WAIVER AND AMENDMENT NO. 3 TO
LOAN AND SECURITY AGREEMENT
This
Waiver and Amendment No. 3 to Loan and Security Agreement (this
“ Amendment ”) dated as of October 20, 2005, by
and among LaSalle Business Credit, LLC, for itself, as a lender,
and as Agent (“ Agent ”) for the lenders
(“ Lenders ”) from time to time party to the
Loan Agreement (as defined below), the Lenders party hereto, Easy
Gardener Products, Ltd., a Texas limited Partnership (“
Borrower ”), EYAS International, Inc., a Texas
corporation (“ EYAS ”), E G Product
Management, L.L.C., a Texas limited liability company (“
E G Product ”), E G, L.L.C., a Nevada
limited liability company (“ E G ”),
Weatherly Consumer Products Group, Inc., a Delaware corporation
(“ WCP Group ”), Weatherly Consumer Products,
Inc., a Delaware corporation (“ WCP ”), and NBU
Group, LLC, a Texas limited liability company (“ NBU
”; Borrower, EYAS, E G Product, E G, WCP Group, WCP
and NBU are collectively referred to herein as the “
Credit Parties ” and each individually as a “
Credit Party ”).
Preliminary Statements
Agent,
Lenders and Credit Parties entered into that certain Loan and
Security Agreement dated as of April 27, 2004 (as amended, restated
or otherwise modified from time to time, the “ Loan
Agreement ”). Capitalized terms used but not defined in
this Amendment shall have the meanings ascribed to such terms in
the Loan Agreement.
The
Credit Parties have requested that Agent and Lenders waive the
Events of Default that exist under the Loan Agreement as a result
of Borrower’s failure to comply with subsection 9(c) with
respect to the timely delivery of its audited financial statements,
and filing of 10-K report for the fiscal year ending June 30, 2005
(the “ Fiscal Year 2005 Reporting Default ”)
subsection 14(b) of the Loan Agreement for the 12 month period
ending June 30, 2005 (the “ June 2005 EBITDA
Default ”) and subsection 14(c) of the Loan Agreement for
the 12 month period ending June 30, 2005 (the “ June 2005
Leverage Default ”; the Fiscal Year 2005 Reporting
Default, the June 2005 EBITDA Default and the June 2005 Leverage
Default are collectively, the “ Existing Defaults
”).
The
Credit Parties have further requested that Agent and Lenders amend
the Loan Agreement in certain respects, as set forth
below.
NOW,
THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
1.
Waiver . Subject to the satisfaction of the conditions set
forth herein, Agent and Lenders hereby waive the Existing Defaults.
The foregoing waiver shall not constitute a waiver of any other
Events of Default that may exist, or a waiver of any future Events
of Default that may occur (including, without limitation, any Event
of Default arising
from any other breach of
subsection 14(b) or 14(c) of the Loan Agreement as of any period
ending after June 30, 2005).
2.
Amendments to Loan Agreement . Subject to the satisfaction
of the conditions set forth herein, the Loan Agreement hereby is
amended as follows:
(a)
The term “EBITDA” set forth in Section 1 of the Loan
Agreement is amended and restated in its entirety as
follows:
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”
EBITDA ” shall mean, with respect to any period,
Borrower’s and its Subsidiaries’ net income after taxes
for such period (excluding any after-tax gains or losses on the
sale of assets (other than the sale of Inventory in the ordinary
course of business) and excluding other after-tax extraordinary
gains or non-cash losses) plus interest expense, income tax
expense, depreciation and amortization for such period, plus
or minus any other non-cash charges or gains which have been
subtracted or added in calculating net income after taxes for such
period, all on a consolidated basis; provided , that
(A) for any calculation of EBITDA pursuant to this Agreement,
Permitted Transaction Costs shall be added to EBITDA to the extent
such Permitted Transaction Costs are accrued by Borrower;
(B) solely for the period ended June 30, 2005, the Credit
Parties’ “EBITDA” shall be increased by the
amount of the Fred Meyer Loss recognized during such period;
(C) solely for the period ended September 30, 2005, the Credit
Parties’ “EBITDA” shall be decreased by the
amount of the Fred Meyer Gain recognized during such period; and
(D) for any calculation of EBITDA pursuant to this Agreement,
installments of the “Performance Fee” that are accrued
by the Borrower in accordance with the terms and provisions of
Section 6 of the Third Amendment to Term Loan and Security
Agreement and Waiver with respect to the CapitalSource Agreements
(the “ CapitalSource Third Amendment ”) shall be
added to EBITDA. “ Permitted Transaction Costs ”
shall mean the $50,000 amendment fee charged by Agent in connection
with the execution and delivery of the Waiver and Amendment, No. 3
to Loan and Security Agreement (the “Third Amendment”),
legal fees and expenses incurred by the Borrower in connection with
the negotiation and documentation of the CapitalSource Third
Amendment and the consummation of a Repayment Event (as that term
is defined in the CapitalSource Third Amendment) and any other
reasonable expenses payable by the Borrower related to consultants,
investment bankers or appraisers engaged on behalf of the Borrower,
CapitalSource or the CapitalSource’s counsel, as the case may
be; provided , however , that such consultants,
investment bankers or appraisers have been requested by the
CapitalSource and the lenders under the CapitalSource Agreements;
and provided , however , further that the fees
and expenses covered by this definition of “Permitted
Transaction Costs” shall not exceed $500,000 in the
aggregate. “ Fred Meyer Loss ” shall mean, for
any period, the amount of the loss incurred during such period in
connection with the reversal of sales made to Fred Meyer and the
treatment thereof as deferred income, provided ,
that
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such loss shall not exceed
$309,000. “ Fred Meyer Gain ” shall mean, for
any period, the amount of the gain incurred during such period in
connection with the recognition of sales made to Fred Meyer that
were previously treated as deferred income, provided that
such gain shall not exceed $309,000.
