Exhibit 10.18
CREDIT AGREEMENT
This Credit Agreement (the Agreement"), dated as of December 22, 1998, is
between CITY NATIONAL BANK ("CNB") and SPECTRUM LABORATORIES, INC., a Delaware
corporation ("Borrower"), successor by merger with Spectrum Medical Industries,
Inc. a California corporation ("SMI"), and Spectrum Laboratories, Inc., a
California corporation ("SLI"), and supersedes and replaces in its entirety that
certain Credit Agreement dated as of February 28, 1997 between, SMI and SLI, as
borrowers, 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 (i) with respect
to Section 5.10.3(a), over the six-month period ending January 2,1999, (ii) with
respect to Section 5.10.3(b), over the nine-month period ending April 3, 1999,
and (iii) with respect to Section 5.10.3(c), 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 (i) with respect to Section
5.10.3(a), during the six-month period ending January 2, 1999, (ii) with respect
to Section 5.10.3(b), during the nine-month period ending April 3, 1999, and
(iii) with respect to Section 5.10.3(c), during the twelve month period ending
on the date of determination.
"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, including,
without limitation, the pledge by Borrower to CNB of a time deposit maintained
by Borrower at CNB in a principal amount of not less than $100,000.00.
"CASH/SECURITIES COLLATERAL" means time deposits, money market mutual
funds or securities acceptable to CNB owned by Xxx Xxxxxxxx which are pledged as
Collateral securing the Obligations, and which will be held under the account
name of CNB.
"CURRENT ASSETS" will be determined on a consolidated basis for
Borrower and the Subsidiaries in accordance with GAAP excluding, however, loans
to stockholders, management or employees, amounts due from Subsidiaries or
Affiliates, deferred costs, and other intangible assets.
"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
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
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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; PROVIDED, HOWEVER, with
respect to Term Loan B, the outstanding principal balance in excess of
$102,000.00 will not be considered Current Maturity of Long Term Debt.
"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.
"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 and Cash/Securities
Collateral therefor, which is the subject of this Agreement.
"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.
"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.
"SLI ACQUISITION CORP. PREFERRED STOCK" means the convertible
preferred stock issued to former Cellco Incorporated shareholders by SLI
Acquisition Corp. to complete the purchase transaction of Cellco Incorporated.
The preferred stock is classified as a minority interest according to GAAP,
however, it shall be included as preferred stock for the purposes of this
Agreement until such date that either (i) it is converted to common stock, at
which time it will be classified as common stock, or (ii) the Put Option is
exercised by the preferred shareholders, at which time it will be classified as
a Debt of Borrower. "Put Option" means the option held by holders of the SLI
Acquisition Corp. preferred stock to sell their preferred stock to SLI
Acquisition Corp. for a sum of $2,000,000 at any time from October 1, 2000 to
September 30, 2001.
"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
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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, 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) Cash/Securities Collateral.
"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, less Subordinated Debt.
2. LOANS.
2.1 THE TERM LOAN A. CNB agrees to make, upon Borrower's request, a
term loan ("Term Loan A") to Borrower in the principal amount of Two Million
Three Hundred Forty Thousand and No/l00 Dollars ($2,340,000.00). The Term Loan A
will be evidenced by a promissory note ("Term Note") in the form attached hereto
as Exhibit "A"
2.1.1 INTEREST ON TERM LOAN A. The Term Loan A will bear
interest from disbursement until due (whether at stated maturity, by
acceleration or otherwise) at a fixed rate equal to nine and 14/100 percent
(9.14%) per annum subject to provisions in CNB's Yield Maintenance Agreement, a
copy of which is attached as Exhibit "C". Interest will be payable monthly in
arrears on the first day of each month, starting on February 1, 1999, and on the
date the Term Loan A is paid in full.
