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EXHIBIT 10.25
AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT dated as of
February 14, 1997 (the "Amendment"), is entered into by and among PHARMCHEM
LABORATORIES, INC., a California corporation, and PHARMCHEM LABORATORIES
OPERATIONS, INC., a California corporation (individually, a "Borrower", and
collectively, the "Borrowers"), and SILICON VALLEY BANK, ("Bank"). Capitalized
terms used herein without definition shall have the same meanings herein as
given to them in the Loan Agreement (defined below).
RECITALS
A. The Borrowers and the Bank have entered into that certain Loan
and Security Agreement dated as of November 17, 1994, and amended by those
certain Loan Modification Agreements dated March 6, 1995, September 1, 1995,
Amendment No. 3 dated March 26, 1996, and Amendment No. 4 dated June 19, 1996
(as amended, the "Loan Agreement") pursuant to which the Bank has agreed to
extend and make available to the Borrowers certain advances of money.
B. The Borrowers desire that the Bank further amend the Loan
Agreement upon the terms and conditions more fully set forth herein.
C. Subject to the representations and warranties of the Borrowers
herein and upon the terms and conditions set forth in this Amendment, the Bank
is willing to so amend the Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
SECTION 1. THE BORROWERS' REPRESENTATIONS AND WARRANTIES. Each of the
Borrowers represents and warrants that, immediately before and immediately
after giving effect to this Amendment, no event shall have occurred and be
continuing which constitutes an Event of Default.
SECTION 2. AMENDMENTS TO THE LOAN AGREEMENT.
2.1 DEFINITIONS. A new definition of "Fifth Amendment
Effective Date" is added to SECTION 1.1 of the Loan Agreement.
" 'Fifth Amendment Effective Date' means December 30, 1996."
2.2 The first paragraph of SECTION 2.2(a) of the Loan
Agreement, entitled "REVOLVING ADVANCES", is hereby deleted and replaced in its
entirety to read as follows:
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"2.1(a) REVOLVING ADVANCES. Subject to the terms and conditions of
this Agreement, Bank agrees to make revolving advances ("Advances") to Borrowers
in an amount not to exceed the lesser of the Committed Line or the Borrowing
Base less the outstanding principal of the Term Loan if Cash Flow Coverage is
equal to or greater than 1.00:1.00 but less than 1.50:1.00. For purposes of this
Agreement "Borrowing Base" shall mean an amount equal to seventy-five percent
(75%) of Eligible Accounts.
2.3 SECTION 6.8 of the Loan Agreement, entitled "QUICK RATIO", is
hereby deleted and replaced in its entirety to read as follows:
"6.8 QUICK RATIO. Borrowers shall maintain, on a monthly basis,
a ratio of Quick Assets to Current Liabilities of at least .80:1.00."
2.4 SECTION 6.11 of the Loan Agreement, entitled "CASH FLOW COVERAGE",
is hereby deleted and replaced in its entirety to read as follows:
"6.11 CASH FLOW COVERAGE. Borrowers shall maintain on a
consolidated basis, a minimum ratio of (a) quarterly EBITDA annualized to (b)
current portion of long term debt plus quarterly interest expense annualized,
as of the last day of each fiscal quarter ("Cash Flow Coverage") of 1.00:1.00.
If Cash Flow Coverage is greater than or equal to 1.00:1.00 but less than
1.50:1.00, then the outstanding principal of the Term Loan shall be reserved
against the Borrowing Base."
2.5 SECTION 6.12 of the Loan Agreement, entitled "PROFITABILITY", is
hereby deleted and replaced in its entirety to read as follows:
"6.12 PROFITABILITY. Borrowers shall be profitable on a
consolidated pre-tax basis for each fiscal quarter commencing March 31, 1997.
for the quarter ending December 31, 1996, a pre-tax loss not to exceed $25,000
shall be allowed."
SECTION 3. LIMITATION. The amendments set forth in this Amendment shall
be limited precisely as written and shall not be deemed (a) to be a
modification of any other term or condition of the Loan Agreement or of any
other instrument or agreement referred to therein or to prejudice any right or
remedy which the Bank may now have or may have in the future under or in
connection with the Loan Agreement or any instrument or agreement referred to
therein; or (b) to be a consent to any future amendment or modification to
any instrument or agreement the execution and delivery of which is consented to
hereby, or to any waiver of any of the provisions thereof. Except as expressly
amended hereby, the Loan Agreement shall continue in full force and effect.
