Exhibit 10.41
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LIMITED WAIVER
This First Amendment to Loan and Security Agreement and Limited Waiver
("Amendment") is dated as of May 1, 1997, and entered into by and between XXXXXX
FINANCIAL, INC. ("Lender") and MEDTOX SCIENTIFIC, INC. (formerly known as
EDITEK, Inc.), MEDTOX LABORATORIES, INC. (formerly known as Psychiatric
Diagnostic Laboratories of America, Inc.) and MEDTOX DIAGNOSTICS, INC. (formerly
known as diAGnostix, Inc.) (collectively, "Borrowers").
WHEREAS, Lender and Borrowers have entered into a Loan and Security
Agreement, (the "Agreement") dated January 30, 1996; and
WHEREAS, the shareholders of Borrowers have approved a change in the
name of each Borrower and the Lender and Borrowers desire to amend the Agreement
to acknowledge said name changes; and
WHEREAS, certain Events of Default are in existence under subsection
8.1(C) of the Agreement as a result of Borrowers' breach of (i) the Tangible Net
Worth covenant contained in subsection 6.1 for the all quarters in Fiscal Year
1996 and for the quarter ended March 31, 1997; (ii) the Minimum EBIDTA covenant
contained in subsection 6.2 for all the monthly periods in Fiscal Year 1996 and
for the twelve (12) month period ended March 31, 1997; (iii) the Ratio of
Indebtedness to Tangible Net Worth covenant contained in subsection 6.3 for all
quarters in Fiscal Year 1996 and for the quarter ended March 31, 1997; (iv) the
Capital Expenditure Limits covenant contained in subsection 6.4 for Fiscal Year
1996; (v) the Fixed Charge Coverage covenant contained in subsection 6.5 for all
monthly periods in Fiscal Year 1996 and for the twelve (12) month period ended
March 31, 1997; and (vi) the Interest Coverage covenant contained in subsection
6.6 for all month periods in Fiscal Year 1996 and the twelve (12) month period
ended March 31, 1997 (collectively, the "Existing Events of Default").
WHEREAS, Borrowers have requested that Lender waive the Existing Events of
Default; and
WHEREAS, Lender has agreed to waive the existing Events of Default and
amend the Agreement in certain respects, subject to the terms and conditions set
forth herein.
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II. AMENDMENTS
The Agreement is hereby amended as follows:
Section 2.01. Amendment to Subsection 1.1 "Certain Defined Terms".
Subsection 1.1 is hereby amended by adding, in proper alphabetical order, the
following new definitions:
"Diagnostics" means MEDTOX Diagnostics, Inc. (f/k/a diAGnostix, Inc.), a
Delaware corporation, and its successors and permitted assigns.
"Medtox" means MEDTOX Scientific, Inc. (f/k/a EDITEK, Inc.), a Delaware
corporation, and its successors and permitted assigns.
"MLI" means MEDTOX Laboratories, Inc. (f/k/a Psychiatric Diagnostic
Laboratories of America, Inc.), a Delaware corporation, and its successors and
permitted assigns.
Section 2.01. Amendment to Subsection 2.1(C) "Eligible Collateral".
Subsection 2.1(C) is hereby amended by adding the following paragraph (18) to
the end of said subsection:
(18) Accounts due from Substance Abuse Management, Inc. ("SAMI") to the
extent that such Accounts exceed in the aggregate, at any date of determination,
an amount equal to the lesser of (i) twelve percent (12%) of the aggregate of
Accounts of all Borrowers at said date or (ii) $590,000.
Section 2.02. Amendment to Subsection 2.2(A) "Rate of Interest". Subsection
2.2 is hereby amended and restated as follows:
(A) Rate of Interest. The Loans and all other Obligations
shall bear interest from the date such Loans are made or such other
Obligations become due to the date paid at a rate per annum equal to
two percent (2.00%) plus the Base Rate with respect to the Revolving
Loan, (ii) two and one-half percent (2.50%) plus the Base Rate with
respect to Term Loan A and (iii) three percent (3.00%) plus the Base
Rate with respect to Term Loan B (the "Interest Rate"). After the
occurrence and during the continuance of an Event of Default, the Loans
and all other Obligations shall, at Lender's option, bear interest at a
rate per annum equal to three percent (3.00%) plus the Interest Rate
(the "Default Rate").
