Exhibit 10.21
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement is entered into as of July
14, 1999, 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 (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 following new definitions are added to Section 1 of
the Credit Agreement:
"CD COLLATERAL" means the time deposits owned by Xxx
Xxxxxxxx and/or Borrower which are maintained at CNB and
pledged as collateral securing the Obligations.
"CD RATE" means the interest rate from time to time in
effect on the CD Collateral; provided, however, if there
is more than one rate, the CD Rate shall be the highest
of such rates.
"NET INCOME" shall be determined on a consolidated basis
for Borrower and the Subsidiaries and shall mean net
income after taxes determined in accordance with GAAP.
2.2 The definition of "Cash/Securities Collateral" is
deleted from Section 1 of the Credit Agreement, and the
term CD Collateral will be substituted for the term
Cash/Securities Collateral everywhere else that the term
Cash/Securities Collateral appears in the Credit
Agreement.
2.3 The definitions of "Cash Flow from Operations" and
"Tangible Net Worth" are amended in their entirety to
provide as follows:
"CASH FLOW FROM OPERATIONS" will be determined on a
consolidated basis for Borrower and the Subsidiaries and
means the sum of (a) net income after taxes and before
extraordinary items in accordance with GAAP earned over
the twelve month period ending on the date of
determination, PLUS (b) amortization of intangible
assets, PLUS (c) interest expense, PLUS (d) depreciation
expensed during the twelve month period ending on the
date of determination, PLUS the amount of "compensation
expense related to stock options" expensed during the
twelve-month period ending on the date of determination,
which expense is reflected as an increase in Borrower's
stockholders' equity, as shown on Borrower's financial
statements delivered to CNB pursuant to the terms of
this Agreement.
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"TANGIBLE NET WORTH" means the total of all assets
appearing on a balance sheet prepared in accordance with
GAAP for Borrower and the Subsidiaries on a consolidated
basis, MINUS (a) all intangible assets, including,
without limitation, unamortized debt discount,
Affiliate, employee and officer receivables or advances,
goodwill, research and development costs, patents,
trademarks, the excess of purchase price over underlying
values of acquired companies, any covenants not to
compete, deferred charges (other than current prepaid
expenses and deferred taxes), copyrights, franchises,
art works and appraisal surplus; MINUS (b) all
obligations which are required by GAAP to be reflected
as a liability on the consolidated balance sheet of
Borrower and the Subsidiaries; MINUS (c) the amount, if
any, at which shares of stock of a non-wholly owned
Subsidiary appear on the asset side of Borrower's
consolidated balance sheet, as determined in accordance
with GAAP; MINUS (d) minority interests; MINUS (e)
deferred income and reserves not otherwise reflected as
a liability on the consolidated balance sheet of
Borrower and the Subsidiaries; PLUS (f) CD Collateral.
2.4 The first sentence of Section 2.1.1 is stricken and
replaced with the following:
"Effective on the later to occur of the date of the
First Amendment, or the date on which Xxx X. Xxxxxxxx
opens at CNB one or more time deposits to evidence CD
Collateral in an amount not less than $843,000.00, the
Term Loan A will bear interest until due (whether at
stated maturity, by acceleration or otherwise) at a rate
equal to (a) the CD Rate plus one percent (1.0%) per
annum on that portion of the outstanding principal
amount of the Term Loan A equal to the principal amount
of the CD Collateral, and (b) nine and 14/100 percent
(9.14%) per annum on that portion of the outstanding
principal amount of the Term Loan A in excess of the
principal amount of the CD Collateral, subject to the
provisions in CNB's Yield Maintenance Agreement, a copy
of which is attached as Exhibit "C", the terms of which
shall only apply to a prepayment on the principal amount
in excess of the CD Collateral."
2.5 Section 2.2 is stricken and replaced with the following:
2.2 THE TERM LOAN B. CNB agrees to make, upon Borrower's
request, a term loan ("Term Loan B") to Borrower in the
principal amount of Two Hundred Seventy Five Thousand
Four Hundred Sixty Five and 44/100 Dollars
($275,465.44). The Term Loan B will be evidenced by a
promissory note ("Term Note") in the form attached
hereto as Exhibit "B". or as superseded in any amendment
to this Agreement.
2.2.1 INTEREST ON TERM LOAN B. The Term Loan B
will bear interest from disbursement until due (whether
at stated maturity, by acceleration or otherwise) at a
fluctuating rate equal to the Prime Rate plus
one-quarter of one percent (0.25%) per annum. Interest
will be payable monthly in arrears on the first day of
each month, starting on August 1, 1999, and on the date
the Term Loan B is paid in full.
2.2.2 PAYMENT OF TERM LOAN B. The principal amount
of the Term Loan B will be repaid by Borrower to CNB in
twelve (12)
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consecutive monthly installments, consisting of eleven
(11) installments each in the amount of $8,530.00, and a
final installment in the amount of $181,635.44,
commencing on August 1, 1999, and continuing on the
first day of each month up to and including July 1,
2000, on which date all principal and accrued interest
will be due and payable in full.
