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__________________________________________________
D & K HEALTHCARE RESOURCES, INC.,
JARON, INC. and ▇▇▇▇▇▇ DRUG CO.
__________________________________________________
__________________________________________________
__________________________________________________
FIFTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated: as of September 30, 2000
$130,000,000.00
__________________________________________________
__________________________________________________
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Fleet Capital Corporation
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TABLE OF CONTENTS
Page
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SECTION 1. CREDIT FACILITY 1
1.1 Revolving Credit Loans 1
1.2 Letters of Credit; LC Guaranties 2
1.3 All Loans to Constitute One Obligation; Joint and Several
Liability 2
1.4 Appointment of D&K as Agent 3
SECTION 2. INTEREST, FEES AND CHARGES 3
2.1 Interest 3
2.2 Computation of Interest and Fees 5
2.5 Letter of Credit and LC Guaranty Fees 5
2.7 Reimbursement of Expenses 6
SECTION 3. LOAN ADMINISTRATION 6
3.1 Manner of Borrowing Revolving Credit Loans 6
3.2 Payments 7
3.3 Prepayments 7
3.4 Application of Payments and Collections 7
3.5 All Loans to Constitute One Obligation 8
3.6 Loan Account 8
3.7 Statements of Account 8
SECTION 4. TERM AND TERMINATION 8
4.1 Term of Agreement 8
4.2 Termination 8
SECTION 5. SECURITY INTERESTS 9
5.1 Security Interest in Collateral 9
5.2 Lien Perfection; Further Assurances 9
SECTION 6. COLLATERAL ADMINISTRATION 10
6.1 General 10
6.2 Administration of Inventory 11
6.3 Payment of Charges 11
SECTION 7. REPRESENTATIONS AND WARRANTIES 11
7.1 General Representations and Warranties 11
7.2 Continuous Nature of Representations and Warranties 15
7.3 Survival of Representations and Warranties 15
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SECTION 8. COVENANTS AND CONTINUING AGREEMENTS 15
8.1 Affirmative Covenants 15
8.3 Specific Financial Covenants 20
SECTION 9. CONDITIONS PRECEDENT 20
9.1 Documentation 21
9.2 No Default 21
9.3 Other Loan Documents 21
9.4 No Litigation 21
9.6 Environmental 21
9.7 No Material Adverse Change 21
9.8 Fee Letter 21
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT 21
10.1 Events of Default 21
10.2 Acceleration of the Obligations 23
10.3 Other Remedies 23
10.4 Remedies Cumulative; No Waiver 24
SECTION 11. MISCELLANEOUS 24
11.1 Power of Attorney 24
11.2 Indemnity 25
11.3 Modification of Agreement; Sale of Interest 25
11.4 Severability 25
11.5 Successors and Assigns 26
11.6 Cumulative Effect; Conflict of Terms 26
11.7 Execution in Counterparts 26
11.8 Notice 26
11.9 Lender's Consent 27
11.10 Credit Inquiries 27
11.11 Time of Essence 27
11.12 Entire Agreement 27
11.13 Interpretation 27
11.14 GOVERNING LAW; CONSENT TO FORUM 27
11.15 WAIVERS BY BORROWERS 28
11.16 Private Sale; Commercial Reasonableness 28
11.14 Confidentiality 28
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FIFTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of
the 30th day of September 2000, by and among FLEET CAPITAL CORPORATION
("Lender"), a Rhode Island corporation with an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; and D & K HEALTHCARE RESOURCES, INC., a
Delaware corporation ("D&K") and JARON, INC., a Florida corporation
("Jaron"), and each of which with its chief executive office and principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
▇▇▇▇▇▇ DRUG CO. ("▇▇▇▇▇▇"), a South Dakota corporation with an office at
___________________________________________. (D&K, Jaron and ▇▇▇▇▇▇ are
sometimes hereinafter referred to collectively as the "Borrowers" and
individually as a "Borrower"). Capitalized terms used in this Agreement have
the meanings assigned to them in Appendix A, General Definitions. Accounting
terms not otherwise specifically defined herein shall be construed in
accordance with GAAP consistently applied.
PRELIMINARY STATEMENT
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A. D&K, Jaron and Lender entered into that certain Fourth Amended and
Restated Loan and Security Agreement dated as of August 7, 1998 (as amended
from time to time, the "Fourth Restated Loan Agreement").
B. D&K acquired all of the issued and outstanding shares of stock of
▇▇▇▇▇▇, and now D&K, Jaron and ▇▇▇▇▇▇ wish to provide for a credit facility
for their respective working capital needs.
C. Borrowers and Lender now mutually desire to amend certain of the
terms and provisions of the Fourth Restated Loan Agreement in accordance with
the terms and conditions stated herein; and in connection therewith Lender
and Borrowers now desire to amend and restate the Fourth Restated Loan
Agreement in its entirety.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to
$130,000,000 available upon Borrower's request therefor, as follows:
1.1. Revolving Credit Loans.
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1.1.1. Loans and Reserves. Lender agrees, for so long as no Default
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or Event of Default exists, to make Revolving Credit Loans to Borrowers from
time to time, as requested by D&K for itself or as agent for the Borrowers in
the manner set forth in subsection 3.1.1 hereof, up to a maximum principal
amount at any time outstanding equal to the Borrowing Base at such time minus
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reserves, if any. Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender shall deem necessary or
appropriate, against the amount of Revolving Credit Loans which Borrowers may
otherwise request under this subsection, including, without limitation, with
respect to (i) price adjustments, damages, unearned discounts, returned
products or other matters for which credit memoranda are issued in the
ordinary course of Borrowers' business; (ii) shrinkage, spoilage and
obsolescence of Inventory; (iii) slow moving Inventory; (iv) other sums
chargeable against Borrowers' Loan Account as Revolving Credit Loans under
any section of this Agreement; (v) amounts owing by any Borrower to any
Person to the extent secured by a Lien on, or trust over, any Property of
such Borrower; and (vi) such other matters, events, conditions or
contingencies as to which Lender, in its sole credit judgment, determines
reserves should be established from time to time hereunder. Borrowers may,
from time to time, enter into contracts or hedging programs, which provide
certain protections with respect to interest rate fluctuations. Lender may,
from time to time (but has no obligation to), provide certain limited
financial assurance to the provider of such products. In addition to the
foregoing, and notwithstanding anything herein to the contrary, if Lender
provides any such assurances, Lender may, in its sole discretion, establish
reserves for any and all obligations, direct or indirect,
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liquidated or contingent, incurred by Lender in connection with Borrowers, or
either of them obtaining or Lender guaranteeing any interest rate protection
or hedging products (such obligations of Lender are sometimes herein
collectively referred to as "Interest Rate Protection Obligations"), and (x)
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without, in any way limiting any liability or other obligations which
Borrowers shall have to Lender under any other document, instrument or
agreement, Borrowers shall be jointly and severally liable to Lender to
reimburse Lender for all Interest Rate Protection Obligations incurred by
Lender in connection with such products and Lender may reimburse itself for
any Interest Rate Protection Obligations by making a Revolving Credit Loan
without request, approval or consent of Borrowers, and (y) the obligations of
Borrowers to reimburse Lender for Interest Rate Protection Obligations are,
without limitation, "Obligations", as defined in this Agreement, and (z) no
Interest Rate Protection Obligations shall extend beyond the Original Term.
1.1.2. Use of Proceeds. The Revolving Credit Loans shall be used
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solely for the expenses incurred in connection with closing this loan
transaction and for Borrowers' general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable law.
1.2. Letters of Credit; LC Guaranties. Lender agrees, for so long as no
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Default or Event of Default exists and if requested by D&K on its own behalf
or as agent for any Borrower, to (i) issue its, or cause to be issued its
Affiliate's, Letters of Credit for the account of any Borrower, or (ii)
execute LC Guaranties by which Lender or its Affiliate shall guaranty the
payment or performance by any Borrower of its reimbursement obligations with
respect to Letters of Credit and letters of credit issued for Borrower's
account by any other Persons in support of such Borrower's obligations (other
than obligations for the repayment of Money Borrowed), provided that the LC
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Amount at any time shall not exceed $25,000,000. No Letter of Credit or LC
Guaranty may have an expiration date that is after the last day of the
Original Term. Any amounts paid by Lender under any LC Guaranty or in
connection with any Letter of Credit shall be treated as Revolving Credit
Loans, shall be secured by all of the Collateral, and shall bear interest and
be payable at the same rate and in the same manner as Revolving Credit Loans.
1.3. All Loans to Constitute One Obligation; Joint and Several Liability.
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All Loans and all other Obligations of the Borrowers hereunder shall constitute
one general obligation of Borrowers, and shall be secured by Lender's security
interest in and Lien upon all of the Collateral, and by all other security
interests and Liens heretofore, now or at any time or times hereafter granted
by any Borrower to Lender. The Borrowers shall be primarily and jointly and
severally liable for all Obligations hereunder. If and to the extent a
Borrower shall be deemed a guarantor of the other Borrowers hereunder, such
Borrower's joint liability for any Loans made to the other Borrowers shall be
deemed to be a guaranty of payment and performance, and not of collection. To
the fullest extent permitted by law, each Borrower hereby waives promptness,
diligence, notice of acceptance, and any other notices of any nature whatsoever
with respect to any of the Obligations, and any requirement that the Lender
protect, secure, perfect or insure any security interest or Lien on any
property subject thereto or exhaust any right or take any action against the
other Borrowers or any other Person or entity or any Collateral. Each Borrower
hereby agrees that it will not exercise any rights which it may acquire by way
of subrogation hereunder, by any payment made hereunder or otherwise, until all
of the Obligations shall have been paid in full and Lender shall be under no
duty to extend credit to or for the benefit of any Borrower. If any amount
shall be paid to a Borrower on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount(s)
shall be held in trust for the sole benefit of Lender and shall forthwith be
paid to Lender to be applied to the Obligations, whether matured or unmatured,
in accordance with the terms of this Agreement. If (i) any Borrower shall make
payment to Lender of all or any part of the Obligations and (ii) all the
Obligations shall be paid in full and Lender shall be under no duty to extend
credit to or for the benefit of any Borrower, then Lender will, at such
Borrower's request, execute and deliver to such Borrower appropriate documents,
without recourse and without representation or warranty, necessary to evidence
the transfer by subrogation to such Borrower of an interest in the Obligations
resulting from such payment by such Borrower. The liability of each Borrower
under this Section shall be absolute and unconditional irrespective of:
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(i) any change in the time, manner or place of payment of,
or in any other term of, any of the Obligations, or any other
amendment or waiver of or any consent to departure from this
Agreement;
(ii) any exchange, release or non-perfection of any
Collateral or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Obligations;
and
(iii) any other circumstance which might otherwise constitute
a defense available to, or discharge of, a Borrower or a guarantor of
the Obligations.
1.4. Appointment of D&K as Agent.
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1.4.1. Appointment of Agent Borrowers hereby appoint their parent
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corporation, D&K, as their agent and attorney-in-fact to take any action,
execute any document or instrument, consent or agree to any modification or
amendment hereto or waiver of or departure from any of the terms hereof, to
perform any Obligation of any Borrower hereunder, and to give or receive any
notice by or to any Borrower hereunder. Without limiting the generality of
the foregoing, D&K may request Loans or incur any other Obligation for the
account of any Borrower, may elect on behalf of the Borrowers to have
interest accrued pursuant to Section 2.1.3 hereof, shall prepare and deliver
to Lender all reports concerning the Collateral and all financial statements
required by this Agreement, and each Borrower shall be fully bound by the
statements and actions of D&K acting as agent hereunder. Lender shall be
entitled to rely absolutely and without duty of inquiry or investigation upon
any agreement, request, communication or other notice given by D&K hereunder.
Any notice given by Lender to D&K shall be deemed given to all Borrowers,
whether or not this Agreement specifically so provides. This appointment of
D&K as agent shall be irrevocable, and Lender shall have no duty to act in
accordance with any direction given by any other Borrower. This provision is
intended, among other things, to protect Lender against inconsistent
directions given by individual Borrowers. It shall be a condition to
Lender's obligations hereunder that each Borrower shall at all times have
appointed a single entity as its agent, which agent shall be acceptable to
Lender in its sole discretion.
1.4.2. Revolving Credit Loans. The Borrowers direct the Lender to
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disburse the proceeds of the Revolving Credit Loans to or at the direction of
D&K as its agent, as specifically set forth in Section 1.4.1 above.
SECTION 2. INTEREST, FEES AND CHARGES.
2.1. Interest.
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2.1.1. Interest Rate. The Borrowers shall pay interest on the
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unpaid principal amount of each Revolving Credit Loan and any other
Obligation for payment of money from the due date at the applicable interest
rates set forth below.
2.1.2. LIBO Rate Loans. So long as no Default or Event of Default
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exists hereunder, and except to the extent that D&K, on its own behalf and as
agent for the Borrowers, shall elect to pay interest on any Revolving Credit
Loan pursuant to Section 2.1.3 below, the Borrowers shall pay interest on (i)
each Revolving Credit Loan, from and including the date of such Loan and (ii)
any other Obligation under the Loan Documents for the payment of money from
the due date thereof, in either case at a fluctuating interest rate per annum
in effect from time to time equal to the LIBO Rate plus the Applicable Margin
with respect to the LIBO Rate. The foregoing rate of interest shall be
increased or decreased, as the case may be, by an amount equal to any
increase or decrease in the LIBO Rate, with such adjustments to be effective
as of the opening of business on the day that any such change in the LIBO
Rate becomes effective. The LIBO Rate in effect on the Closing Date shall be
the LIBO Rate effective as of the opening of business on the Closing Date.
2.1.3. Base Rate Loans D&K, on its own behalf and as agent for the
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Borrowers, may from time to time elect to have the interest on all (but not a
portion of) the outstanding Revolving Credit Loans
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determined and payable at a floating rate equal to the Base Rate plus the
Applicable Margin with respect to the Base Rate by written notice to the
Lender, such notice to be received by the Lender before 10:00 a.m.
(Milwaukee, Wisconsin time) on the day on which such conversion is to take
effect. Notwithstanding any election by Borrowers, upon and after the
occurrence of an Event of Default, and during the continuation thereof,
Lender may at its sole option elect to have the interest of the outstanding
Revolving Credit Loans determined and payable at the Default Rate. After the
date hereof, the foregoing rate of interest shall be increased or decreased,
as the case may be, by an amount equal to any increase or decrease in the
Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective.
The Base Rate in effect on the date of the election to have the Revolving
Credit Loans bear interest at the Base Rate plus the Applicable Margin shall
be the Base Rate effective as of the opening of business on such date.
2.1.4. Illegality; Impracticality. If it shall become unlawful for
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Bank, Lender or any Participating Lender to obtain funds in the London
interbank market in order to fund or maintain LIBO Rate Loans or otherwise to
perform its obligations hereunder with respect to any such Loans, upon at
least five (5) Business Days' notice by Lender to D&K the rate of interest on
all such LIBO Rate Loans shall thereupon be determined under Section 2.1.3,
and the right of D&K, on its own behalf and as agent for the Borrowers, to
have interest accrue on any Loan at the LIBO Rate plus the percentage set
forth herein shall thereupon terminate. Notwithstanding any other provision
of this Agreement to the contrary, if, during any period in which interest at
the LIBO Rate plus a percentage is to be charged on any Loan, (i) deposits in
U.S. dollars for thirty-day periods are not available to the Bank in the
London interbank market, or (ii) the LIBO Rate plus the percentage set forth
herein will not adequately and fairly reflect the cost to Lender or any
Participating Lender of making or maintaining the related LIBO Rate Loan, or
(iii) by reason of national or international financial, political or economic
conditions or by reason of any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or the
interpretation or administration thereof by any governmental authority, or
compliance by the Bank, Lender or any Participating Lender with any request
or directive of such authority (whether or not having the force of law),
including without limitation exchange controls, it is impracticable, unlawful
or impossible for Bank, Lender or any Participating Lender to make or
continue the relevant LIBO Rate Loan, then D&K, on its own behalf and as
agent for the Borrowers, shall not be entitled, so long as such circumstances
continue, to continue to have interest accrue on any Loan be at the LIBO Rate
plus the Applicable Margin with respect to the LIBO Rate.
