Exhibit 10.63
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
Dated as of AUGUST 9, 2002
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 (the "Lender"), hereby agree as follows:
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, as
amended by that certain Second Amendment to Credit and Security Agreement dated
November 10, 1999, as amended by that certain Third Amendment to Credit and
Security Agreement dated March 24, 2000, as amended by that certain Fourth
Amendment to Credit and Security Agreement dated August 3, 2000, as amended by
that certain Fifth Amendment to Credit and Security Agreement dated November 8,
2000, as amended by that certain Sixth Amendment to Credit and Security
Agreement dated March 9, 2001, as amended by that certain Seventh Amendment to
Credit and Security Agreement dated May 30, 2001 as amended by that certain
Eighth Amendment to Credit and Security Agreement and Waiver of Defaults dated
November 15, 2001, as amended by that certain Ninth Amendment to Credit and
Security Agreement and Waiver of Defaults dated April 10, 2002 (collectively,
the "Original Credit Agreement"). Capitalized terms used in these recitals have
the meanings given to them in the Credit Agreement unless otherwise specified.
The Lender has agreed to make certain loan advances to the Borrower
pursuant to the terms and conditions set forth in the Original Credit Agreement.
The loan advances under the Original Credit Agreement are evidenced by the
Borrower's Second Replacement Revolving Note dated as of March 9, 2001, in the
maximum principal amount of $6,500,000.00, Borrower's Term Note dated October 9,
1998 in the original principal amount of $4,300,000.00 and Borrower's Capital
Expenditures Note dated March 24, 2000 in the original principal amount of
$400,000.00, each of which is payable to the order of the Lender (collectively
the "Notes").
All indebtedness of the Borrower to the Lender is secured pursuant to the
terms of the Original Credit Agreement and all other Security Documents as
defined therein and shall be guaranteed pursuant to the unconditional guaranty
of the Guarantor.
Borrower and Lender wish to amend and restate the terms of the Original
Credit Agreement in its entirety.
Now, therefore, in consideration of the premises and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
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Article I.
DEFINITIONS
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower or
either of them arising out of the sale or lease of goods or rendition of
services by the Borrower or either of them on an open account or deferred
payment basis.
"Advance" means a Revolving Advance or a Term Advance.
"Affiliate" or "Affiliates" means the Covenant Entities and any other
Person controlled by, controlling or under common control with the
Borrower, including (without limitation) any Subsidiary of the Borrower.
For purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Credit and Security
Agreement, as amended, supplemented or restated from time to time which
replaces the Original Credit Agreement in its entirety.
"Availability" means the positive difference, if any, of (i) the
Borrowing Base and (ii) the sum of (A) the outstanding principal balance of
the Revolving Note and (B) the L/C Amount.
"Banking Day" means a day other than a Saturday, Sunday or other day
on which banks are generally not open for business in Phoenix, Arizona.
"Base Rate" means the rate of interest publicly announced from time to
time by Xxxxx Fargo Bank N.A. as its "base rate" or, if such bank ceases to
announce a rate so designated, any similar successor rate designated by the
Lender.
"Book Net Worth" means the aggregate of the common and preferred
stockholders' equity in the Borrower, determined in accordance with GAAP.
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"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) the sum of:
(A) the lesser of (x) 85% of Eligible Accounts, or (y)
$6,500,000.00, plus
(B) during the Foreign Accounts Eligibility Period, the
lesser of (A) 85% of Eligible Foreign Accounts or (B)
$500,000.00, plus
(C) the lesser of (x) 60% of Eligible Inventory (exclusive
of Eligible Raw Materials Inventory) plus the lesser of (i) 50%
of the Eligible Raw Materials Inventory or (ii) $250,000.00, or
(y) $2,000,000.00, plus
(D) the lesser of (i) the undisbursed face amount of the
Xxxxxxxx Letter of Credit or (ii) $1,000,000.00 (the "Letter of
Credit Overadvance") which amount shall automatically be reduced
to $0.00 in the event that the Xxxxxxxx Letter of Credit expires
or the issuer refuses to allow a permitted draw thereunder, plus
(E) $1,000,000.00 (the "Seasonal Overadvance). The Seasonal
Overadvance shall automatically be reduced to $900,000.00 on each
January 31, to $800,000.00 on each February 28, to $700,000.00 on
each March 31, to $600,000.00 on each April 30, and to
$500,000.00 on each May 31; provided that upon compliance with
the provisions of romanettes (i) and (ii) contained in the
definition of Seasonal Overadvance Floating Rate, the Letter of
Credit Overadvance shall become the lesser of (a) the undisbursed
face amount of the sum of the Xxxxxxxx Letter of Credit and the
X. Xxxxxxxx Letter of Credit or (b) $2,000,000.00, which amount
automatically shall be reduced to $1,000,000.00 in the event that
one of the Xxxxxxxx Letter of Credit or the X. Xxxxxxxx Letter of
Credit expires or the issuer refuses to allow a permitted draw
thereunder and to $0.00 in the event that both of said letters of
credit expire or the issuer refuses to allow a permitted draw
under either of said letters of credit. In such event, the
Seasonal Overadvance shall be eliminated.
Unless otherwise designated by the Borrower, Revolving Advances
will be allocated first to component D of the Borrowing Base,
second to components A, B and C and finally to component E.
"Capital Expenditures" for a period means any expenditure of money for
the purchase or construction of assets, or for improvements or additions
thereto, which are capitalized on the Borrower's balance sheet.
"Capital Expenditures Advance" has the meaning specified in Section
2.6.2.
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"Capital Expenditures Note" means the Borrower's Capital Expenditures
Note dated March 24, 2000 in the original principal amount of $400,000.00
and any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time.
"Capital Expenditures Floating Rate" means an annual rate equal to the
sum of the Base Rate plus three and one-quarter of one percent (3.25%). The
Capital Expenditures Floating Rate shall change when and as the Prime Rate
changes.
"Collateral" means all of the Borrower's Accounts, chattel paper,
deposit accounts, documents, Equipment, the Real Property, General
Intangibles, goods, instruments, Inventory, Investment Property,
letter-of-credit rights, letters of credit, all sums on deposit in any
Collateral Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing;
(ii) in the case of all goods, all accessions; (iii) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or
affixed to or used in connection with any goods; (iv) all warehouse
receipts, bills of lading and other documents of title now or hereafter
covering such goods; (v) all collateral subject to the Lien of any Security
Document; (vi) any money, or other assets of the Borrower that now or
hereafter come into the possession, custody, or control of the Lender;
(vii) all sums on deposit in the Special Account; and (viii) proceeds of
any and all of the foregoing; provided that Collateral shall not include
funds which are legally contained in employee trust accounts.
"Collateral Accounts" have the meaning given in the Collateral Account
Agreements.
"Collateral Account Agreements" means the Collateral Account
Agreements dated October 9, 1998 by and among FMM, FMS, Xxxxx Fargo Bank
N.A. and the Lender.
"Collateral Assignment of Trademarks" means the Collateral Assignment
of Trademarks by FMM in favor of the Lender dated October 9, 1998.
"Commitment" means the Lender's commitment to make Advances and to
cause the Issuer to issue Letters of Credit to or for the Borrower's
account pursuant to Article II.
"Covenant Entities" means Royal Grip, Inc., Royal Grip Headwear
Company and Royal Precision, Inc.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that
Person as at the date as of which Debt is to be determined. For purposes of
determining a Person's aggregate Debt at any time, "Debt" shall also
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include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under GAAP.
"Deeds of Trust" means the deed of trust in favor of the Lender
encumbering Lot 9 of the Xxxxxxxxx Patent Lots 1 & 9 Replat Subdivision,
according to that plat recorded on 6/1/1976 as Plat No. 281 in the Office
of County Clerk in Teton County, Wyoming and Xxx 0 xx xxx Xxxxxxx xx Xxxxx
________ Phase III _________, 1-20 Subdivision, according to that plat
recorded on 9/25/1996 as Plat No. 612 in the Office of County Xxxxx in
Teton County, Wyoming.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day
of any month during which an Event of Default has occurred and ending on
the date the Lender notifies the Borrower in writing that such Default has
been cured or waived.
"Default Rate" means an annual rate equal to two percent (2%) over the
Revolving Floating Rate, the Term Floating Rate, the Capital Expenditures
Floating Rate, the Seasonal Overadvance Floating Rate and the Letter of
Credit Overadvance Floating Rate, which rate shall change when said Rates
change.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible Accounts:
(i) That portion of Accounts which are 60 days past stated due
date or which are unpaid 120 days or more after the invoice date;
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(iv) Accounts owed by any unit of government, whether foreign or
domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for
which the Borrower has provided evidence satisfactory to the Lender
that (A) the Lender has a first priority perfected security interest
and (B) such Accounts may be enforced by the Lender directly against
such unit of government under all applicable laws);
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(v) Accounts owed by an account debtor located outside the United
States and Canada which are not (A) backed by a bank letter of credit
naming the Lender as beneficiary or assigned to the Lender, in the
Lender's possession or in a Related Lender's possession and acceptable
to the Lender in all respects, in its sole discretion, or (B) covered
by a foreign receivables insurance policy acceptable to the Lender in
its sole discretion;
(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a stockholder, Subsidiary, Affiliate,
officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security interest
in the Lender's favor (except those meeting the provisions of
romanette (v)(A) or (B) above shall not be deemed not to be an
Eligible Account due to the lack of a duly perfected security
interest) or which are subject to any lien, security interest or claim
in favor of any Person other than the Lender including without
limitation any payment or performance bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 20% or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i), (ii) or
(ix) above
(xii) Accounts consisting of tooling charges; and
(xiii) Accounts owed by an Account debtor (other than Xxxxxx
Made, Callaway and Marubeni/Precision Japan) regardless of whether
otherwise eligible, in excess of 15% of total Accounts.
(xiv) Accounts owed by Xxxxxx Made and Callaway, regardless of
whether otherwise eligible, in excess of 25% of total Accounts.
(xv) Accounts owed by Marubeni/Precision Japan, regardless of
whether otherwise eligible, which are not backed by a letter of credit
assigned to the Lender, it being agreed that any Account owed by
Marubeni/Precision Japan which is backed by an acceptable letter of
credit which is assigned to Lender shall be an Eligible Account and an
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Eligible Foreign Account without limitation as to amount or the
provisions of Foreign Account Eligibility Period.
(xvi) Accounts not denominated in US Dollars.
(xvii) Accounts, or portions thereof, otherwise deemed ineligible
by the Lender in its sole discretion.
"Eligible Foreign Accounts" means Accounts due and owing by an Account
debtor located outside the United States and Canada; but excluding any
Accounts having any of the following characteristics:
(i) (A) That portion of Accounts which are 60 days past stated
due date or which are unpaid 120 days or more after the invoice date,
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(iv) That portion of Accounts for which an invoice has not been
sent to the applicable account debtor;
(v) Accounts owed by any unit of government;
(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a stockholder, Subsidiary, Affiliate,
officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security interest
in the Lender's favor or which are subject to any lien, security
interest or claim in favor of any Person other than the Lender
including without limitation, any payment or performance bond (except
Accounts owed by Marubeni/Precision Japan which are backed by a letter
of credit assigned to the Lender shall not be deemed not to be an
Eligible Foreign Account due to the lack of a duly perfected security
interest);
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
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(xi) That portion of Accounts owed by any one Account debtor that
would permit Revolving Advances supported by such Account debtor's
Accounts to exceed $300,000 at any one time;
(xii) Accounts denominated in any currency other than United
States dollars, Canadian dollars, French francs, Swiss francs, German
marks, Japanese yen, United Kingdom pounds sterling or Euros;
(xiii) Accounts with respect to which the Borrower has not
instructed the Account debtor to pay the Account to the Collateral
Account or Lockbox;
(xiv) Accounts owed by debtors located in countries not
acceptable to the Lender in its sole discretion;
(xv) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 20% or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i), (ii) or
(ix) above;
(xvi) Accounts owed by an Account debtor, regardless of whether
otherwise eligible, in excess of 15% of total Accounts; and
(xvii) Accounts otherwise deemed unacceptable to the Lender in
its sole discretion.
"Eligible Raw Materials Inventory" means that portion of Eligible
Inventory consisting of raw materials.
"Eligible Inventory" means all inventory of the Borrower valued at
weighted average cost as determined in accordance with GAAP; provided,
however, that the following shall not in any event be deemed Eligible
Inventory:
(i) Inventory that is: in-transit (exclusive of inventory
in-transit between Premises locations); located at any warehouse or
other premises not approved by the Lender in writing; located outside
of the states, or localities, as applicable, in which the Lender has
not filed financing statements to perfect a first priority security
interest in such inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other document of
title not in the possession of the Lender; on consignment to or from
any other Person or subject to any bailment;
(ii) Packaging inventory;
(iii) Work-in-process inventory (other than frequency coefficient
matched shafts that have been labeled ("FCM Shafts");
(iv) Inventory that is damaged, obsolete or not currently
saleable in the normal course of the Borrower's operations;
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(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the
vendor thereof;
(vi) Inventory that is subject to a security interest in favor of
any Person other than the Lender;
(vii) Inventory that does not consist of finished shafts (other
than FCM Shafts);
(viii) Slow-Moving Inventory;
(ix) Inventory that is subject to a licensing agreement, which
licensing agreement would preclude or hinder the Lender from
liquidating such Inventory in the ordinary course of business; and
(x) Inventory otherwise deemed ineligible by the Lender in its
sole discretion.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but
not limited to all present and future machinery, vehicles, furniture,
fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically (without
limitation) the goods described in any equipment schedule or list herewith
or hereafter furnished to the Lender by the Borrower, and whether located
on the Premises or otherwise.
