EXHIBIT 10.1
AMENDMENT AND FORBEARANCE
This Amendment and Forbearance (this "Agreement") is entered into as of
March 1, 2002, by and between COMERICA BANK-CALIFORNIA ("Bank") and PHARMCHEM,
INC. (the "Borrower"), with reference to the following facts:
A. Borrower has borrowed funds from Bank pursuant to that certain
Amended and Restated Loan and Security Agreement by and between Bank and
Borrower dated as of May 15, 2000, as amended by an Amendment to Loan and
Security Agreement and Limited Waiver dated as of September 12, 2001 (the "Loan
Agreement").
B. As of the date hereof, there is owing under the Loan Agreement a
principal amount of $5,269,944.13, together with accrued but unpaid interest and
costs of enforcement. Such amounts, plus accruing interest and costs and accrued
and accruing attorneys' fees and costs are hereinafter sometimes referred to
herein as the "Existing Debt."
C. One or more Events of Default have occurred under the Loan Agreement
by virtue of Borrower's failure to comply with Sections 6.8, 6.9, 6.10, 6.11 and
6.12 of the Loan Agreement as for the periods ending September 30, 2001 and
December 31, 2001 (the "Existing Defaults"). Such Existing Defaults entitle Bank
immediately to enforce all the remedies set forth in the Loan Agreement.
Borrower has asked Bank to forbear from exercising the remedies arising out of
such Existing Defaults, and to amend certain provisions of the Loan Agreement,
and Bank has agreed, provided Borrower enters into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties agree
as follows:
1. Defined Terms. The term "Overadvance Maturity Date" is added to
Section 1.1, as follows:
"Overadvance Maturity Date" means the earlier of (i) the date
that Borrower receives the proceeds from the sale or other disposition
of all or any part of its interest in the capital stock of Medscreen,
Ltd. or (ii) March 31, 2002.
Capitalized terms not otherwise defined herein shall have the same meanings as
set forth in the Loan Agreement.
2. Acknowledgement of Liability. As of the date of this Agreement,
Borrower owes Bank an amount equal to the Existing Debt. Borrower reaffirms all
of its obligations under the Loan Agreement and hereby forever waives and
relinquishes any and all claims, offsets or defenses that Borrower may now have
with respect to the payment of sums due to Bank and the performance of other
obligations under the Loan Agreement. The security interests granted to Bank in
the Loan Agreement in the Collateral remain perfected, first priority liens.
3. Limited Forbearance. Subject to the conditions contained herein and
performance by Borrower of all of the terms of this Agreement and the Loan
Documents after the date hereof, and in reliance on the representations and
warranties of the Borrower set forth herein, Bank shall forbear from exercising
any rights arising out of the Existing Defaults until the earlier to occur of
(i) the Overadvance Maturity Date or (ii) the date that any Event of Default
occurs. The forbearance set forth herein shall be limited precisely as written
and relates solely to the Existing Defaults, and nothing in this Agreement
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shall be deemed to (i) constitute a forbearance or waiver of compliance by
Borrower with those Sections in any other instance, or (ii) constitute a
forbearance or waiver of any other Event of Default or other failure by Borrower
to perform in accordance with the Loan Agreement or the Loan Documents, or (iii)
prejudice any right or remedy that Bank may now have or may have in the future
under or in connection with the Loan Agreement or the Loan Documents
4. Overadvance Maturity Date. On the Overadvance Maturity Date, (i) the
Borrowing Base shall be equal to seventy-five percent (75%) of Eligible Accounts
and (ii) the Committed Revolving Line shall be Four Million Two Hundred Fifty
Thousand Dollars ($4,250,000), and (iii) Borrower shall make a mandatory
prepayment on account of the Revolving Facility to cause the outstanding
principal balance of the Advances to be not more than the lesser of (i) the
Committed Revolving Line or (ii) the Borrowing Base minus Seven Hundred Fifty
Thousand Dollars ($750,000). From and after the Overadvance Maturity Date, the
outstanding principal balance of the Advances may not exceed the lesser of (i)
the Committed Revolving Line or (ii) the Borrowing Base minus Seven Hundred
Fifty Thousand Dollars ($750,000). On or before the Overadvance Maturity Date,
Borrower shall repay the outstanding principal balance and all accrued interest
on the Term Loan.
