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EXHIBIT 10.41
PHARMCHEM LABORATORIES, INC.
COMERICA BANK - CALIFORNIA
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as
of May 15, 2000 by and between COMERICA BANK-CALIFORNIA ("Bank") and PHARMCHEM
LABORATORIES, INC. ("Borrower").
RECITALS
A. Borrower and Bank are parties to that certain Loan and Security
Agreement (Accounts & Inventory) dated as of November 18, 1997, that certain
Equipment Rider and Environmental Rider attached thereto, that certain Security
Agreement (All Assets) dated as of November 18, 1997, and that certain Variable
Rate-Installment Note (collectively, as amended, the "Original Agreement").
B. Borrower and Bank desire to amend and restate, without novation, the
Original Agreement on the terms stated herein. This Agreement sets forth the
terms on which Bank will advance credit to Borrower, and Borrower will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners (excluding any
corporation as to which any director of such Person serves only as a director or
is the beneficial owner of less than 25% of its outstanding securities).
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty-five percent
(85%) of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close and if such day relates to any LIBOR Rate Extensions, means any such
day on which dealings in Dollar deposits are conducted by and between banks in
the London interbank market.
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"Change in Control" means a transaction in which any "person" or
"group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of a
sufficient number of shares of all classes of stock then outstanding of Borrower
ordinarily entitled to vote in the election of directors, empowering such
"person" or "group" to elect a majority of the Board of Directors of Borrower,
who did not have such power before such transaction.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to Six
Million Dollars ($6,000,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, the Term Loan or any other
extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, the sum,
determined on a consolidated basis, of all liabilities of Borrower and its
consolidated Subsidiaries which may properly be classified as current
liabilities in accordance with GAAP.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Effective Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the financial statement net worth of a
Person on a consolidated basis, minus intangible assets such as goodwill, minus
deferred tax assets and minus loans to officers, and minus trade receivables
converted to notes in excess of $100,000 on a consolidated basis determined in
accordance with GAAP.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of
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Borrower's business that comply with all of the representations and warranties
to Bank set forth in Section 5.4; provided, that standards of eligibility may be
fixed and revised from time to time by Bank as a consequence of any Collateral
audits done pursuant to Section 6.3 in Bank's reasonable judgment and upon 30
days prior written notification thereof to Borrower in accordance with the
provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following:
(a) Accounts that the account debtor has failed to pay
within ninety-one (91) days of invoice date;
(b) Accounts with respect to an account debtor, twenty-five
percent (25%) or more of whose Accounts the account debtor has failed to pay
within ninety-one (91) days of invoice date.
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does
not have its principal place of business in the United States and is not
supported by one or more letters of credit in an amount and of a tenor, and
issued by a financial institution, acceptable to Bank, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the
United States or any agency or subdivision thereof in which Bank has not
perfected its security interest, except upon completion of the following for
each such account: (i) receipt by Bank of a copy of the contract to be assigned;
(ii) execution of document titled Government Receivables Rider to Loan and
Security Agreement by Borrower, in substantially the form of Exhibit E hereto;
(iii) execution of document titled Government Receivables Instrument of
Assignment by Borrower, in substantially the form of Exhibit F hereto; and (iv)
execution of document titled Government Receivables-Notice of Assignment by both
Borrower and the account debtor, in substantially the form of Exhibit G hereto.
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates of such account debtor, whose total obligations to
Borrower exceed twenty percent (20%) of all Accounts, except with respect to the
Administrative Office of U.S. Courts, as to which the percentage shall be
twenty-five percent (25%), to the extent such obligations exceed the
aforementioned percentages;
(j) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that Bank approves on a case-by-case basis.
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"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services (other than trade payables),
(b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property Collateral" means:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right, but
not the obligation, to xxx for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Interest Period" means for each LIBOR Rate Extension, a period
of approximately one, two, three or six months as Borrower may elect, provided
that the last day of an Interest Period for a LIBOR Rate Extension shall be
determined in accordance with the practices of the LIBOR interbank market as
from time to time in effect, provided, further, in the case of Advances such
period shall expire not later than the Revolving Maturity Date and in the case
of the Term Loan such period shall expire not later than the Term Maturity Date.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the
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foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"LIBOR Base Rate" means, for any Interest Period for a LIBOR Rate
Extension, the rate of interest per annum determined by Bank to be the per annum
rate of interest at which deposits in United States Dollars are offered to Bank
in the London interbank market in which Bank customarily participates at 11:00
a.m. (local time in such interbank market) two (2) Business Days before the
first day of such Interest Period for a period approximately equal to such
Interest Period and in an amount approximately equal to the amount of such
Credit Extension.
"LIBOR Rate" shall mean, for any Interest Period for a LIBOR Rate
Extension, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) equal to (i) the LIBOR Base Rate for such Interest Period divided by (ii)
1 minus the Reserve Requirement for such Interest Period.
"LIBOR Rate Advances" means any Advances or a portion thereof, on
which interest is payable based on the LIBOR Rate in accordance with the terms
hereof.
"LIBOR Rate Extensions" means any LIBOR Rate Advances or any
portion of the Term Loan bearing interest at a rate based on the LIBOR Rate.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all loans, advances, debts, liabilities and
obligations for monetary amounts owing by Borrower to Bank, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any kind
or nature, present or future, whether or not evidenced by any note, agreement or
other instrument, including those arising under any of the Loan Documents. This
term includes, without limitation, all principal, interest (including interest
that accrues after the commencement against Borrower or any Subsidiary of
Borrower under the Bankruptcy Code), fees, including, without limitation, any
and all closing fees, prepayment fees, commitment fees, advisory fees, and
attorneys' fees and any and all other fees, expenses, costs or other amounts
chargeable to Borrower under any of the Loan Documents.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all interest payments and other
recurring payments that
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Borrower may now or hereafter become obligated to pay to Bank under this
Agreement.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed
in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness secured by a lien described in clause (c)
of the defined term "Permitted Liens", provided the amount of such Indebtedness
shall not exceed the cost of the Equipment acquired with the proceeds of such
Indebtedness; and
(e) Extensions, renewals, modifications, amendments and
restatements of any of the items of permitted Indebtedness (a) through (d)
above, provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose materially more burdensome terms upon
Borrower.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having rating of at least A-2 or P-2 from either
Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc., (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank, (iv) Bank's money market accounts, and (v)
certificates of deposit and money market accounts listed on the Schedule and as
disclosed to Bank in writing from time to time.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price or lease of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; and
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
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"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate" or "reference rate," whether or
not such announced rate is the lowest rate available from Bank.
"Prime Rate Advances" means any Advances or any portion thereof,
on which interest is payable based on the Prime Rate in accordance with the
terms hereof.
"Prime Rate Extensions" means any Prime Rate Advances or any
portion of the Term Loan bearing interest at a rate based on the Prime Rate.
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the cash, cash-equivalents, net trade receivables and
marketable securities not classified as long term investments, of Borrower and
its consolidated Subsidiaries determined in accordance with GAAP.
"Regulatory Change" means a change after the date hereof, in, or
of the interpretation of, laws or regulations applicable to Bank.
"Reserve Requirement" means, for any Interest Period, the average
maximum rate at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System. Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by Bank by reason of any Regulatory Change
against (i) any category of liabilities which includes deposits by reference to
which the LIBOR Rate is to be determined as provided in the definition of "LIBOR
Base Rate" or (ii) any category of extensions of credit or other assets which
include Advances.
"Responsible Officer" means any of the Chief Executive Officer,
the Chief Financial Officer and Controller of Borrower.
