SECOND AMENDMENT TO AMENDED AND
RESTATED CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of November __, 1997, is made by and
between THE LAMAUR CORPORATION, a Delaware corporation (the "Borrower"), and
NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").
Recitals
The Borrower and the Lender have entered into an Amended and
Restated Credit and Security Agreement dated as of May 16, 1997, as amended by
the First Amendment to Amended and Restated Credit Agreement dated as of August
13, 1997 (as amended, the "Credit Agreement"). Capitalized terms used in these
recitals have the meanings given to them in the Credit Agreement unless
otherwise specified.
The Borrower is in default of various obligations under the
Credit Agreement as set forth in a letter from the Borrower to the Lender dated
November 6, 1997.
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. In addition, Section 1.1 of
the Credit Agreement is amended by adding or amending the following definitions:
"'Borrowing Base' means, at any time and subject to change
from time to time in the Lender's sole discretion, the lesser of
(a) the Commitment, or
(b) the sum of
(i) 80% of Eligible Accounts, plus
(ii) the lesser of (A) the sum of (1) 60% of
Eligible Finished Goods Inventory, plus (2)
50% of Eligible Raw Materials Inventory,
plus (3) the lesser of (I) 35% of Eligible
Carton Inventory or (II) $200,000, or (B)
$7,500,000, plus
(iii) the lesser of (A) 100% of the (i) the
purchase price of any United States Treasury
Securities with an initial maturity date of
not greater than 90 days held from time to
time in the Investment Account and (ii) the
cash held in the Investment Account , or (B)
$6,000,000, less
(iv) $1,000,000."
"First GE Funds" means the funds in the form of 7 day GE
commercial paper in the principal amount of $600,000, with a maturity
date of November 17, 1997, maintained by the Borrower at Bank of
America.
"'Revolving Loan Floating Rate' means an annual rate equal to
the sum of the Base Rate plus one and one-half percent (1.50%), which
Revolving Loan Floating Rate shall change when and as the Base Rate
Changes."
"'Second Amendment' means that certain Second Amendment to
Amended and Restated Credit and Security Agreement, dated as of
November __, 1997, by and between the Borrower and Lender."
"'Second Amendment Effective Date' means the date on which all
of the items listed in paragraph 7 of the Second Amendment are
satisfied in full."
"Second GE Funds" means the funds in the form of 14 day GE
commercial paper in the principal amount of $2,585,000 with a maturity
date of November 19, 1997, maintained by the Borrower at Bank of
America.
"'Term Loan Floating Rate' means an annual rate equal to the
sum of the Base Rate plus one and three-quarters percent (1.75%) which
Term Loan Floating Rate shall change when and as the Base Rate
Changes."
2. Additional Events of Default. Section 8.1 of the Credit
Agreement is amended by adding the following subsections:
(r) The Borrower shall fail to transfer to the
Investment Account the First GE Funds by wire transfer posted
to the Investment Account by the end of the day on November
18, 1997.
(s) The Borrower shall fail to transfer to the
Investment Account the Second GE Funds by wire transfer posted
to the Investment Account by the end of the day on November
20, 1997.
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. Transfer of the First GE Funds and the Second GE Funds. The
Borrower agrees to transfer the First GE Funds to the Investment Account by wire
transfer on or before November 18, 1997, and the Borrower agrees to transfer the
Second GE Funds to the Investment Account on or before November 20, 1997.
5. Acknowledgment of Implementation of Default Rate. The
Borrower hereby acknowledges that (i) it was in default of certain provisions of
the Credit Agreement (the Defaults as defined in Section 5 of the Second
Amendment) and (ii) as a result of the Defaults, the Lender may, at its
discretion, implement the Default Rate as of July 1, 1997. The Lender hereby
elects to implement the Default Rate for the period from July 1, 1997 through
the Second Amendment Effective Date (the "Default Period"). The incremental
difference between (i) the interest that would have been charged had the Default
Rate been in effect during the Default Period and (ii) the interest that was
charged during the Default Period, shall be due and payable to the Lender on the
Second Amendment Effective Date.
6. Waiver of Defaults. The Borrower is in default of the
following provisions of the Credit Agreement (collectively, the "Defaults"):
--------------------------- ------------- ----------------- ------------------
Section/Covenant Date Required Actual
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ss. 6.13 Minimum Book Net
Worth Plus Subordinated
Debt 7/31/97 $28,120,000 $26,994,000
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--------------------------- ------------- ----------------- ------------------
8/31/97 $28,490,000 $24,954,000
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--------------------------- ------------- ----------------- ------------------
9/30/97 $29,050,000 $22,702,000
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--------------------------- ------------- ----------------- ------------------
ss. 6.14 Maximum Leverage
Ratio 7/31/97 1.30 to 1.00 1.46 to 1.00
--------------------------- ------------- ----------------- ------------------
--------------------------- ------------- ----------------- ------------------
8/31/97 1.30 to 1.00 1.71 to 1.00
--------------------------- ------------- ----------------- ------------------
--------------------------- ------------- ----------------- ------------------
9/30/97 1.30 to 1.00 1.88 to 1.00
--------------------------- ------------- ----------------- ------------------
--------------------------- ------------- ----------------- ------------------
ss. 6.15 Minimum Net Income 7/31/97 ($1,900,000) ($3,411,000)
--------------------------- ------------- ----------------- ------------------
--------------------------- ------------- ----------------- ------------------
8/31/97 ($1,510,000) ($5,420,000)
--------------------------- ------------- ----------------- ------------------
--------------------------- ------------- ----------------- ------------------
9/30/97 ($900,000) ($7,632,000)
--------------------------- ------------- ----------------- ------------------
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Defaults. If the Borrower fails to transfer either the
First GE Funds or the Second GE Funds to the Investment Account pursuant to
paragraph 5 above, the waiver set forth in this paragraph 6 will be null and
void, and the Lender shall have all of its rights, and persevere all of its
remedies, as if the waiver set forth in this paragraph 6 had never been granted.
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.
7. Conditions Precedent. This Amendment, and the waiver set
forth in Paragraph 6 hereof, 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) 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 dated as of May 16, 1997
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 dated as of May
16, 1997, 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 and all other
documents, agreements and certificates on behalf of the Borrower.
8. 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 to perform all of its obligations hereunder,
and this Amendment has 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.
(b) The execution, delivery and performance by the Borrower of
this Amendment 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 by-laws 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.
9. 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.
10. No Other Waiver. Except as set forth in Paragraph 6
hereof, the execution of this Amendment shall not be deemed to be a waiver of
any Default or Event of Default 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.
11. Release. The Borrower 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.
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 6 hereof].
13. Miscellaneous. This Amendment 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
THE LAMAUR CORPORATION. NORWEST BUSINESS CREDIT, INC.
By _________________________________ By _________________________________
Xxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxxxxx
Its Vice President Its Vice President