5. Repayment. Borrower shall continue to make all payments as they
become due under the Loan Agreement.
6. Overadvance Facility. Section 2.1.3 is added to the Agreement, as
follows:
2.1.3 Overadvance Facility. Borrower may request one or more cash
advances (individually, an "Overadvance" and, collectively, the "Overadvances")
from time to time in an aggregate principal amount not to exceed One Million
Five Hundred Thousand Dollars ($1,500,000), provided that no more than One
Million Dollars ($1,000,000) will be made available to Borrower until Borrower
delivers to Bank a stock purchase agreement signed by Borrower and the seller(s)
of the capital stock of Medscreen, Ltd., in form and substance reasonably
satisfactory to Bank. To request an Overadvance, Borrower will notify Bank by
facsimile transmission or telephone no later than 11:00 a.m. California time on
the Business Day before the Business Day of the Overadvance on a form acceptable
to Bank, together with a statement acceptable to Bank of the operational
expenses to be paid with the proceeds of the Overadvance. Bank is authorized to
make Overadvances based upon instructions received from a Responsible Officer or
a designee of a Responsible Officer. Bank may rely on any telephonic notice
given by a person who Bank reasonably believes to be a Responsible Officer or a
designee thereof, and Borrower shall indemnify and hold Bank harmless for any
damages or loss suffered by Bank as a result of such reliance. Provided Bank
approves Borrower's request, which approval will not be unreasonably withheld,
and subject to the other terms and conditions of the Agreement, Bank will credit
the amount of each Overadvance to Borrower's deposit account with Bank. "Credit
Extension" under the Agreement shall include all Overadvances. Borrower shall
repay the principal amount of all Overadvances, and any interest accrued
thereon, on or before the Overadvance Maturity Date.
7. Interest Rate. Subject to section 2.2(b), all Advances and
Overadvances shall bear interest, on the outstanding principal balance, at a
rate equal to the Prime Rate plus two percent (2.0%). Borrower may not request
any Credit Extensions bearing interest with respect to the LIBOR Rate. Any
Credit Extensions that are LIBOR Rate Extensions shall immediately convert to
Prime Rate Advances.
8. Stock Pledge. Without limiting the scope of "Collateral" under the
Agreement, which includes all securities, investment property and financial
assets of Borrower, to secure the Obligations, Borrower grants Bank a security
interest in 600 shares of capital stock of Medscreen, Ltd., together with all
proceeds and substitutions thereof, all cash, stock and other moneys and
property paid thereon, all rights to subscribe for securities declared or
granted in connection therewith, and all other cash and noncash proceeds of the
foregoing, together with any securities or distributions issuable, issued or
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received by Borrower upon conversion of, in respect of, or in exchange for any
of the foregoing (the "Pledged Collateral") Borrower shall deliver to Bank in
pledge the certificate evidencing the securities included in the Pledged
Collateral, accompanied by an instrument of assignment duly executed in blank by
Borrower. Borrower will execute and deliver such documents, and take such
actions, as Bank may reasonably request to perfect or continue the perfection of
Bank's security interest in the Pledged Collateral. Borrower represents to Bank
that (i) Borrower owns the Pledged Collateral free and clear of any Liens,
restrictions or rights of any third parties (ii) the Pledged Collateral
represents not less than sixty percent (60%) of the outstanding capital stock of
Medscreen, Ltd., and (iii) the securities included in the Pledged Collateral are
fully paid and nonassessable
9. Sale of Medscreen. By March 11, 2002, Borrower shall deliver to Bank
an executed Stock Purchase Agreement in form and substance reasonably
satisfactory to Bank relating to the sale of the capital stock of Medscreen,
Ltd. Subject to Borrower's compliance with this Agreement, Bank consents to such
sale.