"Event of Default" has the meaning specified in Section 8.1.
"FMM" means FM Precision Golf Manufacturing Corp., a Delaware
corporation.
"FMS" means FM Precision Golf Sales Corp., a Delaware corporation.
"Foreign Accounts Eligibility Period" means the period beginning May
1, 2002 and ending April 30, 2003. Said period may be renewed in subsequent
years by Lender in its sole discretion.
"Funding Date" has the meaning given in Section 2.1. "Funds From
Operations" for a given period means the sum of (i) Net Income, (ii)
depreciation and amortization, (iii) deferred income taxes, and (iv) other
non-cash items, each as determined for such period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial
Accounting Standards Board changing or implementing any new accounting
9
standard, the Borrower either (i) is required to implement such change, or
(ii) for future periods will be required to and for the current period may
in accordance with GAAP implement such change, for its financial statements
to be in conformity with GAAP (any such change is herein referred to as a
"Required GAAP Change"), provided that (1) the Borrower shall fully
disclose in such financial statements any such Required GAAP Change and the
effects of the Required GAAP Change on the Borrower's income, retained
earnings or other accounts, as applicable, and (2) the Borrower's financial
covenants set forth in Sections 6.12 through 6.15 and 7.10 shall be
adjusted as necessary to reflect the effects of such Required GAAP Change.
"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter
acquired, including (without limitation) all present and future patents,
patent applications, copyrights, trademarks, trade names, trade secrets,
customer or supplier lists and contracts, manuals, operating instructions,
permits, franchises, the right to use the Borrower's name, and the goodwill
of the Borrower's business.
"Guarantors" means Royal Precision, Inc., a Delaware corporation,
Xxxxxxxxxxx Xxxxxxxx and Xxxx Xxxxxxxx.
"Hazardous Substance" has the meaning given in Section 5.12.
"Interest Expense" means, for a fiscal year-to-date period, the
Borrower's total gross interest expense during such period (excluding
interest income), and shall in any event include, without limitation or
duplication, (i) interest expensed (whether or not paid) on all Debt, (ii)
the amortization of debt discounts, (iii) the amortization of all fees
payable in connection with the incurrence of Debt to the extent included in
interest expense, and (iv) the portion of any capitalized lease obligation
allocable to interest expense.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or
materials, whether acquired, held or furnished for sale, for lease or under
service contracts or for manufacture or processing, and wherever located.
"Issuer" means the issuer of any Letter of Credit.
"Xxxxxxxx Letter of Credit" has the meaning specified in Section 4.1
below.
"L/C Amount" means the sum of (i) the aggregate face amount of any
issued and outstanding Letters of Credit and (ii) the unpaid amount of the
Obligation of Reimbursement.
"L/C Application" means an application and agreement for letters of
credit in a form acceptable to the Issuer and the Lender.
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"Letter of Credit" has the meaning specified in Section 2.2.
"Letter of Credit Overadvance Floating Rate" means an annual rate
equal to the Base Rate. The Letter of Credit Overadvance Floating Rate
shall change when and as the Base Rate changes.
"Loan Documents" means this Agreement, the Notes and the Security
Documents.
"Maturity Date" means July 31, 2003, provided however, if but only if
(i) there is not a then existing Event of Default or Default Period, (ii)
the expiry date of the Xxxxxxxx Letter of Credit and the X. Xxxxxxxx Letter
of Credit, if issued, are extended through August 12, 2004, (iii) FMM, FMS
and the Covenant Entities in the aggregate have not achieved a Net Loss in
excess of $100,000.00 during the month of June, 2004, and, (iv) the
Borrower and the Lender have mutually agreed (through an executed amendment
to this Agreement), on or before July 31, 2003, upon new covenants levels
(including a debt service coverage ratio covenant) for Section 6.12 through
6.15 below applicable to the period of time from July 31, 2003 through July
31, 2004, which covenants shall be no less stringent than the covenants set
forth below in said Sections, the Borrower shall have the right to extend
the Maturity Date until July 31, 2004. This is a one time right only, and
not further extensions of the Maturity Date shall be permitted unless
consented to by Lender in writing in the Lender's sole and absolute
discretion.
"Maximum Line" means $6,500,000.00, unless said amount is reduced
pursuant to Section 2.12, in which event it means the amount to which said
amount is reduced.
"Minimum Interest Charge" has the meaning given in Section 2.8(c).
"Mortgage Deed" means the Mortgage Deed and Security Agreement by FMM
in favor of Lender dated October 9, 1998.
"Net Income" means for the applicable period, before-tax net income
from continuing operations as determined in accordance with GAAP.
"Net Loss" means for the applicable period, before-tax net loss from
continuing operations as determined in accordance with GAAP.
"Note" means the Revolving Note, the Term Note or the Capital
Expenditures Note, and "Notes" means the Revolving Note, the Term Note and
the Capital Expenditures Note.
"Obligations" means the Notes and each and every other debt, liability
and obligation of every type and description which the Borrower may now or
at any time hereafter owe to the Lender, whether such debt, liability or
obligation now exists or is hereafter created or incurred, and whether it
is direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or sole, joint, several
or joint and several, and including specifically, but not limited to, the
Obligation of Reimbursement and all indebtedness of the Borrower arising
under this Agreement, the Notes, any L/C Application completed by the
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Borrower, or any other loan or credit agreement or guaranty between the
Borrower and the Lender, whether now in effect or hereafter entered into.
"Obligation of Reimbursement" has the meaning given in Section 2.3(a).
"Patent Security Agreement" means the Patent Mortgage, Assignment and
Security Agreement by FMM in favor of the Lender dated October 9, 1998.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including (without limitation) the
premises legally described in Exhibit D attached hereto.
"Real Property" means the real property subject to the lien of the
Mortgage Deed.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out
of a loan, out of the overpayment of taxes or other liabilities, or
otherwise arises under any contract or agreement, whether such right to
payment is created, generated or earned by the Borrower or by some other
person who subsequently transfers such Person's interest to the Borrower,
whether such right to payment is or is not already earned by performance,
and howsoever such right to payment may be evidenced, together with all
other rights and interests (including all liens and security interests)
which the Borrower may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such payment or
against any property of such account debtor or other obligor; all including
but not limited to all present and future Accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the sum of the
Base Rate plus three percent (3.0%). The Revolving Floating Rate shall
change when and as the Base Rate changes.
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"Revolving Note" means the Borrower's Second Replacement Revolving
Note, dated March 9, 2001 in the original principal amount of $6,500,000.00
and any note or notes issued in substitution therefore, as the same may
hereafter be amended, supplemented or restated from time to time.
"Seasonal Overadvance Floating Rate" means an annual rate equal to the
sum of the Base Rate plus three percent (3.0%). The Seasonal Overadvance
Floating Rate shall automatically be reduced to an annual rate equal to the
Base Rate, if but only if, (i) Xxxxxxxxxxx Xxxxxxxx provides to the Lender
the X. Xxxxxxxx Letter of Credit complying with the terms of Section 9.17
below and (ii) there is not a then existing Event of Default or Default
Period. Said reduction shall be effective, if at all, on the date of this
Agreement if the provisions of romanette (i) are complied with on the date
of this Agreement, or the first day of the first full month following
Lender's receipt of the X. Xxxxxxxx Letter of Credit complying with the
provisions of Section 9.17 below. The Seasonal Overadvance Floating Rate
shall change when and as the Base Rate changes.
"Security Documents" means this Agreement, the Mortgage Deed, the
Collateral Account Agreements, the Patent Security Agreement and any other
document delivered to the Lender from time to time in connection with the
Original Credit Agreement, this Agreement or to secure the Obligations, as
the same may hereafter be amended, supplemented or restated from time to
time.
"Security Interest" has the meaning given in Section 3.1.
"Slow-Moving Inventory" means any inventory in excess of the total
amount of like kind inventory sold by the Borrower in the immediately
preceding 12 month period.
"Special Account" means a specified cash collateral account maintained
by a financial institution acceptable to the Lender in connection with
Letters of Credit, as contemplated by Section 2.4.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by either Borrower, by either Borrower and one or more other
Subsidiaries, or by one or more other Subsidiaries.
"Term Advance" has the meaning specified in Section 2.6.1.
"Term Floating Rate" means an annual rate equal to the sum of the Base
Rate plus three and three-quarters of one percent (3.75%). The Term
Floating Rate shall change when and as the Prime Rate changes.
"Term Note" means the Borrower's Term Note, dated October 9, 1998 in
the original principal amount of $4,300,000.00 and any note or notes issued
in substitution therefor, as the same may hereafter be amended,
supplemented or restated from time to time.
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"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default
pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in Section 9.13 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion hereof.
"Xxxxx Fargo Bank N.A." means Xxxxx Fargo Bank, National Association.
Section 1.2 OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP. All terms defined in
the UCC and not otherwise defined herein have the meanings assigned to them in
the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and
the like, are to Articles, Sections and subsections of, or Exhibits or Schedules
attached to, this Agreement unless otherwise expressly provided. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". Unless the context in which used herein otherwise
clearly requires, "or" has the inclusive meaning represented by the phrase
"and/or". Defined terms include in the singular number the plural and in the
plural number the singular. Reference to any agreement (including the Loan
Documents), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof (and, if applicable, in accordance with the terms hereof and the
other Loan Documents), except where otherwise explicitly provided, and reference
to any promissory note includes any promissory note which is an extension or
renewal thereof or a substitute or replacement therefor. Reference to any law,
rule, regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect on the determination date, including rules and
regulations promulgated thereunder.
Article II.
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 REVOLVING ADVANCES. The Lender agrees, on the terms and subject
to the conditions herein set forth, to make advances to the Borrower from time
to time from the date all of the conditions set forth in Section 4.1 are
satisfied (the "Funding Date") to the Termination Date, on the terms and subject
to the conditions herein set forth (the "Revolving Advances"). The Lender shall
have no obligation to make a Revolving Advance if, after giving effect to such
requested Revolving Advance, the sum of the outstanding and unpaid Revolving
Advances under this Section 2.1 or otherwise would exceed the Borrowing Base
less the L/C Amount. The Borrower's obligation to pay the Revolving Advances
shall be evidenced by the Revolving Note and shall be secured by the Collateral
as provided in Article III. Within the limits set forth in this Section 2.1, the
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Borrower may borrow, prepay pursuant to Section 2.12 and reborrow. The Borrower
agrees to comply with the following procedures in requesting Revolving Advances
under this Section 2.1:
(a) The Borrower shall make each request for a Revolving Advance to
the Lender before 11:00 a.m. (Phoenix time) of the day of the requested
Revolving Advance. Requests may be made in writing or by telephone, specifying
the date of the requested Revolving Advance and the amount thereof. Each request
shall be by (i) any officer of either Borrower; or (ii) any person designated as
either Borrower's agent by any officer of either Borrower in a writing delivered
to the Lender; or (iii) any person whom the Lender reasonably believes to be an
officer of either Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall disburse the proceeds of the requested Revolving Advance by
crediting the same to the Borrower's demand deposit account maintained with
Xxxxx Fargo Bank N.A. unless the Lender and the Borrower shall agree in writing
to another manner of disbursement. Upon the Lender's request, the Borrower shall
promptly confirm each telephonic request for an Advance by executing and
delivering an appropriate confirmation certificate to the Lender. The Borrower
shall repay all Advances even if the Lender does not receive such confirmation
and even if the person requesting an Advance was not in fact authorized to do
so. Any request for an Advance, whether written or telephonic, shall be deemed
to be a representation by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the time of the request.
Section 2.2 LETTERS OF CREDIT.
(a) Upon the request of either Borrower, the Lender may, in its sole
discretion, on the terms and subject to the conditions herein set forth, cause
an Issuer to issue, from the Funding Date to the Termination Date, one or more
irrevocable standby or documentary letters of credit (each, a "Letter of
Credit") for the Borrower's account. In the event the Lender elects to issue one
or more Letters of Credit, the aggregate amount at any time outstanding of all
such Letters of Credit shall not exceed the lesser of:
(i) $500,000.00 less the L/C Amount, or
(ii) the Borrowing Base less the sum of (A) all outstanding and
unpaid Revolving Advances, and (B) the L/C Amount.
