EXHIBIT 10.17
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS
This Amendment, dated as of April 13, 1999, is made by and between ROYAL
GRIP, INC., a Nevada corporation, and Roxxi, Inc., a Nevada corporation
(collectively, jointly and severally, the "Borrower"), and XXXXX FARGO BUSINESS
CREDIT, INC., a Minnesota corporation, formerly known as Norwest Business
Credit, Inc. (the "Lender").
RECITALS
The Borrower and the Lender have entered into an Amended and Restated
Credit and Security Agreement dated as of October 9, 1998, as amended by a First
Amendment to Credit and Security Agreement and Waiver of Defaults dated as of
March 16, 1999 (collectively, the "Credit Agreement"). Capitalized terms used in
these recitals have the meanings given to them in the Credit Agreement unless
otherwise specified.
Royal Precision, Inc., a Delaware corporation ("Guarantor") is
contemplating entering into a merger transaction with Coyote Sports, Inc. (the
"Transaction").
Borrower will reimburse Guarantor for certain expenses incurred in
connection with the pursuit of the Transaction.
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 "Book Net Worth" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:
"Book Net Worth" through and until May 31, 1999, means the aggregate of the
common and preferred stockholders' equity (exclusive of Transaction related
expenses and expenses and losses related to the sale of the assets of
Roxxi) in the Borrower, determined in accordance with GAAP. From and after
May 31, 1999, "Book Net Worth" means the aggregate of the common and
preferred stockholder's equity in the Borrower, determined in accordance
with GAAP.
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(b) The definition of "Net Income" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:
"Net Income" through and until May 31, 1999, means for the applicable
period, after-tax net income (exclusive of Transaction related expenses and
expenses and losses related to the sale of the assets of Roxxi) from
continuing operations as determined in accordance with GAAP. From and after
May 31, 1999, "Net Income" means for the applicable period, after-tax net
income from continuing operations as determined in accordance with GAAP.
(c) The definition of "Net Loss" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:
"Net Loss" through and until May 31, 1999, means for the applicable period,
after-tax net loss (exclusive of Transaction related expenses and expenses
and losses related to the sale of the assets of Roxxi) from continuing
operations as determined in accordance with GAAP. From and after May 31,
1999, "Net Loss" means for the applicable period, after-tax net loss from
continuing operations as determined in accordance with GAAP.
(d) The definition of "Revolving Floating Rate" contained in Section
1.1 of the Credit Agreement is hereby deleted in its entirety and replaced as
follows:
"Revolving Floating Rate" through and until January 1, 1999, means an
annual rate equal to the sum of the Base Rate plus one-quarter of one
percent (.25%). From and after January 1, 1999, the "Revolving Floating
Rate" means an annual rate equal to the sum of the Base Rate plus two and
one-quarter percent (2.25%). The Revolving Floating Rate shall change when
and as the Base Rate changes.
(e) The definition of "Term Floating Rate" contained in Section 1.1 of
the Credit Agreement is hereby deleted in its entirety and replaced as follows:
"Term Floating Rate" through and until January 1, 1999, means an annual
rate equal to the sum of the Base Rate plus three-quarters of one percent
(.75%). From and after January 1, 1999, the "Term Floating Rate" means an
annual rate of interest equal to two and three-quarters percent (2.75%).
The Term Floating Rate shall change when and as the Base Rate changes.
(f) The introductory sentence of Section 2.8 of the Credit Agreement
is hereby deleted and replaced as follows:
INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST; PARTICIPATIONS; USURY.
Interest accruing on the Revolving Note shall be due and payable as
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follows: (i) in arrears on the first day of each month, that portion of
Interest accruing at a rate equal to the sum of one and one-quarter percent
(1.25%) plus the Base Rate, and (ii) the balance of the Interest on the
prepayment in whole of the Obligations. Interest accruing on the Term Notes
shall be due and payable as follows: (i) in arrears on the first day of
each month, that portion of Interest accruing at a rate equal to the sum of
one and three-quarters percent (1.75%) plus the Base Rate, and (ii) the
balance of the Interest on the prepayment in whole of the Obligations.