2.1.5. Increased Costs. If, on or after the date hereof, the
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introduction of or any change in, or in the interpretation of, any law or
regulation or the compliance by Lender or any Participating Lender with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against all or any assets held by,
deposits or accounts with, or credit extended by or to, Lender or any
Participating Lender, or impose on Bank, Lender, any Participating
Lender or the London interbank market any other condition affecting
the LIBO Rate Loans, or its obligation to make LIBO Rate Loans; or
(ii) subject Bank, Lender or any Participating Lender to, or
cause the termination or reduction of a previously granted exemption
with respect to, any tax, levy, impost, deduction, charge or
withholding with respect to the LIBO Rate Loans, the Note or Lender's
obligation to make LIBO Rate Loans, or change the basis of taxation
of payment to Lender or any Participating Lender of the principal of
or interest on its Loans or any other amounts under this Agreement
(except for a change in the rate of tax on the overall net income of
Lender or any Participating Lender imposed by any applicable
jurisdiction),
and the result of any of the foregoing events is to increase the cost to
Bank, Lender or any Participating Lender of agreeing to make or making,
funding, or maintaining its LIBO Rate Loans, or to reduce the amount of any
sums received or receivable by Lender under this Agreement or the Note, then,
the Borrowers shall from time to time, not later than thirty (30) days after
Lender's demand therefor, pay such additional amounts as will compensate
Lender for such increased cost or reduced amount. A certificate of Lender
submitted to D&K, setting forth the amounts of
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such increased costs or reduced amount and the additional amounts to be paid
to Lender or any Participating Lender (as applicable) under this Section
shall be conclusive in the absence of manifest error.
2.1.6. Minimum Interest Rate. Notwithstanding the foregoing, in no
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event shall the per annum rate of interest on any Revolving Credit Loan be
less than five percent (5.0%). Interest in all cases shall be calculated on
a daily basis (computed on the actual number of days elapsed over a year of
360 days), commencing on the date hereof.
2.1.7. Default Rate. Upon and after the occurrence of an Event of
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Default, and during the continuation thereof, the principal amount of the
Obligations under this Loan Agreement shall bear interest, calculated daily
(computed on the actual days elapsed over a year of 360 days), at a
fluctuating rate per annum equal to three and one-quarter percent (3.25%)
above the interest rate that would otherwise apply under Sections 2.1.2 and
2.1.3 hereof (the "Default Rate").
2.1.8. Usury. In no contingency or event whatsoever shall the
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aggregate of all amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court
determines that Lender has charged or received interest hereunder in excess
of the highest applicable rate, Lender shall apply any such excess to any
Obligation hereunder then due and payable and shall promptly refund amounts
not so applied to Borrowers and such rate shall automatically be reduced to
the maximum rate permitted by such law.
2.2. Computation of Interest and Fees. Interest, Letter of Credit and
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LC Guaranty fees, unused line fees and collection charges hereunder shall be
calculated daily and shall be computed on the actual number of days elapsed
over a year of 360 days. For the purpose of computing interest hereunder,
all items of payment received by Lender shall be deemed applied by Lender on
account of the Obligations (subject to final payment of such items) on the
same Business Day as receipt by Lender of such items in Lender's account
located in Chicago, Illinois.
2.3. Letter of Credit and LC Guaranty Fees. Borrowers shall pay to
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Lender:
(i) for standby Letters of Credit and LC Guaranties of
standby Letters of Credit outstanding from time to time during the
term of this Agreement, a per annum fee equal to the product of (i)
the Applicable Margin for LIBO Rate loans in effect on the date of
issuance of the Letter of Credit or LC Guaranty times (ii) the
aggregate face amount of each such Letter of Credit and LC Guaranty,
which fee shall be deemed fully earned upon issuance of each such
Letter of Credit or LC Guaranty and shall be due and payable upon the
issuance of such Letter of Credit or execution of such LC Guaranty,
plus all normal and customary charges associated with the issuance
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thereof, which charges shall be deemed fully earned upon issuance of
each such Letter of Credit or LC Guaranty, shall be due and payable
on the first Business Day of each month and shall not be subject to
rebate or proration upon the termination of this Agreement for any
reason; and
(ii) for documentary Letters of Credit and LC Guaranties of
documentary Letters of Credit outstanding from time to time during
the term of this Agreement, a per annum fee equal to the product of
(i) the Applicable Margin for LIBO Rate loans in effect on the date
of issuance of the Letter of Credit or LC Guaranty times (ii) the
aggregate face amount of each such Letter of Credit and LC Guaranty,
and an additional per annum fee equal to the product of (x) the
Applicable Margin for LIBO Rate loans in effect on the date of
issuance of the Letter of Credit or LC Guaranty times (y) the
aggregate face amount of each such Letter of Credit and LC Guaranty
for each renewal and each extension thereof plus the normal and
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customary charges associated with the issuance and administration of
each such Letter of Credit or LC Guaranty (which fees and
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charges shall be fully earned upon issuance, renewal or extension
(as the case may be) of each such Letter of Credit or LC Guaranty,
shall be due and payable on the first Business Day of each month, and
shall not be subject to rebate or proration upon the termination of
this Agreement for any reason).
2.4. Reimbursement of Expenses. If, at any time or times regardless of
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whether or not an Event of Default then exists, Lender incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in
connection with (i) the negotiation and preparation of this Agreement or any
of the other Loan Documents, any amendment of or modification of this
Agreement or any of the other Loan Documents; (ii) the administration of this
Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (iii) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Lender, any Borrower or any
other Person) in any way relating to the Collateral, this Agreement or any of
the other Loan Documents or Borrowers' affairs; (iv) any attempt to enforce
any rights of Lender against any Borrower or any other Person which may be
obligated to Lender by virtue of this Agreement or any of the other Loan
Documents, including, without limitation, the Account Debtors; or (v) any
attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all
such legal and accounting expenses, other costs and out of pocket expenses of
Lender shall be charged to Borrowers. All amounts chargeable to Borrowers
under this Section shall be Obligations secured by all of the Collateral,
shall be payable on demand to Lender or to such Participating Lender, as the
case may be, and shall bear interest from the date such demand is made until
paid in full at the rate applicable to Revolving Credit Loans from time to
time. Borrowers shall also reimburse Lender for expenses incurred by Lender
in its administration of the Collateral to the extent and in the manner
provided in Section 6 hereof.
SECTION 3. LOAN ADMINISTRATION.
3.1. Manner of Borrowing Revolving Credit Loans. Borrowings under the
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credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1. Loan Requests. A request for a Revolving Credit Loan shall
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be made, or shall be deemed to be made, in the following manner: (i) D&K on
its own behalf or as agent for any Borrower may give Lender notice of its
intention to borrow, in which notice D&K shall specify the amount of the
proposed borrowing and the proposed borrowing date, no later than 11:00 a.m.
central time on the proposed borrowing date, provided, however, that no such
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request may be made at a time when there exists a Default or an Event of
Default; and (ii) the becoming due of any amount required to be paid under
this Agreement, whether as interest or for any other Obligation, shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due
date in the amount required to pay such interest or other Obligation. As an
accommodation to D&K, Lender may permit telephonic requests for loans and
electronic transmittal of instructions, authorizations, agreements or reports
to Lender by D&K. Unless D&K specifically directs Lender in writing not to
accept or act upon telephonic or electronic communications from any Borrower,
Lender shall have no liability to any Borrower for any loss or damage
suffered by such Borrower as a result of Lender's honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on
any reports communicated to it telephonically or electronically and
purporting to have been sent to Lender by D&K, for itself or as agent for any
Borrower, and Lender shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
3.1.2. Disbursement. Borrowers hereby irrevocably authorize Lender
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to disburse the proceeds of each Revolving Credit Loan requested, or deemed
to be requested, pursuant to this subsection as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(i) shall be
disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from D&K, for
itself and as agent for the Borrower, and in the case of each subsequent
borrowing, by wire transfer to such bank account as may be agreed upon by
D&K, for itself or as agent for any Borrower and Lender from time to time or
elsewhere if pursuant to a written direction from D&K, for itself or as agent
for any Borrower; and (ii) the proceeds of each Revolving Credit Loan
requested under
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subsection 3.1.1(ii) shall be disbursed by Lender by way of direct payment of
the relevant interest or other Obligation.
3.1.3. Authorization. Borrowers hereby irrevocably authorize
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Lender, in Lender's sole discretion, to advance to Borrowers, and to charge
to Borrowers' Loan Account hereunder as a Revolving Credit Loan, a sum
sufficient to pay all interest accrued on the Obligations during the
immediately preceding month and to pay all costs, fees and expenses at any
time owed by any Borrower to Lender hereunder.
3.2. Payments. Except where evidenced by notes or other instruments
--------
issued or made by any Borrower to Lender specifically containing payment
provisions which are in conflict with this Section (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
3.2.1. Principal. Principal payable on account of Revolving Credit
---------
Loans shall be payable by Borrowers to Lender immediately upon the earliest
of (i) the receipt by Lender or Borrower of any proceeds of any of the
Collateral (after any prior liens thereon are paid in full), to the extent of
said proceeds, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to Section 4
hereof; provided, however, that if an Overadvance shall exist at any time,
-------- -------
Borrowers shall, on demand, repay the Overadvance.
3.2.2. Interest. Interest accrued on account of Revolving Credit
--------
Loans shall be due on the earliest of (1) the first calendar day of each
month (for the immediately preceding month), computed through the last
calendar day of the preceding month, (2) the occurrence of an Event of
Default in consequence of which Lender elects to accelerate the maturity and
payment of the Obligations or (3) termination of this Agreement pursuant to
Section 4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges payable
-----------------------
pursuant to this Agreement shall be payable by Borrowers as and when provided
in Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
3.2.4. Other Obligations. The balance of the Obligations requiring
-----------------
the payment of money, if any, shall be payable by Borrowers to Lender as and
when provided in this Agreement, the Other Agreements or the Security
Documents, or on demand, whichever is later.
3.3. Prepayments.
-----------
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of
------------------------------------------------------
Collateral. If any of the Collateral is lost, damaged or destroyed or taken
----------
by condemnation, Borrowers shall pay to Lender, unless otherwise agreed by
Lender, as and when received by Borrowers and as a mandatory prepayment of
the Loans, a sum equal to the proceeds (including insurance payments)
received by Borrowers from such sale, damage, loss, destruction or
condemnation.
3.3.2. Other Mandatory Prepayments. Borrowers shall pay to Lender,
---------------------------
unless otherwise agreed by Lender, as and when received by Borrowers and as a
mandatory prepayment of the Loans, a sum equal to the proceeds received by
Borrowers as a result of any tax refund, indemnity payment, pension reversion
or issuance of additional debt or equity of the Borrowers.
3.4. Application of Payments and Collections. All items of payment
---------------------------------------
received by Lender by 12:00 noon, central time, on any Business Day shall be
deemed received on that Business Day. All items of payment received after
12:00 noon, central time, on any Business Day shall be deemed received on the
following Business Day. Borrowers irrevocably waive the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrowers, and Borrowers do
hereby irrevocably
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agree that Lender shall have the continuing exclusive right to apply and
reapply any and all such payments and collections received at any time or
times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Lender upon
any of its books and records. If as the result of collections of Accounts as
authorized by this Agreement a credit balance exists in the Loan Account,
such credit balance shall not accrue interest in favor of Borrowers, but
shall be available to Borrowers at any time or times for so long as no
Default or Event of Default exists.
3.5. All Loans to Constitute One Obligation. The Loans shall constitute
--------------------------------------
one general Obligation of Borrowers, and shall be secured by Lender's Lien
upon all of the Collateral.
3.6. Loan Account. Lender shall enter all Loans as debits to the Loan
------------
Account and shall also record in the Loan Account all payments made by
Borrowers on any Obligations and all proceeds of Collateral which are finally
paid to Lender, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all
charges and expenses properly chargeable to Borrowers.
3.7. Statements of Account. Lender will account to D&K monthly with a
---------------------
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrowers unless Lender is notified by D&K in writing to the contrary
within 60 days of the date each accounting is mailed to D&K. Such notice
shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4. TERM AND TERMINATION
4.1. Term of Agreement. Subject to Lender's right to cease making Loans
-----------------
to Borrowers upon or after the occurrence of any Default or Event of Default,
this Agreement shall be in effect for a period from the date hereof, through
and including August 7, 2002 (the "Original Term").
4.2. Termination.
-----------
4.2.1. Termination by Lender. Lender may terminate this Agreement
---------------------
without notice upon or after the occurrence of an Event of Default.
4.2.2. Termination by Borrower. Upon at least 30 days prior written
-----------------------
notice to Lender, D&K in its own behalf and as agent for the Borrowers, may,
at its option, terminate this Agreement; provided, however, no such
-------- -------
termination shall be effective until Borrowers have paid all of the
Obligations in immediately available funds and all Letters of Credit and LC
Guaranties have expired or have been secured by cash collateral to Lender's
satisfaction. Any notice of termination given by D&K shall be irrevocable
unless Lender otherwise agrees in writing, and Lender shall have no
obligation to make any Loans or issue or procure any Letters of Credit or LC
Guaranties on or after the termination date stated in such notice. Borrowers
may elect to terminate this Agreement in its entirety only, and no Borrower
may terminate this Agreement or its liability hereunder unless all Borrowers
terminate this Agreement. No section of this Agreement or type of Loan
available hereunder may be terminated singly.
4.2.3. Termination Charges. At the effective date of termination
-------------------
of this Agreement prior to the end of the Original Term for any reason,
Borrowers shall pay to Lender (in addition to the then outstanding principal,
accrued interest and other charges owing under the terms of this Agreement
and any of the other Loan Documents) as liquidated damages for the loss of
the bargain and not as a penalty, an amount equal to 1.0% of the average of
each month's Average Monthly Loan Balance for the period from the date of
this Agreement through the effective date of such termination, provided,
--------
however, that the termination fee shall not be less than $400,000 or more
-------
than $450,000, regardless of the Average Monthly Loan Balance. If
termination occurs on the last day of the Original Term or any extension of
the Original Term (provided, that Lender has no obligation to extend the
Original Term), no termination charge shall be payable.
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4.2.4. Effect of Termination. All of the Obligations shall be
---------------------
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrowers contained in the Loan Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrowers have irrevocably paid the
Obligations to Lender, in full, in immediately available funds, together with
the applicable termination charge, if any. Notwithstanding the payment in
full of the Obligations, Lender shall not be required to terminate its
security interests in the Collateral unless, with respect to any loss or
damage Lender may incur as a result of dishonored checks or other items of
payment received by Lender from Borrowers or any Account Debtor and applied
to the Obligations, Lender shall, at its option, (i) have received a written
agreement, executed by Borrowers and by any Person whose loans or other
advances to Borrowers are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such loss or damage; or (ii) have
retained such monetary reserves and Liens on the Collateral for such period
of time as Lender, in its reasonable discretion, may deem necessary to
protect Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral. To secure the prompt payment and
-------------------------------
performance to Lender of the Obligations, Borrowers hereby grant to Lender a
continuing Lien upon all of the following Property and interests in Property
of each of the Borrowers (but specifically excluding any Accounts and General
Intangibles and related rights which are, from time to time, owned or
purported to be owned by, or are subject to a security interest for the
benefit of, a party other than any of the Borrowers as a result of a transfer
pursuant to the Securitization Documents), whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Investment Property;
(v) Any stock of any Subsidiary, whether now owned or
hereafter acquired, including but not limited to all stock of Jaron and
▇▇▇▇▇▇, and all stock of PBI whether now owned or hereafter acquired
by D&K.
