EXHIBIT 10.14
CITY NATIONAL BANK
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This Second Amendment to Amended and Restated Credit Agreement is
entered into as of December 14, 2004, 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 Amended and Restated
Credit Agreement, dated as of December 27, 2002, as amended by that certain
First Amendment to Amended and Restated Credit Agreement dated as of June 22,
2004 (the Amended and Restated Credit Agreement, as herein amended, 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 A new definition is added to the Credit Agreement as follows:
"TERM LOAN COMMITMENT" is $6,000,000.00."
2.2 Section 2.3 of the Credit Agreement is stricken and replaced
with the following:
"2.3 TERM LOAN. Upon the conditions to the effectiveness of
this Amendment being met, CNB agrees to make, upon Borrower's
request, a term loan ("Term Loan") to Borrower in the amount
of the Term Loan Commitment. The Term Loan will be evidenced
by a promissory note in the form attached hereto as Exhibit
A."
1
"2.3.1 INTEREST ON TERM LOAN. The Term Loan will bear interest
on the unpaid principal amount thereof at a fluctuating annual
rate equal to the Prime Rate of CNB plus one quarter of one
percent (1/4%). Interest on the Term Loan will be payable
monthly on the first day of each month, commencing on February
1, 2005, and on the date the Term Loan is paid in full."
"2.3.2 Payment of TERM LOAN. The principal amount of the Term
Loan will be repaid by Borrower to CNB as follows:
On the first day of each month commencing February 1, 2005, to
and including January 1, 2007: $85,000.00;
On the first day of each month commencing February 1, 2007, to
and including January 1, 2008: $100,000.00;
On the first day of each month commencing February 1, 2008, to
and including January 1, 2009: $110,000.00;
On the first day of each month commencing February 1, 2009, to
and including January 1, 2010: $120,000.00;
All unpaid principal and interest will be due and payable
sixty (60) months after the funding of the Term Loan, or on
the Termination Date, whichever first occurs."
"2.3.3 USE OF PROCEEDS. Borrower will use the proceeds of the
Term Loan solely for repayment in full of loan # 00004 and
loan # 34348 owed by Borrower to CNB, and for acquisition of
leasehold improvements, equipment and to increase working
capital."
2.3 Section 2.8 (Guarantees) is stricken and replaced with the
following:
2.8 "Guaranties. Xxx X. Xxxxxxxx, an unmarried man, (if more than
one, each a "Guarantor" and collectively, "Guarantors") will
guarantee full repayment of Borrower's Obligations to CNB. Xxx
X. Xxxxxxxx will execute and deliver to CNB his Continuing
Guaranty in the form attached hereto as Exhibit "B"."
2
2.4 A New Section 2.9 is added as follows:
"2.9 COMPENSATING BALANCES. At all times until the later of
the Termination Date or payment in full of all Borrower's
Obligations, Borrower will maintain "Net Free Balances" (as
defined below) with CNB in an amount equal to One Million
Dollars ($1,000,000.00). "Net Free Balances" are the aggregate
collected balances in non-interest bearing unencumbered
accounts, less such reserves as federal regulations require
CNB to maintain against the account(s) and any assessments on
such deposits, including FDIC insurance. Satisfaction of the
balance requirement will be determined monthly by CNB through
Borrower's monthly statement of account analysis. Borrower
authorizes CNB to deduct from Borrower's demand deposit
account at the end of any month in which such balances are not
maintained, a fee in lieu of balances equal to (a) the amount
of any deficiency between the balances required by this
Section and the balances maintained by Borrower during such
month, times (b) a rate per annum (calculated on the basis of
a 360-day year for the actual number of days elapsed during
such month) equal to the average Prime Rate in effect during
such month, plus one quarter of one percent.
2.5 Section 5.10 (Financial Tests) 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 $5,000,000.00, plus $400,000.00 for each full fiscal year
which has elapsed since the fiscal year ending December 31,
2004;
"5.10.2A ratio of Total Senior Liabilities to Tangible Net
Worth plus Subordinated Debt of not more than 2.0 to 1;
"5.10.3 A ratio of Cash Flow from Operations to Debt Service
of not less than 1.3 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 2.0 to 1."
