Exhibit 10.57
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
BY AND AMONG
MEDTOX SCIENTIFIC, INC.,
MEDTOX LABORATORIES, INC.,
MEDTOX DIAGNOSTICS, INC.
CONSOLIDATED MEDICAL SERVICES, INC.
AND
WELLS FARGO BUSINESS CREDIT, INC.
Dated as of: May 7, 2001 but effective as of March 31, 2001
Table of Contents
ARTICLE I DEFINITIONS........................................................1
Section 1.1 Definitions...................................................1
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY..........................10
Section 2.1 Existing Advances............................................10
Section 2.2 Revolving Advances...........................................11
Section 2.3 Procedures for Requesting Revolving Advances.................12
Section 2.4 Issuance of Letters of Credit................................12
Section 2.5 Payment of Amounts Drawn Under Letters of Credit.............13
Section 2.6 Special Account..............................................14
Section 2.7 Obligations Absolute.........................................14
Section 2.9 Requests for 2001 Capex Advances.............................15
Section 2.10 Payments on Term Notes......................................16
Section 2.11 Interest; Minimum Interest Charge...........................16
Section 2.12 Fees........................................................17
Section 2.13 Computation of Interest and Fees............................18
Section 2.14 Capital Adequacy............................................18
Section 2.15 Discretionary Nature of this Facility; Termination
by the Lender; Automatic Renewal............................19
Section 2.16 Voluntary Prepayment; Termination of the Credit
Facility by the Borrowers...................................19
Section 2.17 Termination and Prepayment Fees.............................20
Section 2.18 Mandatory Prepayment........................................20
Section 2.19 Payment.....................................................21
Section 2.20 Payment on Non-Banking Days.................................21
Section 2.21 Use of Proceeds.............................................21
Section 2.22 Liability Records...........................................21
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF............................21
Section 3.1 Grant of Security Interest...................................21
Section 3.2 Notification of Account Debtors and Other Obligors...........21
Section 3.3 Assignment of Insurance......................................22
Section 3.4 Occupancy....................................................22
Section 3.5 License......................................................23
Section 3.6 Financing Statement..........................................23
Section 3.7 Setoff.......................................................23
Section 3.8 Accommodation Party Defenses Waived..........................24
Section 3.9 Security Interest in Special Account.........................24
ARTICLE IV CONDITIONS OF WILLINGNESS TO CONSIDER LENDING....................24
Section 4.1 Conditions Precedent to Lender's Willingness
to Consider Making the Initial Revolving Term Advances and
Issuing Letters of Credit...........................................24
Section 4.2 Conditions Precedent to All Advances and Letters of
Credit..............................................................25
ARTICLE V REPRESENTATIONS AND WARRANTIES....................................25
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax
Identification Number...............................................25
Section 5.2 Authorization of Borrowing; No Conflict as to
Law or Agreements...................................................26
Section 5.3 Legal Agreements.............................................26
Section 5.4 Subsidiaries.................................................26
Section 5.5 Financial Condition; No Adverse Change.......................27
Section 5.6 Litigation...................................................27
Section 5.7 Regulation U.................................................27
Section 5.8 Taxes........................................................27
Section 5.9 Titles and Liens.............................................27
Section 5.10 Plans.......................................................27
Section 5.11 Default.....................................................28
Section 5.12 Environmental Matters.......................................28
Section 5.13 Submissions to the Lender...................................29
Section 5.14 Financing Statements........................................29
Section 5.15 Rights to Payment...........................................29
Section 5.16 Direct and Substantial Economic Interest....................30
Section 5.17 Subrogation.................................................30
Section 5.18 Joint and Several Liability.................................30
ARTICLEVI BORROWERS' AFFIRMATIVE COVENANTS..................................30
Section 6.1 Reporting Requirements.......................................30
Section 6.2 Books and Records; Inspection and Examination................33
Section 6.3 Account Verification.........................................33
Section 6.4 Compliance with Laws.........................................33
Section 6.5 Payment of Taxes and Other Claims............................34
Section 6.6 Maintenance of Properties....................................34
Section 6.7 Insurance....................................................34
Section 6.8 Preservation of Existence....................................35
Section 6.9 Delivery of Instruments, etc.................................35
Section 6.10 Collateral Accounts.........................................35
Section 6.11 Lockboxes...................................................35
Section 6.12 Performance by the Lender...................................36
Section 6.13 Minimum Debt Service Coverage Ratio.........................36
Section 6.14 Minimum Net Income..........................................37
Section 6.15 Minimum Book Net Worth......................................37
Section 6.16 Maximum Debt to Book Net Worth Ratio........................37
Section 6.17 New Covenants...............................................37
ARTICLE VII NEGATIVE COVENANTS..............................................38
Section 7.1 Liens........................................................38
Section 7.2 Indebtedness.................................................38
Section 7.3 Guaranties...................................................39
Section 7.4 Investments and Subsidiaries.................................39
Section 7.5 Sale or Transfer of Assets; Suspension of Business
Operations.......................................................40
Section 7.6 Intellectual Property........................................40
Section 7.7 Consolidation and Merger; Asset Acquisitions.................40
Section 7.8 Sale and Leaseback...........................................40
Section 7.9 Restrictions on Nature of Business...........................40
Section 7.10 Capital Expenditures........................................40
Section 7.11 Accounting..................................................41
Section 7.12 Discounts, etc..............................................41
Section 7.13 Defined Benefit Pension Plans...............................41
Section 7.14 Other Defaults..............................................41
Section 7.15 Place of Business; Name.....................................41
Section 7.16 Organizational Documents; S Corporation Status..............41
Section 7.17 Salaries....................................................41
Section 7.18 Change in Ownership.........................................41
ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES.........................42
Section 8.1 Events of Default............................................42
Section 8.2 Rights and Remedies..........................................44
Section 8.3 Certain Notices..............................................45
ARTICLE IX MISCELLANEOUS....................................................45
Section 9.1 Restatement of Old Credit Documents..........................45
Section 9.2 Release......................................................45
Section 9.3 No Waiver; Cumulative Remedies...............................45
Section 9.4 Amendments, Etc..............................................46
Section 9.5 Addresses for Notices, Etc...................................46
Section 9.6 Further Documents............................................46
Section 9.7 Collateral...................................................47
Section 9.8 Costs and Expenses...........................................47
Section 9.9 Indemnity....................................................47
Section 9.10 Participants................................................48
Section 9.11 Execution in Counterparts...................................48
Section 9.12 Binding Effect; Assignment; Complete Agreement;
Exchanging Information...........................................48
Section 9.13 Severability of Provisions..................................49
Section 9.14 Headings....................................................49
Section 9.15 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial... 50
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
Dated as of May 7, 2001 but effective as of March 31, 2001
This Amended and Restated Credit and Security Agreement is made by and
among MEDTOX SCIENTIFIC, INC., a Delaware corporation ("Scientific"), MEDTOX
LABORATORIES, INC., a Delaware corporation ("Laboratories"), MEDTOX DIAGNOSTICS,
INC., a Delaware corporation ("Diagnostics"), and CONSOLIDATED MEDICAL SERVICES,
INC., a Delaware corporation ("Consolidated", and together with Scientific,
Laboratories and Diagnostics, collectively, the "Borrowers, and each a
"Borrower"), and WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation
formerly known as Norwest Business Credit, Inc. (the "Lender").
The Borrowers and the Lender are parties to the Old Credit Agreement
(defined below). The Borrowers have requested that certain amendments be made to
the Old Credit Agreement, which the Lender is willing to make pursuant to the
terms and conditions set forth herein. Accordingly, the Borrowers and the Lender
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP.
"2000 Capex Advances" has the meaning given in Section 2.1(b).
"2000 Capex Note" means the promissory note of the Borrowers,
dated as of October 26, 2000, payable to the order of the Lender in the
original principal amount $2,450,000.
"2000 Term Advances" has the meaning given in Section 2.1(c).
"2000 Term Note" means the term promissory note of the
Borrowers, dated as of March 31, 2000, payable to the Lender in the
original principal amount of $3,185,000, and any note or notes issued
in substitution therefor, as the same may hereafter be amended,
supplemented or restated from time to time.
"2001 Capex Advances" has the meaning given in Section 2.1(b).
"2001 Capex Note" means the term promissory note of the
Borrowers, substantially in the form of Exhibit A, and any note or
notes issued in substitution therefor, as the same may hereafter be
amended, supplemented or restated from time to time.
"Accounts" means all of the Borrowers' accounts, as such term
is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to the
Borrowers arising out of the sale or lease of goods or rendition of
services by the Borrowers on an open account or deferred payment basis.
"Advance" means a Revolving Advance or a Term Advance, and
"Advances" means the Revolving Advances and the Term Advances.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrowers, including
(without limitation) any Subsidiary of any of the Borrowers. For
purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Minneapolis, Minnesota.
"Book Net Worth" means the aggregate of the common and
preferred stockholders' equity in the Borrowers, determined in
accordance with GAAP.
"Borrowing Base" means, at any time and subject to change from
time to time in the Lender's sole discretion, 85% of the Eligible
Accounts of the Borrower requesting the Revolving Advance.
"Capital Expenditures" for a period means any expenditure of
money for the purchase or construction of assets, or for improvements
or additions thereto, which are capitalized on the Borrowers' balance
sheets.
"Change of Control" means the occurrence of any of the
following events:
(a) Any Person or "group" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, except that a Person will be deemed to have "beneficial
ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more
than forty-nine percent (49%) of the voting power of all
classes of voting stock of Scientific.
(b) During any consecutive two-year period,
individuals who at the beginning of such period constituted
the board of directors of Scientific (together with any new
directors whose election to such board of directors, or whose
nomination for election by the stockholders of Scientific, was
approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Scientific then in
office.
(c) Scientific is liquidated or dissolved or
adopts a plan of liquidation or dissolution.