2.1.2 PAYMENT OF TERM LOAN A. The principal amount of the
Term Loan A will be repaid by Borrower to CNB in thirty-nine (39) consecutive
monthly installments, consisting of thirty-eight (38) installments each in the
amount of $60,000.00, and a final installment in the amount of $60,853.07,
commencing on January 1, 1999, and continuing on the first day of each month up
to and including March 1, 2002, on which date all principal and accrued interest
will be due and payable in full.
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 Three Hundred
Twenty Six Thousand Six Hundred Forty Five and 44/100 Dollars ($326,645.44). The
Term Loan B will be evidenced by a promissory note ("Term Note") in the form
attached hereto as Exhibit "B"
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 February 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 five (5) consecutive monthly
installments, consisting of four (4) installments each in the amount of
$8,530.00, and a final installment in the amount of $294,540.62, commencing on
February 1, 1999, and continuing on the first day of each month up to and
including June 1, 1999, on which date all principal and accrued interest will be
due and payable in full.
2.3 OPTIONAL PREPAYMENTS. Borrower may prepay any Loans provided that
on each prepayment, Borrower will pay the accrued interest on the prepaid
principal, to the date of such prepayment plus any amounts due under CNB's Yield
Maintenance Agreement. All prepayments will be applied to principal installments
in the inverse order of their maturities.
2.4 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
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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.
2.5 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
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.
2.6 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 will execute and deliver to CNB
their Continuing Guaranties ("Guaranties") in the form customarily used by CNB.
2.7 CASH/SECURITIES COLLATERAL. Borrower agrees that the aggregate
principal amount of the Cash/Securities Collateral shall at no time be less than
One Million Two Hundred Twenty One Thousand Dollars ($1,221,000.00).
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 in the Cash/Securities Collateral, and evidence
of such perfection;
3.1.2 Evidence that any insurance required by this Agreement
or any other Loan Document is in effect; and
3.1.3 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
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
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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.
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.
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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 8.8 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
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 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 annual financial statements for such year for Borrower and
the Subsidiaries including therein 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;
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5.2.3 Within forty-five (45) days after the end of each
fiscal quarter, a listing and aging of all accounts receivable and accounts
payable;
5.2.4 Within ten (10) days after filing, a copy of the
Federal Income Tax Return of Borrower and each Guarantor;
5.2.5 Prior to the end of each of Borrower's fiscal years,
for the next fiscal year, a detailed and comprehensive statement of projected
cash flows, a projected balance sheet and a projected income statement, prepared
in accordance with FASB 95, together with a business plan and written analysis
of the business and prospects of Borrower;
5.2.6 Within forty-five (45) days after the end of each
fiscal quarter, Borrower will provide CNB with brokerage and bank statements for
Xxx X. Xxxxxxxx showing all Liquid Assets; and
5.2.7 Such additional information, reports and/or statements
as CNB may, from time to time, reasonably request.
5.3 FINANCIAL STATEMENTS OF GUARANTORS. Not later than ninety (90)
days after Borrower's fiscal year end of each year, Borrower will provide CNB
with the financial statement, in form and substance satisfactory to CNB, of each
Guarantor certified by such Guarantor to be true and correct.
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.).
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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.
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 will maintain:
5.10.1 Tangible Net Worth plus Subordinated Debt plus SLI
Acquisition Corp. Preferred Stock of not less than $1,800,000.00, plus ninety
percent (90%) of net private placement proceeds raised after October 1, 1999,
plus seventy-five percent (75%) of net income of Borrower for each fiscal year
after the date of this Agreement, at all times;
5.10.2 A ratio of Total Senior Liabilities to Tangible Net
Worth plus Subordinated Debt of not more than 3.5 to 1 at all times;
5.10.3 A ratio of Cash Flow from Operations to Debt Service
of not less than 1.1 to 1 (a) for the six-month period ending January 2, 1999,
(b) for the nine-month period ending April 3, 1999, and (c) thereafter, during
the twelve months preceding the date of determination.
