EXHIBIT 10.13
CREDIT AGREEMENT
This Amended and Restated Credit Agreement (the "Agreement"), dated as
of December 26, 2002, is between CITY NATIONAL BANK ("CNB") and SPECTRUM
LABORATORIES, INC., a Delaware corporation ("Borrower"), and supersedes and
replaces in its entirety that certain Credit Agreement dated as of December 22,
1998 between Borrower and CNB.
1. DEFINITIONS. As used in this Agreement, these terms have the following
meanings:
"ACCOUNT" or "ACCOUNTS" mean any right to payment for goods sold or
leased or for services rendered which is not evidenced by an instrument or
chattel paper, whether or not it has been earned by performance.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under common control with, Borrower, and includes any employee
stock ownership plan of Borrower or an Affiliate. "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
"BUSINESS DAY" means a day that CNB's Head Office is open and conducts
a substantial portion of its business.
"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.
"CODE" means the California Uniform Commercial Code, except where the
Uniform Commercial Code of another state governs the perfection of a security
interest in Collateral located in that state.
"COLLATERAL" means the property securing the Obligations.
"CURRENT LIABILITIES" will be determined on a consolidated basis for
Borrower and the Subsidiaries in accordance with GAAP and will include without
limitation (a) all payments on Subordinated Debt required to be made within one
(1) year after the date on which the determination is made; and (b) all
indebtedness payable to stockholders, Affiliates, Subsidiaries or officers
regardless of maturity, unless such indebtedness has been subordinated, on terms
satisfactory to CNB, to the Obligations.
"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
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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; and (h)
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.
"DEBT SERVICE" means (a) the aggregate amount of Current Maturity of
Long Term Debt plus (b) all interest incurred on borrowed money during the
twelve month period ending on the date of determination. "Current Maturity of
Long Term Debt" means that portion of Borrower's consolidated long term
liabilities, determined in accordance with GAAP, which shall, by the terms
thereof, become due and payable within one (1) year following the date of the
balance sheet upon which such calculations are based.
"GAAP" means generally accepted accounting principles and practices,
consistently applied.
"INVENTORY" means goods held for sale or lease in the ordinary course
of business, work in process and any and all raw materials used in connection
with the foregoing.
"LETTERS OF CREDIT" means any Commercial Letters of Credit and Standby
Letters of Credit issued under this Agreement.
"LIQUID ASSETS" means cash, cash equivalents, marketable securities and
other such highly liquid assets as defined by GAAP.
"LOAN" or "LOANS" means one or more of the Loans extended by CNB to
Borrower under Section 2.
"LOAN DOCUMENTS" means, individually and collectively, this Agreement,
any Note, guaranty, security or pledge agreement, financing statement and all
other contracts, instruments, addenda and documents executed in connection with
or related to the extension(s) of credit, and any Collateral which is the
subject of this Agreement.
"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.
"NOTES" means the Notes referenced in Section 2.
"OBLIGATIONS" means all present and future liabilities and obligations
of Borrower to CNB hereunder and all other liabilities and obligations of
Borrower to CNB of every kind, now existing or hereafter owing, matured or
unmatured, direct or indirect, absolute or contingent, joint or several,
including any extensions and renewals thereof and substitutions therefor.
"PERSON" means any individual or entity.
"POTENTIAL EVENT OF DEFAULT" means any condition that with the giving
of notice or passage of time or both would, unless cured or waived, become an
Event of Default.
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"PRIME RATE" means the rate most recently announced by CNB at its
principal office in Beverly Hills, California as its "Prime Rate." Any change in
the interest rate resulting from a change in the Prime Rate will be effective on
the day on which each change in the Prime Rate is announced by CNB.
"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.
"SUBORDINATED DEBT" means Debt of Borrower or any Subsidiary, the
repayment of which is subordinated to the Obligations on terms satisfactory to
CNB.
"SUBSIDIARY" means any corporation, the majority of whose voting shares
are at any time owned, directly or indirectly by Borrower and/or by one or more
Subsidiaries.
"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) preferred stock
and minority interests, so long as Borrower certifies that they are not treated
as Debt on its balance sheet; minus (e) deferred income and reserves not
otherwise reflected as a liability on the consolidated balance sheet of Borrower
and the Subsidiaries.
"TERMINATION DATE" means April 1, 2004, unless the Revolving Credit
Commitment is renewed for an additional term by CNB giving Borrower prior
written notice of such renewal, in which event the Termination Date will mean
the renewed maturity date of the Revolving Credit Commitment set forth in the
notice. Notwithstanding the foregoing, CNB may, at its option, terminate this
Agreement pursuant to Section 8.3; the date of any such termination will become
the Termination Date as that term is used in this Agreement.
"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, minus Subordinated Debt.
2. LOANS.
2.1 FACILITY NO. 1: REVOLVING CREDIT LOANS. CNB agrees to make loans
("Revolving Credit Loans") to Borrower up to, but not including, the Termination
Date, at Borrower's request, up to the amount of Three Hundred Thousand Dollars
($300,000.00) (the "Revolving Credit Commitment"). The Revolving Credit Loans
may be repaid and reborrowed at any time up to the Termination Date; provided,
however, that the aggregate unpaid principal amount of outstanding Revolving
Credit Loans will at no time exceed the Revolving Credit Commitment less the
amount of outstanding Letters of Credit]. Borrower will have a period of not
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less than thirty (30) consecutive days during the twelve-month period ending on
the Termination Date during which time there will be no outstanding Revolving
Credit Loans. All Revolving Credit Loans will be paid by Borrower to CNB on the
Termination Date. The Revolving Credit Loans will be evidenced by a promissory
note ("Revolving Credit Note") in the form attached hereto as Exhibit "A."