"Collateral" means all of the Borrowers' Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in any Collateral Account or other account of the Borrowers,
money, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the
foregoing; (ii) proceeds of any and all of the foregoing; (iii) in the
case of all tangible goods, all accessions; (iv) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or
affixed to or used in connection with any tangible goods; and (v) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement by and among the Borrowers, First Union National Bank of
North Carolina and the Lender dated as of January 14, 1998.
"Collateral Account and Lockbox Agreement" means the
Collateral Account and Lockbox Agreement of even date herewith by and
among the Borrowers, Wells Fargo Bank Minnesota, National Association,
Regulus West LLC and the Lender.
"Companies" means the Borrowers and the St. Paul Real Estate
Subsidiary and "Company" means any of them.
"Credit Facility" means the discretionary credit facility
being made available to the Borrowers by the Lender pursuant to Article
II.
"Current Maturities of Long Term Debt" as of a given date
means the amount of the Borrowers' long-term debt and capitalized
leases which became due during the year-to-date period ending on the
designated date.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum
of (A) Net Income, plus (B) year-to-date depreciation expense, plus (C)
year-to-date amortization expense to (ii) Current Maturities of Long
Term Debt.
"Debt to Book Net Worth Ratio" as of a given date means the
ratio of the Borrowers' Debt to the Borrowers' Book Net Worth.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrowers in
writing that such Default or Event of Default has been cured or waived.
"Default Rate" means, (i) with respect to the Revolving
Advances, an annual rate equal to two percent (2%) over the Revolving
Floating Rate, which rate shall change when and as the Revolving
Floating Rate changes, and (ii) with respect to the Term Advances, an
annual rate equal to two percent (2%) over the Term Floating Rate,
which rate shall change when and as the Term Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means with respect to a Borrower, or the
Borrowers, all unpaid Accounts, net of any credits, and the following
shall not in any event be deemed Eligible Accounts:
(i) that portion of Accounts unpaid 90 days or
more after the invoice date;
(ii) that portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) that portion of Accounts not yet earned by the
final delivery of goods or rendition of services,
as applicable, by the Borrowers to the customer;
(iv) Accounts owed by any unit of government
whether foreign or domestic;
(v) Accounts owed by an account debtor located
outside the United States which are not (A) backed by a bank
letter of credit naming the Lender as beneficiary or assigned
to the Lender, in the Lender's possession and acceptable to
the Lender in all respects, in its sole discretion, (B)
covered by a foreign receivables insurance policy acceptable
to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has
gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of any of the
Borrowers;
(viii) Accounts not subject to a duly
perfected security interest in the Lender's favor or
which are subject to any lien, security interest or
claim in favor of any Person other than the Lender
including without limitation any payment or
performance bond;
(ix) that portion of Accounts that has been
restructured, extended, amended or modified;
(x) that portion of Accounts that constitutes
advertising, finance charges, service charges or
sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 25% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (i), (ii), or (ix) above; and
(xii) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrowers' equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and recordkeeping equipment, parts, tools, supplies, and
including specifically (without limitation) the goods described in any
equipment schedule or list herewith or hereafter furnished to the
Lender by the Borrowers.
"Event of Default" has the meaning specified in Section 8.1.
"Funding Date" has the meaning given in Section 2.2.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5.
"General Intangibles" means all of the Borrowers' general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade
names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
the Borrower's name, and the goodwill of the Borrowers' business.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrowers' inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Investment Property" means all of the Borrowers' investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit and (ii) the unpaid amount
of the Obligation of Reimbursement, determined, as the context
requires, for each Borrower or all the Borrowers.
"L/C Application" means an application and agreement for
Letters of Credit in a form acceptable to the Issuer and the Lender.
"Lender Account" has the meaning given in the Collateral
Account and Lockbox Agreement.
"Letter of Credit" has the meaning given in Section 2.4.
"Loan Documents" means this Agreement, the Notes and the
Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement and
in the Collateral Account and Lockbox Agreement.
"Lockbox Agreements" means the Lockbox Agreement by and among
the Borrowers, First Union National Bank of North Carolina and the
Lender, dated as of January 14, 1998.
"Maturity Date" means March 31, 2003.
"Maximum Line" means $6,000,000.
"Minimum Interest Charge" has the meaning given in Section
2.11(c).
"Net Income" means fiscal year-to-date after-tax net income
from continuing operations as determined in accordance with GAAP.
"Note" means the Revolving Note or a Term Note and "Notes"
means the Revolving Note and the Term Notes.
"Obligation of Reimbursement" has the meaning given in Section
2.5(a).
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which the
Borrowers may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrowers,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, and the Obligation of Reimbursement, all indebtedness
of the Borrowers arising under this Agreement, the Notes or any other
loan or credit agreement or guaranty between the Borrowers and the
Lender, whether now in effect or hereafter entered into.
"Old Credit Agreement" means that certain Credit and Security
Agreement dated as of January 14, 1998, by and among the Borrowers and
the Lender, as amended by First Amendment to Credit and Security
Agreement dated as of May 22, 1998, Second Amendment to Credit and
Security Agreement, Consent to Certain Transaction and Waiver of
Defaults dated as of November 25, 1998, Third Amendment to Credit and
Security Agreement and Waiver of Defaults dated as of April 1, 1999, a
Fourth Amendment to Credit and Security Agreement dated as of June 4,
1999, a Fifth Amendment to Credit and Security Agreement dated as of
March 31, 2000, and a Sixth Amendment to Credit and Security Agreement
dated as of October 26, 2000.
"Overall Borrowing Base" means, at any time and subject to
change from time to time in the Lender's sole discretion, the lesser
of:
(a) the Maximum Line; or
(b) 85% of Eligible Accounts
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrowers' employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrowers conduct
their businesses and have any rights of possession, including (without
limitation) the premises legally described in Exhibit C.
"Prime Rate" means the rate publicly announced from time to
time by Wells Fargo Bank, National Association, as its "prime rate" or,
if such bank ceases to announce a rate so designated, any similar
successor rate designated by the Lender.
"Receivables" means each and every right of the Borrowers to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrowers or by some other person who subsequently
transfers such person's interest to the Borrowers, whether such right
to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights
and interests (including all liens and security interests) which the
Borrowers may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.2.
"Revolving Floating Rate" means an annual rate equal to the
sum of the Prime Rate plus one percent (1.00%), which annual rate shall
change when and as the Prime Rate changes.
"Revolving Note" means the Borrowers' revolving promissory
note, payable to the order of the Lender in substantially the form of
Exhibit A hereto and any note or notes issued in substitution therefor,
as the same may hereafter be amended, supplemented or restated from
time to time.
"Security Documents" means this Agreement, the Collateral
Account Agreement, the Lockbox Agreement, and any other document
delivered to the Lender from time to time to secure the Obligations, as
the same may hereafter be amended, supplemented or restated from time
to time.
"Security Interest" has the meaning given in Section 3.1.
"Special Account" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Sections 2.6 and
3.9.
"St. Paul Real Estate" means the land and building located at 402 West
County Road D, St. Paul, Minnesota 55112.
"St. Paul Real Estate Subsidiary" means New Brighton Business Center LLC, a
Minnesota limited liability company, and a wholly owned Subsidiary of one of the
Borrower's formed for the purpose of owning the St. Paul Real Estate.
"Subordinated Indebtedness" means indebtedness of any of the
Borrowers which is subject to a subordination agreement in favor of the
Lender, in a form acceptable to the Lender in its sole discretion.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrowers, by the Borrowers
and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Tax Expense" as of any date means state and federal income
taxes recorded by the Borrowers for the year-to-date period ending on
such date.
"Term Advance" means a 2000 Capex Advance, a 2000 Term Advance
or a 2001 Capex Advance and "Term Advances" means the 2000 Capex
Advances, the 2000 Term Advances and the 2001 Capex Advances.
"Term Floating Rate" means an annual rate equal to the sum of
the Prime Rate plus one and one-quarter percent (1.25%), which annual
rate shall change when and as the Prime Rate changes.
"Term Note" means the 2000 Term Note, the 2000 Capex Note or
the 2001 Capex Note and "Term Notes" means the 2000 Term Note, the 2000
Capex Note and the 2001 Capex Note.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrowers terminate the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.15 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
Section 1.2 Cross References. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Existing Advances.
-----------------
(a) Existing Revolving Advances. The Lender has made various
revolving advances to the Borrowers (the "Existing Revolving
Advances"), the Borrowers' obligation to pay which is evidenced by the
Revolving Note. As of March 31, 2001, the outstanding principal balance
of the Existing Revolving Advances made to Scientific was $0. As of
March 31, 2001, the outstanding principal balance of the Existing
Revolving Advances made to Diagnostics was $0, with interest paid
through February 28, 2001. As of March 31, 2001, the outstanding
principal balance of the Existing Revolving Advances made to
Laboratories was $3,967,007.99, with interest paid through February 28,
2001. As of March 31, 2001, the outstanding principal balance of the
Existing Revolving Advances made to Consolidated was $0. No Borrower
has any claim, defense or offset to enforcement of the Revolving Note.
Upon execution and delivery of this Agreement, the Existing Revolving
Advances shall be deemed to be Revolving Advances made pursuant to
Section 2.2 and repayable in accordance with the Revolving Note.
(b) 2000 Capex Advances. The Lender has made various term
advances to the Borrowers to finance capital expenditures (the "2000
Capex Advances"), the Borrowers' obligation to pay which is evidenced
by the 2000 Capex Note. As of March 31, 2001, the outstanding principal
balance of the 2000 Capex Note was $1,602,580.12, with interest paid
through February 28, 2001. No Borrower has any claim, defense or offset
to enforcement of the 2000 Capex Note.