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.
3
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 guarantying repayment of
all Obligations of Borrower to CNB; and
4.3 CNB shall have received a loan documentation fee equal to
$2500.00
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.
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 X. Xxxxxxxx, CEO/Chairman/Secretary
"COB" CITY NATIONAL BANK,
a national banking association
By: /s/ Xxxxxxxxx Xxxxxxxx
---------------------------------------
Xxxxxxxxx Xxxxxxxx, Vice President
4
EXHIBIT A
TERM NOTE
$6,000,000.00 Irvine, California
December 14, 2004
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 located at Irvine,
California, the principal sum of Six Million DOLLARS ($6,000,000.00), plus
interest on the unpaid principal balance, from the date of its disbursement at a
rate computed on the basis of a 360-day year, actual days elapsed, at the rates,
times and in accordance with the terms of that certain Amended and Restated
Credit Agreement between Borrower and CNB, dated as of December 27, 2002, as it
may be amended from time to time (the "Credit Agreement"). Principal is payable
as set forth in the Credit Agreement. Capitalized terms not defined herein shall
have the meanings given them in the Credit Agreement.
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 Term 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%) per annum higher than the interest rate as
determined and computed above, and continuing thereafter until the Event of
Default is cured.
This shall be governed by the laws of the State of California.
"BORROWER" SPECTRUM LABORATORIES, INC.,
a Delaware corporation
By: /s/ Xxx X. Xxxxxxxx
---------------------------------------
XXX X. XXXXXXXX, CEO/Chairman/Secretary
EXHIBIT B
CONTINUING GUARANTY
For valuable consideration, the undersigned, Xxx X. Xxxxxxxx
("Guarantor"), unconditionally guarantees and promises to pay City National
BANK, a national banking association ("CNB"), or order, on demand, in lawful
money of the United States, any and all indebtedness of Spectrum Laboratories,
INC., a Delaware corporation ("Borrower") to CNB. The word "indebtedness" is
used herein in its most comprehensive sense and includes debts, obligations and
liabilities of Borrower to CNB currently existing or now or hereafter made,
incurred or created, whether voluntary or involuntary and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether Borrower may be liable individually or
jointly with others, or whether recovery upon such indebtedness may be or become
barred by any statute of limitations or otherwise unenforceable.
The liability of Guarantor shall not exceed at any one time an amount
equal to the sum of THREE MILLION Five HUNDRED THOUSAND DOLLARS ($3,500,000.00),
as adjusted below, for principal, plus all interest thereon and costs and
expenses incurred in enforcing or collecting this Guaranty or the Indebtedness.
In any event, CNB may permit the Indebtedness to exceed Guarantor's liability
under this Guaranty.
ADJUSTMENT TO GUARANTY AMOUNT:
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2005, Guarantor's liability under this Guaranty shall be
reduced to Three Million Dollars ($3,000,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2006, Guarantor's liability under this Guaranty shall be
reduced to TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2005, Guarantor's liability under this Guaranty shall be
reduced to Three Million Dollars ($3,000,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2006, Guarantor's liability under this Guaranty shall be
reduced to Two Million Five Hundred THOUSAND DOLLARS ($2,500,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2007, Guarantor's liability under this Guaranty shall be
reduced to TWO MILLION DOLLARS ($2,000,000.00); AND
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2008, Guarantor's liability under this Guaranty shall be
reduced to ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2009, Guarantor's liability under this Guaranty shall be
reduced to ONE MILLION DOLLARS ($1,000,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2010, Guarantor's liability under this Guaranty shall be
reduced to Five Hundred Thousand Dollars ($500,000.00); and
Provided no Event of Default or uncured Potential Event of Default
exists on December 31, 2011, Guarantor's liability under this Guaranty shall be
reduced to ZERO.
