FIRST AMENDMENT TO CREDIT AGREEMENT
This Amendment is made as of the 11th day of April, 1997 by
and between ROYAL GRIP, INC., a Nevada corporation ("Royal Grip") and ROXXI,
INC., a Nevada corporation ("Roxxi") (collectively, the "Borrower"), and NORWEST
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").
Recitals
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 10, 1997 (the "Credit Agreement").
The Lender has agreed to make certain loan advances to the
Borrower pursuant to the terms and conditions set forth in the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's Revolving and Term Note dated as of February 10, 1997, in the
maximum principal amount of $2,450,000.00 and payable to the order of the Lender
(the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents").
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. 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. Prior to the date of this Amendment, the Borrower has (i)
failed to submit audited fiscal year-end financial statements within 90 days of
the fiscal year-ending 1996 as required by Section 6.1(a) of the Credit
Agreement, (ii) failed to maintain the minimum debt service coverage ratio
required by Section 6.12 of the Credit Agreement, (iii) failed to maintain the
minimum Net Worth required by Section 6.13 of the Credit Agreement, and (iv)
failed to comply with the Net Income (Loss) requirements of Section 6.14 of the
Credit Agreement (collectively the "Current Defaults"). Upon satisfaction by
Borrower of all of the terms and conditions set forth in this Amendment, the
Lender, although under no obligation to do so, shall waive the Current Defaults.
Nothing herein shall be construed as a waiver by Lender of any existing default
or Default Period under the terms of the Credit Agreement other than the Current
Defaults. Nothing herein shall be construed as obligating Lender to waive any
future defaults or Default Period under the Credit Agreement including any
future defaults or Default
Period under Sections 6.1, 6.12, 6.13 and 6.14 of the Credit Agreement. Upon the
satisfaction of all of the terms and conditions set forth in this Amendment, the
Default Period arising as a result of the Current Defaults shall be deemed to
have ceased.
3. The Credit Agreement is hereby amended as follows:
(a) The definition of "Default Rate" is hereby
deleted in its entirety and replaced as follows:
"Default Rate" means at any time three percent (3%)
over the Floating Rate, the Incentive Rate and/or the
Increased Floating Rate, as applicable, which Default Rate
shall change when and as the Floating Rate, the Incentive Rate
and the Increased Floating Rate change.
(b) The definition of "Floating Rate" is hereby
deleted in its entirety and replaced as follows:
"Floating Rate" means, effective April 1, 1997, an
annual rate equal to the sum of the Base Rate plus three
percent (3%), which Floating Rate shall change when and as the
Base Rate changes.
(c) The definition of "Incentive Rate" is hereby
deleted in its entirety and replaced as follows:
"Incentive Rate" means an annual rate equal to the
sum of the Base Rate, plus two percent (2%), which Incentive
Rate shall change when and as the Base Rate changes.
(d) There is hereby added to the Credit Agreement the
"Increased Floating Rate" as a new defined term. The definition of the Increased
Floating Rate shall be as follows:
"Increased Floating Rate" means an annual rate equal
to the sum of the Base Rate, plus four percent (4%), which
Increased Floating Rate shall change when and as the Base Rate
changes.