"Revolving Maturity Date" means May 31, 2001.
"Revolving Facility" means the facility under which Borrower may
request Bank to make Advances, as specified in Section 2.1.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank and which is reflected in a
written agreement in a manner and form acceptable to Bank and approved by Bank
in writing.
"Subsidiary" means any corporation, limited liability company or
partnership in which (i) any general partnership interest or (ii) more than 50%
of the equity of which by the terms thereof ordinary voting power to elect the
Board of Directors, managers or trustees of the entity shall, at the time as of
which any determination is being made, be owned by Borrower, either directly or
through one or more Subsidiaries.
"Term Loan" means the term loan in the amount of One Million Five
Hundred Thousand Dollars ($1,500,000) pursuant to the provisions of Section
2.1.2.
"Term Maturity Date" means April 14, 2004.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
"Trademarks" means any trademark and servicemark rights, whether
registered or not,
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applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT.
2.1.1 Revolving Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, Borrower may request, and Bank agrees to make, Advances in an
aggregate outstanding amount not to exceed the Committed Revolving Line or the
Borrowing Base, whichever is less. Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1.1 may be repaid and
reborrowed at any time prior to the Revolving Maturity Date, at which time all
Advances under this Section 2.1.1 shall be immediately due and payable.
If at any time the outstanding Advances under this Section 2.1.1 exceed
the lesser of the Borrowing Base or the Committed Revolving Line, Borrower shall
immediately pay Bank, in cash, the amount of such excess.
(b) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 11:00 a.m.
California time, on the Business Day that a Prime Rate Advance is to be made,
and 11:00 a.m. California time on the Business Day that is three (3) Business
Days prior to the Business Day on which a LIBOR Rate Advance is made. Each
request for a LIBOR Rate Advance shall be promptly confirmed by a
Payment/Advance Form in substantially the form of Exhibit B-1 hereto. Bank is
authorized to make Advances under this Agreement, based upon instructions
received from a Responsible Officer or a designee of a Responsible Officer, or
without instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
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. Bank will credit the amount of Advances made under this Section 2.1.1
to Borrower's deposit account, as specified by such Borrower.
Each such notice shall specify:
(i) the date such Advance is to be made, which shall be
a Business Day;
(ii) the amount of such Advance;
(iii) whether such Advance is to be a Prime Rate
Advance or a LIBOR Rate Advance; and
(iv) if the Advance is to be a LIBOR Rate Advance, the
Interest Period for such Advance.
Each written request for an Advance, and each confirmation
of a telephone request for such an Advance, shall be in substantially the form
of Exhibit B-1 hereto executed by Borrower.
(c) Prime Rate Advances. The outstanding principal balance
of each Prime Rate Advance shall bear interest until principal is due (computed
daily on the basis of a 360 day year and actual days elapsed), at a floating
rate per annum equal to the Prime Rate plus one half of one percent (0.50%).
Borrower shall pay the entire outstanding principal amount of each Prime Rate
Advance on the Revolving Maturity Date.
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(d) LIBOR Rate Advances. Each LIBOR Rate Advance shall be
in an amount of not less than One Million Dollars ($1,000,000). The outstanding
principal balance of each LIBOR Rate Advance shall bear interest until principal
is due (computed daily on the basis of a 360 day year and actual days elapsed)
at a rate per annum equal to the LIBOR Rate plus 325 basis points for such LIBOR
Rate Advance. The entire outstanding principal amount of each LIBOR Rate Advance
shall be due and payable on the earlier of (i) the last day of the LIBOR Rate
Interest Period for such LIBOR Rate Advance if not converted or continued
pursuant to Section 2.5(a), and (ii) on the Revolving Maturity Date.
(e) Prepayment of the Advances. Borrower may at any time
prepay any Prime Rate Advance or any LIBOR Rate Advance, in full or in part.
Each partial prepayment for a LIBOR Rate Advance shall be in an amount not less
than One Hundred Thousand Dollars ($100,000). Each prepayment shall be made upon
the irrevocable written or telephone notice of Borrower received by Bank not
later than 10:00 a.m. California time on the date of the prepayment of a Prime
Rate Advance, and not less than three (3) Business Days prior to the date of the
prepayment of a LIBOR Rate Advance. The notice of prepayment shall specify the
date of the prepayment, the amount of the prepayment, and the Advance or
Advances prepaid. Each prepayment of a LIBOR Rate Advance shall be accompanied
by the payment of accrued interest on the amount prepaid and any amount required
by Section 2.6.
2.1.2 Term Loan.
(a) Bank has made a Term Loan to Borrower in an aggregate
amount of One Million Five Hundred Thousand Dollars ($1,500,000). Effective as
of January 1, 2000, the Term Loan shall bear interest at a per annum rate equal
to the Prime Rate plus one-half of one percent (0.50%). The Term Loan shall be
payable in fifty seven (57) equal monthly installments of principal in the
amount of Twenty Six Thousand Three Hundred Fifteen Dollars and Seventy-Nine
Cents ($26,315.79) each, plus all accrued interest, beginning on August 14, 1999
and continuing on the same day of each month thereafter through the Term
Maturity Date, at which time all amounts due under this Section 2.1.2 and any
other amounts owing under this Agreement shall be immediately due and payable.
2.2 Interest Rates, Payments, and Calculations.
(a) Interest Rates. Except as set forth in Section 2.2(b),
any Credit Extensions shall bear interest, on the average daily balance thereof,
at the rates specified in Sections 2.1.1 and 2.1.2 hereof.
(b) Default Rate. All Obligations shall bear interest after
notice from Bank of the imposition of such default rate, from and after the
occurrence and during the continuance of an Event of Default, at a rate equal to
three (3) percentage points above the interest rate applicable immediately prior
to the occurrence of the Event of Default.
(c) Payments. Accrued interest shall be due and payable in
arrears upon the earlier of (i) with respect to LIBOR Rate Extensions, the end
of the applicable Interest Period or (ii) with respect to LIBOR Rate Extensions,
any payment of principal or (iii) the last Business Day of each calendar month.
Bank shall automatically charge such interest and all Periodic Payments against
Borrower's deposit account held at Bank or against the Committed Revolving Line,
in which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed
from time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
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2.3 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 2:00 p.m. California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.4 Fees. Borrower shall pay to Bank the following:
(a) Facility Fees. A fee for the Revolving Facility equal
to one quarter of one percent (0.25%) per annum of the amount of the Revolving
Committed Line, payable quarterly on the last day of each March, June, September
and December.
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. On the Closing Date, an amount equal to
the Bank Expenses (including reasonable attorneys' fees and expenses) incurred
in connection with the preparation and negotiation of the Loan Documents and,
after the Closing date, all Bank Expenses, including reasonable attorneys' fees
and expenses incurred in the enforcement of this Agreement, as and when they
become due.
2.5 Conversion/Continuation of Extensions.
(a) Borrower may from time to time submit in writing a
request that Prime Rate Extensions be converted to LIBOR Rate Extensions or that
any existing LIBOR Rate Extensions continue for an additional Interest Period.
