FOURTH AMENDMENT
TO
CREDIT AND SECURITY AGREEMENT
This Fourth Amendment is made this 9th day of December, 1996, by and
between CARLYLE GOLF, INC., a Colorado corporation (the "Borrower"), and
NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").
RECITALS
The Borrower and the Lender entered into a Credit and Security
Agreement dated as of July 7, 1995, as previously amended (the "Credit
Agreement").
The Borrower has requested that the Lender agree to amend certain
loan covenants set forth in the Credit Agreement and to make a temporary
term loan to the Borrower, and the Lender is willing to do so on the terms
and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties hereto agree as follows:
1. Section 1.1 of the Credit Agreement is hereby amended by
amending the definition of the term "Inventory Cap" contained therein to
read in its entirety as follows:
"'Inventory Cap' means $550,000 during the months of December
through May and $500,000 during the months of June through November."
2. Section 1.1 of the Credit Agreement is hereby amended by
deleting in its entirety the definition of the term "Note" contained
therein and by adding the following new definition thereto to read in its
entirety as follows:
"'Notes' means the Term Note and the Revolving Note."
3. Section 1.1 of the Credit Agreement is hereby further amended by
amending the definition of "Prior Season Inventory" contained therein to
read in its entirety as follows:
"'Prior Season Inventory' means Inventory which is initially
offered for sale by the Borrower two or more seasons prior to the
shipping period for the current season. As used in this definition,
the shipping period for the spring season begins January 1 and the
shipping period for the fall season begins June 15."
4. Section 1.1 of the Credit Agreement is hereby further amended by
adding the following new definition thereto to read in their entirety as
follows:
"'Revolving Note' means the Amended and Restated Revolving Note
of the Borrower dated December 9th, 1996 and payable to the Lender in
the principal amount of $1,500,000, which note is issued in
substitution for, and not in repayment of, the Revolving Note of the
Borrower dated July 7, 1995."
5. Section 1.1 of the Credit Agreement is hereby further amended by
adding the following new definition thereto to read in its entirety as
follows:
"'Term Note' means the promissory note of the Borrower dated
December 9th, 1996 and payable to the Lender in the principal amount
of $200,000."
6. Section 1.1 of the Credit Agreement is hereby further amended by
amending the definition of the term "Termination Date" contained therein
to read in its entirety as follows:
"'Termination Date' means June 30, 1999."
7. The Credit Agreement is hereby amended by adding a new Section
2.13 thereto to read in its entirety as follows:
"Section 2.13 TERM ADVANCE. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make a single Advance to
the Borrower in the principal amount of $200,000, which Advance shall be
secured by the Collateral as provided in Article III hereof. Upon
fulfillment of the applicable conditions precedent to such Advance, the
Lender shall disburse the proceeds of such Advance by depositing the same
to the Borrower's demand deposit account maintained with Norwest Bank
Colorado, N.A. unless the Lender and the Borrower shall agree in writing
to another manner of disbursement. The Advance made pursuant to this
Section 2.13 shall be evidenced by and repayable with interest in
accordance with the Term Note. The principal of the Term Note shall be
payable as provided therein and on acceleration by the Lender pursuant to
Section 8.2 hereof, and shall bear interest as provided herein."
8. Section 2.2 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 2.2 NOTES.
(a) All Advances made by the Lender under Section 2.1 hereof
shall be evidenced by and repayable with interest in accordance with
the Revolving Note. The principal of the Revolving Note shall be
payable as provided herein and on the earlier of the Termination Date
or acceleration by the Lender pursuant to Section 8.2 hereof, and
shall bear interest as provided herein.
(b) The Advance made by the Lender under Section 2.13 hereof
shall be evidenced by and be repayable with interest in accordance
with the Term Note. The principal of the Term Note shall be payable
in equal monthly installments of $5,556 each, commencing on February
1, 1997 and continuing on the first day of each month thereafter
until the earlier of March 31, 1997, or acceleration by the Lender
pursuant to Section 8.2 hereof, when the outstanding principal
balance thereof shall be due and payable in full. The Term Note
shall bear interest as provided herein.
