THIRD AMENDMENT TO AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of November 10, 1999, is made by and between ROYAL
GRIP, INC., a Nevada corporation and ROYAL GRIP HEADWEAR COMPANY, a Nevada
corporation, formerly known as ROXXI, INC. (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 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 Credit and Security Agreement and Waiver of Defaults dated April
14, 1999 (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 "Base Rate" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced with the
following definition of "Prime Rate":
"Prime Rate" means the rate of interest publicly announced from time to
time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if such bank ceases
to announce a rate so designated, any similar successor rate designated by
the Lender.
(b) Each and every reference to "Base Rate" contained in the Credit
Agreement is hereby deleted and replaced with the term "Prime Rate".
(c) 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
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(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(A) the lesser of (x) 80% of Eligible Accounts, or (y)
$1,500,000.00, plus
(B) the lesser of (x) 60% of Eligible Royal Grip Inventory, or
(y) $1,000,000.00.
(d) The definition of "Debt Service Coverage Ratio" contained in
Section 1.1 of the Credit Agreement is hereby deleted and replaced as follows:
"Debt Service Coverage Ratio" means the ratio of (i) the sum of (A) Funds
from Operations plus (estimated taxes less cash tax payments) plus (B)
Interest Expense minus (C) unfinanced portion of Capital Expenditures
(exclusive of not more than $750,000.00 of Capital Expenditures (the
"Wastewater Capital Expenditures") incurred by FMM related to the
construction of a wastewater treatment facility) to (ii) the sum of (A)
Current Maturities of Long Term Debt (actually paid during the period) plus
(B) Interest Expense. The Borrower acknowledges that in the event the
Wastewater Capital Expenditures are not refinanced in full on or before May
30, 2000, the Wastewater Capital Expenditures shall be included in said
ratio.
(e) The year "2001" contained in the definition of "Maturity Date"
contained in Section 1.1 of the Credit Agreement is hereby deleted and replaced
with the year "2002".
(f) The definition of "Revolving Floating Rate" contained in Section
1.1 of the Credit Agreement is hereby deleted and replaced as follows:
"Revolving Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus one-quarter of one percent (0.25%), which annual rate shall
change when and as the Prime Rate changes.
(g) The definition of "Roxxi" contained in Section 1.1 of the Credit
Agreement is hereby deleted without replacement.
(h) There is hereby added to Section 1.1 of the Credit Agreement a new
definition of "Royal Headwear" which provides as follows:
"Royal Headwear" means Royal Grip Headwear Company, a Nevada corporation
formerly known as Roxxi, Inc.
(i) Each and every reference to "Roxxi" contained in the Credit
Agreement is hereby deleted and replaced with "Royal Headwear".
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(j) The definition of "Term Floating Rate" contained in Section 1.1 of
the Credit Agreement is hereby deleted and replaced as follows:
"Term Floating Rate" means an annual rate equal to the sum of the Prime
Rate plus three-quarters of one percent (0.75%), which annual rate shall
change when and as the Prime Rate changes.
(k) There is hereby added to Section 1.1 of the Credit Agreement a new
definition for "Xxxxx Fargo Bank, N.A." which provides as follows:
"Xxxxx Fargo Bank, N.A." means Xxxxx Fargo Bank, National Association.
(l) 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 Notes shall be due and payable in arrears on the
first day of each month.
(m) The dollar figure "$6,500.00" contained in Section 2.8(c) of the
Credit Agreement is hereby deleted and replaced with the dollar figure
"$4,000.00".
(n) The figure "$60.00" contained in Section 2.9(d) of the Credit
Agreement is hereby deleted and replaced with the figure "$75.00".
(o) Sections 2.13(a) and 2.13(b) of the Credit Agreement are hereby
deleted and replaced as follows:
(a) TERMINATION AND LINE REDUCTION FEES. If the Credit Facility is
terminated for any reason as of a date other than the Maturity Date, or the
Borrower reduces the Maximum Line, the Borrower shall pay the Lender a fee
in an amount equal to a percentage of the Maximum Line (or the reduction,
as the case may be) as follows: (i) three percent (3%) if the termination
or reduction occurs on or before September 30, 2000; (ii) two percent (2%)
if the termination or reduction occurs after September 30, 2000, but on or
before September 30, 2001; and (iii) one percent (1%) if the termination or
reduction occurs after September 30, 2001.
(b) PREPAYMENT FEES. If the Term Note is prepaid as of any date other than
the Maturity Date for any reason except in accordance with Section 2.7, the
Borrower shall pay to the Lender a fee in an amount equal to a percentage
of the amount prepaid as follows: (i) three percent (3%) if prepayment
occurs on or before September 30, 2000; (ii) two percent (2%) if prepayment
occurs after September 30, 2000 but on or before September 30, 2001; and
(iii) one percent (1%) if prepayment occurs after September 30, 2001.
