d), to the
Borrower's best knowledge, the Borrower's businesses are and have
in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and
necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force
and effect. No permit, for which a renewal application has not
been submitted, required under any Environmental Law is scheduled
to expire within 12 months (other than those that are renewed on
an annual basis) and there is no threat known to the Borrower
that any such permit currently held by Borrower will be
withdrawn, terminated, limited or materially changed. Provided,
however, that the water discharge permit referenced in
subparagraph 5.12(d) will be materially changed from the previous
permit.
(f) To the Borrower's best knowledge, the Premises is not
listed on the National Priorities List, or any similar federal,
state or local list, schedule, log, inventory or database.
Provided, however, the premises have been listed on the
Comprehensive Environmental Response, Compensation and Liability
Information System.
(g) The Borrower has delivered to Lender all environmental
assessments in Borrower's possession or which Borrower has
knowledge of, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or
Borrower's businesses (while under the ownership of the
Borrower).
(d) Effective April 1, 2002, 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,
2001, the aggregate consolidated Net Worth of Royal Grip, Royal
Grip Headwear and the Covenant Entities was $13,841,589.69. 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.
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Quarter Ending Net Worth Increase (Decrease)
-------------- -----------------------------
February 28, 2002 ($3,200,000.00)
May 31, 2002 ($2,700,000.00)
August 31, 2002 ($50,000.00)
November 30, 2002 and each
November 30 thereafter ($300,000.00)
February 28, 2003 and each
February 28 thereafter ($100,000.00)
May 31, 2003 and each May 31
thereafter $600,000.00
August 31, 2003 and each
August 31 thereafter $0.00
For purposes of calculating the above covenants for the quarters
ending February 28, 2002 and May 31, 2002 only, the calculation
of the Net Worth Decrease shall be exclusive of goodwill
impairment, non-cash increase in the valuation allowance on
deferred income tax assets, amortization of non-cash expenses
associated with the issuance of warrants to the Xxxxxxxx Family
Charitable Foundation on October 26, 2001, non-cash expenses
resulting from the conversion of subordinated debt (owed to the
Xxxxxxxx Family Charitable Foundation arising pursuant to an
instrument dated October 26, 2001), to equity, non-cash expenses
resulting from modifications to "in the money" options held by
employees who lost their jobs in connection with the corporate
restructuring approved on September 25, 2001 (collectively the
"Fiscal Year 2002 Non-Cash Expenses"). For purposes of
calculating the above covenants for the quarters in the
Borrower's 2003 fiscal year only, the Net Worth Increase and Net
Worth Decrease, as applicable, shall be exclusive of amortization
(not to exceed $300,000.00) of non-cash expenses associated with
the issuance of warrants to the Xxxxxxxx Family Charitable
Foundation on October 26, 2001 (the "Non-Cash Warrant Expenses")
and the Non-Cash Expenses.
(e) 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 Royal Grip,
Royal Grip Headwear 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.
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Quarter Ending Net Income (Loss)
-------------- -----------------
February 28, 2002 ($3,200,000.00)
May 31, 2002 ($2,700,000.00)
August 31, 2002 ($50,000.00)
November 30, 2002 and each November 30
thereafter ($300,000.00)
February 28, 2003 and each February 28
thereafter ($100,000.00)
May 31, 2003 and each May 31 thereafter $600,000.00
August 31, 2003 and each August 31
thereafter $0.00
For purposes of calculating the above covenants for the quarters
ending February 28, 2002 and May 31, 2002 only, the calculation
of the Net Loss shall exclude the Fiscal Year 2002 Non-Cash
Expenses. For purposes of calculating the above covenants for the
quarters in the Borrower's 2003 fiscal year only, the Net Income
and Net Loss, as applicable, shall exclude the Non-Cash Warrant
Expenses and the Non-Cash Expenses.
(f) 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 March 1, 2002, and continuing for each month
thereafter, Royal Grip, Royal Grip Headwear 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.
Month Net Income/(Net Loss)
----- ---------------------
March, 2002 ($50,000.00)
April, 2002 $150,000.00
May, 2002 $150,000.00
June of 2002 and each June thereafter $0.00
July of 2002 and each July thereafter $0.00
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August of 2002 and each August thereafter ($300,000.00)
September of 2002 and each September
thereafter ($150,000.00)
October of 2002 and each October thereafter ($200,000.00)
November of 2002 and each November thereafter ($100,000.00)
December of 2002 and each December thereafter ($350,000.00)
January, 2003 and each January thereafter ($50,000.00)
February, 2003 and each February thereafter $0.00
March, 2003 and each March thereafter $0.00
April, 2003 and each April thereafter $0.00
May, 2003 and each May thereafter $0.00
For purposes of calculating the above covenants for the months
through and until May 31, 2002 only, the calculation of the Net
Income/Net Loss shall exclude the Fiscal Year 2002 Non-Cash
Expenses. For purposes of calculating the above covenants for the
months of June through October in the Borrower's 2003 fiscal year
only, the calculation of the Net Income/Net Loss shall exclude
the Non-Cash Warrant Expenses and the Non-Cash Expenses.
