1
EXHIBIT 10.1
FOURTH AMENDMENT TO FOURTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------
THIS FOURTH AMENDMENT TO THE FOURTH AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is made as of December 17, 1999, by and
---------
among FLEET CAPITAL CORPORATION, a Rhode Island corporation (the "Lender"),
------
and D&K HEALTHCARE RESOURCES, INC. ("D & K"), JARON, INC. ("Jaron") and
----- -----
▇▇▇▇▇▇ DRUG CO., a South Dakota corporation ("▇▇▇▇▇▇") (D & K, Jaron and
------
▇▇▇▇▇▇ are sometimes hereinafter referred to individually as "Borrower" and
--------
collectively as "Borrowers").
---------
Preliminary Statements
----------------------
A. Lender, and Borrowers are parties to that certain Fourth Amended
and Restated Loan and Security Agreement dated as of August 7, 1998 (as
amended, restated or renewed from time to time, the "Loan Agreement").
--------------
Capitalized terms used herein and not otherwise defined shall have the meanings
given them in the Loan Agreement.
B. D & K has requested that Lender amend certain provisions of the
Loan Agreement and certain other Loan Documents to increase the aggregate
amount of credit available under the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Increase in Credit Facility. The Loan Agreement and all of the
---------------------------
Loan Documents are hereby amended to increase the Total Credit Facility from
$95,000,000 to $95,000,000 and, during the Seasonal Period, $120,000,000.
Accordingly, whenever the number "$95,000,000" appears in any Loan Document,
it shall be replaced with "$95,000,000, and, during the Seasonal Period,
$120,000,000."
2. Amendment of Negative Covenants. Section 8.2 of the Loan Agreement
-------------------------------
[RELATING TO NEGATIVE COVENANTS] is hereby deleted in its entirety and
replaced with the following new Section 8.2 as follows:
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; (ii) the
1
2
merger of Jaron into D&K, with D&K the surviving company, shall not
constitute a violation of this covenant, and (iii) 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.
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;
(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
2
3
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;
(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.
3
4
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 $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.
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.
3. Financial Covenants. Section 8.3 of the Loan Agreement [RELATING TO
-------------------
SPECIFIC FINANCIAL COVENANTS] is hereby deleted in its entirety and replaced
with the following new Section 8.3:
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 1.25 to 1.0. For purposes of computing the ratio
contemplated herein, (i) the amount of
4
5
Borrowers' Inventory comprising Consolidated Current Assets shall be
computed on a first in, first out basis in accordance with GAAP, and
(ii) any transfers of assets made pursuant to the Securitization
Documents shall be ignored.
(B) Interest Coverage Ratio. Maintain at all times for
-----------------------
each period of three (3) consecutive months (computed on a
rolling-basis commencing with the three month period ending December
31, 1999) a ratio of Net Cash Flow plus Interest Expense to Interest
Expense of not less than (i) 2.0 to 1.0 in the fiscal year ending
June 30, 2000, (ii) 2.25 to 1.0 in the fiscal year ending June 30,
2001 and thereafter.
(C) Maintenance of Capital Base. Maintain at all times
---------------------------
during the periods specified below a Capital Base in an amount not
less than the amount shown below for the period corresponding
thereto (excluding any purchases by D & K of its own stock made
between May 20, 1999 and June 1, 2000 pursuant to a consent letter
from Lender dated May 20, 1999):
Period Amount
------ ------
June 1, 1999 through December 30, 1999 $ 1,480,000
December 31, 1999 through June 29, 2000 $ 3,000,000
June 30, 2000 through June 29, 2001 $10,000,000
June 30, 2001 and thereafter $20,000,000
(D) Cash Flow to Fixed Charges. Maintain for each fiscal
--------------------------
year of Borrowers a ratio of Net Cash Flow minus taxes to Fixed
Charges of not less than 1.5 to 1.0 as of each fiscal year end,
commencing with the fiscal year ending June 30, 2000.