Such request shall specify the amount of the Prime Rate Extensions which will
constitute LIBOR Rate Extensions (subject to the limits set forth below) and the
Interest Period to be applicable to such LIBOR Rate Extensions. Each written
request for a conversion to a LIBOR Rate Extension or a continuation of a LIBOR
Rate Extension shall be substantially in the form of a Libor Rate
Conversion/Continuation Certificate as set forth on Exhibit B-2, which shall be
duly executed by a Responsible Officer. Subject to the terms and conditions
contained herein, three (3) Business Days after Bank's receipt of such a request
from Borrower, such Prime Rate Extensions shall be converted to LIBOR Rate
Extensions or such LIBOR Rate Extensions shall continue, as the case may be
provided that:
(i) no Event of Default or event which with notice or
passage of time or both would constitute an Event of Default exists;
(ii) no party hereto shall have sent any notice of
termination of the Agreement;
(iii) Borrower shall have complied with such reasonable
and customary procedures as Bank has established from time to time for
Borrower's requests for LIBOR Rate Extensions; and
(iv) the amount of a LIBOR Rate Extension shall be
$1,000,000 or such greater amount which is an integral multiple of $500,000.
Any request by Borrower to convert Prime Rate Extensions to LIBOR Rate
Extensions or continue any existing LIBOR Rate Extensions shall be irrevocable.
Notwithstanding anything to the contrary contained herein,
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Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable LIBOR Rate market to fund any LIBOR
Rate Extensions, but the provisions hereof shall be deemed to apply as if Bank
had purchased such deposits to fund the LIBOR Rate Extensions.
(b) Any LIBOR Rate Extensions shall automatically
convert to Prime Rate Extensions upon the last day of the applicable Interest
Period, unless Bank has received and approved a complete and proper request to
continue such LIBOR Rate Extension at least three (3) Business Days prior to
such last day in accordance with the terms hereof. Any LIBOR Rate Extensions
shall, at Bank's option, convert to Prime Rate Extensions on the last day of the
applicable Interest Period in the event that an Event of Default shall exist.
2.6 Additional Requirements/Provisions Regarding LIBOR Rate
Extensions.
(a) If for any reason (including voluntary or mandatory
prepayment or acceleration), Bank receives all or part of the principal amount
of a LIBOR Rate Extension prior to the last day of the Interest Period for such
LIBOR Rate Extension, Borrower shall on demand by Bank, pay Bank the amount (if
any) by which (i) the additional interest which would have been payable on the
amount so received had it not been received until the last day of such Interest
Period or term exceeds (ii) the interest which would have been recoverable by
Bank by placing the amount so received on deposit in the London Dollar interbank
markets for a period starting on the date on which it was so received and ending
on the last day of such Interest Period. Bank's determination as to such amount
shall be conclusive absent manifest error.
(b) Borrower shall pay to Bank, upon demand by Bank, from
time to time such amounts as Bank may reasonably determine to be necessary to
compensate it for any costs incurred by Bank that Bank determines are
attributable to its making or maintaining of any amount receivable by Bank
hereunder in respect of any Credit Extensions relating thereto (such increases
in costs and reductions in amounts receivable being herein called "Additional
Costs"), in each case resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts
payable to Bank under this Agreement in respect of any Credit Extensions (other
than changes which affect taxes measured by or imposed on the overall net income
of Bank by the jurisdiction in which Bank has its principal office or its
lending office); or
(ii) imposes or modifies any reserve, special deposit
or similar requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of Bank (including any Credit
Extensions or any deposits referred to in the definition of "LIBOR Base Rate"
other than those reflected in the calculation of the Reserve Requirement); or
(iii) imposes any other material condition affecting
this Agreement (or any of such extensions of credit or liabilities).
Bank will notify Borrower of any event occurring after the date of the Agreement
that will entitle Bank to compensation pursuant to this section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation; provided that Borrower shall not be liable for any Additional
Costs which relate to a period more than 90 days prior to the giving of such
notices by Bank. Bank will furnish Borrower with a statement setting forth the
basis and a reasonably detailed calculation of the amount of each request by
Bank for compensation under this Section 2.6. Determinations and allocations by
Bank for purposes of this Section 2.6 of the effect of any Regulatory Change on
its costs of maintaining its obligations to make Credit Extensions or of making
or maintaining Credit Extensions or on amounts receivable by it in respect of
Credit Extensions, and of the additional amounts required to compensate Bank in
respect of any Additional Costs, shall be conclusive absent manifest error.
(c) Borrower shall pay to Bank, upon the request of Bank,
such amount or amounts as shall be sufficient (in the sole good faith opinion of
Bank) to compensate it for any reasonable loss, costs or expense incurred by it
as a result of any failure by Borrower to borrow a LIBOR Rate Extension on the
date for such borrowing specified in the relevant notice of borrowing hereunder.
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(d) If Bank shall determine that the adoption or
implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Bank (or its applicable lending office) with any respect or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of Bank or any person or entity
controlling Bank (a "Parent") as a consequence of its obligations hereunder to a
level below that which Bank (or its Parent) could have achieved but for such
adoption, change or compliance (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by Bank to be material, then
from time to time, within 15 days after demand by Bank, Borrower shall pay to
Bank such additional amount or amounts as will compensate Bank for such
reduction, other than amounts which relate to a period more than 90 days prior
to the making of such demand by Bank. A statement of Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive absent manifest error.
(e) If at any time Bank, in its sole and absolute
discretion, determines that: (i) the amount of the LIBOR Rate Extensions for
periods equal to the corresponding Interest Periods or any other period are not
available to Bank in the offshore currency interbank markets, or (ii) the LIBOR
Rate does not accurately reflect the cost to Bank of lending the LIBOR Rate
Extension, then Bank shall promptly give notice thereof to Borrower, and upon
the giving of such notice Bank's obligation to make the LIBOR Rate Extensions
shall be suspended until such conditions no longer exist, unless Bank and
Borrower agree in writing to a different interest rate applicable to LIBOR Rate
Extensions. If it shall become unlawful for Bank to continue to fund or maintain
any LIBOR Rate Extensions, upon demand by Bank, Borrower shall prepay the LIBOR
Rate Extensions in full with accrued interest thereon (including, without
limitation, any amount payable in connection with such prepayment pursuant to
Section 2.6(a)).
2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Term Maturity Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF CREDIT EXTENSIONS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension after the Closing Date is subject
to the condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) an intellectual property security agreement; and
(d) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
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(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, except those
representations and warranties that expressly relate to an earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy of
the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except for Permitted Liens,
such security interest shall constitute a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Notwithstanding the foregoing, the security interest granted herein does not
extend to and the term "Collateral" does not include any license or contract
rights to the extent (i) the granting of a security interest in it would be
contrary to applicable law, or (ii) that such rights are nonassignable by their
terms (but only to the extent the prohibition is enforceable under applicable
law, including, without limitation, Section 9318(4) of the Code) without the
consent of the licensor or other party (but only to the extent such consent has
not been obtained). Borrower shall take such steps as Bank reasonably requests
to obtain the consent of, or waiver by, any person whose consent or waiver is
necessary for such licenses or contract rights to be deemed "Collateral" and for
Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or agreement, whether now
existing or entered into in the future.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right at Borrower' expense (not to exceed $5,000 per
annum, as long as an Event of Default has not occurred and is continuing) upon
reasonable prior notice, from time to time during Borrower's usual business
hours, to inspect Borrower's Books and to make copies thereof and to check,
test, and audit and appraise the Collateral in order to verify Borrower's
financial condition or the amount, condition of, or any other matter relating
to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
5.1 Due Organization and Qualification. Borrower is a corporation
duly existing under the laws of the State of California and qualified and
licensed to do business in any state in which the conduct of its business or its
ownership of property requires that it be so qualified in which the failure to
so qualify could reasonably be expected to have a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could reasonably be expected to have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and marketable title to
the Collateral, free and clear of Liens, except for Permitted Liens.
