Exhibit 10.1
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) dated as of June 25, 2021, is entered into by umb bank, n.a. (together with its successors and assigns, “Lender”), SCOTT’S LIQUID GOLD-INC., a Colorado corporation (“SLG”), SLG CHEMICALS, INC., a Colorado corporation (“Chemicals”), and NEOTERIC COSMETICS, INC., a Colorado corporation (“NC”, and together with SLG and Chemicals, collectively, “Borrowers” and each, a “Borrower”) and each of the undersigned guarantors (collectively “Guarantors” and together with Borrowers, “Obligors”), with reference to the following facts:
RECITALS
A. | Lender and Borrowers are parties to a Loan and Security Agreement dated as of July 1, 2020, as amended by the First Amendment to the Loan and Security Agreement dated as of March 26, 2021 (as may be further amended, supplemented, replaced, restated or otherwise modified, the “Loan Agreement”), pursuant to which Lender has provided certain credit facilities to Borrowers. |
B. | Borrowers have requested that Lender make certain modifications to the Loan Agreement. |
C. | Lender is willing to provide such accommodations to the Borrowers on the terms and conditions set forth below. |
NOW, THEREFORE, the parties hereby agree as follows:
1. | Defined Terms. Any and all initially capitalized terms used in this Amendment (including, without limitation, in the Recitals to this Amendment) without definition shall have the respective meanings assigned thereto in the Loan Agreement. |
2. | Consent to Interim Management. Effective as of April 1, 2021, Lender consents to Kevin Paprzycki and Tisha Pedrazzini serving as interim co-presidents of Borrowers until such time as a permanent replacement or permanent replacements reasonably acceptable to Lender are appointed and agrees that such service until such replacements are appointed, does not violate clause (e) of the definition of Change of Control in the Loan Agreement,. |
3. | Consent to Severance Add-Backs. Effective as of April 1, 2021, in accordance with clause (e) of the definition of EBITDA, Lender hereby consents to the add-back to EBITDA of non-cash, non-recurring charges related to the severance package of certain employees of the Company in the amount of $805,000 in April 2021. Notwithstanding the foregoing, as such payments are paid in cash, they will be deducted from EBITDA. |
4. | Financial Covenants. Effective as of April 1, 2021, Section 9.1(a) of the Loan Agreement is hereby amended to read in full as follows: |
“(a)Minimum Tangible Net Worth. Tangible Net Worth as of the last day of each month, shall not be less than the Tangible Net Worth Requirement. As used herein:
(i)‘Tangible Net Worth Requirement’ means the respective Tangible Net Worth Requirement set forth below:
Test Date | Tangible Net Worth Requirement |
December 31, 2020 | -$1,325,000 |
January 31, 2021 | -$1,325,000 |
February 28, 2021 | -$1,582,000 |
March 31, 2021 | -$1,505,000 |
April 20, 2021 | -$2,163,000 |
May 31, 2021, and the last day of each month thereafter through March 31, 2022 | -$2,105,000 |
thereafter, the Tangible Net Worth Requirement shall be increased (but not decreased) on each Determination Date by an amount equal to 25% of positive Net Income for the fiscal year immediately preceding such Determination Date, based on the audited financial statements required by Section 8.1(a) with respect to the fiscal year ending prior to such Determination Date.
(ii)‘Determination Date’ means the date that Borrowers are required to deliver audited financial statements as set forth in Section 8.1(a).
5. | Inventory Appraisal. Each Obligor will take commercially reasonable steps to cause an inventory appraisal to be conducted by a third-party appraiser acceptable to Lender, with a start date not later than 30 days after the date of this Amendment, and with a delivery date of not later than 60 days after the date of this Amendment. |
| (a) | Lender has a valid, perfected and first priority security interest and lien upon all of the Collateral to secure the Obligations; |
| (b) | Each of the Loan Documents is in full force and effect, and is enforceable against such Obligor and the Collateral in accordance with its respective terms; and |
| (c) | Such Obligor has no defenses, offsets, recoupments or counterclaims to: (i) its obligation to pay all amounts from time to time owing and to perform all obligations required to be performed under the Loan Documents, (ii) enforcement of Lender’s rights in and to the Collateral, or (iii) enforcement of any other of Lender’s rights or remedies. |
7.Representations and Warranties. Each Obligor represents and warrants to Lender that:
| (a) | Upon the effectiveness of this Amendment, there exists no Default or Event of Default, or any other condition or occurrence of events that constitutes or with the passage of time or the giving of notice or both, would constitute a Default or Event of |
| Default, under the Loan Agreement or any other Loan Document. |
| (b) | Each Obligor executing and delivering this Amendment, has been duly authorized to execute and deliver this Amendment by all necessary corporate action on the part of such Obligor. |
| (c) | All representations and warranties of the Obligors contained in the Loan Documents, except for those that speak as of a particular date, are and remain true and correct in all material respects as of the date of this Amendment. |
8. | Conditions Precedent. The effectiveness of this Amendment shall be subject to the prior satisfaction of each of the following conditions: |
| (a) | This Amendment. Lender shall have received this Amendment duly executed by an authorized officer of Borrowers and Guarantors; and |
| (b) | Officers Certificate. Lender shall have received a duly executed Officer’s Certificate in form acceptable to Lender. |
10. | Integration. This Amendment, and the documents referred to herein constitute the entire agreement of the parties in connection with the subject matter hereof and cannot be changed or terminated orally. All prior agreements, understandings, representations, warranties and negotiations regarding the subject matter hereof, if any, are merged into this Amendment. |
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
14. | Costs and Expenses. Borrowers agree to pay upon demand all of Lender’s expenses, including without limitation reasonable, reasonably documented attorneys’ fees, charges and disbursements of outside counsel for Lender, incurred in connection with the preparation, negotiation, review, analysis, administration, enforcement or modification of, and collection and other litigation relating to, or arising out of the Loan Agreement or any other Loan Document, or any amounts owing thereunder. Lender may pay someone else to help collect such amounts and to enforce the Loan Agreement or any other Loan Document, and Borrowers will pay that amount. This includes, subject to any limits under applicable law, reasonable, reasonably documented Lender’s attorneys’ fees and legal expenses, whether or not there is a lawsuit, including attorneys’ fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), foreclosure costs, appeals, and any anticipated post-judgment collection services. Borrowers will pay any court costs, in addition to all other sums provided by law. |
15. | Governing Law. This Amendment, the interpretation and construction of this Amendment and any provision of this Amendment and of any issue relating to the transactions contemplated by this Amendment shall be governed by the laws of the State of CALIFORNIA, not including conflicts of law rules. |
17. | Further Assurances. Borrowers agree to execute and deliver such other agreements, documents and instruments and take such other actions as Lender may reasonably request in connection with the transactions contemplated by this Amendment. |
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. |
[Signature Page Follows]
IN WITNESS WHEREOF, Obligors and Lender have executed this Amendment by their respective duly authorized officers as of the date first above written.
| GUARANTORS: By: /s/ Kevin Paprzycki |