(vi) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Lender or
a bailee or Affiliate of Lender;
(vii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (v)
above, including, without limitation, proceeds of and unearned premiums
with respect to insurance policies insuring any of the Collateral; and
(viii) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records and all records of purchases and sales of
prescription drugs and controlled substances required to be kept by the
Federal or any state government or agency thereof) of Borrower pertaining
to any of (i) through (vi) above.
5.2. Lien Perfection; Further Assurances. Borrowers shall execute such
-----------------------------------
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's
Lien upon any of the Collateral and shall take such other action as may be
required to perfect or to continue the perfection of Lender's Lien upon the
Collateral. Unless prohibited by applicable law, each Borrower hereby
authorizes Lender to execute and file any such financing statement on
Borrower's behalf. The parties agree that a
9
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carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrowers shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give
effect to or carry out the terms or intent of the Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1. General
-------
6.1.1. Location of Collateral. All Collateral, other than Inventory
----------------------
in transit and motor vehicles, will at all times be kept by Borrowers and
their respective Subsidiaries at one or more of the business locations set
forth in EXHIBIT B hereto and shall not, without the prior written approval
of Lender, be moved therefrom except, prior to an Event of Default and
Lender's acceleration of the maturity of the Obligations in consequence
thereof, for (i) sales of Inventory in the ordinary course of business; and
(ii) the storage of Inventory at locations within the continental United
States other than those shown on EXHIBIT B if (A) Borrowers give Lender
written notice of the new storage location at least thirty (30) days prior to
storing Inventory at such location, (B) Lender's security interest in such
Inventory is and continues to be a duly perfected, first priority Lien
thereon (subject only to Permitted Liens), (C) neither Borrowers' nor
Lender's right of entry upon the premises where such Inventory is stored, or
its right to remove the Inventory therefrom, in any way is restricted, (D)
the owner of such premises agrees in writing pursuant to a waiver agreement,
in form and substance acceptable to Lender, among other things, not to assert
any landlord's, bailee's or other Lien in respect of the Inventory for unpaid
rent or storage charges, and (E) all negotiable documents and receipts in
respect of any Collateral maintained at such premises are delivered promptly
to Lender.
6.1.2. Insurance of Collateral. Borrowers shall maintain and pay
-----------------------
for insurance upon all Collateral wherever located and with respect to
Borrowers' business, covering casualty, hazard, public liability and such
other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. Borrowers shall deliver the originals of
such policies to Lender with satisfactory lender's loss payable endorsements,
naming Lender as sole loss payee, assignee or additional insured, as
appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Lender in the event of cancellation of the policy for any reason whatsoever
and a clause specifying that the interest of Lender shall not be impaired or
invalidated by any act or neglect of Borrowers or the owner of the Property
or by the occupation of the premises for purposes more hazardous than are
permitted by said policy.
In the event Borrowers, at any time, fail to provide Lender with evidence of
the insurance coverage as required by this Agreement, Lender may, but shall
not be obligated to, purchase the insurance coverage at Borrowers' expense to
protect Lender's interests in the Collateral. Such insurance may, but need
not, protect Borrowers' interests. The insurance coverage that Lender
purchases on behalf of Borrowers may not pay any claim that Borrowers make or
any claim that is made against Borrowers in connection with the Collateral.
Borrowers may later cancel any insurance coverage purchased by Lender, but
only after providing Lender with evidence that insurance coverage has been
obtained as provided for in this Agreement. In the event Lender purchases
all or any portion of the insurance coverage for the Collateral or as
otherwise required hereunder, Borrowers will be responsible for all costs and
expenses of such insurance coverage, with the purchase of the insurance
coverage including, but not limited to interest and any other charges imposed
by Lender in connection with the purchase of the insurance coverage until the
effective date of the cancellation or expiration of the insurance coverage.
The costs and expenses of any insurance coverage purchased by Lender shall be
added to the Obligations. Borrowers acknowledge that the costs and expenses
of the insurance coverage purchased by Lender pursuant hereto may be more
than the cost of insurance Borrowers may be able to obtain on their own.
Borrowers shall deliver to Lender in kind, all instruments representing
proceeds of insurance received by Borrowers. Borrowers agree to deliver to
Lender, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies.
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Pursuant to Mo. Rev. Stat. Sec. 427.120, Borrower acknowledges receipt of the
following notice:
"Unless you [Borrower] provide evidence of the insurance coverage required by
your agreement with us [Lender], we may purchase insurance at you expense to
protect our interests in your collateral. This insurance may, but need not,
protect your interests. The coverage that we purchase may not pay any claim
that you make or any claim that is made against you in connection with the
collateral. You may later cancel any insurance purchased by us, but only
after providing evidence that you have obtained insurance as required by our
agreement. If we purchase insurance for the collateral, you will be
responsible for the costs of that insurance, including the insurance premium,
interest and any other charges we may impose in connection with the placement
of the insurance, until the effective date of the cancellation or expiration
of the insurance. The costs of the insurance may be added to your total
outstanding balance or obligation. The costs of the insurance may be more
than the cost of insurance you may be able to obtain on your own."
6.1.3. Protection of Collateral. All expenses of protecting,
------------------------
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, and any and all excise, property, sales, and use taxes imposed by
any state, federal, or local authority on any of the Collateral or in respect
of the sale thereof shall be borne and paid by Borrowers. If Borrowers fail
to promptly pay any portion thereof when due, Lender may, at its option, but
shall not be required to, pay the same and charge Borrowers therefor. Lender
shall not be liable or responsible in any way for the safekeeping of any of
the Collateral or for any loss or damage thereto (except for reasonable care
in the custody thereof while any Collateral is in Lender's actual possession)
or for any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency, or other person whomsoever, but the
same shall be at Borrowers' sole risk.
6.2. Administration of Inventory.
---------------------------
6.2.1. Records and Reports of Inventory. Borrowers shall keep
--------------------------------
accurate and complete records of all Inventory. Borrowers shall furnish to
Lender Inventory reports in form and detail satisfactory to Lender at such
times as Lender may request, but at least once each week, not later than each
Monday, for the immediately preceding week, or more frequently if requested
by Lender. Borrowers shall conduct a physical inventory no less frequently
than annually and shall provide to Lender a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Lender shall request. No Inventory will at any time be
misbranded or adulterated, and all Inventory shall bear all labels and
warnings required by all federal or state laws, rules and regulations.
6.2.2. Returns of Inventory. If at any time or times hereafter any
--------------------
Account Debtor returns to Borrowers any Inventory the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$250,000, Borrowers shall immediately notify Lender of the same, specifying
the reason for such return and the location, condition and intended
disposition of the returned Inventory.
6.2.3. Inventory Appraisal. On or prior to December 31, 2000 and on
-------------------
or prior to each December 31st thereafter, Borrowers, at their sole cost and
expense, shall provide Lender with an appraisal of the Inventory in a form
and substance acceptable to Lender containing the orderly liquidation value
of the Inventory. Said appraisal shall be conducted and prepared by a
third-party independent appraiser acceptable to the Lender.
6.3. Payment of Charges. All amounts chargeable to Borrowers under
------------------
Section 6 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand and shall bear interest from the date such advance was
made until paid in full at the rate applicable to Revolving Credit Loans from
time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties. To induce Lender to enter
--------------------------------------
into this Agreement and to make advances hereunder, Borrowers jointly and
severally warrant, represent and covenant to Lender that:
11
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7.1.1. Organization and Qualification. Each Borrower and each of
------------------------------
their respective Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Borrower and each of their respective Subsidiaries is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each state or jurisdiction listed on EXHIBIT C hereto
and in all other states and jurisdictions where the character of its
Properties or the nature of its activities make such qualification necessary
and in which the failure of such Borrower or any of its Subsidiaries to be so
qualified would have a material adverse effect on the financial condition,
business or Properties of such Borrower or any of its Subsidiaries.
7.1.2. Corporate Power and Authority. Each Borrower and each of
-----------------------------
their respective Subsidiaries is duly authorized and empowered to enter into,
execute, deliver and perform this Agreement and each of the other Loan
Documents to which it is a party. The execution, delivery and performance of
this Agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate action and do not and will not (i) require any
consent or approval of the shareholders of any Borrower or any of its
Subsidiaries; (ii) contravene any Borrower's or any of its Subsidiaries'
charter, articles or certificate of incorporation or by-laws; (iii) violate,
or cause any Borrower or any of its Subsidiaries to be in default under, any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award in effect having applicability to such
Borrower or any of its Subsidiaries; (iv) result in a breach of or constitute
a default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which any Borrower or any of its
Subsidiaries is 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
Lien (other than Permitted Liens) upon or with respect to any of the
Properties now owned or hereafter acquired by any Borrower or any of its
Subsidiaries.
7.1.3. Legally Enforceable Agreement. This Agreement is, and each
-----------------------------
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding joint and several obligation of each Borrower and
each of their respective Subsidiaries enforceable against each such entity in
accordance with its respective terms.
7.1.4. Capital Structure. EXHIBIT D hereto states (i) the correct
-----------------
name of each of the Subsidiaries of each Borrower, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by such Borrower,
(ii) the name of all of each Borrower's corporate or joint venture Affiliates
and the nature of the affiliation, (iii) the number, nature and holder of all
outstanding Securities of each Borrower and each Subsidiary of such Borrower
and (iv) the number of authorized, issued and treasury shares of each
Borrower and each Subsidiary of such Borrower. Each Borrower has good title
to all of the shares it purports to own of the stock of each of its
Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. There are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell,
or any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of any Borrower or any of its
Subsidiaries. There are no outstanding agreements or instruments binding
upon any of any Borrower's shareholders relating to the ownership of its
shares of capital stock.
7.1.5. Corporate Names. Neither Borrowers nor any of their
---------------
respective Subsidiaries has been known as or used any corporate, fictitious
or trade names except those listed on EXHIBIT E hereto. Except as set forth
on EXHIBIT E, neither Borrowers nor any of their respective Subsidiaries has
been the surviving corporation of a merger or consolidation or acquired all
or substantially all of the assets of any Person.
7.1.6. Business Locations; Agent for Process. Each Borrower's and
-------------------------------------
its Subsidiaries' chief executive office and other places of business are as
listed on EXHIBIT B hereto. During the preceding one-year period, neither
Borrowers nor any of their respective Subsidiaries has had an office, place
of business or agent for service of process other than as listed on EXHIBIT
B. Except as shown on EXHIBIT B, no Inventory is stored with a bailee,
warehouseman or similar party, nor is any Inventory consigned to any Person.
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7.1.7. Title to Properties; Priority of Liens. Each Borrower and
--------------------------------------
its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its
other Property, in each case, free and clear of all Liens except Permitted
Liens. Each Borrower has paid or discharged all lawful claims, which, if
unpaid, might become a Lien against any of Borrower's Properties that is not
a Permitted Lien. The Liens granted to Lender under Section 5 hereof are
first priority Liens, subject only to Permitted Liens.
7.1.8. Financial Statements; Fiscal Year. The consolidated and
---------------------------------
consolidating balance sheets of Borrowers and such other Persons described
therein (including the accounts of all Subsidiaries of Borrowers for the
respective periods during which a Subsidiary relationship existed) as of June
30, 2000, and the related statements of income, changes in stockholder's
equity, and changes in financial position for the periods ended on such
dates, have been prepared in accordance with GAAP, and present fairly the
financial positions of Borrowers and such Persons at such dates and the
results of Borrowers' operations for such periods. Since June 30, 2000,
there has been no material change in the condition, financial or otherwise,
of Borrowers and such other Persons as shown on the Consolidated balance
sheet as of such date and no change in the aggregate value of Equipment and
real Property owned by any Borrower or such other Persons, except changes in
the ordinary course of business, none of which individually or in the
aggregate has been materially adverse. The fiscal year of each Borrower and
its Subsidiaries ends on June 30 of each year.
7.1.9. Full Disclosure. The financial statements referred to in
---------------
subsection 7.1.8 hereof do not, nor does this Agreement or any other written
statement of Borrowers to Lender, contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. There is no fact which Borrowers have
failed to disclose to Lender in writing which materially affects adversely
or, so far as Borrowers can now foresee, will materially affect adversely the
Properties, business, prospects, profits or condition (financial or
otherwise) of any Borrowers or any of its Subsidiaries or the ability of any
Borrowers or its Subsidiaries to perform this Agreement or the other Loan
Documents.
7.1.10. Solvent Financial Condition. Each Borrower and its
---------------------------
Subsidiaries is now and, after giving effect to the Loans to be made and the
Letters of Credit and LC Guaranties to be issued hereunder, at all times will
be, Solvent.
7.1.11. Surety Obligations. No Borrower nor any of its Subsidiaries
------------------
is obligated as surety or indemnitor under any surety or similar bond or
other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of
any Person.
7.1.12. Taxes. D&K's federal tax identification number is
-----
▇▇-▇▇▇▇▇▇▇. Jaron's federal tax identification number is ▇▇-▇▇▇▇▇▇▇. ▇▇▇▇▇▇'▇
federal tax identification number is ▇▇-▇▇▇▇▇▇▇. The federal tax
identification number of each of Borrowers' Subsidiaries is shown on EXHIBIT
F hereto. Each Borrower and each of its Subsidiaries has filed all federal,
state and local tax returns and other reports it is required by law to file
and has paid, or made provision for the payment of, all taxes, assessments,
fees, levies and other governmental charges upon it, its income and
Properties as and when such taxes, assessments, fees, levies and charges that
are due and payable, unless and to the extent any thereof are being actively
contested in good faith and by appropriate proceedings and Borrowers maintain
reasonable reserves on its books therefor. The provision for taxes on the
books of Borrowers and their Subsidiaries are adequate for all years not
closed by applicable statutes, and for its current fiscal year.
7.1.13. Brokers. There are no claims for brokerage commissions,
-------
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
7.1.14. Patents, Trademarks, Copyrights and Licenses. Each Borrower
--------------------------------------------
and its Subsidiaries owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses necessary for the present and
planned future conduct of its business without any known conflict with the
rights of others. All such
13
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patents, trademarks, service marks, tradenames, copyrights, licenses and
other similar rights are listed on EXHIBIT G hereto.
7.1.15. Governmental Consents. Each Borrower and its Subsidiaries
---------------------
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its Properties
as now owned or leased by it.
7.1.16. Compliance with Laws. Each Borrower and its Subsidiaries
--------------------
has duly complied with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions of
all federal, state and local laws, rules and regulations applicable to such
Borrower or such Subsidiary, as applicable, its Properties or the conduct of
its business and there have been no citations, notices or orders of
noncompliance issued to such Borrower or any of its Subsidiaries under any
such law, rule or regulation. Each Borrower and its Subsidiaries has
established and maintains an adequate monitoring system to insure that it
remains in compliance with all federal, state and local laws, rules and
regulations applicable to it. No Inventory has been produced in violation of
the Fair Labor Standards Act (29 U.S.C. Sec. 201 et seq.), as amended.
-- ---
7.1.17. Restrictions. No Borrower nor any of such Borrower's
------------
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which materially and adversely affects its
business or the use or ownership of any of its Properties. No Borrower nor
any of such Borrower's Subsidiaries is a party or subject to any contract or
agreement which restricts its right or ability to incur Indebtedness, other
than as set forth on EXHIBIT H hereto, none of which prohibit the execution
of or compliance with this Agreement or the other Loan Documents by such
Borrower or any of its Subsidiaries, as applicable.
7.1.18. Litigation. Except as set forth on EXHIBIT I hereto, there
----------
are no actions, suits, proceedings or investigations pending, or to the
knowledge of any Borrower, threatened, against or affecting any Borrower or
any of its Subsidiaries, or the business, operations, Properties, prospects,
profits or condition of any Borrower or any of its Subsidiaries. No Borrower
nor any of its Subsidiaries is in default with respect to any order, writ,
injunction, judgment, decree or rule of any court, governmental authority or
arbitration board or tribunal.
7.1.19. No Defaults. No event has occurred and no condition exists
-----------
which would, upon or after the execution and delivery of this Agreement or
Borrowers' performance hereunder, constitute a Default or an Event of
Default. No Borrower nor any of its Subsidiaries is in default, and no event
has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default
in the payment of any Indebtedness to any Person for Money Borrowed.