9. Section 2.3 of the Credit Agreement is hereby amended by
amending subsection (a) thereof to read in its entirety as follows:
"(a) The principal of the Advances outstanding from time to time
during any month shall bear interest (computed on the basis of actual
days elapsed in a 360-day year) as follows:
(1) Advances pursuant to Section 2.1 hereof and evidenced
by the Revolving Note shall bear interest at the Floating Rate;
provided, however, that in any event no rate change shall be put
into effect which would result in a rate greater than the
highest rate permitted by law. Interest accruing on the
principal balance of such Advances outstanding from time to time
shall be payable on the first day of each month and on the
Termination Date or earlier demand or prepayment in full.
(2) The Advance made pursuant to Section 2.13 hereof and
evidenced by the Term Note shall bear interest at the Floating
Rate; provided, however, that in any event no rate change shall
be put into effect which would result in a rate greater than the
highest rate permitted by law. Interest accruing on the
principal balance of such Advance outstanding from time to time
shall be payable on the first day of each month and on March 31,
1997 or earlier demand or prepayment in full.
(3) Notwithstanding anything contained in this Section 2.3
or the Notes to the contrary, from the first day of any month
during which any Default or Event of Default occurs or exists at
any time, in the Lender's discretion and without waiving any of
its other rights and remedies, the rate of interest payable on
any and all Advances and on the Notes shall be the Default
Rate."
10. Section 2.4 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 2.4 VOLUNTARY PREPAYMENT; TERMINATION OF AGREEMENT BY
BORROWER.
(a) The Borrower may, in its discretion, prepay the Revolving
Note in whole or from time to time in part without penalty or
premium.
(b) The Borrower may, in its discretion, prepay the Term Note
in whole or from time to time in part, PROVIDED, HOWEVER, that the
Term Note may not be prepaid from the proceeds of a loan provided by
a lender other than the Lender (or an affiliate of Norwest
Corporation) unless the Borrower first provides the Lender with the
opportunity of providing such credit facility on the same terms as
such lender and the Lender declines to do so. If such prepayment is
not made with the proceeds of a loan or other financing from an
affiliate of Norwest Corporation, the Borrower shall pay a prepayment
premium equal to two percent (2%) of the amount of such prepayment.
(c) The Borrower may terminate this Agreement at any time and,
subject to payment and performance of all the Borrower's obligations
to the Lender, may obtain any release or termination of the Security
Interest to which the Borrower is otherwise entitled by law by (i)
giving at least 30 days' prior written notice to the Lender of the
Borrower's intention to terminate this Agreement; and (ii) paying the
Lender a prepayment fee of two percent (2%) of the Commitment if the
prepayment occurs on or before July 7, 1997, and one percent (1%) of
the Commitment if the prepayment occurs after July 7, 1997, but prior
to the Termination Date, unless the Credit Facility is refinanced by
an affiliate of Norwest Corporation, the outstanding Advances are
repaid solely out of the cash flow of the Borrower or by the proceeds
of the sale by the Borrower of equity securities and the Borrower
does not obtain another credit facility with another lender within 90
days following such termination, or the termination occurs within 60
days after demand by the Lender for payment of compensation pursuant
to Section 2.12."
11. Section 2.5 of the Credit Agreement is hereby amended by
amending the first sentence thereof to read in its entirety as follows:
"Section 2.5 MANDATORY PREPAYMENT. Without notice or demand, if the
sum of the outstanding principal balance of the Advances made pursuant to
Section 2.1 and evidenced by the Revolving Note shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Revolving
Note to the extent necessary to reduce the sum of the outstanding
principal balance of such Advances to the Borrowing Base."
