SECOND AMENDMENT TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment") dated as of
May 9, 1997 by and among EASY GARDENER ACQUISITION CORP., a Delaware
corporation, (the "Borrower") U.S. HOME & GARDEN INC., a Delaware corporation,
("Guarantor"), THE PROVIDENT BANK, an Ohio banking corporation ("Agent") and
LASALLE NATIONAL BANK, ANTARES LEVERAGED CAPITAL CORP. and THE PROVIDENT BANK
("Lenders").
PRELIMINARY STATEMENT
WHEREAS, Borrower, Agent and Lenders have entered into a Credit Agreement
dated as of August 9, 1996, and by a First Amendment to Credit Agreement dated
as of April 3, 1997 (the "Credit Agreement"); and
WHEREAS, Borrower has requested Agent and Lenders to provide additional
loans to fund the purchase by Borrower of the assets of Plasti-Chain; and
WHEREAS, Borrower, Agent and Lenders now wish to amend the Credit Agreement
in accordance with the terms and provisions hereof;
NOW, THEREFORE, the parties hereto agree to supplement and amend the Credit
Agreement upon such terms and conditions as follows:
1. Capitalized Terms. All capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement unless the context hereof
requires otherwise. Any definitions as capitalized terms set forth herein shall
be deemed incorporated into the Credit Agreement as amended by this Second
Amendment.
2. Definitions; Exhibits; and Schedules; (a) The following definitions
contained in Section 1.2 of the Credit Agreement are hereby amended in their
entirety to read as follows:
"Borrowing Base" means the sum of (A) Fifty Percent (50%) of the cost
or market value, whichever is lower, of Eligible Inventory, not to exceed
Seven Million and 00/100 Dollars ($7,000,000.00), and (B) Eighty Percent
(80%) of the outstanding amount of Eligible Accounts (excepting those
Eligible Accounts which have a due date more than ninety (90) days but not
more than one hundred fifty (150) days past the invoice date, with respect
to which the advance rate shall be Fifty Percent (50%), not to exceed Four
Million Dollars ($4,000,000.00)), less deductions for co-op advertising
liability, customer rebate liabilities and the other deductions specified
on the Borrowing Base Report.
"Credit Commitment" means, in the context of more than one Lender
hereunder, the maximum amount to be loaned by such Lender to Borrower as
set forth on Schedule 1 hereto or as such Credit Commitment may be amended
from
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time to time or as such is adjusted from time to time amended pursuant to
Section hereof.
"Term Loans" means the Term Loan I, the Term Loan II and the Bridge
Loan.
"Term Notes" means the Term Notes I, the Term Notes II and the Bridge
Notes.
(b) Section 1.2 of the Credit Agreement is hereby amended to add the
following definitions to read in their entirety as follows:
"Bridge Loans" shall have the meaning set forth in Section 2.5A.
"Bridge Notes" shall have the meaning set forth in Section 2.5A.
"Make-Whole Amount" - means an amount equal to (i) the sum of the
present values of the then remaining scheduled payments of principal and
interest discounted at the Make-Whole Discount Rate, (ii) minus the sum of
the outstanding principal amount and the amount of interest accrued on such
principal since the immediately preceding scheduled payment date; provided,
however, that in no event shall the Make-Whole Amount be less than zero.
"Make-Whole Discount Rate" means, at any time, with respect to the
principal amount of the Loan being prepaid, the per annum percentage rate
(rounded to the nearest basis point) equal to (i) the arithmetic mean of
the average annual yields to maturity for actively traded marketable United
States Treasury fixed interest rate securities, adjusted to a rate equal to
that reported for U.S. Government--Treasury Constant Maturity (as such term
is calculated and defined in the then applicable Statistical Release H.15
published by the Federal Reserve Board) for the two calendar weeks ending
on the Saturday next preceding the date of prepayment most nearly equal to
the weighted average life to maturity of the outstanding remaining payments
of principal.
"Plasti-Chain Acquisition" means the acquisition by Borrower of
substantially all the properties and assets of Plastic Molded Concepts,
Inc., a Wisconsin corporation ("PMC") related to a product line of PMC
commonly known as the Plastic-Chain product line, substantially on the
terms and conditions of an Asset Purchase Agreement dated as of May 9, 1997
among Guarantor, Borrower and PMC.
(c) The Credit Agreement is hereby amended to add a new Exhibit R to read
in its entirety as Exhibit R to this Second Amendment.
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(d) Schedule 4.9 of the Credit Agreement is hereby amended to add the
Intellectual Property Matters listed on Schedule 4.9A to this Second Amendment.
(e) Schedule 4.20 of the Credit Agreement is hereby amended to add the
jurisdictions listed on Schedule 4.20A to this Second Amendment.
3. Bridge Loan Commitment and Terms. Article 2 of the Credit Agreement is
hereby amended to add a new Section 2.5A to be inserted immediately preceding
Section 2.6 to read in its entirety as follows:
Section 2.5A Bridge Loan.