7.1.20. Leases. EXHIBIT J hereto is a complete listing of all
------
capitalized leases of each Borrower and its Subsidiaries and EXHIBIT K hereto
is a complete listing of all operating leases of each Borrower and its
Subsidiaries. Each Borrower and its Subsidiaries is in full compliance with
all of the terms of each of its respective capitalized and operating leases.
7.1.21. Pension Plans. Except as disclosed on EXHIBIT L hereto, no
-------------
Borrower nor any of its Subsidiaries has any Plan. Each Borrower and each of
its Subsidiaries is in full compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of any Borrower or any of its Subsidiaries exists in connection
with any Plan. No Borrower nor any of its Subsidiaries has any withdrawal
liability in connection with a Multiemployer Plan.
7.1.22. Trade Relations. There exists no actual or threatened
---------------
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Borrower or any of its Subsidiaries and
any customer or any group of customers whose purchases individually or in the
aggregate are material to the business of such Borrower or any of its
Subsidiaries, or with any material supplier, and there exists
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no present condition or state of facts or circumstances which would
materially affect adversely any Borrower or any of its Subsidiaries or
prevent any Borrower or any of its Subsidiaries from conducting such business
after the consummation of the transaction contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted.
7.1.23. Labor Relations. Except as described on EXHIBIT M hereto,
---------------
no Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of any Borrower's or
any of its Subsidiaries' employees, or threats of strikes, work stoppages or
any asserted pending demands for collective bargaining by any union or
organization.
7.1.24. Environmental Matters. Except as described in EXHIBIT N,
---------------------
each Borrower and its Subsidiaries and/or each property, operations and
facility that any Borrower or any Subsidiary may own, operate or control (i)
is in compliance with, in all material respects, all applicable Environmental
Laws; (ii) is not subject to any judicial or administrative proceeding or
order alleging the violation of any Environmental Law; (iii) has not received
any written notice (A) that it may be in violation of any Environmental Law,
(B) threatening the commencement of any proceeding relating to any Adverse
Environmental Condition, (C) alleging that it is or may be responsible (in
whole or in part) for any Adverse Environmental Condition, or (D) ordering or
directing any Borrower or any Subsidiary to take any action or refrain from
taking any action because of an Adverse Environmental Condition; (iv) to the
best of each Borrower's knowledge, is not the subject of any federal, state
or local investigation evaluating whether any investigation, remedial action
or other response is needed to respond to an Adverse Environmental Condition;
and (v) has not filed any notice indicating or reporting any Adverse
Environmental Condition except for such notices or reports required by
Environmental Laws as a result of routine business operations.
7.1.25. Securitization. No default has occurred under any of the
--------------
Securitization Documents
7.2. Continuous Nature of Representations and Warranties. Each
---------------------------------------------------
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete
and not misleading at all times during the term of this Agreement, except for
changes in the nature of any Borrower's or its Subsidiaries' business or
operations that would render the information in any exhibit attached hereto
either inaccurate, incomplete or misleading, so long as Lender has consented
to such changes or such changes are expressly permitted by this Agreement.
7.3. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties of Borrowers contained in this Agreement or any of the other
Loan Documents shall survive the execution, delivery and acceptance thereof
by Lender and the parties thereto and the closing of the transactions
described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants. During the term of this Agreement, and
---------------------
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1. Visits and Inspections. Permit representatives of Lender,
----------------------
from time to time, as often as may be reasonably requested, but only during
normal business hours, to visit and inspect the Properties of each Borrower
and each of its Subsidiaries, inspect, audit (which shall, prior to a
Default, be at Lender's cost) and make extracts from its books and records,
and discuss with its officers, its employees and its independent accountants,
such Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations.
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8.1.2. Notices. Promptly notify Lender in writing of the occurrence
-------
of any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading.
8.1.3. Financial Statements. Keep, and cause each Subsidiary to
--------------------
keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to Lender and to each Participating Lender the following (all to be
prepared in accordance with GAAP applied on a consistent basis, unless such
Borrower's certified public accountants concur in any change therein and such
change is disclosed to Lender and is consistent with GAAP):
(i) not later than 90 days after the close of each fiscal year
of Borrowers, unqualified audited financial statements of each
Borrower and its Subsidiaries as of the end of such year, on a
Consolidated and consolidating basis, certified by a firm of
independent certified public accountants of recognized standing
selected by Borrowers but acceptable to Lender (except for a
qualification for a change in accounting principles with which the
accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter, including the last month of each Borrower's fiscal year,
unaudited interim financial statements of each Borrower and its
Subsidiaries as of the end of such month and of the portion of such
Borrower's financial year then elapsed, on a Consolidated and
consolidating basis, certified by the principal financial officer of
such Borrower as prepared in accordance with GAAP and fairly
presenting the Consolidated financial position and results of
operations of each Borrower and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments
and except that such statements need not contain notes;
(iii) as soon as possible, but no later than 30 days after the
close of each fiscal year of the Borrowers, monthly Projections for
all Borrowers for the following year on a consolidated and
consolidating basis;
(iv) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or
reports which any Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which any Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(v) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan; and
(vi) such other data and information (financial and otherwise)
as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or any Borrower's and any of such
Borrower's Subsidiaries' financial condition or results of
operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection, each Borrower shall forward to
Lender a copy of the accountants' letter to such Borrower's management that
is prepared in connection with such financial statements and also shall cause
to be prepared and shall furnish to Lender a certificate of the aforesaid
certified public accountants certifying to Lender that, based upon their
examination of the financial statements of such Borrower and its Subsidiaries
performed in connection with their examination of said financial statements,
they are not aware of any Default or Event of Default, or, if they are aware
of such Default or Event of Default, specifying the nature thereof, and
acknowledging, in a manner satisfactory to Lender, that they are aware that
Lender is relying on such financial statements in making its decisions with
respect to the Loans. Concurrently with the delivery of the financial
statements described in clauses (i) and (ii) of this subsection, or more
frequently if requested by Lender, each Borrower shall cause to be prepared
and furnished to
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Lender a Compliance Certificate in the form of EXHIBIT O hereto executed by
the Chief Financial Officer of such Borrower.
8.1.4. Landlord and Storage Agreements. Provide Lender with copies
-------------------------------
of all agreements between any Borrower or any of its Subsidiaries and any
landlord or warehouseman which owns any premises at which any Inventory may,
from time to time, be kept.
8.1.5. Intentionally Omitted.
---------------------
8.1.6. Subordinations. Provide Lender with a debt subordination
--------------
agreement, in form and substance satisfactory to Lender, executed by such
Borrower and any Person who is an officer, director or Affiliate of such
Borrower to whom such Borrower is or hereafter becomes indebted for Money
Borrowed, subordinating in right of payment and claim all of such
Indebtedness and any future advances thereon to the full and final payment
and performance of the Obligations.
8.1.7. Further Assurances. At Lender's request, promptly execute or
------------------
cause to be executed and delivered to Lender any and all documents,
instruments and agreements deemed necessary by Lender to perfect or to
continue the perfection of Lender's Liens, to facilitate the collection of
the Collateral or otherwise to give effect to or carry out the terms or
intent of this Agreement or any of the other Loan Documents. Without
limiting the generality of the foregoing, if any of the Accounts, the face
value of which exceeds $10,000, arises out of a contract with the United
States of America, or any department, agency, subdivision or instrumentality
thereof, Borrowers shall promptly notify Lender thereof in writing and shall
execute any instruments and take any other action required or requested by
Lender to comply with the provisions of the Federal Assignment of Claims Act.
8.1.8. Compliance with Subordination Agreements and Intercreditor
----------------------------------------------------------
Agreement. Comply at all times (within any applicable grace or cure period)
---------
with all the terms of the Subordination Agreements and the Intercreditor
Agreement, to the extent not inconsistent with this Agreement.
8.2. Negative Covenants. During the term of this Agreement, and
------------------
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1. Mergers; Consolidations; Acquisitions. Except as otherwise
-------------------------------------
provided in this Section 8.2.1, merge or consolidate, or permit any
Subsidiary of any Borrower to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any
substantial part of the Properties of any Person; provided that (i) the
consolidation of PBI with D&K shall not constitute a violation of this
covenant so long as such consolidation does not involve a merger and so long
as D&K does not become directly or indirectly liable for any Indebtedness of
PBI; and (ii) the Borrowers may make acquisitions of the Properties of any
Person so long as the aggregate purchase price (however structured or
denominated) for all acquisitions by the Borrowers for any fiscal year does
not exceed $5,000,000, and further provided that in connection with any
acquisition, goodwill does not increase by more than $1,000,000.
8.2.2. Loans. Make, or permit any Subsidiary of any Borrower to
-----
make, any loans or other advances of money (other than pursuant to the
Securitization Documents, and other than for salary, travel advances,
advances against commissions and other similar advances in the ordinary
course of business) to any Person in excess of $250,000, and with an
aggregate of not more than $750,000 outstanding at any time.
8.2.3. Total Indebtedness. Create, incur, assume, or suffer to
------------------
exist, or permit any Subsidiary of any Borrower to create, incur or suffer to
exist, any Indebtedness, except:
(i) Obligations owing to Lender;
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(ii) Subordinated Debt existing on the date of this
Agreement;
(iii) Indebtedness of any Subsidiary of any Borrower to such
Borrower;
(iv) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which are not aged
more than 60 days from billing date or more than 30 days from the due
date, in each case incurred in the ordinary course of business and
paid within such time period, unless the same are being actively
contested in good faith and by appropriate and lawful proceedings;
and Borrower or such Subsidiary shall have set aside such reserves,
if any, with respect thereto as are required by GAAP and deemed
adequate by Borrower or such Subsidiary and its independent
accountants;
(v) Obligations to pay Rentals permitted by subsection
8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business; and
(viii) Indebtedness pursuant to the Securitization Documents.
8.2.4. Affiliate Transactions. Enter into, or be a party to, or
----------------------
permit any Subsidiary of any Borrower to enter into or be a party to, any
transaction with any Affiliate of such Borrower or stockholder, except in the
ordinary course of and pursuant to the reasonable requirements of such
Borrower's or such Subsidiary's business and upon fair and reasonable terms
which are fully disclosed to Lender and are no less favorable to such
Borrower than would obtain in a comparable arm's length transaction with a
Person not an Affiliate or stockholder of such Borrower or such Subsidiary.
The parties hereto acknowledge that the conduct by Borrowers or their
Subsidiaries of the transactions contemplated by and in accordance with the
Securitization Documents shall not violate the provisions of this Section.
8.2.5. Limitation on Liens. Create or suffer to exist, or permit
-------------------
any Subsidiary of any Borrower to create or suffer to exist, any Lien upon
any of its Property, income or profits, whether now owned or hereafter
acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in
the manner described in subsection 7.1.12 hereto, but only if in
Lender's judgment such Lien does not adversely affect Lender's rights
or the priority of Lender's Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in
respect of any such Lien is not at the time required and such Liens
do not, in the aggregate, materially detract from the value of the
Property of Borrower or materially impair the use thereof in the
operation of Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(vi) such other Liens as appear on EXHIBIT P hereto;
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(vii) Liens arising out of the Securitization Documents; and
(viii) such other Liens as Lender may hereafter approve in
writing.
8.2.6. Subordinated and Intercreditor Debt. Make, or permit any
-----------------------------------
Subsidiary of any Borrower to make, any payment of any part or all of any
Subordinated Debt or take any other action or omit to take any other action
in respect of any Subordinated Debt, except in accordance with the
Subordination Agreement relative thereto.
8.2.7. Distributions. Declare or make, or permit any Subsidiary of
-------------
Borrower to declare or make, any Distributions, except for dividends of Jaron
to D&K, provided that not less than 5 business days prior to the payment of
such dividend, D&K shall give Lender written notice describing the amount of
such dividend.
8.2.8. Capital Expenditures. Make Capital Expenditures (including,
--------------------
without limitation, by way of capitalized leases) which, in the aggregate, as
to Borrower and its Subsidiaries, exceed $4,000,000 during any fiscal year of
Borrowers.
8.2.9. Disposition of Assets. Sell, lease or otherwise dispose of
---------------------
any of, or permit any Subsidiary of any Borrower to sell, lease or otherwise
dispose any of, its Properties, including any disposition of Property as part
of a sale and leaseback transaction, to or in favor of any Person, except (i)
sales of Inventory in the ordinary course of business for so long as no Event
of Default exists hereunder, (ii) disposition of worn out, obsolete or
damaged Equipment in the ordinary course of business, (iii) transfer of
Property to a Borrower by a Subsidiary of such Borrower, (iv) dispositions
expressly authorized by this Agreement or (v) dispositions under or pursuant
to the Securitization.
8.2.10. Stock of Subsidiaries. Permit any of its Subsidiaries to
---------------------
issue any additional shares of its capital stock except director's qualifying
shares.
8.2.11. ▇▇▇▇-and-Hold Sales, Etc. Make a sale to any customer on a
------------------------
▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis.
8.2.12. Restricted Investment. Make or have, or permit any
---------------------
Subsidiary of any Borrower to make or have, any Restricted Investments in
excess of $1,500,000 in the aggregate.
8.2.13. Leases. Become, or permit any of its Subsidiaries to
------
become, a lessee under any operating lease (other than a lease under which a
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of 12 consecutive months
under the lease in question and all other leases under which Borrowers or any
of their Subsidiaries is then lessee would exceed $3,000,000. The term
"Rentals" means, as of the date of determination, all payments, which the
lessee is required to make by the terms of any lease.
8.2.14. Tax Consolidation. File or consent to the filing of any
-----------------
consolidated income tax return with any Person other than a Subsidiary of
D&K.
8.2.15. Amendment of Securitization Documents. Request any waiver
-------------------------------------
of or consent to any default under the terms of the Securitization Documents
or amend or otherwise revise the Securitization Documents.
8.2.16. API. Permit API, as a Subsidiary of D&K, to own any
---
property other than the real property currently owned by such Subsidiary.
8.2.17. Termination of Securitization Documents. Upon the
---------------------------------------
termination of the Securitization Documents, fail to execute and deliver at
Lender's request therefor any documents, instruments or agreements, including
UCC Financing Statements or amendments thereto, to ensure that Lender has a
perfected first lien on all
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of each Borrower's Accounts and General Intangibles. Such assets had formerly
been pledged or transferred to a third party in connection with the
Securitization Documents, but the parties hereto acknowledge and agree that
all rights thereto should revert to Borrower, with a first lien in favor of
Lender, upon termination of the Securitization Documents.
8.3 Specific Financial Covenants. During the term of this Agreement, and
----------------------------
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless otherwise consented to by Lender in writing, it and
all other Borrowers shall (all financial covenants being computed on a
consolidated basis):
(A) Current Ratio. Maintain at all times a ratio of Consolidated
-------------
Current Assets to Consolidated Current Liabilities of not less than 1.15 to
1.0. For purposes of computing the ratio contemplated herein, said ratio
shall be computed in accordance with GAAP.
(B) Interest Coverage Ratio. Maintain at all times [at the end of
-----------------------
each month during each respective period specified below on a trailing twelve
(12) month basis,] a ratio of Net Cash Flow plus Interest Expense to Interest
Expense of not less than the amount shown below:
Period Ratio
------ -----
End of each calendar month from
July, 2000 through December, 2000 1.75 to 1.00
End of each calendar month from
January, 2001 through June, 2001 2.00 to 1.00
End of each calendar month from July, 2.25 to 1.00
2001 and thereafter
(C) Book Net Worth. Maintain at all times during the periods
--------------
specified below a book net worth in accordance with GAAP (and to the extent
such book net worth is reflected on the interim financial statements of the
Borrowers furnished pursuant to Section 8.1.3 (ii) hereunder, such statements
shall be prepared consistently with the audited year-end statements furnished
pursuant to Section 8.1.3 (i) hereunder) in an amount not less than the
amount shown below for the period corresponding thereto:
Period Amount
------ ------
June 1, 2000 through September 30, 2000 $44,000,000
October 1, 2000 through June 29, 2001 $45,000,000
June 30, 2001 through June 29, 2002 $52,100,000
June 30, 2002 and thereafter $59,200,000
(D) Cash Flow to Fixed Charges. Maintain for each fiscal year of
--------------------------
Borrowers a ratio of Cash Flow to Fixed Charges of not less than 1.3 to 1.0
as of each fiscal year end, commencing with the fiscal year ending June 30,
2001.