10. Limited Waiver. Effective upon the satisfaction of Borrower's
obligations under this Agreement, including the repayment in full of the
Overadvances and the Term Advance, Bank waives the Existing Defaults. Such
waiver relates solely to the Existing Defaults, and does not waive compliance
with any other Event of Default or other failure by Borrower to perform in
accordance with the Loan Agreement or the Loan Documents, or prejudice any right
or remedy that Bank may now have or may have in the future under or in
connection with the Loan Agreement or the Loan Documents.
11. Ratification by Borrower of Bank's First Priority Security Interest
in Collateral. Borrower hereby confirms and ratifies Bank's first priority lien
and security interest in and to all Collateral. Borrower shall execute such
security agreements, financing statements and other documents as Bank may from
time to time reasonably request to carry out the terms of this Agreement and the
Loan Agreement. Such liens and security interests shall secure all of the
obligations of Borrower under this Agreement and the Loan Documents.
12. Representations and Warranties.
(a) Borrower hereby represents and warrants that no Event of Default
or failure of condition has occurred or exists, or would exist with notice or
lapse of time or both under any of the Loan Agreement, other than the Events of
Default described in Recital C.
(b) All representations and warranties of Borrower in this Agreement
and the other Loan Agreement are true and correct as of the date hereof, and
shall survive the execution of this Agreement.
13. Default. Borrower's failure to pay any amount when due under this
Agreement or to perform any covenant or other agreement contained in this
Agreement or any other document entered into pursuant hereto shall constitute an
Event of Default under the Loan Agreement.
14. Conditions Precedent. The effectiveness of this Agreement is subject
to receipt by Bank of the following, in each case in form and substance
acceptable to Bank:
(a) This Agreement;
(b) Payment to Bank of a non-refundable amendment fee in the amount
of $2,500;
(c) Payment of all Bank Expenses incurred in connection with this
Agreement; and
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(d) Such other documents and completion of such other matters as
Bank may reasonably deem necessary or appropriate.
15. Events of Default. Borrower acknowledges that Events of Default have
occurred under the Loan Agreement that, but for the forbearance granted under
this Agreement, would have entitled Bank to exercise all the remedies available
to Bank under the Loan Agreement and applicable law.
16. Release.
(a) Borrower acknowledges that Bank would not enter into this
Agreement without Borrower's assurance that Borrower has no claims against Bank
or any of Bank's officers, directors, employees or agents. Except for the
obligations arising hereafter under this Agreement, Borrower releases Bank, any
person or entity that has obtained any interest from Bank under the Loan
Agreement and each of Bank's and entity's officers, directors and employees from
any known or unknown claims which Borrower now has against Bank of any nature,
including any claims that Borrower, its successors, counsel, and advisors may in
the future discover they would have now had if they had known facts not now
known to them, whether founded in contract, in tort or pursuant to any other
theory of liability, including but not limited to any claims arising out of or
related to the Loan Agreement or the transactions contemplated thereby. Borrower
waives the provisions of California Civil Code section 1542, which states:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor.
(b) The provisions, waivers and releases set forth in this section
are binding upon Borrower and Borrower's agents, employees, assigns and
successors in interest. The provisions, waivers and releases of this section
shall inure to the benefit of Bank and its agents, employees, officers,
directors, assigns and successors in interest.
(c) Borrower warrants and represents that Borrower is the sole and
lawful owner of all right, title and interest in and to all of the claims
released hereby and Borrower has not heretofore voluntarily, by operation of law
or otherwise, assigned or transferred or purported to assign or transfer to any
person any such claim or any portion thereof. Borrower shall indemnify and hold
harmless Bank from and against any claim, demand, damage, debt, liability
(including payment of attorneys' fees and costs actually incurred whether or not
litigation is commenced) based on or arising out of any assignment or transfer.
