Exhibit 10.36
EIGHTH AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of May 30, 2001, 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 an 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 and as amended by that certain Seventh Amendment to Amended and Restated
Credit and Security Agreement dated March 9, 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 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:
(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, minus
(C) $5,000.00, which amount shall be automatically increased by
$1,000.00 on June 1, 2001 and by $1,000.00 on the first day
of each month thereafter until either the payment in full to
the Lender of the Accrued Default Interest or the waiver of
said payment on the Trigger Date (defined below) as a result
of none of the Interest Rate Criteria (defined below) having
occurred. Upon the payment in full of the Accrued Default
Interest to the Lender or the waiver of said payment
requirement, said amount shall automatically be reduced to
$0.00.
(b) In the event that Borrower's 2001 fiscal year audited financial
statements complying with Section 6.1(a) indicate that (i) the Borrower and the
Covenant Entities achieved an aggregate Net Loss in excess of $200,000.00 for
the 2001 fiscal year (ii) the Borrower and the Covenant Entities aggregate
consolidated Net Worth decreased by more than $200,000.00 during the 2001 fiscal
year, or (iii) the Borrower was in default of any provision of the Credit
Agreement (collectively the "Interest Rate Increase Criteria"), then effective
on the first day of the first full month following the earlier of (i) that date
which Borrower is required to deliver to Lender Borrower's 2001 fiscal year
audited financial statements pursuant to Section 6.1(a) or (ii) Lender's receipt
of Borrower's 2001 fiscal year audited financial statements (the "Trigger
Date"), the definitions of "Revolving Floating Rate" and Term Floating Rate"
contained in Section 1.1 of the Credit Agreement shall be deleted and replaced
as follows:
"Revolving Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus two and one-quarter of one percent (2.25%). The Revolving
Floating Rate shall automatically be reduced to an annual rate equal to the
sum of the Prime Rate plus one-quarter of one percent (.25%) on the first
day of the first full month following Lender's receipt of Borrower's 2002
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 2002 fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during Borrower's 2002 fiscal year by
not less than $600,000.00, and (iii) there is not a then existing Event of
Default or Default Period. If but only if said reduction is not achieved as
provided above, the Revolving Floating Rate shall automatically be adjusted
on the first day of the first full month following Lender's receipt of
Borrower's audited financial statements complying with Section 6.1(a) below
in any year subsequent to Borrower's 2002 fiscal year, to an annual rate
equal to the sum of the Prime Rate plus one-quarter of one percent (0.25%)
in the event that (i) said financial statements indicate that the Borrower
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and the Covenant Entities have achieved a Net Income for any such fiscal
year of not less than $600,000.00, (ii) said financial statements indicate
that the Borrower and the Covenant Entities increased their aggregate Net
Worth during any such fiscal year by not less than $600,000.00, 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.
"Term Floating Rate" means an annual rate equal to the sum of the Prime
Rate plus two and three-quarters of one percent (2.75%). The Term Floating
Rate shall automatically be reduced to an annual rate equal to the sum of
the Prime Rate plus three-quarters of one percent (.75%) on the first day
of the first full month following Lender's receipt of Borrower's 2002
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 2002 fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during Borrower's 2002 fiscal year by
not less than $600,000.00, and (iii) there is not a then existing Event of
Default or Default Period. If but only if said reduction is not achieved as
provided above, the Term Floating Rate shall automatically be adjusted on
the first day of the first full month following Lender's receipt of
Borrower's audited financial statements complying with Section 6.1(a) below
in any year subsequent to Borrower's 2002 fiscal year, to an annual rate
equal to the sum of the Prime Rate plus three-quarters of one percent
(0.75%) in the event that (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for any such
fiscal year of not less than $600,000.00, (ii) said financial statements
indicate that the Borrower and the Covenant Entities increased their
aggregate Net Worth during any such fiscal year by not less than
$600,000.00, and (iii) there is not a then existing Event of Default or
Default Period. The Term Floating Rate shall change when and as the Prime
Rate changes.
In the event that none of the Interest Rate Increase Criteria occurs, the
definitions of "Revolving Floating Rate" and "Term Floating Rate" shall remain
as defined in the Seventh Amendment to the Credit Agreement.