(c) 2000 Term Advances. The Lender has made various term
advances to the Borrowers (the "2000 Term Advances"), the Borrowers'
obligation to pay which is evidenced by the 2000 Term Note. As of March
31, 2001, the outstanding principal balance of the 2000 Term Note was
$2,455,104.24, with interest paid through February 28, 2001. No
Borrower has any claim, defense or offset to enforcement of the 2000
Term Note.
(d) The Old Credit Documents constitute the legal, valid and
binding obligations of the Borrowers, enforceable against the Borrowers
in accordance with their respective terms. No Borrower has any claim,
defense or offset to enforcement of the Old Credit Documents.
Section 2.2 Revolving Advances. The Lender may, in its sole
discretion, make advances to the Borrowers from time to time from the date all
of the conditions set forth in Section 4.1 are satisfied (the "Funding Date") to
the Termination Date, on the terms and subject to the conditions herein set
forth (the "Revolving Advances"). The Lender shall not consider any request for
a Revolving Advance if, after giving effect to such requested Revolving Advance,
the sum of the outstanding and unpaid Revolving Advances and the L/C Amount
would exceed the Overall Borrowing Base. The Borrowers' obligation to pay the
Revolving Advances shall be evidenced by the Revolving Note and shall be secured
by the Collateral as provided in Article III. Within the limits set forth in
this Section 2.2, the Borrowers may request Revolving Advances, prepay pursuant
to Section 2.16 and request additional Revolving Advances. Revolving Advances,
and requests for such Revolving Advances, will be made on an individual Borrower
basis. The Lender shall not consider any requests for Revolving Advances by a
Borrower if, after giving effect to such requested Revolving Advances, the sum
of the outstanding and unpaid Revolving Advances and L/C Amount of that Borrower
would exceed the Borrowing Base of that Borrower.
Section 2.3 Procedures for Requesting Revolving Advances. The
Borrowers agree to comply with the following procedures in requesting Revolving
Advances under this Section 2.2:
(a) The Borrower seeking the Revolving Advance shall make each
request for a Revolving Advance to the Lender before 11:00 a.m.
(Minneapolis, Minnesota time) of the day of the requested Revolving
Advance. Requests may be made in writing or by telephone, specifying
the date of the requested Revolving Advance and the amount thereof.
Each request shall be by (i) any officer of a Borrower; or (ii) any
person designated as a Borrower's agent by any officer of that Borrower
in a writing delivered to the Lender; or (iii) any person whom the
Lender reasonably believes to be an officer of that Borrower or such a
designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with Wells Fargo Bank Minnesota, National
Association, in the case of Revolving Advances made to Laboratories, or
First Union National Bank of North Carolina, in the case of Revolving
Advances made to Diagnostics, unless the Lender and the Borrower shall
agree in writing to another manner of disbursement. Upon the Lender's
request, the Borrowers shall promptly confirm each telephonic request
for a Revolving Advance by executing and delivering an appropriate
confirmation certificate to the Lender. The Borrowers shall repay all
Revolving Advances even if the Lender does not receive such
confirmation and even if the person requesting a Revolving Advance was
not in fact authorized to do so. Any request for a Revolving Advance,
whether written or telephonic, shall be deemed to be a representation
by the Borrowers that the conditions set forth in Section 4.2 have been
satisfied as of the time of the request.
Section 2.4 Issuance of Letters of Credit.
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(a) The Lender may, in its sole discretion, cause to be issued
by an Issuer one or more letters of credit for the account of
Laboratories and/or Diagnostics (each a "Letter of Credit") from time
to time during the period from the date of the Second Amendment until
the Termination Date, in an aggregate amount at any time outstanding
not to exceed the lesser of:
(i) $500,000 less the aggregate L/C Amount for both
Laboratories and Diagnostics, or
(ii) the Borrowing Base for Laboratories and/or
Diagnostics, as applicable, less the sum of (A) all
outstanding and unpaid Advances to Laboratories and/or
Diagnostics, as applicable, and (B) the L/C Amount of
Laboratories and/or Diagnostics, as applicable.
Each Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application entered into by Laboratories and/or Diagnostics, as
applicable, and the Lender as co-applicants for the benefit of the
Issuer, completed in a manner satisfactory to the Lender and the
Issuer. The terms and conditions set forth in each such L/C Application
shall supplement the terms and conditions hereof, but in the event of
inconsistency between the terms of any such L/C Application and the
terms hereof, the terms hereof shall control.
(b) No Letter of Credit shall be issued with an expiry
date later than the Maturity Date.
(c) Any request for the issuance of a Letter of Credit
under this Section 2.4 shall be deemed to be a
representation by the Borrowers that the statements set
forth in Section 4.2 are correct as of the time of the
request.
Section 2.5 Payment of Amounts Drawn Under Letters of Credit.
The Borrowers acknowledge that the Lender, as co-applicant, will be liable to
the Issuer of any Letter of Credit for reimbursement of any and all draws
thereunder and all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrowers shall pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as
required to be paid thereby, and the amounts designated below, when and as
designated:
(a) The Borrowers shall pay the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn
under such Letter of Credit plus any and all reasonable charges and
expenses that the Issuer or the Lender may pay or incur relative to
such draw, plus interest on all such amounts, charges and expenses as
set forth below (all such amounts are hereinafter referred to,
collectively, as the "Obligation of Reimbursement").
(b) The Borrowers shall pay the Lender on demand interest on
all amounts, charges and expenses payable by the Borrowers to the
Lender under this Section 2.5, accrued from the date any such draft,
charge or expense is paid by the Issuer until payment in full by the
Borrowers at the Revolving Floating Rate.
If the Borrowers fail to pay to the Lender promptly the amount of the Obligation
of Reimbursement in accordance with the terms hereof and the L/C Application
pursuant to which such Letter of Credit was issued, the Lender is hereby
irrevocably authorized and directed, in its sole discretion, to make a Revolving
Advance to the applicable account party(ies) in an amount sufficient to
discharge the Obligation of Reimbursement, including all interest accrued
thereon but unpaid at the time of such Revolving Advance, and such Revolving
Advance shall be evidenced by the Revolving Note and shall bear interest as
provided in Section 2.11.
Section 2.6 Special Account. If the Lender terminates this
Credit Facility pursuant to Section 2.15, or this Credit Facility is otherwise
terminated for any reason whatsoever, while any Letter of Credit is outstanding,
the Borrowers shall thereupon pay the Lender in immediately available funds for
deposit in the Special Account an amount equal to the maximum aggregate amount
available to be drawn under all Letters of Credit then outstanding, assuming
compliance with all conditions for drawing thereunder. The Special Account shall
be maintained for the Lender by any financial institution acceptable to the
Lender. Any interest earned on amounts deposited in the Special Account shall be
credited to the Special Account. Amounts on deposit in the Special Account may
be applied by the Lender at any time or from time to time to the Obligation of
Reimbursement or any other Obligations, in the Lender's sole discretion, and
shall not be subject to withdrawal by the Borrowers so long as the Lender
maintains a security interest therein. The Lender agrees to transfer any balance
in the Special Account to the Borrowers at such time as the Lender is required
to release its security interest in the Special Account under applicable law.
Section 2.7 Obligations Absolute. The obligations of the
Borrowers arising under Section 2.5 shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including (without limitation)
the following circumstances:
(a) any lack of validity or enforceability of any
Letter of Credit or any other agreement or instrument
relating to any Letter of Credit (collectively the "Related
Documents");
(b) any amendment or waiver of or any consent to
departure from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or
other right which the Borrowers may have at any time,
against any beneficiary or any transferee of any Letter of
Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement,
the transactions contemplated herein or in the Related
Documents or any unrelated transactions;
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer or the Lender under
any Letter of Credit against presentation of a draft or certificate
which does not strictly comply with the terms of such Letter of Credit;
or
(f) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
Section 2.8 2001 Capex Advances. The Lender may, in its sole
discretion, make advances to the Borrowers from time to time, from the Funding
Date through March 31, 2002, in an aggregate amount not to exceed the lesser of
$3,500,000 or eighty percent (80%) of the purchase price (less insurance,
freight, delivery, interest, taxes, installation, licenses or any similar costs
or expenses, and less any discounts, rebates, refunds or other reductions in
price) of new Equipment (the "2001 Capex Advances"). The Borrowers' obligation
to pay the 2001 Capex Advances shall be evidenced by the 2001 Capex Note and
shall be secured by the Collateral as provided in Article III. The 2001 Capex
Advances are term advances. Any 2001 Capex Advances that are prepaid may not be
reborrowed. After the first 2001 Capex Advance is made, the Lender intends to
obtain, at the Borrowers' expense, an appraisal of all Equipment and all
equipment owned by all Subsidiaries of the Borrowers. The Lender expects such
appraisal to occur within sixty (60) days after the first 2001 Capex Advance is
made.
Section 2.9 Requests for 2001 Capex Advances. The Borrowers
shall comply with the following procedures when requesting 2001 Capex Advances:
(a) The Borrowers shall request no more than two (2) 2001
Capex Advances between the Funding Date and August 31, 2001 and no more
than two (2) 2001 Capex Advances between September 1, 2001 and March
15, 2002.
(b) Requests for a 2001 Capex Advance shall be made on an
individual Borrower basis and shall be made in writing, by a person
authorized under Section 2.3, specifying the amount of the 2001 Capex
Advance, and the date it is to be made, which shall be at least five
(5) Banking Days after the date of the request. The Borrowers shall be
obligated to repay all 2001 Capex Advances notwithstanding the fact
that the Person requesting the same was not in fact authorized to do
so. Any request for a 2001 Capex Advance shall be deemed to be a
representation by the Borrowers that the conditions set forth in
Section 4.2 have been met as of the time of the request.
(c) Each request shall be accompanied by (i) the actual
invoice and purchase order for the newly acquired Equipment, (ii) a
description of such Equipment, (iii) evidence of (A) delivery of such
Equipment to the applicable Borrower and its acceptance by the
applicable Borrower, (B) title to such Equipment in the name of the
applicable Borrower, (C) payment therefor or a letter from the
applicable Borrower directing the Lender to disburse the 2001 Capex
Advance proceeds to the Equipment vendor directly, (D) the Lender's
first priority security interest in such Equipment, (E) insurance on
such Equipment in form and substance acceptable to the Lender; and (iv)
such other documentation or information as the Lender may require.
