ROYAL PRECISION INC
SUBORDINATION AGREEMENT DATED 12-7-00
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>ex10-4.txt
<DESCRIPTION>SUBORDINATION AGREEMENT DATED 12-7-00
<TEXT>

                                                                    Exhibit 10.4

                             SUBORDINATION AGREEMENT

          This  Agreement,  dated as of December 7, 2000,  is made by Richard P.
Johnston,  as Trustee of the Johnston Family Charitable Remainder Unitrust No. 3
(the "Subordinated  Creditor"),  for the benefit of Wells Fargo Business Credit,
Inc., a Minnesota corporation (the "Lender").

          Royal Grip,  Inc., a Nevada  corporation  ("RG")  Royal Grip  Headwear
Company, a Nevada corporation ("RGHC"), FM Precision Golf Manufacturing Corp., a
Delaware  corporation  ("FMM") and FM  Precision  Golf Sales  Corp.,  a Delaware
corporation  ("FMS")  are now or  hereafter  may be  indebted  to the  Lender on
account of loans or the other  extensions of credit or financial  accommodations
from  the  Lender  to  them,  or to any  other  person  under  the  guaranty  or
endorsement of them.

          Royal Precision,  Inc., a Delaware corporation ("RP") is the guarantor
of all indebtedness  owed to RG, RGHC, FMM and FMS to Lender.  RP, RG, RGHC, FMS
and FMM are collectively referred to as the "Borrower".

          The  Subordinated  Creditor  has made or may make loans or grant other
financial accommodations to the Borrower.

          As a  condition  to  making  any loan or  extension  of  credit to the
Borrower, the Lender has required that the Subordinated Creditor subordinate the
payment of the Subordinated Creditor's loans and other financial  accommodations
to the  payment  of any and all  indebtedness  of the  Borrower  to the  Lender.
Assisting the Borrower in obtaining  credit  accommodations  from the Lender and
subordinating  its interests  pursuant to the terms of this Agreement are in the
Subordinated Creditor's best interest.

          ACCORDINGLY,  in  consideration  of  the  loans  and  other  financial
accommodations  that have been made and may  hereafter be made by the Lender for
the benefit of the Borrower, and for other good and valuable consideration,  the
receipt  and  sufficiency  of which are hereby  acknowledged,  the  Subordinated
Creditor hereby agrees as follows:

          1. Definitions.  As used herein, the following terms have the meanings
set forth below:

          "Borrower  Default"  means a Default or Event of Default as defined in
     any agreement or instrument evidencing,  governing, or issued in connection
     with Lender  Indebtedness,  including,  but not limited to, (i) the Amended
     and Restated Credit and Security  Agreement dated as of October 9, 1998, as
     amended  from time to time by and  between  RG,  RGHC and the Lender as the
     same may hereafter be amended,  supplemented or restated from time to time,
     (ii) the  Credit and  Security  Agreement  dated as of October 9, 1998,  as
     amended  from time to time,  by and between  FMS, FMM and the Lender as the
     same may hereafter be amended,  supplemented or restated from time to time,
     (iii) the Guaranty dated as of October 9, 1998 by RP in favor of Lender, as
     the same may  hereafter be amended,  supplemented  or restated from time to
     time, and (iv) the  Replacement  Guaranty dated as of October 9, 1998 by RP
     in favor of Lender,  as the same may hereafter be amended,  supplemented or
     restated  from  time to time,  or any  default  under or breach of any such
     agreement or instrument.

                                       1
<PAGE>
          "Lender  Indebtedness"  means  each  and  every  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 or may  be  direct  or  indirect,  due or to  become  due,  absolute  or
     contingent,  primary or secondary,  liquidated or  unliquidated,  or joint,
     several  or  joint  and  several,   all  interest  thereon,  all  renewals,
     extensions  and  modifications  thereof  and any  notes  issued in whole or
     partial substitution therefor.

          "Subordinated  Indebtedness"  means  all  obligations  to repay  funds
     borrowed  as  evidenced  by the  Subordinated  Note  as  amended,  renewed,
     substituted or restated from time to time.