2.1.1 INTEREST ON REVOLVING CREDIT LOANS. Each Revolving
Credit Loan 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 (1/4%) per annum. Interest will be payable
monthly in arrears on the first day of each month for the previous month,
starting on February 1, 2003, and on the date the Revolving Credit Loans are
paid in full.]
2.1.2 PROCEDURE FOR REVOLVING CREDIT LOANS. Each Revolving
Credit Loan may be made by CNB at the oral or written request of anyone who is
authorized in writing by Borrower to request Revolving Credit Loans until
written notice of the revocation of such authority is received by CNB.
2.2 FACILITY NO. 2: LETTER OF CREDIT FACILITY. CNB will, at the request
of Borrower, at any time up to, but not including, the Termination Date, issue
Letters of Credit for the account of Borrower. The aggregate face amount of
outstanding Letters of Credit will not at any time exceed $300,000.00 (the
"Letter of Credit Commitment") less Revolving Credit Loans outstanding on the
date of the request].
2.2.1 ISSUANCE OF LETTERS OF CREDIT. Commercial Letters of
Credit will be issued to finance the import of merchandise in accordance with an
Irrevocable Letter of Credit Application and Security Agreement submitted by
Borrower and incorporated herein by this reference, subject to the terms of this
Agreement in the event of any conflict herewith. Standby Letters of Credit will
be issued in accordance with an Irrevocable Standby Letter of Credit Application
and Letter of Credit Agreement submitted by Borrower and incorporated herein by
this reference, subject to the terms of this Agreement in the event of any
conflict herewith. All Letters of Credit will be issued on normal documentation
used by CNB from time to time in accordance with the Uniform Customs and
Practices for Documentary Credits (1993 Revision) International Chamber of
Commerce Publication No. 500 or the International Standby Practices 1998,
whichever is applicable. Letters of Credit will expire no more than ninety (90)
days after issuance. Unless CNB otherwise agrees in writing, no Letters of
Credit may expire after the Termination Date. Standard CNB fees and charges will
apply to the issuance of Letters of Credit.
2.2.2 REIMBURSEMENT FOR FUNDING LETTER OF CREDIT. Any drawing
under a Letter of Credit will be deemed to be an irrevocable request for a
Revolving Credit Loan under this Agreement. Borrower's obligation to reimburse
CNB may also be satisfied by immediately charging Borrower's demand deposit
account if requested by Borrower, and if sufficient clear and collected funds
are on deposit. CNB's obligation under this subsection to make a Revolving
Credit Loan will exist irrespective of the existence of any Potential Event of
Default or Event of Default. Any obligations for Letters of Credit not paid when
due (and not constituting Revolving Credit Loans) will bear interest from such
time until repaid at a fluctuating rate equal to the Prime Rate, from time to
time in effect, plus five percent (5.0%) per annum.
2.3 FACILITY NO. 3: EQUIPMENT ACQUISITION LOANS. CNB agrees to make
loans ("Equipment Acquisition Loans") to Borrower from time to time up to, but
not including, January 31, 2003, up to the amount of Two Million Dollars
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($2,000,000.00) (the "Equipment Acquisition Commitment"), the proceeds of which
will be used to pay up to one hundred percent (100%) of the purchase price of
new machinery and equipment, excluding sales taxes, delivery and set-up charges,
or other asset acquisitions. The Equipment Acquisition Loans will be evidenced
by a promissory note ("Equipment Acquisition Note") in the form attached hereto
as Exhibit "B".
2.3.1 INTEREST ON EQUIPMENT ACQUISITION LOANS. Each Equipment
Acquisition Loan 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 (1/4%) per annum. 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
each Equipment Acquisition Loan is paid in full.
2.3.2 PROCEDURE FOR EQUIPMENT ACQUISITION LOANS. Each
Equipment Acquisition Loan will be made against delivery by Borrower to CNB of
(a) an appropriate purchase invoice evidencing the purchase of items of
machinery and/or equipment, (b) a duly executed asset purchase agreement, and
(c) such further documents as will be requested by CNB to perfect a security
interest of first priority in the assets being purchased in favor of CNB.
2.3.3 PAYMENT OF EQUIPMENT ACQUISITION LOANS. The principal
amount of each Equipment Acquisition Loan will be repaid in fourteen (14)
successive monthly installments of $17,500.00; commencing with the principal
payment due April 1, 2005, the Equipment Acquisition Loan will be repaid in
monthly installments of $80,000.00 until paid, payable on the first day of each
month.
2.4 EXISTING TERM LOANS. The following existing Term Loan will be
governed by the terms of this Agreement:
Note Number: * Date of Note: * Original Principal Amount: *
2.5 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. All prepayments will be applied to
principal installments in the inverse order of their maturities.
2.6 LOANS AND PAYMENTS. All payments will be in United States Dollars
and in immediately available funds. Interest will be computed on the basis of a
360-day year, actual days elapsed. All payments of principal, interest, fees and
other charges on the Loans will be made directly to CNB at the address specified
at the end of this agreement CNB is authorized to note the date, amount and
interest rate of each Loan and each payment of principal and interest on CNB's
books and records, which notations will constitute presumptive evidence of the
accuracy of the information noted. Any Loan will be conclusively presumed to
have been made to or for the benefit of Borrower when CNB, in its sole
discretion, believes that the request therefor has been made by authorized
persons (whether in fact that is the case), or when the Loan is deposited to the
credit of Borrower's account with CNB, regardless of whether any Person other
than Borrower may have authority to draw against such account.
2.7 DEFAULT INTEREST RATE. From and after written notice by CNB to
Borrower of the occurrence of an Event of Default (and without constituting a
waiver of such Event of Default), each Loan (and interest thereon to the extent
permitted by law) will bear additional interest at a fluctuating rate equal to
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five percent (5.0%) per annum higher than the respective interest rate
applicable to each Loan until the Event of Default has been cured. All interest
provided for in this Section will be compounded monthly and payable on demand.