(g) Section 2.13(c) of the Credit Agreement is hereby deleted and
replaced as follows:
(c) TERMINATION AS A RESULT OF THE TRANSACTION. Notwithstanding
anything in Section 2.13 to the contrary, if the Obligations are prepaid in
whole as a result of financing obtained in connection with the Transaction,
Borrower shall pay the Lender a fee in an amount equal to (i) three percent (3%)
of the sum of the Maximum Line plus the then outstanding principal balances of
the First Term Advance and the Second Term Advance if the prepayment occurs
before October 9, 1999, (ii) two percent (2%) of the sum of the Maximum Line
plus the then outstanding principal balances of the First Term Advance and the
Second Term Advance if the prepayment occurs after October 9, 1999 but before
October 9, 2000, and (iii) one percent (1%) of the sum of the Maximum Line plus
the then outstanding principal balances of the First Term Advance and the Second
Term Advance if the prepayment occurs after October 9, 2000.
(h) Section 6.12 of the Credit Agreement is hereby deleted in its
entirety, and replaced as follows:
Section 6.12 DEBT SERVICE COVERAGE RATIO. The Borrower covenants that Royal
Grip, Roxxi and the Covenant Entities shall, as of the last day of each
fiscal quarter, on and after August 31, 1999, maintain a consolidated
average minimum debt service coverage ratio (based upon the period set
forth below) as follows:
Quarter Ending Debt Service Coverage Ratio
-------------- ---------------------------
August 31, 1999 .75 to 1 based upon the immediately
preceding three month period
November 30, 1999 .75 to 1 based upon the immediately
preceding six month period
February 28, 2000 .85 to 1 based upon the immediately
preceding nine month period
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May 31, 2000 and each 1.05 to 1 based upon the immediately
May 31 thereafter preceding twelve month period
August 31, 2000 and each 1.05 to 1 based upon the immediately
August 31 thereafter preceding twelve month period
November 30, 2000 and each 1.05 to 1 based upon the immediately
November 30 thereafter preceding twelve month period
February 28, 2001 and each 1.05 to 1 based upon the immediately
February 28 thereafter preceding twelve month period
(i) Section 6.13 of the Credit Agreement is hereby deleted in its
entirety, and replaced as follows:
Section 6.13 NET WORTH. The Borrower covenants that as of May 31, 1999, the
aggregate consolidated Net Worth of Royal Grip, Roxxi and the Covenant
Entities shall increase by not less than $196,000.00 as measured from the
last day of the immediately preceding fiscal quarter ending aggregate
consolidated Net Worth. Thereafter, 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)
-------------- -----------------------------
August 31, 1999 and each August 31
thereafter $0.00
November 30, 1999 and each November 30
thereafter ($300,000.00)
February 28, 2000 and each February 28
thereafter ($100,000.00)
May 31, 2000 and each May 31 thereafter $600,000.00
(j) 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 for the fiscal quarter
ending May 31, 1999, Royal Grip, Roxxi and the Covenant Entities shall
achieve an aggregate consolidated Net Income of at least $223,000.00 as
measured from the immediately preceding fiscal quarter end. Thereafter, the
Borrower covenants that Royal Grip, Roxxi and the Covenant Entities shall
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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 Worth Increase (Decrease)
-------------- -----------------------------
August 31, 1999 and each August 31
thereafter $0.00
November 30, 1999 and each November 30
thereafter ($300,000.00)
February 28, 2000 and each February 28
thereafter ($100,000.00)
May 31, 2000 and each May 31 thereafter $600,000.00
(k) Section 6.15 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
Section 6.15 STOP LOSS. The Borrower covenants that for the period
commencing on March 1, 1999 and ending on May 30, 1999, Royal Grip, Roxxi
and the Covenant Entities shall not achieve an aggregate consolidated Net
Loss in excess of $150,000.00. Thereafter, the Borrower covenants that
beginning with August, 1999, and continuing for each month thereafter,
Royal Grip, Roxxi and the Covenant Entities shall not achieve an aggregate
consolidated Net Loss in excess of the amounts set forth below for each
month as measured from the last day of the immediately preceding month.
