Item 1.01 Entry into a Material Definitive Agreement
Acquisition
On May 1, 2019, Bioanalytical Systems,
Inc. (the “Company”), through its wholly-owned subsidiary Oriole Toxicology Services LLC (the “Purchaser”),
acquired (the “Acquisition”) from Smithers Avanza Toxicology Services LLC (the “Seller”), a consulting-based
contract research laboratory located in Gaithersburg, Maryland, substantially all of the assets used by the Seller in connection
with the performance of in-vivo mammalian toxicology CRO services for pharmaceuticals (small molecules and biologics), vaccines,
agro and industrial chemicals, under the terms and conditions of an Asset Purchase Agreement, dated May 1, 2019, among the Purchaser,
the Company, the Seller and the member of the Seller (the “Purchase Agreement”). The consideration for the Acquisition
consisted of $1,270,646.10 in cash, subject to certain adjustments and an indemnity escrow of $125,000, 200,000 of the Company’s
common shares and an unsecured promissory note in the initial principal amount of $810,000 made by Purchaser and guaranteed by
the Company. The Company funded the cash portion of the purchase price for the Acquisition with cash on hand and the net proceeds
from the refinancing of its credit arrangements with First Internet Bank (“FIB”), as described below.
The Purchase Agreement contains customary
representations, warranties, covenants (including non-competition requirements applicable to the selling parties for a 5 year period)
and indemnification provisions. As contemplated by the Purchase Agreement, on May 1, 2019 the Purchaser assumed amended lease arrangements
for certain premises in Gaithersburg, Maryland (the “Lease Arrangements”). Under the Lease Arrangements, the Purchaser
agreed to lease the premises for a term of 5 years and 8 months, with two 5 year extensions at Purchaser’s option. Annual
minimum rental payments under the initial term of the Lease Arrangements range from $400,000 to $800,000, provided that the Lease
Arrangements provide the Purchaser with the option to purchase the premises. The Lease Arrangements include customary rights upon
a default by landlord or tenant.
Amendment to Credit Arrangements
In connection with the Acquisition, on
May 1, 2019 the Company and FIB entered into a fourth amendment (the “Fourth Amendment”) to the Credit Agreement by
and between the parties dated June 23, 2017, as previously amended July 2, 2018, September 6, 2018 and September 28, 2018 (as amended,
the “Credit Agreement”) to (i) extend the term of the Company’s $3,500,000 revolving credit facility to June
30, 2020, (ii) provide the Company with an additional term loan (the “New Term Loan”) in the amount of $1,270,641.10,
the proceeds of which were used to fund the cash consideration for the Acquisition, and (iii) provide for an additional line of
credit in the principal amount of $1,100,000 (the “Capex Line”), which the Company may borrow from time to time, subject
to the terms of the Credit Agreement. The New Term Loan and the Capex Line mature November 1, 2025 and June 30, 2020, respectively.
Amounts outstanding under the New Term
Loan bear interest at a fixed per annum rate of 4.63%, while interest accrues on the principal balance of the Capex Line at a floating
per annum rate equal to the sum of the Prime Rate plus Fifty Basis Points (0.5%), which rate shall change concurrently with the
Prime Rate. Commencing June 1, 2019, the New Term Loan requires monthly interest only payments until December 1, 2019, from which
time payments of principal and interest in monthly installments equal to $20,288.97 become due, with all accrued but unpaid interest,
cost and expenses due and payable at the maturity date. The Company is required to pay accrued but unpaid interest on the Capex
Line on a monthly basis commencing on June 1, 2019, until June 30, 2020, at which time the entire balance of the Capex Line, together
with accrued but unpaid interest, costs and expenses, shall be due and payable in full.
Following its amendment, the Company’s
obligations under the Credit Agreement are guaranteed by BAS Evansville, Inc. (“BASEV”), Seventh Wave Laboratories,
LLC (“Seventh Wave”), as well as the Purchaser, each a wholly owned subsidiary of the Company. The Company’s
obligations under the Credit Agreement and BASEV’s, Seventh Wave’s and the Purchaser’s obligations under their
respective Guaranties are secured by first priority security interests in substantially all of the assets of the Company, BASEV,
Seventh Wave and the Purchaser respectively, as well as mortgages on the Company’s and BASEV’s facilities in West Lafayette,
Indiana and Evansville, Indiana, respectively, and pledges of the Company’s ownership interests in its subsidiaries.
The various restrictive covenants under
the Credit Agreement remain consistent, provided that the parties agreed (i) to modify the computation of the minimum debt service
coverage ratio and lower the ratio itself during certain periods to 1.15 to 1.0 or 1.20 to 1.0 to appropriately reflect relevant
aspects of the Acquisition and (ii) to suspend application of the cash flow coverage ratio through the fiscal quarter ending December
31, 2019, with the ratio of the Company’s total funded debt (as defined in the Credit Agreement) as of the last day of each
fiscal quarter to its EBITDA (as defined in the Credit Agreement) for the 12 months ended as of March 31, 2020 and June 30, 2020
not to exceed 5.00 to 1.00 and 4.50 to 1.00, respectively. The Company also agreed to obtain a life insurance policy in an amount
not less than $2,000,000 for its President and Chief Executive Officer and to provide FIB an assignment of such life insurance
policy as collateral.
The foregoing descriptions of the Purchase
Agreement, the Fourth Amendment and the Lease Arrangements do not purport to be complete and are qualified in their entirety by
the terms and conditions of those agreements, copies of which will be filed as exhibits to the Company’s Quarterly Report
on Form 10-Q for the period ending June 30, 2019.