(e) Section 2.9(a) of the Credit Agreement is hereby
deleted in its entirety and replaced as follows:
The principal of the Advances and the Term Loan
outstanding from time to time during any month shall bear
interest (computed on the basis of actual days elapsed in a
360-day year) at the Floating Rate; provided, however, if
there is not a then existing Event of Default or Default
Period, then from the first day
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of the first month following the receipt by the Lender of the
fiscal year end audited financial statements of the Borrower
complying with the provisions of Section 6.1(a) for the fiscal
year ending December 31, 1997, the principal of the Advances
and the Term Loan outstanding from time to time shall bear
interest at the Incentive Rate, but only if such financial
statements show a Net Loss of $400,000.00 or less; and
provided, further, however, in the event such financial
statements show a Net Loss in excess of $750,000.00, then
effective January 1, 1998, the principal of the Advances and
the Term Loan outstanding from time to time shall bear
interest at the Increased Floating Rate; and provided,
further, however, that from the first day of any month during
which any Default Period or Event of Default occurs or exists
at any time, in the Lender's discretion and without waiving
any of its other rights and remedies, the principal of the
Advances and the Term Loan outstanding from time to time shall
bear interest at the Default Rate during the entire Default
Period; and provided, further, however, that in any event no
rate change shall be put into effect which would result in a
rate greater than the highest rate permitted by law. Interest
accruing on the principal balance of the Advances and the Term
Loan outstanding from time to time shall be payable on the
first day of each succeeding month and on the Termination Date
or earlier demand or prepayment in full. The Borrower agrees
that the interest rate contracted for includes the interest
rate set forth herein plus any other charges or fees set forth
herein and costs and expenses incident to this transaction
paid by the Borrower to the extent same are deemed interest
under applicable law.
(f) Section 6.1(a) of the Credit Agreement is hereby
modified to provide that (i) Borrower must deliver its audited financial
statement for the fiscal year ended December 31, 1996 on or before April 21,
1997, and (ii) such audited financial statements may contain a going concern
qualification based solely upon Borrower's ability to obtain adequate financing
and funds in order to meet future obligations. These modifications apply only to
the delivery of Borrower's audited financial statements for the fiscal year
ended December 31, 1996. For all future years, Section 6.1(a) remains in full
force and effect, unmodified in any way.
(g) 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 agrees that it shall, as of the last day of each
fiscal quarter, on and after March 31, 1998, maintain an
average minimum debt service coverage ratio (based upon the
period set forth below) as follows:
Quarter Ending Debt Service Coverage
-------------- ---------------------
Ratio
-----
March 31, 1998 1.0 to 1 based upon the
immediately preceding
three month period
June 30, 1998 1.25 to 1 based upon the
immediately preceding six
month period
September 30, 1998 1.25 to 1 based upon the
immediately preceding
nine month period
December 31, 1998 and on the 1.25 to 1 based upon the
last day of each fiscal quarter immediately preceding
thereafter twelve month period
The debt service coverage ratio shall be calculated
according to the following formula:
Funds from Operations + Interest Expense - Unfinanced Portion of
----------------------------------------------------------------
Capital Expenditures
--------------------
Current Maturities Long-Term Debt (actually paid during the period) +
Interest Expense
(h) Section 6.13 of the Credit Agreement is hereby
deleted in its entirety and replaced as follows:
Section 6.13 Net Worth. The Borrower warrants that,
as of December 31, 1996 Borrower had a minimum Net Worth of
not less than $6,300,000.00, less a dollar for dollar
reduction for amounts associated exclusively with the write
off of Roxxi acquisition goodwill in Borrower's 1996 fiscal
year.
The Borrower covenants that its minimum Net Worth as
of the end of each fiscal quarter, or month, as applicable, in
the 1997 fiscal year shall decrease by not more than the
amounts set forth below as measured from the Borrower's 1996
fiscal year end Net Worth.
Cumulative Net Worth
Quarter/Month Ending Increase (Decrease)
-------------------- -------------------
March 31, 1997 ($1,000,000.00)
June 30, 1997 ($1,600,000.00)
July 31, 1997 ($1,600,000.00)
August 31, 1997 ($1,600,000.00)
September 30, 1997 ($1,600,000.00)
October 31, 1997 ($1,600,000.00)
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November 30, 1997 ($1,600,000.00)
December 31, 1997 ($1,600,000.00)
The Borrower covenants that the minimum Net Worth as
of the end of each future fiscal quarter end, beginning with
the fiscal quarter ending March 31, 1998, shall increase by
not less than (or, in the event a decrease is allowed for such
fiscal quarter, decrease by not more than) the amounts set
forth below as measured from the immediately preceding fiscal
quarter ending Net Worth.
