Exhibit 10.1
SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of March 9, 2001, is made by and between FM
PRECISION GOLF MANUFACTURING CORP., a Delaware corporation, and FM PRECISION
GOLF SALES CORP., a Delaware corporation (collectively, jointly and severally,
the "Borrower"), and ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of October 9, 1998, as amended by that certain Amendment to
Credit and Security Agreement and Waiver of Defaults dated April 13, 1999, 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 and, as amended
by that certain Fifth Amendment to Credit and Security Agreement dated November
8, 2000 (collectively, the "Credit Agreement"). Capitalized terms used in these
recitals have the meanings given to them in the Credit Agreement unless
otherwise specified.
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
2. AMENDMENTS. The Credit Agreement is hereby amended as follows:
(a) The definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(A) the lesser of (x) 85% of Eligible Accounts, or (y)
$6,500,000.00, plus
(B) the lesser of (x) 60% of Eligible Inventory (exclusive of
Eligible Raw Materials Inventory), or (y) $2,500,000.00 from
March 1 through September 30 of each year and $3,500,000.00 from
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October 1 of each year through February 28 of each subsequent
year, provided however, during the year 2001 only, the
$3,500,000.00 figure shall be effective through and until April
1, 2001 at which point it shall be automatically reduced to
$2,500,000.00, plus
(C) the lesser of (x) 50% of Eligible Raw Materials Inventory, or
(y) $2,500,000.00 from March 1 through September 30 of each year
and $3,500,000.00 from October 1 of each year through February 28
of each subsequent year, provided however, during the year 2001
only the $3,500,000.00 figure shall be effective through and
until April 1, 2001 at which point it shall be automatically
reduced to $2,500,000.00, plus
(D) If but only if Lender, in its sole and absolute discretion,
elects to make Revolving Advances under the Overadvance Limit, as
hereafter defined, in Borrower's 2001 fiscal year, an overadvance
in the amount not to exceed $500,000.00 (the "Overadvance Limit),
which Overadvance Limit shall be automatically reduced to
$400,000.00 on April 1, 2001, to $200,000.00 on May 1, 2001 and
to $0.00 on June 1, 2001. No Overadvance Limit shall exist at any
time from June 1, 2001 through October 31, 2001. In addition, if
but only if Lender, in its sole and absolute discretion, elects
to make Revolving Advances under the Overadvance Limit, in any
given year subsequent to Borrower's 2001 fiscal year, commencing
on November 1 of each year, an overadvance in the amount not to
exceed $500,000.00 (the "Overadvance Limit), which Overadvance
Limit shall be automatically reduced to $400,000.00 on March 1 of
the immediately following year, to $300,000.00 on April 1 of the
immediately following year, to $200,000.00 on May 1 of the
immediately following year and to $0.00 on June 1 of the
immediately following year. No Overadvance Limit shall exist at
any time from June 1 through October 31 in any year.
(b) Effective March 1, 2001, the definition of "Capital Expenditures
Floating Rate" contained in Section 1.1 of the Credit Agreement was hereby
deleted and replaced as follows:
"Capital Expenditures Floating Rate" means an annual rate equal
to the sum of the Prime Rate plus one and one-quarter of one
2
percent (1.25%). The Capital Expenditures Floating Rate shall
automatically be reduced to an annual rate equal to the sum of
the Prime Rate plus one-quarter of one percent (0.25%) on the
first day of the first full month following Lender's receipt of
Borrower's 2001 fiscal year audited financial statements
complying with Section 6.1(a) below, if but only if (i) said
financial statements indicate that the Borrower and the Covenant
Entities have achieved a Net Income for the Borrower's 2001
fiscal year of not less than $250,000.00, (ii) said financial
statements indicate that the Borrower and the Covenant Entities
increased their aggregate Net Worth during Borrower's 2001 fiscal
year by not less than $250,000.00, and (iii) there is not a then
existing Event of Default or Default Period. If but only if said
reduction is not achieved as provided above, the Capital
Expenditures Floating Rate shall automatically be adjusted on the
first day of the first full month following Lender's receipt of
Borrower's audited financial statements complying with Section
6.1(a) below in any year subsequent to Borrower's 2001 fiscal
year, to an annual rate equal to the sum of the Prime Rate plus
one-quarter of one percent (0.25%) in the event that (i) said
financial statements indicate that the Borrower and the Covenant
Entities have achieved a Net Income for any such fiscal year of
not less than $600,000.00, (ii) said financial statements
indicate that the Borrower and the Covenant Entities increased
their aggregate Net Worth during any such fiscal year by not less
than $600,000.00, and (iii) there is not a then existing Event of
Default or Default Period. The Capital Expenditures Floating Rate
shall change when and as the Prime Rate changes.