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(p) Section 6.12 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
DEBT SERVICE COVERAGE RATIO. The Borrower covenants that Royal Grip and
Royal Headwear and the Covenant Entities shall, as of the last day of each
fiscal quarter, on and after November 30, 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
-------------- ---------------------------
November 30, 1999 .0001 based upon the immediately
preceding six month period
February 29, 2000 .50 to 1 based upon the immediately
preceding nine month period
May 31, 2000 and each May 31 1.05 to 1 based upon the immediately
thereafter preceding twelve month period
August 31, 2000 and each August 31 1.05 to 1 based upon the immediately
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
(q) Section 6.15 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
MONTHLY NET INCOME/NET LOSS. The Borrower covenants that beginning with
June, 1999, and continuing for each month thereafter, Royal Grip and Royal
Headwear and the Covenant Entities shall achieve an aggregate consolidated
Net Income of not less than (or in the event a Net Loss is permitted, 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)
----- ---------------------
June, 1999 $50,000.00
July, 1999 $0.00
August, 1999 ($400,000.00)
September, 1999 ($150,000.00)
October, 1999 ($200,000.00)
November, 1999 ($200,000.00)
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December, 1999 ($350,000.00)
January, 2000 ($100,000.00)
February, 2000 $0.00
March, 2000 $50,000.00
April, 2000 $75,000.00
May, 2000 $75,000.00
June of each year thereafter $0.00
July of each year thereafter $0.00
August of each year thereafter ($300,000.00)
September of each year thereafter ($150,000.00)
October of each year thereafter ($200,000.00)
November of each year thereafter ($100,000.00)
December of each year thereafter ($350,000.00)
January of each year thereafter ($50,000.00)
February of each year thereafter $0.00
March of each year thereafter $0.00
April of each year thereafter $0.00
May of each year thereafter $0.00
(r) Section 6.16 of the Credit Agreement is hereby deleted without
replacement.
(s) Section 7.4(a)(iv) of the Credit Agreement is hereby deleted in
its entirety and replaced as follows:
(iv) loans, advances or any other credits at any time disbursed and
outstanding after the date of this Agreement shown on the balance sheet of
Borrower granted to the Covenant Entities for fair and adequate
consideration which will not increase from the date hereof by more than in
the aggregate (i) $1,500,000.00 through September 30, 2000, (ii)
$2,250,000.00 after September 30, 2000 through September 30, 2001, and
(iii) $3,000,000.00 after September 30, 2001 through the Termination Date.
This subsection (iv) shall not apply to the payment of Expense
Reimbursements, as hereafter defined, to Guarantor.
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(t) Section 7.10 of the Credit Agreement is hereby deleted and
replaced as follows:
CAPITAL EXPENDITURES. During each fiscal year, Royal Grip, Royal Headwear,
and the Covenant Entities will not incur or contract to incur Capital
Expenditures in the aggregate of more than $2,000,000.00. In addition,
during each fiscal year, Royal Grip, Royal Headwear, and the Covenant
Entities will not incur or contract to incur Capital Expenditures paid with
working capital in the aggregate of more than $1,250,000.00. The Borrower
acknowledges that in the event the Wastewater Capital Expenditures are not
refinanced in full on or before May 30, 2000, the Wastewater Capital
Expenditures shall be considered Capital Expenditures paid with working
capital by the Covenant Entities.
(u) Section 7.22 of the Credit Agreement is hereby deleted without
replacement.
(v) Section 7.19 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
PAYMENTS TO AFFILIATES. Neither Royal Grip nor Royal Headwear 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 Royal
Headwear), Royal Headwear (from Royal Grip), to any Covenant Entity or to
any other Affiliate which is not for fair and adequate consideration or
which is in the aggregate in excess of $1,500,000.00 for any fiscal year.
Notwithstanding the above, Royal Grip and Royal Headwear may make Payments
to Guarantor on their behalf so long as such Payments are a reimbursement
of expenses which are related solely to the costs associated with Royal
Grip's and Royal Headwear's normal and customary day to day operations
("Expense Reimbursements").
(w) Section 7.17 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
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 in a director capacity, officer or any member of their
families, by more than 20% 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. Notwithstanding the
above, so long as there is not a then existing Event of Default or Default
Period, Borrower may make payments to Borrower's executives in accordance
with the terms of that certain Executive Bonus Plan dated September 14,
1999. The Executive Bonus Plan will not be amended without the consent of
the Lender.
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3. SATISFACTION OF CONDITIONS. Upon the terms and subject to the conditions
set forth in this Amendment, the Lender hereby acknowledges that the conditions
contained in the Lender's October 14, 1999 letter have been satisfied.
4. 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.
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
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.
6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The Borrower has all requisite corporate 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 articles of incorporation or by-laws of the Borrower, or
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(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. WAIVER OF INTEREST. That portion of accrued but unpaid interest (which
accrued commencing on January 1, 1999 through the date hereof at a rate of 1% of
the Revolving Advances and 1% of the Term Advances) which was, prior to the
effectiveness of this Amendment, due and payable by Borrower upon the prepayment
in whole of the Obligations is hereby forgiven by Lender.
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. Except as set forth above with respect to Lender's October
14, 1999 letter, 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.
10. RELEASE. The Borrower, and 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 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. 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.
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12. 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 Business Banking Officer
ROYAL GRIP, INC., a Nevada corporation
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Its President
ROYAL GRIP HEADWEAR COMPANY,
a Nevada 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 Royal Grip, Inc. and
Royal Grip Headwear Company, formerly known as Roxxi, Inc., each a Nevada
corporation (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 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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