4. Definitions. Appendix A to the Loan Agreement [RELATING TO
-----------
DEFINITIONS] is hereby amended by replacing certain definitions therein with
the new ones set forth below, as follows:
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
5
6
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 reduced by the
aggregate amount of Indebtedness of Jaron to D&K; and the aggregate
amount of available Loans to or on behalf of ▇▇▇▇▇▇ will be reduced by
the aggregate amount of Indebtedness of ▇▇▇▇▇▇ to D&K.
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.
Fixed Charges - For any period means the sum of (i) scheduled
-------------
payments of principal required to be made during such period with respect
to Indebtedness, plus (ii) Capital Expenditures which are not financed.
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
purpose of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a
Capitalized Lease Obligation.
Seasonal Period - A period each year during which the Total Credit
---------------
Facility is increased, beginning on or after October 1 but not later than
December 1 of each year and continuing until six months after
commencement of such Seasonal Period. Each year the Seasonal Period
shall commence upon the date of the first Loan which, together with all
other Loans then outstanding, exceeds $95,000,000.
Total Credit Facility - $95,000,000, and, during the Seasonal
---------------------
Period, $120,000,000.
5. Conditions Precedent. The amendments contained herein are expressly
--------------------
conditioned upon the satisfaction by Borrowers of the following conditions.
Failure of Borrowers to deliver to Lender such documents, instruments or
agreements, each in form and substance acceptable to Lender, no later than
the delivery dates set forth herein, shall mean that the Lender's consents
and the amendments related thereto contained herein are ineffective and void,
and Borrowers shall be in default under the Loan Agreement:
(a) Delivery of this Amendment, duly executed by all Borrowers.
(b) Delivery of duly executed amendments and/or consents by the
parties to the Securitization Documents, containing such terms as are
acceptable to Lender to allow for amendments set forth herein.
(c) Delivery of duly executed amendments and/or consents by all
participants in the Loans, containing such terms as are acceptable to
Lender to allow for the
6
7
amendments set forth herein, including, without limitation, an aggregate
participation of $80,000,000 or more in the Loans.
(d) There shall exist no Default or Event of Default under the
Loan Agreement.
(e) There shall have occurred no material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Borrower or any of their Subsidiaries,
taken as a whole, since June 30, 1999.
(f) 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 the Loan Agreement.
(g) Payment of Lender's fees due on the date hereof, as such fees
have been set out in the Fee Letter of even date herewith.
(h) Delivery of an opinion of counsel to Borrowers or other
evidence acceptable to Lender as to the due authorization of this
Amendment and such other matters as Lender may require.
(i) Delivery of an updated EXHIBIT P To the Loan Agreement.
6. No Claims. Borrowers acknowledge that there are no existing claims,
---------
defenses (personal or otherwise) or rights of set-off or recoupment
whatsoever with respect to any of the Loan Documents. Borrowers agree that
this Amendment in no way acts as a release or relinquishment of any Liens in
favor of the Lender securing payment of the Obligations.
7. Miscellaneous. Except as expressly set forth herein, there are no
-------------
agreements or understandings, written or oral, between any Borrower and
Lender relating to the Loan Agreement and the other Loan Documents that are
not fully and completely set forth herein or therein. Except to the extent
specifically waived or amended herein or in any of the documents,
instruments, or agreements delivered in connection herewith, all terms and
provisions of the Loan Agreement and the other Loan Documents are hereby
ratified and reaffirmed and shall remain in full force and effect in
accordance with the respective terms thereof. This Agreement may be executed
in one or more counterparts, and by different parties on different
counterparts. All such counterparts shall be deemed to be original documents
and together shall constitute one and the same agreement. A signature of a
party delivered by facsimile or other electronic transmission shall be deemed
to be an original signature of such party.
IN WITNESS WHEREOF, this Amendment has been executed and delivered by the
duly authorized representatives of the parties as of the date first above
written.
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
7
8
D & K HEALTHCARE RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior VP & CEO
JARON, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ DRUG CO.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice Chairman
8