Each Letter of Credit, if any, shall be issued pursuant to a separate L/C
Application entered into by the Borrower and the Lender for the benefit of the
Issuer, completed in a manner satisfactory to the Lender and the Issuer. The
terms and conditions set forth in each such L/C Application shall supplement the
terms and conditions hereof, but if the terms of any such L/C Application and
the terms of this Agreement are inconsistent, the terms hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date later than
the Termination Date in effect as of the date of issuance.
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(c) Any request to cause an Issuer to issue a Letter of Credit under
this Section 2.2 shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the date of the
request.
Section 2.3 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT; OBLIGATION OF
REIMBURSEMENT.
The Borrower acknowledges that the Lender, as co-applicant, will be liable
to the Issuer for reimbursement of any and all draws under Letters of Credit and
for all other amounts required to be paid under the applicable L/C Application.
Accordingly, the Borrower agrees to pay to the Lender any and all amounts
required to be paid under the applicable L/C Application, when and as required
to be paid thereby, and the amounts designated below, when and as designated:
(a) The Borrower hereby agrees to pay the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn under such
Letter of Credit plus any and all reasonable charges and expenses that the
Issuer or the Lender may pay or incur relative to such draw and the applicable
L/C Application, plus interest on all such amounts, charges and expenses as set
forth below (the Borrower's obligation to pay all such amounts is herein
referred to as the "Obligation of Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit, the Lender
shall make a Revolving Advance in the amount of the Obligation of Reimbursement
and shall apply the proceeds of such Revolving Advance thereto. Such Revolving
Advance shall be repayable in accordance with and be treated in all other
respects as a Revolving Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the Borrower
is unable, because a Default Period then exists or for any other reason, to
obtain a Revolving Advance to pay the Obligation of Reimbursement, the Borrower
shall pay to the Lender on demand and in immediately available funds, the amount
of the Obligation of Reimbursement together with interest, accrued from the date
of the draft until payment in full at the Default Rate. Notwithstanding the
Borrower's inability to obtain a Revolving Advance for any reason, the Lender is
irrevocably authorized, in its sole discretion, to make a Revolving Advance in
an amount sufficient to discharge the Obligation of Reimbursement and all
accrued but unpaid interest thereon.
(d) The Borrower's obligation to pay any Revolving Advance made under
this Section 2.3, shall be evidenced by Revolving Note and shall bear interest
as provided in Section 2.8.
Section 2.4 SPECIAL ACCOUNT. If the Credit Facility is terminated for any
reason whatsoever while any Letter of Credit is outstanding, the Borrower shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount. The Special Account shall be
an interest bearing account maintained for the Lender by any financial
institution acceptable to the Lender. Any interest earned on amounts deposited
in the Special Account shall be credited to the Special Account. Amounts on
deposit in the Special Account may be applied by the Lender at any time or from
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time to time to the Obligations in the Lender's sole discretion, and shall not
be subject to withdrawal by the Borrower so long as the Lender maintains a
security interest therein. The Lender agrees to transfer any balance in the
Special Account to the Borrower at such time as the Lender is required to
release its security interest in the Special Account under applicable law.
Section 2.5 OBLIGATIONS ABSOLUTE. The Borrower's obligations arising under
Section 2.3 shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of Section 2.3, under all circumstances
whatsoever, including (without limitation) the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
any other agreement or instrument relating to any Letter of Credit (collectively
the "Related Documents");
(b) any amendment or waiver of or any consent to departure from all or
any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time, against any beneficiary or any transferee of
any Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), or other Person, whether in connection with this
Agreement, the transactions contemplated herein or in the Related Documents or
any unrelated transactions;
(d) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer or the Lender under any
Letter of Credit against presentation of a draft or certificate which does not
strictly comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 2.6.1 TERM ADVANCE.
(a) The Lender agrees, on the terms and subject to the conditions
herein set forth, to make a one time non-revolving advance to the Borrower in
the amount of $4,300,000.00 (the "Term Advance"). The Borrower hereby
acknowledges that as of the date hereof, the Term Advance is fully disbursed and
as of the date hereof has a current outstanding principal balance of
$2,014,550.00.
(b) The Borrower's obligation to pay the Term Advance shall be
evidenced by the Term Note and shall be secured by the Collateral as provided in
Article III.
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Section 2.6.2 CAPITAL EXPENDITURES ADVANCE.
(a) The Lender agrees, on the terms and subject to the conditions
herein set forth (including without limitation Section 4.2 and 4.3 below), to
make a non-revolving advance to the Borrower in the amount of $400,000.00 (the
"Capital Expenditures Advance"). The Borrower hereby acknowledges that as of the
date hereof, the Capital Expenditures Advance is fully disbursed and as of the
date hereof has a current outstanding principal balance of $300,010.00.
(b) The Borrower's obligation to pay the Capital Expenditures Advance
is evidenced by the Capital Expenditures Note and is secured by the Collateral
as provided in Article III.
Section 2.7.1 PAYMENT OF TERM NOTE. The outstanding principal balance of
the Term Note shall be due and payable as follows:
(a) Beginning on April 1, 2001 and on the first day of each month
thereafter, in equal monthly installments of $46,850.00;
(b) On the Termination Date, the entire unpaid principal balance of
the Term Note, and all unpaid interest accrued thereon, shall in any event be
due and payable.
Section 2.7.2 PAYMENT OF CAPITAL EXPENDITURES NOTE. The outstanding
principal balance of the Capital Expenditures Note shall be due and payable as
follows:
(a) Beginning on May 31, 2001 and on the first day of each month
thereafter in equal monthly installments of $6,666.00; and
(b) On the Termination Date, the entire unpaid principal balance of
the Capital Expenditures Note, and all unpaid interest accrued thereon, shall in
any event be due and payable.
Section 2.8 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.
(a) REVOLVING NOTE. Except as set forth in Sections 2.8(d), 2.8(f) and
2.8(g), the outstanding principal balance (exclusive of that portion of the
Revolving Advances which constitutes the Seasonal Overadvance and the Letter of
Credit Overadvance) of the Revolving Note shall bear interest at the Revolving
Floating Rate. Except as set forth in Sections 2.8(d), 2.8(f) and 2.8(g), the
outstanding principal balance of that portion of the Revolving Advances which
constitutes the Seasonal Overadvance shall bear interest at the Seasonal
Overadvance Floating Rate. Except as set forth in Section 2.8(d), 2.8(f) and
2.8(g), the outstanding principal balance of that portion of the Revolving
Advances which constitutes the Letter of Credit Overadvance shall bear interest
at the Letter of Credit Overadvance Floating Rate.
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(b) TERM NOTE. Except as set forth in Sections 2.8(d), 2.8(f) and
2.8(g), the outstanding principal balance of the Term Note shall bear interest
at the Term Floating Rate.
(c) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
pursuant to Section 2.8(a), 2.8(b) and 2.8(h), the Borrower shall pay to the
Lender interest of not less than $15,000.00 per calendar month (the "Minimum
Interest Charge") during the term of this Agreement, and the Borrower shall pay
any deficiency between the Minimum Interest Charge and the amount of interest
otherwise calculated under Sections 2.8(a) and 2.8(e) on the date and in the
manner provided in Section 2.10.
(d) DEFAULT INTEREST RATE. At any time during any Default Period, in
the Lender's sole discretion and without waiving any of its other rights and
remedies, the principal of the Advances outstanding from time to time shall bear
interest at the Default Rate, effective for any periods designated by the Lender
from time to time during that Default Period.
(e) PARTICIPATIONS. If any Person shall acquire a participation in the
Advances under this Agreement, the Borrower shall be obligated to the Lender to
pay the full amount of all interest calculated under, along with all other fees,
charges and other amounts due under this Agreement, regardless if such Person
elects to accept interest with respect to its participation at a lower rate than
the Revolving Floating Rate or the Term Floating Rate, or otherwise elects to
accept less than its pro rata share of such fees, charges and other amounts due
under this Agreement.
(f) USURY. 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.
Notwithstanding anything to the contrary contained in any Loan Document, all
agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
any applicable usury laws. If any payments in the nature of interest, additional
interest and other charges made under any Loan Document are held to be in excess
of the limits imposed by any applicable usury laws, it is agreed that any such
amount held to be in excess shall be considered payment of principal hereunder,
and the indebtedness evidenced hereby shall be reduced by such amount so that
the total liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrower and the
Lender. This provision shall never be superseded or waived and shall control
every other provision of the Loan Documents and all agreements between the
Borrower and the Lender, or their successors and assigns.
(g) SAVINGS CLAUSE. 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 that some are deemed interest
under applicable law.
(h) CAPITAL EXPENDITURES NOTE. Except as set forth in Sections 2.8(d),
2.8(f) and 2.8(g), the outstanding principal balance of the Capital Expenditures
Note shall bear interest at the Capital Expenditures Floating Rate. Said
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interest shall begin to accrue upon the disbursement of any portion of the
Capital Expenditures Advance.
Section 2.9 FEES.
(a) UNUSED LINE FEE. For the purposes of this Section 2.9(a),"Unused
Amount" means the Maximum Line reduced by (1) outstanding Revolving Advances and
(2) the L/C Amount. The Borrower agrees to pay to the Lender an unused line fee
at the rate of one-half of one percent (0.5%) per annum on the average daily
Unused Amount from the date of this Agreement to and including the Termination
Date, due and payable monthly in arrears on the first day of the month and on
the Termination Date.
(b) LETTER OF CREDIT FEES. The Borrower agrees to pay the Lender a fee
with respect to each Letter of Credit, if any, accruing on a daily basis and
computed at the annual rate of three percent (3%) of the aggregate amount that
may then be drawn on all issued and outstanding Letters of Credit assuming
compliance with all conditions for drawing thereunder (the "Aggregate Face
Amount"), from and including the date of issuance of such Letter of Credit until
such date as such Letter of Credit shall terminate by its terms or be returned
to the Lender, due and payable monthly in arrears on the first day of each month
and on the Termination Date.
(c) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower agrees to pay
the Lender, on written demand, the administrative fees charged by the Issuer in
connection with the honoring of drafts under any Letter of Credit, amendments
thereto, transfers thereof and all other activity with respect to the Letters of
Credit at the then-current rates published by the Issuer for such services
rendered on behalf of customers of the Issuer generally.
(d) AUDIT FEES. The Borrower hereby agrees to pay the Lender, on
demand, audit fees of $87.50 per hour (or Lender's then applicable rate) per
auditor in connection with any audits or inspections by the Lender of any
collateral or the operations or business of the Borrower, together with all
actual out-of-pocket costs and expenses incurred in conducting any such audit or
inspection (collectively, "Out-of-Pockets"). So long as there is not any then
existing Event of Default or Default Period, such audit fees shall not exceed
$5,000.00 per audit plus all applicable Out-of-Pockets and audits shall be
performed not more frequently than four times per annum. The Lender shall send
to the Borrower an invoice applicable to such audit fees, out-of-pocket costs
and expenses, provided, however, any failure of the Lender to send such invoices
shall not relieve the Borrower of its obligations under this Section 2.9(d).
(e) OVERADVANCE FEE. As of the date hereof, the Borrower owes to the
Lender $4,200.00 in overadvance fees pursuant to Section 2.14 of the Original
Credit Agreement. Said amount shall be due and payable on April 1, 2003.
(f) WIRE FEES. The Borrower agrees to pay the Lender a wire fee in the
amount of $15.00 for each funding wire initiated by the Lender at the Borrower's
request.
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(g) FOREIGN CREDIT INSURANCE. The Borrower agrees to pay to the Lender
a Foreign Credit Insurance fee in the amount of $1,250.00 per quarter. Said fee
shall be due and payable in arrears on the last day of each fiscal quarter.
(h) AMENDMENT FEE. Pursuant to the terms of the Ninth Amendment to the
Credit and Security Agreement and Waiver of Defaults applicable to the Original
Credit Agreement, the Borrower owes the Lender an amendment fee in the amount of
$15,000.00 (the "Amendment Fee"). The Amendment Fee shall be due and payable on
April 1, 2003.
(i) AMENDED AND RESTATED FEE. The Borrower shall pay to the Lender a
fully earned non-refundable fee in the amount of $50,000.00 in consideration of
the Lender's execution and delivery of this Agreement. Said fee shall be due and
payable as follows: $10,000.00 upon the execution and delivery of this
Agreement, $20,000.00 on February 1, 2003 and $20,000.00 on March 1, 2003.
(j) SUCCESS FEE. The Borrower shall pay to the Lender a fully earned
non-refundable fee in the amount of $100,000.00 in the event of a stock (whether
the stock is that of Royal Precision, Inc. or the stock of either Borrower) or
asset sale outside of the ordinary course of business or a liquidation of Royal
Precision, Inc.'s or either Borrower's business or a sale of substantially all
of the assets of any of them. Said fee shall be due and payable upon the
consummation of any of the above transactions. Notwithstanding anything to the
contrary, no such fee shall be due in the event that substantially all of the
issued and outstanding stock of Royal Precision, Inc. is acquired by Royal
Associates, Inc., or Royal Precision, Inc. merges with a subsidiary of Royal
Associates, Inc.