          "Subordinated Note" means RP's Revolving  Promissory Note, dated as of
     December 7, 2000, payable to the order of the Subordinated  Creditor in the
     original  principal  amount of  $1,000,000.00,  together with all renewals,
     extensions  and  modifications  thereof  and any  note or notes  issued  in
     substitution therefor.

          2. Subordination.  The payment of all of the Subordinated Indebtedness
is hereby expressly subordinated to the extent and in the manner hereinafter set
forth to the payment in full of the Lender  Indebtedness;  and regardless of any
priority  otherwise  available  to  the  Subordinated  Creditor  by  law  or  by
agreement,  the Lender shall hold a first  security  interest in all  collateral
securing payment of the Lender Indebtedness (the "Collateral"), and any security
interest  claimed  therein  (including  any proceeds  thereof but  excluding the
Option (as defined in the Subordinated  Note) and the proceeds from the exercise
of  the  Option)  by  the  Subordinated  Creditor  shall  be  and  remain  fully
subordinate for all purposes to the security  interest of the Lender therein for
all purposes whatsoever.

          3. Principal  Payments.  Until all of the Lender Indebtedness has been
paid in full, the  Subordinated  Creditor shall not,  without the Lender's prior
written  consent,  demand,  receive or accept  any  principal  payment  from the
Borrower in respect of the Subordinated  Indebtedness,  or exercise any right of
or permit any setoff in respect of the  Subordinated  Indebtedness,  except that
the Subordinated Creditor may accept scheduled payments (but not prepayments and
the  Lender   acknowledges  that  January  30,  2001  is  the  maturity  of  the
Subordinated Note) of principal required to be paid under the Subordinated Note,
so long as (i) no Borrower  Default has occurred and is continuing or will occur
as a result  of or  immediately  following  any such  payment  and (ii) any such
payment does not exceed the amount  equal to the  aggregate  Availability  under
both Credit Agreements, as defined in the Credit Agreements,  minus (x) accounts
payable  more than 30 days past  respective  due date and (y) plus  $250,000.00,
each as determined on the applicable payment date.

          4. Interest Payments.  Without the Lender's prior written consent, the
Subordinated  Creditor shall not demand,  receive or accept any interest payment
from the  Borrower in respect of the  Subordinated  Indebtedness  so long as any
Borrower  Default  exists or if a Borrower  Default will occur as a result of or
immediately following such interest payment.

          5.  Receipt  of  Prohibited  Payments.  If the  Subordinated  Creditor
receives  any payment on the  Subordinated  Indebtedness  that the  Subordinated
Creditor is not entitled to receive under the provisions of this Agreement,  the
Subordinated  Creditor  will hold the amount so received in trust for the Lender

                                       2
<PAGE>
and will  forthwith  turn over such  payment to the Lender in the form  received
(except for the endorsement of the  Subordinated  Creditor where  necessary) for
application to then-existing  Lender Indebtedness  (whether or not due), in such
manner of application as the Lender may deem  appropriate.  If the  Subordinated
Creditor  exercises any right of setoff which the  Subordinated  Creditor is not
permitted to exercise under the provisions of this Agreement,  the  Subordinated
Creditor will promptly pay over to the Lender,  in immediately  available funds,
an amount  equal to the  amount  of the  claims or  obligations  offset.  If the
Subordinated  Creditor  fails  to  make  any  endorsement  required  under  this
Agreement,  the Lender,  or any of its officers or employees or agents on behalf
of the Lender, is hereby irrevocably  appointed as the  attorney-in-fact  (which
appointment is coupled with an interest) for the  Subordinated  Creditor to make
such endorsement in the Subordinated Creditor's name.

          6. Action on  Subordinated  Debt. The  Subordinated  Creditor will not
commence  any action or  proceeding  against the  Borrower to recover all or any
part of the  Subordinated  Indebtedness,  or join with any creditor  (unless the
Lender shall so join) in bringing any proceeding  against the Borrower under any
bankruptcy,   reorganization,   readjustment   of  debt,   arrangement  of  debt
receivership,  liquidation  or  insolvency  law or statute of the federal or any
state government,  or take possession of, sell, or dispose of any Collateral, or
exercise or enforce any right or remedy available to the  Subordinated  Creditor
with respect to any such  Collateral,  unless and until the Lender  Indebtedness
has been paid in full.