(E) Inventory Turnover. Maintain as of each fiscal quarter of
------------------
Borrowers for the prior twelve (12) months, a consolidated Inventory
turnover, based upon a first in first out basis, of not less than six (6)
times.
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SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, Lender shall not be required to
make any Loan under this Agreement unless and until each of the following
conditions has been and continues to be satisfied:
9.1. Documentation. Lender shall have received, in form and substance
-------------
satisfactory to Lender and its counsel, a duly executed copy of this
Agreement and the other Loan Documents, together with such additional
documents, instruments, certificates and opinions of Borrowers' counsel as
Lender and its counsel shall require in connection therewith from time to
time, all in form and substance satisfactory to Lender and its counsel.
9.2. No Default. No Default or Event of Default shall exist.
----------
9.3. Other Loan Documents. Each of the conditions precedent set forth
--------------------
in the other Loan Documents shall have been satisfied.
9.4. No Litigation. No action, proceeding, investigation, regulation or
-------------
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or the consummation of the transactions
contemplated hereby.
9.5. Intentionally Omitted.
---------------------
9.6. Environmental. Lender shall be satisfied as to the existing and
-------------
potential liability of the Borrowers and their respective Subsidiaries with
respect to any environmental matters including, without limitation,
compliance with Environmental Laws and regulations.
9.7. No Material Adverse Change. There shall have occurred no material
--------------------------
adverse change in the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Borrowers or their
Subsidiaries (taken as a whole) since June 30, 2000.
9.8. Fee Letter. Borrowers shall have paid to Lender the fees payable
----------
under the Fee Letter which are due and payable on the Closing Date.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default. The occurrence of one or more of the following
-----------------
events shall constitute an "Event of Default":
10.1.1. Default under Securitization Documents. Any default,
--------------------------------------
liquidation event, or termination (other than a voluntary termination by
Borrower), or any event giving rise to a right of liquidation or termination,
shall occur under the Securitization Documents.
10.1.2. Payment of Other Obligations. Borrowers shall fail to pay any
----------------------------
of the Obligations within ten (10) days after the due date thereof (whether
due at stated maturity, on demand, upon acceleration or otherwise).
10.1.3. Misrepresentations. Any representation, warranty or other
------------------
statement made or furnished to Lender by or on behalf of any Borrower or any
Subsidiary of any Borrower in this Agreement, any of the other Loan Documents
or any instrument, certificate or financial statement furnished in compliance
with or in reference thereto proves to have been false or misleading in any
material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
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10.1.4. Breach of Specific Covenants. Any Borrower shall fail or
----------------------------
neglect to perform, keep or observe any covenant contained in Sections 5.2,
6.1.1, 6.2, 8.1.1, 8.1.3, 8.1.8, 8.2, or 8.3 hereof on the date that such
Borrower is required to perform, keep or observe such covenant.
10.1.5. Breach of Other Covenants. Any Borrower shall fail or
-------------------------
neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
10.1 hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within 30 days after the sooner to occur of D&K's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of such Borrower.
10.1.6. Default Under Security Documents/Other Agreements. Any
-------------------------------------------------
event of default shall occur under, or any Borrower shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the Security Documents; or the Other Agreements and such
default shall continue beyond any applicable grace period.
10.1.7. Other Defaults. There shall occur any default or event of
--------------
default on the part of any Borrower under any agreement, document or
instrument to which such Borrower is a party or by which such Borrower or any
of its Property is bound, creating or relating to any Indebtedness in excess
of $10,000 (other than the Obligations) if the payment or maturity of such
Indebtedness is accelerated in consequence of such event of default or demand
for payment of such Indebtedness is made.
10.1.8. Uninsured Losses. Any material loss, theft, damage or
----------------
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.9. Insolvency and Related Proceedings. Any Borrower shall
----------------------------------
cease to be Solvent or shall suffer the appointment of a receiver, trustee,
custodian or similar fiduciary, or shall make an assignment for the benefit
of creditors, or any petition for an order for relief shall be filed by or
against any Borrower under the Bankruptcy Code (if against any Borrower, the
continuation of such proceeding for more than 60 days), or any Borrower shall
make any offer of settlement, extension or composition to their respective
unsecured creditors generally.
10.1.10. Business Disruption; Condemnation. There shall occur a
---------------------------------
cessation of a substantial part of the business of any Borrower, or any
Subsidiary of any Borrower for a period which significantly affects any
Borrower's capacity to continue its business, on a profitable basis; or any
Borrower or any Subsidiary of any Borrower shall suffer the loss or
revocation of any material license or permit now held or hereafter acquired
by any Borrower or such Subsidiary which is necessary to the continued or
lawful operation of its business; or any Borrower shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or
any material lease or agreement pursuant to which any Borrower leases, uses
or occupies any Property shall be canceled or terminated prior to the
expiration of its stated term; or any part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
10.1.11. ERISA. A Reportable Event shall occur which Lender, in its
-----
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee
for any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if any Borrower, or any Subsidiary of any Borrower
is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from such Borrower's, such
Subsidiary's or such Guarantor's complete or partial withdrawal from such
Plan.
10.1.12. Challenge to Agreement. Any Borrower, or any Subsidiary of
----------------------
any Borrower, or any Affiliate of any of them, shall challenge or contest in
any action, suit or proceeding the validity or enforceability of
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this Agreement, or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender.
10.1.13. Repudiation of or Default Under Guaranty. Any Guarantor
----------------------------------------
shall revoke or attempt to revoke any guaranty signed by such Guarantor, or
shall repudiate such Guarantor's liability thereunder or shall be in default
under the terms thereof.
10.1.14. Criminal Forfeiture. Any Borrower, or any Subsidiary of
-------------------
any Borrower shall be criminally indicted or convicted under any law that
could lead to a forfeiture of any Property of Borrower, any Subsidiary of
Borrower or any Guarantor.
10.1.15. Judgments. Any money judgment, writ of attachment or
---------
similar process in an amount in excess of $1,000,000 is filed against any
Borrower or any Subsidiary of any Borrower, or any of their respective
Property.
10.2. Acceleration of the Obligations. Without in any way limiting the
-------------------------------
right of Lender to demand payment of any portion of the Obligations payable
on demand in accordance with this Agreement, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations
shall, at the option of Lender and without presentment, demand, protest or
further notice by Lender, become at once due and payable and Borrowers shall
forthwith pay to Lender, the full amount of such Obligations, provided, that
--------
upon the occurrence of an Event of Default specified in subsection 10.1.9
hereof (relating to insolvency), all of the Obligations shall become
automatically due and payable without declaration, notice or demand by
Lender. In connection with any Letter of Credit issued or guaranteed
pursuant to this Agreement, Borrowers shall deliver to Lender cash collateral
to be held interest-free by Lender in the aggregate maximum amount of all
letters of Credit then issued and outstanding. If Borrowers fail to so
deliver cash collateral, Lender may sell Collateral pursuant to this
Agreement and hold the proceeds thereof as cash collateral.
10.3. Other Remedies. Upon and after the occurrence of an Event of
--------------
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
10.3.1. All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights
to which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall
be exclusive.
10.3.2. The right to take immediate possession of the Collateral,
and to (i) require Borrowers to assemble the Collateral, at Borrowers'
expense, and make it available to Lender at a place designated by Lender
which is reasonably convenient to both parties, and (ii) enter any premises
where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property
of a Borrower, such Borrower agrees not to charge Lender for storage
thereof).
10.3.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as
Lender, in its sole discretion, may deem advisable. Borrowers agree that 10
days written notice to D&K of any public or private sale or other disposition
of Collateral shall be reasonable notice thereof, and such sale shall be at
such locations as Lender may designate in said notice. Lender shall have the
right to conduct such sales on Borrowers' premises, without charge therefor,
and such sales may be adjourned from time to time in accordance with
applicable law. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any
Collateral may be applied, after allowing 1 Business Day for collection,
first to the costs, expenses and
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attorneys' fees incurred by Lender in collecting the Obligations, in
enforcing the rights of Lender under the Loan Documents and in collecting,
retaking, completing, protecting, removing, storing, advertising for sale,
selling and delivering any Collateral, second to the interest due upon any of
the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrowers shall remain jointly and severally liable
to Lender therefor. In the event of a sale of Collateral on credit terms,
the Borrowers' Obligations shall be reduced only to the extent that Lender
receives cash payment in respect of such credit sale.
10.3.4. Lender is hereby granted a license or other right to use,
without charge, Borrowers' labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrowers' rights under
all licenses and all franchise agreements shall inure to Lender's benefit.
10.3.5. Lender may, at its option, require Borrowers to deposit with
Lender funds equal to the LC Amount and, if Borrowers fail to promptly make
such deposit, Lender may advance such amount as a Revolving Credit Loan
(whether or not an Overadvance is created thereby). Any such deposit or
advance shall be held by Lender as a reserve to fund future payments on such
LC Guaranties and future drawings against such Letters of Credit. At such
time as all LC Guaranties have been paid or terminated and all Letters of
Credit have been drawn upon or expired, any amounts remaining in such reserve
shall be applied against any outstanding Obligations, or, if all Obligations
have been indefeasibly paid in full, returned to Borrowers.
10.4. Remedies Cumulative; No Waiver. All covenants, conditions,
------------------------------
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrowers contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary
hereto or in any schedule or in any guaranty given to Lender or contained in
any other agreement between Lender and any Borrower, heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and
not in derogation or substitution of any of the terms, covenants, conditions,
or agreements of Borrowers herein contained. The failure or delay of Lender
to require strict performance by any Borrower of any provision of this
Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans
and all other Obligations owing or to become owing from Borrowers to Lender
shall have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of Borrowers contained in this
Agreement or any of the other Loan Documents and no Event of Default by any
Borrower under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is
by an instrument in writing specifying such suspension or waiver and is
signed by a duly authorized representative of Lender and directed to D&K, as
agent for the Borrowers.
SECTION 11. MISCELLANEOUS
11.1. Power of Attorney. Borrowers hereby irrevocably designate, make,
-----------------
constitute and appoint Lender (and all Persons designated by Lender) as
Borrowers' true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to any Borrower and in either any
Borrower's or Lender's name, but at the cost and expense of Borrowers:
11.1.1. At such time or times upon or after the occurrence of a
Default or an Event of Default as Lender or said agent, in its sole
discretion, may determine, endorse any Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Lender or under
Lender's control.
11.1.2. At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of any Accounts which are part of the Collateral from the
Account Debtors, enforce payment of such Accounts by legal proceedings or
otherwise, and generally
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exercise all of any Borrower's rights and remedies with respect to the
collection of such Accounts; (ii) settle, adjust, compromise, discharge or
release any of such Accounts or other Collateral or any legal proceedings
brought to collect any of such Accounts or other Collateral; (iii) sell or
assign any of such Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Lender deems advisable; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign any Borrower's name to a proof of
claim in bankruptcy or similar document against any Account Debtor of an
Account which is part of the Collateral or to any notice of lien, assignment
or satisfaction of lien or similar document in connection with any of the
Collateral; (vi) receive, open and dispose of all mail addressed to any
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of
any Borrower upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Lender on account of the
Obligations; (viii) endorse the name of any Borrower upon any chattel paper,
document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use any Borrower's stationery and sign the name of any
Borrower to verifications of the Accounts which are part of the Collateral
and notices thereof to Account Debtors; (x) use the information recorded on
or contained in any data processing equipment and computer hardware and
software relating to the Accounts, Inventory, Investment Property, and any
other Collateral; (xi) make and adjust claims under policies of insurance;
and (xii) do all other acts and things necessary, in Lender's determination,
to fulfill Borrowers' obligations under this Agreement.
11.1.3. Indemnity. Borrowers hereby jointly and severally agree to
---------
indemnify and hold harmless each Indemnified Party from and against any
liability, loss, damage, suit, action or proceeding ever suffered or incurred
by such Indemnified Party (including reasonable attorneys fees and legal
expenses) arising out of or in connection with the Securitization Documents
or the closing of the transaction described therein, or as a result of any
Borrower's failure to observe, perform or discharge Borrower's duties
hereunder. In addition, Borrowers shall jointly and severally be obligated
to defend each Indemnified Party against and save it harmless from all claims
of any Person with respect to the Collateral. Without limiting the
generality of the foregoing, these indemnities shall extend to any claims
asserted against any Indemnified Party by any Person under any Environmental
Laws or similar laws by reason of any Borrower's or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials
or other toxic substances. Notwithstanding any contrary provision in this
Agreement, the obligation of Borrowers under this Section shall survive the
payment in full of the Obligations and the termination of this Agreement.
11.1.4. Modification of Agreement; Sale of Interest. This Agreement
-------------------------------------------
may not be modified, altered or amended, except by an agreement in writing
signed by Borrowers and Lender. Borrowers may not sell, assign or transfer
any interest in this Agreement, any of the other Loan Documents, or any of
the Obligations, or any portion thereof, including, without limitation,
Borrowers' rights, title, interests, remedies, powers, and duties hereunder
or thereunder. Borrowers hereby consent to Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof
or thereof, including, without limitation, Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the
same rights, benefits and obligations as it would if it were "Lender"
hereunder and in the case of a total assignment Lender shall be relieved of
all obligations hereunder upon any such assignments. Each Borrower agrees
that it will use its best efforts to assist and cooperate with Lender in any
manner reasonably requested by Lender to effect the sale of participations in
or assignments of any of the Loan Documents or any portion thereof or
interest therein, including, without limitation, assisting in the preparation
of appropriate disclosure documents. Each Borrower further agrees that
Lender may disclose credit information regarding such Borrower and its
Subsidiaries to any potential participant or assignee.
11.1.5. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such
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prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.2. Successors and Assigns. This Agreement, the Other Agreements and
----------------------
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrowers and Lender permitted hereunder.
11.3. Cumulative Effect; Conflict of Terms. The provisions of the Other
------------------------------------
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2
hereof and except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.4. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate
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, subject to Section 11.14.
11.5. Notice. Except as otherwise provided herein, all notices,
------
requests and demands to or upon a party hereto, to be effective, shall be in
writing and shall be sent by certified or registered mail, return receipt
requested, by personal delivery against receipt, by overnight courier or by
facsimile and, unless otherwise expressly provided herein, shall be deemed to
have been validly served, given or delivered immediately when delivered
against receipt, one Business Day after deposit in the mail, postage prepaid,
or with an overnight courier or, in the case of facsimile notice, when sent,
addressed as follows:
If to Lender: Fleet Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: 414/798-4882
With a copy to: Husch & Eppenberger, LLC
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: 314/421-0239
If to Borrowers: D & K Healthcare Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.:314/727-5759
or to such other address as each party may designate for itself by notice
given in accordance with this Section; provided, however, that any notice,
-------- -------
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2
hereof shall not be effective until received by Lender.
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11.6. Lender's Consent. Whenever Lender's consent is required to be
----------------
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or
event, Lender shall be authorized to give or withhold such consent in its
sole and absolute discretion and to condition its consent upon the giving of
additional collateral security for the Obligations, the payment of money or
any other matter.
11.7. Credit Inquiries. Each Borrower hereby authorizes and permits
----------------
Lender to respond to usual and customary credit inquiries from third parties
concerning such Borrower or any of its Subsidiaries, subject to Section
11.14.
11.8. Time of Essence. Time is of the essence of this Agreement, the
---------------
Other Agreements and the Security Documents.
11.9. Entire Agreement. This Agreement and the other Loan Documents,
----------------
together with all other instruments, agreements and certificates executed by
the parties in connection therewith or with reference thereto, embody the
entire understanding and agreement between the parties hereto and thereto
with respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral
or written.