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5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The service or property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor whose accounts are included in any Borrowing
Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Intellectual Property Collateral. Borrower is the owner or
licensee of the Intellectual Property Collateral, except for non-exclusive
licenses granted by Borrower to its customers in the ordinary course of
business. Each of the Patents is valid and enforceable, and no part of the
Intellectual Property Collateral has been judged invalid or unenforceable, in
whole or in part, and to Borrower's knowledge, no claim has been made that any
part of the Intellectual Property Collateral violates the rights of any third
party, which violation could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the Schedule, no part of the Intellectual
Property Collateral is subject to any agreement restricting the transfer thereof
or the grant of a security interest therein. The Copyrights, Patents and
Trademarks listed on the Exhibits to the Intellectual Property Security
Agreement constitute all of the intellectual property necessary to sell, license
or distribute all of Borrower's products in the ordinary course of business. The
Schedule lists all of the material licenses, contracts and agreements as to
which Borrower's rights are excluded from the Collateral pursuant to Section
4.1.
5.8 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could reasonably
be expected to have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Bank's security interest in the Collateral. Borrower does
not have knowledge of any such pending or threatened actions or proceedings.
5.9 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and its Subsidiaries that
are delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank, other than as set forth in the Schedule.
5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower has met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could have a Material Adverse Effect. Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940. Borrower is
not engaged principally, or as one of the important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of any regulations promulgated by the Board of Governors of
the Federal Reserve System). Borrower has complied in all material respects with
all the provisions of the Federal Fair Labor Standards Act. Borrower has not
violated any statutes, laws, ordinances or rules applicable to it, violation of
which could reasonably be expected to have a Material Adverse Effect.
5.12 Environmental Condition. None of Borrower's properties or assets
has ever been used by Borrower or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has
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ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower; and Borrower has
not received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by Borrower resulting in the releasing, or
otherwise disposing of hazardous waste or hazardous substances into the
environment.
5.13 Taxes. Borrower has filed or caused to be filed all tax returns
required to be filed, and has paid, or has made adequate provision for the
payment of, all taxes reflected therein, except for taxes which are being
contested in good faith by appropriate proceedings and reserved against (to the
extent required by GAAP) by Borrower.
5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 Government Consents. Borrower has obtained all material
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could reasonably be expected to have a Material Adverse
Effect.
5.16 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that, until
payment in full of all outstanding Obligations under this Agreement, and for so
long as Bank may have any commitment to make a Credit Extension hereunder,
Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
material Subsidiaries' corporate existence in its jurisdiction of incorporation
and maintain qualification in each jurisdiction in which the failure to so
qualify could reasonably by expected to have a Material Adverse Effect. Borrower
shall maintain, and shall cause each of its Subsidiaries to maintain in force
all licenses, approvals and agreements, the loss of which could reasonably by
expected to have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could reasonably by expected to have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within forty five
(45) days after the end of each of Borrower's fiscal quarters, a copy of the
report filed by Borrower on Form 10-Q with the Securities and Exchange
Commission; (b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, a copy of the report filed by Borrower
on Form 10-K with the Securities and Exchange Commission, together with audited
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, and an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank (each
of the "Big 5" accounting firms is acceptable), which financial statements shall
reflect no material adverse changes from the financial statements prepared by
Borrower and delivered to Bank; (c) as soon as available, but in any event
within five (5) days after filing, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders or to any
holders of Subordinated Debt and any other reports filed with the Securities and
Exchange Commission; (d) promptly upon receipt of notice thereof, a report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any
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Subsidiary of Two Hundred Fifty Thousand Dollars ($250,000) or more; (e) as soon
as available, but in any case within ninety (90) days after the first day of
each fiscal year, Borrower's business plan, including operating budget, for such
year.
Borrower shall deliver to Bank with the quarterly financial
statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto.
Within twenty-five (25) days of the last day of each month, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together with aged
listings of Borrower's accounts payable and accounts receivable, in each case in
form and substance reasonably satisfactory to Bank and certified by a
Responsible Officer. Bank agrees to adjust Borrowing Base within ten (10) days
of receipt of Borrowing Base Certificate and further agrees to advise Borrower
of any changes to the Certificate submitted by Borrower.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Two Hundred Fifty
Thousand Dollars ($250,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance. Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's. All such policies
of insurance shall be in such form, with such companies, and in such amounts as
are reasonably satisfactory to Bank. All such policies of property insurance
shall contain a Bank's loss payable endorsement, in a form satisfactory to Bank,
showing Bank as an additional loss payee thereof and all liability insurance
policies shall show the Bank as an additional insured, and shall specify that
the insurer must give at least ten (10) days notice to Bank before canceling its
policy for any reason. Upon Bank's request, Borrower shall deliver to Bank
certified copies of such policies of insurance and evidence of the payments of
all premiums therefor. After the occurrence and during the continuance of an
Event of Default, all proceeds payable under any such policy that are not used
to repair or replace the property insured shall, at the option of Bank, be
payable to Bank to be applied on account of the Obligations.
6.7 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within thirty (30) days of the date of this
Agreement. Borrower shall, on an expedited basis, register or cause to be
registered with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, and notify Bank of, all registerable
intellectual property rights which constitute or give rise to more than five
percent (5%) of Borrower's gross income in any fiscal quarter which Borrower has
developed as of the date of this Agreement but heretofore
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failed to register and give Bank notice thereof. Borrower shall register or
cause to be registered with the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, and notify Bank of those
additional intellectual property rights which constitute or give rise to more
than five percent (5%) of Borrower's gross income in any fiscal quarter which
are developed or acquired by Borrower from time to time in connection with any
product prior to the sale or licensing of such product to any third party and
prior to Borrower's use of such product (including without limitation major
revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C) and shall give Bank notice thereof.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Bank in writing of material infringements detected and (iii) not
allow any material Trademarks, Patents or Copyrights to be abandoned, forfeited
or dedicated to the public without the written consent of Bank, which shall not
be unreasonably withheld.
(d) Bank may audit Borrower's Intellectual Property Collateral to
confirm compliance with this Section 6.8, provided such audit may not occur more
often than once per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.7 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.7.
6.8 Current Ratio. Borrower shall maintain, as of the last day of
each fiscal quarter, a ratio of Current Assets to Current Liabilities of at
least 1.0 to 1.0.
6.9 Quarterly Cash Flow Coverage. Borrower shall maintain, as of the
last day of each fiscal quarter, a Quarterly Cash Flow Ratio of not less than
1.50 to 1.0. "Quarterly Cash Flow Ratio" is defined as the Net Profit after tax
of the Borrower for any fiscal quarter of determination, plus depreciation and
amortization for such quarter, all of the foregoing multiplied by four, divided
by the current portion of all term debt, including the current portion of
capital lease obligations.
6.10 Total Liabilities-Effective Tangible Net Worth. Borrower shall
maintain, as of the last day of each fiscal quarter, a ratio of Total
Liabilities to Effective Tangible Net Worth of not more than (i) 2.3 to 1.0
through December 31, 1999, and (ii) 1.50 to 1.0 thereafter.
6.11 Capital Expenditures. The aggregate amount of all Capital
Expenditures of Borrower and its consolidated Subsidiaries shall not exceed Two
Million Six Hundred Thousand Dollars ($2,600,000) in any fiscal year. "Capital
Expenditures" means, without duplication, all financed or unfinanced
expenditures exceeding $25,000 individually (whether made in the form of cash or
property, including, without limitation, expenditures made by exchanging or
trading in property) for any fixed assets or improvements, or for renewals,
replacement, substitutions or additions thereto, which have a useful life of
more than two years (excluding expenditures for such assets funded with
insurance proceeds) including, but not limited to, the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise, and expenditures which are financed pursuant to
Capital Leases or with the proceeds of purchase money indebtedness. "Capital
Lease" means any lease of any property (whether real, personal or mixed) by any
Person that, in conformity with GAAP, is or should be accounted for as a capital
lease on the Balance Sheet of such Person.