(c) The definition of "Default Rate" contained in Section 1.1 of the
Credit Agreement is deleted and replaced as follows:
"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 and the Overadvance Floating
Rate, which rate shall change when and as the Term Floating Rate
changes.
(d) The definition of "Maturity Date" contained in Section 1.1 of the
Credit Agreement is hereby deleted and
replaced as follows:
"Maturity Date" means September 30, 2004.
(e) The figure "$5,000,000.00" contained in the definition of "Maximum
Line" contained in Section 1.1 of the Credit Agreement is hereby deleted and
replaced with the figure "$6,500,000.00".
(f) There is hereby added a new definition for "Overadvance Floating
Rate" to Section 1.1 of the Credit Agreement which provides as follows:
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"Overadvance Floating Rate" means an annual rate equal to the sum
of the Prime Rate plus three and one-quarter percent (3.25%). The
Overadvance Floating Rate shall automatically be reduced to an
annual rate equal to the sum of the Prime Rate plus two and
one-quarter percent (2.25%) on the first day of the first full
month following Lender's receipt of Borrower's 2001 fiscal year
audited financial statements complying with Section 6.1(a) below,
if but only if (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for
the Borrower's 2001 fiscal year of not less than $250,000.00,
(ii) said financial statements indicate that the Borrower and the
Covenant Entities increased their aggregate Net Worth during
Borrower's 2001 fiscal year by not less than $250,000.00, and
(iii) there is not a then existing Event of Default or Default
Period. If but only if said reduction is not achieved as provided
above, the Overadvance Floating Rate shall automatically be
adjusted on the first day of the first full month following
Lender's receipt of Borrower's audited financial statements
complying with Section 6.1(a) below in any year subsequent to
Borrower's 2001 fiscal year, to an annual rate equal to the sum
of the Prime Rate plus two and one-quarter percent (2.25%) in the
event that (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for
any such fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant
Entities increased their aggregate Net Worth during any such
fiscal year by not less than $600,000.00, and (iii) there is not
a then existing Event of Default or Default Period. The
Overadvance Floating Rate shall change when and as the Prime Rate
changes.
(g) Effective March 1, 2001, the definition of "Revolving Floating
Rate" contained in Section 1.1 of the Credit Agreement was hereby deleted and
replaced as follows:
"Revolving Floating Rate" means an annual rate equal to the sum
of the Prime Rate plus one and one-quarter of one percent
(1.25%). The Revolving Floating Rate shall automatically be
reduced to an annual rate equal to the sum of the Prime Rate plus
one-quarter of one percent (0.25%) on the first day of the first
full month following Lender's receipt of Borrower's 2001 fiscal
year audited financial statements complying with Section 6.1(a)
below, if but only if (i) said financial statements indicate that
the Borrower and the Covenant Entities have achieved a Net Income
for the Borrower's 2001 fiscal year of not less than $250,000.00,
(ii) said financial statements indicate that the Borrower and the
Covenant Entities increased their aggregate Net Worth during
Borrower's 2001 fiscal year by not less than $250,000.00, and
(iii) there is not a then existing Event of Default or Default
Period. If but only if said reduction is not achieved as provided
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above, the Revolving Floating Rate shall automatically be
adjusted on the first day of the first full month following
Lender's receipt of Borrower's audited financial statements
complying with Section 6.1(a) below in any year subsequent to
Borrower's 2001 fiscal year, to an annual rate equal to the sum
of the Prime Rate plus one-quarter of one percent (0.25%) in the
event that (i) said financial statements indicate that the
Borrower and the Covenant Entities have achieved a Net Income for
any such fiscal year of not less than $600,000.00, (ii) said
financial statements indicate that the Borrower and the Covenant
Entities increased their aggregate Net Worth during any such
fiscal year by not less than $600,000.00, and (iii) there is not
a then existing Event of Default or Default Period. The Revolving
Floating Rate shall change when and as the Prime Rate changes.
