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[COMERICA LOGO] EXHIBIT 10.23
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
OBLIGOR# NOTE # AGREEMENT DATE
November 18, 1997
CREDIT LIMIT INTEREST RATE B+1.00% OFFICER NO./INITIALS
$6,000,000 9.50% 48201 Xxxxx Xxxxx
THIS AGREEMENT is entered into on November 18, 1997 , between COMERICA
BANK-CALIFORNIA ("Bank") as secured party, whose Headquarter Office is 000 XXXX
XXXXX XXXXX XXXXXX, XXX XXXX, XX, and PHARMCHEM LABORATORIES, INC. ("Borrower"),
a CALIFORNIA CORPORATION whose sole place of business (if it has only one),
chief executive office (if it has more than one place of business) or residence
(if an individual) is located at 0000X X'XXXXX XXXXX, XXXXX XXXX, XX. The
parties agree as follows:
1. DEFINITIONS
1.1 "Agreement" as used in this Agreement means and includes this Loan &
Security Agreement (Accounts and Inventory), any concurrent or subsequent rider
to this Loan and Security Agreement (Accounts and Inventory) and any extensions,
supplements, amendments or modifications to this Loan and Security Agreement
(Accounts and Inventory) and to any such rider.
1.2 "Bank Expenses" as used in this Agreement means and includes: all costs
or expenses required to be paid by Borrower under this Agreement which are paid
or advanced by Bank; taxes and insurance premiums of every nature and kind of
Borrower paid by Bank; filing, recording, publication and search fees, appraiser
fees, auditor fees and costs, and title insurance premiums paid or incurred by
Bank in connection with Bank's transactions with Borrower, costs and expenses
incurred by Bank in collecting the Receivables (with or without suit) to correct
any default or enforce any provision of this Agreement, or in gaining possession
of, maintaining, handling, preserving, storing, shipping, selling, disposing of,
preparing for sale and/or advertising to sell the Collateral, whether or not a
sale is consummated; costs and expenses of suit incurred by Bank in enforcing or
defending this Agreement or any portion hereof, including, but not limited to,
expenses incurred by Bank in attempting to obtain relief from any stay,
restraining order, injunction or similar process which prohibits Bank from
exercising any of its rights or remedies; and attorneys' fees and expenses
incurred by Bank in advising, structuring, drafting, reviewing, amending,
terminating, enforcing, defending or concerning this Agreement, or any portion
hereof or any agreement related hereto, whether or not suit in brought. Bank
Expenses shall include Bank's in-house legal charges at reasonable rates.
1.3 "Base Rate" as used in this Agreement means that variable rate of
interest so announced by Bank at its headquarters office in San Jose, California
as its "Base Rate" from time to time and which serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto.
1.4 "Borrower's Books" as used in this Agreement means and includes all of
the Borrower's books and records including but not limited to: minute books;
ledgers; records indicating, summarizing or evidencing Borrower's assets,
liabilities, Receivables, business operations or financial condition, and all
information relating thereto, computer programs; computer disk or tape files;
computer printouts; computer runs; and other computer prepared information and
equipment of any kind.
1.5 "Borrowing Base" as used in this Agreement means the sum of: (1) EIGHTY
FIVE percent (85.00%) of the net amount of Eligible Accounts after deducting
therefrom all payments, adjustments and credits applicable thereto (Accounts
Receivable Borrowing Base; and (2) the amount, if any, of the advances against
inventory agreed to be made pursuant to any Inventory Rider (Inventory Borrowing
Base, or other rider, amendment or modification to this Agreement, that may now
or hereafter be entered into by Bank and Borrower.
1.6 "Cash Flow" as used in this Agreement means for any applicable period of
determination, the Net Income (after deduction for income taxes and other taxes
of such person determined by reference to income or profits of such person) for
such period, plus, to the extent deducted in computation of such Net Income, the
amount of depreciation and amortization expense and the amount of deferred tax
liability during such period, all as determined in accordance with GAAP. The
applicable period of determination will be N/A, beginning with the period from
________________ to _______________.
1.7 "Collateral" as used in this Agreement means and includes each and all of
the following: the Receivables; the intangibles; the negotiable collateral, the
inventory, all money, deposit accounts and all other assets of Borrower in which
Bank receives a security interest or which hereafter come into the possession,
custody or control of Bank; and the proceeds of any of the foregoing, including,
but not limited to, proceeds of insurance covering the collateral and any and
all Receivables, intangibles, negotiable collateral, inventory, equipment,
money, deposit accounts of other tangible and intangible property of borrower
resulting from the sale or other disposition of the collateral, and the proceeds
thereof. Notwithstanding anything to the contrary contained herein, collateral
shall not include any waste or other materials which have been or may be
designated as toxic or hazardous by Bank.
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1.8 "Credit" as used in this Agreement means all Obligations, except those
obligations arising pursuant to any other separate contract, instrument, note,
or other separate agreement which, by its terms, provides for a specified
interest rate and term.
1.9 "Current Assets" as used in this Agreement means, as of any applicable
date of determination, all cash, nonaffiliated customer receivables, United
States government securities, claims against the United States government, and
inventories.
1.10 "Current Liabilities" as used in this Agreement means, as of any
applicable date of determination, i) all liabilities of a person that should be
classified as current in accordance with GAAP, including without limitation any
portion of the principal of the indebtedness classified as current, plus (ii) to
the extent not otherwise included, all liabilities of the Borrower to any of its
affiliates whether or not classified as current in accordance with GAAP.
1.11 "Daily Balance" as used in this Agreement means the amount determined by
taking the amount of the Credit owed at the beginning of a given day, adding any
now Credit advanced or incurred on such date, and subtracting any payments or
collections which are deemed to be paid and are applied by Bank in reduction of
the Credit on that date under the provisions of this Agreement.
1.12 "Eligible Accounts" as used in this Agreement means and includes those
accounts of Borrower which are due and payable within THIRTY (30) days, or
less, from the date of invoice, have been validly assigned to Bank and strictly
comply with all of Borrower's warranties and representations to Bank; but
Eligible Accounts shall not include the following: (a) accounts with respect to
which the account debtor is an officer, employee, partner, joint venturer or
agent of Borrower; (b) accounts with respect to which goods are placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional; c) accounts with respect to which the
account debtor is not a resident of the United States which are not covered by
specific Assignments of Receivables; (d) accounts with respect to which the
account debtor is the United States or any department, agency or instrumentality
of the United States;(e) (f) accounts with respect to which the
account debtor is any State of the United States or any city, county, town,
municipality or division thereof, (g) accounts with respect to which the account
debtor is a subsidiary of, related to, affiliated or has common shareholders,
officers or directors with Borrower, (h) accounts with respect to which Borrower
is or may become liable to the account debtor for goods sold or services
rendered by the account debtor to Borrower, (i) accounts not paid by an account
debtor within ninety (90) days from the date of the invoice; (i) accounts with
respect to which account debtors dispute liability or make any claim, or have
any defense, crossclaim, counterclaim, or offset; j) accounts with respect to
which any Insolvency Proceeding is filed by or against the account debtor, or if
an account debtor becomes insolvent, falls or goes out of business; and (k)
accounts owed by any single account debtor which exceed twenty percent (20%) of
all of the Eligible Accounts with 25% concentration allowance for federal
government U.S. Courts; and (l) accounts with a particular account debtor on
which over twenty-five percent (25%) of the aggregate amount owing is greater
than ninety (90) days from the date of the invoice.