11.10. Interpretation. No provision of this Agreement or any of the
--------------
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
11.11. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
-------------------------------
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE
IN CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS: PROVIDED, HOWEVER, THAT IF
-------- -------
ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN
ILLINOIS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND
PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW VALUE
RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE
OF BUSINESS OF ANY BORROWER OR LENDER, EACH BORROWER HEREBY CONSENTS AND
AGREES THAT ANY STATE OR FEDERAL COURT LOCATED IN THE CITY OR COUNTY OF ST.
LOUIS, MISSOURI, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN ANY BORROWER AND LENDER PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY
WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO
--------------------
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO ANY BORROWER AT THE ADDRESS SET
FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT
SHALL BE
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DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF
ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
11.12. WAIVERS BY BORROWERS. EACH BORROWER WAIVES (i) THE RIGHT TO
--------------------
TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF
THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii) PRESENTMENT,
DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH EACH BORROWER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN
THIS REGARD; (iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE
COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR
TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (iv) THE BENEFIT OF
ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE
HEREOF. EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER.
EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE COURT.
11.13. Private Sale; Commercial Reasonableness. The Borrowers
---------------------------------------
acknowledge that a significant portion of the Collateral consists of
prescription drugs and controlled substances that are subject to applicable
federal and state regulations which, among other things, restrict the right
to sell and purchase such drugs and controlled substances to certain licensed
or otherwise authorized Persons. In view of these restrictions on the
ability to sell and purchase such Collateral, the Borrowers acknowledge that
a public sale of such Collateral under the UCC would be legally impossible or
otherwise impractical. Accordingly, the Borrowers agree that a private sale
of any such Collateral, and any other Collateral sold in connection
therewith, shall not be deemed a commercially unreasonable sale under the UCC
by virtue of the Lender selling, or offering to sell, such Collateral only to
Persons who are licensed or otherwise authorized to purchase such Collateral.
The Borrowers further recognize that, in connection with the disposition of
such Collateral subject to federal and state regulations, the Lender may
incur additional costs and expenses such as, by way of example and not as a
limitation, obtaining certain federal and state licenses or other
authorizations to permit the Lender to sell or purchase such Collateral,
retaining the services of auctioneers or other persons licensed or otherwise
authorized to dispose of such Collateral, retaining legal counsel and experts
in the area of prescription drugs and controlled substances to advise Lender
on the disposition of such Collateral, and verifying that any purchasers of
such Collateral are licensed or otherwise authorized to acquire such
Collateral. Any such reasonable additional costs and expenses incurred by
the Lender shall be added to the Obligations and be payable on demand and
shall not affect the commercial reasonableness of any such sale. Borrowers
hereby agree to cooperate with any such sale to the extent reasonably
requested by Lender.
11.14. Confidentiality. Lender agrees to take and to cause its
---------------
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential"
or "secret" by Borrowers and provided to it by the Borrowers or any
Subsidiary, under this Agreement or any other Loan Document, and neither such
Lender nor any of its Affiliates shall use any such information other than in
28
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connection with or in enforcement of this Agreement and the other Loan
Documents or in connection with other business now or hereafter existing or
contemplated with the Borrowers or any Subsidiary; except to the extent such
information (i) was or becomes generally available to the public other than
as a result of disclosure by Lender, or (ii) was or becomes available on a
non-confidential basis from a source other than the Borrowers, provided that
such source is not bound by a confidentiality agreement with the Borrowers or
any Subsidiary known to Lender; provided, however, that any Lender may
-------- -------
disclose such information (A) at the request or pursuant to any requirement
of any governmental authority to which Lender is subject or in connection
with an examination of Lender by any such authority; (B) pursuant to subpoena
or other court process; (C) when required to do so in accordance with the
provisions of any applicable requirement of law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Lender
or any of their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder
or under any other Loan Document; (F) to Lender's independent auditors and
other professional advisors; (G) to any participant or assignee, actual or
potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Lender hereunder;
(H) as to any Lender or its Affiliate, as expressly permitted under the terms
of any other document or agreement regarding confidentiality to which the
Borrowers or any Subsidiary is party or is deemed party with Lender or Such
Affiliate; and (I) to its Affiliates.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning of this Agreement.
D & K HEALTHCARE RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Sr. Vice President and CFO
JARON, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ DRUG CO.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of
______________, by and among Fleet Capital Corporation, D & K Healthcare
Resources, Inc., Jaron, Inc., ▇▇▇▇▇▇ Drug Co. and ___________, the following
terms shall have the following meanings (terms defined in the singular to
have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or
--------------
on account of an Account.
Accounts - all Accounts (as defined in the Code), contract rights,
--------
chattel paper, instruments and documents, whether now owned or hereafter
created or acquired by Borrowers or in which Borrowers now have or
hereafter acquires any interest.
Adjusted Net Earnings From Operations - with respect to any fiscal
-------------------------------------
period, means the net earnings (or loss) after provision for income taxes
for such fiscal period of a Borrowers, as reflected on the financial
statement of such Borrower supplied to Lender pursuant to the Agreement,
but excluding:
(i) any gain or loss arising from the sale of capital
assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of any Borrower accrued
prior to the date it became a Subsidiary;
(iv) earnings of any corporation, substantially all the
assets of which have been acquired in any manner by a Borrower,
realized by such corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a
Subsidiary of a Borrower) in which Borrowers have an ownership
interest unless such net earnings shall have actually been received
by a Borrower in the form of cash distributions;
(vi) any portion of the net earnings of any Subsidiary of a
Borrower which for any reason is unavailable for payment of dividends
to such Borrower;
(vii) the earnings of any Person to which any assets of a
Borrower shall have been sold, transferred of disposed of, or into
which a Borrower shall have merged, or been a party to any
consolidation or other form of reorganization, prior to the date of
such transaction;
(viii) any gain arising from the acquisition of any Securities
of a Borrower; and
(ix) any gain arising from extraordinary or non-recurring
items.
Adverse Environmental Condition shall mean (i) any release, spill,
-------------------------------
emission, leaking, pumping, injection, presence, deposit, abandonment,
disposal, discharge, dispersal, emission, leaching or migration in, into,
on, or emanating from the indoor or outdoor environment (including,
without limitation, the air, ground, water, groundwater, or any surface)
of any substance, chemical, material, pollutant, hazardous material, gas,
odor or audible noise related to the conduct of a Borrower's or any of
its Subsidiaries' businesses; (ii) any complaint, citation, notice of
violation, request for information, claim, demand or
1
35
order by any governmental authority or any person for the personal
injury, property damage, damage to the environment, or adverse effect on
the environmental resulting from (i) above; and (iii) the violation, or
alleged violation of, or liability under any applicable Environmental
Law, permits, approvals, directives, injunctions, orders, licenses or
judgments of, by or from any governmental authority, agency, person or
court relating to environmental matters connected with any Borrower's
or any of its Subsidiaries' businesses.
Affiliate - a Person (other than a Subsidiary): (i) which directly
---------
or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of
a Person; or (iii) 5% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 5% or more of the equity interest) of
which is beneficially owned or held by a Person or a Subsidiary of a
Person.
Agreement - the Fifth Amended and Restated Loan and Security
---------
Agreement referred to in the first sentence of this Appendix A, all
Exhibits thereto and this Appendix A.
API - Associated Pharmacies, Inc.
---
Applicable Margin - For periods before delivery of the Borrowers'
-----------------
financial statements for the twelve-month period ending June 30, 2000,
the Applicable Margin with respect to the Base Rate shall be 0.25%, and
the Applicable Margin with respect to the LIBO Rate shall be 1.75%. For
any period or date beginning with the delivery of the Borrowers'
financial statements for the twelve-month period ending June 30, 2000 and
thereafter, the Applicable Margin with respect to the Base Rate and the
LIBO Rate, as applicable, shall be as set forth in the chart below
corresponding to the Interest Coverage Ratio for the immediately
preceding 12 month period ending each December 31 and June 30, as
reflected by the most recently delivered financial statements for the
period ending on such date, of Borrowers and their Subsidiaries pursuant
to Section 8.1.3(i) (for the twelve month periods ending on June 30 of
each year) and pursuant to Section 8.1.3(ii) (for the twelve month
periods ending on December 31 of each year). The Applicable Margin shall
be effective from and after the date of delivery of such financial
statements:
-----------------------------------------------------------------------------
Interest Coverage Ratio for Applicable Margin Applicable Margin
preceding twelve month period Base Rate LIBO Rate
-----------------------------------------------------------------------------
From 1.75 to 1.0
To 2.00 to 1.0 1.00% 2.50%
-----------------------------------------------------------------------------
From 2.01 to 1.0
To 2.50 to 1.0 0.75% 2.25%
-----------------------------------------------------------------------------
From 2.51 to 1.0
To 3.00 to 1.0 0.50% 2.00%
-----------------------------------------------------------------------------
From 3.01 to 1.0
To 3.25 to 1.0 0.25% 1.75%
-----------------------------------------------------------------------------
From 3.26 to 1.0
To 3.50 to 1.0 0.00% 1.50%
-----------------------------------------------------------------------------
>3.50 to 1.0 0.00% 1.25%
-----------------------------------------------------------------------------
2
36
In calculating the Interest Coverage Ratio, Lender will calculate
numbers to thousandths, and amounts of .005 or greater will be rounded up
to the next hundredth. For example (and not by way of limitation) 2.445
shall be rounded to 2.45.
Availability - means, on any date, the excess of the Borrowing Base
------------
over the sum of all outstanding Loans hereunder on such date.
Average Monthly Loan Balance - The amount obtained by adding the
----------------------------
unpaid balance of all Loans owing by the Borrowers to Lender at the end
of each day for each day during the month in question and by dividing
such sum by the number of days in such month.
Bank - Fleet National Bank.
----
Base Rate - the rate of interest generally announced or quoted by
---------
Bank from time to time as its base rate for commercial loans, whether or
not such rate is the lowest rate charged by Bank to its most preferred
borrowers; and if such base rate for commercial loans is discontinued by
Bank as a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
Borrowers - collectively, D & K, Jaron and ▇▇▇▇▇▇, and "Borrower"
---------
shall mean any one of them.
Borrowing Base - as at any date of determination thereof, an amount
--------------
equal to the lesser of:
(i) the Total Credit Facility, or
(ii) an amount equal to (A) 70% of the value of Eligible
Trading Company Inventory, plus (B) 65% of the value of all other
Eligible Inventory at such date, calculated in each case on the basis
of the lower of cost or market with the cost of raw materials and
finished goods calculated on a first-in, first-out basis,
MINUS
an amount equal to the sum of (A) the face amount of all letters of
credit issued or guaranteed by Lender or any Affiliate of Lender for
the account of a Borrower and outstanding at such date, and (B) any
amounts which Lender may be obligated to pay in the future for the
account of a Borrower.
Notwithstanding anything else herein to the contrary, the aggregate
amount of available Loans to or on behalf of Jaron will be limited at all
times to 65% of the value of Jaron's Eligible Inventory, calculated as
set forth above, and the aggregate amount of available Loans to or on
behalf of ▇▇▇▇▇▇ will be limited at all times to 65% of the value of
▇▇▇▇▇▇'▇ Eligible Inventory calculated as set forth above.
Business Day - any day excluding Saturday, Sunday and any day which
------------
is a legal holiday under the laws of the State of Missouri or the State
of Illinois or is a day on which banking institutions located in either
of such states are closed.
Capital Expenditures - expenditures made and liabilities incurred for
--------------------
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year, including the total payments with respect to Capitalized Lease
Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
----------------------------
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
3
37
Cash Flow - EBITDA minus (i) cash taxes paid for each year, and (ii)
---------
Capital Expenditures which are not financed.
Closing Date - the date on which all of the conditions precedent in
------------
Section 9 of the Agreement are satisfied and the initial Loan is made or
the initial Letter of Credit or LC Guaranty is issued under the
Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
----
State of Illinois, as from time to time in effect.
Collateral - all of the Property and interests in Property described
----------
in Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any
of the Obligations.
Consolidated - the consolidation in accordance with GAAP of the
------------
accounts or other items as to which such term applies.
Control - means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract, or
otherwise.
Current Assets - at any date means the amount at which all of the
--------------
current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP, except
that amounts due from Affiliates and investments in Affiliates and
prepaid expenses shall be excluded therefrom.
Current Liabilities - at any date means the amount at which all of
-------------------
the current liabilities of a Person would be properly classified as
current liabilities on a balance sheet at such date in accordance with
GAAP excluding the Loans.
Debt Service - for any period, all scheduled principal payments
------------
payable on Indebtedness, whether at maturity or regularly scheduled
payments, mandatory prepayments, by acceleration or otherwise.
Default - an event or condition the occurrence of which would, with
-------
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in subsection 2.1.7 of the Agreement.
------------
Distribution - in respect of any corporation means and includes: (i)
------------
the payment of any dividends or other distributions on capital stock of
the corporation (except distributions in such stock) and (ii) the
redemption or acquisition of Securities unless made contemporaneously
from the net proceeds of the sale of Securities.
EBITDA - with respect to any fiscal period, the sum of Borrowers'
------
Consolidated net earnings (or loss) before interest expense, taxes, and
allowances for depreciation and amortization, for said period as
determined in accordance with GAAP.
Eligible Inventory - such Inventory of a Borrower (other than
------------------
packaging materials and supplies) which Lender, in its sole credit
judgment, deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory if:
4
38
(i) it is not raw materials or finished goods, or work-in-
process that is, in Lender's opinion, readily marketable in its
current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any
governmental agency or authority; or
(v) it does not conform in all respects to the warranties
and representations set forth in the Agreement; or
(vi) it is not at all times subject to Lender's duly
perfected, first priority security interest and no other Lien except
a Permitted Lien;
(vii) it is not situated at a location in compliance with the
Agreement; or
(viii) it consists of supplies or labels; or
Eligible Trading Company Inventory - Branded prescription
----------------------------------
pharmaceutical products located in the Borrower's Davie, Florida facility
and segregated from other Inventory located at such facility.
Environmental Laws - all federal, state and local laws, rules,
------------------
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
---------
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in any Borrower's
operations or owned by any Borrower in which any Borrower has an
interest, whether now owned or hereafter acquired by any Borrower and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
thereof.
ERISA - the Employee Retirement Income Security Act of 1974, as
-----
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
----------------
Fee Letter - that certain fee letter from Borrowers to Lenders dated
----------
on or about the Closing Date.
Fixed Charges - For any period means the sum of (i) Interest Expense,
-------------
(ii) the scheduled payments of principal required to be paid with respect
to Indebtedness, and (iii) scheduled payments of Capital Lease
Obligations.
GAAP - generally accepted accounting principles in the United States
----
of America in effect from time to time.
General Intangibles - all General Intangibles (as defined in the
-------------------
Code) of Borrowers, whether now owned or hereafter created or acquired by
the Borrowers, including, without limitation, all choses in action,
causes of action, corporate or other business records, deposit accounts,
inventions, designs, patents, patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, computer programs, all
claims under guaranties, security interests or other security held by or
granted to Borrowers to secure payment of any of the Accounts by an
5
39
account debtor, all rights to indemnification and all other intangible
property of every kind and nature (other than Accounts).
Guarantor - Any Person who may hereafter guarantee payment or
---------
performance of the whole or any part of the Obligations.
Indebtedness - as applied to a Person means, without duplication
------------
(i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet of such Person as at the date as of which
Indebtedness is to be determined, including, without limitation,
Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has
guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for the
account of such Person, and
(iv) in the case of any Borrower (without duplication), the
Obligations.
Indemnified Parties - the Lender and any Participating Lender and
-------------------
each of their respective Affiliates and their respective officers,
directors, employees, agents and advisors.
Intercreditor Agreement - that certain Intercreditor Agreement
-----------------------
between Lender and Magna Bank, N.A., predecessor to Magna Bank, N.A.,
relating to a loan made by such Bank to D&K in the original principal
amount of $1,495,000, as the same may be amended, restated, extended or
modified from time to time.