Section 2.10 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest shall be
payable in arrears on the first day of each month and on the Termination Date.
Section 2.11 [INTENTIONALLY DELETED]
Section 2.12 VOLUNTARY PREPAYMENT; REDUCTION OF THE MAXIMUM LINE;
TERMINATION OF THE CREDIT FACILITY BY THE BORROWER. Except as otherwise provided
herein, the Borrower may prepay the Revolving Advances in whole at any time or
from time to time in part. The Borrower may prepay the Term Advance and the
Capital Expenditures Advance (other than in accordance with Section 2.7.1(a) and
2.7.2(a)), and terminate the Credit Facility or reduce the Maximum Line at any
time if it gives the Lender at least 30 days' prior written notice. Any
prepayment of the Term Advance and the Capital Expenditure Advance (other than
in accordance with Section 2.7.1(a) and 2.7.2(a)) or reduction in the Maximum
Line must be in an amount not less than $250,000.00 or an integral multiple
thereof. No reduction of the Maximum Line shall in any way affect the Minimum
Interest Charges. If the Borrower reduces the Maximum Line to zero, all
Obligations shall be immediately due and payable. Any partial prepayments of the
Term Note and the Capital Expenditures Note (other than in accordance with
Section 2.7.1(a) and 2.7.2(a)) shall be applied to principal payments due and
owing in inverse order of their maturities. Upon termination of the Credit
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Facility and payment and performance of all Obligations, the Lender shall
release or terminate the Security Interest and the Security Documents to which
the Borrower is entitled by law.
Section 2.13 [INTENTIONALLY DELETED]
Section 2.14 MANDATORY PREPAYMENT. Without notice or demand, if the sum of
the outstanding principal balance of the Revolving Advances plus the L/C Amount
shall at any time exceed the Borrowing Base, the Borrower shall (i) first,
immediately prepay the Revolving Advances to the extent necessary to eliminate
such excess; and (ii) if prepayment in full of the Revolving Advances is
insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess. Any payment received by the Lender under this Section 2.14 may
be applied to the Obligations, in such order and in such amounts as the Lender,
in its discretion, may from time to time determine; and any prepayment under
Section 2.12 shall be applied as indicated and if to the Term Note or the
Capital Expenditures Note in the inverse order of maturity. For each day or
portion thereof that the Revolving Advances shall exceed the Borrowing Base, the
Borrower shall pay to the Lender an overadvance charge (which charge shall be in
addition to and not in lieu of any other interest, fees or charges payable by
Borrower hereunder) in the amount of $500.00; provided however, that if such day
occurs during a Default Period, the overadvance charge for such day shall be
$1,000.00.
Section 2.15 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations one Banking
Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for two (2) additional days before
applying them to the Obligations. Notwithstanding anything in Section 2.1, the
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time without the Borrower's request and even if the conditions set forth
in Section 4.2 would not be satisfied, to make a Revolving Advance in an amount
equal to the portion of the Obligations from time to time due and payable.
Section 2.16 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Banking Day, such
payment may be made on the next succeeding Banking Day, and such extension of
time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
Section 2.17 USE OF PROCEEDS. The Borrower shall use the proceeds of
Revolving Advances, each Letter of Credit, and the Term Advances if any, for
ordinary working capital purposes.
Section 2.18 LIABILITY RECORDS. The Lender may maintain from time to time,
at its discretion, liability records as to the Obligations. All entries made on
any such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower absent manifest
error which must be proven on or before any applicable due date.
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Article III.
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The Lender
may at any time (upon the occurrence of an Event of Default or during a Default
Period) notify any account debtor or other Person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any reasonable compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and otherwise handle the Borrower's mail, applying all Collateral as
permitted under this Agreement and holding all other mail for the Borrower's
account or forwarding such mail to the Borrower's last known address.
Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the payment
and performance of the Obligations, the Borrower hereby assigns to the Lender
any and all monies (including, without limitation, proceeds of insurance and
refunds of unearned premiums) due or to become due under, and all other rights
of the Borrower with respect to, any and all policies of insurance now or at any
time hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and, during the existence of a Default
Period, adjust, litigate, compromise or release any claim against the issuer of
any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the right to
take possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of
goods that are Collateral and for other purposes that the Lender may in good
xxxxx xxxx to be related or incidental purposes.
23
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Obligations and
termination of the Commitment, and (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises, the Borrower shall reimburse the Lender promptly for the full amount
thereof. In addition, the Borrower will pay, or reimburse the Lender for, all
taxes (other than income taxes), fees, duties, imposts, charges and expenses at
any time incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this Agreement
or the provisions of this Section 3.4.
Section 3.5 LICENSE. Without limiting the generality of any of the Security
Documents, the Borrower hereby grants to the Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit all trademarks, franchises,
trade names, copyrights and patents of the Borrower for the purpose of selling,
leasing or otherwise disposing of any or all Collateral during any Default
Period.
Section 3.6 FINANCING STATEMENT. The Borrower authorizes the Lender to file
from time to time where permitted by law, such financing statements against
collateral described as "all personal property" as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtors:
FM Precision Golf Manufacturing Corp.
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Federal Tax Identification No. 06 1453898
FM Precision Golf Sales Corp.
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Federal Tax Identification No. 06 1453897
24
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx
7th Floor, MAC S4101-076
Xxxxxxx, XX 00000
Section 3.7 SETOFF. The Borrower agrees that the Lender may at any time or
from time to time, at its sole discretion and without demand and without notice
to anyone, setoff any liability owed to the Borrower by the Lender, whether or
not due, against any Obligation, whether or not due. In addition, each other
Person holding a participating interest in any Obligations shall have the right
to appropriate or setoff any deposit or other liability then owed by such Person
to the Borrower, whether or not due, and apply the same to the payment of said
participating interest, as fully as if such Person had lent directly to the
Borrower the amount of such participating interest.
Article IV.
CONDITIONS OF LENDING
Section 4.1 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING AND TERM ADVANCES
AND THE INITIAL LETTER OF Credit. The Lender's obligation to make the initial
Revolving Advance, cause to be issued any Letter of Credit, or make the one time
disbursement of the Term Advance hereunder shall be subject to the condition
precedent that the Lender shall have received all of the following, each in form
and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Revolving Note, the Term Note and the Capital Expenditures
Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Premises, together with a landlord's disclaimer and
consent (and Memorandum thereof) with respect to each such lease.
(d) Current searches of appropriate filing offices showing that (i) no
state or federal tax liens have been filed and remain in effect against the
Borrower, (ii) no financing statements or assignments of patents, trademarks or
copyrights have been filed and remain in effect against the Borrower except
those financing statements and assignments of patents, trademarks or copyrights
relating to Permitted Liens or to liens held by Persons who have agreed in
writing that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of patents,
trademarks or copyrights satisfactory to the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by filing.
25
(e) A certificate of the Secretary or Assistant Secretary of each of
FMM and FMS certifying as to (i) the resolutions of the Borrower's directors
and, if required, shareholders, authorizing the execution, delivery and
performance of the Loan Documents, (ii) the articles of incorporation and bylaws
of each of FMM and FMS, and (iii) the signatures of the officers or agents
authorized to execute and deliver the Loan Documents and other instruments,
agreements and certificates, including Advance requests, on behalf of each of
FMM and FMS.
(f) Evidence that each of FMM and FMS is duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes such licensing or
qualification necessary.
(g) A certificate of an officer of each of FMM and FMS confirming the
representations and warranties set forth in Article V.
(h) An opinion of counsel to each of FMM and FMS, addressed to the
Lender, together with the results of a litigation search or searches showing all
actions or proceedings where each of FMM and FMS is a defendant or involving a
claim against the Borrower.
(i) the Collateral Assignment of Trademarks properly executed by
Borrower.
(j) Guaranties, properly executed by the Guarantors, pursuant to which
Guarantors unconditionally guarantees the prompt payment of all Obligations to
the extent set forth in the applicable Guaranty.
(k) All outstanding subordinated debt owed by the Guarantor has been
converted into equity.
(l) An opinion of counsel to Guarantors, addressed to the Lender.
(m) Payment of the fees and commissions due through the date of the
Initial Advance or Letter of Credit under Section 2.9 and expenses incurred by
the Lender through such date and required to be paid by the Borrower under
Section 9.7, including all legal expenses incurred through the date of this
Agreement.
(n) The Patent Security Agreement properly executed by Borrower.
(o) The Collateral Assignment of Trademarks properly executed by
Borrower.
(p) The Amendment to the Mortgage Deed properly executed by FMM.
(q) The Deeds of Trust property executed by Xxxxx Xxxxxxxx and Xxxx
Xxxxxxxx.
26
(r) Current certificates issued by the Secretaries of State of
Delaware and Connecticut certifying that FMM and FMS are in compliance with all
applicable organizational requirements of such States.
(s) Management Support Agreement in favor of Lender properly executed
by Xxxx Xxxxxxxx, Xxxxx Xxxxxx and Xxxxxx Xxxxxxxx.
(t) Assignment with respect to Letter of Credit proceeds properly
executed by Borrower and Xxxxx Fargo Bank N.A.
(u) An irrevocable letter of credit in the face amount of
$1,000,000.00 issued by The Xxxxxxx State Bank and Trust Company in favor of the
Lender with an expiration date of not sooner than August 12, 2003 (the "Xxxxxxxx
Letter of Credit").
(v) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT. The
Lender's obligation to make each Advance or to cause the Issuer to issue any
Letter of Credit shall be subject to the further conditions precedent that on
such date:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance or issuance of Letter of Credit as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from such
Advance or the issuance of such Letter of Credit, as the case may be, which
constitutes a Default or an Event of Default.
Section 4.3 [INTENTIONALLY DELETED]
Article V.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. FMM is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary and failure to so qualify would have a material adverse
effect on the financial condition, properties or operations of the Borrower or
any of its Affiliates, taken as a whole. FMS is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and is duly licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the
27
business transacted by it makes such licensing or qualification necessary and
failure to so qualify would have a material adverse effect on the financial
condition, properties or operations of the Borrower or any of its Affiliates,
taken as a whole. The Borrower has all requisite power and authority, corporate
or otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents. During
its existence, the Borrower has done business solely under the names set forth
in Schedule 5.1 hereto. The Borrower's chief executive office and principal
place of business is located at the addresses set forth in Schedule 5.1 hereto,
and all of the Borrower's records relating to its business or the Collateral are
kept at said location. All Inventory and Equipment is located at that location
or at one of the other locations set forth in Schedule 5.1 hereto. The
Borrower's tax identification number is correctly set forth in Section 3.6
hereto.
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the stockholders of either FMM or FMS which has not
been obtained; (ii) require any authorization, consent or approval by, or
registration, declaration or filing with, or notice to, any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof, or for required disclosure in filings to be
made with the Securities and Exchange Commission; (iii) violate any provision of
any law, rule or regulation (including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to either FMM or
FMS or of the articles of incorporation or bylaws of either FMM or FMS; (iv) to
the best of Borrower's knowledge after due inquiry, result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which either FMM or FMS is a
party or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by either FMM or FMS.
Section 5.3 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of FMM and FMS, enforceable against FMM and FMS in
accordance with their respective terms, except as enforceability may be subject
to the effect of any applicable bankruptcy, insolvency, recognition, moratorium
or similar law affecting creditor's rights.
Section 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4 hereto,
neither Borrower has Subsidiaries.
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender consolidated audited financial statements of
Royal Precision, Inc. for its fiscal year ended May 31, 2001 and consolidated
unaudited financial statements for the fiscal year-to-date period ended May 31,
2002 and those statements fairly present the Borrower's financial condition on
the dates thereof and the results of its operations and cash flows for the
28
periods then ended and were prepared in accordance with GAAP except for footnote
disclosures and year end adjustments. Since the date of the most recent
financial statements to the date of this Agreement, there has been no material
adverse change in the Borrower's business, properties or condition (financial or
otherwise).
Section 5.6 LITIGATION. To the best of Borrower's knowledge after due
inquiry, there are no actions, suits or proceedings pending or, to the
Borrower's knowledge, threatened against or affecting either Borrower or any of
their Affiliates or the properties of either Borrower or any of their Affiliates
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to the
Borrower or any of its Affiliates, would have a material adverse effect on the
financial condition, properties or operations of the Borrower or any of its
Affiliates.
Section 5.7 REGULATION U. Neither Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
Section 5.8 TAXES. To the best of Borrower's knowledge after due inquiry,
the Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them. The Borrower and its Affiliates have filed all federal, state
and local tax returns which to the knowledge of the officers of the Borrower or
any Affiliate, as the case may be, are required to be filed, and the Borrower
and its Affiliates have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
any of them to the extent such taxes have become due.
Section 5.9 TITLES AND LIENS. The Borrower has clear and absolute title to
all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest financial
statements referred to in Section 5.5 and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances, except for
Permitted Liens. No financing statement naming the Borrower as debtor is on file
in any office except to perfect only Permitted Liens.