Month Maximum Net Loss
----- ----------------
August of each year $400,000.00
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 $250,000.00
January of each year $50,000.00
February of each year $0.00
March of each year $0.00
April of each year $0.00
May of each year $0.00
June of each year $0.00
July of each year $0.00
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(l) There is hereby added a new Section 6.16 to the Credit Agreement
which provides as follows:
Section 6.16 MINIMUM AVAILABILITY. In the event the Transaction fails to
close on or before July 1, 1999, then until such time as Borrower is
reimbursed by Coyote Sport, Inc. for all Transaction related expenses, the
Borrower covenants that there shall at all times be an aggregate
Availability under this Credit Agreement and the Credit Agreement by and
between the Covenant Entities and Lender in the following amounts:
Aggregate Availability Period
---------------------- ------
$150,000.00 Within seven (7) days of the public
announcement that the Transaction has
been terminated through and until 7-1-99
$500,000.00 From 7-1-99 through and until 9-30-99
$350,000.00 From 10-1-99 through and until 10-31-99
$200,000.00 From 11-1-99 through and until 11-30-99
$50,000.00 From 12-1-99 through and until 12-31-99
$0.00 On and after January 1, 2000
(m) Section 7.19 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
Section 7.19 PAYMENTS TO AFFILIATES. Neither Royal Grip nor Roxxi shall,
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 ("Payment") to Royal Grip (from Roxxi), Roxxi
(from Royal Grip), to any Covenant Entity or to any other Affiliates which
is not for fair and adequate consideration or which (i) is in the aggregate
in excess of $2,500,000.00 (of which not more than $600,000.00 of the
$1,000,000.00 increase may be applicable to Transaction related expenses
and not more than $400,000.00 of the $1,000,000.00 increase may be
applicable to management related expenses) during Borrower's 1999 fiscal
year, and (ii) is in the aggregate in excess of $1,500,000.00 for any
fiscal year thereafter.
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(n) There is hereby added a new Section 7.22 to the Credit Agreement
which provides as follows:
7.22 TRANSACTION RELATED EXPENSES. In no event shall Royal Grip, Roxxi or
any of the Covenant Entities make Payments to any Affiliates or incur in
the aggregate in excess of $900,000.00 for Transaction related 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. WAIVER OF DEFAULTS. The Borrower is in default of the following
provisions of the Credit Agreement (collectively, the "Current Defaults"):
(a) Borrower has failed to satisfy the Debt Service Coverage Ratio
required by Section 6.12 of the Credit Agreement for the quarter ending February
28, 1999.
(b) Borrower has failed to satisfy the Net Worth requirements required
by Section 6.13 of the Credit Agreement for the quarter ending February 28,
1999.
(c) Borrower has failed to satisfy the Net Income requirements
required by Section 6.14 of the Credit Agreement for the quarter ending February
28, 1999.
(d) Borrower has failed to satisfy the Monthly Stop Loss requirements
required by Section 6.15 of the Credit Agreement for the months ending January
31, 1999, and February 28, 1999.
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Current 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.
5. CONDITIONS PRECEDENT. This Amendment, and the waiver set forth in
Paragraph 4 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) 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 articles 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
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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 October 9, 1998, 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 6(a) and 6(b) hereof and as to such other matters as the Lender
shall require.
(d) Such other matters as the Lender may require.
6. 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 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 articles 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.
7. 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.
8. NO OTHER WAIVER. Except as set forth in Paragraph 4 hereof, the
execution of this Amendment and acceptance of 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.
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9. RELEASE. The Borrower, and each 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.
10. 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.
11. 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.
By /s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Its Business Banking Officer
----------------------------------
ROYAL GRIP, INC., a Nevada corporation
By /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Its President
----------------------------------
ROXXI, INC., a Nevada corporation
By /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Its President
----------------------------------
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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of Royal Grip, Inc., and
Roxxi, Inc., each Nevada corporations (collectively, jointly and severally, the
"Borrowers") to Xxxxx Fargo Business Credit, Inc., formerly known as Norwest
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 9 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 Xxxxxxxxx
-----------------------------------
Its President
----------------------------------
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