2.8 GUARANTIES. Xxx X. Xxxxxxxx, an unmarried man, Spectrum Europe
B.V., a Netherlands company, SLI Acquisition Corp., a Delaware corporation,
Hydro-med Products, Inc., a Texas corporation, and Spectrum Molecular
Separations, Inc. dba Spectrum Chromatography, a Delaware corporation (if more
than one, each a "Guarantor" and collectively, "Guarantors") will guarantee full
repayment of Borrower's Obligations to CNB, and, except for Guarantor Xxx X.
Xxxxxxxx, will execute and deliver to CNB their Continuing Guaranties
("Guaranties") in the form customarily used by CNB; Xxx X. Xxxxxxxx will execute
and deliver to CNB his Continuing Guaranty in the form attached hereto as
Exhibit "C".
3. CONDITIONS PRECEDENT.
3.1 EXTENSION OF CREDIT. The obligation of CNB to make any Loan or
other extension of credit hereunder is subject to CNB's receipt of each of the
following, in form and substance satisfactory to CNB, and duly executed as
required by CNB:
3.1.1 All Loan Documents required by CNB, including but not
limited to such documents necessary to perfect CNB's first priority security
interest in the Collateral and evidence of such perfection;
3.1.2 If a Commercial Letter of Credit is to be issued, CNB
will have received an Irrevocable Letter of Credit Application and Security
Agreement, duly executed and delivered by Borrower, in the form customarily used
by CNB;
3.1.3 If a Standby Letter of Credit is to be issued, CNB will
have received an Irrevocable Standby Letter of Credit Application and Letter of
Credit Agreement, duly executed and delivered by Borrower, in the form
customarily used by CNB;
3.1.4 Evidence that any insurance required by this Agreement
or any other Loan Document is in effect; and
3.1.5 Where Borrower or any party signing a Loan Document is a
business entity, such authorization documents as CNB may require, in form and
substance satisfactory to CNB.
3.2 CONDITIONS TO EACH EXTENSION OF ALL LOANS. The obligation of CNB to
make any Loan or other extension of credit hereunder will be subject to the
fulfillment of each of the following conditions to CNB's satisfaction:
3.2.1 The representations and warranties of Borrower set forth
in Section 4 of this Agreement and in all other Loan Documents will be true and
correct on the date of the making of each Loan or other extension of credit with
the same effect as though such representations and warranties had been made on
and as of such date;
3.2.2 There will be no Event of Default or Potential Event of
Default under this Agreement or any of the Loan Documents; and
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3.2.3 All other documents and legal matters in connection with
the transactions described in this Agreement will be satisfactory in form and
substance to CNB.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and each
request for a Loan or other extension of credit will be deemed a representation
and warranty made on the date of such request) that:
4.1 CORPORATE EXISTENCE, POWER AND AUTHORIZATION. Borrower and each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the state of its organization, and is duly qualified to conduct business
in each jurisdiction in which its business is conducted. The execution, delivery
and performance of all Loan Documents executed by Borrower are within Borrower's
powers and have been duly authorized by the Board of Directors of Borrower and
do not require any consent or approval of the stockholders of Borrower.
4.2 BINDING AGREEMENT. The Loan Documents constitute the valid and
legally binding obligations of Borrower, enforceable against Borrower in
accordance with their terms.
4.3 ANCILLARY DOCUMENTS. To the extent that any security agreement,
subordination agreement or Guaranty is required to be executed by a Subsidiary
or Affiliate, the representations and warranties set forth in Sections 4.1 and
4.2 are also true and correct with respect to any such Subsidiary or Affiliate
and such document.
4.4 OTHER AGREEMENTS. The execution and performance of the Loan
Documents will not violate any provision of law or regulation (including,
without limitation, Regulations X and U of the Federal Reserve Board) or any
order of any governmental authority, court, or arbitration board or the Articles
of Incorporation or By-laws of Borrower, or result in the breach of, constitute
a default under, contravene any provisions of, or result in the creation of any
security interest, lien, charge or encumbrance upon any of the assets of
Borrower pursuant to any indenture or agreement to which Borrower or any of its
properties is bound, except liens and security interests in favor of CNB.
4.5 LITIGATION. There is no litigation, tax claim, investigation or
proceeding pending, threatened against or affecting Borrower, any Subsidiary,
any Guarantor or any of their respective properties which, if adversely
determined, would have a material adverse effect on the business, operations or
condition, financial or otherwise, of Borrower, any Subsidiary or any Guarantor.
4.6 FINANCIAL CONDITION. Borrower's most recent financial statements,
copies of which have been delivered to CNB, have been prepared in accordance
with GAAP and are true, complete and correct and fairly present the financial
condition of Borrower and the Subsidiaries, including operating results, as of
the accounting period referenced therein. There has been no material adverse
change in the financial condition or business of Borrower or any Subsidiary
since the date of such financial statements. Neither Borrower nor any Subsidiary
has any material liabilities for taxes or long-term leases or commitments,
except as disclosed in the financial statements.
4.7 NO VIOLATIONS. Borrower is not, nor is any Subsidiary, in violation
of any law, ordinance, rule or regulation to which it or any of its properties
is subject.
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4.8 USE OF PROCEEDS. Borrower will use the proceeds of Term Loan A
solely for repayment in full of loan # 26916 owed by SMI and SLI to CNB, and the
proceeds of Term Loan B solely for repayment in full of loan # 28528 owed by SMI
and SLI to CNB.
4.9 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). No Reportable Event (as defined in ERISA and the regulations issued
thereunder [other than a "Reportable Event" not subject to the provision for
thirty (30) day notice to the Pension Benefit Guaranty Corporation ("PBGC")
under such regulations]) has occurred with respect to any benefit plan of
Borrower nor are there any unfunded vested liabilities under any benefit plan of
Borrower. Borrower has met its minimum funding requirements under ERISA with
respect to each of its plans and has not incurred any material liability to the
PBGC in connection with any such plan.