2.6 Section 2.7 is stricken and replaced with the following:
"2.7 CD COLLATERAL. Borrower agrees that the aggregate
principal amount of the CD Collateral shall at no time
be less than $943,000.00, of which $843,000.00 shall be
pledged by Xxx X. Xxxxxxxx; provided, however, CNB
agrees to release (a) $250,000.00 of the principal
amount of the CD Collateral pledged by Xxx X. Xxxxxxxx
("Xxxxxxxx XX Collateral") if Borrower is in compliance
with Section 5.10 of this Agreement as determined by CNB
from Borrower's financial statements for its fiscal
quarter ending July 3, 1999 delivered to CNB pursuant to
the terms of this Agreement and no Event of Default
exists hereunder at the time of such release, and (b) an
additional $250,000.00 of the principal amount of the
Xxxxxxxx XX Collateral if Borrower is in compliance with
Section 5.10 of this Agreement as determined by CNB from
Borrower's financial statements for its fiscal quarter
ending October 3, 1999 delivered to CNB pursuant to the
terms of this Agreement and no Event of Default exists
hereunder at the time of such release. If concurrently
with CNB's release of the Xxxxxxxx XX Collateral as
provided in this Section 2.7, the principal amount of
the released CD Collateral is used to prepay the
principal amount of Term Loan A, the prepayment charge
set forth in CNB's Yield Maintenance Agreement shall not
apply to such prepaid principal amount."
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
plus SLI Acquisition Corp. Preferred Stock of not less
than $2,500,000.00;
5.10.2 A ratio of Total Senior Liabilities to
Tangible Net Worth plus Subordinated Debt of not more
than 2.5 to 1 at all times;
5.10.3 A ratio of Cash Flow from Operations to
Debt Service of not less than 1.25 to 1 during the
twelve months preceding the date of determination;
5.10.4 Net Income of not less than $400,000.00 for
Borrower's' fiscal year ending; and
5.10.5 Net Income of not less than $1.00 for each
of Borrower's fiscal quarters."
2.8 Section 7.1.9 is stricken and replaced with the
following:
"7.1.9 Xxx X. Xxxxxxxx fails to maintain verifiable
Liquid Assets including CD Collateral of at least
$1,500,000.00."
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2.9 Exhibit "B" currently attached to the Credit Agreement
is superseded and replaced with Exhibit "B" attached to
this Amendment.
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 and acknowledged by the Guarantors;
4.2 CNB shall have received a new Term Loan B in the form
attached as Exhibit "B" to this Amendment, duly executed
by Borrower;
4.3 Xxx X. Xxxxxxxx has opened one or more time deposits at
CNB to evidence CD Collateral in an amount not less than
$843,000.00 and CNB shall have received a pledge
agreement, duly executed by Xxx X. Xxxxxxxx, pursuant to
which Xxx X. Xxxxxxxx will pledge to CNB as collateral
for the Obligations CD Collateral in the foregoing
amount; and
4.4 All other documents and legal matters in connection with
the transactions described in the 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.
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, Chief Executive Officer
"CNB" City National Bank, a national
banking association
By: /s/ Xxxxxxx Xxxx
----------------------------------------
Xxxxxxx Xxxx, Vice President
[Consent of Guarantors continued on next page]
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[Consent of Guarantors continued from prior page]
CONSENT OF GUARANTORS:
The undersigned have previously guaranteed the indebtedness of
SPECTRUM LABORATORIES, INC. owed to CNB. The undersigned confirm that their
respective guaranties and the security given in connection therewith, if any,
shall continue in full force and effect and that each such guaranty shall be a
separate and distinct obligation and apply to the indebtedness arising from the
Credit Agreement as amended herein, subject to the overall limitation as to the
amount guaranteed.
/s/ Xxx X. Xxxxxxxx
- -----------------------------
Xxx X. Xxxxxxxx
Spectrum Europe B.V., a Hydro-med Products, Inc., a
Netherlands company Texas Corporation
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxx X. Xxxxxxxx
----------------------------- --------------------------------
Its: CEO Its: CEO
----------------------------- --------------------------------
SLI Acquisition Corp., a Spectrum Molecular Separations, Inc., a
Delaware corporation Delaware corporation
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxx X. Xxxxxxxx
----------------------------- --------------------------------
Its: CEO Its: CEO
----------------------------- --------------------------------
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TERM NOTE B
(ANY INTEREST RATE)
$275,465.44 Irvine, California
July 14, 1999
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 0
Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000 the principal amount of TWO HUNDRED
SEVENTY FIVE THOUSAND FOUR HUNDRED SIXTY FIVE AND 44/100 DOLLARS ($275,465.44),
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 of that certain Credit Agreement between Borrower and CNB, dated as of
December 22, 1998, as may be amended from time to time (the "Credit Agreement").
Principal is payable in twelve (12) consecutive monthly installments, consisting
of eleven (11) installments each in the amount of $8,530.00, and a final
installment in the amount of $181,635.44. commencing August 1, 1999, and
continuing on the first day of each month up to and including July 1, 2000, on
which day the balance of principal and interest thereon unpaid shall become due
and payable. Capitalized terms not defined herein will 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 Term 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 B referred to in the Credit Agreement and is
entitled to the benefits thereof, and supersedes and replaces in its entirety
that certain Term Note B dated December 22, 1998 in the original principal sum
of $326,645.44 executed by Borrower in favor of CNB.
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
By: /s/ Xxx X. Xxxxxxxx
----------------------------------------
Xxx X. Xxxxxxxx, Chief Executive Officer