1
This is a continuing guaranty relating to any Indebtedness, including
but not limited to that arising under successive transactions which shall
continue the Indebtedness or create new Indebtedness after satisfaction, payment
or reduction of previous Indebtedness. The amount of Guarantor's liability
hereunder and under any other agreement now or at any time hereafter in force
between Guarantor and CNB, including any other guaranty executed by Guarantor
relating to any Indebtedness, shall be cumulative and not alternative. This
Guaranty shall not apply to any new Indebtedness created after actual receipt by
CNB of written notice from Guarantor revoking this Guaranty as to future
transactions. Any payment by Guarantor shall not reduce Guarantor's maximum
obligation hereunder, unless written notice to that effect has been actually
received by CNB at or prior to the time of such payment. This is a continuing
guaranty and Guarantor agrees that it shall remain in full force until and
unless Guarantor delivers to CNB written notice that it has been revoked as to
credit granted or Indebtedness incurred subsequent to the effective time of
revocation as herein provided. Delivery of such notice shall not affect any of
Guarantor's obligations hereunder with respect to Indebtedness created or
extended prior to the effective date of such revocation nor shall it affect any
of the obligations of any other guarantor for the credit granted to or
Indebtedness incurred by Borrower.
The obligations hereunder are independent of the obligations of
Borrower, and a separate action or actions may be brought and prosecuted against
Guarantor whether action is brought against Borrower or whether Borrower is
joined in any such action or actions; and Guarantor waives the benefit of any
statute of limitations affecting Guarantor's liability hereunder or the
enforcement thereof.
Either before or after revocation hereof, Guarantor authorizes CNB,
without notice or demand and without affecting Guarantor's liability hereunder,
from time to time, to (a) renew, compromise, extend, accelerate or otherwise
change any of the terms of the Indebtedness or any part thereof, including
changing the rate of interest thereon or the time for payment thereof; (b) take
and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, waive and release any such security; (c) apply such security
and direct the order or maimer of sale or other disposition thereof as CNB in
its discretion may determine; (d) apply payments received from Borrower or
Guarantor, or any of them, to the Indebtedness of such order as CNB may
determine in its sole discretion; and (e) release or substitute any Person
liable on the Indebtedness, any other guarantor of the Indebtedness, or any
other Person providing support for the Indebtedness to CNB, this Guaranty, or
any other guaranty. As used in this Guaranty, "Person" means any individual or
entity.
Guarantor waives any right to require CNB to (a) proceed against
Borrower, Guarantor or any other guarantor; (b) proceed against or exhaust any
security or other support for the Indebtedness granted by Borrower, Guarantor,
or any other guarantor or Person; or (c) pursue any other remedy in CNB's power
whatsoever. Guarantor waives any defense arising by reason of (i) any disability
or other defense of Borrower; (ii) the cessation from any cause whatsoever of
the liability of Borrower for the Indebtedness for any reason other than payment
in full and final satisfaction; or (iii) the non-perfection of any security or
support for the Indebtedness, this Guaranty, or any other guaranty of the
Indebtedness. Guarantor shall have no right of subrogation to and waives any
right to enforce any remedy which CNB now has or may hereafter have against
Borrower, and waives any benefit of, any right to participate in, and any right
to direct the application of any security for the Indebtedness, this Guaranty or
any other guaranty of the Indebtedness, now or hereafter held by CNB, whether
any of the foregoing rights arise in equity, at law or by contract. Without
limiting the generality of the foregoing, Guarantor specifically waives all
rights and defenses arising out of an election of remedies by the creditor, even
though that election of remedies, such as non-judicial foreclosure with respect
to security for a guaranteed obligation, has destroyed Guarantor's rights of
subrogation and reimbursement against the principal by the operation of Section
580d of CALIFORNIA CODE OF CIVIL PROCEDURE or otherwise. For purposes of the
waiver just given, the "creditor" referred to therein is CNB, and the
"principal" is the Borrower. Guarantor waives all presentments, demands for
performance, notices of nonperformance, or other defaults, protests, notices of
protest, notices of dishonor, and notices of acceptance of this Guaranty and of
the existence, creation, or incurring of new or additional Indebtedness.
Guarantor assumes the responsibility for being and keeping itself informed of
the financial condition of Borrower and of all other circumstances bearing upon
the risk of nonpayment of the Indebtedness which diligent inquiry would reveal,
and agrees that CNB shall have no duty to advise Guarantor of information known
to CNB regarding such condition or circumstances.