4.10 CONSENTS. No consent, license, permit, or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with,
any governmental authority or agency is required in connection with the
execution and performance by Borrower of the Loan Documents or the transactions
contemplated hereunder.
4.11 REGULATION U. Borrower is not engaged principally, or as one of
its principal activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations U or X of
the Federal Reserve Board). No part of the proceeds of the Loans will be used by
Borrower to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying such margin stock.
4.12 ENVIRONMENTAL MATTERS.
4.12.1 The operations of Borrower and each Subsidiary comply
in all material respects with all applicable federal, state and local
environmental, health and safety statutes, regulations and ordinances, and fully
comply with all terms of all required permits and licenses;
4.12.2 Borrower and each Subsidiary have received no notices
of any threatened or pending governmental or private civil, criminal or
administrative proceeding regarding any environmental or health and safety
statute, regulation or ordinance and have not been subject to any federal, state
or local investigations, inspections or orders regarding any environmental or
health and safety statute, regulation or ordinance;
4.12.3 Neither Borrower nor any Subsidiary knows of any facts
or conditions which may exist which may subject Borrower or any Subsidiary to
liability or contingent liability and neither Borrower nor any Subsidiary is
presently liable or contingently liable for any removal, remedial, response or
other costs or damages in connection with any release into the environment of
toxic or hazardous substances or waste included on any federal, state or local
hazardous chemical or substance lists under any federal, state or local statute,
regulation or ordinance.
4.12.4 Borrower will, at all times, defend and indemnify and
hold CNB (which for purposes of this Section 4.12 and Section 9.8 includes CNB's
parent company and subsidiaries and all of their respective shareholders,
directors, officers, employees, agents, representatives, successors, attorneys,
and assigns) harmless from and against any liabilities, claims, demands, causes
of action, losses, damages, expenses (including without limitation reasonable
attorneys' fees, [which attorneys may be employees of CNB, or may be outside
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counsel]) costs, settlements, judgments or recoveries (collectively, "Claims")
directly or indirectly arising out of or attributable to the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal, or presence of a hazardous substance on, under or about Borrower's
property or operations or property leased to or used by Borrower. For these
purposes, the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any Federal, state, or local
law. Any obligation or liability of Borrower to CNB under this Section will
survive the expiration or termination of this Agreement and the repayment of all
Loans and the payment or performance of all other Obligations of Borrower to
CNB.
5. AFFIRMATIVE COVENANTS. Borrower agrees that until payment in full of all
Obligations, Borrower will comply with the following covenants:
5.1 BOOKS AND RECORDS. Borrower will maintain, in accordance with sound
accounting practices, accurate records and books of account showing, among other
things, all Inventory and Accounts, the proceeds of the sale or other
disposition thereof and the collections therefrom. Borrower will not change the
accounting method used to determine Borrower's Inventory cost without
notification to CNB. CNB may, at any reasonable time, inspect, audit, and make
extracts from, or copies of, all books, records and other data, inspect any of
Borrower's properties and confirm balances due on Accounts by direct inquiry to
Account Debtors (defined as those Persons obligated on the Accounts). Borrower
will furnish CNB with all information regarding the business or finances of
Borrower promptly upon CNB's request.
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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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.
5.4 TAXES AND PREMIUMS. Borrower will, and will cause each Subsidiary
to, pay and discharge all taxes, assessments, governmental charges and real and
personal property taxes, including, but not limited to, federal and state income
taxes, employee withholding taxes and payroll taxes, and all premiums for
insurance required under this Agreement, prior to the date upon which penalties
are attached thereto.
5.5 INSURANCE.
5.5.1 Borrower will, and will cause each Subsidiary to,
provide and maintain the insurance required under the Loan Documents;
5.5.2 In addition to the insurance required above, Borrower
will, and will cause each Subsidiary to, maintain insurance of the types and in
amounts customarily carried in its lines of business, including, but not limited
to, fire, public liability, property damage, and worker's compensation, such
insurance to be carried with companies and in amounts satisfactory to CNB, and
will deliver to CNB from time to time, upon CNB's request, schedules setting
forth all insurance then in effect; and
5.5.3 If Borrower fails to provide, maintain, or furnish to
CNB the policies required by this Section, CNB may immediately procure such
insurance or other insurance necessary to protect CNB's interest, and Borrower
will pay all premiums thereon promptly upon demand by CNB, together with
interest, at the highest rate provided for any of the Loans extended under
Section 2 above, from the date of expenditure, and if not paid within ten (10)
days of CNB's demand therefor (and without constituting a waiver of an Event of
Default), at a rate five percent (5%) per year higher than such interest rate
until such amount (and interest thereon, to the extent permitted by law), is
paid in full.
5.6 NOTICE. Borrower will promptly advise CNB in writing of (a) the
opening of any new, or the closing of any existing, places of business, each
location at which Inventory or Equipment is or will be kept, and any change to
Borrower's name, trade name or other name under which it does business or of any
such new or additional name; (b) the occurrence of any Event of Default or
Potential Event of Default; (c) any litigation pending or threatened against
Borrower, any Subsidiary or any Guarantor where the amount or amounts in
controversy exceed $50,000.00; (d) any unpaid taxes of Borrower, any Subsidiary
or any Guarantor, which are more than fifteen (15) days delinquent; and (e) any
other matter that might materially or adversely affect Borrower's, any
Subsidiary's or any Guarantor's financial condition, property or business.
5.7 FAIR LABOR STANDARDS ACT. Borrower will, and will cause each
Subsidiary to, comply with the requirements of, and all regulations promulgated
under, the Fair Labor Standards Act of 1938 (29 U.S.C. Code ss. 201 et seq.).
