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EXHIBIT 10.33
MODIFICATION TO LOAN AND SECURITY AGREEMENT
This First Modification to Loan & Security Agreement (this
"Modification") is entered into by and between PharmChem Laboratories, Inc.
("Borrower") and Comerica Bank-California ("Bank") as of this 10th day of
August, 1998, at San Jose, California.
RECITALS
A. Bank and Borrower have previously entered into or are concurrently
herewith entering into a Loan & Security Agreement (Accounts & Inventory) (the
"Agreement") dated November 18, 1997 and executed on December 5, 1997.
B. Borrower has requested, and Bank has agreed, to modify the Agreement
as set forth below.
AGREEMENT
For good and valuable consideration, the parties agree as set forth
below:
Incorporation by Reference. The Agreement as modified hereby and the
Recitals are incorporated herein by this reference.
Section 1.17 Delete the following words from the Section: "computer
disks, computer tapes, literature, reports, catalogs"
Sections 1.121
1.21h, 6.2 accounts with a particular account debtor on which over
twenty-five (25%) of the aggregate amount owing is greater
than ninety-one (91) DAYS from the date of the invoice.
Section 1.27 To be deleted in its entirety.
Section 2.4 Advances under the line of credit shall be allowed up to a
maximum of $500,000.00 over the Borrowing Base but within
the line amount through and including September 30, 1998,
and shall bear interest at the rate set forth in section 2.2
Section 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 One (91) days from the date of invoice, or an account
debtor disputes liability or
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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,
fails or goes out of business, then 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. 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.
Section 6.16c Account Receivable Aging on a monthly basis within 25 days
of month-end.
Account Payable Aging on a monthly basis within 25 days of
month end.
Borrowing Base Certificate on a monthly basis within 25 days
of month-end.
Lender 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 Certificate submitted
by Borrower.
Section 6.17 Delete the words "'and non-consolidated" from the Section.
Section 6.17b Tangible Effective Net Worth in an amount not less than
$5,755,000.00 as of March 31, 1998 increasing by 75% of
quarterly net profit after tax commencing April 1, 1998;
ETNW defined as shareholder's equity less intangibles, less
deferred tax asset, less due from employees.
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Section 6.17c a ratio of Current Assets to Current Liabilities of not less
than 0.80:1.00 through June 30, 1999; 0.85:1.00 thereafter,
Current Ratio defined as Current Assets divided by Current
Liabilities.
Section 6.17e a ratio of Total Liabilities (less debt subordinated to
Bank) to Tangible Effective Net Worth of less than 2.3:1.00.
Legal Effect. Except as specifically set forth in this Modification, all
of the terms and conditions of the Agreement remain in full force and effect.
Integration. This is an integrated Modification and supersedes all prior
negotiations and agreements regarding the subject matter hereof. All amendments
hereto must be in writing and signed by the parties.
IN WITNESS WHEREOF, the parties have agreed as of the date first set
forth above.
PHARMCHEM LABORATORIES, INC. COMERICA BANK-CALIFORNIA
By: /s/ David A. Lattanzio By: /s/ James L. Weber
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David A. Lattanzio James L. Weber
Vice President & CFO Vice President