(d) The provisions of this Section shall survive payment in full of
the Obligations, full performance of all the terms of this Agreement and the
Loan Agreement, and/or Bank's actions to exercise any remedy available under the
Loan Agreement or otherwise.
17. Further Assurances. Borrower will take such other actions as Bank
may reasonably request from time to time to perfect or continue Bank's security
interests in Borrower's property, and to accomplish the objectives of this
Agreement.
18. Consultation of Counsel. Borrower acknowledges that Borrower has had
the opportunity to be represented by legal counsel of its own choice throughout
all of the negotiations that preceded the execution of this Agreement. Borrower
has executed this Agreement after reviewing and understanding each provision of
this Agreement and without reliance upon any promise or representation of any
person or persons acting for or on behalf of Bank. Borrower further acknowledges
that Borrower and its counsel have had adequate opportunity to make whatever
investigation or inquiry they may deem necessary or
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desirable in connection with the subject matter of this Agreement prior to the
execution hereof and the delivery and acceptance of the consideration described
herein.
19. Miscellaneous.
(a) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
(b) Integration. This Agreement and any documents executed in
connection herewith or pursuant hereto contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, offers and negotiations, oral or written, with
respect thereto and no extrinsic evidence whatsoever may be introduced in any
judicial or arbitration proceeding, if any, involving this Agreement; except
that any financing statements or other agreements or instruments filed by Bank
with respect to Borrower shall remain in full force and effect.
(c) Entire Agreement. This Agreement and the Loan Documents contain
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings with respect to the subject matter hereof
and thereof.
(d) Course of Dealing; Waivers. No course of dealing on the part of
Bank or its officers, nor any failure or delay in the exercise of any right by
Bank, shall operate as a waiver thereof, and any single or partial exercise of
any such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by an
officer of Bank.
(e) Time is of the Essence. Time is of the essence as to each and
every term and provision of this Agreement and the Loan Documents.
(f) Counterparts. This Agreement may be signed in counterparts and
all of such counterparts when properly executed by the appropriate parties
thereto together shall serve as a fully executed document, binding upon the
parties.
(g) Legal Effect. The Loan Documents remain in full force and
effect. If any provision of this Agreement conflicts with applicable law, such
provision shall be deemed severed from this Agreement, and the balance of this
Agreement shall remain in full force and effect.
(h) WAIVER OF JURY. BANK AND BORROWER ACKNOWLEDGE AND AGREE THAT THE
TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED
FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, RELATED TO OR ARISING OUT OF
THE TRANSACTIONS CONTEMPLATED BY THE LOAN AGREEMENT, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS
AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
(i) Assignment. Borrower consents to Bank's assignment of all or any
part of Bank's rights under this Agreement and the Loan Agreement.
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(j) Power of Attorney. Borrower confirms that the irrevocable power
of attorney granted in the Loan Agreement remains in full force and effect
(k) Choice of Law and Venue. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of California,
without regard to principles of conflicts of law. Each of Borrower and Bank
submits to the exclusive jurisdiction of the state and Federal courts located in
the County of Santa Xxxxx, State of California.
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IN WITNESS WHEREOF the undersigned have executed this Agreement as of
the first date above written.
PHARMCHEM, INC.
By: Xxxxx Xxxxxxxxx
----------------------------
Title: Vice President and CFO
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COMERICA BANK-CALIFORNIA
By: Xxxxx X. Xxxxx
----------------------------
Title: First Vice President
----------------------------
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ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, PHARMCHEM, INC., a Delaware corporation, hereby
sells, assigns and transfers unto _____________ (________________) shares of the
_____________ stock of MEDSCREEN, LTD., a ___________ company (the "Company"),
standing in the undersigned's name on the books of the Company represented by
Certificate No. _________ herewith, and does hereby irrevocably constitute and
appoint ______________________ its attorney to transfer the said stock on the
books of the Company with full power of substitution in the premises.
PHARMCHEM, INC., a Delaware corporation
By _____________________________________
Name ____________________________
Title ____________________________
Dated:_____________, ____