5.8 CORPORATE EXISTENCE. Borrower will, and will cause each Subsidiary
to, maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal course of its business.
10
5.9 COMPLIANCE WITH LAW. Borrower will, and will cause each Subsidiary
to, comply with all requirements of all applicable laws, rules, regulations,
orders of any governmental agency and all material agreements to which they are
a party.
5.10 FINANCIAL TESTS. Borrower shall maintain:
5.10.1 Tangible Net Worth plus Subordinated Debt of not less
than $3,500,000.00;
5.10.2 A 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 1.5 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 2.0 to 1.
6. NEGATIVE COVENANTS. Borrower agrees that until payment in full of all
Obligations, Borrower will not, nor will it permit any Subsidiary to, do any of
the following, without CNB's prior written consent:
6.1 BORROWING. Create, incur, assume or permit to exist any Debt,
except Debt to CNB, the Subordinated Debt, and trade Debt incurred in the
ordinary course of business.
6.2 SALE OF ASSETS. Sell, lease or otherwise dispose of any of
Borrower's or any Subsidiary's assets, other than in the ordinary course of
business.
6.3 LOANS. Make loans or advances to any Person except credit extended
to employees or to customers in the ordinary course of its business.
6.4 CONTINGENT LIABILITIES. Assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable for the obligation of any Person
including Borrower, a Subsidiary, or Affiliate, except (a) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, and (b) contingent liabilities in favor of CNB.
6.5 INVESTMENTS. Purchase or acquire the obligations or stock of, or
any other interest in, any partnership, joint venture or corporation, except (a)
direct obligations of the United States of America; and (b) investments in
certificates of deposit issued by, and other deposits with, commercial banks
organized under the United States or a State thereof having capital of at least
One Hundred Million Dollars ($100,000,000.00).
6.6 MORTGAGES, LIENS, ETC. Mortgage, pledge, hypothecate, grant or
contract to grant any security interest of any kind in any property or assets,
to anyone except CNB.
6.7 INVOLUNTARY LIENS. Permit any involuntary liens to arise with
respect to any property or assets including but not limited to those arising
from the levy of a writ of attachment or execution, or the levy of any state or
federal tax lien which lien will not be removed within a period of thirty (30)
days.
11
6.8 SALE AND LEASEBACK. Enter into any sale-leaseback transaction.
6.9 MERGERS AND ACQUISITIONS. Enter into any merger or consolidation,
or acquire all or substantially all the assets of any Person, except a
Subsidiary may be merged into or consolidated with another Subsidiary or with
Borrower.
6.10 CAPITAL EXPENDITURES. Make or be committed to make, directly or
indirectly, expenditures for capital assets (including any patents and
capitalized lease expenditure) amounting, in the aggregate for Borrower and all
Subsidiaries in any one fiscal year, to more than $1,000,000.00.
6.11 REDEMPTIONS, DIVIDENDS AND DISTRIBUTIONS. Redeem or repurchase
stock or partnership interests, declare or pay any dividends or make any other
distribution, whether of capital, income or otherwise, and whether in cash or
other property, except that any Subsidiary may declare distributions to
Borrower; provided, however, if Borrower for any tax year elects to file as a
Sub-Chapter S corporation under the federal and state income tax laws,
distributions may be made to Borrower's shareholders during any current or
subsequent tax year in proportion to their holdings, in an aggregate amount
equal to that payable by an individual in the highest tax bracket upon
Borrower's taxable income computed as if Borrower were a tax-paying entity.
6.12 EVENT OF DEFAULT. Permit a default to occur under any document or
instrument evidencing Debt incurred under any indenture, agreement or other
instrument under which such Debt may be issued, or any event to occur under any
of the foregoing which would permit any holder of the Debt outstanding
thereunder to declare the same due and payable before its stated maturity,
whether or not such acceleration occurs or such default be waived.
7. SECURITY AGREEMENT.
7.1 GRANT OF SECURITY INTEREST. To secure all Obligations hereunder as
well as all other Obligations to CNB, Borrower hereby grants and transfers to
CNB a continuing security interest in the following property whether now owned
or hereafter acquired:
7.1.1 All of Borrower's Inventory;
7.1.2 All of Borrower's Accounts;
7.1.3 All of Borrower's general intangibles as that term is
defined in the Code;
7.1.4 All of Borrower's equipment, as that term is defined in
the Code;
7.1.5 All of Borrower's interest in any patents (now existing
or pending), copyrights, trade names, trademarks and service marks useful to the
operation of Borrower's business;
7.1.6 All notes, drafts, acceptances, instruments, documents
of title, policies and certificates of insurance, chattel paper, guaranties and
securities now or hereafter received by Borrower or in which Borrower has or
acquires an interest;
7.1.7 All cash and noncash proceeds of the foregoing property,
including, without limitation, proceeds of policies of fire, credit or other
insurance;
12
7.1.8 All of Borrower's books and records pertaining to any of
the Collateral described in this Section 7.1; and
7.1.9 Any other Collateral which CNB and Borrower may
designate as additional security from time to time by separate instruments.
7.2 NOTIFICATION OF ACCOUNT DEBTORS. CNB will have the right to notify
any Account Debtor to make payments directly to CNB, take control of the cash
and noncash proceeds of any Account, and settle any Account, which right CNB may
exercise at any time whether or not an Event of Default has occurred or whether
Borrower was theretofore making collections thereon. Until CNB elects to
exercise such right, Borrower is authorized on behalf of CNB to collect and
enforce the Accounts. Immediately upon CNB's request, Borrower will deliver to
CNB for application in accord with this Agreement, all checks, drafts, cash and
other remittances in payment or on account of payment of its Accounts on the
banking day following the receipt thereof, and in precisely the form received,
except for the endorsement of Borrower where necessary to permit collection of
the items, which endorsement Borrower hereby agrees to make. Pending such
delivery, Borrower will not commingle any such checks, cash, drafts and other
remittances with any of its other funds or property, but will hold them separate
and apart therefrom expressly in trust for CNB. All such remittances will be
accompanied by such statements and reports of collections and adjustments as CNB
may specify.