Section 2.03. Amendment to Subsection 5.1(F) "Borrowing Base Certificate,
Registers and Journals". Subsection 5.1(F) is hereby amended and restated as
follows:
(F) Borrowing Base Certificates, Registers and Journals. On the Closing
Date and within five (5) Business Days after the last day of each month
and from time to time upon the request of Lender, each Borrower shall
deliver to Lender: (1) a Borrowing Base Certificate updated since the
date of the prior Borrowing Base Certificate, together with a report of
the outstanding balance of the Revolving Loan owing by such Borrower
and the amount of all intercompany advances owing by and to such
Borrower; (2) an invoice register or sales journal describing all sales
of such Borrower since the date of the prior invoice register, in form
and substance satisfactory to Lender, and, if Lender so requests,
copies of invoices evidencing such sales and proofs of delivery
relating thereto; (3) a cash receipts journal describing all cash
receipts of such Borrower since the date of the prior cash receipts
journal; (4) an aged trial balance of all its then existing Accounts;
and (5) an aged trial balance of all its then existing accounts
payable; and (6) a detailed inventory listing and cover summary report.
All such reports shall be in form and substance satisfactory to Lender.
Notwithstanding the foregoing, effective May 1, 1997, and until further
notice from Lender, Borrowers shall deliver the Borrowing Base
Certificate referred to in clause (1) above to Lender on each Business
Day and the items referred to in clauses (2), (3), (4), (5) and (6)
above to Lender within five (5) Business Days after the last day of
each month.
Section 2.04. Amendment to Subsection 6.1 "Tangible Net Worth". Subsection
6.1 is hereby amended and restated as follows:
6.1 Tangible Net Worth. Borrowers shall at all times maintain
a consolidated Tangible Net Worth of at least the amounts set forth
below at the end of each quarter of a Fiscal Year set forth below.
Fiscal Quarter Amount
March 31, 1996 $ 500,000
June 30, 1996 $1,000,000
September 30, 1996 $1,500,000
December 31, 1996 $2,000,000
March 31, 1997 $2,500,000
June 30, 1997 $ 180,000
September 30, 1997 $ 550,000
December 31, 1997 $ 970,000
March 31, 1998 $1,300,000
June 30, 1998 $1,700,000
September 30, 1998 $2,150,000
December 31, 1998 and as of the $2,650,000
last day of each fiscal quarter thereafter
Section 2.05. Amendment to Subsection 6.2 "Minimum EBITDA". Subsection 6.2
is hereby amended and restated as set forth below:
6.2 Minimum EBITDA. Borrowers shall at all times maintain a
consolidated EBITDA less Registration Payments paid or accrued of at
least the amounts set forth below for the periods set forth below.
Medtox &
Period Diagnostics MLI Consolidated
2 months ended February 29, 1996 $100,000 $ 50,000 $ 150,000
3 months ended March 31, 1996 $100,000 $ 100,000 $ 200,000
4 months ended April 30, 1996 $100,000 $ 400,000 $ 500,000
5 months ended May 31, 1996 $100,000 $ 800,000 $ 900,000
6 months ended June 30, 1996 $200,000 $ 1,000,000 $ 1,200,000
7 months ended July 31, 1996 $200,000 $ 1,400,000 $ 1,600,000
8 months ended August 31, 1996 $200,000 $ 1,800,000 $ 2,000,000
9 months ended September 30, 1996 $200,000 $ 2,100,000 $ 2,300,000
10 months ended October 31, 1996 $300,000 $ 2,400,000 $ 2,700,000
11 months ended November 30, 1996 $300,000 $ 2,800,000 $ 3,100,000
12 months ended December 31, 1996 $300,000 $ 3,100,000 $ 3,400,000
12 months ended March 31, 1997 $350,000 $ 3,100,000 $ 3,450,000
6 months ended June 30, 1997 $ 1,350,000
9 months ended September 30, 1997 $ 2,000,000
12 months ended December 31, 1997 $ 2,700,000
12 months ended March 31, 1998 $ 3,100,000
12 months ended June 30, 1998 $ 3,400,000
12 months ended September 30, 1998 $ 3,750,000
12 months ended December 31, 1998 and for the 12 months $ 3,800,000
ended on the last day of each fiscal quarter thereafter
Section 2.06. Amendment to Subsection 6.3 "Ratio of Indebtedness to
Tangible Net Worth". Subsection 6.3 is hereby amended and restated as follows:
6.3 Ratio of Indebtedness to Tangible Net Worth. The ratio of
(a) Borrowers' consolidated Indebtedness to (b) Borrowers' consolidated
Tangible Net Worth shall be no greater than the ratio set forth below
at the end of each quarter of a Fiscal Year set forth below.
