SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of November 10, 1999, 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,
formerly known as Norwest Business Credit, Inc. (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
(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
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
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(A) the lesser of (x) 85% of Eligible Accounts, or (y)
$5,000,000.00, 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.
(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.
(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") 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 figure "$4,000,000.00" contained in the definition of "Maximum
Line" contained in Section 1.1 of the Credit Agreement is hereby deleted and
replaced with the figure "$5,000,000.00".
(g) 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.
(h) The definition of "Term Floating Rate" contained in Section 1.1 of
the Credit Agreement is hereby deleted and replaced as follows:
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"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.
(i) 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.
(j) 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.
(k) Section 2.9(a) of the Credit Agreement is hereby deleted and
replaced as follows:
(a) UNUSED LINE FEE. For the purposes of this Section 2.9(b), "Unused
Amount" means the $4,500,000.00 reduced by (1) outstanding Revolving
Advances and (2) the L/C Amount, until such time as the outstanding
Revolving Advances are greater than $4,500,000.00 at which point
(regardless of whether or not at some point thereafter the outstanding
Revolving Advances are less than $4,500,000.00) the term "Unused Amount"
means the Maximum Line reduced by (1) outstanding Revolving Advances and
(2) the L/C Amount.
(l) The figure "$60.00" contained in Section 2.9(d) of the Credit
Agreement is hereby deleted and replaced with the figure "$75.00".
(m) 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 $4,500,000.00, until such time as the
outstanding Revolving Advances are greater than $4,500,000.00, at which
time said figure shall automatically be increased to the Maximum Line
regardless of whether or not at some point thereafter the outstanding
Revolving Advances are less than $4,500,000.00 (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.
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(b) PREPAYMENT FEES. If the Term Note is prepaid as of a 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.
(n) 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 FMM and FMS 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
(o) 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, 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 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.
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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)
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
(p) Section 6.16 of the Credit Agreement is hereby deleted without
replacement.
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(q) 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.
(r) Section 7.22 of the Credit Agreement is hereby deleted without
replacement.
(s) Section 7.10 of the Credit Agreement is hereby deleted and
replaced as follows:
CAPITAL EXPENDITURES. During each fiscal year, FMM, FMS 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,
FMM, FMS 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.
(t) Section 7.19 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
PAYMENTS TO AFFILIATES. Neither FMM nor FMS 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 FMM (from FMS), FMS (from FMM), 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, FMM and FMS 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 FMM's and
FMS's normal and customary day to day operations ("Expense
Reimbursements").
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(u) 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.
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. AMENDMENT FEE. The Borrower shall pay the Lender a fully earned,
non-refundable fee in the amount of $10,000.00 in consideration of the Lender's
execution of this Amendment. Said fee shall be due and payable as follows: (i)
$5,000.00 as of the date hereof, and (ii) $5,000.00 as of that date on which the
outstanding Revolving Advances are greater than $4,500,000.00.
5. 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.
6. 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 replacement revolving note substantially in the form of
Exhibit A-2 hereto, duly executed on behalf of the Borrower (the "Replacement
Note").
(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 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
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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.
(d) 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.
7. 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 the Replacement Note and to perform all of its
obligations hereunder, and this Amendment and the Replacement Note have 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 and the Replacement Note 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 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.
8. 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.
9. 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. Upon the satisfaction of
each of the conditions set forth in paragraph 5 hereof, the definition of
"Revolving Note" and all references thereto in the Credit Agreement shall be
deemed amended to describe the Replacement Note, which Replacement Note shall be
issued by the Borrower to the Lender in replacement, renewal and amendment, but
not in repayment, of the Note.
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10. 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.
11. 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.
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, and the fee
required under paragraph 6 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 Business Banking Officer
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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., 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 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/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Its President
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EXHIBIT A-2
REPLACEMENT REVOLVING NOTE
$5,000,000.00 Phoenix, Arizona
_________, 1999
For value received, the undersigned, FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation, and FM PRECISION GOLF SALES CORP., a Delaware
corporation (collectively, jointly and severally, "Borrower"), hereby jointly
and severally promise to pay on the Termination Date under the Credit Agreement
(defined below), to the order of XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender"), at its main office in Phoenix, Arizona, or at any
other place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of FIVE MILLION and N0/100 Dollars ($5,000,000.00) or, if less, the aggregate
unpaid principal amount of all Revolving Advances made by the Lender to the
Borrower under the Credit Agreement (defined below) together with interest on
the principal amount hereunder remaining unpaid from time to time, computed on
the basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Credit and Security Agreement dated October 8, 1998, as amended from
time to time (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
Both entities constituting the Borrower hereby jointly and severally agree
to pay all costs of collection, including attorneys' fees and legal expenses in
the event this Note is not paid when due, whether or not legal proceedings are
commenced.
This Note, upon its execution, is a replacement of, issued in substitution
and not in satisfaction of a promissory note, and a portion of the indebtedness
hereunder is the same indebtedness evidenced by that certain Revolving Note in
the amount of $4,000,000.00, made by the undersigned, which Revolving Note was
executed pursuant to the Credit Agreement. The indebtedness evidenced by said
Revolving Note is not extinguished hereby.
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Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation
By
-------------------------------------
Its
---------------------------------
FM PRECISION GOLF SALES CORP.,
a Delaware corporation
By
-------------------------------------
Its
---------------------------------
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