7.3 ATTORNEY-IN-FACT. CNB or any of its officers is hereby irrevocably
made the true and lawful attorney for Borrower with full power of substitution
to do the following: (a) endorse the name of Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of moneys which are
payable to Borrower and constitute collections on Accounts; (b) execute in the
name of Borrower any schedules, assignments, instruments, documents and
statements which Borrower is obligated to give CNB hereunder; (c) receive, open
and dispose of all mail addressed to Borrower; (d) notify the Post Office
authorities to change the address for delivery of mail addressed to Borrower to
such address as CNB will designate; and (e) do such other acts in the name of
Borrower which CNB may deem necessary or desirable to enforce any Account or
other Collateral. The powers granted CNB hereunder are solely to protect its
interests in the Collateral and will not impose any duty upon CNB to exercise
any such powers.
8. EVENTS OF DEFAULT.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following will
constitute an Event of Default:
8.1.1 Borrower fails to pay when due any installment of
principal or interest or any other amount payable under the Loan Documents;
8.1.2 Any Person, or any Subsidiary of any Person, which is a
party to any Loan Document fails to perform or observe any of the terms,
provisions, covenants, conditions, agreements or obligations contained in the
Loan Documents;
8.1.3 The entry of an order for relief or the filing of an
involuntary petition with respect to Borrower, any Subsidiary or any Guarantor
under the UNITED STATES BANKRUPTCY CODE, the appointment of a receiver, trustee,
custodian or liquidator of or for any part of the assets or property of
13
Borrower, any Subsidiary or any Guarantor, or Borrower, any Subsidiary or any
Guarantor makes a general assignment for the benefit of creditors;
8.1.4 Any financial statement, representation or warranty made
or furnished by Borrower, any Subsidiary or any Guarantor in connection with the
Loan Documents proves to be in any material respect incorrect;
8.1.5 CNB's security interest in or lien on any portion of any
Collateral becomes impaired or otherwise unenforceable;
8.1.6 Any Person obtains an order or decree in any court of
competent jurisdiction enjoining or prohibiting Borrower or CNB or either of
them from performing this Agreement, and such proceedings are not dismissed or
such decree is not vacated within ten (10) days after the granting thereof;
8.1.7 Borrower or any Subsidiary neglects, fails or refuses to
keep in full force and effect any governmental permit or approval which is
necessary to the operation of its business;
8.1.8 All or substantially all of the property of Borrower,
any Guarantor or any Subsidiary is condemned, seized or otherwise appropriated;
8.1.9 The occurrence of (a) a Reportable Event as defined in
ERISA which CNB determines in good faith constitutes grounds for the institution
of proceedings to terminate any pension plan by the PBGC, (b) an appointment of
a trustee to administer any pension plan of Borrower, or (c) any other event or
condition which might constitute grounds under ERISA for the involuntary
termination of any pension plan of Borrower, where such event set forth in (a),
(b) or (c) results in a significant monetary liability to Borrower;
8.1.10 Any obligee of Subordinated Debt fails to comply with
the provisions of the documents evidencing such Subordinated Debt or any
Subordination Agreement; or
8.1.11 Any Guarantor dies, becomes incapacitated, or revokes
his or its Guaranty, or such Guaranty becomes otherwise unenforceable with
respect to future advances.
8.2 NOTICE OF DEFAULT AND CURE OF POTENTIAL EVENTS OF DEFAULT. Except
with respect to the Events of Default specified in Sections 8.1.1, 8.1.3, or
8.1.5 above, and subject to the provisions of Section 8.4, CNB will give
Borrower at least ten (10) days' written notice of any event which constitutes
or, with the lapse of time would become an Event of Default, during which time
Borrower will be entitled to cure same.
8.3 CNB'S REMEDIES. Upon the occurrence of an Event of Default, at the
sole and exclusive option of CNB, and upon written notice to Borrower, CNB may
(a) declare the principal of and accrued interest on the Loans, and all other
Obligations immediately due and payable in full, whereupon the same will
immediately become due and payable; (b) terminate this Agreement as to any
future liability or obligation of CNB, but without affecting CNB's rights and
security interest in the Collateral and without affecting the Obligations owing
by Borrower to CNB; and/or (c) exercise its rights and remedies under the Loan
Documents and all rights and remedies of a secured party under the Code and
other applicable laws with respect to all of the Collateral.
14
8.4 ADDITIONAL REMEDIES. Notwithstanding any other provision of this
Agreement, upon the occurrence of any event, action or inaction by Borrower, or
if any action or inaction is threatened which CNB reasonably believes will
materially affect the value of the Collateral, CNB may take such legal actions
as it deems necessary to protect the Collateral, including but not limited to,
seeking injunctive relief and the appointment of a receiver, whether or not an
Event of Default or Potential Event of Default has occurred under this
Agreement.
9. MISCELLANEOUS.
9.1 REIMBURSEMENT OF COSTS AND EXPENSES. Borrower will reimburse CNB
for all costs and expenses relating to this Agreement including, but not limited
to, filing, recording or search fees, audit or verification fees, appraisals of
the Collateral and other out-of-pocket expenses, and reasonable attorneys' fees
and expenses expended or incurred by CNB (or allocable to CNB's in-house
counsel) in documenting or administering the Loan Documents or collecting any
sum which becomes due CNB under the Loan Documents, irrespective of whether suit
is filed, or in the protection, perfection, preservation or enforcement of any
and all rights of CNB in connection with the Loan Documents, including, without
limitation, the fees and costs incurred in any out-of-court work-out or a
bankruptcy or reorganization proceeding.