(d) Upon the Lender's determination to make a 2001 Capex
Advance, the Lender shall disburse the amount of the 2001 Capex Advance
by crediting the same to the demand deposit account of the applicable
Borrower, as specified in Section 2.2, unless the applicable Borrower
and the Lender shall agree in writing to another manner of
disbursement.
Section 2.10 Payments on Term Notes. The outstanding principal
balance of the Term Notes shall be due and payable on demand, and if no demand
is made, as follows:
(a) 2000 Capex Note. Beginning on March 1, 2001, and on the
first day of each month thereafter, the Borrowers shall pay the 2000
Capex Note in substantially equal monthly installments of $29,188.13,
allocated to each Borrower based on each Borrower's portion of the
aggregate 2000 Capex Advances. On the Termination Date, the entire
unpaid principal balance of the 2000 Capex Note, and all unpaid
interest accrued thereon, shall in any event be due and payable.
(b) 2000 Term Note. Beginning on March 1, 2001, and on the
first day of each month thereafter, the Borrowers shall pay the 2000
Term Note in substantially equal monthly installments of $66,354.49,
allocated to each Borrower based on each Borrower's portion of the
aggregate 2000 Term Advances. On the Termination Date, the entire
unpaid principal balance of the 2000 Term Note, and all unpaid interest
accrued thereon, shall in any event be due and payable.
(c) 2001 Capex Note.
(i) The amount of each 2001 Capex Advance shall be
due and payable beginning on the first day of the first month
after the date on which that 2001 Capex Advance is made, and
continuing on the first day of each month thereafter, in
substantially equal monthly installments in an amount
sufficient to fully amortize the principal balance of that
2001 Capex Advance in 60 equal monthly installments; the
principal amount to be paid each month on the 2001 Capex Note
shall be the sum of such monthly installments; and
(ii) On the Termination Date, the entire unpaid
principal balance of the 2001 Capex Note, and all unpaid
interest accrued thereon, shall be due and payable in full.
Section 2.11 Interest; Minimum Interest Charge. Interest
accruing on the Notes shall be due and payable in arrears on the first day of
each month and on the Termination Date, and shall be paid by means of a
Revolving Advance, allocated between the Borrower, on a proportional basis.
(a) Revolving Note. Except as set forth in Sections
2.11(d) and (f), the outstanding principal balance of the
Revolving Note shall bear interest at the Revolving Floating
Rate.
(b) Term Notes. Except as set forth in Sections 2.11(d)
and (f), the outstanding principal balance of the Term Notes
shall bear interest at the Term Floating Rate.
(c) Minimum Interest Charge. Notwithstanding the interest
payable pursuant to Sections 2.11(a) and (b), the Borrowers shall pay
to the Lender interest of not less than $80,000 per calendar year (the
"Minimum Interest Charge") during the term of this Agreement, and the
Borrowers shall pay any deficiency between the Minimum Interest Charge
and the amount of interest otherwise calculated under Sections 2.11(a)
and (b) on March 31st of each year and on the Termination Date.
(d) Default Interest Rate. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(e) Participations. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrowers shall
be obligated to the Lender to pay the full amount of all interest
calculated under this Section 2.11, along with all other fees, charges
and other amounts due under this Agreement, regardless if such Person
elects to accept interest with respect to its participation at a lower
rate than the Revolving Floating Rate or the Term Floating Rate or
otherwise elects to accept less than its prorata share of such fees,
charges and other amounts due under this Agreement.
(f) Usury. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
Section 2.12 Fees.
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(a) Audit Fees. The Borrowers shall pay the Lender, on demand,
audit fees in connection with any audits or inspections conducted by
the Lender of any Collateral or the Borrowers' operations or business
at the rates established from time to time by the Lender as its audit
fees (which fees are currently $62.50 per hour per auditor), together
with all actual out-of-pocket costs and expenses incurred in conducting
any such audit or inspection. Such audits shall be conducted, at the
least, on a quarterly basis.
(b) Letter of Credit Fees. The Borrowers shall pay the Lender
a fee with respect to each Letter of Credit, if any, accruing on a
daily basis and computed at the annual rate of two percent (2.0%) of
the aggregate amount that may then be drawn on all issued and
outstanding Letters of Credit, assuming compliance with all conditions
for drawing thereunder (the "Aggregate Face Amount") from and including
the date of issuance of such Letter of Credit until such date as such
Letter of Credit shall terminate by its terms or be returned to the
Lender, due and payable monthly in arrears on the first day of each
month and on the Termination Date; provided, however that during
Default Periods, in the Lender's sole discretion and without waiving
any of its other rights and remedies, such fee shall increase to four
percent (4%) of the Aggregate Face Amount. The foregoing fee shall be
in addition to any and all fees, commissions and charges of any Issuer
of a Letter of Credit with respect to or in connection with such Letter
of Credit.
(c) Letter of Credit Administrative Fees. The Borrowers shall
pay the Lender, on demand, the reasonable administrative fees charged
by the Issuer in connection with the honoring of drafts under any
Letter of Credit, amendments thereto, transfers thereof and all other
activity with respect to the Letters of Credit at the then-current
rates published by the Issuer for such services rendered on behalf of
customers of the Issuer generally.
Section 2.13 Computation of Interest and Fees. Interest
accruing on the outstanding principal balance of the Advances and fees hereunder
outstanding from time to time shall be computed on the basis of actual number of
days elapsed in a year of 360 days.
Section 2.14 Capital Adequacy. If any Related Lender
determines at any time that its Return has been reduced as a result of any Rule
Change, such Related Lender may require the Borrowers to pay it the amount
necessary to restore its Return to what it would have been had there been no
Rule Change. For purposes of this Section 2.14:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "L/C Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding letters of credit, or the
interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules imposing taxes, duties or other similar charges, or
mandating reserves, special deposits or similar requirements against
assets of, deposits with or for the account of, or credit extended by
any Related Lender, on letters of credit.
(c) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
(d) "Return", for any period, means the return as determined
by a Related Lender on the Advances based upon its total capital
requirements and a reasonable attribution formula that takes account of
the Capital Adequacy Rules then in effect and amounts received or
receivable under this Agreement or the Notes with respect to any
Advance. Return may be calculated for each calendar quarter and for the
shorter period between the end of a calendar quarter and the date of
termination in whole of this Agreement.
(e) "Rule Change" means any change in any Capital Adequacy
Rule or L/C Rule occurring after the date of this Agreement, but the
term does not include any changes in applicable requirements that at
the Closing Date are scheduled to take place under the existing Capital
Adequacy Rules or L/C Rules or any increases in the capital that any
Related Lender is required to maintain to the extent that the increases
are required due to a regulatory authority's assessment of the
financial condition of such Related Lender.
The Lender will promptly notify the Borrowers of any event of which it has
knowledge, occurring after the date hereof, which will entitle the Lender to
compensation pursuant to this Section 2.14. Certificates of any Related Lender
sent to the Borrowers from time to time claiming compensation under this Section
2.14, stating the reason therefor and setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to the Related Lender
hereunder to restore its Return shall be conclusive absent manifest error. In
determining such amounts, the Related Lender may use any reasonable averaging
and attribution methods.
Section 2.15 Discretionary Nature of this Facility;
Termination by the Lender; Automatic Renewal. This Agreement contains the terms
and conditions upon which the Lender presently expects to make Advances to the
Borrowers. Each Advance by the Lender to the Borrowers shall be in the Lender's
sole discretion, and the Lender need not show that an adverse change has
occurred in any of the Borrowers' conditions, financial or otherwise, or that
any of the conditions of Article IV have not been met, in order to refuse to
make any requested Advance, to cause any Letter of Credit to be issued, or to
demand payment of the Obligations. The Lender may at any time terminate the
revolving portion of the Credit Facility whereupon the Lender shall no longer
consider requests for Advances or Letters of Credit under this Agreement.
Section 2.16 Voluntary Prepayment; Termination of the Credit
Facility by the Borrowers. Except as otherwise provided herein, the Borrowers
may prepay the Revolving Advances in whole at any time or from time to time in
part. The Borrowers may prepay the Term Advances, and terminate the Credit
Facility at any time if it (i) gives the Lender at least 30 days' prior written
notice and (ii) pays the Lender the prepayment or termination fees in accordance
with Section 2.17. Any prepayment of the Term Advances must be in an amount not
less than $100,000 or an integral multiple thereof. If the Borrowers terminate
the revolving Credit Facility, all Obligations shall be immediately due and
payable. Any partial prepayments of any of the Term Advances shall be applied to
principal payments due and owing in inverse order of their maturities. Upon
termination of the Credit Facility and payment and performance of all
Obligations, the Lender shall release or terminate the Security Interest and the
Security Documents to which the Borrowers are entitled by law.
Section 2.17 Termination and Prepayment Fees.
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(a) Termination Fees. If the Credit Facility is terminated for
any reason as of a date other than the Maturity Date, the Borrowers
shall pay the Lender a fee in an amount equal to a percentage of the
Maximum Line as follows: (i) three percent (3.0%) if the termination or
reduction occurs on or before March 31, 2001; (ii) two percent (2.0%)
if the termination or reduction occurs after March 31, 2001, but on or
before March 31, 2002; and (iii) one percent (1.0%) if the termination
or reduction occurs after March 31, 2002, but before the Maturity Date.
(b) Prepayment Fees. If the Term Advances are prepaid for any
reason, the Borrowers shall pay to the Lender a fee in an amount equal
to a percentage of the amount prepaid as follows: (i) three percent
(3.00%) if prepayment occurs on or before March 31, 2001; (ii) two
percent (2.00%) if prepayment occurs after March 31, 2001, but on or
before March 31, 2002; and (iii) one percent (1.00%) if prepayment
occurs after March 31, 2002, but before the Maturity Date.