(h) Effective March 1, 2001, the definition of "Term Floating Rate"
contained in Section 1.1 of the Credit Agreement was hereby deleted and replaced
as follows:
"Term Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus one and three-quarters of one percent (1.75%).
The Term Floating Rate shall automatically be reduced to an
annual rate equal to the sum of the Prime Rate plus
three-quarters of one percent (0.75%) on the first day of the
first full month following Lender's receipt of Borrower's 2001
fiscal year audited financial statements complying with Section
6.1(a) below, if but only if (i) said financial statements
indicate that the Borrower and the Covenant Entities have
achieved a Net Income for the Borrower's 2001 fiscal year of not
less than $250,000.00, (ii) said financial statements indicate
that the Borrower and the Covenant Entities increased their
aggregate Net Worth during Borrower's 2001 fiscal year by not
less than $250,000.00, and (iii) there is not a then existing
Event of Default or Default Period. If but only if said reduction
is not achieved as provided above, the Term Floating Rate shall
automatically be adjusted on the first day of the first full
month following Lender's receipt of Borrower's audited financial
statements complying with Section 6.1(a) below in any year
subsequent to Borrower's 2001 fiscal year, to an annual rate
equal to the sum of the Prime Rate plus three-quarters of one
percent (0.75%) in the event that (i) said financial statements
indicate that the Borrower and the Covenant Entities have
achieved a Net Income for any such fiscal year of not less than
$600,000.00, (ii) said financial statements indicate that the
Borrower and the Covenant Entities increased their aggregate Net
Worth during any such fiscal year by not less than $600,000.00,
and (iii) there is not a then existing Event of Default or
Default Period. The Term Floating Rate shall change when and as
the Prime Rate changes.
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(i) Section 2.6(a) of the Credit Agreement is hereby deleted and
replaced as follows:
(a) The Lender agrees, on the terms and subject to the conditions
herein set forth, to make a non-revolving advance to the Borrower in
the amount of $2,811,000.00 (the "Term Advance"). Borrower hereby
acknowledges that as of March 1, 2001, $2,007,000.00 of the Term
Advance was currently outstanding.
(j) Section 2.7.1(a) of the Credit Agreement is hereby deleted and
replaced 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.
(k) Section 2.8(a) of the Credit Agreement is hereby deleted and
replaced as follows:
(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
Overadvance Limit) 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 Overadvance Limit
shall bear interest at the Overadvance Floating Rate.
(l) Section 2.9(a) of the Credit Agreement is hereby deleted and
replaced as follows:
(a) UNUSED LINE FEE. For the purposes of this Section
2.9(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.
(m) Subsection (d) of Section 2.9 of the Credit Agreement is hereby
deleted and replaced as follows:
(d) AUDIT FEES. The Borrower hereby agrees to pay the Lender, on
demand, audit fees of $75.00 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
6
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. Lender shall
send to Borrower an invoice applicable to such audit fees,
out-of-pocket costs and expenses, provided, however, any failure of
Lender to send such invoices shall not relieve Borrower of its
obligations under this Section 2.9(d).
(n) Sections 2.13(a) and 2.13(b) of the Credit Agreement are hereby
deleted and replaced as follows:
(a) TERMINATION AND LINE REDUCTION FEES. If the Credit Facility
is terminated for any reason as of a date other than the Maturity
Date, or the Borrower reduces the Maximum Line, the Borrower
shall pay the Lender a fee in an amount equal to a percentage of
the Maximum Line (or the reduction, as the case may be) as
follows: (i) three percent (3%) if the termination or reduction
occurs on or before September 30, 2001, (ii) two percent (2%) if
the termination or reduction occurs after September 30, 2001 but
on or before September 1, 2002, and (iii) one percent (1%) if the
termination or reduction occurs after September 30, 2002.
(b) PREPAYMENT FEES. If the Term Note or the Capital Expenditures
Note are prepaid as of a date other than the Maturity Date for
any reason except in accordance with Section 2.7, the Borrower
shall pay to the Lender a fee in an amount equal to a percentage
of the amount prepaid as follows: (i) three percent (3%) if
prepayment occurs on or before September 30, 2001; (ii) two
percent (2%) if prepayment occurs after September 30, 2001 but on
or before September 30, 2002; and (iii) one percent (1%) if
prepayment occurs after September 30, 2002.