Section 5.10 PLANS. Except as disclosed to the Lender in writing prior to
the date hereof, neither Borrower nor any of their Affiliates maintains or has
maintained any Plan. Neither Borrower nor any Affiliate has received any notice
or has any knowledge to the effect that it is not in full compliance with any of
the requirements of ERISA. No Reportable Event or other fact or circumstance
which may have an adverse effect on the Plan's tax qualified status exists in
connection with any Plan. Neither Borrower nor any of their Affiliates has:
(a) Any accumulated funding deficiency within the meaning of ERISA; or
(b) Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
29
connection with any Plan (other than accrued benefits which or which may become
payable to participants or beneficiaries of any such Plan).
Section 5.11 DEFAULT. The Borrower is in compliance with all provisions of
all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a material adverse effect on the Borrower's financial condition,
properties or operations.
Section 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the protection
of human health and the environment.
(ii) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions thereof, and all
other chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) The Premises were acquired by Borrower from Brunswick Corporation.
In accordance with the provisions of the Connecticut Transfer Act, Brunswick
Corporation accepted responsibility for environmental remediation of the site.
Other than Hazardous Substances for which Brunswick has assumed responsibility
and except for the information in this Section 5.12 below, to the Borrower's
best knowledge except as disclosed in writing to Lender, there are not present
in, on or under the Premises any Hazardous Substances in such form or quantity
as to create any liability or obligation for either the Borrower or the Lender
under common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to create any
such liability, except for those Hazardous Substances identified in the April
1996 Phase II Environmental Site Assessment of the Premises by GZA
GeoEnvironmental, Inc. with respect to which Brunswick Corporation is
contractually obligated to remediate.
(c) To the Borrower's best knowledge except as identified in
subparagraph 5.12(d) below, the Borrower has not disposed of Hazardous
Substances in such a manner as to create any liability under any Environmental
Law.
(d) Except for the ongoing actions by Brunswick Corporation under the
Connecticut Transfer Act and except as noted in the concluding three sentences
of this subparagraph 5.12(d), there are no material requests, claims, notices,
investigations, demands, administrative proceedings, hearings or litigation,
relating in any way to the Premises or the Borrower, alleging liability under,
violation of, or noncompliance with any Environmental Law or any license, permit
or other authorization issued pursuant thereto that have not been appropriately
resolved to the satisfaction of the administrative agency having jurisdiction
over the matter. Provided, however, there is an outstanding Notice of Violation
30
for noncompliance with a State of Connecticut water discharge permit. The
Borrower has taken appropriate steps to resolve this issue with the State of
Connecticut and had made changes in its discharge system to prevent further
violations. The Borrower's financial statements make provisions for the fine
that might be imposed.
(e) Except as set forth in Section 5.12(d), to the Borrower's best
knowledge, the Borrower's businesses are and have in the past always been
conducted substantially in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force and effect. No
permit for which an application is required under any Environmental Law is
scheduled to expire within 12 months (other than those that are renewed on an
annual basis) and there is no threat known to the Borrower that any such permit
currently held by Borrower will be withdrawn, terminated, limited or materially
changed.
(f) To the Borrower's best knowledge, the Premises is not listed on
the National Priorities List, or any similar federal, state or local list,
schedule, log, inventory or database. Provided, however, the premises have been
listed on the Comprehensive Environmental Response, Compensation and Liability
Information System.
(g) The Borrower has agreed to make available to Lender all
environmental assessments in Borrower's possession or which Borrower has
knowledge of, audits, reports, permits, licenses and other documents describing
or relating in any way to the Premises or Borrower's businesses (while under the
ownership of the Borrower).
Section 5.13 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is true and
correct in all material respects and, as to projections, valuations or proforma
financial statements, present a good faith opinion as to such projections,
valuations and proforma condition and results.
Section 5.14 FINANCING STATEMENTS. The Borrower has provided to the Lender
signed financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the Security Documents which is capable of
being perfected by filing financing statements. None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.15 RIGHTS TO PAYMENT. Except as disclosed in writing to the
Lender, each right to payment in excess of $500.00 and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral or other collateral covered by the Security Documents is (or, in the
case of all future Collateral or such other collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim, of the account debtor or other obligor named
31
therein or in the Borrower's records pertaining thereto as being obligated to
pay such obligation.
Article VI.
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or cause to
be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
(a) as soon as available, and in any event within 120 days after the
end of each fiscal year of the Borrower consolidated and consolidating audited
financial statements of FMM, FMS and the Covenant Entities with the unqualified
opinion of Ernst & Young, L.L.P. or such other independent certified public
accountants selected by the Borrower and acceptable to the Lender, which annual
financial statements shall include the consolidated balance sheet of FMM, FMS
and the Covenant Entities as at the end of such fiscal year and the related
consolidated statements of income, retained earnings and cash flows, all in
reasonable detail and prepared in accordance with GAAP applied on a basis
consistent with the accounting practices applied in the financial statements
referred to in Section 5.5 hereof, together with a report signed by such
accountants stating that in making the investigations necessary for said opinion
they obtained no knowledge, except as specifically stated, of any Default or
Event of Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.12 through 6.15 and
Section 7.10 hereof (provided that for fiscal year end May 31, 2002, such
opinion may have a going concern qualification;
(b) as soon as available and in any event within 25 days after the end
of each month, a consolidated unaudited/internal balance sheet and statements of
income and retained earnings of FMM and FMS as at the end of and for such month
and for the year to date period then ended, prepared, if the Lender so requests,
on a consolidating and consolidated basis to include the Covenant Entities and
any other Affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments and
without footnote disclosure; and accompanied by a certificate of the Vice
President of Finance or any other officer of each of FMM and FMS, substantially
in the form of Exhibit C hereto stating (i) that such financial statements have
been prepared in accordance with GAAP, subject to year-end audit adjustments and
the absence footnotes, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore reported
and remedied and, if so, stating in reasonable detail the facts with respect
thereto, and (iii) all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.12 through 6.15 and 7.10;
32
(c) within 15 days after the end of the month, agings of the
Borrower's accounts receivable and its accounts payable and an inventory
certification report as at the end of such month, provided however, in the event
that Advances are made under the Seasonal Overadvance, the Borrower shall submit
inventory ineligible certifications and associated inventory reports on a weekly
basis. The obligation to submit such weekly reports shall cease at such time as
the Advances outstanding under the Seasonal Overadvance are not more than
$500,000.00 for 30 consecutive days. The weekly reporting requirement shall be
reinstated in the event that at some point in the future, Advances in excess of
$500,000.00 are made under the Seasonal Overadvance;
(d) at least 30 days before the beginning of each fiscal year of the
Borrower, the projected balance sheets and income statements for each month of
such year, each in reasonable detail, representing the Borrower's good faith
projections and certified by the Borrower's Vice President of Finance or any
other officer as being the most accurate projections available and identical to
the projections used by the Borrower for internal planning purposes, together
with such supporting schedules and information as the Lender may in its
discretion reasonably require;
(e) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower of the type described in Section 5.12 or which
seek a monetary recovery against the Borrower in excess of $25,000.00;
(f) as promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default hereunder,
notice of such occurrence, together with a detailed statement by a responsible
officer of the Borrower of the steps being taken by the Borrower to cure the
effect of such breach, default or event;
(g) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with respect to
any Plan has occurred, the statement of the Borrower's Vice President of Finance
setting forth details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after the
Borrower fails to make any quarterly contribution required with respect to any
Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended, the
statement of the Borrower's Vice President of Finance setting forth details as
to such failure and the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any disputes or
claims by the Borrower's customers in excess of $20,000.00; (ii) credit memos in
excess of $20,000.00; (iii) any goods returned to or recovered by the Borrower
33
valued in excess of $20,000.00; and (iv) any change in the persons constituting
the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or material
damage to any Collateral or other collateral covered by the Security Documents
or of any substantial adverse change in any Collateral or such other collateral
or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent to
its stockholders;
(l) promptly after the sending or filing thereof, copies of all
regular and periodic reports which the Borrower shall file with the Securities
and Exchange Commission or any national securities exchange;
(m) daily copies of all invoices in excess of $100,000.00, together
with all shipping documentation applicable thereto;
(n) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which could
materially and adversely affect the Borrower's business or its financial
condition; and
(o) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment schedules,
copies of invoices to account debtors, shipment documents and delivery receipts
for goods sold, and such other material, reports, records or information as the
Lender may request.
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to the Borrower's business and financial condition and
such other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours. The Lender will exercise such care to maintain the
confidentiality of the documents and information obtained from any such
inspection or examination as the Lender takes with respect to similarly situated
borrowers.
Section 6.3 ACCOUNT VERIFICATION. The Lender may at any time and from time
to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
34
Section 6.4 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and keep
the Collateral, and require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental Laws
and obtain and comply with all permits, licenses and similar approvals required
by any Environmental Laws, and will not generate, use, transport, treat, store
or dispose of any Hazardous Substances in such a manner as to create any
liability or obligation under the common law of any jurisdiction or any
Environmental Law, except any liability which is only derivative in nature and
which arises solely as a result of the negligence or intentional misconduct of a
third party.
Section 6.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including, without limitation, the Collateral) or upon or against the
creation, perfection or continuance of the Security Interest, prior to the date
on which penalties attach thereto, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which are due and, if unpaid, might by law become a lien or charge
upon any properties of the Borrower; provided, that the Borrower shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and so long as the Collateral and Lender's lien thereon is not in
any manner impaired by any enforcement remedy available to the tax levying
entity during the period of such contest.
Section 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted) and will from time to time replace or repair any
worn, defective or broken parts; provided, however, that nothing in this Section
6.6 shall prevent the Borrower from discontinuing the operation and maintenance
of any of its properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not disadvantageous in
any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender) claiming the Collateral or any
interest therein.
(c) The Borrower will keep all Collateral and other collateral covered
by the Security Documents free and clear of all security interests, liens and
encumbrances except Permitted Liens.
35
Section 6.7 INSURANCE. The Borrower will obtain and at all times maintain
insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
reasonably required by the Lender, but in all events in such amounts and against
such risks as exist as of the date hereof and is usually carried by companies
engaged in similar business and owning similar properties in the same general
areas in which the Borrower operates. Without limiting the generality of the
foregoing, the Borrower will at all times keep all tangible Collateral insured
against risks of fire (including so-called extended coverage), theft, collision
(for Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.
Section 6.8 PRESERVATION OF EXISTENCE. Each Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in all material respects in an orderly, efficient and regular
manner.
Section 6.9 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender, the
Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.10 COLLATERAL ACCOUNTS.
(a) Each Borrower agrees to deposit in its respective Collateral
Accounts or, at the Lender's option, to deliver to the Lender all collections on
Accounts, contract rights, chattel paper and other rights to payment
constituting Collateral (but not the proceeds of any loan to Borrower as a
borrower made by any party other than Lender and permitted under the terms of
this Agreement), and all other cash proceeds of Collateral, which the Borrower
may receive immediately upon receipt thereof, in the form received, except for
the Borrower's endorsement when deemed necessary. Until delivered to the Lender
or deposited in the Collateral Accounts, all proceeds or collections of
Collateral shall be held in trust by the Borrower for and as the property of the
Lender and shall not be commingled with any funds or property of the Borrower.
Amounts deposited in the Collateral Accounts shall not bear interest and shall
not be subject to withdrawal by the Borrower, except after full payment and
discharge of all Obligations. All such collections shall constitute proceeds of
Collateral and shall not constitute payment of any Obligation. Collected funds
from the Collateral Accounts shall be transferred to the Lender's general
account, and the Lender may deposit in its general account or in the Collateral
Accounts any and all collections received by it directly from the Borrower. The
Lender may commingle such funds with other property of the Lender or any other
person. The Lender or the Borrower shall, after allowing two Banking Days after
deposit in the Collateral Accounts, deposit such funds to the Lender's Account
No. 6355010053 at Xxxxx Fargo Bank N.A. The Lender from time to time at its
discretion shall, after allowing (i) one Banking Day after direct deposit in the
Lender's Account No. 6355010053 at Xxxxx Fargo Bank N.A., and/or (ii) such later
date as may be required for collection, apply such funds to the payment of any
and all Obligations, in any order or manner of application satisfactory to the
Lender, provided however such application may not be made to payments not yet
36
due on the Term Note or the Capital Expenditures Note or made in contradiction
to the effective Borrowing Base allocation. All items delivered to the Lender or
deposited in the Collateral Accounts shall be subject to final payment. If any
such item is returned uncollected, the Borrower will immediately pay the Lender,
or, for items deposited in the Collateral Accounts, the bank maintaining such
account, the amount of that item, or such bank at its discretion may charge any
uncollected item to the Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the Collateral
Accounts, whether or not in fact endorsed by the Borrower.
(b) If a Default or Default Period exists and upon demand of the
Lender, the Borrower shall establish one or more lockbox accounts as directed by
the Lender with such banks or depository institutions as shall be satisfactory
to the Lender and shall irrevocably direct all present and future Account
debtors and other Persons obligated to make payments constituting Collateral to
make such payments directly to such lockbox account. All of the Borrower's
invoices, account statements and other written or oral communications directing,
instructing, demanding or requesting payment of any Account or any other amount
constituting Collateral shall conspicuously direct that all payments be made to
such lockbox and shall include such lockbox address or addresses. All payments
received in such lockbox accounts shall be processed to the Collateral Accounts.