(c) Waiver of Termination and Prepayment Fees. The Borrowers
will not be required to pay the termination or prepayment fees
otherwise due under this Section 2.16 if such termination or prepayment
is made because of increased cash flow generated from the Borrowers'
operations or refinancing by an affiliate of the Lender.
Section 2.18 Mandatory Prepayment. Without notice or demand,
if the outstanding principal balance of the Revolving Advances plus the L/C
Amount shall at any time exceed the Overall Borrowing Base, or, if for any
Borrower, the outstanding principal balance of the Revolving Advances plus the
L/C Amount for that Borrower shall at any time exceed that Borrower's Borrowing
Base, the Borrowers shall (i) immediately prepay the Revolving Advances to the
extent necessary to eliminate such excess; and (ii) if prepayment in full of the
Revolving Advances is insufficient to eliminate such excess, pay to the Lender
in immediately available funds for deposit in the Special Account an amount
equal to the remaining excess. Any payment received by the Lender under this
Section 2.18 or under Section 2.16 may be applied to the Obligations, in such
order and in such amounts as the Lender, in its discretion, may from time to
time determine; provided that any prepayment under Section 2.16 which the
Borrowers designate as a partial prepayment of the Term Notes shall be applied
to principal installments of the Term Notes in inverse order of maturity.
Section 2.19 Payment. All payments to the Lender shall be made
in immediately available funds and shall be applied to the Obligations one
Banking Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) additional days before
applying them to the Obligations. Notwithstanding anything in Section 2.2, the
Borrowers hereby authorize the Lender, in its discretion at any time or from
time to time without the Borrowers' request and even if the conditions set forth
in Section 4.2 would not be satisfied, to make a Revolving Advance in an amount
equal to the portion of the Obligations from time to time due and payable.
Section 2.20 Payment on Non-Banking Days. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.21 Use of Proceeds. The Borrowers shall use the
proceeds of Revolving Advances for ordinary working capital purposes.
Section 2.22 Liability Records. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrowers
establish the contrary. Upon the Lender's demand, the Borrowers will admit and
certify in writing the exact principal balance of the Obligations that the
Borrowers then assert to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrowers
unless the Borrowers give the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. Each of the Borrowers
hereby pledge, assign and grant to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrowers will join
in giving such notice if the Lender so requests. At any time after the Borrowers
or the Lender give such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrowers' names, (a) demand,
sue for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrowers' agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrowers' mail to any address
designated by the Lender, otherwise intercept the Borrowers' mail, and receive,
open and dispose of the Borrowers' mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrowers' account or
forwarding such mail to the Borrowers' last known address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrowers hereby assign
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrowers with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrowers
hereby direct the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrowers' name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
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(a) The Borrowers hereby irrevocably grant to the Lender the
right to take possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good faith deem to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations, and (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrowers shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrowers will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 License. The Borrowers hereby grant to the Lender
a non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrowers
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
Section 3.6 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrowers is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Names and addresses of Borrowers:
Medtox Scientific, Inc.
402 West County Road D
St. Paul, Minnesota 55112
Federal Tax Identification No. 95-3863205
Medtox Laboratories, Inc.
402 West County Road D
St. Paul, Minnesota 55112
Federal Tax Identification No. 52-1130579
Medtox Diagnostics, Inc.
1238 Anthony Road
Burlington, North Carolina 27215
Federal Tax Identification No. 54-1548727
Consolidated Medical Services, Inc.
402 West County Road D
St. Paul, Minnesota 55112
Federal Tax Identification No. 41-1923633
Name and address of Secured Party:
Wells Fargo Business Credit, Inc.
MAC N9312-040
Wells Fargo Center
Sixth & Marquette
Minneapolis, MN 55479
Federal Tax Identification No. 41-1237652
Section 3.7 Setoff. The Borrowers agree that the Lender may at
any time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrowers by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations
shall have the right to appropriate or setoff any deposit or other liability
then owed by such Person to the Borrowers, whether or not due, and apply the
same to the payment of said participating interest, as fully as if such Person
had lent directly to the Borrowers the amount of such participating interest.
Section 3.8 Accommodation Party Defenses Waived. The parties
intend that each Borrower shall be fully liable, jointly and severally, for all
Obligations. Nonetheless, in case a court finds that any Borrower is not such a
primary obligor with respect to all or any part of the Obligations, the
Borrowers expressly waive the benefit of any and all defenses and discharges
available to a guarantor, surety, endorser or accommodation party dependent on
an obligor's character as such. Without limiting the generality of the
foregoing, the liability of each Borrower hereunder shall not be affected or
impaired in any way by any of the following acts or things (which the Lender is
hereby expressly authorized to do, omit or suffer from time to time without
notice to or consent of anyone): (i) any acceptance of collateral security,
guarantors, accommodation parties or sureties for any Obligations; (ii) any
extension or renewal of any Obligations (whether or not for longer than the
original period) or any modification of the interest rate, maturity or other
terms of any Obligations; (iii) any waiver or indulgence granted to any other
Borrower, and any delay or lack of diligence in the enforcement of the
Obligations; (iv) any full or partial release of, compromise or settlement with,
or agreement not to sue, any other Borrower, guarantor or other person liable on
any Obligations; (v) any release, surrender, cancellation or other discharge of
any Obligations or the acceptance of any instrument in renewal or substitution
for any instrument evidencing any Obligations; (vi) any failure to obtain
collateral security (including rights of setoff) for any Obligations, or to see
to the proper or sufficient creation and perfection thereof, or to establish the
priority thereof, or to preserve, protect, insure, care for, exercise or enforce
any collateral security for any Obligations; (vii) any modification, alteration,
substitution, exchange, surrender, cancellation, termination, release or other
change, impairment, limitation, loss or discharge of any Collateral, or other
collateral security for the Obligations; (viii) any assignment, sale, pledge or
other transfer of any of Obligations; or (ix) any manner, order or method of
application of any payments or credits on any Obligations.
Section 3.9 Security Interest in Special Account. The
Borrowers hereby pledge, and grant to the Lender a security interest in, all
funds held in the Special Account from time to time and all proceeds thereof, as
security for the payment of all Obligations."
ARTICLE IV
CONDITIONS OF WILLINGNESS TO CONSIDER LENDING
Section 4.1 Conditions Precedent to Lender's Willingness to
Consider Making the Initial Revolving Term Advances and Issuing Letters of
Credit. The Lender's willingness to consider making the initial Revolving
Advances and the initial Term Advances and to cause any Letters of Credit to be
issued shall be subject to the condition precedent that the Lender shall have
received all of the following, each in form and substance satisfactory to the
Lender:
(a) This Agreement, properly executed by each of the
Borrowers.
(b) The 2001 Capex Note, properly executed by each of
the Borrowers.
(c) The Collateral Account and Lockbox Agreement,
properly executed by the Borrowers and Wells Fargo Bank
Minnesota, National Association.
(d) A landlord disclaimer, duly executed by the St.
Paul Real Estate Subsidiary.
(e) A separate certificate of each of the Borrowers'
secretaries or assistant secretaries certifying as to (i)
the resolutions of such Borrowers' directors and if
required, shareholders, authorizing the execution, delivery
and performance of the Loan Documents, (ii) such Borrowers'
articles of incorporation and bylaws, and (iii) the
signatures of such Borrowers' officers or agents authorized
to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance
requests, on such Borrowers' behalf.
(f) An opinion of counsel to the Borrowers, addressed
to the Lender.
(g) Such other documents as the Lender in its sole
discretion may require.
Section 4.2 Conditions Precedent to All Advances and Letters
of Credit. The Lender will not consider any request for an Advance or the
issuance of a Letter of Credit unless on such date:
(a) the representations and warranties contained in Article IV
are correct on and as of such date as though made on and as of such
date, except to the extent that such representations and warranties
relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance or the issuance of such Letter of Credit which
constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax Identification Number.
The Borrowers are each corporations, duly organized, validly existing and in
good standing under the laws of the State of Delaware and are duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. No dissolution or termination of any
of the Borrowers has occurred, and no notice of dissolution or articles of
termination have been filed with respect to any of the Borrowers. The Borrowers
have all requisite power and authority, corporate or otherwise, to conduct their
businesses, to own their properties and to execute and deliver, and to perform
all of their obligations under, the Loan Documents. During their existence, the
Borrowers have done business solely under the names set forth in Schedule 5.1
hereto. The Borrowers' chief executive offices and principal places of business
are located at the addresses set forth in Schedule 5.1 hereto, and all of the
Borrowers' records relating to their businesses or the Collateral are kept at
those locations. All Inventory and Equipment is located at those locations or at
one of the other locations set forth in Schedule 5.1 hereto. The Borrowers' tax
identification numbers are correctly set forth in Section 3.6 hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law
or Agreements. The execution, delivery and performance by the Borrowers of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of any of the Borrowers' shareholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
any of the Borrowers or of any of the Borrowers' articles of incorporation and
bylaws; (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other material agreement, lease or instrument
to which any of the Borrowers are a party or by which it or its properties may
be bound or affected; or (v) result in, or require, the creation or imposition
of any mortgage, deed of trust, pledge, lien, security interest or other charge
or encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by any of the
Borrowers.
Section 5.3 Legal Agreements. This Agreement constitutes and,
upon due execution by the Borrowers, the other Loan Documents will constitute
the legal, valid and binding obligations of the Borrowers, enforceable against
the Borrowers in accordance with their respective terms.