(o) Section 6.12 of the Credit Agreement is hereby deleted and
replaced as follows:
DEBT SERVICE COVERAGE RATIO. The Borrower covenants that FMM and FMS
and the Covenant Entities shall, as of the last day of each fiscal
quarter, on and after May 31, 2001, maintain a consolidated average
minimum debt service coverage ratio (based upon the period set forth
below) as follows:
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Quarter Ending Debt Service Coverage Ratio
-------------- ---------------------------
May 31, 2001 1.0 to 1 based upon the immediately preceding
three month period, and excluding all payments
made on or Subordinated Indebtedness owed to the
▇▇▇▇▇▇▇▇ Family Charitable Remainder ▇▇▇▇▇▇▇▇
▇▇. ▇
▇▇▇▇▇▇ ▇▇, ▇▇▇▇ and 1.0 to 1 based upon the immediately preceding
each August 31 three month period
thereafter
November 30, 2001 and .75 to 1 based upon the immediately preceding six
each November 30 month period
thereafter
February 28, 2002 and .75 to 1 based upon the immediately preceding nine
each February 28 month period
thereafter
May 31, 2002 and each 1.05 to 1 based upon the immediately preceding
May 31 thereafter twelve month period
(p) Section 6.13 of the Credit Agreement is hereby deleted and
replaced as follows:
Section 6.13 NET WORTH. The Borrower covenants that as of May 31, 2000, the
aggregate consolidated Net Worth of FMM, FMS and the Covenant Entities was
$14,411,226.36. The Borrower covenants that said aggregate consolidated Net
Worth as of the end of each future fiscal quarter end shall increase by not
less than (or in the event a decrease is allowed, decrease by not more
than) the amounts set forth below as measured from the immediately
preceding fiscal year ending aggregate consolidated Net Worth.
Quarter Ending Net Worth Increase (Decrease)
-------------- -----------------------------
February 28, 2001 ($1,200,000.00)
May 31, 2001 ($200,000.00)
August 31, 2001 and
each August 31
thereafter $0.00
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November 30, 2001 and
each November 30
thereafter ($300,000.00)
February 28, 2002 and
each February 28
thereafter ($100,000.00)
May 31, 2002 and each
May 31 thereafter $600,000.00
(q) Section 6.14 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
Section 6.14 NET INCOME. The Borrower covenants that 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 fiscal
quarter as measured from the immediately preceding fiscal year end.
Quarter Ending Net Income (Loss)
-------------- -----------------
February 28, 2001 ($1,200,000.00)
May 31, 2001 ($200,000.00)
August 31, 2001 and
each August 31
thereafter $0.00
November 30, 2001 and
each November 30
thereafter ($300,000.00)
February 28, 2002 and
each February 28
thereafter ($100,000.00)
May 31, 2002 and each
May 31 thereafter $600,000.00
(r) Section 6.15 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
Section 6.15 MONTHLY NET INCOME/NET LOSS. The Borrower covenants that
beginning with January 1, 2001, and continuing for each month thereafter,
FMM, FMS and the Covenant Entities shall achieve an aggregate consolidated
Net Income of not less than (or in the event a Net Loss is allowed for such
month, a Net Loss of not more than) the amounts set forth below for each
month as measured from the last day of the immediately preceding month.
9
Month Net Income/(Net Loss)
----- ---------------------
January, 2001 $0.00
February, 2001 $50,000.00
▇▇▇▇▇, ▇▇▇▇ $100,000.00
April, 2001 $150,000.00
May, 2001 $150,000.00
June of each year $0.00
July of each year $0.00
August of each year ($300,000.00)
September of each year ($150,000.00)
October of each year ($200,000.00)
November of each year ($100,000.00)
December of each year ($350,000.00)
January, 2002 and each January thereafter ($50,000.00)
February, 2002 and each February thereafter $0.00
March, 2002 and each March thereafter $0.00
April, 2002 and each April thereafter $0.00
May, 2002 and each May thereafter $0.00
(s) Section 7.10 of the Credit Agreement is hereby deleted and
replaced as follows:
CAPITAL EXPENDITURES. FMM, FMS and the Covenant Entities will not incur or
contract to incur Capital Expenditures in the aggregate of more than (i)
$1,250,000.00 during Borrower's 2001 fiscal year, and (ii) $1,500,000.00
during any fiscal year thereafter. In addition, FMM, FMS and the Covenant
Entities will not incur or contract to incur Capital Expenditures paid with
working capital in the aggregate of more than (i) $800,000.00 during
Borrower's 2001 fiscal year, and (ii) $900,000.00 during any fiscal year
thereafter. 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 Lender's sole discretion.