(c) Amounts deposited in the Collateral Accounts shall not bear
interest and shall not be subject to withdrawal by the Borrower, except after
full payment and discharge of all Obligations.
Section 6.11 PERFORMANCE BY THE LENDER. If the Borrower at any time fails
to perform or observe any of the foregoing covenants contained in this Article
VI or elsewhere herein, and if such failure shall continue for a period of ten
calendar days after the Lender gives the Borrower written notice thereof (or in
the case of the agreements contained in Sections 6.5, 6.7 and 6.10, immediately
upon the occurrence of such failure, without notice or lapse of time), the
Lender may, but need not, perform or observe such covenant on behalf and in the
name, place and stead of the Borrower (or, at the Lender's option, in the
Lender's name) and may, but need not, take any and all other actions which the
Lender may reasonably deem necessary to cure or correct such failure (including,
without limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances, the performance of obligations owed to account
debtors or other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrower shall thereupon pay to the Lender
on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Floating Rate. To facilitate
the Lender's performance or observance of such covenants of the Borrower, the
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as the Borrower's attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
37
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.11.
Section 6.12 DEBT SERVICE COVERAGE RATIO. [INTENTIONALLY DELETED]
Section 6.13 NET WORTH. The Borrower covenants that as of May 31, 2002, the
aggregate consolidated Net Worth of FMM, FMS and the Covenant Entities was
$3,718,000.00. The Borrower covenants that said aggregate consolidated Net Worth
as of the end of each future month 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.
MONTH ENDING NET WORTH INCREASE (DECREASE)
------------ -----------------------------
August 31, 2002 ($1,000,000.00)
September 30, 2002 ($1,200,000.00)
October 31, 2002 ($1,400,000.00)
November 30, 2002 ($1,400,000.00)
December 31, 2002 ($1,500,000.00)
January 31, 2003 ($1,400,000.00)
February 28, 2003 ($1,250,000.00)
March 31, 2003 ($800,000.00)
April 30, 2003 ($350,000.00)
May 31, 2003 $100,000.00
Section 6.14 NET INCOME. The Borrower covenants that FMM, FMS 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 month as measured from the
immediately preceding fiscal year end.
MONTH ENDING NET WORTH INCREASE (DECREASE)
------------ -----------------------------
August 31, 2002 ($1,000,000.00)
September 30, 2002 ($1,200,000.00)
October 31, 2002 ($1,400,000.00)
November 30, 2002 ($1,400,000.00)
December 31, 2002 ($1,500,000.00)
January 31, 2003 ($1,400,000.00)
February 28, 2003 ($1,250,000.00)
March 31, 2003 ($800,000.00)
April 30, 2003 ($350,000.00)
May 31, 2003 $100,000.00
38
Section 6.15 STOP LOSS. The Borrower covenants that beginning with July 1,
2002, and continuing for each month thereafter, FMM, FMS and the Covenant
Entities shall not achieve an aggregate consolidated Net Loss (exclusive of
non-cash extraordinary adjustments) in excess of $500,000.00 for any month as
measured from the last day of the immediately preceding month.
Article VII.
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:
Section 7.1 LIENS. The Borrower will not create, incur or suffer to exist
any mortgage, deed of trust, pledge, lien, security interest, assignment or
transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; EXCLUDING, HOWEVER, from the operation of the
foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents, covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the Borrower's business or operations as presently
conducted;
(b) mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in Schedule 7.1 hereto,
securing indebtedness for borrowed money permitted under Section 7.2;
(c) the Security Interest and liens and security interests created by
the Security Documents; and
(d) purchase money security interests relating to Capital Expenditures
(and which attach only to the assets acquired by such Capital Expenditures) made
after the date of this Agreement by the Borrower or any Affiliate so long as the
Borrower is in, and maintains, compliance with every other provision of this
Agreement.
39
(e) liens for governmental charges or levies not yet due or which are
being contested in good faith by appropriate action and for which adequate
reserves in accordance with GAAP have been made; legal or equitable encumbrances
deemed to exist by reason of the existence of any litigation or other legal
proceedings or arising out of any judgment or award, the existence of which does
not violate Section 8.1(h); vendors', carriers', warehousemen's, repairmen's,
construction or other like liens arising by operation of law in the ordinary
course of business or incident to the construction or improvement of any
property in respect of obligations which are not yet due or which are being
contested in good faith by appropriate proceedings by or on behalf of the
Borrower and for which an adequate reserve in accordance with GAAP has been
made, all of which in the aggregate may not secure in excess of $100,000.00; and
(f) real property taxes or assessments not yet due and payable.
Section 7.2 INDEBTEDNESS. The Borrower will not incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on the
Borrower's behalf, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto;
(c) indebtedness relating to liens permitted in accordance with
Section 7.1;
(d) indebtedness permitted pursuant to Section 7.19.
Section 7.3 GUARANTIES. The Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business;
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in existence on
the date hereof and listed in Schedule 7.2 hereto; and
(c) indemnifications arising in the ordinary course of business.
Section 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit to exist any
loans or advances to, or make any investment or acquire any interest whatsoever
40
in, any other Person, including specifically but without limitation any
partnership or joint venture, except:
(i) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America having a
maturity of one year or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or "P-2" by Xxxxx'x
Investors Service or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the Federal Reserve System
having deposits in excess of $100,000,000 (which certificates of deposit or
bankers' acceptances are fully insured by the Federal Deposit Insurance
Corporation);
(ii) travel advances or loans to the Borrower's officers and
employees not exceeding at any one time an aggregate of $75,000.00; and
(iii) advances in the form of progress payments, prepaid rent not
exceeding 2 months or security deposits.
(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 not to exceed in the aggregate (i)
$1,500,000.00 through the first anniversary date of the Funding Date, (ii)
$2,250,000.00 after the first anniversary of the Funding Date through the second
anniversary of the Funding Date, and (iii) $3,000,000.00 after the second
anniversary of the Funding Date through the Termination Date.
(v) payments to the Covenant Entities so long as they are
expensed in accordance with GAAP, and appear on all statements of income
required pursuant to Section 6.1
(b) The Borrower will not create or permit to exist any Subsidiary,
other than the Subsidiar(y)(ies) in existence on the date hereof and listed in
Schedule 5.4.
Section 7.5 DIVIDENDS. Except for dividends payable solely to Royal
Precision, Inc. for actual operating expenses of Royal Precision, Inc., Borrower
will not declare or pay any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly.
Section 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS OPERATIONS.
The Borrower will not sell, lease, assign, transfer or otherwise dispose of (i)
the stock of any Subsidiary, (ii) all or a substantial part of its assets, or
(iii) any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than the sale of Inventory in
the ordinary course of business and will not liquidate, dissolve or suspend
business operations. The Borrower will not in any manner transfer any property
without prior or present receipt of full and adequate consideration.
41
Section 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower will
not consolidate with or merge into any Person, or permit any other Person to
merge into it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the assets of any other
Person.
Section 7.8 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 7.10 CAPITAL EXPENDITURES. FMM, FMS and the Covenant Entities will
not incur or contract to incur Capital Expenditures in the aggregate of more
than $50,000.00 for the fiscal quarter ending August 31, 2002, $100,000.00 for
the fiscal quarter ending November 30, 2002, $200,000.00 for the fiscal quarter
ending February 28, 2003 and $650,000.00 for the fiscal quarter ending May 31,
2003, as each of said figures is measured from May 31, 2002. In addition,
commencing with the Borrower's 2004 fiscal year and continuing each fiscal year
thereafter, the Borrower and the Covenant Entities will not incur or contract to
incur Capital Expenditures in the aggregate of more than $650,000.00 during any
fiscal year. In addition, FMM, FMS and the Covenant Entities will not incur or
contract to incur Capital Expenditures in excess of $500,000.00 in any one
transaction without the prior approval of Lender which approval can be granted
or withheld in the Lender's sole discretion.
Section 7.11 ACCOUNTING. The Borrower will not adopt any material change in
accounting principles other than as required by GAAP. The Borrower will not
adopt, permit or consent to any change in its fiscal year.
Section 7.12 DISCOUNTS, ETC. The Borrower will not, after notice from the
Lender during the existence of any Default Period, grant any discount, credit or
allowance to any customer of the Borrower or accept any return of goods sold, or
at any time (whether before or after notice from the Lender) modify, amend,
subordinate, cancel or terminate the obligation of any account debtor or other
obligor of the Borrower.
Section 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will not adopt,
create, assume or become a party to any defined benefit pension plan, unless
disclosed to the Lender pursuant to Section 5.10.
Section 7.14 OTHER DEFAULTS. The Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon the Borrower, which in the aggregate are valued in
excess of $100,000.00.
42
Section 7.15 PLACE OF BUSINESS; NAME. The Borrower will not transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.16 ORGANIZATIONAL DOCUMENTS. The Borrower will not amend its
certificate of incorporation, articles of incorporation or bylaws.
Section 7.17 SALARIES. The Borrower will not pay excessive or unreasonable
salaries, bonuses, commissions, consultant fees or other compensation
(collectively "Compensation"); or increase the Compensation of any director in a
director capacity, officer or any member of their families, by more than 10% 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 anything to the contrary, in no event shall the
Borrower increase the Compensation of any director, officer or any member of
their families during the existence of an Event of Default or Default Period.
Section 7.18 ISSUANCE OF STOCK/LOSS OF VOTING CONTROL. The Borrower will
not issue or sell any stock of the Borrower. The Borrower shall not permit or
suffer to occur any transfer, assignment, pledge or other disposition of any or
all of the issued and outstanding stock of the Borrower so as to materially
change the voting control of the Borrower.
Section 7.19 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 to FMS (from FMM), FMM (from FMS) to any Covenant Entity or to any other
Affiliates (i) in the aggregate in excess of $1,500,000.00 per fiscal year, or
(ii) which is not for fair and adequate consideration.
Section 7.20 MANAGEMENT CONTROL. The Borrower shall not permit or suffer to
occur any change in its current executive management personnel without the
consent of the Lender, which consent shall not be unreasonably withheld.
Article VIII.
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 EVENTS OF DEFAULT. "Event of Default", wherever used herein,
means any one of the following events:
(a) Default in the payment of the Obligations when they become due and
payable;
(b) Failure to pay when due any amount specified in Section 2.3
relating to the Borrower's Obligation of Reimbursement, or failure to pay
immediately when due or upon termination of the Credit Facility any amounts
required to be paid for deposit in the Special Account under Section 2.4 or;
43
(c) Default in the payment of any fees, commissions, costs or expenses
required to be paid by the Borrower under this Agreement;
(d) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement other than a covenant or
agreement which is specifically dealt with in this Section 8.1 and the
continuance thereof for a period of 5 days after the actual knowledge thereof by
an executive officer of either Borrower or receipt of written notice thereof
from the Lender; or
(e) Any of FMM, FMS or any Covenant Entity shall be or become
insolvent, or admit in writing its inability to pay its or his debts as they
mature, or make an assignment for the benefit of creditors; or any of FMM, FMS
or any Covenant Entity shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or for all or any substantial part
of its property; or such receiver, trustee or similar officer shall be appointed
without the application or consent of FMM, FMS or any Covenant Entity, as the
case may be; or any of FMM, FMS or a Covenant Entity shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against FMM, FMS or any Covenant Entity and shall not be dismissed within 60
calendar days; or any judgment, writ, warrant of attachment, garnishment or
execution or similar process shall be issued or levied against a substantial
part of the property of FMM, FMS or any Covenant Entity; or
(f) A petition shall be filed by or against (which when filed against
shall not be dismissed within 60 calendar days) any of FMM, FMS or any Covenant
Entity under the United States Bankruptcy Code naming FMM or FMS as debtor; or
(g) Any representation or warranty made by the Borrower in this
Agreement, by Guarantors in any guaranty delivered to the Lender, or by the
Borrower (or any of its officers) or Guarantors in any agreement, certificate,
instrument or financial statement or other statement contemplated by or made or
delivered pursuant to or in connection with this Agreement or any such guaranty
shall prove to have been incorrect in any material respect when deemed to be
effective;
(h) The rendering against either FMM or FMS of a final judgment,
decree or order for the payment of money in excess of $25,000.00 and the
continuance of such judgment, decree or order unsatisfied and in effect for any
period of 30 consecutive days without a stay of execution;
(i) A default under any bond, debenture, note or other evidence of
indebtedness of either Borrower owed to any Person other than the Lender, or
under any indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any lease of
any of the Premises, in any case in excess of $25,000.00, and the expiration of
44
the applicable period of grace, if any, specified in such evidence of
indebtedness, indenture, other instrument or lease;
(j) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the appointment
by the appropriate United States District Court of a trustee to administer any
Plan, shall have occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Lender; or a trustee shall
have been appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan; or the Borrower shall have filed for a distress termination of any Plan
under Title IV of ERISA; or the Borrower shall have failed to make any quarterly
contribution required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, which the Lender determines in good
faith may by itself, or in combination with any such failures that the Lender
may determine are likely to occur in the future, result in the imposition of a
lien on the Borrower's assets in favor of the Plan;
(k) An event of default shall occur under any Security Document or
under any other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any obligations of the Borrower hereunder or
under any note;
(l) An event of default shall occur under that certain Second Amended
and Restated Credit and Security Agreement of even date herewith by and between
Lender, Royal Grip, Inc. and Royal Grip Headwear Company (the "RG Credit
Agreement"), as the RG Credit Agreement may from time to time be modified,
amended or restated. Borrower hereby acknowledges that it shall have no right to
approve any such modifications, amendments or restatements;
(m) An event of default shall occur under any document, instrument or
agreement executed from time to time in connection with the RG Credit Agreement
(collectively, the "RG Security Documents"), as the RG Security Documents may
from time to time be modified, amended or restated. Borrower hereby acknowledges
that it shall have no right to approve any such modifications, amendments or
restatements;
(n) Either Borrower shall liquidate, dissolve, terminate or suspend
its business operations or otherwise fail to operate its business in the
ordinary course, or sell all or substantially all of its assets, without the
Lender's prior written consent;
(o) Either Borrower shall fail to pay, withhold, collect or remit any
tax or tax deficiency when due (other than any tax deficiency which is being
contested in good faith and by proper proceedings and for which it shall have
set aside on its books adequate reserves therefor) or notice of any state or
federal tax liens shall be filed or issued;
(p) Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
45
(q) Any Guarantors shall repudiate, purport to revoke or fail to
perform any such Guarantor's obligations under such Guarantor's guaranty in
favor of the Lender, any Guarantors shall cease to validly exist;
(r) Any event or circumstance with respect to the Borrower shall occur
such that the Lender shall believe in good faith that the prospect of payment of
all or any part of the Obligations or the performance by the Borrower under the
Loan Documents is impaired or any material adverse change in the business or
financial condition of the Borrower shall occur.
