EXHIBIT 10.10
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement is entered into as of January
8, 2001, by and between Spectrum Laboratories, Inc., a Delaware corporation
("Borrower") and City National Bank, a national banking association ("CNB").
RECITALS
A. Borrower and CNB are parties to that certain Credit Agreement dated
as of December 22, 1998, as amended by that certain First Amendment to Credit
Agreement dated as of July 14, 1999 and that certain Second Amendment to Credit
Agreement dated as of July I, 2000 (hereinafter the "Credit Agreement").
B. Borrower and CNB desire to supplement and amend the Credit Agreement
as hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment without definition
shall have the meanings set forth in the Credit Agreement.
2. AMENDMENTS. The Credit Agreement is amended as follows:
2.1 The definitions of "Debt", "SLI Preferred Corp. Preferred Stock"
and "Total Senior Liabilities" in Section 1 are amended in their entirety to
provide as follows:
"DEBT" means, at any date, the aggregate amount of, without
duplication, (a) all obligations of Borrower or any Subsidiary for
borrowed money; (b) all obligations of Borrower or any Subsidiary
evidenced by bonds, debentures, notes or other similar instruments; (c)
all obligations of Borrower or any Subsidiary to pay the deferred
purchase price of property or services; (d) all capitalized lease
obligations of Borrower or any Subsidiary; (e) all obligations or
liabilities of others secured by a lien on any asset of Borrower or any
Subsidiary, whether or not such obligation or liability is assumed; (f)
all obligations guaranteed by Borrower or any Subsidiary; (g) all
obligations of Borrower or any Subsidiary, direct or indirect, for
letters of credit; (h) the SLI Acquisition Corp. Preferred Stock (until
it is no longer considered Debt as provided in the definition of such
term), and (i) any other obligations or liabilities which are required
by generally accepted accounting principles to be shown as debt on the
balance sheet of Borrower or any Subsidiary.
"SLI PREFERRED CORP. PREFERRED STOCK" means the convertible
preferred stock issued to former Cellco Incorporated shareholders by
SLI Acquisition Corp. to complete the purchase transaction of Cellco
Incorporated. The preferred stock is classified as a minority interest
according to GAAP, howcver, it shall be included as a Debt of Borrower
for the purposes of this Agreement until such date that either (i) it
is converted to common stock of Borrower. as verified by and subject to
evidence satisfactory to CNB, at which time it will be classified as
common stock of Borrower, or (ii) the Put Option is exercised by the
preferred shareholders, at which time it will continue to be classified
as a Debt of Borrower for purposes of this Agreement. "Put Option"
means the option held by holders of the SLI Acquisition Corp. preferred
stock to sell their preferred stock to SLI Acquisition Corp. for a sum
of $1,755,000 at any time from October 1, 2000 to September 30, 2001.
"TOTAL SENIOR LIABILITIES" means, as of any date of
determination, the amount of all obligations that should be reflected
as a liability on a consolidated balance sheet of Borrower and the
Subsidiaries prepared in accordance with GAAP, plus the SLI Acquisition
Corp. Preferred Stock (until it is no longer Debt as provided in the
definition of such term), minus Subordinated Debt.
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2.2 The following new definitions are added to Section 1:
"QUICK ASSETS" means the sum of cash, plus cash equivalents,
plus accounts receivable, plus securities classified as short-term
marketable securities according to generally accepted accounting
principles consistently applied, as such items appear on Borrower's
consolidated balance sheet, determined in accordance with generally
accepted accounting principles consistently applied.
"TREASURY RATE" means the yield to maturity two (2) Business
Days prior to March 1, 2002 of the U.S. Treasury Bond or Note (as
quoted in the Bloomberg Financial Markets, or if such source is not
available or discontinued, then such other source or publication
available to CNB which most nearly approximates the data reported
therein) the due date of which is closest in time to (either on or
immediately after) the maturity date of the Equipment Acquisition
Loans.