1.13 "Event of Default" as used in this Agreement means those events
described in Section 7 contained herein below.
1.14 "Fixed Charges" as used in this Agreement means and includes for any
applicable period of determination, the sum, without duplication, of (a) all
interest paid or payable during such period by a person on debt of such person,
plus (b) all payments of principal or other sums paid or payable during such
period by such person with respect to debt of such person having a final
maturity more than one year from the date of creation of such debt, plus (c) all
debt discount and expense amortized or required to be amortized during such
period by such person, plus (d) the maximum amount of all rents and other
payments paid or required to be paid by such person during such period under any
lease or other contract or arrangement providing for use of real or personal
property in respect of which such person is obligated as a lessee, use or
obligor, plus (e) all dividends and other distributions paid or payable by such
person or otherwise accumulating during such period on any capital stock of such
person, plus (f) all loans or other advances made by such person during such
period to any Affiliate of such person. The applicable period of determination
will be N/A , beginning with the period from ________ to _______________.
1.15 "GAAP" as used in this Agreement means as of any applicable period,
generally accepted accounting principles effect during each period.
1.16 "Insolvency Proceeding" as used in this Agreement means and includes any
proceeding or case commenced by or against the Borrower, or any guarantor of
Borrower's Obligations, or any of Borrower's account debtors, under any
provisions of the Bankruptcy Code, as amended, or any other bankruptcy or
insolvency law, including but not limited to assignment for the benefit of
creditors, formal or informal moratoriums, composition or extensions with some
or all creditors, any proceeding seeking a reorganization, arrangement or any
other relief under the Bankruptcy code, as amended, or any other Bankruptcy or
insolvency law.
1.17 "Intangibles" as used in this Agreement means and includes all of
Borrower's present and future general intangibles and other personal property
(including, without limitation, any and all rights in any legal proceedings,
goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings,
purchase orders, computer programs, computer disks, computer tapes, literature,
reports, catalogs and deposit accounts) other than goods and Receivables, as
well as Borrower's Books relating to any of the foregoing.
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1.18 "Inventory" as used in this Agreement means and includes all present and
future inventory in which Borrower has any interest, including, but not limited
to, goods held by Borrower for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials, work in
process, finished goods, advertising materials, and packing and shipping
materials, wherever located and any documents of title representing any of the
above, and any equipment, fixtures or other property used in the storing,
moving, preserving, identifying, accounting for and shipping or preparing for
the shipping of inventory, and any and all other items hereafter acquired by
Borrower by way of substitution, replacement, return, repossession or otherwise,
and all additions and accessions thereto, and the resulting product or mass, and
any documents of title respecting any of the above.
1.19 "Net Income" as used in this agreement means the net income (or loss) of
a person for any period determined in accordance with GAAP but excluding in any
event:
(a) any gains or losses on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital assets,
and any taxes on the excluded gains and any tax deductions or credits
on account on any excluded losses; and
(b) in the case of the Borrower, net earnings of any Person in which
Borrower has an ownership interest, unless such not earnings shall have
actually been received by Borrower in the form of cash distributions.
1.20 "Judicial Officer or Assignee" as used in this Agreement means and
includes any trustee, receiver, controller, custodian, assignee for the benefit
of creditors or any other person or entity having powers or duties like or
similar to the powers and duties of trustee, receiver, controller, custodian or
assignee for the benefit of creditors.
1.21 "Obligations" as used in this Agreement means and includes any and all
loans, advances, overdrafts, debts, liabilities (including, without limitation,
any and all amounts charged to Borrower's account pursuant to any agreement
authorizing Bank to charge Borrower's account), obligations, lease payments,
guaranties, covenants and duties owing by Borrower to Bank of any kind and
description whether advanced pursuant to or evidenced by this Agreement; by any
note or other instrument; or by any other agreement between Bank and Borrower
and whether or not for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including, without limitation, any debt, liability or obligation owing from
Borrower to others which Bank may have obtained by assignment, participation,
purchase or otherwise, and further including, without limitation, all interest
not paid when due and all Bank Expenses which Borrower is required to pay or
reimburse by this Agreement, by law, or otherwise.
1.22 "Person" or "person" as used in this Agreement means and includes any
individual, corporation, partnership, joint venture, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.
1.23 "Receivables" as used in this Agreement means and includes all presently
existing and hereafter arising accounts, instruments, documents, chattel paper,
general intangibles, all other forms of obligations owing to Borrower, all of
Borrower's rights in, to and under all purchase orders heretofore or hereafter
received, all moneys due to Borrower under all contracts or agreements (whether
or not yet earned or due), all merchandise returned to or reclaimed by Borrower
and the Borrower's books (except minute books) relating to any of the foregoing.
1.24 "Subordinated Debt" as used in this Agreement means indebtedness of the
Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content satisfactory to the
Bank.
1.25 "Subordination Agreement" as used in this Agreement a subordination
agreement in form satisfactory to Bank making all present and future
indebtedness of the Borrower to n/a subordinate to the Obligations.
1.26 Tangible Effective Not Worth" as used in this Agreement means net worth
as determined in accordance with GAAP consistently applied, increased by
subordinated debt if any, and decreased by the following: patents, licenses,
goodwill, subscription lists, organization expenses, trade receivables converted
to notes in excess of $100,000, and money due from affiliates (including
officers, directors, subsidiaries and commonly hold companies).
1.27 Tangible Net Worth" as used in this Agreement means, as of any
applicable date of determination, the excess of:
a. The net book value of all assets of a person (other than patents,
patent rights, trademarks, trade names, franchises, copyrights, licenses,
goodwill, and similar intangible assets) after all appropriate deductions in
accordance with GAAP (including, without limitation, reserves for doubtful
receivables, obsolescence, depreciation and amortization), over
b. All total liabilities of such person.
1.28 "Total Liabilities" as used in this Agreement means the total of all
items of indebtedness, obligation or liability which, in accordance with GAAP
consistently applied, would be included in determining the total liabilities of
the Borrower as of the date Total Liabilities is to determined, including
without limitation (a) all obligations secured by any mortgage, pledge, security
interest or other lien on property owned or acquired, whether or not the
obligations secured thereby shall have been assumed; (b) all obligations which
are capitalized lease obligations; and (c) all guaranties, endorsements or other
contingent or surety obligations with respect to the indebtedness of others,
whether
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or not reflected on the balance sheets of the Borrower, including any obligation
to furnish funds, directly or indirectly through the purchase of goods,
supplies, services, or by way of stock purchase, capital contribution, advance
or loan or any obligation to enter into a contract for any of the foregoing.
1.29 "Working Capital" as used in this Agreement means, as of any applicable
date of determination, Current Assets less Current Liabilities.
1.30 Any and all terms used in this Agreement shall be construed and defined
in accordance with the meaning and definition of such terms under and pursuant
to the California Uniform Commercial Code (hereinafter referred to as the "Code"
as amended.
2. LOAN AND TERMS OF PAYMENT
For value received, Borrower promises to pay to the order of Bank such amount,
as provided for below, together with interest, as provided for below.
2.1 Upon the request of Borrower, made at any time and from time to time
during the term hereof, and so long as no Event of Default has occurred, Bank
shall lend to Borrower an amount up to the Borrowing Base; provided, however,
that in no event shall Bank be obligated to make advances to Borrower under this
Section 2.1 whenever the Daily Balance exceeds, at any time, either the
Borrowing Base or the SUM Of Six Million and No/100 ($6,000,000), such amount
being referred to herein as " Overadvance".