(a) Commitment. Each Lender, severally and not jointly, subject to the
terms and conditions of this Agreement, hereby agrees to make loans to Borrower
in an amount equal to its Participation Percentage of the bridge loans of Three
Million Eight Hundred Thousand and 00/100 Dollars ($3,800,000.00) ("Bridge
Loan").
(b) Bridge Notes. The absolute and unconditional obligation of the Borrower
to repay the principal of the Bridge Loans and the interest thereon shall be
evidenced by promissory notes executed by the Borrower to each Lender in
substantially the form of Exhibit R. In the event of an assignment under Section
10.17(a), Borrower shall issue new notes to reflect the new Credit Commitments
of the assigning Lender and the assignee thereof. The Bridge Notes shall include
the following terms:
(i) Bridge Loan Maturity. Each Bridge Note shall be dated as of the
Second Amendment Closing Date and shall mature and be due and payable in
full on November 5, 1997.
(ii) Interest Rate. Each Bridge Note shall bear interest (computed on
the basis of the actual number of days elapsed over a 360-day year) on the
daily outstanding principal balance thereunder at a rate per annum equal to
Twelve percent (12%) per annum. No part of the Bridge Loan shall be
eligible to become a Libor Rate Loan pursuant to Section 2.6.
(iii) Interest Payment Dates. Interest on the Bridge Notes shall be
payable monthly in arrears on the last Business Day of each month beginning
May 31, 1997, for the account of Lenders in accordance with their
respective Pro Rata Shares, and on the date a Bridge Loan is due (whether
by maturity, acceleration or otherwise).
4. Prepayment of Bridge Loan. Section 2.9(b) of the Credit Agreement is
hereby amended to add a new sentence at the end thereof to read as follows:
"The Borrower shall have the right to prepay the principal of Bridge Loan
in full at any time and in part from time to time upon notice to Lenders at
least three (3) Business Days prior to the specified prepayment date and
upon payment to
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Lenders of the Make Whole Amount with respect to the Bridge Loan principal
being prepaid."
5. Application of Funds. Section 2.11(f) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(f) Sixth, to the payment of any outstanding principal on the Bridge
Loan, and then, if such payment is received in connection with a prepayment
in full of the Term Loan I and a termination of the Revolving Credit
Commitment, the payment of any outstanding principal of the Term Loan II
Notes; and"
6. Use of Proceeds. Section 2.13 of the Credit Agreement is hereby
amended to add a new sentence at the end thereof to read as follows:
"The Borrower represents, warrants and covenants to the Agent and each
Lender that all proceeds of the Bridge Loan shall be used by the Borrower
solely for the purpose of financing all or a portion of the transactions
contemplated by the Plasti-Chain Acquisition."
7. Additional Security for Loans. Section 3.3 of the Credit Agreement is
hereby amended to delete the word "and" at the end of clause (c), to replace the
"." at the end of clause (d) with "; and", to add a new clause (e) to read as
follows:
(e) each of the following documents with respect to the Plasti-Chain
Acquisition:
(i) a Collateral Assignment of Purchase Agreement;
(ii) a Collateral Assignment of Management and Manufacturing
Contracts;
(iii) UCC-1 Financing statements for each of the jurisdictions
set forth on Schedule 4.20A of the Second Amendment; and
8. EBITDA. Section 6.8 of the Credit Agreement is hereby amended in its
entirety to read as follows:
Section 6.8 EBITDA. Borrower shall not permit EBITDA for the Reference
Period ending on each Computation Date set forth below to be less than the
dollar amount set forth below opposite such date.
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COMPUTATION DATE AMOUNT
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December 31, 1996 $1,400,000
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March 31, 1997 6,700,000
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June 30, 1997 11,500,000
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September 30, 1997 12,000,000
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December 31, 1997 12,000,000
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March 31, 1998 13,500,000
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June 30, 1998 14,250,000
September 30, 1998
December 31, 1998
March 31, 1999
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June 30, 1999 16,000,000
September 30, 1999
December 31, 1999
March 31, 2000
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June 30, 2000, and each Computation 17,000,000
Date thereafter
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9. Fixed Charge Coverage. For purposes of calculating compliance with
Section 6.9 of the Credit Agreement, for Reference Periods including any period
during which the Bridge Loan is outstanding, the calculation of Fixed Charges
shall be reduced by the outstanding balance of the Bridge Loan at such time.
10. Reaffirmation of Covenants, Warranties and Representations. Borrower
hereby agrees and covenants that all representations and warranties in the
Credit Agreement, including without limitation all of those warranties and
representations set forth in Article 4 are true and accurate as of the date
hereof. Borrower further reaffirms all covenants in the Credit Agreement, and
reaffirm each of the affirmative covenants set forth in Article 5 and negative
covenants set forth in Article 6 thereof, as if fully set forth herein, except
to the extent modified by this Second Amendment.