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 TERM ADVANCES. The Borrower shall prepay the outstanding
principal balance of the Term Advances on the date of this Amendment (the "Term
Advance Prepayment"). Lender hereby waives the application of the prepayment fee
set forth in Section 2.13(b) of the Credit Agreement as the same applies to the
Term Advance Prepayment. This waiver is applicable only to the Term Advance
Prepayment. This waiver shall not entitle the Borrower to any other or further
waiver in any similar or other circumstances, including without limitation any
termination or reduction in the Credit Facility. Borrower acknowledges and
agrees that the Lender has no further obligation to make any additional Term
Advances.
5. THE EQUIPMENT APPRAISAL. Lender shall have the right to cause
Borrower's Equipment to be appraised by an appraiser satisfactory to the Lender
(the "Appraisal"). Borrower shall, upon demand, reimburse Lender for any and all
costs incurred by Lender in connection with the Appraisal.
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6. WAIVER OF DEFAULTS. The Borrower has indicated that for the quarter
ending February 28, 2002, the Borrower was in default of the following
provisions of the Credit Agreement (collectively, the "Existing Defaults"):
(a) The Borrower and the Covenant Entities have exceeded the
permitted Net Worth Decrease in violation of Section 6.13 of the Credit
Agreement.
(b) The Borrower and the Covenant Entities have failed to achieve
the required Net Income in violation of Section 6.14 of the Credit Agreement.
(c) The Borrower and the Covenant Entities have exceeded the
permitted Net Loss in violation of Section 6.15 of the Credit Agreement.
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Existing Defaults. This waiver shall be effective only
in this specific instance and for the specific purpose for which it is given,
and this waiver shall not entitle the Borrower to any other or further waiver in
any similar or other circumstances.
7. [INTENTIONALLY DELETED]
8. CONDITIONS PRECEDENT. This Amendment, and the waiver set forth in
Paragraph 5 hereof, 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) Subordination Agreements, properly acknowledged by the
Borrower and the Covenant Entities and properly executed on behalf of Xxxxxxx
and Xxxxx Xxxxxxxx, Trustees of the Xxxxxxxx Family Living Trust (the "Trust"),
Xxxxxxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxx, Xx., Xxxx X. Xxxxxxxx and DWR
Custodian for Xxxxxxx Xxxxxx Attorney at Law f/b/o Xxxxxxx X. Xxxxxx VIP+ Profit
Sharing Plan dated March 24, 1997, Account No. 362 050358 036.
(b) The Acknowledgment and Agreement of Guarantor set forth at
the end of this Amendment, duly executed by the Guarantor.
(c) 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 as to the officers and agents
of the Borrower who have been authorized to sign and to act on behalf of the
Borrower and 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.
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(d) A guaranty, properly executed and notarized by the Trust
which Guaranty shall be applicable to the repayment of the Overadvance as
defined in the FM Credit Agreement, to the extent set forth in the Guaranty.
(e) An opinion of the Borrower's counsel as to the matters set
forth in Paragraphs 9(a) and 9(b) hereof and as to such other matters as the
Lender shall require.
(f) An opinion of the Trust counsel (licensed to practice law in
the State of Wyoming) as to the enforceability and validity of the Guaranty and
as to such other matters as Lender shall require.
(g) An amendment to the Trust Agreement applicable to the Trust.
(h) Evidence satisfactory to Lender than any and all indebtedness
owed by Borrower, the Covenant Entities and Royal Precision, Inc., to the
Xxxxxxxx Family Charitable Foundation has been fully and finally converted to
equity.
(i) Such other matters as the Lender may require.
9. 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 have been duly authorized by all necessary corporate action and
do 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 by-laws 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.
(c) 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.
10. 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.
11. NO OTHER WAIVER. Except as set forth in Paragraph 5 hereof, the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default, Event of Default or Default Period
under the Credit Agreement or breach, default or event of default under any
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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.
12. REPAYMENT TO THE TRUST. In the event the Trust pays amounts to
Lender pursuant to the terms of the Trust Guaranty (collectively "Guaranty
Payments"), the Borrower shall have the right to repay such amounts to the Trust
if but only if:
(a) The aggregate of all payments made to the Trust by Borrower,
the Covenant Entities and Royal Precision, Inc. does not exceed the aggregate
amount of the Guaranty Payments.
(b) No Borrower default has occurred and is continuing or will
occur as a result of or immediately following any such payment.
After giving effect to any and all payments made to the Trust by the
Borrower, the Covenant Entities and Royal Precision, Inc. the sum of the
Revolving Advances and the L/C Amounts under the Credit Agreement and the FM
Credit Agreement does not exceed Aggregate Availability under the Credit
Agreement and the FM Credit Agreement.
13. 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.
14. 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 Loan Documents,
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 the Term Advance Prepayment and paying any such fees,
disbursements, costs and expenses.
15. 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.
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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.,
a Minnesota corporation
By
-------------------------------------
Its
---------------------------------
ROYAL GRIP, INC., a Nevada corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Xxxx X. Xxxxxxxx, President
ROYAL GRIP HEADWEAR COMPANY,
a Nevada corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Xxxx X. Xxxxxxxx, President
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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of Royal Grip, Inc. and
Royal Grip Headwear Company, each Nevada 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 11 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/ Xxxx X. Xxxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxx, President
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