Net Worth Increase
Quarter Ending (Decrease)
-------------- ------------------
March 31 ($300,000.00)
June 30 $400,000.00
September 30 $150,000.00
December 31 ($250,000.00)
Notwithstanding anything to the contrary, beginning
with the fiscal year ending December 31, 1998, and continuing
each fiscal year thereafter, the Borrower's minimum Net Worth
as of the end of each fiscal year end shall increase by not
less than $300,000.00 over the Borrower's Net Worth as of the
end of the immediately preceding fiscal year end.
(i) Section 6.14 of the Credit Agreement is hereby
deleted in its entirety and replaced as follows:
6.14 Net Income. The Borrower covenants that
beginning with the fiscal quarter ending March 31, 1997, and
continuing each fiscal quarter, or month, as applicable, in
the 1997 fiscal year thereafter it shall achieve a cumulative
1997 fiscal year Net Loss of not more than the amounts set
forth below:
Quarter Ending Cumulative Net Loss
-------------- -------------------
March 31, 1997 ($1,000,000.00)
June 30, 1997 ($1,600,000.00)
July 31, 1997 ($1,600,000.00)
August 31, 1997 ($1,600,000.00)
September 30, 1997 ($1,600,000.00)
October 31, 1997 ($1,600,000.00)
November 30, 1997 ($1,600,000.00)
December 31, 1997 ($1,600,000.00)
The Borrower covenants that beginning with the fiscal
quarter ending March 31, 1998, and continuing each fiscal
quarter
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thereafter, it shall achieve a 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 of each fiscal year.
Quarter Ending Net Income (Loss)
-------------- -----------------
March 31 ($300,000.00)
June 30 $400,000.00
September 30 $150,000.00
December 31 ($250,000.00)
Except as specifically provided above, prior to March
of 1998 there shall be no limitation as to the amount of a Net
Loss the Borrower shall be allowed to sustain in any one
month. Notwithstanding anything to the contrary, beginning
with March of 1998, and continuing for each month thereafter,
the Borrower shall not suffer a Net Loss in excess of
$100,000.00 in any one month. Notwithstanding anything to the
contrary, beginning with the fiscal year ending December 31,
1998, and continuing each fiscal year thereafter, the Borrower
shall achieve a Net Income of not less than $300,000.00.
(j) Section 7.10 of the Credit Agreement is hereby
deleted in its entirety and replaced as follows:
7.10 Capital Expenditures. The Borrower will not
expend or contract to make unfinanced Capital Expenditure
greater than (i) $250,000.00 in the aggregate during the 1997
fiscal year, or (ii) $800,000.00 in the aggregate during any
fiscal year thereafter for the lease, purchase or other
acquisition of any capital asset, or for the lease of any
other asset, whether payable currently or in the future.
4. Except as specifically 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 thereunder.
5. The Borrower agrees to pay the Lender as of the date
hereof a fully earned, non-refundable fee in the amount of $20,000.00 in
consideration of the execution by the Lender of this Amendment.
6. This Amendment shall be effective upon receipt by the
Lender of an executed original hereof, together with each of the following, each
in substance and form acceptable to the Lender in its sole discretion:
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(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 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 as being authorized to sign and to act on behalf of the
Borrower continue to be so authorized.
7. 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 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. 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. From the date of this Amendment forward, Exhibit D of the
Credit Agreement shall be amended to comply with the revisions to the Credit
Agreement contained herein.
10. Except as specifically set forth in Section 2 above, the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default, Event of Default or Default Period
under the Credit Agreement or breach, default or event of default under any
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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11. The Borrower 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 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. 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 5 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
ROYAL GRIP, INC., a Nevada corporation
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Its Secretary
----------------------------
ROXXI, INC., a Nevada corporation
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Its Secretary
----------------------------
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NORWEST BUSINESS CREDIT, INC., a
Minnesota corporation
By /s/ Xxxxx Xxxxxxxx
---------------------------------
Its Vice-President
----------------------------
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