11. Conditions Precedent to Closing of Second Amendment. On or prior to the
closing of the Second Amendment (hereinafter the "Second Amendment Closing
Date"), each of the following conditions precedent shall have been satisfied:
(a) Proof of Corporate Authority. Agent shall have received from
Borrower and Guarantor copies, certified by a duly authorized officer to be
true and complete on and as of the Second Amendment Closing Date, of
records of all action taken by Borrower to authorize (i) the execution and
delivery of this Second Amendment and all
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other certificates, documents and instruments to which it is or is to
become a party as contemplated or required by this Second Amendment, and
(ii) its performance of all of its obligations under each of such
documents.
(b) Documents. Each of the documents to be executed and delivered at
the Second Amendment Closing and all other certificates, documents and
instruments to be executed in connection herewith shall have been duly and
properly authorized, executed and delivered by Borrower and shall be in
full force and effect on and as of the Second Amendment Closing Date.
(c) Legality of Transactions. No change in applicable law shall have
occurred as a consequence of which it shall have become and continue to be
unlawful (i) for Agent and each Lender to perform any of its agreements or
obligations under any of the Loan Documents, or (ii) for Borrower to
perform any of its agreements or obligations under any of the Loan
Documents.
(d) Performance, Etc. Except as set forth herein, Borrower shall have
duly and properly performed, complied with and observed each of its
covenants, agreements and obligations contained in each of the Loan
Documents. Except as set forth herein, no event shall have occurred on or
prior to the Second Amendment Closing Date, and no condition shall exist on
the Second Amendment Closing Date, which constitutes a Default or an Event
of Default.
(e) Proceedings and Documents. All corporate, governmental and other
proceedings in connection with the transactions contemplated on the Second
Amendment Closing Date, including execution and delivery of a Bridge Note
to each Lender in the amount of its respective Credit Commitments, each of
the other Loan Documents and all instruments and documents incidental
thereto shall be in form and substance reasonably satisfactory to Agent.
(f) Changes; None Adverse. Since the date of the most recent balance
sheets of Borrower delivered to Provident, no changes shall have occurred
in the assets, liabilities, financial condition, business, operations or
prospects of Borrower which, individually or in the aggregate, are material
to Borrower, and Provident shall have completed such review of the status
of all current and pending legal issues as Agent shall deem necessary or
appropriate.
(g) Closing Fees. Agent shall have receive, for the benefit of Lenders
in accordance with their Participation Percentages, their portion of the
closing fee of $84,000 with respect to the Bridge Loan.
(h) Plasti-Chain Acquisition. Borrower shall have closed, or be
prepared to close contemporaneously with the closing of this Second
Amendment, the Plasti-Chain Acquisition on terms and conditions reasonably
satisfactory to Agent.
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12. Miscellaneous. (a) Borrower shall reimburse Agent for all fees and
disbursements of legal counsel to Agent which shall have been incurred by Agent
in connection with the preparation, negotiation, review, execution and delivery
of this Second Amendment and the handling of any other matters incidental
hereto.
(b) All of the terms, conditions and provisions of the Agreement not herein
modified shall remain in full force and effect. In the event a term, condition
or provision of the Agreement conflicts with a term, condition or provision of
this Second Amendment, the latter shall govern.
(c) This Second Amendment shall be governed by and shall be construed and
interpreted in accordance with the laws of the State of Ohio.
(d) This Second Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(e) This Second Amendment may be executed in several counterparts, each of
which shall constitute an original, but all which together shall constitute one
and the same agreement.
[Remainder of page intentionally left blank. Signature page follows.]
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IN WITNESS WHEREOF, this Second Amendment has been duly executed and
delivered by or on behalf of each of the parties as of the day and in the year
first above written.
SIGNED IN THE PRESENCE OF: EASY GARDENER ACQUISITION CORP.,
Borrower
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------- ----------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------- Title: VP and Secretary
U.S. HOME & GARDEN INC., Guarantor
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------- ----------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------- Title: C.O.O.
THE PROVIDENT BANK, Agent
/s/ ▇▇▇ ▇. Herald By: /s ▇▇▇▇ ▇▇▇▇▇
-------------------------- ----------------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇
-------------------------- Title: VP
THE PROVIDENT BANK, Lender
/s/ ▇▇▇ ▇. Herald By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------- ----------------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇
-------------------------- Title: VP
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LASALLE NATIONAL BANK, Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Commercial Lending Officer
ANTARES LEVERAGED CAPITAL
CORP., Lender
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
SCHEDULE 1
Lender Credit Commitment
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The Provident Bank Revolving Credit Commitment:
Percentage: 37.254902% $5,960,784.32
Term Loan I Commitment:
$8,568,627.46
Term Loan II Commitment:
$838,235.30
Bridge Loan Commitment:
$1,415,686.28
LaSalle National Bank Revolving Credit Commitment:
Percentage: 29.411765% $4,705,882.40
Term Loan I Commitment:
$6,764,705.95
Term Loan II Commitment:
$661,764.71
Bridge Loan Commitment:
$1,117,647.07
Antares Leveraged Capital Corp. Revolving Credit Commitment:
Percentage: 33.333333% $5,333,333.28
Term Loan I Commitment:
$7,666,666.59
Term Loan II Commitment:
$749,999.99
Bridge Loan Commitment:
$1,266,666.65