2.3 Section 2.3 is stricken and replaced with the following:
"2.3 OPTIONAL PREPAYMENTS. Borrower may prepay any Loans
provided that on each prepayment, Borrower will pay the accrued
interest on the prepaid principal, to the date of such prepayment, plus
with respect to Term Loan A, any amounts due under CNB's Yield
Maintenance Agreement, and with respect to any other Loans, any
prepayment penalties set forth in the promissory notes evidencing such
Loans. All prepayments will be applied to principal installments in the
inverse order of their maturities."
2.4 A new Section 2.8 is added to provide as follows:
"2.8 EQUIPMENT ACQUISITION LOANS. CNB agrees to make loans
("Equipment Acquisition Loans") to Borrower from time to time up to,
but not including, December 1, 2001, up to the amount of Nine Hundred
Thousand Dollars ($900,000.00) (the "Equipment Acquisition
Commitment"), the proceeds of which will be used to pay up to one
hundred percent (100%) of any of the following: (a) the purchase price
of machinery and equipment, including sales taxes, but excluding
delivery and set-up charges, (b) leasehold improvements at Borrower's
place of business located at 00000 Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxxxxx,
Xxxxxxxxxx 00000, and (c) the purchase price of certain patents owned
Monsanto. The Equipment Acquisition Loans will be evidenced by a
promissory note ("Multiple Disbursement Equipment Acquisition Note") in
the form attached hereto as Exhibit "D."
2.8.1 INTEREST ON EQUIPMENT ACQUISITION LOANS. The
Equipment Acquisition Loans will bear interest from disbursement until
due (whether at stated maturity, by acceleration or otherwise) as
follows:
(a) INTEREST ONLY PERIOD: During the period
from the date of disbursement of the initial Equipment Acquisition Loan
up to but excluding March 1, 2002, at a fluctuating rate equal to the
Prime Rate plus one-quarter of one percent (0.25%) per annum.
(b) AMORTIZATION PERIOD. During the period
from March 1, 2002 until payment in full, at a rate equal to, at the
election of Borrower, either (i) a fixed rate equal to the Treasury
Rate plus three and one-quarter percent (3.25%) per annum ("Fixed Rate
Option"), or (ii) a fluctuating rate equal to the Prime Rate plus
one-quarter of one percent (0.25%) per annum ("Prime Rate Option").
Borrower shall notify CNB in writing no later than two (2) Business
Days prior to March 1, 2002 of Borrower's election of the Fixed Rate
Option or the Prime Rate Option, which election shall be irrevocable
once made. If Borrower fails to notify
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CNB of such election, the Equipment Acquisition Loan shall bear
interest at the Prime Rate Option.
(c) PAYMENT OF INTEREST. Interest will be
payable monthly in arrears on the first day of each month, for the
previous month, starting on the first such date following disbursement
and on the date the Equipment Acquisition Loans are paid in full.
2.8.3 PROCEDURE FOR EQUIPMENT ACQUISITION LOANS. Each
Equipment Acquisition Loan shall be made against delivery by Borrower
to CNB of (a) if the Equipment Acquisition Loan is for the purchase of
equipment or machinery, an appropriate purchase invoice evidencing the
purchase of items of machinery and/or equipment, (b) if the Equipment
Acquisition Loan is to finance the leasehold improvements, a schedule
of completed leasehold Improvements, (c) if the Equipment Acquisition
is to finance the purchase of the patents from Monsanto, a copy of the
purchase agreement between Borrower and Monsanto, which agreement shall
be acceptable to CNB, (d) such further documents as will be requested
by CNB to perfect a security interest of first priority in favor of CNB
in the equipment, machinery and patents, as the case may be, being
purchased, and (e) Borrower's payment to CNB of CNB's fees and costs
incurred in perfecting CNB's security interest in the patents,
including without limitation any attorney's fees incurred by CNB and
any filing fees to be paid to the United States Patent and Trademark
Office.