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(b)
Subsection 4(a) of the Loan Agreement is amended and restated in
its entirety as follows:
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(a)
Interest Rate .
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Subject
to the terms and conditions set forth below, effective
October 1, 2005, the Loans shall bear interest at the per
annum rate of interest set forth in subsection (i) ,
(ii) or (iii) below:
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(i)
one percent (1.0%) per annum in excess of the Prime Rate in effect
from time to time ( provided , however , that such
per annum rate shall be reduced to one-half of one percent (0.50%)
per annum in excess of the Prime Rate in effect from time to time
if Borrower and its Subsidiaries achieve a ratio of EBITDA to Fixed
Charges in excess of 1.0 for the twelve month period ending on the
last day of a fiscal quarter ending on or after December 31, 2005,
as evidenced by the financial statements to be delivered to Agent
for the twelve month period ending on such date in accordance with
subsection 9(c) of this Agreement, from and following the date on
which Agent receives such financial statements), payable on the
last Business Day of each month in arrears. Said rate of interest
shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the effective date of each
such change in the Prime Rate.
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(ii)
three hundred seventy-five (375) basis points in excess of the
LIBOR Rate for the applicable Interest Period, such rate to remain
fixed for such Interest Period ( provided , however ,
that such rate shall be reduced to three hundred twenty-five (325)
basis points in excess of the LIBOR Rate for any new Interest
Periods, such rate to remain fixed for such Interest Periods, if
Borrower and its Subsidiaries achieve a ratio of EBITDA to Fixed
Charges in excess of 1.0 for the twelve month period ending on the
last day of a fiscal quarter ending on or after December 31, 2005,
as evidenced by the financial statements to be delivered to Agent
for the twelve month period ending on such date in accordance with
subsection 9(c) of this Agreement, from and following the date on
which Agent receives such financial statements). “
Interest Period ” shall mean any continuous period of
(1) one, two (2) or three (3) months, as selected from time to time
by Borrower by irrevocable notice (in writing, by telecopy, telex,
electronic mail or cable) given to Agent not less than three (3)
Business Days prior to the first day of each respective Interest
Period; provided that: (A) each such period occurring after
such initial period shall commence on the day on which the
immediately preceding period expires; (B) the final Interest
Period shall be such that its expiration occurs on
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or before the end of the Original
Term or any Renewal Term; and (C) if for any reason Borrower
shall fail to timely select a period, then such Loans shall
continue as, or revert to, Prime Rate Loans. Interest shall be
payable on the last Business Day of each month in arrears and on
the last Business Day of such Interest Period.
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(iii)
Upon the occurrence of an Event of Default and during the
continuance thereof, the Loans shall bear interest at the rate of
two percent (2.0%) per annum in excess of the interest rate
otherwise payable thereon, which interest shall be payable on
demand. All interest shall be calculated on the basis of a 360-day
year.
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(c)
Section 10 of the Loan Agreement is amended and restated in its
entirety, as follows:
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10.
TERMINATION; AUTOMATIC RENEWAL .
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THIS
AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL SEPTEMBER
30, 2006 (THE “ORIGINAL TERM”) AND SHALL AUTOMATICALLY
RENEW ITSELF FROM YEAR TO YEAR THEREAFTER (EACH SUCH ONE-YEAR
RENEWAL BEING REFERRED TO HEREIN AS A “RENEWAL TERM”)
UNLESS (A) THE DUE DATE OF THE LIABILITIES IS ACCELERATED
PURSUANT TO SECTION 16 HEREOF; (B) BORROWER ELECTS TO
TERMINATE THIS AGREEMENT AT THE END OF THE ORIGINAL TERM OR AT THE
END OF ANY RENEWAL TERM BY GIVING THE OTHER PARTIES HERETO WRITTEN
NOTICE OF SUCH ELECTION AT LEAST FIFTEEN (15) DAYS PRIOR TO THE END
OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM, IN WHICH
CASE BORROWER SH
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