2.2 Except as hereinbelow provided, the Credit shall bear interest, on the
Daily Balance owing, at a rate one and no/100 (1.000%) percentage points per
annum above the Base Rate (the "Rate"). The Credit shall bear interest, from and
after the occurrence of an Event of Default and without constituting a waiver of
any such Event of Default, on the Daily Balance owing, at a rate three (3)
percentage points per annum above the Rate. All interest chargeable under this
Agreement that is based upon a per annum calculation shall be computed on the
basis of a three hundred sixty (360) day year for actual days elapsed.
The Base Rate as of the date of this Agreement is Eight and 500/1000 (8.500%)
per annum. In the event that the Base Rate announced is, from time to time
hereafter, changed, adjustment in the Rate shall be made and based on the Base
Rate in effect on the date of such change. The Rate, as adjusted, shall apply to
the Credit until the Base Rate is adjusted again. The minimum interest payable
by the Borrower under this Agreement shall in no event be less than N/A per
month. All interest payable by Borrower under the Credit shall be due and
payable on the first day of each calendar month during the term of this
Agreement and Bank may, at its option, elect to treat such interest and any and
all Bank Expenses as advances under the Credit, which amounts shall thereupon
constitute Obligations and shall thereafter accrue interest at the rate
applicable to the Credit under the terms of the Agreement.
2.3 Without affecting Borrower's obligation to repay immediately any
Overadvance in accordance with Section 2.1 hereof, all Overadvances shall bear
additional interest on the amount thereof at a rate equal to N/A (N/A%)
percentage points per month in excess of the interest rate set forth in Section
2.2, from the date incurred and for each month thereafter, until repaid in full.
3. TERM
3.1 This Agreement shall remain in full force and effect until terminated by
notice, by either party. Notice of such termination shall be effectuated by
mailing of a registered or certified letter not less than thirty (30) days prior
to the effective data of such termination, addressed to the other party at the
address set forth herein and the termination shall be effective as of the date
so fixed in such notice. Notwithstanding the foregoing, should Borrower be in
default of one or more of the provisions of this Agreement, Bank may terminate
this Agreement at any time without notice. Notwithstanding the foregoing, should
either Bank or Borrower become insolvent or unable to meet its debts as they
mature, or fail, suspend, or go out of business, the other party shall have the
right to terminate this Agreement at any time without notice. On the date of
termination all Obligations shall become immediately due and payable without
notice or demand; no notice of termination by Borrower shall be effective until
Borrower shall have paid all Obligations to Bank in full. Notwithstanding
termination, until all Obligations have been fully satisfied, Bank shall retain
its security interest in all existing Collateral and Collateral arising
thereafter, and Borrower shall continue to perform all of its Obligations.
3.2 After termination and when Bank has received payment in full of
Borrower's Obligations to Bank, Bank shall reassign to Borrower all Collateral
held by Bank, and shall execute a termination of all security agreements and
security interests given by Borrower to Bank, upon the execution and delivery of
mutual general releases.
4. CREATION OF SECURITY INTEREST
4.1 Borrower hereby grants to Bank a continuing security interest in all
presently existing and hereafter arising Collateral in order to secure prompt
repayment of any and all Obligations owed by Borrower to Bank and in order to
secure prompt performance by Borrower of each and all of its covenants and
Obligations under this Agreement and otherwise created. Bank's security interest
in the Collateral shall attach to all Collateral without further act on the part
of Bank or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of a letter of credit,
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advice of credit, instrument, money, negotiable documents, chattel paper or
similar property (collectively, 'Negotiable Collateral"), Borrower shall,
immediately upon receipt thereof, endorse and assign such Negotiable Collateral
over to Bank and deliver actual physical possession of the Negotiable Collateral
to Bank.
4.2 Bank's security interest in Receivables shall attach to all Receivables
without further act on the part of Bank or Borrower. Upon request from Bank,
Borrower shall provide Bank with schedules describing all Receivables created or
acquired by Borrower (including without limitation agings listing the names and
addresses of, and amounts owing by date by account debtors), and shall execute
and deliver written assignments of all Receivables to Bank all in a form
acceptable to Bank, provided, however, Borrower's failure to execute and deliver
such schedules and/or assignments shall not affect or limit Bank's security
interest and other rights in and to the Receivables. Together with each
schedule, Borrower shall furnish Bank with copies of Borrower's customers,
invoices or the equivalent, and original shipping or delivery receipts for all
merchandise sold, and Borrower warrants the genuineness thereof. Bank or Bank's
designee may notify customers or account debtors of collection costs and
expenses to Borrower's account but, unless and until Bank does so or gives
Borrower other written instructions, Borrower shall collect all Receivables for
Bank, receive in trust all payments thereon as Bank's trustee, and, if so
requested to do so from Bank, Borrower shall immediately deliver said payments
to Bank in their original form as received from the account debtor and all
letters of credit, advices of credit, instruments, documents, chattel paper or
any similar property evidencing or constituting Collateral. Notwithstanding
anything to the contrary contained herein, if sales of inventory are made for
cash, Borrower shall immediately deliver to Bank, in identical form, all such
cash, checks, or other forms of payment which Borrower receives. The receipt of
any check or other item of payment by Bank shall not be considered a payment on
account until such check or other item of payment is honored when presented for
payment, in which event, said check or other item of payment shall be deemed to
have been paid to Bank two (2) calendar days after the date Bank actually
receives such check or other item of payment.
4.3 Bank's security interest in inventory shall attach to all inventory
without further act on the part of Bank or Borrower. Upon Bank's request
Borrower will from time to time at Borrower's expense pledge, assemble and
deliver such inventory to Bank or to a third party as Bank's bailee; or hold the
same in trust for Bank's account or store the same in a warehouse in Bank's
name; or deliver to Bank documents of title representing said inventory; or
evidence of Bank's security interest in some other manner acceptable to Bank.
Until a default by Borrower under this Agreement or any other Agreement between
Borrower and Bank, Borrower may, subject to the provisions hereof and consistent
herewith, sell the inventory, but only in the ordinary course of Borrower's
business. A sale of inventory in Borrower's ordinary course of business does not
include an exchange or a transfer in partial or total satisfaction of a debt
owing by Borrower.
4.4 Borrower shall execute and deliver to Bank concurrently with Borrower's
execution of this Agreement, and at any time or times hereafter at the request
of Bank, all financing statements, continuation financing statements, security
agreements, mortgages, assignments, certificates of title, affidavits, reports,
notices, schedules of accounts, letters of authority and all other documents
that Bank may request, in form satisfactory to Bank, to perfect and maintain
perfected Bank's security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under this Agreement. Borrower
hereby irrevocably makes, constitutes and appoints Bank (and any of Bank's
officers, employees or agents designated by Bank) as Borrowers true and lawful
attorney-in-fact with power to sign the name of Borrower on any financing
statements, continuation financing statements, security agreement, mortgage,
assignment, certificate of title, affidavit, letter of authority, notice of
other similar documents which must be executed and/or filed in order to perfect
or continue perfected Bank's security interest in the Collateral.
Borrower shall make appropriate entries in Borrowers Books disclosing Bank's
security interest in the Receivables. Bank (through any of its officers,
employees or agents) shall have the right at any time or times hereafter during
Borrower's usual business hours, or during the usual business hours of any third
party having control over the records of Borrower, to inspect and verify
Borrower's Books in order to verify the amount or condition of, or any other
matter, relating to, said Collateral and Borrower's financial condition.