SECTION 4. EFFECTIVENESS.
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4.1 This Amendment shall be deemed to be effective as of the Fifth
Amendment Effective Date; provided, however, that such effectiveness is subject
to the condition precedent that Bank shall have received, in form and substance
satisfactory to Bank and its counsel, the following:
(a) The execution and delivery of a copy hereof, whether the same
or different copies, by each of the Borrowers, to the Bank;
(b) Bank's receipt of a certificate executed by the Secretary of
each of the Borrowers and the Guarantor certifying:
(i) the name of the officer(s) of the Borrower and Guarantor
authorized to execute Loan Documents on behalf of the Borrower and
Guarantor together with a sample of the true signatures of such
officer(s), with the signature of the Secretary being certified by a
separate authorized officer; and
(c) Bank's receipt of the Reaffirmation of Guaranty, executed by
the Guarantor.
SECTION 6. RELEASE AND WAIVER. EACH BORROWER HEREBY REPRESENTS AND
WARRANTS TO THE BANK THAT IT HAS NO KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A
CLAIM, COUNTERCLAIM, DEFENSE OR RIGHT OF SET-OFF, AND HEREBY RELEASES BANK FROM
ALL LIABILITY ARISING UNDER OR WITH RESPECT TO AND WAIVES ANY AND ALL CLAIMS,
COUNTERCLAIMS, DEFENSES AND RIGHTS OF SET-OFF, AT LAW OR IN EQUITY, THAT ANY
BORROWER MAY HAVE AGAINST BANK EXISTING AS OF THE DATE OF THIS AMENDMENT
ARISING UNDER OR RELATED TO THIS AMENDMENT, THE LOAN AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO THE LOANS CONTEMPLATED HEREBY OR THEREBY OR TO ANY
ACT OR OMISSION TO ACT BY THE BANK WITH RESPECT HERETO OR THERETO.
SECTION 7. COUNTERPARTS. This Amendment may be signed in any number
of counterparts, and by different parties hereto in separate counterparts, with
the same effect as if the signatures to each such counterpart were upon a
single instrument. All counterparts shall be deemed an original of this
Amendment.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWERS PHARMCHEM LABORATORIES, INC.
By: Xxxxx X. Xxxxxxxxx
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Printed Name: Xxxxx Xxxxxxxxx
Title: Vice President
PHARMCHEM LABORATORIES OPERATIONS, INC.
By: Xxxxx X. Xxxxxxxxx
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Printed Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
BANK SILICON VALLEY BANK
By: Xxxxx Xxxxxxxxx
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Printed Name: Xxxxx Xxxxxxxxx
Title: Asst. Vice President
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SCHEDULE 6.3(b)
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: PharmChem Laboratories, Inc.
PharmChem Laboratories Operations, Inc.
0000X X'Xxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Each of the undersigned, PHARMCHEM LABORATORIES, INC., a California
corporation ("Pharmchem") and PHARMCHEM LABORATORIES OPERATIONS, INC., a
California corporation ("Operations") (Pharmchem and Operations each being
hereinafter referred to individually as a "Borrower" and collectively as the
"Borrowers") hereby certifies that in accordance with the terms and conditions
of the Loan and Security Agreement among Borrowers and Bank (the "Agreement").
(i) Borrowers are in complete compliance for the period ending _________ of all
required conditions and terms except as noted below and (ii) all
representations and warranties of Borrowers stated in the Agreement are true,
accurate and complete in all material respects as of the date hereof. Attached
herewith are the required documents supporting the above certification. The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principals (GAAP) and are consistency from one period to
the next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days of Yes No
non-quarter ending months
Quarterly financial statements Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly
Basis:
Minimum Quick Ratio .80:1.00 ____:1.00 Yes No
Minimum TNW $7,200,000 plus 75% $_____ Yes No
of net profit after
tax
Maximum Debt/TNW 1.75:1.00 ____:1.0 Yes No
Maintain on a Quarterly
Basis:
Profitability Profitable on a pre ________ Yes No
-tax basis*
Minimum Cash Flow 1.00:1.00** ____:1.0 Yes No
Coverage
* Pre-tax loss of $25,000 allowed at 12/31/96
** If Cash Flow Coverage is greater than 1.00x but less than 1.50x, then the
Term Loan amount outstanding shall be reserved against the Borrowing Base. If
Cash Flow Coverage is 1.50x or greater, then no reserve will be required.