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3. NO OTHER CHANGES. Except as explicitly amended by this Amendment, all of
the terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance or letter of credit thereunder.
4. THE DEFAULTS. The Borrower is in default of the following provisions of
the Credit Agreement (collectively, the "Current Defaults"):
(a) The Borrower has failed to achieve the required Debt Service
Coverage Ratio for the quarter ending November 30, 2000 as required by Section
6.12 of the Credit Agreement.
(b) The Borrower and the Covenant Entities have failed to achieve the
Net Worth for the quarter ending November 30, 2000 as required by Section 6.13
of the Credit Agreement.
(c) The Borrower and the Covenant Entities have failed to achieve the
Net Income for the quarter ending November 30, 2000 as required by Section 6.14
of the Credit Agreement.
(d) The Borrower and the Covenant Entities have exceeded the maximum
allowable Net Loss for the month of November, 2000 as set forth in Section 6.15
of the Credit Agreement.
The Borrower acknowledges that as a result of the Current Defaults, a
Default Period exists and the Default Rate was implemented on November 1, 2000.
The Borrower further acknowledges as of the date hereof, the amounts owed as a
result of the implementation of the Default Rate have not been paid (the
"Default Interest"). Upon the terms and subject to the conditions set forth in
this Amendment, the Lender hereby waives the Current Defaults. This waiver shall
be effective only in this specific instance and for the specific purpose for
which it is given, and this waiver shall not entitle the Borrower to any other
or further waiver in any similar or other circumstances. The Borrower further
agrees that notwithstanding the above waiver, the Obligations shall continue to
bear interest at the Default Rate. The Borrower shall pay one-half of the past
due Default Interest (which equals $22,826.38) upon the execution of this
Amendment. The Borrower shall pay one-half of the Default Interest going forward
monthly as required by the Credit Agreement. The second one-half of the past due
Default Interest and one-half of the Default Interest going forward
(collectively the "Accrued Default Interest") shall continue to accrue and shall
be due and payable on the earlier of (i) the first day of the first full month
after Lender's receipt of Borrower's audited financial statements for Borrower's
2001 fiscal year complying with the terms of Section 6.1(a) of the Credit
Agreement (the "2001 Financials") which indicate that there is an event of
default existing under the Credit Agreement, or (ii) the date after the date
hereof upon which any Event of Default occurs under the Credit Agreement. In the
event the Accrued Default Interest becomes due and payable, the Current Defaults
and the Default Period associated therewith, shall automatically be reinstated
retroactively to November 1, 2000. Notwithstanding the above, if but only if the
Accrued Default Interest has not previously become due and payable and the 2001
Financial Statements indicate that the Borrower is in compliance with all of the
provisions of the Credit Agreement, the Lender shall waive the payment of the
Accrued Default Interest and the Obligations shall cease to bear interest at the
Default Rate.
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5. ORIGINATION FEE. The Borrower shall pay the Lender as of the date hereof
a fully earned, non-refundable origination fee in the amount of $11,195.00 in
consideration of the Lender's execution of this Amendment.
6. CONDITIONS PRECEDENT. This Amendment shall be effective when the Lender
shall have received an executed original hereof, together with each of the
following, each in substance and form acceptable to the Lender in its sole
discretion:
(a) The replacement revolving note substantially in the form of
Exhibit A hereto, duly executed on behalf of the Borrower (the "Replacement
Note").
(b) The Acknowledgment and Agreement of Guarantor set forth at the end
of this Amendment, duly executed by the Guarantor.