4.5 Borrower appoints Bank or any other person whom Bank may designate as
Borrower's attorney-in-fact,, with power to endorse Borrower's name on any
checks, notes, acceptances, money order, drafts or other forms of payment or
security that may come into Bank's possession; to sign Borrowers name on any
invoice or xxxx of lading relating to any Receivables, on drafts against account
debtors, on schedules and assignments of Receivables, on verifications of
Receivables and on notices to account debtors; to establish a lock box
arrangement and/or to notify the post office authorities to change the address
for delivery of Borrower's mail addressed to Borrower to an address designated
by Bank, to receive and open all mail addressed to Borrower, and to retain all
mail relating to the Collateral and forward all other mail to Borrower; to send,
whether in writing or by telephone, requests for verification of Receivables;
and to do all things necessary to carry out this Agreement. Borrower ratifies
and approves all acts of the attorney-in-fact. Neither Bank nor its
attorney-in-fact will be liable for any acts or omissions or for any error of
judgement or mistake of fact or law. This power being coupled with an interest,
is irrevocable so long as any Receivables in which Bank has a security interest
remain unpaid and until the Obligations have been fully satisfied.
4.6 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, warehousemen
or any personnel to protect the Collateral, pay any service bureau, or, obtain
any records, and all costs for the same shall be added to the Obligations and
shall be payable on demand.
4.7 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and
service providers.
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5. CONDITIONS PRECEDENT
5.1 Conditions precedent to the making of the loans and the extension of the
financial accommodations hereunder, Borrower shall execute, or cause to be
executed, and deliver to Bank, in form and substance satisfactory to Bank and
its counsel, the following:
a. This Agreement and other documents required by Bank;
b. Financing statements (Form UCC-1 ) in form satisfactory to Bank for
filing and recording with the appropriate governmental authorities;
c. If Borrower is a corporation, then certified extracts from the minutes
of the meeting of its board of directors, authorizing the borrowings and the
granting of the security interest provided for herein and authorizing specific
officers to execute and deliver the agreements provided for herein;
d. If Borrower is a corporation, then a certificate of good standing
showing that Borrower is in good standing under the laws of the state of its
incorporation and certificates indicating that Borrower is qualified to transact
business and is in good standing in any other state in which it conducts
business;
e. If Borrower is a partnership, then a copy of Borrower's partnership
agreement certified by each general partner of Borrower;
f. UCC searches, tax lien and litigation searches, fictitious business
statement filings, insurance certificates, notices or other similar documents
which Bank may require and in such form as Bank may require, in order to
reflect, perfect or protect Bank's first priority security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement;
g. Evidence that Borrower has obtained insurance and acceptable
endorsements;
h. Waivers executed by landlords and mortgagees of any real property on
which any Collateral is located; and
l. Warranties and representations of officers.
6. WARRANTIES, REPRESENTATIONS AND COVENANTS,
6.1 If so requested by Bank, Borrower shall, at such intervals designated by
Bank, during the term hereof execute and deliver a Report of Accounts Receivable
or similar report, in form customarily used by Bank. Borrower's Borrowing Base
at all times pertinent hereto shall not be less than the advances made
hereunder. Bank shall have the right to recompute Borrower's Borrowing Base in
conformity with this Agreement.
6.2 If any warranty is breached as to any account, or any account is not paid
in full by an account debtor within ninety ( 90 ) days from the date of invoice,
or an account debtor disputes liability or makes any claim with respect thereto,
or a petition in bankruptcy or other application for relief under the Bankruptcy
Code or any other insolvency law is filed by or against an account debtor, or an
account debtor makes an assignment for the benefit of creditors, becomes
insolvent, falls or goes out of business, than Bank may deem ineligible any and
all accounts owing by that account debtor, and reduce Borrower's Borrowing Base
by the amount thereof. Bank shall retain its security interest in all
Receivables and accounts, whether eligible or ineligible, until all Obligations
have been fully paid and satisfied. Returns and allowances, if any, as between
Borrower and its customers, will be on the same basis and in accordance with the
usual customary practices of the Borrower, as they exist at this time. Any
merchandise which is returned by an account debtor or otherwise recovered shall
be set aside, marked with Bank's name, and Bank shall retain a security interest
therein. Borrower shall promptly notify Bank of all disputes and claims and
settle or adjust them on terms approved by Bank. After default by Borrower
hereunder, no discount, credit or allowance shall be granted to any account
debtor by Borrower and no return of merchandise shall be accepted by Borrower
without Bank's consent. Bank may, after default by Borrower, settle or adjust
disputes and claims directly with account debtors for amounts and upon terms
which Bank considers advisable, and in such cases Bank will credit Borrower's
account with only the net amounts received by Bank in payment of the accounts,
after deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
a. Borrower has good and marketable title to the Collateral. Bank has and
shall continue to have a first priority perfected security interest in and to
the Collateral. The Collateral shall at all times remain free and clear of all
liens, encumbrances and security interests (except those in favor of Bank).
b. All accounts are and will, at all times pertinent hereto, be bona fide
existing Obligations created by the sale and delivery of merchandise or the
rendition of services to account debtors in the ordinary course of business,
free of liens, claims, encumbrances and security interests (except as held by
Bank and except as may be consented to, in writing, by Bank) and are
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, rights of return or cancellation, and Borrower shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time an account due from such account debtor is assigned to Bank.
7
c. At the time each account is assigned to Bank, all property giving rise
to such account shall have been delivered to the account debtor or to the agent
for the account debtor for immediate shipment to, and unconditional acceptance
by, the account debtor. Borrower shall deliver to Bank, as Bank may from time to
time require, delivery receipts, customer's purchase orders, shipping
instructions, bills of lading and any other evidence of shipping arrangements.
Absent such a request by Bank, copies of all such documentation shall be held by
Borrower as custodian for Bank.
6.4 At the time each eligible account is assigned to Bank, all such eligible
accounts will be due and payable on terms set forth in Section 1.7, or on such
other terms approved in writing by Bank in advance of the creation of such
accounts and which are expressly set forth on the face of all invoices, copies
of which shall be held by Borrower as custodian for Bank. and no such eligible
account will then be past due.
6.5 Borrower shall keep the inventory only at the following locations _______
________________and the owner or mortgages of the respective locations are:
_______________.
a. Borrower, immediately upon demand by Bank therefor, shall now and from
time to time hereafter, at such intervals as are requested by Bank, deliver to
Bank, designations of inventory specifying Borrower's cost of inventory, the
wholesale market value thereof and such other matters and information relating
to the inventory as Bank may request;
b. Borrower's inventory, valued at the lower of Borrower's cost or the
wholesale market value thereof, at all times pertinent hereto shall not be less
than N/A Dollars ($ N/A) which no less than N/A Dollars ($ N/A) shall be in raw
materials and finished goods;
c. All of the inventory is and shall remain free from all purchase money
or other security interests, liens or encumbrances, except as held by Bank;
d. Borrower does now keep and hereafter at all times shall keep correct
and accurate records itemizing and describing the kind, type, quality and
quantity of the inventory, its cost therefor and selling price thereof, and the
daily withdrawals therefrom and additions thereto, all of which records shall be
available upon demand to any of Bank's officers, agents and employees for
inspection and copying;
e. All inventory, now and hereafter at all times, shall be now inventory
of good and merchantable quality free from defects;
f. Inventory is not now and shall not at any time or times hereafter be
located or stored with a bailee, warehouseman or other third party without
Bank's prior written consent, and, in such event, Borrower will concurrently
therewith cause any such bailee, warehouseman or other third party to issue and
deliver to Bank in a form acceptable to Bank, warehouse receipts in Bank's name
evidencing the storage of inventory or other evidence of Bank's prior rights in
the inventory. In any event, Borrower shall instruct any third party to hold all
such inventory for Bank's account subject to Bank's security interests and its
instructions; and
g. Bank shall have the right upon demand now and/or at all times
hereafter, during Borrower's usual business hours, to inspect and examine the
inventory and to check and test the same as to quality, quantity, value and
condition and Borrower agrees to reimburse Bank for Bank's reasonable costs and
expenses in so doing.