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BANK USE ONLY
Received by:
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AUTHORIZED SIGNER
Date:
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Verified:
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AUTHORIZED SIGNER
Date:
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Compliance Status: Yes No
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COMMENTS REGARDING EXCEPTIONS:
Sincerely,
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SIGNATURE
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TITLE
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DATE
COMMENTS REGARDING EXCEPTIONS:
Sincerely,
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SIGNATURE
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TITLE
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DATE
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BORROWING BASE CERTIFICATE
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Borrowers: PharmChem Laboratories, Inc. Lender: Silicon Valley Bank
PharmChem Laboratories Operations, Inc. 0000 Xxxxxx Xxxxx
0000X X'Xxxxx Xxxxx Xxxxx Xxxxx, XX 00000
Xxxxx Xxxx, XX 00000
Commitment Amount: Five Million Dollars ($5,000,000)
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ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
2. Additions (please explain on reverse) $
3. TOTAL ACCOUNTS RECEIVABLE $
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Amounts over 90 days due $
5. Balance of 50% over 90 day accounts $
6. Concentration Limits $
7. Foreign Accounts $
8. Governmental Accounts $
9. Contra Accounts $
10. Promotion or Demo Accounts $
11. Intercompany/Employee Accounts $
12. Other (please explain on reverse) $
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
14. Eligible Accounts (No. 3-No. 13) $
15. LOAN VALUE OF ACCOUNTS (75% of No. 14)
BALANCES
16. Maximum Loan Amount $5,000,000
17. Total Funds Available (Lesser of #16 or #15) $
18. Present balance owing on Line of Credit $
19. Outstanding under ADP Sublimit $
20. Outstanding under Term Loan (if Cash Flow Coverage $
is greater than 1.00x but less than 1.50x)
21. RESERVE POSITIVE (#17-#18, #19 and 20) $
The undersigned represent and warrant that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement among the undersigned and Silicon Valley Bank.
COMMENTS:
PHARMCHEM LABORATORIES OPERATIONS, INC. PHARMCHEM LABORATORIES, INC. ---------------------------------
By: By: BANK USE ONLY
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Rec'd By:
Title: Title: ----------------
--------------------------------- ---------------------------- Auth. Signer
Date:
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Verified:
----------------
Auth. Signer
Date:
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REAFFIRMATION OF GUARANTY
TO: Silicon Valley Bank ("Lender")
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
The undersigned (hereinafter referred to as "Guarantor") hereby
acknowledges and agrees that Guarantor has read and is familiar with, and
hereby consents to, all of the terms and conditions of that certain Amendment
No. 5 to Loan and Security Agreement, dated as of February 14, 1997
(hereinafter referred to as the "Amendment") and all of the agreements and
documents referred to therein, and specifically consents to the financial
accommodations extended and to be extended by Lender to PHARMCHEM LABORATORIES,
INC., a California corporation ("Pharmchem") and PHARMCHEM LABORATORIES
OPERATIONS, INC., a California corporation ("Operations") (Pharmchem and
Operations each being hereinafter referred to individually as a "Borrower" and
collectively as the "Borrowers") whose address is 0000X X'Xxxxx Xxxxx, Xxxxx
Xxxx, Xxxxxxxxxx 00000, as set forth therein, and in said agreements and
documents. Guarantor hereby confirms and agrees that all of the terms and
provisions of Guarantor's Unconditional Guaranty (Corporate), dated November
17, 1994 (hereinafter referred to as the "Guaranty"), are hereby ratified and
confirmed, and shall continue in full force and effect as the guaranty of all
obligations of Borrowers under the Agreements (as defined in the Guaranty), as
modified by the Amendment.
Although Lender has informed Guarantor of said foregoing Amendment, and
Guarantor has acknowledged having read the same and consented to all of the
terms and conditions thereof, Guarantor understands and agrees that Lender has
no duty under any agreement with any Borrower, the Guaranty or any agreement
with Guarantor to so notify Guarantor or to seek such an acknowledgement and
consent, and nothing contained herein is intended to, or shall create such a
duty as to any advances or transactions hereafter.
Dated as of February 14, 1997.
MEDSCREEN, LTD.
By: Xxxxx Xxxxxxxxx
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Title: Vice President
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