Fiscal Quarter Ratio
March 31, 1996 7.5:1
June 30, 1996 7.5:1
September 30, 1996 7.5:1
December 31, 1996 7.5:1
March 31, 1997 7.5:1
June 30, 1997 28.3:1
September 30, 1997 8.3:1
December 31, 1997 4.5:1
March 31, 1998 3.0:1
June 30, 1998 3.0:1
September 30, 1998 3.0:1
December 31, 1998 3.0:1
and as of the last day of each fiscal
quarter thereafter
Section 2.07. Amendment to Subsection 6.5 "Fixed Charge Coverage".
Subsection 6.5 is hereby amended and restated as follows:
6.5 Fixed Charge Coverage. Borrowers shall not permit their
consolidated Fixed Charge Coverage for any period set forth below to be
less than the amount set forth below for such period.
Period Amount
3 months ended March 31, 1996 0.8
6 months ended June 30, 1996 1.0
9 months ended September 30, 1996 1.3
12 months ended December 31, 1996 1.3
12 months ended March 31, 1997 1.3
6 months ended June 30, 1997 0.4
9 months ended September 30, 1997 0.8
12 months ended December 31, 1997 0.8
12 months ended March 31, 1998 1.0
12 months ended June 30, 1998 1.2
12 months ended September 30, 1998 1.3
12 months ended December 31, 1998 1.4
and for the 12 months ended on the
last day of each fiscal quarter thereafter
Section 2.08. Amendment to Subsection 6.6 "Interest Coverage". Subsection
6.6 is hereby amended and restated as follows:
6.6 Interest Coverage. Borrowers shall not permit their consolidated
Interest Coverage for any period set forth below to be less than the amount set
forth below for such period.
Period Amount
3 months ended March 31, 1996 3.0
6 months ended June 30, 1996 3.4
9 months ended September 30, 1996 4.6
12 months ended December 31, 1996 5.6
12 months ended March 31, 1997 6.0
6 months ended June 30, 1997 1.8
9 months ended September 30, 1997 3.2
12 months ended December 31, 1997 3.8
12 months ended March 31, 1998 4.6
12 months ended June 30, 1998 5.0
12 months ended September 30, 1998 5.4
12 months ended December 31, 1998 6.0
and for the 12 months ended on the
last day of each fiscal quarter thereafter
ARTICLE III. NAMES
Notwithstanding anything contained in the Agreement to the contrary,
whenever (i) the defined term "diAGnostix" appears therein, it shall be
substituted with the amended defined term "Diagnostics", (ii) the defined term
"Editek" appears therein, it shall be substituted with the amended defined term
"Medtox" and (iii) the defined term "PDLA" appears therein, it shall be
substituted with the amended defined term "MLI".
ARTICLE IV. WAIVER
Lender hereby waives the Existing Events of Default. This is a limited
waiver and shall not be deemed to constitute a waiver of any other existing
Event of Default or any future breach of the Agreement or any of the other Loan
Documents (including, without limitation, a breach of the covenants causing the
Existing Events of Default for any periods other than those specified herein).
ARTICLE V. MISCELLANEOUS
Section 5.01. Conditions. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent (unless specifically
waived in writing by Lender):
(a) there shall have occurred no material adverse change in the business,
operations, financial conditions, profits or prospects, or in the Collateral of
Borrowers;
(b) Borrowers shall have executed and delivered such other documents and
instruments as Lender may require;
(c) all corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Lender and its
legal counsel; and
(d) Borrowers shall have paid Lender an amendment fee in the amount of
$10,000 and a documentation fee in the amount of $500.
Section 5.02 Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement, are ratified and confirmed
and shall continue in full force and effect.
Section 5.03 Corporate Action The execution, delivery and performance
of this Amendment have been authorized by all requisite corporate action on the
part of each Borrower and will not violate the Articles of Incorporation or
Bylaws of any Borrower.
Section 5.04 Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.05 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of Lender and Borrowers and their respective
successors and assigns.
Section 5.06 Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first above written.
XXXXXX FINANCIAL, INC.,
as Lender
By:____________________________
Title:__________________________
MEDTOX SCIENTIFIC, INC.,
(f/k/a EDITEK, Inc..), as a Borrower
By:_____________________________
Title:___________________________
[Signatures continue on following page.]
MEDTOX LABORATORIES, INC.,
(f/k/a Psychiatric Diagnostic Laboratories
of America, Inc.), as a Borrower
By:______________________________
Title:____________________________
MEDTOX DIAGNOSTICS, INC.,
(f/k/a Diagnostix, Inc.), as a Borrower
By:_______________________________
Title:_____________________________