6.6 Borrower represents, warrants and covenants with Bank that Borrower will
not, without Bank's prior written consent:
x. Xxxxx a security interest in or permit a lien, claim or encumbrance
upon any of the Collateral to any person, association, firm, corporation, entity
or governmental agency or instrumentality;
b. Permit any levy, attachment or restraint to be made affecting any of
Borrower's assets;
c. Permit any judicial officer or assignee to be appointed or to take
possession of any or all of Borrower's assets;
d. Other than sales of inventory in the ordinary course of Borrower's
business, to sell, lease, or otherwise dispose of, move, or transfer, whether by
sale or otherwise, any of Borrower's assets.
e. Change its name, business structure, corporate identity or structure;
add any new fictitious names, liquidate, merge or consolidate with or into any
other business organization;
f. Move or relocate any Collateral;
g. Acquire any other business organization;
8
h. Enter into any transaction not in the usual course of Borrower's
business;
l. Make any investment in securities of any person, association, firm,
entity, or corporation other than the securities of the United States of
America;
j. Make any change in Borrower's financial structure or in any of its
business objectives, purposes or operations which would adversely affect the
ability of Borrower to repay Borrower's Obligations;
k. Incur any debts outside the ordinary course of Borrower's business
except renewals or extensions of existing debts and interest thereon;
l. Make any advance or loan except in the ordinary course of Borrower's
business as currently conducted;
m. Make loans, advances or extensions of credit to any Person, except for
sales on open account and otherwise in the ordinary course of business;
n. Guarantee or otherwise, directly or indirectly, in any way be or
become responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other Person, agreement for the furnishing of
funds to any other Person through the furnishing of goods, supplies or services,
by way of stock purchase, capital contribution, advance or loan, for the purpose
of paying or discharging (or causing the payment or discharge of) the
indebtedness of any other person, or otherwise, except for the endorsement of
negotiable instruments by the Borrower in the ordinary course of business for
deposit or collection except for Performance guarantees for Borrower's
wholly-owned subsidiary, Medscreen Limited.
o. (a) Sell, lease, transfer or otherwise dispose of properties and
assets having an aggregate book value of more than N/A Dollars ($N/A) (whether
in one transaction or in a series of transactions) except as to the sale of
inventory in the ordinary course of business; (b) change its name, consolidate
with or merge into any other corporation, permit another corporation to merge
into it, acquire all or substantially all the properties or assets of any other
Person, enter into any reorganization or recapitalization or reclassify its
capital stock, or (c) enter into any sale-leaseback transaction;
p. Purchase or hold beneficially any stock or other securities of, or
make any investment or acquire any interest whatsoever in, any other Person,
except for the common stock of the Subsidiaries owned by the Borrower on the
date of this Agreement and except for certificates of deposit with maturities of
one year or less of United States commercial banks with capital, surplus and
undivided profits in excess of One Hundred Million Dollars ($100,000,000) and
direct obligations of the United States Government maturing within one year from
the date of acquisition thereof;
q. Allow any fact, condition or event to occur or exist with respect to
any employee pension or profit sharing plans established or maintained by it
which might constitute grounds for termination of any such plan or for the court
appointment of a trustee to administer any such plan.
6.7 Borrower is not a merchant whose sales for resale of goods for personal,
family or household purposes exceeded seventy-five percent (75%) in dollar
volume of its total sales of all goods during the twelve (12) months preceding
the filing by Bank of a financing statement describing the Collateral. At no
time hereafter shall Borrower's sales for resale goods for personal, family or
household purposes exceed seventy-five percent (75%) in dollar volume of its
total sales.
6.8 Borrower's sole place of business or chief executive office or residence
is located at the address indicated above and Borrower covenants and agrees that
it will not, during the term of this Agreement, without prior written
notification to Bank, relocate said sole place of business or chief executive
office or residence.
6.9 If Borrower is a corporation, Borrower represents, warrants and covenants
as follows:
a. Borrower will not make any distribution or declare or pay any dividend
(in stock or in cash) to any shareholder or on any of its capital stock, of any
class, whether now or hereafter outstanding, or puchase, acquire, repurchase, or
redeem or retire any such capital stock,
b. Borrower is and shall at all times hereafter be a corporation duly
organized and existing in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in California or any
other state in which in conducts it business;
9
c. Borrower has the right and power and Is duly authorized to enter Into
this Agreement; and
d. The execution by Borrower of this Agreement shall not constitute a
breach of any provision contained in Borrower's articles of Incorporation or
by-laws.
6.10 The execution of and performance by Borrower of all of the terms and
provisions contained In this Agreement shall not result In a breach of or
constitute an event of default under any Agreement to which Borrower Is now or
hereafter becomes a party.
6.11 Borrower shall promptly notify Bank In writing of Its acquisition by
purchase, lease or otherwise of any after acquired property of the type included
In the Collateral, with the exception of purchases of Inventory In the ordinary
course of business.
6.12 All assessments and taxes, whether real, personal or otherwise, due or
payable by, or Imposed, levied or assessed against, Borrower or any of its
property have been paid, and shall hereafter be paid In full, before
delinquency. Borrower shall make due and timely payment or deposit of all
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. Borrower will make timely payment
or deposit of all F.I.C.A. payments and withholding taxes required of It by
applicable laws, and will upon request fumish Bank with proof satisfactory to it
that Borrower has made such payments or deposit. If Borrower falls to pay any
such assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in Its sole and absolute discretion and without notice
to Borrower, (I) make payment of the same or any part thereof, or (ii) set up
such reserves in Borrower's account as Bank deems necessary to satisfy the
liability therefor, or both. Bank may conclusively rely on the usual statements
of the amount owing or other official statements Issued by the appropriate
governmental agency. Each amount so paid or deposited by Bank shall constitute a
Bank Expense and an additional advance to Borrower.
6.13 There are no material actions or proceedings pending by or against
Borrower or any guarantor of Borrower before any court or administrative agency
and Borrower has no knowledge of any pending, threatened or Imminent litigation,
governmental Investigations or claims, complaints, actions or prosecutions
Involving Borrower or any guarantor of Borrower, except as heretofore
specifically disclosed In writing to Bank. If any of the foregoing arise during
the term of the Agreement, Borrower shall Immediately notify Bank In writing.