6.12 Effective Tangible Net Worth. Borrower shall maintain, as of the
last day of each fiscal quarter, a minimum Effective Tangible Net Worth of
$7,664,000 as of September 30, 1999, such amount to increase after the end of
each fiscal quarter thereafter by an amount equal to seventy five percent (75%)
of Borrower's quarterly Net Income after-tax (after-tax being determined in
accordance with GAAP). The calculation of the Net Income after-tax shall be
conducted at the end of each fiscal quarter, and the adjustment in the required
Effective Tangible Net Worth, if any, shall be effective at the beginning of the
following fiscal quarter.
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6.13 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS. Borrower covenants and agrees that, so long as
any credit hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Credit Extensions, Borrower will not do any of the following without the
written consent of Bank:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a Change in Control. Borrower will not,
without thirty (30) days prior written notification to Bank, relocate its chief
executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
Notwithstanding the foregoing, Borrower may enter into a transaction of
reincorporation in the State of Delaware, if (i) the new corporation's
shareholders immediately after such reincorporation will be the shareholders of
Borrower immediately prior to such reincorporation, (ii) immediately before and
after giving effect to the consummation of such reincorporation no Event of
Default, or condition or event which with the giving of notice or the passage of
time or both would constitute an Event of Default, hereunder exists or has
happened and is continuing, and (iii) Borrower has given Bank at least thirty
(30) days advance written notice of such reincorporation, and in connection with
such reincorporation, at Borrower's cost and expense, the new corporation and
Borrower execute, deliver, file and/or record documents, agreements and
instruments (in such manner and form as Bank may reasonably require) in order to
make the new corporation a Borrower hereunder and to create, preserve, perfect,
validate or satisfy the first priority security interest in, and lien on, the
Collateral.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any cash dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, or otherwise Transfer any assets to any Affiliates, other
than Permitted Investments; provided that Borrower may utilize up to $2,000,000
in Advances to repurchase outstanding stock of the Borrower; and provided,
further, that Borrower shall be permitted to declare and distribute any
dividends in the form of rights which allow shareholders to purchase shares of a
new series of preferred stock of Borrower, including the Rights Agreement dated
as of November 30, 1999 previously furnished to Bank, or other such actions that
are now currently contemplated by Borrower.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower,
except for transactions that are in the ordinary course of
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Borrower's business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm's length transaction with a
non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
if an Event of Default exists at the time of such payment or would exist after
giving effect to such payment, or make any payment on any Subordinated Debt
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory and Equipment. Store the Inventory or Equipment with a
bailee, warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory or Equipment. Except for that sold in
the ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment only at the
locations set forth in the Schedule and such other locations of which Borrower
gives Bank prior written notice and as to which Borrower signs and files a
financing statement where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" within the meaning of
the Investment Company Act of 1940, or become principally engaged in, or
undertake as one of its important activities, the business of extending credit
for the purpose of purchasing or carrying margin stock, or use the proceeds of
any Credit Extension for such purpose. Fail to meet the minimum funding
requirements of ERISA, permit a Prohibited Transaction, as defined in ERISA, to
occur, fail to comply with the Federal Fair Labor Standards Act or any other law
or regulation, which failure or violation could have a Material Adverse Effect
or a material adverse effect on the Collateral or the priority of Bank's Lien on
the Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT. Any one or more of the following events shall
constitute an Event of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Article 6
or violates any of the covenants contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Bank and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within twenty (20) days after the occurrence thereof
(provided that no Credit Extensions will be required to be made during such cure
period);
8.3 Material Adverse Change. If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of
Borrower or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;
8.4 Attachment. If any portion of Borrower's assets with a value in
excess of $50,000 is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any trustee, receiver or
person acting in a similar capacity and such attachment, seizure, writ or
distress warrant or levy has not been removed, discharged or rescinded within
ten (10) days, or if Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs, or if a judgment or other claim in excess of $50,000 becomes a
lien or encumbrance upon any material portion of Borrower's assets, or if a
notice of lien, levy, or assessment in excess of $50,000 is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or
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by any state, county, municipal, or governmental agency, and the same is not
paid within ten (10) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrower (provided that no Credit Extensions will be required to be made
during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within twenty (20) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties, and such default shall not
have been cured or waived within any applicable grace period, resulting in a
right by such third party or parties, whether or not exercised, to accelerate
the maturity of Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment);
8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank as of the date such
representation or warranty was made by any Responsible Officer pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
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(e) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit except to the extent such license would result in a breach of such
agreement;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank (and
any of Bank's designated officers, or employees) as Borrower's true and lawful
attorney to: (a) if an Event of Default has occurred and is continuing, send
requests for verification of Accounts or notify account debtors of Bank's
security interest in the Accounts; (b) if an Event of Default has occurred and
is continuing, endorse Borrower's name on any checks or other forms of payment
or security that may come into Bank's possession; (c) if an Event of Default has
occurred and is continuing, sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) if an Event of Default has occurred and is continuing, dispose of
any Collateral; (e) if an Event of Default has occurred and is continuing, make,
settle, and adjust all claims under and decisions with respect to Borrower's
policies of insurance; and (f) if an Event of Default has occurred and is
continuing, settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; provided Bank may exercise such power of attorney to sign the
name of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. If an Event of Default has occurred and is
continuing, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account. After the
occurrence and during the continuance of an Event of Default, Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
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9.5 Bank's Liability for Collateral. Except as provided under the
Code, Bank shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person whomsoever.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by facsimile to Borrower or to Bank, as the case may be, at its
addresses set forth below:
If to Borrower: Pharmchem Laboratories, Inc.
0000X X'Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxxxxxx
FAX: (000) 000-0000
If to Bank: Comerica Bank-California
000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Mr. Xxx Xxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. 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. Borrower and Bank
hereby submit to the jurisdiction of the state and Federal courts located in the
County of Los Angeles and the County of Santa Xxxxx, State of California.
BORROWER AND BANK HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, 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.
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12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Effect of Amendment and Restatement.
This Agreement is intended to and does completely amend and
restate, without novation, the Original Agreement. All security interests
granted under the Original Agreement are hereby confirmed and ratified and shall
continue to secure all Obligations under this Agreement. In particular, in
connection with the Original Agreement, Borrower executed for the benefit of
Bank five (5) documents entitled Government Receivables Rider to Security
Agreement, five (5) documents entitled Government Receivables - Notice of
Assignment, and five (5) documents entitled Government Receivables Instrument of
Assignment (collectively, the "Government Receivables Documents"). The
Government Receivables Documents shall continue in full force and effect, shall
continue to secure all Obligations under this Agreement, and each Government
Receivables Rider to Security Agreement shall be and hereby is incorporated by
reference into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PHARMCHEM LABORATORIES, INC.
By: /s/ XXXXX X. XXXXXXXXX
Title: VP & CFO
COMERICA BANK-CALIFORNIA
By: /s/ XXXXX XXXXX
Title: VICE PRESIDENT
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) Any and all goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) Any and all inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) Any and all contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind, but excluding
real estate leases;
(d) Any and all now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing;
(e) Any and all documents, cash, deposit accounts, securities,
investment property, financial assets, securities entitlements, securities
accounts, letters of credit, certificates of deposit, instruments and chattel
paper now owned or hereafter acquired and Borrower's Books relating to the
foregoing;
(f) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
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EXHIBIT B-1
ADVANCE REQUEST FORM
The undersigned hereby certifies as follows:
I, ________________________, am the duly elected and acting
________________________ of PharmChem Laboratories, Inc. ("Borrower").
This Advance Request Form is delivered on behalf of Borrower to Comerica
Bank-California, pursuant to that certain Amended and Restated Loan and Security
Agreement between the undersigned and Comerica Bank-California dated May 15,
2000 (the "Agreement"). The terms used herein which are defined in the Agreement
have the same meaning herein as ascribed to them therein.