          7. Action Concerning Collateral.

               (a)  Notwithstanding  any security interest now held or hereafter
acquired by the Subordinated  Creditor, the Lender may take possession of, sell,
dispose of, and  otherwise  deal with all or any part of the  Collateral  (other
than the  Option and the  proceeds  from the  exercise  of the  Option)  and may
enforce any right or remedy available to it with respect to the Collateral,  all
without notice to or consent of the Subordinated Creditor except as specifically
required by applicable law.

               (b) In  addition,  and without  limiting  the  generality  of the
foregoing, if a Borrower Default has occurred and is continuing and the Borrower
intends to sell any Collateral to an unrelated  third party outside the ordinary
course of business,  the Subordinated Creditor shall, upon the Lender's request,
execute and deliver to such  purchaser  such  instruments  as may  reasonably be
necessary  to  terminate   and  release  any  security   interest  or  lien  the
Subordinated Creditor has in the Collateral to be sold.

               (c) The Lender shall have no duty to preserve, protect, care for,
insure,  take possession of, collect,  dispose of, or otherwise realize upon any
of the Collateral,  and in no event shall the Lender be deemed the  Subordinated
Creditor's  agent with respect to the Collateral.  All proceeds  received by the
Lender with respect to any Collateral may be applied, first, to pay or reimburse
the Lender for all costs and expenses  (including  reasonable  attorneys'  fees)
incurred by the Lender in connection with the collection of such proceeds,  and,
second,  to any indebtedness  secured by the Lender's  security interest in that
Collateral in any order that it may choose.

          8.  Bankruptcy  and  Insolvency.  In the  event  of any  receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,  reorganization
or arrangement  with  creditors,  whether or not pursuant to bankruptcy law, the
sale of all or  substantially  all of the assets of the  Borrower,  dissolution,

                                       3
<PAGE>
liquidation  or any  other  marshalling  of the  assets  or  liabilities  of the
Borrower,  the  Subordinated  Creditor will file all claims,  proofs of claim or
other instruments of similar  character  necessary to enforce the obligations of
the Borrower in respect of the Subordinated  Indebtedness and will hold in trust
for the Lender and promptly pay over to the Lender in the form received  (except
for  the  endorsement  of  the   Subordinated   Creditor  where  necessary)  for
application  to the  then-existing  Lender  Indebtedness,  any and  all  moneys,
dividends or other  assets  received in any such  proceedings  on account of the
Subordinated  Indebtedness,  unless and until the Lender  Indebtedness  has been
paid in full. If the  Subordinated  Creditor shall fail to take any such action,
the Lender, as  attorney-in-fact  for the Subordinated  Creditor,  may take such
action on the Subordinated  Creditor's behalf. The Subordinated  Creditor hereby
irrevocably  appoints the Lender,  or any of its officers or employees on behalf
of the Lender,  as the  attorney-in-fact  for the  Subordinated  Creditor (which
appointment  is  coupled  with an  interest)  with the power but not the duty to
demand, sue for, collect and receive any and all such moneys, dividends or other
assets and give  acquittance  therefor and to file any claim,  proof of claim or
other instrument of similar  character,  to vote claims comprising  Subordinated
Indebtedness  to accept or reject any plan of partial or  complete  liquidation,
reorganization,  arrangement,  composition  or extension  and to take such other
action in the Lender's own name or in the name of the  Subordinated  Creditor as
the Lender may deem necessary or advisable for the enforcement of the agreements
contained herein; and the Subordinated  Creditor will execute and deliver to the
Lender such other and further  powers-of-attorney  or  instruments as the Lender
may request in order to accomplish the foregoing.