Interest Coverage Ratio - with respect to any period of
-----------------------
determination, the ratio of Consolidated (i) Net Cash Flow for such
period to (ii) Interest Expense for such period, all as determined in
accordance with GAAP.
Interest Expense - with respect to any fiscal period, the sum of (i)
----------------
the interest expense incurred for such period as determined in accordance
with GAAP, plus (ii) the Letter of Credit and LC Guaranty fees owing for
such period, and (iii) the Earned Discount charged under and defined in
the Securitization Documents.
Inventory - all of Borrowers' Inventory (as defined in the Code),
---------
whether now owned or hereafter acquired including, but not limited to,
all goods intended for sale or lease by Borrowers, or for display or
demonstration; all work in process; all raw materials and other materials
and supplies of every nature and description used or which might be used
in connection with the manufacture, printing, packing, shipping,
advertising, selling, leasing or furnishing of such goods or otherwise
used or consumed in Borrowers' business; and all documents evidencing and
General Intangibles relating to any of the foregoing, whether now owned
or hereafter acquired by Borrowers.
Investment Property - all of the Borrowers' Investment Property (as
-------------------
defined in the Code), 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.
LC Amount - at any time, the aggregate undrawn face amount of all
---------
Letters of Credit and LC Guaranties then outstanding.
6
40
LC Guaranty - any guaranty pursuant to which Lender or any Affiliate
-----------
of Lender shall guaranty the payment or performance by Borrowers of their
reimbursement obligation under any letter of credit.
Legal Requirement - any requirement imposed on Lender by any law,
-----------------
regulation, order, interpretation, ruling or official directive (whether
or not having the force of law) of any board, central bank or
governmental or administrative agency, institution or authority.
Letter of Credit - any letter of credit issued by Lender or any of
----------------
Lender's Affiliates for the account of Borrowers.
LIBO Rate - a fluctuating interest rate per annum equal to the rate
---------
(rounded upwards, if necessary, to the next higher 1/16 of 1%) at which
deposits of U.S. Dollars approximately equal in principal amount to the
outstanding amount of Revolving Credit Loans are offered to Lender for a
30-day period by Bank in the London interbank foreign currency deposits
market at approximately 11:00 a.m., London time, on any Business Day.
Each determination by Lender of any LIBO Rate shall, in the absence of
manifest error, be conclusive. The foregoing notwithstanding, in the
event deposits of U.S. dollars are not offered to Lender by Bank for a
30-day period in the London Interbank foreign currency deposits markets,
then LIBO Rate shall mean London Interbank offered rate for a 30-day
period as published from time to time by the Wall Street Journal, or if
-------------------
not published in the Wall Street Journal, the Financial Times of London.
------------------- -------------------------
Lien - any interest in Property securing an obligation owed to, or a
----
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purpose of
the Agreement, Borrowers shall be deemed to be the owner of any Property
which it has acquired or holds subject to a conditional sale agreement or
other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
Loan Account - the loan account established on the books of Lender
------------
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
--------------
Documents.
Loans - all loans and advances of any kind made by Lender pursuant to
-----
the Agreement.
Money Borrowed - means (i) Indebtedness arising from the lending of
--------------
money by any Person to a Borrower; (ii) Indebtedness, whether or not in
any such case arising from the lending by any Person of money to a
Borrower, (A) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C) upon
which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property;
(iii) Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit and (v) Indebtedness of a Borrower under any
guaranty of obligations that would constitute Indebtedness for Money
Borrowed under clauses (i) through (iii) hereof, if owed directly by such
Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
------------------
of ERISA.
Net Cash Flow - For any period means Consolidated Adjusted Net
-------------
Earnings from Operations during such period, plus amounts deducted in the
----
computation thereof for depreciation, amortization and taxes.
7
41
Obligations - all Loans and all other advances, debts, liabilities,
-----------
obligations, covenants and duties, together with all interest, fees and
other charges thereon, owing, arising, due or payable from any Borrower
to Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising
under the Agreement or any of the other Loan Documents or otherwise
whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now
existing or hereafter arising and however acquired, and any replacements,
renewals, extensions or other modifications of any of them.
Original Term - as defined in Section 4.1 of the Agreement.
-------------
Other Agreements - any and all agreements, instruments and documents
----------------
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by any Borrower, any Subsidiary of any Borrower or any
other third party and delivered to Lender in respect of the transactions
contemplated by the Agreement, including, without limitation the Fee
Letter.
Overadvance - the amount, if any, by which the outstanding principal
-----------
amount of Revolving Credit Loans plus the LC Amount exceeds the Borrowing
----
Base.
Participating Lender - each Person who shall be granted the right by
--------------------
Lender to participate in any of the Loans described in the Agreement and
who shall have entered into a participation agreement in form and
substance satisfactory to Lender.
PBI - Pharmaceutical Buyers, Inc., an Arkansas corporation.
---
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of
---------------
the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness
-------------------------------------
of a Borrower incurred after the date hereof which is secured by a
Purchase Money Lien and which, when aggregated with the principal amount
of all other such Indebtedness and Capitalized Lease Obligations of all
Borrowers at the time outstanding, does not exceed $3,000,000. For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a
Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
------
company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
----
employees of Borrower that is covered by Title IV of ERISA.
Projections - Borrowers' forecasted Consolidated and consolidating
-----------
(a) balance sheets, (b) profit and loss statements, (c) cash flow
statements, and (d) capitalization statements, all prepared on a
consistent basis with Borrowers' historical financial statements,
together with appropriate supporting details and a statement of
underlying assumptions.
Property - any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
---------------------------
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within 10 days prior to or after
the acquisition of any fixed
8
42
assets for the purpose of financing all or any part of the purchase price
thereof, and (iii) any renewals, extensions or refinancings thereof, but
not any increases in the principal amounts thereof outstanding at the
time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
-------------------
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such
Lien.
Rentals - as defined in subsection 8.2.13 of the Agreement.
-------
Reportable Event - any of the events set forth in Section 4043(b) of
----------------
ERISA.
Restricted Investment - any investment made in cash or by delivery of
---------------------
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital
contribution, or otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of any Borrower
to the extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of a Borrower and its
Subsidiaries;
(iv) investments in direct obligations of the United States
of America, or any agency thereof or obligations guaranteed by the
United States of America, provided that such obligations mature
within one year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within
one year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at
least $100,000,000;
(vi) investments made under and pursuant to the
Securitization Documents; and
(vii) investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more than
270 days from the date of creation thereof.
Revolving Credit Facility - means the amounts available to be
-------------------------
borrowed under Section 1.1 of the Agreement.
Revolving Credit Loan - a Loan made by Lender as provided in Section
---------------------
1.1 of the Agreement.
Securitization - the transactions to be carried out pursuant to (i)
--------------
that certain Purchase and Sale Agreement between D&K, its subsidiary, D&K
Receivables Corporation, and certain other subsidiaries of D&K relating
to transfer of certain Accounts and related rights to D&K Receivables
Corporation, and (ii) that certain Receivables Purchase Agreement between
D&K, Receivables Corporation, Blue Keel Funding, LLC and Fleet National
Bank pursuant to which Fleet National Bank for the benefit of Blue Keel
Funding, LLC will purchase an interest in such Accounts and related
rights from D&K, Receivables Corporation, and (iii) that certain
Liquidity Agreement among Blue Keel Funding, LLC, Fleet National Bank,
and Lender.
9
43
Securitization Documents - (i) the Purchase and Sale Agreement
------------------------
between D&K, its subsidiary, D&K Receivables Corporation, and certain
other subsidiaries of D&K; (ii) the Receivables Purchase Agreement
between D&K, Receivables Corporation, Blue Keel Funding, LLC and Fleet
National Bank; (iii) the Liquidity Agreement among Blue Keel Funding,
LLC, Fleet National Bank, and Lender, and Liquidity Agreement among Blue
Keel Funding, LLC, Fleet National Bank, and Lender; and (iv) any and all
other documents, instruments and agreements executed and delivered in
connection therewith, as well as all amendments, modifications,
extensions, renewals or successor facilities.
Security - shall have the same meaning as in Section 2(1) of the
--------
Securities Act of 1933, as amended.
Security Documents - All the instruments and agreements now or at any
------------------
time hereafter securing the whole or any part of the Obligations.
Solvent - as to any Person, such Person (i) owns Property whose fair
-------
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay
all of its Indebtedness as such Indebtedness matures and (iii) has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
Subordinated Debt - Indebtedness of the Borrowers that is
-----------------
subordinated to the Obligations in a manner satisfactory to Lender,
including, without limitation, the Promissory Note of D&K in favor of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as agent, issued in connection with the purchase of
Northern Drug Company.
Subordination Agreements - the Subordination Agreements relating to
------------------------
each of the notes evidencing the Subordinated Debt between Lender and the
holders of such notes.
Subsidiary - any corporation of which a Person owns, directly or
----------
indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
Total Credit Facility - $130,000,000.
---------------------
Voting Stock - Securities of any class or classes of a corporation
------------
the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons
performing similar functions).
OTHER TERMS. All other terms contained in the Agreement shall have,
-----------
when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
-------------------------------
"hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section titles, table
of contents and list of exhibits appear as a matter of convenience only and
shall not affect the interpretation of the Agreement. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. All references to any of the Loan
Documents shall include any and all modifications thereto and any and all
extensions or renewals thereof.
10
44
LIST OF EXHIBITS
Exhibit A Omitted
Exhibit B Borrowers' and each Subsidiary's Business Locations
Exhibit C Jurisdictions in which each Borrower and each Subsidiary
is Authorized to do Business
Exhibit D Capital Structure of Borrowers
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrowers' Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Environmental Matters
Exhibit O Compliance Certificate
Exhibit P Permitted Liens
11
45
EXHIBIT B
BUSINESS LOCATIONS
1. Each Borrower currently has the following business locations, and no
others:
Chief Executive Office: D&K Health Care Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Chief Executive Office - Jaron:
▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Other Locations: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. Each Borrower maintains its books and records relating to Accounts and
General Intangibles at:
D&K Healthcare Resources, Inc. -
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Jaron - ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. Each Borrower maintains Inventory at the following locations owned or
leased by such Borrower:
Address Owner
------- -----
Cape Girardeau, MO Leased
Lexington, KY Leased
Minneapolis, MN D&K Healthcare Resources, Inc.
Davie, FL Leased
Aberdeen, SD Leased
4. Each Borrower has had no office, place of business or agent for process
located in any county other than as set forth above, except:
None.
1
46
5. Each Subsidiary currently has the following business locations, and no
others:
Subsidiary Address
---------- -------
Jaron, Inc. ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
VC Services, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
D&K Receivables Corporation ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tykon, Inc. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Drug Co. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6. Each Subsidiary maintains its books and records relating to Accounts and
General Intangibles at:
Subsidiary Address
---------- -------
Jaron, Inc. ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
VC Services, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
D&K Receivables Corporation ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tykon, Inc. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Drug Co. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
7. Each Borrower maintains Inventory at the following locations owned or
leased by such Borrower:
Address Owner
------- -----
▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Leased
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Leased
8. Each Subsidiary has had no office, place of business or agent for process
located in any county other than as set forth above, except:
None.
9. The following bailees, warehouseman, similar parties and consignees hold
inventory of any Borrower or any Subsidiary:
None.
2
47
EXHIBIT C
JURISDICTIONS IN WHICH EACH BORROWER
AND ITS SUBSIDIARIES
ARE AUTHORIZED TO DO BUSINESS
-----------------------------------------------------------------------------------------
NAME OF ENTITY & INCORPORATION STATE AUTHORIZED JURISDICTIONS
-----------------------------------------------------------------------------------------
D&K Healthcare Resources, Inc.
Delaware corporation Florida
Illinois
Iowa
Kentucky
Minnesota
Missouri
North Dakota
Tennessee
-----------------------------------------------------------------------------------------
D&K Receivables Corporation Missouri
Delaware corporation
-----------------------------------------------------------------------------------------
VC Services, Inc. None
Minnesota corporation
-----------------------------------------------------------------------------------------
Jaron, Inc. New Jersey
Florida Corporation Indiana (d/b/a Jaron, Inc. of Indiana)
Minnesota (d/b/a Jaron, Inc. of Minnesota)
-----------------------------------------------------------------------------------------
▇▇▇▇▇▇ Drug Co. North Dakota
South Dakota corporation
-----------------------------------------------------------------------------------------
3
48
EXHIBIT D
CAPITAL STRUCTURE
1. The classes and number of authorized shares of each Borrower and each
Subsidiary and the record owner of such shares are as follows:
Borrowers:
---------
----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
ISSUED AND AUTHORIZED BUT
CLASS OF STOCK OUTSTANDING RECORD OWNERS UNISSUED
----------------------------------------------------------------------------------------------------------
D&K - Preferred 0 N/A 1,000,000
----------------------------------------------------------------------------------------------------------
D&K - Common 4,219,631 Publicly held (approx 1800) 5,780,369
----------------------------------------------------------------------------------------------------------
Jaron - Common 100 D&K Healthcare Resources, Inc. 7,400
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ - Common 1,694 2/3 D&K Healthcare Resources, Inc. 805 1/3
----------------------------------------------------------------------------------------------------------
Subsidiaries:
------------
----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
ISSUED AND AUTHORIZED BUT
CLASS OF STOCK OUTSTANDING RECORD OWNERS UNISSUED
----------------------------------------------------------------------------------------------------------
VC Services - Common 100 D&K Healthcare Resources, Inc. 0
----------------------------------------------------------------------------------------------------------
D&K Receivables - Common 100 D&K Healthcare Resources, Inc. 900
----------------------------------------------------------------------------------------------------------
Tykon, Inc. 3000 D&K Healthcare Resources, Inc. 557,000
----------------------------------------------------------------------------------------------------------
2. The number, nature and holder of all other outstanding Securities of each
Borrower and each Subsidiary are as follows:
Not applicable.
3. The correct name and jurisdiction of incorporation of each Subsidiary of
each Borrower and the percentage of its issued and outstanding shares owned
by each Borrower are as follows:
1
49
--------------------------------------------------------------------
PERCENTAGE OF
JURISDICTION OF SHARES OWNED
NAME INCORPORATION BY BORROWER
--------------------------------------------------------------------
Jaron, Inc. Florida 100%
--------------------------------------------------------------------
VC Services, Inc. Minnesota 100%
--------------------------------------------------------------------
D&K Receivables Corporation Delaware 100%
--------------------------------------------------------------------
▇▇▇▇▇▇ Drug Co. South Dakota 100%
--------------------------------------------------------------------
4. The name of each of any Borrower's corporate or joint venture Affiliates
and the nature of the affiliation are as follows:
Pharmaceutical Buyers, Inc. 50% owner
SourceTenn LLC 50% owner
Innovative Solutions in Healthcare, Inc. 7% owner
2
50
EXHIBIT E
CORPORATE NAMES
1. D&K's correct corporate name, as registered with the Secretary of State
of the State of Delaware, is:
D&K Healthcare Resources, Inc.
2. In the conduct of its business, D&K has used the following names:
▇. ▇▇▇▇▇ Company
Delta Wholesale Drug, Inc.
Twin Cities Wholesale Drug
D&K Wholesale Drug, Inc.
Wholesale Management Services, Inc.
Northern Drug Company
Krelitz Industries, Inc.
D&K Receivables Corporation
3. Of D&K's Subsidiaries, the correct corporate name, as registered with the
Secretary of State of the State of its incorporation of each, is:
Jaron, Inc.
Associated Pharmacies, Inc.
Southwest Computer Systems, Inc.
VC Services, Inc.
D&K Receivables Corporation
▇▇▇▇▇▇ Drug Co.
Tykon, Inc.
4. In the conduct of its business, each Subsidiary of D&K has used the
following names:
Associated Pharmacies, Inc.
Jaron, Inc.
D&K Receivables Corporation
Southwest Computer Systems, Inc.
Viking Computer Services, Inc.
▇▇▇▇▇▇ Drug Co., Inc.