All amounts due under this Section 9.1 will bear interest at the
highest rate provided for any of the Loans extended under Section 2 above, from
the date of expenditure (or allocation), and if not paid within ten (10) days of
CNB's demand therefor (and without constituting a waiver of an Event of
Default), at a rate five percent (5%) per year higher than such interest rate
until such amount (and interest thereon, to the extent permitted by law), is
paid in full.
9.2 DISPUTE RESOLUTION.
9.2.1 MANDATORY ARBITRATION. At the request of CNB or
Borrower, any dispute, claim or controversy of any kind (whether in contract or
tort, statutory or common law, legal or equitable) now existing or hereafter
arising between CNB and Borrower and in any way arising out of, pertaining to or
in connection with: (1) this Agreement, and/or any renewals, extensions, or
amendments thereto; (2) any of the Loan Documents; (3) any violation of this
Agreement or the Loan Documents; (4) all past, present and future loans; (5) any
incidents, omissions, acts, practices or occurrences arising out of or related
to this Agreement or the Loan Documents causing injury to either party whereby
the other party or its agents, employees or representatives may be liable, in
whole or in part, or (6) any aspect of the past, present or future relationships
of the parties, will be resolved through final and binding arbitration conducted
at a location determined by the arbitrator in Los Angeles County, California,
and administered by the American Arbitration Association ("AAA") in accordance
with the California Arbitration Act (Title 9, California Code of Civil Procedure
Section 1280 et. seq.) and the then existing Commercial Rules of the AAA.
Judgment upon any award rendered by the arbitrator(s) may be entered in any
state or federal court having jurisdiction thereof.
9.2.2 REAL PROPERTY COLLATERAL. Notwithstanding the provisions
of subsection 9.2.1, no controversy or claim will be submitted to arbitration
without the consent of all the parties if, at the time of the proposed
submission, such controversy or claim arises from or relates to an obligation
owed to CNB which is secured in whole or in part by real property collateral. If
15
all parties do not consent to submission of such a controversy or claim to
arbitration, the controversy or claim will be determined as provided in
subsection 9.2.3.
9.2.3 JUDICIAL REFERENCE. At the request of any party, a
controversy or claim which is not submitted to arbitration as provided and
limited in subsections 9.2.1 and 9.2.2 will be determined by a reference in
accordance with California Code of Civil Procedure Sections 638 et. seq. If such
an election is made, the parties will designate to the court a referee or
referees selected under the auspices of the AAA in the same manner as
arbitrators are selected in AAA-sponsored proceedings. The presiding referee of
the panel, or the referee if there is a single referee, will be an active
attorney or retired judge. Judgment upon the award rendered by such referee or
referees will be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
9.2.4 PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No
provision of this Agreement will limit the right of any party to: (1) foreclose
against any real property collateral by the exercise of a power of sale under a
deed of trust, mortgage or other security agreement or instrument, or applicable
law, (2) exercise any rights or remedies as a secured party against any personal
property collateral pursuant to the terms of a security agreement or pledge
agreement, or applicable law, (3) exercise self help remedies such as setoff, or
(4) obtain provisional or ancillary remedies such as injunctive relief or the
appointment of a receiver from a court having jurisdiction before, during or
after the pendency of any arbitration or referral. The institution and
maintenance of an action for judicial relief or pursuit of provisional or
ancillary remedies, or exercise of self help remedies will not constitute a
waiver of the right of any party, including the plaintiff, to submit any dispute
to arbitration or judicial reference.
9.2.5 POWERS AND QUALIFICATIONS OF ARBITRATORS. The
arbitrator(s) will give effect to statutes of limitation, waiver and estoppel
and other affirmative defenses in determining any claim. Any controversy
concerning whether an issue is arbitratable will be determined by the
arbitrator(s). The laws of the State of California will govern. The arbitration
award may include equitable and declaratory relief. All arbitrator(s) selected
will be required to be a practicing attorney or retired judge licensed to
practice law in the State of California and will be required to be experienced
and knowledgeable in the substantive laws applicable to the subject matter of
the controversy or claim at issue.
9.2.6 DISCOVERY. The provisions of California Code of Civil
Procedure Section 1283.05 or its successor section(s) are incorporated herein
and made a part of this Agreement. Depositions may be taken and discovery may be
obtained in any arbitration under this Agreement in accordance with said
section(s).
9.2.7 MISCELLANEOUS. The arbitrator(s) will determine which is
the prevailing party and will include in the award that party's reasonable
attorneys' fees and costs (including allocated costs of in-house legal counsel).
Each party agrees to keep all controversies and claims and the arbitration
proceedings strictly confidential, except for disclosures of information
required in the ordinary course of business of the parties or by applicable law
or regulation.
9.3 CUMULATIVE RIGHTS AND NO WAIVER. All rights and remedies granted to
CNB under the Loan Documents are cumulative and no one such right or remedy is
exclusive of any other. No failure or delay on the part of CNB in exercising any
power, right or remedy under any Loan Document will operate as a waiver thereof,
16
and no single or partial exercise or waiver by CNB of any such power, right or
remedy will preclude any further exercise thereof or the exercise of any other
power, right or remedy.
9.4 APPLICABLE LAW. This Agreement will be governed by California law.
9.5 LIEN AND RIGHT OF SETOFF. Borrower grants to CNB a continuing lien
for all Obligations of Borrower to CNB upon any and all moneys, securities and
other property of Borrower and the proceeds thereof, now or hereafter held or
received by or in transit to CNB from or for Borrower, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of Borrower with, and any and all
claims of Borrower against CNB at any time existing. Upon the occurrence of any
Event of Default, CNB is authorized at any time and from time to time, without
notice to Borrower or any other Person, to setoff, appropriate and apply any or
all items hereinabove referred to against all Obligations of Borrower whether
under this Agreement or otherwise, and whether now existing or hereafter
arising.