Borrower hereby requests on __________________, 20______ an Advance (the
"Advance") as follows:
(a) The date on which the Advance is to be made is ________________,
_____.
(b) The amount of the Advance is to be ___________________
($____________), in the form of a Prime Rate Advance of $______________; and/or
a LIBOR Rate Advance of $____________ for an Interest Period of
__________________ months.
All representations and warranties of Borrower and stated in the
Agreement are true and correct in all material respects as of the date of this
request for an Advance; provided, however, that those representations and
warranties expressly referring to another date shall be true and correct in all
material respects as of such date.
IN WITNESS WHEREOF, this Advance Request Form is executed by the
undersigned as of this ______ day of __________________, ______.
PHARMCHEM LABORATORIES, INC.
By: _________________________________
Title: _________________________________
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EXHIBIT B-2
LIBOR RATE CONVERSION/CONTINUATION CERTIFICATE
The undersigned hereby certifies as follows:
I, ____________________, am the duly elected and acting
____________________ of PharmChem Laboratories, Inc. ("Borrower").
This certificate is delivered on behalf of Borrower to Bank, pursuant to
Section 2 of that certain Amended and Restated Loan and Security Agreement
between the undersigned and other Borrower and Bank (the "Agreement"). The terms
used in this LIBOR Rate Conversion/Continuation Certificate which are defined in
the Agreement have the same meaning herein as ascribed to them therein.
Borrower hereby requests on _________________, _______ a LIBOR Rate
Extension (the "Extension") as follows:
(a) ___ (i) A rate conversion of an existing Prime Rate Extension from a
Prime Rate Extension to a LIBOR Rate Extension; or
___ (ii) A continuation of an existing LIBOR Rate Extension as a
LIBOR Rate Extension.
[Check (i) or (ii) above]
(b) The date on which the Extension is to be made is
_____________________, _____
(c) The amount of the Extension is to be ___________________
($____________), for an Interest Period of ____________ month(s).
All representations and warranties of Borrower stated in the Agreement
are true and correct in all material respects as of the date of this request for
a loan; provided, however, that those representations and warranties expressly
referring to another date shall be true and correct in all material respects as
of such date.
IN WITNESS WHEREOF, this LIBOR Rate Conversion/Continuation Certificate
is executed by the undersigned as of this _____________ day of
____________________, _____.
PHARMCHEM LABORATORIES, INC.
By: _____________________________
Title: _____________________________
For Internal Bank Use Only
-------------------------------------------------------------------------------------------
LIBOR Pricing Date LIBOR Rate LIBOR Rate Variance Maturity Date
%
-------------------- -------------------- ---- -------------
-------------------------------------------------------------------------------------------
29
COMERICA EXHIBIT C
Comerica Bank-California PHARMCHEM LABORATORIES, INC.
REPORT OF ACCOUNTS RECEIVABLE
We submit the following information in connection with the Security Agreement(s)
(Accounts Receivable) heretofore executed by the undersigned in favor of the
bank. This report is dated __________ and this report's sequential number is __.
THIS MONTH LAST MONTH
---------- ----------
ACCOUNTS RECEIVABLE
1. Balance Accounts Receivable 1. $
---------------- ---------------
2. Charges Billed This Month to Date (Dr to A/R) 2. + N/A + N/A
---------------- ---------------
3. Credits Month to Date (Cr to A/R)
A. Payments
-------------
B. Adjustments 3. - N/A - N/A
------------- ----------------- ----------------
Month/Day/Year
4. Balance Accounts Rec. 4. $ N/A $ N/A
-------------- ---------------- ---------------
5. Charges Since Last Report
--------------
6. Payments Since Last Report
--------------
7. Ineligible Accounts (see detail) 7. -
---------------- ---------------
8. Net Eligible Accounts Receivable (Line 4 less Line 7) 8. $ 0 $ 0
---------------- ---------------
9. LOAN FORMULA @ 85% OF NET ELIGIBLE ACCOUNTS 9. $ 0 $ 0
Receivable or Maximum Line Amount ---------------- ---------------
LOAN
10. Loan Balance Per Last Report dated: ------------ 10. $ $
---------------- ---------------
11. Less Loan Payments - -
---------------- ---------------
12. Subtotal $ N/A $ N/A
---------------- ---------------
13. Plus Advances and Other Obligations 13.
---------------- ---------------
A. Advances Since Last Report
-----------------
(Attach tape to illustrate calculation)
B. This Advance
-----------------
C. Other Obligations + N/A + N/A
----------------- ---------------- ---------------
14. Current Loan Balance 14. $
================ ===============
15. Net Loan Availability (Line 9 less Line 14) 15. $ 0 $ 0
================ ===============
AS SECURITY FOR ALL OBLIGATIONS OF THE UNDERSIGNED, DIRECT OR CONTINGENT, WHICH
ARE NOW OWING OR WHICH HEREAFTER MBE OWING TO COMERICA BANK-CALIFORNIA, THE
COMPANY HEREBY ASSIGNS AND GRANTS TO SAID BANK A SECURITY INTEREST IN THE
ACCOUNTS LISTED IN THE ABOVE SCHEDULE MONIES DUE UPON THE SAME AND ALL
MERCHANDISE RETURNED OR REJECTED. THE COMPANY REPRESENTS THAT THE ABOVE SCHEDULE
CORRECTLY SETS FORTH THE ACCOUNTS NOW OWING THE UNDERSIGNED FOR BONA FIDE SALES
AND DELIVERIES OF MERCHANDISE, THAT THERE ARE NO OFFSETS OR COUNTER-CLAIMS OF
ANY NATURE WHATSOEVER AGAINST ANY OF THE ACCOUNTS, THAT OF THE SAID ACCOUNTS ARE
PAST DUE (EXCEPT AS NOTED ON LINE 7); THAT PROPER ENTRIES HAVE BEEN MADE ON THE
BOOKS OF THE COMPANY DISCLOSING THE ASSIGNMENT OF SUCH ACCOUNTS TO SAID BANK,
THAT NONE OF SAID ACCOUNTS HAVE BEEN SOLD OR ASSIGNED TO ANY OTHER PARTY; THAT
SAID ACCOUNTS ARE ASSIGNED PURSUANT TO AND IN ACCORDANCE WITH ALL THE TERMS AND
PROVISIONS OF THE SECURITY AGREEMENT AND ANY OTHER AGREEMENT EXECUTED BY THE
COMPANY AND COMERICA BANK-CALIFORNIA RELATING TO ADVANCES TO BE MADE BY SAID
BANK ON SUCH ACCOUNTS AND THE ASSIGNMENT THEREOF, AND THAT ALL SUCH ACCOUNTS ARE
ELIGIBLE ACCOUNTS (EXCEPT AS NOTED) ON LINE 7); AS DEFINED IN SAID SECURITY
AGREEMENTS.
PHARMCHEM LABORATORIES, INC.