2
Without limiting any waiver of rights of subrogation contained herein,
any indebtedness of Borrower now or hereafter held by Guarantor is hereby
subordinated to the Indebtedness; and such indebtedness of Borrower to
Guarantor, if CNB so requests, shall be collected, enforced and received by
Guarantor as trustee for CNB and be paid over to CNB on account of the
Indebtedness but without reducing or affecting in any maimer the liability of
Guarantor under the other provisions of this Guaranty. CNB shall have rights of
setoff against, and bankers' liens upon all monies, securities and other
properties of Guarantor to the extend provided by law.
This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any Indebtedness by Borrower or any
other guarantor is avoided as a preference, or on any other grounds provided by
law, or must otherwise be returned by CNB as a result of an order for relief
being entered with respect to Borrower or any other guarantor under the UNITED
STATES BANKRUPTCY CODE, or as a result of Borrower's or any other guarantor's
assignment for the benefit of creditors.
Guarantor has entered into this Guaranty with the understanding that
CNB may rely upon it to the exclusion of any other guaranties. CNB has not, nor
has Borrower represented that there are or may be other guarantors. Nothing in
this Guaranty, however, shall bind CNB to seek other guarantors, separate and
apart from the undersigned. Guarantor understands that CNB may already have, or
concurrently herewith may have obtained or hereafter may obtain other guarantors
(one or more, several or joint) of the Indebtedness. Such guarantors,
heretofore, herewith, or hereafter obtained, shall in no way affect Guarantor's
complete liability hereunder for the full amount of the Indebtedness. Nothing
herein shall require CNB to xxx all of the guarantors severally or together or
to xxx more than one or to prorate the above liability among the guarantors or
any of them. Guarantor agrees that CNB may, in its sole and uncontrolled
discretion, xxx any one or more of the guarantors for all of the Indebtedness;
and within its sole and uncontrolled discretion CNB may take judgment against
any one of the guarantors for all of the Indebtedness, plus interest, costs and
attorneys' fees, or, within its sole discretion, CNB may prorate such judgment
between or among one or more of the guarantors.
Guarantor agrees to pay reasonable attorneys' fees and all other costs
and expenses which may be incurred by CNB (or allocable to CNB's in-house
counsel) in the enforcement of this Guaranty, or the collection of any
Indebtedness of Borrower to CNB, irrespective of whether suit is filed, or in
the renewal, extension or restructure of any Indebtedness, irrespective of
whether such renewal, extension or restructure is consummated.
When there is more than one Borrower named herein, or when this
Guaranty is executed by more than one Guarantor, the word "Borrower" and the
word "Guarantor," respectively, shall mean all and any one or more of them and
each promise and obligation set forth herein shall be joint and several.
This Guaranty shall benefit CNB, its successors and assigns, and shall
bind Guarantor's successors and assigns. This Guaranty is assignable by CNB with
respect to all or any portion of the Indebtedness and obligations guaranteed
hereunder, and when so assigned Guarantor shall be liable to the assignees under
this Guaranty without in any maimer affecting Guarantor's liability hereunder
with respect to any Indebtedness or obligations retained by CNB.
If any term, provision, covenant or condition of this Guaranty is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of California and venue and jurisdiction with respect hereto
shall be with any court of competent jurisdiction located in the county in the
State of California where the Indebtedness is payable.
Any notice to CNB required hereunder shall not be effective against CNB
unless it is given in writing, and actually received by CNB, to the attention of
"Manager" at each address where the Indebtedness is payable, with a copy to:
City National Bank, 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 902
10-5021, Attention: General Counsel.
This Guaranty is intended by Guarantor and CNB as the final expression
of Guarantor's obligations and liabilities to CNB described herein and is
intended as a complete statement of their agreement concerning the subject
matter hereof. This Guaranty may be amended only by a writing signed by
Guarantor and agreed to by CNB.
This Continuing Guaranty is executed by Guarantor as of this l4~ day of
December, 2004.
/s/ Xxx X. Xxxxxxxx
-------------------
Xxx X. Xxxxxxxx