(s) Any breach, default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender.
Section 8.2 RIGHTS AND REMEDIES. During any Default Period, the Lender may
exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without further
action, apply any and all money owing by the Lender to the Borrower to the
payment of the Obligations;
(d) the Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available funds
for deposit in the Special Account pursuant to Section 2.14 an amount equal to
the aggregate maximum amount available to be drawn under all Letters of Credit
then outstanding, assuming compliance with all conditions for drawing
thereunder;
(e) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including,
without limitation, the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process (without a
prior hearing or notice thereof, which the Borrower hereby expressly waives) and
the right to sell, lease or otherwise dispose of any or all of the Collateral,
and, in connection therewith, the Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be designated by
the Lender which is reasonably convenient to both parties;
(f) the Lender may exercise and enforce its rights and remedies under
the Loan Documents; and
46
(g) the Lender may exercise any other rights and remedies available to
it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (e) or (f) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 CERTAIN NOTICES. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten calendar days before
the date of intended disposition or other action.
Article IX.
MISCELLANEOUS
Section 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 9.2 AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.3 ADDRESSES FOR NOTICES, ETC.
(a) Except as otherwise expressly provided herein, all notices,
requests, demands and other communications provided for under the Loan Documents
shall be in writing and shall be (i) personally delivered, (ii) sent by first
class United States mail, (iii) sent by overnight courier of national
reputation, or (iv) transmitted by telecopy, in each case addressed or
telecopied to the party to whom notice is being given at its address or
telecopier number as set forth below:
If to FMM or FMS:
c/o FM Precision Golf Manufacturing Corp.
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xx. Xxxx Xxxxxxxx
47
If to the Lender:
Xxxxx Fargo Business Credit, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx
7th Floor, MAC S4101-076
Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
(b) A copy of each notice to Borrower shall also be sent to:
Xx. Xxx Xxxxxx
0000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxx 00000
Telecopier: (000) 000-0000
The copies of notices sent in accordance with this Section 9.3(b) are
informational and are not required in order for the notices given pursuant to
Section 9.3(a) above to be effective.
Section 9.4 FURTHER DOCUMENTS. The Borrower will from time to time execute
and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
Section 9.5 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
48
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.6 COSTS AND EXPENSES. The Borrower agrees to pay on demand all
costs and expenses, including (without limitation) attorneys' fees, incurred by
the Lender in connection with the Obligations, this Agreement, the Loan
Documents, any Letters of Credit, and any other document or agreement related
hereto or thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest.
Section 9.7 INDEMNITY. In addition to the payment of expenses pursuant to
Section 9.7, FMM and FMS, jointly and severally, agree to indemnify, defend and
hold harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of the Loan Documents or the making of the Advances;
(ii) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.12 proves to
be incorrect in any respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by or asserted
against any such Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligations of FMM
49
and FMS under this Section 9.7 shall survive the termination of this Agreement
and the discharge of the Borrower's other obligations hereunder.
Section 9.8 PARTICIPANTS. The Lender and its participants, if any, are not
partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
Section 9.9 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
Section 9.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT; EXCHANGING
INFORMATION. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Xxxxx Fargo Corporation, and all direct and indirect
subsidiaries of Xxxxx Fargo Corporation, may exchange any and all information
they may have in their possession regarding the Borrower and its Affiliates, and
the Borrower waives any right of confidentiality it may have with respect to
such exchange of such information.
Section 9.11 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Section 9.12 HEADINGS. Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 9.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL. The
Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Arizona. The parties hereto
hereby (i) consents to the personal jurisdiction of the state and federal courts
located in the State of Arizona, County of Maricopa in connection with any
controversy related to this Agreement; (ii) waives any argument that venue in
any such forum is not convenient, (iii) agrees that any litigation initiated by
the Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the Superior Court of Maricopa County,
Arizona, or the United States District Court, District of Arizona; and (iv)
agrees that a final judgment in any such suit, action or proceeding shall be
50
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
Section 9.14 RELEASE. FMM, FMS and Guarantor 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 FMM, FMS
and Guarantor have 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 Agreement,
whether such claims, demands and causes of action are matured or unmatured or
known or unknown.
Section 9.15 EFFECT OF AGREEMENT. This Agreement shall become effective
only upon the satisfaction of all of the conditions contained within Section 4.1
hereof. At such time as this Agreement becomes effective, it shall in all
respects supersede the Original Credit Agreement, and all Advances (past,
present and future) made by the Lender to the Borrower shall in all respects be
governed by this Agreement. Until such time as all of the conditions contained
in Section 4.1 have been fully satisfied, this Agreement shall be of no force
and effect, and all Advances (past, present and future) made by the Lender to
the Borrower shall in all respects be governed by the Original Credit Agreement.
Section 9.16 PRIORITY OF LIENS. Nothing herein is intended to change the
priority of any lien or security interest the Lender has in any property of the
Borrower. All such liens and security interests remain in full force and effect,
unmodified, and in all respects are ratified, confirmed and approved.
Section 9.17 RELEASE OF THE DEEDS OF TRUST. The Lender shall release the
Deeds of Trust if but only if, (i) Xxxxx Xxxxxxxx provides the Lender with an
irrevocable letter of credit (in form and substance satisfactory to the Lender
in the Lender's sole discretion) in the face amount of $1,000,000.00 in favor of
the Lender with an expiration date of not sooner than August 12, 2003 (the "C
Xxxxxxxx Letter of Credit") and (ii) there is not a then existing Event of
Default or Default Period. Any such release shall be made, if at all, to the
person entitled thereto.
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Its President
---------------------------------
FM PRECISION GOLF SALES CORP.,
a Delaware corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Its President
--------------------------------
XXXXX FARGO BUSINESS CREDIT, INC.,
a Minnesota corporation
By /s/ Xxxxx Xxxxxx
-------------------------------------
Its Officer
---------------------------------
52
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., (the "Lender") pursuant to a Guaranty dated as of
October 9, 1998 (the "Guaranty"), hereby (i) acknowledges receipt of the
foregoing Amended and Restated Credit Agreement; (ii) consents to the terms
(including without limitation the release set forth in Section 9.14 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 Amended and Restated 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/ Xxxx X. Xxxxxxxx
-------------------------------------
Xxxx X. Xxxxxxxx, President
53
Table of Exhibits and Schedules
Exhibit C Compliance Certificate
Exhibit D Premises
-------------------
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
[INTENTIONALLY DELETED]
A-1
Exhibit B to Credit and Security Agreement
[INTENTIONALLY DELETED]
B-1
Exhibit C to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To: ______________________
Xxxxx Fargo Business Credit, Inc.
Date: ______________________
Subject: FM Precision Golf Manufacturing Corp., a Delaware corporation and
FM Precision Golf Sales Corp., a Delaware corporation
Financial Statements
In accordance with our Amended and Restated Credit and Security Agreement dated
as of ___________, 2002 (the "Credit Agreement"), attached are the financial
statements of FM Precision Golf Manufacturing Corp., a Delaware corporation and
FM Precision Golf Sales Corp., a Delaware corporation (collectively the
"Borrower"), as of and for ________________, ____ (the "Reporting Date") and the
year-to-date period then ended (the "Current Financials"). All terms used in
this certificate have the meanings given in the Credit Agreement.
I certify (as an officer of the Borrower, but not in my personal capacity)
that the Current Financials have been prepared in accordance with GAAP, subject
to year-end audit adjustments, and fairly present the Borrower's financial
condition and the results of its operations as of the date thereof.
EVENTS OF DEFAULT. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement and attached hereto is a statement of
the facts with respect to thereto.
I hereby certify to the Lender as follows:
[ ] The Reporting Date does not xxxx the end of one of the Borrower's
fiscal quarters, hence I am completing only paragraph __ below.
[ ] The Reporting Date marks the end of one of the Borrower's fiscal
quarters, hence I am completing all paragraphs below except paragraph __.
[ ] The Reporting Date marks the end of the Borrower's fiscal year, hence I
am completing all paragraphs below.
Compliance Certificate C-1
FINANCIAL COVENANTS. I further hereby certify that (as an officer of the
Borrower, but not in my personal capacity) the Borrower is in compliance with
the covenants set forth in Sections 6.13, 6.14, 6.15, 7.10 and 7.17 of the
Agreement, except as indicated below. The calculations made to determine
compliance are as follows:
Covenant 6.13 Net Income/Net Loss
Month Ending Minimum Net Income Actual
------------ ------------------ ------
August 31, 2002 ($1,000,000.00)
September 30, 2002 ($1,200,000.00)
October 31, 2002 ($1,400,000.00)
November 30, 2002 ($1,400,000.00)
December 31, 2002 ($1,500,000.00)
January 31, 2003 ($1,400,000.00)
February 28, 2003 ($1,250,000.00)
March 31, 2003 ($800,000.00)
April 30, 2003 ($350,000.00)
May 31, 2003 $100,000.00
Covenant 6.14 Book Net Worth
Month Ending Minimum Net Income Actual
------------ ------------------ ------
August 31, 2002 ($1,000,000.00)
September 30, 2002 ($1,200,000.00)
October 31, 2002 ($1,400,000.00)
November 30, 2002 ($1,400,000.00)
December 31, 2002 ($1,500,000.00)
January 31, 2003 ($1,400,000.00)
February 28, 2003 ($1,250,000.00)
March 31, 2003 ($800,000.00)
April 30, 2003 ($350,000.00)
May 31, 2003 $100,000.00
Compliance Certificate C-2
Covenant 6.15 Stop Loss
Month Ending Maximum Allowable Net Loss Actual
------------ -------------------------- ------
Each month $500,000.00
Covenant 7.10 Capital Expenditures
Maximum Allowable Capital
Quarter Ending Expenditures Actual
-------------- ------------ ------
August 31, 2002 $ 50,000.00
November 30, 2002 $100,000.00
February 28, 2003 $200,000.00
May 31, 2003 $650,000.00
Maximum Allowable Capital
Year Expenditures Actual
---- ------------ ------
Borrower's 2004 fiscal
year and each fiscal
year thereafter $650,000.00
As of the Reporting Date, the Borrower ____ is ____ is not in compliance with
Section 7.17 of the Credit Agreement concerning salary increases not to exceed
10% per annum.
TOTAL MANAGEMENT FEES
OFFICERS PERCENTAGE INCREASE PAID YEAR TO DATE
-------- ------------------- -----------------
-------- ------------------- -----------------
-------- ------------------- -----------------
-------- ------------------- -----------------
(To be completed within 30 days of any salary increase and within 30 days
of paying any increase)
Compliance Certificate C-3
Attached hereto are all relevant facts in reasonable detail to evidence,
and the computations of the financial covenants referred to above.
FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Its President
---------------------------------
FM PRECISION GOLF SALES CORP.,
a Delaware corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Its President
---------------------------------
Compliance Certificate C-4
Exhibit D to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are legally
described as follows:
All that certain piece or parcel of land, with the buildings and improvements
thereon, situated in the Town of Torrington, County of Litchfield and State of
Connecticut, more particularly bounded and described as follows:
Commencing at a point in the southerly line of Migeon Avenue, which point
marks a corner of the parcel herein described and the northeasterly corner of
land now or formerly of Xxxxxx Xxxxxx Xxxxx, and which point is marked by an
iron pin; thence along the southerly line of Migeon Avenue S 72(degree) 30' 38"
E, 258.12' to a point; thence along a curve to the right with a delta angle of
41(degree) 32' 40", a radius of 89.64' and an arc length of 65.00' to a point;
thence S 30(degree) 58' 08" E, 374.33' to a point; thence S 31(degree) 21' 38"
E, 103.90' to a corner of the parcel herein described and the northwesterly
corner of land now or formerly of Xxxxxxx X. & Xxxxxx X. Xxxxxx; thence along
land now or formerly of said Xxxxxxx X. & Xxxxxx X. Xxxxxx, S 58(degree) 54' 35"
W, 131.33' to a corner of the parcel herein described; thence still along land
now or formerly of said Xxxxxxx X. & Xxxxxx X. Xxxxxx, S 31(degree) 24' 25" E,
49.98' to a point in the northerly line of Xxxxxxxx Avenue, which point is a
corner of the parcel herein described; thence along the northerly line of said
Xxxxxxxx Avenue, S 69(degree) 10' 35" W, 54.40' and N 71(degree) 02' 45" W,
48.25' to the northwesterly terminus of said Xxxxxxxx Avenue and which point
marks a corner of the parcel herein described; Thence S 43(degree) 10' 56" W,
47.40' to the southwesterly terminus of said Xxxxxxxx Avenue, and which point
marks the northwesterly corner of land now or formerly of Xxxxxx X. & Xxxxxxxxx
X. Xxxxx; thence along land now or formerly of said Xxxxxx X. & Xxxxxxxxx X.
Xxxxx S 18(degree) 44' 34" W, 32.04' to a point; S 18(degree) 33' 47" W, 66.47'
to a point and S 17(degree) 58' 44" W, 72.32" to a point in the northerly line
of land now or formerly of A. B. Leasing Corp., which point marks the
southwesterly corner of land now or formerly of said Xxxxxx X. & Xxxxxxxxx X.
Xxxxx and a corner of the parcel herein described; thence along the northerly
line of land now or formerly of said A. B. Leasing Corp. S 80(degree) 03' 05" W,
242.00" to a corner of the parcel herein described S 27(degree) 11' 17" E,
125.68', S 17(degree) 23' 04" E, 57.56' and S 5(degree) 36' 08" E, 119.08' to
the southwesterly corner of land now or formerly of said A. B. Leasing Corp.,
the northwesterly corner of land now or formerly of Xxxx X. Xxxxxx, Xx. &
Xxxxxxxx X. Xxxxxx, the northeasterly corner of land now or formerly of the City
of Torrington, and a corner of the parcel herein described, and which point is
marked by an iron pipe; thence S 72(degree) 11' 47" W, 30.00' to a point on the
easterly side of the Naugatuck River; thence along the easterly and
northeasterly sides of said Naugatuck River, 3,310' to a point, which point
marks the southwesterly corner of land now or formerly of the City of Torrington
and a corner of the parcel herein described. The last described course has
closing lines of N 26(degree) 51' 57" W, 946.80'; N 65(degree) 08' 06" W,
1251.62' and N 46(degree) 46' 44" W, 1073.11'; thence along lands of the City of
Torrington and Xxxxxx X. Xxxxxxxxx, partly of each, N 62(degree) 00' 00" E,
8.00'; S 54(degree) 51' 01" E, 112.44'; S 42(degree) 59' 59" E, 44.81'; S
58(degree) 16' 59" E, 154.61' and S 55(degree) 44' 59" E, 320.40' to a point in
the westerly line of Xxxxxx Street (unimproved), which point is the
southeasterly corner of land now or formerly of said Xxxxxx X. Xxxxxxxxx and a
corner of the parcel herein described; thence along the westerly line of Xxxxxx
X-0
Xxxxxx (xxxxxxxxxx), N 35(degree) 53' 59" E, 262.23' to a point in the southerly
line of Migeon Avenue, which point marks the northeasterly corner of said Xxxxxx
X. Xxxxxxxxx and a corner of the parcel herein described; thence along the
southerly line of Migeon Avenue, S 50(degree) 13' 16" E, 20.05' to a point in
the center of Xxxxxx Street (unimproved) and a corner of the parcel herein
described; thence along the center of Xxxxxx Street (unimproved) S 35(degree)
53' 59" W, 265.39' to a corner of the parcel herein described; thence along
Xxxxxx Street (unimproved), and along land now or formerly of Xxxxxx X.
Xxxxxxxxx, S 54(degree) 59' 37" E, 79.93' and S 51(degree) 06' 01" E, 50.00' to
the southeasterly corner of land now or formerly of said Xxxxxx X. Xxxxxxxxx and
a corner of the parcel herein described, and which point is marked by an iron
pin; thence N 35(degree) 53' 59" E, 66.10' to a point in the southerly line of
Xxxx Avenue (unimproved), which point marks the northeasterly corner of land now
or formerly of said Xxxxxx X. Xxxxxxxxx and a corner of the parcel herein
described, and which point is marked by an iron pin; thence S 51(degree) 06' 01"
E, 50.00' to the northwesterly corner of land now or formerly of Xxxx X. &
Xxxxxxx X. Xxxxxxxx, which point is a corner of the parcel herein described;
thence S 35(degree) 53' 59" W, 78.20' to the southwesterly corner of land now or
formerly of said Xxxx X. & Xxxxxxx X. Xxxxxxxx, which point is a corner of the
parcel herein described; thence along lands now or formerly of Xxxx X. & Xxxxxxx
X. Xxxxxxxx, Xxxxxx X. & Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xx. & Xxxxx X.
Xxxxxx and Xxxxxxx Street (discontinued & abandoned), partly of each, S
57(degree) 49' 06" E, 101.97' and S 70(degree) 08' 41" E, 125.39' to a point in
the center terminus of said Xxxxxxx Street (discontinued & abandoned), which
point is a corner of the parcel herein described; thence along the center of
said Xxxxxxx Street (discontinued & abandoned), N 35(degree) 13' 49" E, 220.14'
to a point in the southerly line of Migeon Avenue, which point is a corner of
the parcel herein described; thence along the southerly line of Migeon Avenue, S
60(degree) 17' 03" E, 20.09' to the northeasterly terminus of Xxxxxxx Street
(discontinued & abandoned), the northwesterly corner of land now or formerly of
the Estate of Xxxx & Xxxxxxx Xxxxxx, and a corner of the parcel herein
described; thence S 35(degree) 13' 49" W, 150.87' to a point in the easterly
line of Xxxxxxx Street (discontinued & abandoned), which point is the
southwesterly corner of land now or formerly of the Estate of Xxxx & Xxxxxxx
Xxxxxx and a corner of the parcel herein described; thence S 54(degree) 46' 11"
E, 48.97' to the southeasterly corner of the Estate of Xxxx & Xxxxxxx Xxxxxx and
a corner of the parcel herein described; thence along the easterly line of the
Estate of Xxxx & Xxxxxxx Xxxxxx N 35(degree) 13' 49" E, 17.00' to an iron pipe
at the southwesterly corner of land now or formerly of Emanuel & Xxxxxxx X.
Xxxxxxx and a corner of the parcel herein described; thence along lands of
Emanuel & Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx, et al, partly of each, S
70(degree) 10' 44" E, 113.90' and S 77(degree) 07' 03" E, 52.31' to a point in
the westerly line of land now or formerly of Xxxxxxx X. XxXxxxx, which point is
a corner of the parcel herein described; thence S 29(degree) 59' 28" W, 27.72'
to an iron pin at the southwesterly corner of land now or formerly of Xxxxxxx X.
XxXxxxx and a corner of the parcel herein described; thence S 79(degree) 39' 11"
E, 204.06' to an iron pin at the southeasterly corner of land now or formerly of
Xxxxxxx X. XxXxxxx and the southwesterly corner of land now or formerly of
Xxxxxx X. & Xxxxxx X. XxXxxxxxxxx; thence S 64(degree) 51' 21" E, 164.66' to an
iron pin at the southeasterly corner of land now or formerly of Xxxxxx X. &
Xxxxxx X. XxXxxxxxxxx and the southwesterly corner of land now or formerly of V.
S. H. Realty; thence S 60(degree) 02' 12" E, 200.44' to the southeasterly corner
of land now or formerly of V. S. H. Realty and the southwesterly corner of land
now or formerly of Xxxx X. & Xxxxxxx X. Xxxxxxxxxx; thence S 46(degree) 37' 42"
E, 87.07' and S 56(degree) 44' 17" E, 70.34' to a drill hole at the
southeasterly corner of land now or formerly of Xxxx X. & Xxxxxxx X. Xxxxxxxxxx
and a corner of the parcel herein described; thence N 20(degree) 22' 33" E,
144.16' to a point in the southerly line of Migeon Avenue at the northeasterly
D-2
corner of land now or formerly of Xxxx X. & Xxxxxxx X. Xxxxxxxxxx and a corner
of the parcel herein described; thence along the southerly line of Migeon Avenue
S 72(degree) 30' 38" E, 34.93' to an iron pin at the northwesterly corner of
land now or formerly of Xxxxxx Xxxxxxxxx and a corner of the parcel herein
described; thence S 20(degree) 22' 33" W, 129.21' to the southwesterly corner of
land now or formerly of Xxxxxx Xxxxxxxxx and a corner of the parcel herein
described; thence S 53(degree) 47' 26" E, 92.99' to the southeasterly corner of
land now or formerly of Xxxxxx Xxxxxxxxx and a corner of the parcel herein
described; thence along lands now or formerly of Xxxxxx Xxxxxxxxx and Xxxxxxx X.
& Xxxxxx X. Xxxxxx, partly of each, N 48(degree) 25' 54" E, 38.34' and N
65(degree) 30' 34" E, 48.60' to a corner of the parcel herein described; thence
along lands now or formerly of Xxxxxxx X. & Xxxxxx X. Xxxxxx, Xxxxxx Xxxxxxxx,
Xx. & Xxxx X. Xxxxxxxx, and Xxxxxx Xxxxxx Xxxxx, partly of each, S 65(degree)
39' 56" E, 270.29' to the southeasterly corner of land now or formerly of Xxxxxx
Xxxxxx Xxxxx and a corner of the parcel herein described; thence N 19(degree)
50' 34" E, 125.82' to an iron pin at the point and place of beginning.
This description is intended to include any interest in and to the
Naugatuck River.
The parcel described above is more particularly shown and described on a
map entitled "MAP PREPARED FOR - BRUNSWICK CORPORATION - MIGEON AVENUE &
XXXXXXXX AVENUE - TORRINGTON, CONNECTICUT", which map is drawn at a scale of 1"
= 40', dated Xxxxx, 0000 and certified by Xxxxxxx X. Xxxxxxxx, Land Surveyor,
Torrington, Connecticut.
TOGETHER WITH:
a) Rights reserved in a Warranty Deed from Brunswick Corporation to Xxxx and
Xxxxxx Xxxxxxx Home for the Sick, Inc. dated September 9, 1964 and recorded
on September 30, 1964 in Volume 239 at Page 506 of the Torrington Land
Records; and
b) Right of way as more particularly described in an Agreement by and between
Xxxxxxx Xxxxxxx and Brunswick Corporation dated November 4, 1978 and
recorded on February 22, 1979 in Volume 327 at Page 162 of the Torrington
Land Records.
D-3
Schedule 5.1 to Credit and Security Agreement
Trade Names, Chief Executive Office, Principal Place of Business,
and Locations of Collateral
TRADE NAMES
None
CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS
FM Precision Golf 000 Xxxxxx Xxxxxx
Manufacturing Corp.: Xxxxxxxxxx, Xxxxxxxxxxx 00000
FM Precision Golf 000 Xxxxxx Xxxxxx
Sales Corp. Xxxxxxxxxx, Xxxxxxxxxxx 00000
OTHER INVENTORY AND EQUIPMENT LOCATIONS
None
1
Schedule 5.4 to Credit and Security Agreement
SUBSIDIARIES
FMS is a subsidiary FMM
1
Schedule 7.1 to Credit and Security Agreement
PERMITTED LIENS
CREDITOR COLLATERAL JURISDICTION FILING DATE FILING NO.
-------- ---------- ------------ ----------- ----------
NONE
1
Schedule 7.2 to Credit and Security Agreement
PERMITTED INDEBTEDNESS AND GUARANTIES
INDEBTEDNESS
CREDITOR PRINCIPAL AMOUNT MATURITY DATE MONTHLY PAYMENT COLLATERAL
-------- ---------------- ------------- --------------- ----------
None
GUARANTIES
AMOUNT AND DESCRIPTION OF
PRIMARY OBLIGOR OBLIGATION GUARANTEED BENEFICIARY OF GUARANTY
--------------- --------------------- -----------------------
None
1