(c) A Certificate of the Secretary of the Borrower certifying as to
(i) the resolutions of the board of directors of the Borrower approving the
execution and delivery of this Amendment, (ii) the fact that the articles of
incorporation and bylaws of the Borrower, which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower's secretary
or assistant secretary dated as of October 9, 1998 in connection with the
execution and delivery of the Credit Agreement continue in full force and effect
and have not been amended or otherwise modified except as set forth in the
Certificate to be delivered, and (iii) certifying that the officers and agents
of the Borrower who have been certified to the Lender, pursuant to the
Certificate of Authority of the Borrower's secretary or assistant secretary
dated as of October 9, 1998, as being authorized to sign and to act on behalf of
the Borrower continue to be so authorized or setting forth the sample signatures
of each of the officers and agents of the Borrower authorized to execute and
deliver this Amendment, the Replacement Note and all other documents, agreements
and certificates on behalf of the Borrower.
(d) An opinion of the Borrower's counsel as to the matters set forth
in paragraphs 7(a) and 7(b) hereof and as to such other matters as the Lender
shall require.
(e) Payment of the fee described in Paragraph 5.
(f) Payment of the Default Interest as described in Paragraph 4(d).
(g) Such other matters as the Lender may require.
7. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute this
Amendment and the Replacement Note and to perform all of its obligations
hereunder, and this Amendment and the Replacement Note have been duly executed
and delivered by the Borrower and constituteS the legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms.
12
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Replacement Note have been duly authorized by all necessary
corporate action and do not (i) require any authorization, consent or approval
by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law,
rule or regulation or of any order, writ, injunction or decree presently in
effect, having applicability to the Borrower, or the articles of incorporation
or bylaws of the Borrower, or (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in Article V
of the Credit Agreement are correct on and as of the date hereof as though made
on and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.
8. REFERENCES. All references in the Credit Agreement to "this Agreement"
shall be deemed to refer to the Credit Agreement as amended hereby; and any and
all references in the Security Documents to the Credit Agreement shall be deemed
to refer to the Credit Agreement as amended hereby. Upon the satisfaction of
each of the conditions set forth in paragraph 6 hereof, the definition of
"Revolving Note" and all references thereto in the Credit Agreement shall be
deemed amended to describe the Replacement Note, which Replacement Note shall be
issued by the Borrower to the Lender in replacement, renewal and amendment, but
not in repayment, of the Revolving Note.
9. NO OTHER WAIVER. Except as specifically set forth in Section 4 above,
the execution of this Amendment and acceptance of the Replacement Note and any
documents related hereto shall not be deemed to be a waiver of any Default or
Event of Default or Default Period under the Credit Agreement or breach, default
or event of default under any Security Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the
date of this Amendment.
10. RELEASE. The Borrower, and the Guarantor by signing the Acknowledgment
and Agreement of Guarantor set forth below, each hereby absolutely and
unconditionally releases and forever discharges the Lender, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
11. PAYMENTS ON THE SUBORDINATED DEBT. Notwithstanding anything in that
certain Subordination Agreement dated December 7, 2000 (the "Subordination
Agreement") to the contrary, the Borrower agrees that it shall only make
payments on the Subordinated Indebtedness in strict accordance with the
following:
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(a) Payments may only be made on the following dates (or, in the event
any such date falls on a weekend or holiday, the next business day) in amounts
not to exceed the following amounts:
(i) On the date hereof, $100,000.00;
(ii) On March 31, 2001, $200,000.00;
(iii) On April 30, 2001, $200,000.00; and
(iv) On May 31, 2001, the balance of the Subordinated
Indebtedness.
(b) The amount of any payment may not exceed the amount equal to the
aggregate Availability under the Credit Agreement and the RG Credit Agreement
minus Accounts more than 30 days past respective due date minus $500,000.00.
(c) With respect to the May 31, 2001 payment only, the average
aggregate excess Availability under the Credit Agreement and the RG Credit
Agreement for the 60 days immediately preceding said payment was not less than
$1,000,000.00, and
(d) no Event of Default or Default Period has occurred and is
continuing or will occur as a result of or immediately following any such
payment.
Any payments received by the Subordinated Creditor which are not permitted
hereby shall be handled in strict accordance with Section 5 of the Subordination
Agreement. Nothing contained herein shall limit the Borrower from issuing its
shares of Common Stock to the Subordinated Creditor in accordance with the terms
of the Subordinated Indebtedness.
12. COSTS AND EXPENSES. The Borrower hereby reaffirms its agreement under
the Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses and the fee
required under paragraph 5 hereof.