▇▇▇▇▇▇ Drug Company
5. Jaron's correct corporate name, as registered with the Secretary of State
of the State of Florida, is:
Jaron, Inc.
6. In the conduct of its business, Jaron has used the following names:
Jaron, Inc.
Advantage Diabetic Care
7. Of Jaron's Subsidiaries, the correct corporate name, as registered with
the Secretary of State of the State of its incorporation of each, is:
None.
8. In the conduct of its business, each Subsidiary of Jaron has used the
following names:
None.
1
51
EXHIBIT F
TAX IDENTIFICATION NUMBERS OF SUBSIDIARIES
Subsidiary Number
---------- ------
Jaron, Inc. ▇▇-▇▇▇▇▇▇▇
VC Services, Inc. ▇▇-▇▇▇▇▇▇▇
Associated Pharmacies, Inc. ▇▇-▇▇▇▇▇▇▇
Southwest Computer Systems, Inc. ▇▇-▇▇▇▇▇▇▇
U.P.C., Inc. ▇▇-▇▇▇▇▇▇▇
D&K Receivables Corporation ▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇▇ Drug Co. ▇▇-▇▇▇▇▇▇▇
Tykon, Inc. ▇▇-▇▇▇▇▇▇▇
1
52
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
1. Each Borrower's and each Subsidiaries' patents:
D&K owns the following patents:
A. HEMAGOSTAT PATENT, U.S. ▇▇▇. No. 4,316,473, issued 2/23/82.
Record owner is Krelitz Industries, Inc. Obtained by D&K by merger
dated 5/1/98.
B. EASEL PATENT, U.S. ▇▇▇. No. 4,332,364, issued 6/1/82. Record owner
is Krelitz Industries, Inc. Obtained by D&K by merger dated 5/1/98.
C. EASEL PATENT, Can. ▇▇▇. No. 1,116,041, issued 5/29/84. Record owner
is Krelitz Industries, Inc. Obtained by D&K by merger dated 5/1/98.
None of the Subsidiaries owns any patents or pending applications.
2. Each Borrower's and each Subsidiaries' trademarks:
D&K owns the following United States Trademark registrations:
A. MED-PLUS, U.S. Reg. No. 1,874,116.
B. SCRIPTMASTER, U.S. Reg. No. 1,448,230. Record owner is Krelitz
Industries, Inc. Obtained by D&K by merger dated 5/1/98.
C. PRIME SOURCE, U.S. Reg. No. 1,458,654. Record owner is Krelitz
Industries, Inc. Obtained by D&K by merger dated 5/1/98.
D. ARMS RX, U.S. Reg. No. 1,775,083. Record owner is Krelitz
Industries, Inc. Obtained by D&K by merger dated 5/1/98.
E. PRIME SOURCE WIN!, U.S. Reg. No. 1,778,784. Record owner is Krelitz
Industries, Inc. Obtained by D&K by merger dated 5/1/98.
F. D&K HEALTHCARE RESOURCES, INC. & DESIGN, U.S. Reg. No. 2,246,672.
D&K owns the following state-registered trademarks:
A. VIKING COMPUTER SERVICES, Minnesota Reg. No. 5,270. Record owner is
Krelitz Industries, Inc. Obtained by D&K by merger dated 5/1/98.
B. HEALTH SOURCE PHARMACIES, Minnesota Reg. No. 8,657. Record owner is
Krelitz Industries, Inc. Obtained by D&K by merger dated 5/1/98.
C. SOURCE DRUGSTORES, Minnesota Reg. No. 8,665. Record owner is Krelitz
Industries, Inc. Obtained by D&K by merger dated 5/1/98.
1
53
In addition, D&K owns several unregistered common law trademarks.
D&K is in the process of filing federal trademark applications for
several marks based on use of the marks or an intent to use the marks
in interstate commerce.
None of the Subsidiaries owns any federal trademark registrations or
pending applications or state trademark registrations. Some of the
Subsidiaries own unregistered common law trademarks.
3. Each Borrower's and each Subsidiaries' copyrights:
D&K and the Subsidiaries may own copyrightable works or works
protected by U.S. copyright law. However, neither D&K nor the
Subsidiaries owns any registered copyrights.
2
54
EXHIBIT H
CONTRACTS RESTRICTING ANY BORROWER'S RIGHT TO INCUR DEBTS
Credit Agreements with Fleet Capital:
- Securitization documents
- Line of Credit
1
55
EXHIBIT I
LITIGATION
1. Actions, suits, proceedings and investigations pending against any
Borrower or any Subsidiary:
-----------------------------------------------------------------------------------------------------------------------
JURISDICTION OR
TITLE OF ACTION NATURE OF ACTION COMPLAINING PARTIES TRIBUNAL
-----------------------------------------------------------------------------------------------------------------------
▇.▇. ▇▇▇▇▇ Enterprises, Ltd. Alleged breach of contract Circuit Court of
v. D&K Healthcare Resources St. Louis County,
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ State of Missouri
-----------------------------------------------------------------------------------------------------------------------
2. The only threatened actions, suits, proceedings or investigations of
which any Borrower or any Subsidiary is aware are as follows:
None.
1
56
EXHIBIT J
CAPITALIZED LEASES
Each Borrower and each Subsidiary has the following capitalized leases:
-------------------------------------------------------------------------------------------------
LESSEE LESSOR TERM OF LEASE PROPERTY COVERED
-------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Drug Co. ▇▇▇▇▇▇ Family Investments, LLC 1/1/97-12/31/06 Aberdeen Facility
-------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Drug Co. ▇▇▇▇▇▇ Family Investments, LLC 7/1/97-6/30/07 Sioux Falls Facility
-------------------------------------------------------------------------------------------------
1
57
EXHIBIT K
OPERATING LEASES
Each Borrower and each Subsidiary has the following operating leases:
TERM OF
LESSEE LESSOR LEASE PROPERTY COVERED
------ ------ ------- ----------------
D&K Healthcare ▇▇▇▇▇▇▇▇ ▇▇▇▇ Co 7/97-6/03 St. Louis Corporate office
D&K Healthcare Enterprise Leasing 2/99-5/02 executive auto - ▇▇▇
D&K Healthcare Enterprise Leasing 1/99-1/03 executive auto - CML
D&K Healthcare Enterprise Leasing 2/99-2/02 executive auto - TLH
D&K Healthcare Enterprise Leasing 8/00-8/03 executive auto - JL
D&K Healthcare First Star Leasing 2/00-2/03 executive auto - JC
D&K Healthcare Debis Financial 8/99-11/02 executive auto - BL
D&K Healthcare Compass Financial 2/99-5/02 executive auto - MW
Services
D&K Healthcare GE Capital 9/96-4/01 executive auto - RH
D&K Healthcare GE Capital 4/97-4/02 executive auto -
D&K Healthcare Fleet Capital 7/99-6/06 Aircraft
D&K Healthcare Pitney ▇▇▇▇▇ 4/99-7/02 Mail machine
D&K Healthcare CIT Leasing 5/00-5/03 AS/400's
D&K Healthcare IOS Capital 10/99-10/01 Fax 9th floor
D&K Healthcare IOS Capital 8/99-10/01 Fax 11th floor
D&K Healthcare IOS Capital 2/99-2/01 Copier ▇▇▇ ▇▇▇▇▇
▇&▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇/▇▇-▇/▇▇ ▇▇▇▇▇▇ 11th floor
1
58
D&K Healthcare American Technology 3/99-3/03 Phone equipment
D&K Healthcare NTFC Capital 9/98-9/01 Phone system
D&K Healthcare West Cape Development 12/96-11/06 Cape Girardeau, MO DC
D&K Healthcare Ascom ▇▇▇▇▇▇ Leasing 12/96-12/01 mail machine
D&K Healthcare ▇▇▇▇▇▇▇▇▇ Financial 11/98-10/01 fax machine
D&K Healthcare De ▇▇▇▇ ▇▇▇▇▇▇ 2/00-1/03 fax machine
D&K Healthcare Nissan Motor 11/99-10/02 executive auto-▇▇▇▇▇
D&K Healthcare GMAC 3/27-2/03 executive auto - ▇▇▇▇▇
D&K Healthcare GE Capital Lease 1/98-1/01 sales auto - ▇▇▇▇▇▇▇▇
D&K Healthcare Deco Waste 11/96-10/01 trash compactor
D&K Healthcare Westin Management 2/00-1/01 St. Louis Depot
D&K Healthcare Fleet Capital Leasing 7/00-6/05 Lexington, KY DC
D&K Healthcare Fleet Capital Leasing 7/00-6/05 Warehouse Equipment
D&K Healthcare Fifth Third Bank 10/98-10/03 Hindo Box Truck
D&K Healthcare Fifth Third Bank 11/99-12/03 Executive auto - ▇. ▇▇▇▇▇
D&K Healthcare Duplicator Sales 1/99-1/02 copier
D&K Healthcare Chrysler Financial 11/99-10/02 executive auto - ▇. ▇▇▇▇▇
D&K Healthcare Enterprise fleet Service 4/00-3/03 sales auto - ▇. ▇▇▇▇▇▇
D&K Healthcare Enterprise fleet service 7/99-6/01 sales auto - ▇. ▇▇▇▇▇▇▇▇
D&K Healthcare GE Capital 9/97-9/00 sales auto - ▇. ▇▇▇▇▇▇
D&K Healthcare GE Capital 12/97-12/00 sales auto - ▇. ▇▇▇▇▇▇
D&K Healthcare Crown Credit 1/00-12/04 Fork Lift
D&K Healthcare Enterprise Fleet 5/99-5/02 sales auto - ▇. ▇▇▇▇
2
59
D&K Healthcare GE Capital 6/97-6/00 delivery auto
D&K Healthcare GE Capital 6/97-6/00 delivery auto
D&K Healthcare GE Capital 6/97-6/00 delivery auto
D&K Healthcare GE Capital 6/97-6/00 delivery auto
D&K Healthcare GE Capital 7/97-7/00 delivery auto
D&K Healthcare GE Capital 8/97-8/00 delivery auto
D&K Healthcare GE Capital 8/97-8/00 delivery auto
D&K Healthcare GE Capital 8/97-10/01 delivery auto
D&K Healthcare GE Capital 8/97-10/01 delivery auto
D&K Healthcare GE Capital 8/97-10/01 delivery auto
D&K Healthcare GE Capital 2/1/00-1/03 delivery auto
D&K Healthcare GE Capital 2/00-1/03 delivery auto
D&K Healthcare Pitney ▇▇▇▇▇ 4/99-4/01 Mail Machine
D&K Healthcare Pitney ▇▇▇▇▇ 8/99-8/01 Copier
D&K Healthcare Pitney ▇▇▇▇▇ 12/99-12/01 Copier
D&K Healthcare GE Capital 5/98-5/01 sales auto - M.D.
D&K Healthcare GE Capital 5/98-5/02 executive auto - K.D.
D&K Healthcare GE Capital 5/98-06/02 sales auto-B.M.
D&K Healthcare GE Capital 5/98-10/02 sales auto-T.G.
D&K Healthcare GE Capital 5/98-11/02 sales auto-J.O.
D&K Healthcare GE Capital 5/98-4/03 sales auto-T.S.
D&K Healthcare GE Capital 5/98-7/03 sales auto-D.D.
D&K Healthcare Butters 8/99-7/04 Davie, Florida DC
3
60
D&K Healthcare BSFS 9/99-8/04 telephone equipment
D&K Healthcare American Honda 6/00-9/03 executive auto - ▇. ▇▇▇▇▇▇▇▇
D&K Healthcare Conseco 1/00-12/02 office equipment
D&K Healthcare Crown 1/00-12/04 Warehouse equipment
Jewett Pitney ▇▇▇▇▇ 9/98-9/01 mailing machine
▇▇▇▇▇▇ Midland Lease Co 9/98-2/01 1999 chevy lumina
▇▇▇▇▇▇ Midland Lease Co 11/98-11/01 1999 chevy tahoe
▇▇▇▇▇▇ Midland Lease Co 11/98-11/01 1999 ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ Midland Lease Co 12/99-3/02 1992 dodge caravan
▇▇▇▇▇▇ Midland Lease Co 8/99-8/02 1999 suburban
▇▇▇▇▇▇ Midland Lease Co 10/99-9/01 2000 malibu
▇▇▇▇▇▇ Midland Lease Co 2/99-7/01 1999 lumina
▇▇▇▇▇▇ Midland Lease Co 1/99-5/02 scanner & printer
▇▇▇▇▇▇ Information Leasing 1/98-2/01 computer equipment
Corporation
▇▇▇▇▇▇ Working Capital 1/98-1/01 computer equipment server
Tykon Meadow Ridge 6/99-4/04 Tykon office
Viking Westwood Lake 4/00-3/05 Viking office
Viking Great American Leasing 12/99-11/04 telephone system
Viking Green Tree vendor 3/98-2/03 copier
services
4
61
EXHIBIT L
PENSION PLANS
Each Borrower and each Subsidiary has the following Plans:
-------------------------------------------------------------------------
PARTY TYPE OF PLAN
-------------------------------------------------------------------------
Borrower
-------------------------------------------------------------------------
D&K Wholesale Drug, Inc. 401(k) Profit Sharing Plan
-------------------------------------------------------------------------
D&K Wholesale Drug, Inc. Flexible Benefit Plan (Section 125 plan)
-------------------------------------------------------------------------
▇▇▇▇▇▇ Drug Co. Retirement Plan (401(k) plan)
Flexible Benefit Plan (Section 125 plan)
-------------------------------------------------------------------------
[Subsidiaries]
-------------------------------------------------------------------------
1
62
EXHIBIT M
COLLECTIVE BARGAINING AGREEMENTS; LABOR CONTROVERSIES
1. Each Borrower and each Subsidiary is a party to the following collective
bargaining agreements:
D&K Healthcare Resources' union contract with Miscellaneous Drivers,
Helpers and Warehousemen's Union Local 638 with a term expiring 3/03.
▇▇▇▇▇▇ Drug Co.'s union contract with the General Drivers and Helpers
Union Local 749 with a term expiring 2/04.
In June 2000, the National Labor Relations Board certified the United
Steel Workers of America as the collective bargaining representative
FOR approximately 39 of D&K Healthcare Resources' employees in Cape
Girardeau, MO.
2. Material grievances, disputes of controversies with employees are
as follows:
None.
3. Threatened strikes, work stoppages and asserted pending demands for
collective bargaining are as follows:
None.
1
63
EXHIBIT N
ENVIRONMENTAL MATTERS
None.
1
64
EXHIBIT O
COMPLIANCE CERTIFICATE
[Letterhead of D & K]
__________________, 19__
Fleet Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
The undersigned, the chief financial officer of D & K Healthcare
Resources, Inc., a Delaware corporation ("D&K"), gives this certificate to
Fleet Capital Corporation ("Lender") in accordance with the requirements of
subsection 8.1.2 of that certain Loan and Security Agreement dated
______________, 19__, among D&K, Jaron, Inc., ▇▇▇▇▇▇ Drug Co. and
_______________ (collectively with D&K, the "Borrowers") and Lender ("Loan
Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan
Agreement.
1. Based upon my review of the balance sheets and statements of income
of Borrowers for the [fiscal year] [quarterly period] ending
__________________, 19__, copies of which are attached hereto, I hereby
certify that:
(a) The Current Ratio is ____ to 1;
(b) The Interest Coverage Ratio is ____ to ____;
(c) Annual Fixed Charge Ratio as of June 30 is ____ to ____;
(d) Inventory Turnover as of every fiscal quarter was no less than
six times;
(e) Capital Expenditures during the period and for the fiscal year
to date total $__________ and $__________, respectively.
2. No Default exists on the date hereof, other than:
________________________________________________ [if none, so state]; and
3. No Event of Default exists on the date hereof, other than
____________________________________________________ [if none, so state].
Very truly yours,
_______________________________
Chief Financial Officer
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EXHIBIT P
PERMITTED LIENS
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SECURED PARTY NATURE OF LIEN
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