6.14 a. Borrower, at Its expense, shall keep and maintain Its assets Insured
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners who use such
properties In similar businesses for the full Insurable value thereof. Borrower
shall also keep and maintain business interruption insurance and public
liability and property damage Insurance relating to Borrower's ownership and use
of the Collateral and Its other assets. All such policies of Insurance shall be
In such form, with such companies, and in such amounts as may be satisfactory to
Bank. Borrower shall deliver to Bank certified copies of such policies of
Insurance and evidence of the payments of all premiums therefor. All such
policies of Insurance (except those of public liability and property damage)
shall contain an endorsement in a form satisfactory to Bank showing Bank as a
loss payee thereof, with a waiver of warranties (Form 438-BFU), and all proceeds
payable thereunder shall be payable to Bank and, upon receipt by Bank, shall be
applied on account of the Obligations owing to Bank. To secure the payment of
the Obligations, Borrower grants Bank a security Interest In and to all such
policies of Insurance (except those of public liability and property damage) and
the proceeds thereof, and Borrower shall direct all insurers under such policies
of Insurance to pay all proceeds thereof directly to Bank.
b. Borrower hereby irrevocably appoints Bank (and any of Bank's
officers, employees or agents designated by Bank) as Borrower's attorney for the
purpose of making, selling and adjusting claims under such policies of
Insurance, endorsing the name of Borrower on any check, draft, instrument or
other Item of payment for the proceeds of such policies of Insurance and for
making all determinations and decisions with respect to such policies of
insurance. Borrower will not cancel any of such policies without Bank's prior
written consent. Each such Insurer shall agree by endorsement upon the policy or
policies of Insurance issued by It to Borrower as required above, or by
Independent Instruments furnished to Bank, that It will give Bank at least ten
(10) days written notice before any such policy or policies of insurance shall
be altered or cancelled, and that no act or default of Borrower, or any other
person, shall affect the right of Bank to recover under such policy or policies
of insurance required above or to pay any premium in whole or in part relating
thereto. Bank, without waiving or releasing any Obligations or any Event of
Default, may, but shall have no obligation to do so, obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect to such policies which Bank deems advisable. All sums so disbursed by
Bank, as well as reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall constitute Bank Expenses and are payable on
demand.
10
6.15 All financial statements and information relating to Borrower which have
been or may hereafter be delivered by Borrower to Bank are true and correct and
have been prepared in accordance with GAAP consistently applied and there has
been no material adverse change in the financial condition of Borrower since the
submission of such financial information to Bank.
6.16 a. Borrower at all times hereafter shall maintain a standard and modern
system of accounting in accordance with GAAP consistently applied with ledger
and account cards and/or computer tapes and computer disks, computer printouts
and computer records pertaining to the Collateral which contain information as
may from time to time be requested by Bank, not modify or change its method of
accounting or enter into, modify or terminate any agreement presently existing,
or at any time hereafter entered into with any third party accounting firm
and/or service bureau for the preparation and/or storage of Borrower's
accounting records without the written consent of Bank first obtained and
without said accounting firm and/or service bureau agreeing to provide
information regarding the Receivables and Inventory and Borrower's financial
condition to Bank; permit Bank and any of its employees, officers or agents,
upon demand, during Borrower's usual business hours, or the usual business hours
of third persons having control thereof, to have access to and examine all of
the Borrower's Books relating to the Collateral, Borrower's Obligations to Bank,
Borrower's financial condition and the results of Borrower's operations and in
connection therewith, permit Bank or any of its agents, employees or officers to
copy and make extracts therefrom.
b. Borrower shall deliver to Bank within forty five (45) days after the
end of each quarter , a company prepared (10Q) balance sheet and profit and loss
statement covering Borrower's operations and deliver to Bank within ninety (90)
days after the end of each of Borrower's fiscal years a(n) Audited FYE (10K)
statement of the financial condition of the Borrower for each such fiscal year,
including but not limited to, a balance sheet and profit and loss statement and
any other report requested by Bank relating to the Collateral and the financial
condition of Borrower, and a certificate signed by an authorized employee of
Borrower to the effect that all reports, statements, computer disk or tape
files, computer printouts, computer runs, or other computer prepared information
of any kind or nature relating to the foregoing or documents delivered, or
caused to be delivered to Bank under this subparagraph are complete, correct and
thoroughly present the financial condition of Borrower and that there exists on
the date of delivery to Bank no condition or event which constitutes a breach or
Event of Default under this Agreement.
c. In addition to the financial statements requested above, the Borrower
agrees to provide Bank with the following schedules:
X Accounts Receivable Agings on a Monthly basis
-------------- ------------------
X Accounts Payable Agings on a Monthly basis
-------------- ------------------
Job Progress Reports on a basis
-------------- ------------------
Borrowing Base Certificate on a Monthly basis
Sales Report on a Weekly Basis
6.17 Borrower shall maintain the following financial ratios and covenants on
a consolidated and non-consolidated basis:
a. Borrower shall maintain Working Capital in an amount not less than
n/a
b. Tangible Effective Net Worth in an amount not less than $6,894,000 to
increase by 75% of quarterly net profit after taxes beginning January 1, 1998.
c. a ratio of Current Assets to Current Liabilities of 0.90:1.00
d. a quick ratio of cash plus securities plus Receivables to Current
Liabilities of n/a
e. a ratio of Total Liabilities (less debt subordinated to Bank) to
Tangible Not Worth of less than 2.00:1.00
f. Borrower shall maintain a flow coverage ratio of Cash Flow to Fixed
Charges of n/a
g. Borrower shall maintain a net income after taxes of not less than
n/a
h. Borrower shall not without Bank's prior written consent acquire or
expand for or commit itself to acquire or expand for fixed assets by lease,
purchase or otherwise in an aggregate amount that exceeds Two Million and No/100
Dollars ($2,000,000) in any fiscal year; and
i. Bank to allow Borrower to refinance $500,000.00 of equipment to
support working capital needs so loan as they are in compliance with Loan
Agreement not to occur prior to receipt of December 31, 1997 financial
statements showing compliance with loan covenants. Bank reserves the right to
concurrently reduce advance rate.
j. No down streaming of cash/loans to Medscreen in excess of $2,500,000
(at 12/3/97 exchange rates).
k. Pricing will decline to prime plus 0.5% with a quarterly fee of .25%
paid in arrears upon the occurrence of the following: quarterly profitability
and total liabilities/EFTNW below 1.20 to 1. This shall be measured at the end
of each quarter and the rate shall go into effect at the beginning of the next
quarter; Fee goes into effect at the end of the quarter where covenants met.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets
11
for all purposes hereunder.
6.18 Borrower shall promptly supply Bank (and cause any guarantor to supply
Bank) with such other information (including tax returns) concerning its affair
(or that of any guarantor) as Bank may request from time to time hereafter,and
shall promptly notify Bank of any material adverse change in Borrower's
financial condition and of any condition or event which constitutes a breach of
or an event which constitutes an Event of Default under this Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent and able to
pay its debts (including trade debts) as they mature.
6.20 Borrower shall immediately and without demand reimburse Bank for all
sums expanded by Bank in connection with any action brought by Bank to correct
any default or enforce any provision of this Agreement, including all Bank
Expenses; Borrower authorizes and approves all advances and payments by Bank for
items described in this Agreement as Bank Expenses.
6.21 Each warranty, representation and agreement contained in this Agreement
shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank, either now or hereafter.
6.22 Borrower shall keep all of its principal bank accounts with Bank and
shall notify the Bank immediately in writing of the existence of any other bank
account, deposit account, or any other account into which money can be
deposited.
6.23 Borrower shall furnish to the Bank: (a) as soon as possible, but in no
event later than thirty (30) days after Borrower knows or has reason to know
that any reportable event with respect to any deferred compensation plan has
occurred, a statement of the chief financial officer of Borrower setting forth
the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower, (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information from time
to time disseminated to the participants by the administrator of the deferred
compensation plan.
6.24 Borrower is now and shall at all times hereafter remain in compliance
with all federal, state and municipal laws, regulations and ordinances relating
to the handling, treatment and disposal of toxic substances, wastes and
hazardous material and shall maintain all necessary authorizations and permits.