2.8.4 PAYMENT OF EQUIPMENT ACQUISITION LOANS. The
outstanding principal amount of the Equipment Acquisition Loans as of
March 1, 2002 will be repaid in forty-eight (48) substantially equal,
successive monthly installments, payable on the first day of each month
commencing April 1, 2002."
2.5 Section 5.2 is stricken and replaced with the following:
"5.2 FINANCIAL STATEMENTS. Borrower will furnish to CNB on a
continuing basis:
5.2.1 Within forty-five (45) days after the end of
each quarterly accounting period of each fiscal year, a copy of the 10Q
report filed by Borrower with the Securities and Exchange Commission
("SEC"), including therein a financial statement for Borrower and the
Subsidiaries consisting of not less than a balance sheet, income
statement, reconciliation of net worth and statement of cash flows,
with notes thereto, prepared in accordance with GAAP, which financial
statement may be internally prepared;
5.2.2 Within ninety (90) days after the end of each
fiscal year, a copy of the 10K report filed by Borrower with the SEC,
including therein a financial statement for Borrower and the
Subsidiaries consisting of not less than a balance sheet, income
statement, reconciliation of net worth and statement of cash flows,
with notes thereto, audited by an independent certified public
accountant acceptable to CNB, and certified by such accountant to have
been prepared in accordance with GAAP, and accompanied by Borrower's
certification as to whether any event has occurred which constitutes an
Event of Default or Potential Event of Default, and if so, stating the
facts with respect thereto;
5.2.3 Within forty-five (45) days after the end of
each fiscal quarter, a listing and aging of all account receivable and
accounts payable;
5.2.4 Within ten (10) days after filing, a copy of
the Federal Income Return of Borrower and each Guarantor; and
5.2.5 Such additional information, reports and/or
statements as CNB may, from time to time, reasonably request."
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2.6 Section 5.3 is stricken and replaced with the following:
"5.3 FINANCIAL STATEMENTS OF GUARANTOR. Not later than ninety
(90) days after Borrower's fiscal year end of each year, Borrower will
provide CNB with (a) the financial statement, in form and substance
satisfactory to CNB, of each Guarantor, certified by such Guarantor to
be trust and correct, and (b) brokerage and bank statements for Xxx X.
Xxxxxxxx showing all Liquid Assets.
2.7 Section 5.10 is stricken and replaced with the following:
"5.10 FINANCIAL TESTS. Borrower shall maintain:
5.10.1 Tangible Net Worth plus Subordinated Debt of
not less than (a) $2,350,000.00 through December 30, 2001, and (b)
$3,100,000.00 commencing December 31, 2001 and thereafter;
5.10.2 A ratio of Total Senior Liabilities to
Tangible Net Worth plus Subordinated Debt of not more than (a) 2.5 to I
through December 30, 2000, and (b) 2.0 to 1 commencing December 31,
2001 and thereafter;
5.10.3 A ratio of Cash Flow from Operations to Debt
Service to Debt Service of not less than 1.5 to 1 during the twelve
months preceding the date of determination;
5.10.4 Net Income of not less than $400,000.00 for
each fiscal year of Borrower; and
5.10.5 A ratio of Quick Assets to Current Liabilities
of not less than (a) 0.75 to 1 through December 30, 2001, and (b) 1.0
to 1 commencing December 31, 2001 and thereafter."
2.8 Section 7.1.9 is deleted in its entirety.
3. EXISTING AGREEMENT. Except as expressly amended herein, the Credit Agreement
shall remain in full force and effect, and in all other respects is affirmed.
4. CONDITIONS PRECEDENT. This Amendment shall become effective upon the
fulfillment of all of the following conditions to CNB's satisfaction:
4.1 CNB shall have received this Amendment duly executed by Borrower;
4.2 CNB shall have received a separate Continuing Guaranty executed by
each of the Guarantors, in form and substance and in an amount acceptable to
CNB; and
4.3 All other documents and legal matters in connection with the
transactions described in the Credit Agreement will be satisfactory in form and
substance to CNB.