------------------------------------- ----------------------------------------
Company Name Company's Authorized Signature
--------------------------------------------------------------------------------
BANK USE ONLY (4-7-93)
Received by: Transmittal:
--------------------- ----------------------
Obligation #: Date Received:
--------------------- ----------------------
Customer: Reviewer Initials:
--------------------- ----------------------
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30
INELIGIBLE BREAKDOWN PHARMCHEM LABORATORIES, INC. EXHIBIT C
Customer Name: PHARMCHEM LABORATORIES, INC.
----------------------------------------
Aging Date:
----------------------------------------
LIST TOTAL LESS THAN 90 DAYS FOR EACH CATEGORY(S) AND THE GRAND TOTAL OF OVER 90
DAY ACCOUNTS. USE SPACE BELOW TO ITEMIZE LISTED CATEGORY(S) AS NEEDED.
THIS MONTH LAST MONTH
--------------------- ---------------------
FEDERAL GOVERNMENT A/R (1)
--------------------- ---------------------
ADD OLD CREDIT (8)
--------------------- ---------------------
FINANCE OR SERVICE CHARGES
--------------------- ---------------------
RETENTIONS AND BONDED JOBS
--------------------- ---------------------
OVER 90+ DAYS FROM INVOICE (*)
--------------------- ---------------------
25% RULE (5) (*)
--------------------- ---------------------
FOREIGN A/R (2)
--------------------- ---------------------
CONTRA ACCOUNTS (3)
--------------------- ---------------------
AFFILIATES (4)
--------------------- ---------------------
CONCENTRATIONS (6)
--------------------- ---------------------
OTHER (SPECIFY) (7)
--------------------- ---------------------
INELIGIBLE GRAND TOTAL $ 0 $ 0
--------------------- ---------------------
transfer to line 7 on first page transfer to line 7 on first page
THIS MONTH LAST MONTH
--------------------------------------------------- ---------------------------------------------
(*)1. See attached for over 90 days
--------------------- --------------------- --------------------- ---------------------
25% ineligibles:
--------------------- --------------------- --------------------- ---------------------
2.
--------------------- --------------------- --------------------- ---------------------
3.
--------------------- --------------------- --------------------- ---------------------
4.
--------------------- --------------------- --------------------- ---------------------
5.
--------------------- --------------------- --------------------- ---------------------
6.
--------------------- --------------------- --------------------- ---------------------
7.
--------------------- --------------------- --------------------- ---------------------
8.
--------------------- --------------------- --------------------- ---------------------
9.
--------------------- --------------------- --------------------- ---------------------
10. Others detailed out in last
month's report which are --------------------- --------------------- ---------------------
not included in current month
--------------------- --------------------- --------------------- ---------------------
Total $ - $ -
===================== ===================== ===================== =====================
To the best of my knowledge and belief, this information is correct and may be
relied upon by you as a basis for advancing any credit to us.
----------------------------------------------
Customer Signature
Notes:
(1) Federal Government A/R - Customers that are a part of the Federal
Government. This does not include any state or local governments.
Assignments of claim must be filed to include receivables as eligible
collateral if they exceed $1,000.
(2) Foreign A/R - Includes any customer that is located outside of the United
States. This includes foreign affiliates or divisions of domestic
corporations. The originating locations of obligor purchase orders and
payments remitted by them are the determining factors when labeling the
obligor as a foreign account. Such A/R is not eligible unless backed by a
confirmed L/C or
(3) CONTRA ACCOUNTS - CONTRAS EXIST WHEN THERE IS A LIABILITY OWING TO A
CUSTOMER ON YOUR ACCOUNTS RECEIVABLE AGING. A GOOD WAY TO REVEAL CONTRA
ACCOUNTS IS TO COMPARE THE ACCOUNTS RECEIVABLE AGING AND ACCOUNTS PAYABLE
AGING FOR ACCOUNTS FOR LIKE ACCOUNTS AT MONTH END.
(4) Affiliate Accounts - An accounts receivable account in which you have a
material interest is an affiliate account. Employee accounts, salesman
accounts, and related company accounts are all examples of affiliate
accounts.
(5) 25% RULE - IF OVER 25% OF THE TOTAL FOR THIS CUSTOMER IS OVER 90 DAYS, THIS
WILL ELIMINATE THE CUSTOMER ENTIRELY. LOOK DOWN THE PRIORS COLUMN (90 DAY)
FOR OUTSTANDING DOLLARS. WHEN YOU REACH FIGURE, MANUALLY QUADRUPLE IT.
COMPARE TO TOTAL OUTSTANDING FOR THAT CUSTOMER. IF GREATER THAN TOTAL, THE
ACCOUNT WOULD BE ELIMINATED. CONTINUE THIS PROCESS THROUGH THE AGING.
(6) CONCENTRATIONS - THERE IS A CONCENTRATION CLAUSE IN EVERY LOAN AND SECURITY
AGREEMENT. BASED UPON YOUR CONCENTRATION ALLOWANCE (USUALLY 20% OF TOTAL
A/R) DETERMINE WHAT WOULD BE INELIGIBLE BY MULTIPLYING THE TOTAL A/R BY 20%
OF WHATEVER IS ALLOWED. IF ANY CUSTOMER EXCEEDS THIS AMOUNT, THE EXCESS IS
INELIGIBLE (LESS ANY PORTION IN THE PRIORS OR RETENTION COLUMN) EXCEPT FOR
U.S. COURTS WHERE 25% CONCENTRATION IS PERMITTED.
(7) Other - Progress xxxxxxxx, service (maintenance) contracts, commissions,
container receivables, non-trade receivables, Chapter 11 receivables, any
invoices (e.g., COD, cash account and miscellaneous) for which customer
signed documentation is not available (verifying that shipment was received
or services were provided).
(8) Old Credit - Any credit over 50 days is to be added back as a positive
number.
31
EXHIBIT D
PHARMCHEM LABORATORIES, INC.
COMERICA BANK
COVENANT REPORTING - 2000
($000'S Omitted)
03/31/2000 06/30/2000 09/30/2000 12/31/2000
---------- ---------- ---------- ----------
6.8 CURRENT RATIO
Current Assets
========== ========== ========== ==========
Current Liabilities
========== ========== ========== ==========
Ratio
========== ========== ========== ==========
------------------------------------------------------------------------------------------------------
Minimum 1.0 : 1.0 1.0 : 1.0 1.0 : 1.0 1.0 : 1.0
------------------------------------------------------------------------------------------------------
6.9 QUARTERLY CASH FLOW COVERAGE
NPAT
Deprec. & Amort.
---------- ---------- ---------- ----------
Total $ - $ - $ - $ -
Multiply by 4 4 4 4
---------- ---------- ---------- ----------
Annualized $ - $ - $ -
========== ========== ========== ==========
Current Portion L-T-D(*)
========== ========== ========== ==========
Ratio
========== ========== ========== ==========
------------------------------------------------------------------------------------------------------
Minimum 1.5 : 1.00 1.5 : 1.00 1.5 : 1.00 1.5 : 1.00
------------------------------------------------------------------------------------------------------
(*) Excludes revolver
6.10 TOTAL LIABILITIES TO TENW @ 100% NPAT
Current liabilities
L/T liabilities
---------- ---------- ---------- ----------
Total $ - $ - $ - $ -
========== ========== ========== ==========
TENW (below) $ - $ - $ - $ -
========== ========== ========== ==========
Ratio (with 100% NPAT)
========== ========== ========== ==========
------------------------------------------------------------------------------------------------------
Maximum 1.50 : 1.00 1.50 : 1.00 1.50 : 1.00 1.50 : 1.00
------------------------------------------------------------------------------------------------------
Page 1 of 3
32
EXHIBIT D
PHARMCHEM LABORATORIES, INC.