6.25 Borrower shall maintain insurance on the life of n/a in an amount
not to be less than No/100s Dollars ($ n/a ) under one or more policies issued
by insurance companies satisfactory to Bank, which policies shall be assigned to
Bank as security for the indebtedness and on which Bank shall be named as sole
beneficiary.
6.26 Borrower shall limit direct and indirect compensation paid to the
following employees: n/a to an aggregate of n/a Dollars ($ n/a ) per n/a .
7. EVENTS OF DEFAULT Any one or more of the following events shall constitute a
default by Borrower under this Agreement:
a. If Borrower falls or neglects to perform, keep or observe any term,
provision, condition, covenant, agreement, warranty or representation contained
in this Agreement, or any other present or future agreement between Borrower and
Bank;
b. If any representation, statement, report or certificate made or
delivered by Borrower, or any of its officers, employees or agents to Bank is
not true and correct;
c. If Borrower falls to pay when due and payable or declared due and
payable, all or any portion of the Borrower's Obligations (whether of principal,
interest, taxes, reimbursement of Bank Expenses, otherwise);
d. If there is a material impairment of the prospect of repayment of all
or any portion of Borrower's Obligations or a material impairment of the value
or priority of Bank's security interest in the Collateral;
e. If all or any of Borrower's assets are attached, seized, subject to a
writ or distress warrant, or are levied upon, or come into the possession of any
Judicial Officer or Assignee and the same are not released, discharged or bonded
against with ten (10) days thereafter;
f. If any Insolvency Proceeding is filed or commenced by or against
Borrower without being dismissed within ten (10) days thereafter;
12
g. If any proceeding is filed or commenced by or against Borrower for its
dissolution or liquidation;
h. 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;
i. If a notice of lien, levy or assessment is filed of record with
respect to any or all of Borrower's assets by the United States Government, or
any department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether xxxxxx or
otherwise, upon any or all of the Borrower's assets and the same is not paid on
the payment date thereof;
j. If a judgment or other claim becomes a lien or encumbrance upon any or
all of Borrower's assets and the same is not satisfied, dismissed or bonded
against within ten (10) days thereafter;
k. If Borrower's records are prepared and kept by an outside computer
service bureau at the time this Agreement is entered into or during the term of
this Agreement such an agreement with an outside service bureau is entered into,
and at any time thereafter, without first obtaining the written consent of Bank,
Borrower terminates, modifies, amends or changes its contractual relationship
with said computer service bureau or said computer service bureau fails to
provide Bank with any requested information or financial data pertaining to
Bank's Collateral, Borrower's financial condition or the results of Borrower's
operations;
l. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result in an acceleration of the
maturity of Borrower's indebtedness to others, whether under any indenture,
agreement or otherwise;
m. If Borrower makes any payment on account of indebtedness which has
been subordinated to Borrower's Obligations to Bank;
n. If any misrepresentation exists now or thereafter in any warranty or
representation made to Bank by any officer or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director,
o. If any party subordinating its claims to that of Bank's or any
guarantor of Borrower's Obligations dies or terminates its subordination or
guaranty, becomes insolvent or an Insolvency Proceeding is commenced by or
against any such subordinating party or guarantor;
p. If Borrower is an individual and Borrower dies;
q. If there is a change of ownership or control of n/a or more of the
issued and outstanding stock of Borrower, or
r. If any reportable event, which the Bank determines constitutes grounds
for the termination of any deferred compensation plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any such plan, shall have occurred and
be continuing thirty (30) days after written notice of such determination shall
have been given to Borrower by Bank, or any such Plan shall be terminated within
the meaning of Title IV of the Employment Retirement Income Security Act
("ERISA"), or a trustee shall be appointed by the appropriate United States
District Court to administer any such plan, or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any plan and in case of any
event described in this Section 7.0, the aggregate amount of the Borrowees
liability to the Pension Benefit Guaranty Corporation under Sections 4062, 4063
or 4064 of ERISA shall exceed five percent (5%) of Borrower's Tangible Effective
Not Worth.
Notwithstanding anything contained in Section 7 to the contrary, Bank shall
refrain from exercising its rights and remedies and Event of Default shall
thereafter not be deemed to have occurred by reason of the occurrence of any of
the events set forth in Sections 7.e, 7.f or 7.1 of this Agreement if, within
ten (10) days from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; provided, however, if the event is the
institution of Insolvency Proceedings against Borrower, Bank shall not be
obligated to make advances to Borrower during such cure period.
8. BANKS RIGHTS AND REMEDIES
8.1 Upon the occurence of an Event of Default by Borrower under this
Agreement, 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 Borrower's Obligations, whether evidenced by this Agreement,
installment notes, demand notes or otherwise, immediately due and payable to the
Bank;
b. Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, or any other agreement between Borrower and Bank;
c. Terminate this Agreement as to any future liability or obligation of
Bank, but without affecting Bank's rights and security interests in the
Collateral, and the Obligations of Borrower to Bank;
13
d. Without notice to or demand upon Borrower or any guarantor, 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 promises where the
Collateral is located, take and maintain possession of the Collateral and the
promises (at no charge to Bank), or any part thereof, and to pay, purchase,
contest or compromise any encumbrance, charge or lien which in the opinion of
Bank appears to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith;
e. Without limiting Bank's rights under any security interest, Bank is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks 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 Borrower's rights under all licenses and all
franchise agreement shall inure to Bank's benefit, and Bank shall have the right
and power to enter into sublicense agreements with respect to all such rights
with third parties on terms acceptable to Bank;
f. Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sales and sell (in the manner provided for herein) the
inventory;
g. Sell or dispose 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 promises) as is
commercially reasonable in the opinion of Bank. It is not necessary that the
Collateral be present at any such sale;
h. Bank shall give notice of the disposition of the Collateral as
follows:
(1) Bank shall give the Borrower and each holder of a security interest
in the Collateral who has filed with Bank a written request for notice, a notice
in writing of the time and place of public sale, or, if the sale is a private
sale or some disposition other than a public sale is to be made of the
Collateral, the time on or after which the private sale or other disposition is
to be made;
(2) The notice shall be personally delivered or mailed, postage prepaid,
to Borrowers address appearing in this Agreement, at least five (5) calendar
days before the data fixed for the sale, or at least five (5) calendar days
before the date on or after which the private sale or other disposition is to be
made, unless the Collateral is perishable or threatens to decline speedily in
value. Notice to persons other than Borrower claiming an interest in the
Collateral shall be sent to such addresses as have been furnished to Bank;
(3) If the sale is to be a public sale, Bank shall also give notice of
the time and place by publishing a notice one time at least five (5) calendar
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be hold; and
(4) Bank may credit bid and purchase at any public sale.
i. Borrower shall pay all Bank Expenses incurred in connection with
Bank's enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Bank;
j. Any deficiency which exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of third parties, to
Borrower by Bank, or, in Bank's discretion, to any party who Bank believes, in
good faith, is entitled to the excess; and
k. Without constituting a retention of Collateral in satisfaction of an
obligation within the meaning of 9505 of the Uniform Commercial Code or an
action under California Code of Civil Procedure 726, apply any and all amounts
maintained by Borrower as deposit accounts (as that term is defined under 9105
of the Uniform Commercial Code) or other accounts that Borrower maintains with
Bank against the Obligations.