5. COUNTERPARTS. This Amendment may be executed in any number of counterparts,
and all such counterparts taken together shall be deemed to constitute one and
the same instrument.
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6. GOVERNING LAW. This Amendment and the rights and obligations of the parties
hereto shall be construed in accordance with, and governed by the laws of the
State of California.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and
year first above written.
"Borrower" SPECTRUM LABORATORIES, INC., a
Delaware corporation
By: /s/ Xxx X. Xxxxxxxx
-------------------------------------
Xxx Xxxxxxxx, Chief Executive Officer
"CNB" CITY NATIONAL BANK, a national
banking association
By /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxx, Senior Vice President
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EXHIBIT D
MULTIPLE DISBURSEMENT
EQUIPMENT ACQUISITION NOTE
636814/34348
$900,000.00 Xxxxx Xxxxxx Xxxxxx XXX #00 Xxxxxx
Xxxxxx, Xxxxxxxxxx
January 4, 2001
FOR VALUE RECEIVED, the undersigned, SPECTRUM LABORATORIES, INC., a
Delaware corporation ("Borrower"), promises to pay to the order of City National
Bank, a national banking association ("CNB"), at its office in this city, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Nine Hundred Thousand Dollars ($900,000.00), or so much
thereof as may be advanced and be outstanding, plus interest on the unpaid
principal balance, computed on the basis of a 360-day year, actual days elapsed,
at the rates, times and in accordance with the terms set forth in that certain
Credit Agreement between Borrower and CNB, dated as of December 22, 1998, as it
may be amended from time to time (the "Credit Agreement"). Capitalized terms not
defined herein shall have the meanings given them in the Credit Agreement.
Advances hereunder, up to the total principal sum stated above, may be
made by CNB at the oral or written request of Borrower up to (but excluding)
December 1, 2001, in accordance with the terms of the Credit Agreement and
provided at the time of any advance no Event of Default or Potential Event of
Default exists under the terms and conditions of the Credit Agreement. Each
request for an advance hereunder shall be noted in the books and records of CNB.
Advances hereunder shall be conclusively presumed to have been made to or for
the benefit of Borrower when made as noted in such books and records.
The outstanding principal balance on this Note as of March 1, 2002
("Balance") shall be payable in forty-eight (48) consecutive monthly
installments, each equal to one-forty-eighth (1/48th) of the Balance, commencing
April 1, 2002 and continuing first day of each month up to and including March
1, 2006, on which day the balance of principal and interest remaining unpaid
shall be become due and payable in full.
If payment on this Note becomes due and payable on a non-business day,
the maturity thereof shall be extended to the next business day and, with
respect to payments of principal or interest thereon shall be payable during
such extension at the then applicable rate. Upon the occurrence of one or more
of the Events of Default specified in the Credit Agreement, all amounts
remaining unpaid on this Note may become or be declared to be immediately
payable as provided in the Credit Agreement, without presentment, demand or
notice of dishonor, all of which are expressly waived, Borrower agrees to pay
all costs of collection of this Note and reasonable attorneys' fees (including
attorneys' fees allocable to CNB's in-house counsel) in connection therewith,
irrespective of whether suit is brought thereon,
This is the Multiple Disbursement Equipment Acquisition Note referred
to in the Credit Agreement and is entitled to the benefits thereof.
Upon CNB's written notice to Borrower of the occurrence of an Event of
Default, the outstanding principal balance (and interest, to the extent
permitted by law) shall bear additional interest from the date of such notice at
the rate of five percent (5.0%) per annum higher than the interest rate as
determined and computed above, and continuing thereafter until the Event of
Default is cured.
This Note shall be governed by the laws of the State of California. If
this Note is executed by more than one Borrower, all obligations are joint and
several.
"Borrower" SPECTRUM LABORATORIES, INC., a
Delaware corporation
EXHIBIT PLEASE DO NOT SIGN
By:
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Xxx X. Xxxxxxxx, Chief Executive Officer