Section 5.4 Subsidiaries. Except as disclosed on Schedule 5.4,
the Borrowers have no Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change. The
Borrowers have heretofore furnished to the Lender their audited financial
statements for its fiscal year ended December 31, 1999, and their unaudited
financial statements for the fiscal year-to-date period ended December 31, 2000,
and those statements fairly present each Borrower's financial condition on the
dates thereof and the results of its operations and cash flows for the periods
then ended and were prepared in accordance with GAAP. Since the date of the most
recent financial statements, there has been no material adverse change in any
Borrower's businesses, properties or conditions (financial or otherwise).
Section 5.6 Litigation. Except as disclosed on Schedule 5.6,
there are no actions, suits or proceedings pending or, to any Borrower's
knowledge, threatened against or affecting any Borrower or any Affiliates of the
Borrowers or the properties of any of the Borrowers or any of their Affiliates
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to the
Borrowers or any of their Affiliates, would have a material adverse effect on
the financial condition, properties or operations of the Borrowers or any of
their Affiliates.
Section 5.7 Regulation U. The Borrowers are not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes. The Borrowers and their Affiliates have
paid or caused to be paid to the proper authorities when due all federal, state
and local taxes required to be withheld by each of them. The Borrowers and their
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrowers or any Affiliate, as the case may be,
are required to be filed, and the Borrowers and their Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 Titles and Liens. The Borrowers have good and
absolute title to all Collateral described in the collateral reports provided to
the Lender and all other Collateral, properties and assets reflected in the
latest financial statements referred to in Section 5.5 and all proceeds thereof,
free and clear of all mortgages, security interests, liens and encumbrances,
except for Permitted Liens. No financing statement naming any of the Borrowers
as debtor is on file in any office except to perfect only Permitted Liens.
Section 5.10 Plans. Except as disclosed to the Lender in
writing prior to the date hereof, none of the Borrowers nor any of their
Affiliates maintain or have maintained any Plan. None of the Borrowers nor any
Affiliate have received any notice or has any knowledge to the effect that it is
not in full compliance with any of the requirements of ERISA. No Reportable
Event or other fact or circumstance which may have an adverse effect on the
Plan's tax qualified status exists in connection with any Plan. None of the
Borrowers nor any of their Affiliates have:
(a) Any accumulated funding deficiency within the
meaning of ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 Default. Each of the Borrowers is in compliance
with all provisions of all agreements, instruments, decrees and orders to which
each is a party or by which it or its property is bound or affected, the breach
or default of which could have a material adverse effect on any of the
Borrowers' financial conditions, properties or operations.
Section 5.12 Environmental Matters.
---------------------
(a) Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(i) "Environmental Law" means any federal, state, local
or other governmental statute, regulation, law or ordinance
dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrowers' best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for any of the
Borrowers or the Lender under common law of any jurisdiction or under
any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on
or under the Premises in such a way as to create any such liability.
(c) To the Borrowers' best knowledge, the Borrowers have not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or any of
the Borrowers, alleging liability under, violation of, or noncompliance
with any Environmental Law or any license, permit or other
authorization issued pursuant thereto. To the Borrowers' best
knowledge, no such matter is threatened or impending.
(e) To the Borrowers' best knowledge, the Borrowers'
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrowers' possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(f) To the Borrowers' best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrowers have delivered to the Lender all
environmental assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or
Borrowers' businesses.
Section 5.13 Submissions to the Lender. All financial and
other information provided to the Lender by or on behalf of the Borrowers in
connection with the Borrowers' request for the credit facilities contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or proforma financial statements, present a good faith opinion as to
such projections, valuations and proforma condition and results.
Section 5.14 Financing Statements. The Borrowers have provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
Section 5.15 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrowers' records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 Direct and Substantial Economic Interest. Each
Borrower has a direct and substantial economic interest in each other Borrower
and as such, each Borrower expects to derive substantial benefits from any and
all Advances made to each Borrower and other transactions and events resulting
in the creation of any and all Obligations.
Section 5.17 Subrogation. No Borrower will exercise or enforce
any right of contribution, reimbursement, recourse or subrogation available to
such Borrower as against any other Borrower unless and until all of the
Obligations have been fully paid and discharged.
Section 5.18 Joint and Several Liability. The Obligations
created by this Agreement are the joint and several obligation of the Borrowers.
The Lender shall not be required to first seek payment of the Obligations from
any one of the Borrowers, but rather may seek payment from any or all of the
Borrowers as it sees fit, in its sole discretion.
ARTICLEVI
BORROWERS' AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrowers will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrowers will
deliver, or cause to be delivered, to the Lender each of the following, which
shall be in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of the fiscal year of the Borrowers, Scientific's audited
consolidated and consolidating financial statements with the
unqualified opinion of independent certified public accountants
selected by the Borrowers and acceptable to the Lender, which annual
financial statements shall include each of the Borrowers' balance
sheets as at the end of such fiscal year and the related statements of
each of the Borrowers' income, retained earnings and cash flows for the
fiscal year then ended, prepared, if the Lender so requests, on a
consolidating and consolidated basis to include any Affiliates, all in
reasonable detail and prepared in accordance with GAAP, together with
(i) copies of all management letters prepared by such accountants; (ii)
a report signed by such accountants stating that in making the
investigations necessary for said opinion they obtained no knowledge,
except as specifically stated, of any Default or Event of Default
hereunder and all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrowers are in compliance
with the requirements set forth in Sections 6.13, 6.14, 6.15, 6.16 and
7.10 and; (iii) a certificate of the Borrowers' chief financial
officers stating that such financial statements have been prepared in
accordance with GAAP, fairly represent the Borrowers' financial
positions and the results of their operations, and whether or not such
officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of Scientific as at the end
of and for such month and for the year to date period then ended,
prepared on a consolidating and consolidated basis to include each of
the Borrowers and any Affiliates, in reasonable detail and stating in
comparative form the figures for the corresponding date and periods in
the previous year, all prepared in accordance with GAAP, subject to
year-end audit adjustments; and accompanied by a certificate of the
Borrowers' chief financial officers, substantially in the form of
Exhibit E hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, and fairly represent the Borrowers' financial positions
and the results of their operations, (ii) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all
relevant facts in reasonable detail to evidence, and the computations
as to, whether or not the Borrowers are in compliance with the
requirements set forth in Sections 6.13, 6.14, 6.15, 6.16 and 7.10;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of each of the Borrowers'
accounts receivable and their accounts payable, an inventory
certification report, and a calculation of each of the Borrowers'
Accounts, Eligible Accounts and Inventory as at the end of such month
or shorter time period;
(d) at least 30 days before the beginning of each fiscal year
of the Borrowers, the projected balance sheets and income statements
for each month of such year, each in reasonable detail, representing
each of the Borrowers' good faith projections and certified by such
Borrower's chief financial officer as being the most accurate
projections available and identical to the projections used by such
Borrower for internal planning purposes, together with such supporting
schedules and information as the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting any of the Borrowers of the
type described in Section 5.12 or which seek a monetary recovery
against any of the Borrowers in excess of $25,000;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of any of the Borrowers
obtains knowledge of the occurrence of any breach, default or event of
default under any Security Document or any event which constitutes a
Default or Event of Default hereunder, notice of such occurrence,
together with a detailed statement by a responsible officer of such
Borrower of the steps being taken by the Borrowers to cure the effect
of such breach, default or event;
(g) as soon as possible and in any event within 30 days after
any of the Borrowers know or have reason to know that any Reportable
Event with respect to any Plan has occurred, the statement of the
Borrowers' chief financial officers setting forth details as to such
Reportable Event and the action which the Borrowers propose to take
with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
any of the Borrowers fail to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue
Code of 1986, as amended, the statement of the Borrower's chief
financial officers setting forth details as to such failure and the
action which the such Borrower proposes to take with respect thereto,
together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by any of the Borrowers' customers (individually
exceeding $10,000); (ii) credit memos (individually exceeding $10,000);
(iii) any goods returned to or recovered by any of the Borrowers
(individually exceeding $10,000); and (iv) any change in the persons
constituting any of the Borrowers' officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all
financial statements, reports and proxy statements which
any of the Borrowers shall have sent to its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic reports which any of the Borrowers shall file
with the Securities and Exchange Commission or any national securities
exchange;
(m) promptly upon knowledge thereof, notice of any of the
Borrowers' violation of any law, rule or regulation, the non-compliance
with which could materially and adversely affect the Borrowers'
businesses or their financial condition; and
(n) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
The Borrowers shall also deliver copies of the items required by subsections
(a), (b), (c) and (d) to each participant in the Credit Facility at the same
time as they are delivered to the Lender.
Section 6.2 Books and Records; Inspection and Examination. The
Borrowers will keep accurate books of record and account pertaining to the
Collateral and pertaining to the Borrowers' businesses and their financial
condition and such other matters as the Lender may from time to time request in
which true and complete entries will be made in accordance with GAAP and, upon
the Lender's request, will permit any officer, employee, attorney or accountant
for the Lender to audit, review, make extracts from or copy any and all
corporate and financial books and records of the Borrowers at all times during
ordinary business hours, to send and discuss with account debtors and other
obligors requests for verification of amounts owed to the Borrowers, and to
discuss the Borrowers' affairs with any of their directors, officers, employees
or agents. The Borrowers will permit the Lender, or its employees, accountants,
attorneys or agents, to examine and inspect any Collateral, other collateral
covered by the Security Documents or any other property of the Borrowers at any
time during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time
and from time to time send or require the Borrowers to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
Section 6.4 Compliance with Laws.
(a) The Borrowers will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrowers
specifically agree that they will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrowers
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to them (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by them, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrowers; provided, that the Borrowers
shall not be required to pay any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made.
Section 6.6 Maintenance of Properties.
(a) The Borrowers will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrowers from discontinuing the operation and maintenance of any of
its properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrowers' businesses and not
disadvantageous in any material respect to the Lender.
(b) The Borrowers will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrowers will keep all Collateral and other
collateral covered by the Security Documents free and clear of all
security interests, liens and encumbrances except Permitted Liens.