6.2 Bank's rights and remedies under this Agreement and all other agreements
shall be cumulative. Bank shall have all other rights and remedies not
inconsistent herewith as provided 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
default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election or acquiescence by Bank..
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY
If Borrower fails to pay promptly when due to another person or entity,
monies which Borrower is required to pay by reason of any provision in this
Agreement, Bank may, but need not, pay the same and charge Borrower's account
therefor, and Borrower shall promptly reimburse Bank. All such sums shall become
additional indebtedness owing to Bank, shall bear interest at the rate
hereinabove provided, and shall be secured by all Collateral. Any payments made
by Bank shall not constitute (i) an agreement by it to make similar payments in
the future, or (ii) a waiver by Bank of any default under this Agreement. Bank
need not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance or lien and the receipt of the usual official
notice of the payment thereof shall be conclusive evidence that the same was
validly due and owing. Such payments shall constitute Bank Expenses and
additional advances to Borrower.
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10. WAIVERS
10.1 Borrower agrees that checks and other instruments received by Bank in
payment or on account of Borrower's Obligations constitute only conditional
payment until such items are actually paid to Bank and Borrower waives the right
to direct the application of any and all payments at any time or times hereafter
received by Bank on account of Borrower's Obligations and Borrower agrees that
Bank shall have the continuing exclusive right to apply and reapply such
payments in any manner as Bank may deem advisable, notwithstanding any entry by
Bank upon its books.
10.2 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 any or all
commercial paper, accounts, documents, instruments chattel paper, and guarantees
at any time hold by Bank on which Borrower may In any way be liable.
10.3 Bank shall not in any way or manner be liable or responsible for (a) the
safekeeping of the inventory; (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. All risk of loss, damage or
destruction of inventory shall be borne by Borrower.
10.4 Borrower waives the right and the right to assert a confidential
relationship, if any, it may have with any accountant, accounting firm and/or
service bureau or consultant in connection with any information requested by
Bank pursuant to or in accordance with this Agreement, and agrees that a Bank
may contact directly any such accountants, accounting firm and/or service bureau
or consultant in order to obtain such information.
10.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER, OR
CONTEMPLATED HEREUNDER, OR ANY OTHER CLAIM (INCLUDING TORT OR BREACH OF DUTY
CLAIMS) OR DISPUTE HOWSOEVER ARISING BETWEEN BANK AND BORROWER.
10.6 In the event that Bank elects to waive any rights or remedies hereunder,
or compliance with any of the terms hereof, or delays or falls to pursue or
enforce any term, such waiver, delay or failure to pursue or enforce shall only
be effective with respect to that single act and shall not be construed to
affect any subsequent transactions or Bank's right to later pursue such rights
and remedies.
11. ONE CONTINUING LOAN TRANSACTION. All loans and advances heretofore, now
or at any time or times hereafter made by Bank to Borrower under this Agreement
or any other agreement between Bank and Borrower, shall constitute one loan
secured by Bank's security interests in the Collateral and by all other security
interests, liens, encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Bank.
Notwithstanding the above, (i) to the extent that any portion of the
Obligations are consumer loan, that portion shall not be secured by any deed of
trust or mortgage on or other security interest in the Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if the
Borrower (or any of them) has (have) given or give(s) Bank a deed of trust or
mortgage covering real property, that deed of trust or mortgage shall not secure
the loan and any other Obligation of the Borrower (or any of them), unless
expressly provided to the contrary in another place.
12. NOTICES. Unless otherwise provided in this Agreement, all notices or
demands by either party on the other relating to this Agreement shall be in
writing and sent by regular United States mail, postage prepaid, properly
addressed to Borrower or to Bank at the addresses stated in this Agreement, or
to such other addresses as Borrower or Bank may from time to time specify to the
other in writing. Requests to Borrower by Bank hereunder may be made orally.
13. AUTHORIZATION TO DISBURSE. Bank is hereby authorized to make loans and
advances hereunder upon telephonic or other instructions received from those
individuals designated on Borrower's Telephone and Facsimile authorization
attached hereto, or at the discretion of Bank if said loans and advances are
necessary to meet any Obligations of Borrower to Bank. Bank shall have no duty
to make inquiry or verify the authority of any such party, and Borrower shall
hold Bank harmless from any damage, claims or liability by reason of Bank's
honor of, or failure to honor, any such instructions.
14. DESTRUCTION OF BORROWER'S DOCUMENTS. Any documents, schedules, invoices
or other papers delivered to Bank, may be destroyed or otherwise disposed of by
Bank six (6) months after they are delivered to or received by Bank, unless
Borrower requests, in writing, the return of the said documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.
15. CHOICE OF LAW. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined according to the laws of the
State of California. The parties agree that all actions or proceedings arising
in connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or the County of Santa
Xxxxx.
16. GENERAL PROVISIONS
16.1 This Agreement shall be binding and deemed effective when executed by
the Borrower and accepted and executed by Bank at its headquarter office.
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16.2 This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties, provided, however, that Borrower
may not assign this Agreement or any rights hereunder without Bank's prior
written consent and any prohibited assignment shall be absolutely void. No
consent to an assignment by Bank shall release Borrower or any guarantor from
their Obligations to Bank. Bank may assign this Agreement and its rights and
duties hereunder. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in Bank's rights
and benefits hereunder. In connection therewith, Bank may disclose all documents
and information which Bank now or hereafter may have relating to Borrower or
Borrower's business.
16.3 Paragraph headings and paragraph numbers have been set forth herein for
convenience only; unless the contrary is compelled by the context, everything
contained in each paragraph applies equally to this entire Agreement.
16.4 Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against Bank or Borrower, whether under any rule of
construction or otherwise; on the contrary, this Agreement has been reviewed by
all parties and shall be construed and Interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto. When permitted by the context, the singular includes the
plural and vice versa.
16.5 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.
16.6 This Agreement cannot be changed or terminated orally. Except as to
currently existing Obligations owing by Borrower to Bank, all prior agreements,
understandings, representations, warranties, and negotiations, if any, with
respect to the subject matter hereof, are merged into this Agreement.
16.7 The parties intend and agree that their respective rights, duties,
powers, liabilities, obligations and discretions shall be performed, carried
out, discharged and exercised reasonably and in good faith.
16.8 In addition, if this Agreement is secured by a deed of trust or mortgage
covering real property, then the trustor or mortgagor shall not mortgage or
pledge the mortgaged promises as security for any other indebtedness or
obligations. This Agreement, together with all other indebtedness secured by
said deed of trust or mortgage, shall become due and payable immediately,
without notice, at the option of Bank, (a) If said trustor or mortgagor shall
mortgage or pledge the mortgaged promises for any other indebtedness or
obligations or shall convoy, assign or transfer the mortgaged promises by deed,
installment sale contract or other instrument; (b) If the title to the mortgaged
promises shall become vested in any other person or party in any manner
whatsoever, or (c) If there is any disposition (through one or more
transactions) of legal or beneficial title to a controlling interest of said
trustor or mortgagor.
IN WITNESS WHEREOF, the parties hereto have caused this Loan & Security
Agreement (Accounts and Inventory) to be executed as of the data first
hereinabove written.
ATTEST:
Title:
BORROWER: PharmChem Laboratories, Inc.
Accepted and effective as of By: /s/ Xxxxx Xxxxxxxxx
November 18, 1997 at --------------------------------
Bank's Headquarter Office Signature of
Title: VP & CFO
-----------------------------
By: /s/ Xxxxx Xxxxx
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Signature of Xxxxx Xxxxx
Title: First Vice President
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