9.6 NOTICES. Any notice required under any Loan Document will be given
in writing and will be deemed to have been given when personally delivered or
when sent by the U.S. mail, postage prepaid, certified, return receipt
requested, to the address listed at the end of this Agreement or such other
address which a party may provide to the other.
9.7 COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, when taken together, will constitute but one agreement.
9.8 INDEMNIFICATION. Borrower will, at all times, defend and indemnify
and hold CNB harmless from and against any and all Claims (as that term is
defined in Section 4.12.4) arising out of or resulting from (a) any breach of
the representations, warranties, agreements or covenants made by Borrower
herein; (b) any suit or proceeding of any kind or nature whatsoever against CNB
arising from or connected with the transactions contemplated by the Loan
Documents or any of the rights and properties assigned to CNB hereunder; and/or
(c) any suit or proceeding that CNB may deem necessary or advisable to
institute, in the name of CNB, Borrower or both, against any other Person, for
any reason whatsoever to protect the rights of CNB hereunder or under any of the
documents, instruments or agreements executed or to be executed pursuant hereto,
including attorneys' fees and court costs and all other costs and expenses
incurred by CNB (or allocable to CNB's in-house counsel), all of which will be
charged to and paid by Borrower and will be secured by the Collateral. Any
obligation or liability of Borrower to CNB under this Section will survive the
expiration or termination of this Agreement and the repayment of all Loans and
the payment or performance of all other Obligations of Borrower to CNB.
9.9 ASSIGNMENTS. The provisions of this Agreement are hereby made
applicable to and will inure to the benefit of CNB's successors and assigns and
Borrower's successors and assigns; provided, however, that Borrower may not
assign or transfer its rights or Obligations under this Agreement without the
prior written consent of CNB.
9.10 ACCOUNTING TERMS. Except as otherwise stated in this Agreement,
all accounting terms and financial covenants and information will be construed
in conformity with, and all financial data required to be submitted will be
prepared in conformity with, GAAP as in effect on the date hereof.
9.11 SEVERABILITY. Any provision of the Loan Documents which is
prohibited or unenforceable in any jurisdiction, will be, only as to such
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of the Loan Documents will remain valid.
17
9.12 COMPLETE AGREEMENT. This Agreement, together with the other Loan
Documents, constitutes the entire agreement of the parties and supersedes any
prior or contemporaneous oral or written agreements or understandings, if any,
which are merged into this Agreement. This Agreement may be amended only in a
writing signed by Borrower and CNB.
9.13 JOINT AND SEVERAL. Should more than one Person sign this
Agreement, the obligations of each signer will be joint and several.
This Agreement is executed as of the date stated at the top of the first page.
"BORROWER" SPECTRUM LABORATORIES, INC.,
a Delaware corporation
By: /s/ Xxx X. Xxxxxxxx
----------------------------------------
XXX X. XXXXXXXX, Chief Executive Officer
Address:
--------
00000 Xx Xxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000-0000
Attention: Xxx X. Xxxxxxxx
Telephone Number: (000) 000-0000
"CNB" CITY NATIONAL BANK,
a national banking association
By: /s/ Xxxxxxxxx Xxxxxxxx
----------------------------------
XXXXXXXXX XXXXXXXX, Vice President
Address:
--------
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxxxx, Vice President
Telephone Number: (000) 000-0000
with a copy of all Notices to:
City National Bank, Legal Department
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel
18
EXHBIT A
REVOLVING CREDIT NOTE
$300,000.00 Irvine, California
December 26, 2002
FOR VALUE RECEIVED, the undersigned, SPECTRUM LABORATORIES, INC., a
Delaware corporation ("Borrower"), promises to pay on the Termination Date to
the order of CITY NATIONAL BANK, a national banking association ("CNB"), at its
Office located at Irvine, California, the principal amount of THREE HUNDRED
THOUSAND DOLLARS ($300,000.00) or so much thereof as may be advanced and be
outstanding, with interest thereon to be computed on each Revolving Credit Loan
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 26, 2002, as it may be amended from time to time (the
"Credit Agreement"). Capitalized terms not defined herein shall have the
meanings given them in that certain Credit Agreement.
All or any portion of the principal of this Revolving Credit Note
("Note") may be borrowed, repaid and reborrowed from time to time prior to the
Termination Date, provided at the time of any borrowing no default exists under
this Note and no Event of Default or Potential Event of Default exists under the
terms and conditions of the Credit Agreement and provided, further that the
total borrowings outstanding at any one time shall not exceed the Revolving
Credit Commitment less the amount of Letters of Credit issued and outstanding
under the Credit Agreement. Each borrowing and repayment of a Revolving Credit
Loan shall be noted in the books and records of CNB. The excess of borrowings
over repayments as noted on such books and records shall constitute presumptive
evidence of the principal balance due hereon from time to time and at any time.
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 Revolving Credit 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.
1
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
2
EXHIBIT B
EQUIPMENT ACQUISITION NOTE
$2,000,000.00 Irvine, California
December 26, 2002
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 TWO MILLION DOLLARS ($2,000,000.00), 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 26, 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 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%) 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. 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
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XXX X. XXXXXXXX, Chief Executive Officer
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EXHIBIT C
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 TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00),
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, 2003, 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, 2004, Guarantor's liability under this Guaranty shall be
reduced to FIVE HUNDRED THOUSAND DOLLARS ($500,000.00).
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.
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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 manner 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.
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 manner the liability of
Guarantor under the other provisions of this Guaranty. CNB shall have rights of
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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 manner 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.
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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
00000-0000, 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 this 26th day of
December, 2002.
/s/ Xxx X. Xxxxxxxx
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Xxx X. Xxxxxxxx
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BANK USE ONLY
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