Section 6.7 Insurance. The Borrowers will obtain and at all
times maintain insurance with insurers believed by the Borrowers to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrowers operate. Without limiting the generality of the foregoing, the
Borrowers will at all times maintain business interruption insurance including
coverage for force majeure and keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable and mortgagee's endorsement for the Lender's
benefit acceptable to the Lender. All policies of liability insurance required
hereunder shall name the Lender as an additional insured.
Section 6.8 Preservation of Existence. The Borrowers will
preserve and maintain their existence and all of their rights, privileges and
franchises necessary or desirable in the normal conduct of their businesses and
shall conduct their businesses in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
Lender, the Borrowers will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the appropriate Borrower.
Section 6.10 Collateral Accounts.
(a) If, notwithstanding the instructions to debtors to make
payments to the Lockboxes, any of the Borrowers receive any payments on
Receivables, that Borrower shall deposit such payments into the
Collateral Account or Lender Account. Until so deposited, the Borrowers
shall hold all such payments in trust for and as the property of the
Lender and shall not commingle such payments with any of its other
funds or property.
(b) Amounts deposited in the Collateral Account and the Lender
Account shall not bear interest and shall not be subject to withdrawal
by the Borrowers, except after full payment and discharge of all
Obligations.
(c) All deposits in the Collateral Account and the Lender
Account shall constitute proceeds of Collateral and shall not
constitute payment of the Obligations. The Borrower may from time to
time cause balances in the Collateral Account and the Lender Account to
be transferred to the Lender for payment of the Obligations of the
appropriate Borrower, in any order or manner of application
satisfactory to the Lender.
(d) All items deposited in the Collateral Account or the
Lender Account shall be subject to final payment. If any such item is
returned uncollected, the Borrowers will immediately pay the Lender,
or, for items deposited in the Collateral Account or the Lender
Account, the bank maintaining such accounts, the amount of that item.
The Borrowers shall be liable as an endorser on all items deposited in
the Collateral Account and the Lender Account, whether or not in fact
endorsed by the Borrowers.
Section 6.11 Lockboxes. Upon the Lender's request, the
Borrowers will irrevocably direct all present and future Account debtors and
other Persons obligated to make payments on Receivables to make such payments
directly to the Lockboxes. After such request, all of the Borrowers' invoices,
account statements and other written or oral communications directing,
instructing, demanding or requesting payment of any Receivable or any other
amount constituting Collateral shall conspicuously direct that all payments be
made to the appropriate Lockbox and shall include such Lockbox address. All
payments received in the Lockboxes shall be processed to the Collateral Account
or the Lender Account, as applicable.
Section 6.12 Performance by the Lender. If the Borrowers at
any time fail to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrowers written notice
thereof (or in the case of the agreements contained in Sections 6.5, 6.7, 6.10
and 6.11, immediately upon the occurrence of such failure, without notice or
lapse of time), the Lender may, but need not, perform or observe such covenant
on behalf and in the name, place and stead of the Borrowers (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrowers shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Revolving Floating Rate. To facilitate the Lender's performance or observance of
such covenants of the Borrowers, the Borrowers hereby irrevocably appoint the
Lender, or the Lender's delegate, acting alone, as the Borrowers' attorney in
fact (which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrowers any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrowers under this Section 6.12.
Section 6.13 Minimum Debt Service Coverage Ratio. The
Borrowers will maintain, on a consolidated basis, during each period described
below, their Debt Service Coverage Ratio, determined as at the end of each
period, at not less than the ratio set forth opposite such period:
Period Ending Minimum Debt Service
Coverage Ratio
March 31, 2001 1.50 to 1.00
June 30, 2001 1.75 to 1.00
September 30, 2001 1.75 to 1.00
December 31, 2001 1.75 to 1.00
Section 6.14 Minimum Net Income. The Borrowers will maintain,
on a consolidated basis, their Net Income, determined as at the end of each
period, at an amount not less than the amount set forth opposite such period:
Year-to-Date Period Ending Minimum Net Income
-------------------------- ------------------
March 31 ,2001 ($150,000)
June 30, 2001 $775,000
September 30, 2001 $1,600,000
December 31, 2001 $2,400,000
Section 6.15 Minimum Book Net Worth. The Borrowers will
maintain, on a consolidated basis, their Book Net Worth, determined as at the
end of each period, at an amount not less than the amount set forth opposite
such period:
Period Ending Minimum Book Net Worth
------------- ----------------------
March 31, 2001 $15,500,000
June 30, 2001 $16,100,000
September 30, 2001 $16,900,000
December 31, 2001 $17,700,000
Section 6.16 Maximum Debt to Book Net Worth Ratio. The
Borrowers will maintain, on a consolidated basis, the ratio of their Debt to
their Book Net Worth, determined as at the end of each period, at not more than
the ratio set forth opposite such period:
Period Ending Maximum Debt to
Book Net Worth Ratio
March 31, 2001 1.75 to 1.00
June 30, 2001 1.75 to 1.00
September 30, 2001 1.75 to 1.00
December 31, 2001 1.75 to 1.00
Section 6.17 New Covenants On or before January 31st of each
year, the Borrowers and the Lender shall agree on new covenant levels for
Sections 6.13, 6.14, 6.15, 6.16 and 7.10 for periods after such date. The new
covenant levels will be based on the Borrower's projections for such periods and
shall be no less stringent than the present levels. An Event of Default shall
occur if the new covenants are not agreed to by the above date.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrowers agree that, without the
Lender's prior written consent:
Section 7.1 Liens. The Borrowers will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the operation of
the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrowers' property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrowers' businesses
or operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) a mortgage lien against the St. Paul Real Estate
securing indebtedness of not more than $6,500,000; and
(d) the Security Interest and liens and security
interests created by the Security Documents.
Section 7.2 Indebtedness. The Borrowers will not incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness for borrowed money or letters of credit
issued on the Borrowers' behalf, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrowers in existence on the
date hereof and listed in Schedule 7.2 hereto;
(c) indebtedness relating to liens permitted in
accordance with Section 7.1;
(d) indebtedness secured by the St. Paul Real Estate not
exceeding $6,500,000;
(e) indebtedness arising from loans from one or more
Companies to one or more Companies as follows:
(i) indebtedness owed by Laboratories to
Diagnostics in connection with the acquisition of the
laboratory business, not exceeding $1,949,000;
(ii) indebtedness, excluding any indebtedness
related to any transfer of goodwill, owed by Diagnostics
to Laboratories not exceeding $6,000,000;
(iii) indebtedness arising from loans from one or
more Borrowers to the St. Paul Real Estate Subsidiary,
provided the aggregate principal amount of such loans plus the
aggregate equity investment of all of the Borrowers in the St.
Paul Real Estate Subsidiary does not exceed $750,000 before
December 31, 2001, or more than $500,000 thereafter, plus in
each case, Letters of Credit issued for the benefit of the St.
Paul Real Estate Subsidiary not exceeding an aggregate face
amount of $300,000; and
(f) Subordinated Indebtedness.
Section 7.3 Guaranties. The Borrowers will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the
Borrowers for deposit or collection or similar
transactions in the ordinary course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2.
Section 7.4 Investments and Subsidiaries.
(a) The Borrowers will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper rated "A-1" or higher by Standard &
Poor's Rating Services or "P-1" or higher by Moody's Investors
Service, Inc. or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by
banks rated "A-1" or higher by Standard & Poor's Rating
Services or "P-1" or higher by Moody's Investors Service,
Inc.;
(ii) travel advances or loans to any of the Borrowers'
officers and employees not exceeding at any one time an aggregate
of $25,000;
(iii) Scientific's investment in the other Companies;
(iv) inter-company loans and investments described in
Section 7.2(e); and
(v) advances in the form of progress payments, prepaid rent
not exceeding two (2) months or security deposits.
(b) The Borrowers will not create or permit to exist any
Subsidiary, other than the Subsidiaries in existence
on the date hereof and listed in Schedule 5.4 and the St. Paul
Real Estate Subsidiary.
Section 7.5 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrowers will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
their assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrowers will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.6 Intellectual Property. The Borrowers shall not
sell or grant licenses to use any of their applications for patents, patents,
copyrights, trademarks, trade secrets, or trade names to any other Person.
Section 7.7 Consolidation and Merger; Asset Acquisitions. The
Borrowers will not consolidate with or merge into any Person, or permit any
other Person to merge into, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 7.8 Sale and Leaseback. The Borrowers will not enter
into any arrangement, directly or indirectly, with any other Person whereby the
Borrowers shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which the Borrowers intends
to use for substantially the same purpose or purposes as the property being sold
or transferred.
Section 7.9 Restrictions on Nature of Business. The Borrowers
will not engage in any line of business materially different from that presently
engaged in by the Borrowers and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 Capital Expenditures. During the fiscal year
2001, the Borrowers and their Subsidiaries will not incur or contract to incur
Capital Expenditures of more than $12,500,000 in the aggregate.
Section 7.11 Accounting. The Borrowers will not adopt any
material change in accounting principles other than as required by GAAP. The
Borrowers will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 Discounts, etc. The Borrowers will not, after
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrowers or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the
Borrowers.
Section 7.13 Defined Benefit Pension Plans. The Borrowers will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 Other Defaults. The Borrowers will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrowers.
Section 7.15 Place of Business; Name. The Borrowers will not
transfer their chief executive offices or principal place of business, or move,
relocate, close or sell any business location. The Borrowers will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrowers will not change
their names.
Section 7.16 Organizational Documents; S Corporation Status.
The Borrowers will not amend their articles of incorporation or bylaws. None of
the Borrowers will become an S Corporation within the meaning of the Internal
Revenue Code of 1986, as amended. The Borrowers shall not permit any provision
of their articles of incorporation or bylaws relating to the dissolution or
duration of the Borrowers, to be modified or deleted.