12. Section 6.12 of the Credit Agreement is hereby amended to read
in its entirety as follows:
Section 6.12 BOOK NET WORTH. The Borrower shall, on each of the
dates set forth below, maintain its Book Net Worth at an amount which is
greater than or equal to the amount set forth opposite such date:
PERIOD BOOK NET WORTH
December 31, 1996 $1,531,000
January 31, 1997 $1,439,000
February 28, 1997 $1,454,000
March 31, 1997 $1,481,000
April 30, 1997 $1,498,000
May 31, 1997 $1,519,000
June 30, 1997 $1,525,000
July 31, 1997 $1,550,000
August 31, 1997 $1,562,000
September 30, 1997 $1,545,000
October 31, 1997 $1,461,000
Prior to October 1, 1997 the Lender and the Borrower shall negotiate in
good faith as to the Book Net Worth that the Borrower shall be required to
maintain for periods after October 31, 1997, but if the Borrower and the
Lender do not agree, the Lender may designate the required Book Net Worth
in its sole discretion, and the failure of the Borrower to maintain its
Book Net Worth at or above the amounts designated by the Lender pursuant
to this Section 6.12 shall constitute a default by the Borrower
hereunder."
13. Section 6.13 of the Credit Agreement is hereby amended to read
in its entirety as follows:
"Section 6.13 NET INCOME. The Borrower shall, on each of the dates
set forth below, have Actual Income or Loss of an amount which is greater
than or equal to the amount set forth opposite such date:
DATE ACTUAL INCOME OR LOSS
December 31, 1996 ($320,000)
January 31, 1997 ($420,000)
February 28, 1997 ($415,000)
March 31, 1997 ($395,000)
April 30, 1997 ($395,000)
May 31, 1997 ($380,000)
June 30, 1997 ($385,000)
July 31, 1997 ($370,000)
August 31, 1997 ($370,000)
September 30, 1997 ($395,000)
October 31, 1997 ($490,000)
Prior to October 1, 1997 the Lender and the Borrower shall negotiate in
good faith as to the Actual Income or Loss that the Borrower shall be
required to achieve for periods after October 31, 1997 but if the Borrower
and the Lender do not agree, the Lender may designate the required Actual
Income or Loss in its sole discretion, and the failure of the Borrower to
achieve the designated Actual Income or Loss shall constitute a default by
the Borrower hereunder."
14. Section 1.1 of the Credit Agreement is hereby further amended by
amending the definition of the term "Floating Rate" contained therein to
read in its entirety as follows:
"'Floating Rate' means an annual rate equal to the sum of the
Base Rate plus four percent (4.0%), which Floating Rate shall change
when and as the Base Rate Changes, PROVIDED, HOWEVER, that if, on or
before January 31, 1997, the Borrower uses the proceeds of an
additional loan from the Lender to fund the acquisition of (i)
substantially all of the assets of Pro-Line Cap Company, or (ii) a
majority of the voting capital stock of Pro-Line Cap Company, the
Floating Rate shall be reduced to an annual rate equal to the sum of
the Base Rate plus three and one-quarter percent (3.25%) effective as
of the date of such acquisition, which Floating Rate shall change
when and as the Base Rate Changes."
15. Section 2.11 of the Credit Agreement is hereby amended by adding
a new subsection (d) thereto, to read in its entirety as follows:
"(d) If, on January 31, 1997, the Borrower shall not have used
the proceeds of an additional loan from the Lender to fund the
acquisition of (i) substantially all of the assets of Pro-Line Cap
Company, or (ii) a majority of the voting capital stock of Pro-Line
Cap Company, the Borrower agrees to pay to the Lender a fully earned
and non-refundable covenant restructuring fee of $7,500."
16. Section 7.10 of the Credit Agreement is hereby amended to read
in its entirety as follows:
"Section 7.10 CAPITAL EXPENDITURES. The Borrower will not expend or
contract to expend in the aggregate more than $200,000 during its fiscal
year ending October 31, 1997, or more than $100,000 in the aggregate
during any subsequent fiscal year, for the lease, purchase or other
acquisition of any capital asset, or for the lease of any other asset,
whether payable currently or in the future."
17. All outstanding Defaults by the Borrower under the Credit
Agreement, which occurred prior to the date hereof, are waived effective
as of the date each such Default occurred.
18. This Fourth Amendment shall be effective only upon the execution
and delivery by the Borrower of the promissory notes in substantially the
form of Exhibits A and B hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the day and year first above written.
CARLYLE GOLF, INC.
By: /s/Xxxxxx X. Xxxxx
Its: President
NORWEST BUSINESS CREDIT, INC.
By: Xxxxxx Xxxxxxxx
Its: Comm'l Banking Rep.