(c) 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, 2000, the
aggregate consolidated Net Worth of Royal Grip, Royal Headwear and the
Covenant Entities was $14,411,226.36. The Borrower covenants that said
aggregate consolidated Net Worth as of the end of each future fiscal
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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)
-------------- -----------------------------
May 31, 2001 $(650,000.00)
August 31, 2001 and each August 31 thereafter $ 0.00
November 30, 2001 and each November 30 thereafter $(300,000.00)
February 28, 2002 and each February 28 thereafter $(100,000.00)
May 31, 2002 and each May 31 thereafter $ 600,000.00
(d) 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
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.
QUARTER ENDING NET INCOME (LOSS)
-------------- -----------------
May 31, 2001 $(650,000.00)
August 31, 2001 and each August 31 thereafter $ 0.00
November 30, 2001 and each November 30 thereafter $(300,000.00)
February 28, 2002 and each February 28 thereafter $(100,000.00)
May 31, 2002 and each May 31 thereafter $ 600,000.00
(e) 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 January 1, 2001, and continuing for each month thereafter,
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Royal Grip, 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 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)
----- ---------------------
January, 2001 $ 0.00
February, 2001 $ 50,000.00
March, 2001 $ 100,000.00
April, 2001 $ 150,000.00
May, 2001 $ 100,000.00
June of each year $ 0.00
July of each year $ 0.00
August of each year $(300,000.00)
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 $(350,000.00)
January, 2002 and each January thereafter $ (50,000.00)
February, 2002 and each February thereafter $ 0.00
March, 2002 and each March thereafter $ 0.00
April, 2002 and each April thereafter $ 0.00
May, 2002 and each May thereafter $ 0.00
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 INVENTORY APPRAISAL. The Borrower, at its sole cost and expense,
shall cause its Inventory to be appraised by an Inventory appraiser who is
satisfactory to the Lender (the "Appraisal"). The Appraisal shall be completed
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and delivered to the Lender on or before July 31, 2001. Any failure on the part
of the Borrower to strictly comply with the terms of this Section 4 shall
constitute an Event of Default under the Credit Agreement.
5. ORIGINATION FEE/ACCRUED DEFAULT INTEREST.
(a) The Borrower shall pay the Lender as of the date hereof a fully
earned, non-refundable amendment fee in the amount of $2,500.00 in consideration
of the Lender's execution of this Amendment.
(b) In the event that any one of the Interest Rate Criteria occurs,
the Borrower shall pay the Lender, on the Trigger Date, all Accrued Default
Interest (which is continuing to accrue), as defined in the Seventh Amendment to
the Credit Agreement, which is unpaid as of the Trigger Date. The Borrower
acknowledges that as of April 30, 2001, the amount of Accrued Default Interest
was $4,693.74. In the event that none of the Interest Rate Increase Criteria
occurs, the Lender shall waive the payment of the Accrued Default Interest.
6. CONDITIONS PRECEDENT. This Amendment 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 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 in previous Certificates which have from time to
time been 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
November 10, 1999, 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 7(a) and 7(b) hereof and as to such other matters as the Lender
shall require.
(d) Payment of the amendment fee described in Paragraph 5.
(e) Such other matters as the Lender may require.
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7. 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.
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 OTHER WAIVER. Except as specifically set forth in Section 4 above,
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 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.
11. PAYMENTS ON THE SUBORDINATED DEBT. Notwithstanding anything in (i) that
certain Subordination Agreement dated December 7, 2000 (the "Subordination
Agreement"), or (ii) the Seventh Amendment to the Credit Agreement to the
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contrary, the Borrower agrees that it shall only make payments on the
Subordinated Indebtedness in strict accordance with the following:
(a) A payment may only be made on May 31, 2001.
(b) The amount of the payment may not exceed the lesser of (i) the
amount equal to the aggregate Availability under the Credit Agreement and the FM
Credit Agreement minus Accounts more than 30 days past respective due date minus
$500,000.00 or (ii) $500,000.00 plus accrued interest.
(c) The average aggregate excess Availability under the Credit
Agreement and the FM Credit Agreement for the 60 days immediately preceding May
31, 2001 was not less than $1,000,000.00, and
(d) no Event of Default or Default Period has occurred and is
continuing or will occur as a result of or immediately following any such
payment.
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, the fee
required under paragraph 5 hereof and the Accrued Default Interest which is due
and payable under Paragraph 5 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 Assistant Vice President
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, 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 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