Section 7.17 Salaries. The Borrowers will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any directors, shareholders or consultant, or any member
of their families, by more than 15% in any one year, either individually or for
all such persons in the aggregate, or pay any such increase from any source
other than profits earned in the year of payment.
Section 7.18 Change in Ownership. Scientific will at all
times own all issued and outstanding stock of Laboratories, Diagnostic,
Consolidated and the St. Paul Real Estate Subsidiary.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events (notwithstanding that the
Lender may demand immediate payment, at any time, of the Revolving Advances and
all obligations related thereto, whether or not a Default Period then exists,
and without waiving or limiting in any respect the Lender's right to so demand
payment, at any time, of the Revolving Advance and all obligations related
thereto):
(a) Default in the payment of the Revolving Advance and
all obligations related thereto, on demand or on any portion of the
Obligations that otherwise becomes due and payable;
(b) Default in the payment of any fees, commissions,
costs or expenses required to be paid by the Borrowers under this
Agreement;
(c) Default in the performance, or breach, of any
covenant or agreement of the Borrowers contained in this Agreement;
(d) Any of the Borrowers shall be or become insolvent, or
admit in writing their inability to pay their debts as they mature, or
make an assignment for the benefit of creditors; or the Borrowers shall
apply for or consent to the appointment of any receiver, trustee, or
similar officer for it or him or for all or any substantial part of its
or his property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of the Borrowers; or the
Borrowers shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it or him under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrowers; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrowers;
(e) A petition shall be filed by or against any of the
Borrowers under the United States Bankruptcy Code naming any of the
Borrowers as debtor;
(f) Any representation or warranty made by the Borrowers in
this Agreement, or by the Borrowers (or any of their officers) in any
agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement shall prove to have been incorrect in
any material respect when deemed to be effective;
(g) The rendering against any of the Borrowers of a final
judgment, decree or order for the payment of money in excess of $25,000
and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of 30 consecutive days without a stay of
execution;
(h) A default under any bond, debenture, note or other
evidence of indebtedness of any of the Borrowers owed to any Person
other than the Lender, or under any indenture or other instrument under
which any such evidence of indebtedness has been issued or by which it
is governed, or under any lease of any of the Premises or any other
material lease, and the expiration of the applicable period of grace,
if any, specified in such evidence of indebtedness, indenture, other
instrument or lease;
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
any of the Borrowers by the Lender; or a trustee shall have been
appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or any of the Borrowers shall have filed for a
distress termination of any Plan under Title IV of ERISA; or any of the
Borrowers shall have failed to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue
Code of 1986, as amended, which the Lender determines in good faith may
by itself, or in combination with any such failures that the Lender may
determine are likely to occur in the future, result in the imposition
of a lien on the Borrowers' assets in favor of the Plan;
(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrowers hereunder or under any note;
(k) Any of the Borrowers shall liquidate, dissolve, terminate
or suspend their business operations or otherwise fail to operate their
businesses in the ordinary course, or sell all or substantially all of
their assets, without the Lender's prior written consent;
(l) Any of the Borrowers shall fail to pay, withhold, collect
or remit any tax or tax deficiency when assessed or due (other than any
tax deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(m) Default in the payment of any amount owed by the
Borrowers to the Lender other than any indebtedness arising hereunder;
(n) Any event or circumstance with respect to any of the
Borrowers shall occur such that the Lender shall believe in good faith
that the prospect of payment of all or any part of the Obligations or
the performance by the Borrowers under the Loan Documents is impaired
or any material adverse change in the business or financial condition
of the Borrowers shall occur; or
(o) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender.
(p) A Change of Control shall occur with respect to
Scientific.
Section 8.2 Rights and Remedies. Upon the occurrence of an
Event of Default, or at any time thereafter, the Lender may exercise any or all
of the following rights and remedies (notwithstanding that the Lender may, at
any time, as provided in Section 2.15, refuse to make any requested Revolving
Advances, demand payment of the Revolving Advances and related obligations,
whether or not an Event of Default exists):
(a) the Lender may, by notice to the Borrowers, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrowers hereby expressly waive;
(b) the Lender may, without notice to the Borrowers and
without further action, apply any and all money owing by the Lender to
the Borrowers, including without limitation any funds on deposit with
the Lender, whether or not matured, to the payment of the Obligations;
(c) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrowers hereby expressly waive) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrowers will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(d) the Lender may require the Borrowers to pay to the Lender
in immediately available funds for deposit in the Special Account
pursuant to Sections 2.6 and 2.18 an amount equal to the maximum
aggregate amount available to be drawn under all Letters of Credit then
outstanding, assuming compliance with all conditions for drawing
thereunder;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and
remedies available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 Certain Notices. If notice to the Borrowers of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.5) at least ten (10)
calendar days before the date of intended disposition or other action.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Restatement of Old Credit Documents. This
Agreement is executed for the purpose of amending and restating the Old Credit
Agreement.
Section 9.2 Release. Each Borrower hereby absolutely and
unconditionally releases and forever discharges the Lender, and any and all
parent corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which any Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Agreement, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
Section 9.3 No Waiver; Cumulative Remedies. No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.4 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by any of the Borrowers therefrom or any release of a Security
Interest shall be effective unless the same shall be in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers to any other or
further notice or demand in similar or other circumstances.
Section 9.5 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to the Borrowers:
Medtox Laboratories, Inc.
402 West County Road D
St. Paul, Minnesota 55112
Telecopier: (612) 628-6105
Attention: Vice President of Finance
If to the Lender:
Wells Fargo Business Credit, Inc.
Wells Fargo Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0152
Telecopier: (612) 341-2472
Attention: Terry Jackson
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article IX shall not be
effective until received by the Lender. Notice to the Borrowers is effectively
made upon providing notice to Laboratories, as agent for all the Borrowers.
Section 9.6 Further Documents. The Borrowers will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that the
Borrowers execute, deliver or endorse any such item shall not affect or impair
the validity, sufficiency or enforceability of the Loan Documents and the
Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).
Section 9.7 Collateral. This Agreement does not contemplate a
sale of accounts, contract rights or chattel paper, and, as provided by law, the
Borrowers are entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral. The Lender shall not be obligated to preserve any rights the
Borrowers may have against prior parties, to realize on the Collateral at all or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Section 9.8 Costs and Expenses. The Borrowers agree to pay on
demand all costs and expenses, including (without limitation) attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement, the
Loan Documents, and any other document or agreement related hereto or thereto,
and the transactions contemplated hereby, including without limitation all
mortgagee's title insurance premiums and all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest. The Borrower
acknowledges receipt of $25,000 toward the payment of those costs and expenses.
Section 9.9 Indemnity. In addition to the payment of expenses
pursuant to Section 9.8, the Borrowers agree to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or the
making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.12 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrowers, or counsel designated by the Borrowers and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrowers' sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrowers shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrowers' obligation
under this Section 9.9 shall survive the termination of this Agreement and the
discharge of the Borrowers' other obligations hereunder.
Section 9.10 Participants. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.11 Execution in Counterparts. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.12 Binding Effect; Assignment; Complete Agreement;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrowers and the Lender and their respective successors and
assigns, except that the Borrowers shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrowers and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest Corporation, may exchange any and all information they
may have in their possession regarding the Borrowers and their Affiliates, and
the Borrowers waive any right of confidentiality they may have with respect to
such exchange of such information.
Section 9.13 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.14 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
[remainder of page left intentionally blank]
Section 9.15 Governing Law; Jurisdiction, Venue; Waiver of
Jury Trial. The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Minnesota.
The parties hereto hereby (i) consent to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrowers in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court of Hennepin County,
Minnesota, or the United States District Court, District of Minnesota, Fourth
Division; and (iv) agree that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. THE PARTIES WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO
THIS AGREEMENT.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
WELLS FARGO BUSINESS CREDIT, INC. MEDTOX SCIENTIFIC, INC.
MEDTOX DIAGNOSTICS, INC.
By _________________________________ MEDTOX LABORATORIES, INC.
Kimberly Leppanen CONSOLIDATED MEDICAL SERVICES, INC.
Its Vice President
By _________________________________
Richard J. Braun
Their Chief Executive Officer
Exhibit A to Amended and
Restated Credit and Security Agreement
2001 CAPEX NOTE
$3,500,000 Minneapolis, Minnesota
May 7, 2001, but effective as of March 31, 2001
For value received, the undersigned, MEDTOX SCIENTIFIC, INC.,
a Delaware corporation, MEDTOX LABORATORIES, INC., a Delaware corporation,
MEDTOX DIAGNOSTICS, INC., a Delaware corporation, and CONSOLIDATED MEDICAL
SERVICES, INC., a Delaware corporation (together, the "Borrowers"), hereby
jointly and severally promise to pay as provided in the Credit Agreement
(defined below), to the order of WELLS FARGO BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender"), at its main office in Minneapolis, Minnesota, or at
any other place designated at any time by the holder hereof, in lawful money of
the United States of America and in immediately available funds, the principal
sum of Three Million Five Hundred Thousand Dollars ($3,500,000) or, if less, the
aggregate unpaid principal amount of all 2001 Capex Advances made by the Lender
to the Borrowers under the Credit Agreement together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Amended and Restated Credit and Security Agreement of even date
herewith (as the same may hereafter be amended, supplemented or restated from
time to time, the "Credit Agreement") by and among the Lender and the Borrowers.
The principal hereof and interest accruing thereon shall be due and payable as
provided in the Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the 2001 Capex Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one or more
other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.
The Borrowers hereby jointly and severally agree to pay all
costs of collection, including attorneys' fees and legal expenses in the event
this Note is not paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
MEDTOX SCIENTIFIC, INC.
MEDTOX LABORATORIES, INC.
MEDTOX DIAGNOSTICS, INC.
CONSOLIDATED MEDICAL SERVICES, INC.
By ____________________________
Richard J. Braun
Their Chief Executive Officer