          9.  Restrictive  Legend;  Transfer of Subordinated  Indebtedness.  The
Subordinated  Creditor will cause the  Subordinated  Note or any part thereof to
contain a specific statement thereon to the effect that the indebtedness thereby
evidenced is subject to the provisions of this Agreement,  and the  Subordinated
Creditor  will  mark its  books  conspicuously  to  evidence  the  subordination
effected hereby.  Attached hereto is a true and correct copy of the Subordinated
Note  bearing such  legend.  At the request of the Lender,  after and during the
continuance of a Borrower Default, the Subordinated  Creditor shall deposit with
the Lender the Subordinated Note and all of the other notes,  bonds,  debentures
or other  instruments  evidencing the  Subordinated  Indebtedness,  which notes,
bonds,  debentures or other instruments may be held by the Lender so long as any
Lender Indebtedness remains outstanding. The Subordinated Creditor is the lawful
holder of the Subordinated  Note and has not transferred any interest therein to
any other person.

          10.  Continuing  Effect.  This Agreement shall constitute a continuing
agreement of subordination,  and the Lender may, without notice to or consent by
the  Subordinated  Creditor,  modify  any  term of the  Lender  Indebtedness  in
reliance upon this Agreement.  Without limiting the generality of the foregoing,
the  Lender  may,  at any time and from  time to time,  either  before  or after
receipt of any such  notice of  revocation,  without the consent of or notice to
the  Subordinated   Creditor  and  without   incurring   responsibility  to  the
Subordinated  Creditor or impairing or releasing  any of the Lender's  rights or
any of the Subordinated Creditor's obligations hereunder:

               (a) change the  interest  rate or change the amount of payment or
extend the time for payment or renew or otherwise  alter the terms of any Lender
Indebtedness or any instrument evidencing the same in any manner;

                                       4
<PAGE>
               (b) sell,  exchange,  release or otherwise deal with any property
at any time securing payment of the Lender Indebtedness or any part thereof;

               (c)  release  anyone  liable in any  manner  for the  payment  or
collection of the Lender Indebtedness or any part thereof;

               (d) exercise or refrain  from  exercising  any right  against the
Borrower or any other person (including the Subordinated Creditor); and

               (e) apply any sums received by the Lender, by whomsoever paid and
however realized,  to the Lender Indebtedness in such manner as the Lender shall
deem appropriate.

          11. No Commitment.  None of the provisions of this Agreement  shall be
deemed or construed to constitute  or imply any  commitment or obligation on the
part of the Lender to make any  future  loans or other  extensions  of credit or
financial accommodations to the Borrower.

          12. Notice. All notices and other communications hereunder shall be in
writing and shall be (i) personally  delivered,  (ii)  transmitted by registered
mail, postage prepaid, or (iii) transmitted by telecopy,  in each case addressed
to the party to whom notice is being given at its address as set forth below:

          If to the Lender:

          Wells Fargo Business Credit, Inc
          100 West Washington Street, 7th Floor
          MAC S4101-076
          Phoenix, Arizona  85003
          Telecopier: 602-378-6215
          Attention:  Mr. Cliff Moschnik

          If to the Subordinated Creditor:

          c/o Richard P. Johnston, Trustee
          4350 Greens Place
          Wilson, Wyoming 83014
          Telecopier: 307-739-1070

or at such  other  address as may  hereafter  be  designated  in writing by that
party.  All such  notices or other  communications  shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if  delivered  by  mail,  or (iii)  the date of  transmission  if  delivered  by
telecopy.

          13.  Conflict in Agreements.  If the  subordination  provisions of any
instrument evidencing Subordinated  Indebtedness conflict with the terms of this
Agreement, the terms of this Agreement shall govern the relationship between the
Lender and the Subordinated Creditor.

                                       5
<PAGE>
          14. No Waiver.  No waiver  shall be deemed to be made by the Lender or
the  Subordinated  Creditor of any of its rights hereunder unless the same shall
be in writing signed on behalf of the Lender or the  Subordinated  Creditor,  as
the case may be,  and each  such  waiver,  if any,  shall be a waiver  only with
respect to the specific  matter or matters to which the waiver relates and shall
in no way impair the rights of the Lender or the  Subordinated  Creditor  or the
obligations of the Subordinated Creditor to the Lender or the obligations of the
Lender to the Subordinated Creditor in any other respect at any time.