5.11 YEAR 2000 COMPLIANCE. Borrower has adopted a plan, appropriate to
its business or industry, to insure that its computer software is Year 2000
Compliant. Borrower has or intends to develop an action plan to deal with
significant disruption in its business which might be anticipated in the event
of foreseen or unforeseen failures of its computer systems or its production and
manufacturing equipment to be Year 2000 Compliant.
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.
6.8 SALE AND LEASEBACK. Enter into any sale-leaseback transaction.
8
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 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.
6.11 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. EVENTS OF DEFAULT.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following will
constitute an Event of Default:
7.1.1 Borrower fails to pay when due any installment of
principal or interest or any other amount payable under the Loan Documents;
7.1.2 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;
7.1.3 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
Borrower, any Subsidiary or any Guarantor, or Borrower, any Subsidiary or any
Guarantor makes a general assignment for the benefit of creditors;
7.1.4 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;
7.1.5 CNB's security interest in or lien on any portion of
any Collateral and Cash/Securities Collateral becomes impaired or otherwise
unenforceable;
7.1.6 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;
7.1.7 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;
7.1.8 All or substantially all of the property of Borrower,
any Guarantor or any Subsidiary is condemned, seized or otherwise appropriated;
7.1.9 Xxx X. Xxxxxxxx fails to maintain verifiable Liquid
Assets including Cash/Securities Collateral of at least $1,600,000.00 at all
times.
7.1.10 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
9
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;
7.1.11 Any obligee of Subordinated Debt fails to comply with
the provisions of the documents evidencing such Subordinated Debt or any
Subordination Agreement; or
7.1.12 Any Guarantor dies, becomes incapacitated, or revokes
his or its Guaranty, or such Guaranty becomes otherwise unenforceable with
respect to future advances.
7.2 NOTICE OF DEFAULT AND CURE OF POTENTIAL EVENTS OF DEFAULT. Except
with respect to the Events of Default specified in Sections 7.1.1, 7.1.3, or
7.1.5 above, and subject to the provisions of Section 7.4, 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.
7.3 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 Cash/Securities 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 and Cash/Securities Collateral.
7.4 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 and Cash/Securities Collateral,
CNB may take such legal actions as it deems necessary to protect the Collateral
and Cash/Securities 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.
8. MISCELLANEOUS.
8.1 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 8.1 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.
8.2 DISPUTE RESOLUTION.
8.2.1 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
10
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
8.2.2 REAL PROPERTY COLLATERAL. Notwithstanding the provisions
of subsection 8.2.1, 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
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 8.2.3.
8.2.3 JUDICIAL REFERENCE. At the request of any party, a
controversy or claim which is not submitted to arbitration as provided and
limited in subsections 8.2.1 and 8.2.2 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.
8.2.4 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.
8.2.5 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.
8.2.6 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).
8.2.7 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.
8.3 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, 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.
8.4 APPLICABLE LAW. This Agreement will be governed by California law.
8.5 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
11
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.
8.6 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.
8.7 COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, when taken together, will constitute but one agreement.
8.8 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 and
Cash/Securities 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.
8.9 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.
8.10 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.
8.11 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.
8.12 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.
*****
12
8.13 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/ Xxxx Xxxx
----------------------------------------
Xxxx Xxxx, Vice President
Address:
--------
00000 X. Xxxxxxxxx Xxxx., Xxxxx 000
Xx Xxxxxx, XX 00000
Attention: Xxxx Xxxx, 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
13
EXHIBIT A
TERM NOTE A
(Any Interest Rate)
$2,340,000.00 Irvine, California
December 22, 1998
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 MILLION
THREE HUNDRED FORTY THOUSAND DOLLARS ($2,340,000.00), 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
thirty-nine (39) consecutive monthly installments, consisting of thirty-eight
(38) installments each in the amount of $60,000.00, and a final installment in
the amount of $60,853.07 commencing January 1, 1999, and continuing on the first
day of each month up to and including March 1, 2002, 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 A referred to in the Credit Agreement and is
entitled to the benefits thereof.