13. MISCELLANEOUS. This Amendment and the Acknowledgment and Agreement of
Guarantor may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
▇▇▇▇▇ FARGO BUSINESS CREDIT, INC.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Its Assistant Vice President
FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Its Chief Financial Officer
FM PRECISION GOLF SALES CORP.,
a Delaware corporation
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Its Chief Financial Officer
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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of FM Precision Golf
Manufacturing Corp., and FM Precision Golf Sales Corp., each Delaware
corporations (collectively, jointly and severally, the "Borrowers") to ▇▇▇▇▇
Fargo Business Credit, Inc., (the "Lender") pursuant to a Guaranty dated as of
October 9, 1998 (the "Guaranty"), hereby (i) acknowledges receipt of the
foregoing Amendment; (ii) consents to the terms (including without limitation
the release set forth in paragraph 10 of the Amendment) and execution thereof;
(iii) reaffirms its obligations to the Lender pursuant to the terms of its
Guaranty; and (iv) acknowledges that the Lender may amend, restate, extend,
renew or otherwise modify the Credit Agreement and any indebtedness or agreement
of the Borrower, or enter into any agreement or extend additional or other
credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the
Guaranty for all of the Borrowers' present and future indebtedness to the
Lender.
ROYAL PRECISION, INC.,
a Delaware corporation
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Its Chief Financial Officer
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ACKNOWLEDGMENT OF SUBORDINATED CREDITOR
The undersigned has executed and delivered to ▇▇▇▇▇ Fargo Business Credit,
Inc., a Minnesota corporation ("Lender"), a Subordination Agreement applicable
to amounts owed to the undersigned by the Borrower, Royal Grip, Inc., a Nevada
corporation, and Royal Grip Headwear Company, a Nevada corporation. The Borrower
has requested that the Lender enter into this Sixth Amendment to Credit and
Security Agreement. The Lender has agreed to do so if, but only if, the
undersigned delivered to the Lender this acknowledgment.
Accordingly, as an inducement to the Lender to entering into this Sixth
Amendment, the undersigned acknowledges that its Debt Subordination Agreement
remains in full force and effect.
The undersigned specifically consent to the provisions of Section 11 of the
Amendment.
The Debt Subordination Agreement is in all respects ratified, confirmed and
approved.
Dated March 9, 2001.
THE ▇▇▇▇▇▇▇▇ FAMILY CHARITABLE
REMAINDER UNITRUST NO. 3
Witness: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Trustee
----------------------- -----------------------------------
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EXHIBIT A
SECOND REPLACEMENT REVOLVING NOTE
$6,500,000.00 Phoenix, Arizona
____________, 2001
For value received, the undersigned, FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation, and FM PRECISION GOLF SALES CORP., a Delaware
corporation (collectively, jointly and severally, "Borrower"), hereby jointly
and severally promise to pay on the Termination Date under the Credit Agreement
(defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender"), at its main office in Phoenix, Arizona, or at any
other place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of SIX MILLION FIVE HUNDRED THOUSAND and N0/100 Dollars ($6,500,000.00) or, if
less, the aggregate unpaid principal amount of all Revolving Advances made by
the Lender to the Borrower under the Credit Agreement (defined below) together
with interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a 360-day
year, from the date hereof until this Note is fully paid at the rate from time
to time in effect under the Credit and Security Agreement dated October 8, 1998,
as amended from time to time (as the same may hereafter be amended, supplemented
or restated from time to time, the "Credit Agreement") by and between the Lender
and the Borrower. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
Both entities constituting the Borrower hereby jointly and severally agree
to pay all costs of collection, including attorneys' fees and legal expenses in
the event this Note is not paid when due, whether or not legal proceedings are
commenced.
This Note, upon its execution, is a replacement of, issued in substitution
and not in satisfaction of a promissory note, and a portion of the indebtedness
hereunder is the same indebtedness evidenced by that certain Replacement
Revolving Note in the amount of $5,000,000.00, made by the undersigned, which
Replacement Revolving Note was executed pursuant to the Credit Agreement. The
indebtedness evidenced by said Replacement Revolving Note is not extinguished
hereby.
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Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
FM PRECISION GOLF MANUFACTURING CORP.,
a Delaware corporation
By
-----------------------------------
Its
----------------------------------
FM PRECISION GOLF SALES CORP.,
a Delaware corporation
By
-----------------------------------
Its
----------------------------------
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