          15. Binding Effect;  Acceptance.  This Agreement shall be binding upon
the parties hereto and their legal  representatives,  successors and assigns and
shall inure to the benefit of each party hereto and its participants, successors
and assigns irrespective of whether this or any similar agreement is executed by
any other Subordinated Creditor of the Borrower.

          16.  Miscellaneous.  The  paragraph  headings  herein are included for
convenience  of reference only and shall not constitute a part of this Agreement
for  any  other  purpose.  This  Agreement  may be  executed  in any  number  of
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one instrument.

          17. Governing Law;  Consent to Jurisdiction and Venue;  Waiver of Jury
Trial.  This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona.  Each party
consents to the personal jurisdiction of the state and federal courts located in
the  State of  Arizona  in  connection  with  any  controversy  related  to this
Agreement,  waives any argument that venue in any such forum is not  convenient,
and agrees that any litigation  initiated by any of them in connection with this
Agreement  shall be venued in either  the  Superior  Court of  Maricopa  County,
Arizona or the United States  District Court,  District of Arizona.  THE PARTIES
WAIVE  ANY  RIGHT TO  TRIAL  BY JURY IN ANY  ACTION  OR  PROCEEDING  BASED ON OR
PERTAINING TO THIS ACKNOWLEDGMENT.

          IN WITNESS  WHEREOF,  each party has executed this Agreement as of the
day and year first above-written.

                                     THE JOHNSTON FAMILY CHARITABLE
                                     REMAINDER UNITRUST NO. 3


Witness: /s/ Jayne A. Johnston       By: /s/ Richard P. Johnston
         ------------------------        --------------------------------------
                                         ______________, as Trustee


                                     WELLS FARGO BUSINESS CREDIT, INC.


                                     By: /s/ Scott O. Schryver - Vice President
                                         --------------------------------------

                                       6
<PAGE>
                           Acknowledgment by Borrower

          The  undersigned,  being the  Borrower  referred  to in the  foregoing
Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all
of the terms and provisions thereof, (iii) agrees to and with the Lender that it
shall make no payment on the  Subordinated  Indebtedness  that the  Subordinated
Creditor would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such  payment will  constitute  a default  under the Lender
Indebtedness,  and (v) agrees to mark its books  conspicuously  to evidence  the
subordination of the Subordinated Indebtedness effected hereby.

                                     ROYAL PRECISION, INC.,
                                     a Delaware corporation

                                     By:  /s/ Thomas A. Schneider
                                          --------------------------------------
                                     Its: President
                                          --------------------------------------


                                     ROYAL GRIP, INC.,
                                     a Nevada corporation

                                     By:  /s/ Thomas A. Schneider
                                          --------------------------------------
                                     Its: President
                                          --------------------------------------


                                     ROYAL GRIP HEADWEAR COMPANY,
                                     a Nevada corporation

                                     By:  /s/ Thomas A. Schneider
                                          --------------------------------------
                                     Its: President
                                          --------------------------------------


                                     FM PRECISION GOLF MANUFACTURING CORP.,
                                     a Delaware corporation

                                     By:  /s/ Thomas A. Schneider
                                          --------------------------------------
                                     Its: President
                                          --------------------------------------


                                     FM PRECISION GOLF SALES CORP.,
                                     a Delaware corporation

                                     By:  /s/ Thomas A. Schneider
                                          --------------------------------------
                                     Its: President
                                          --------------------------------------

                                       7
<PAGE>
                                    EXHIBIT A

             attach copy of Subordinated Note with following legend

THIS  INSTRUMENT  IS  SUBJECT  TO THE  TERMS  OF A  SUBORDINATION  AGREEMENT  BY
________________________  IN FAVOR OF WELLS FARGO BUSINESS CREDIT, INC. DATED AS
OF ______________________.

                                       8
</TEXT>
</DOCUMENT>