COMERICA BANK
COVENANT REPORTING - 2000
($000'S Omitted)
03/31/2000 06/30/2000 09/30/2000 12/31/2000
---------- ---------- ---------- ----------
6.11 LIMITATION ON
CAPITAL EXPENDITURES Capital expenditures of $2,600,000
--------------------------------------------------------------------------
6.12 TENW
Equity @ End of Qtr.
Less goodwill
Less deferred tax asset
Less N/R from employees
---------- ---------- ---------- ----------
TENW $ - $ - $ - $ -
Less 25% of NPAT - - - -
---------- ---------- ---------- ----------
TENW $ - $ - $ - $ -
========== ========== ========== ==========
NPAT
---------- ---------- ---------- ----------
75% thereof - - - -
TENW Prior Qtr. - - - -
---------- ---------- ---------- ----------
Minimum TENW $ - $ - $ - $ -
========== ========== ========== ==========
------------------------------------------------------------------------------------------------------
Minimum $ - $ - $ - $ -
------------------------------------------------------------------------------------------------------
2.11 PRICING: Base rate prime (9.00% at 3/31/00) + 1/2%
Fee: 0.25% of line (paid quarterly, in arrears)
Maturity 5/31/2001 (Revolver) and 4/14/2004 (Term Loan)
(1.1) 1) NO INCREASE IN ADVANCES TO MEDSCREEN IN EXCESS OF $1.5 MM AT EXCHANGE
RATE ON 12/31/99.
Page 2 of 3
33
EXHIBIT D
PHARMCHEM LABORATORIES, INC.
COMERICA BANK
COVENANT REPORTING - 2000
($000'S Omitted)
6.3 WITHIN 45 DAYS OF EACH QUARTER END, BANK WILL BE FURNISHED A FORM 10-Q.
WITHIN 90 DAYS OF YEAR-END, BANK WILL BE FURNISHED A FORM 10-K.
NOTIFICATION OF ANY LEGAL ACTION WHEREBY DAMAGES TO BORROWER COULD BE
$250,000 OR MORE.
WITHIN 90 DAYS OF YEAR-END, AN OPERATING BUDGET WILL BE FURNISHED TO BANK.
WITHIN 25 DAYS OF EACH MONTH END, BORROWER WILL SUBMIT A BORROWING BASE
CERTIFICATE (BANK AGREES TO ADJUST BORROWING BASE WITHIN TEN DAYS OF
RECEIPT THEREOF AND ADVISE IF ANY CHANGES THERETO).
7.7 DISCLOSURE OF PERMITTED INVESTMENT (BANK ACCOUNTS, ETC.) REQUIRED.
Bank Requires: NOTE: THIS DOCUMENT REFLECTS CHANGES DATED MAY , 2000
Monthly A/P Agings
Monthly A/R Agings
Monthly Borrowing Base
Quarterly Financials
----------------------------------
Signed
----------------------------------
Date
Page 3 of 3
34
EXHIBIT E
[COMERICA LOGO] GOVERNMENT RECEIVABLES
RIDER TO LOAN AND SECURITY AGREEMENT
As of ___________________________________, this Rider is made by and
between __________________________ ("Debtor") and ____________________ ("Bank");
WHEREAS, said parties desire to incorporate by reference this Rider into
that certain Security Agreement (All Assets) dated ____________________________,
entered into by and between Debtor and Bank (herein called "Agreement");
NOW THEREFORE, it is agreed that the Agreement is hereby amended and
modified to include and incorporate by reference all of the following:
1. Notwithstanding anything in the Agreement to the contrary, Collateral
includes, but is not limited to, the government contract(s) ("Contract(s)")
identified on the attached instrument(s) of Assignment.
2. The attached instrument(s) of Assignment is(are) not prohibited by the
terms of the Contract(s) and is(are) a legal and binding obligation(s) of
Debtor.
3. Debtor will fulfill and perform all of Debtor's obligations and duties
under the Contract(s) and will cooperate fully and assist Bank in the
enforcement of the Contract(s) and the collection of all monies due and to
become due under the Contract(s).
4. Bank may but will not be obligated to cure or cause to be cured any default
which could excuse payment or performance by the government under the
Contract(s).
5. Debtor will not modify, cancel, rescind or terminate the Contract(s) of
Debtor's own volition IN ANY MANNER WHICH WOULD ADVERSELY AFFECT DEBTOR without
the prior written consent of Bank, and will notify Bank of any modification,
supplement, cancellation, rescission or termination of the Contract(s) by the
government.
6. Debtor represents, warrants and covenants to Bank as follows:
(a) Debtor has delivered a true copy of the Contract(s) to Bank upon the
execution of the Agreement. The Contract(s) is(are) genuine, enforceable and in
full force and effect.
(b) No Event of Default as defined in any Contract has occurred and is
continuing and no event has occurred and is continuing which with the lapse of
time or the giving of notice or both, would constitute an Event of Default under
the Contract(s).
(c) Debtor will at all times fulfill and comply with all the warranties,
representations and agreements set forth in the Contract(s) and Debtor will
perform all obligations and duties required of Debtor under the terms of the
Contract(s) to insure to Bank that the government will not be able to terminate
the Contract(s) or assert any offset or counterclaim or defense for nonpayment
of rental by reason of a default by Debtor.
(d) Debtor will promptly notify Bank of any payment made by the government
to Debtor, of any Event of Default in any Contract, and of any material event
which comes to the attention of Debtor and which Debtor believes may affect the
government's ability to perform any material obligation under the Contract(s).
(e) Bank may, but shall not be obligated to, perform any duty, covenant, or
condition required to be observed or performed by Debtor under any of the terms
of the Contract(s) TO THE EXTENT PERMITTED
35
BY THE CONTRACT(S) and shall not be bound by or obligated to perform or see to
the performance of any warranty, express or implied, made by Debtor in the
Contract(s) or resulting from the provisions thereof, Debtor expressly
acknowledges and agrees that all such covenants and agreements of Debtor
provided for in the Contract(s), and all representations and warranties, shall
be and remain the sole liability of Debtor.
7. With respect to the Contract(s), the following are accurate names and
addresses:
(a) Contracting officer or the agency head:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
(b) Surety on any bond applicable:
N/A
------------------------------
------------------------------
------------------------------
(c) Disbursing officer designated to make payment
------------------------------
------------------------------
------------------------------
------------------------------
This Rider has been duly executed as of the day and year first above written.
DEBTOR: PHARMCHEM LABORATORIES, INC.
By: By:
-------------------------------- -------------------------------
By: By:
-------------------------------- -------------------------------
XX 00000 (12-94)
36
EXHIBIT F
[FORM OF GOVERNMENT RECEIVABLES INSTRUMENT OF ASSIGNMENT BY BORROWER]
37
EXHIBIT G
[FORM OF GOVERNMENT RECEIVABLES-NOTICE OF ASSIGNMENT]
38
SCHEDULE OF EXCEPTIONS
Permitted Indebtedness (Section 1.1)
See Attached Schedule 1
Permitted Investments (Section 1.1)
1) Loans to officers/employees in an aggregate amount not to exceed $250,000 at
any time outstanding.
2) Investments consisting of (i) ownership of 900,000 shares of common stock of
Medscreen, a Subsidiary, existing on the Closing Date, and (ii) loans or
advances to Medscreen in an amount not to exceed One Million Five Hundred
Thousand Dollars ($1,500,000) in the aggregate at any time outstanding.
Permitted Liens (Section 1.1)
See Attached Schedule 1
Prior Names (Section 5.6)
Intellectual Property (Section 5.7)
Litigation (Section 5.8)
Locations of Inventory and Equipment (Section 7.10)