Upon CNB's written notice to Borrower of the occurrence of an Event of
Default, the outstanding principal balance (and interest, to the extent
permitted by law) shall bear additional interest from the date of such notice at
the rate of Five Percent (5.0%) per annum higher than the interest rate as
determined and computed above, and continuing thereafter until the Event of
Default is cured.
This Note shall be governed by the laws of the State of California. If
this Note is executed by more than one Borrower, all obligations are joint and
several.
"BORROWER" Spectrum Laboratories, Inc., a
Delaware corporation
By: EXHIBIT PLEASE DO NOT SIGN
----------------------------------------
Xxx X. Xxxxxxxx, Chief Executive Officer
EXHIBIT B
TERM NOTE B
(Any Interest Rate)
$326,645.44 Irvine, California
December 22, 1998
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 THREE HUNDRED
TWENTY SIX THOUSAND SIX HUNDRED FORTY FIVE AND 44/100 DOLLARS ($326,645.44),
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 five (5) consecutive monthly installments, consisting of
four (4) installments each in the amount of $8,530.00, and a final installment
in the amount of $294,540.62 commencing February 1, 1999, and continuing on the
first day of each month up to and including June 1, 1999, 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.
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: EXHIBIT PLEASE DO NOT SIGN
----------------------------------------
Xxx X. Xxxxxxxx, Chief Executive Officer
EXHIBIT C
YIELD MAINTENANCE AGREEMENT
During the first thirty (30) months of Term Loan A, Borrower shall have the
right to prepay the principal of the Term Loan A, in whole or in part, on the
first day of a calendar month, which prepayment must be preceded by not less
than thirty (30) days prior written notice to CNB of Borrower's intention to
make such prepayment, the amount thereof, and the day upon which such prepayment
will be made, and there shall be paid to CNB concurrently with such prepayment
all then accrued interest and any and all other amounts then due hereunder,
TOGETHER WITH A PREPAYMENT CHARGE equal to the greater of:
(1) One percent (1%) of the principal balance being prepaid; or
(2) An amount obtained by:
(a) first computing a "Future Value", which shall be
equal to the product of:
(i) the excess, if any, expressed as a decimal, of
(A) the interest rate at the time of such prepayment, over (B) the Yield Rate,
as that term is hereinafter defined, multiplied by,
(ii) the quotient obtained by dividing (a) the
number of days after such prepayment date through and including the Maturity
Date by (b) 365, and multiplied by
(iii) the amount of principal balance to be prepaid,
and then,
(b) determining the present value, as of the date of
prepayment of a future payment in an amount equal to the Future Value paid on
the Maturity Date, discounted at a discount rate equal to the Yield Rate.
The "Yield Rate", as used herein, shall be the yield to maturity of that U.S.
Treasury Bond or Note (as reported in the edition of the Wall Street Journal, or
similar publication which is dated on the fifth (5th) business day preceding the
proposed repayment date), the due date of which is closest to (either before,
after or on) the Maturity Date of the Note. However, if the period between the
Maturity Date and the closest due date of the U.S. Treasury Bond or Note exceeds
six (6) months, the average of the yields to maturity of the two (2) U.S.
Treasury Bonds or Notes, with due dates next preceding and following the
Maturity Date, shall be used to compute such difference; and if there are two
(2) or more U.S. Treasury Bonds or Notes with the same due dates, that one whose
yield to maturity is closest to the Interest Rate shall be used to compute such
difference. The Yield Rate shall be rounded to the nearest one-hundredth of one
percent (0.01%).
On or after the commencement of the thirty-first (31st) month of the Term Loan
A, Borrower shall have the right to prepay the principal of the Term Loan A, in
whole or in part, without any prepayment charge, on the first (1st) day of a
calendar month, which prepayment must be preceded by not less than thirty (30)
days prior written notice to CNB of Borrower's intention to make such
prepayment, the amount thereof, and the date upon which such prepayment will be
made, and there shall be paid to CNB concurrently therewith, all then accrued
interest and any and all other amounts then due thereunder.
