1
EXHIBIT 10.26
================================================================================
PURCHASE AND SALE AGREEMENT
among
D&K HEALTHCARE RESOURCES, INC.
as an Originator and initial Servicer,
CERTAIN OTHER SUBSIDIARIES OF D&K HEALTHCARE RESOURCES, INC.
THAT MAY BECOME PARTY HERETO,
as Originators
and
D&K RECEIVABLES CORPORATION,
as the Initial Purchaser
Dated as of August 7, 1998
================================================================================
2
TABLE OF CONTENTS
PAGE
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Agreement to Purchase and Sell................................................4
SECTION 1.2. Timing of Purchases...........................................................5
SECTION 1.3. No Recourse...................................................................6
SECTION 1.4. True Sales....................................................................6
SECTION 1.5. Consideration for Purchases...................................................7
SECTION 1.6. Initial Purchaser Agreement to Make
Demand Loans..................................................................7
SECTION 1.7. Addition of Originators.......................................................7
ARTICLE II CALCULATION OF PURCHASE PRICE
SECTION 2.1. Calculation of Purchase Price.................................................8
ARTICLE III PAYMENT OF PURCHASE PRICE
SECTION 3.1. The Initial Purchase Price Payment...........................................10
SECTION 3.2. Purchase Price Payments......................................................11
SECTION 3.3. Deemed Collections, Etc......................................................12
SECTION 3.4. Payments and Computations, Etc...............................................13
ARTICLE IV CONDITIONS TO PURCHASES
SECTION 4.1. Conditions Precedent to Initial
Purchase.....................................................................14
SECTION 4.2. Conditions Precedent to All Purchases........................................16
SECTION 4.3. Certification as to Representations
and Warranties...............................................................16
SECTION 4.4. Effect of Payment of Purchase Price..........................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Representations and Warranties...............................................17
ARTICLE VI COVENANTS
SECTION 6.1. Affirmative Covenants........................................................20
SECTION 6.2. Negative Covenants...........................................................22
SECTION 6.3. Separate Existence...........................................................23
ARTICLE VII INDEMNIFICATION
SECTION 7.1. Indemnities by the Originators...............................................23
SECTION 7.2. Contribution.................................................................26
SECTION 7.3. AfterTax Basis...............................................................26
(i)
3
ARTICLE VIII ADMINISTRATION AND COLLECTIONS; ADDITIONAL
RIGHTS AND OBLIGATIONS IN RESPECT OF THE
POOL RECEIVABLES
SECTION 8.1. Servicing of Pool Receivables
and Related Rights...........................................................26
SECTION 8.2. Rights of the Initial Purchaser;
Enforcement Rights...........................................................27
SECTION 8.3. Responsibilities of the Originator...........................................28
SECTION 8.4. Further Action Evidencing Purchases..........................................29
ARTICLE IX MISCELLANEOUS
SECTION 9.1. Amendments, Etc..............................................................30
SECTION 9.2. Notices, Etc.................................................................30
SECTION 9.3. Acknowledgment and Consent...................................................31
SECTION 9.4. Binding Effect; Assignability................................................32
SECTION 9.5. Costs, Expenses and Taxes....................................................32
SECTION 9.6. No Proceedings; Limitation on Payments.......................................32
SECTION 9.7. GOVERNING LAW AND JURISDICTION...............................................33
SECTION 9.8. Execution in Counterparts....................................................33
SECTION 9.9. Survival of Termination......................................................34
SECTION 9.10. WAIVER OF JURY TRIAL.........................................................34
SECTION 9.11. Entire Agreement.............................................................34
SECTION 9.12. Headings.....................................................................34
SCHEDULE 9.2 NOTICE ADDRESSES
SCHEDULE I LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
EXHIBIT A FORM OF PURCHASE REPORT
EXHIBIT B FORM OF INITIAL PURCHASER NOTE
EXHIBIT C FORM OF ORIGINATOR NOTE
(ii)
4
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement") is entered into as of August 7,
1998, between D&K HEALTHCARE RESOURCES, INC., a Delaware corporation ("D&K" or,
together with the other Persons who may become parties hereto pursuant to
Section 1.7, an "Originator"), as seller and as initial Servicer, and D&K
RECEIVABLES CORPORATION, a Delaware corporation, as initial purchaser (the
"Initial Purchaser").
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires,
certain terms that are used throughout this Agreement (including the Exhibits
hereto) are defined in Appendix A to the Receivables Purchase Agreement, dated
as of even date herewith, among the Initial Purchaser, as Seller, D&K, as the
initial Servicer, Blue Keel Funding, LLC, as Purchaser, and Fleet National Bank,
as Administrator (as the same may be amended, modified or supplemented from time
to time, the "Receivables Purchase Agreement"). Any reference to "this
Agreement" or "the Purchase and Sale Agreement", including any such reference in
any Exhibit hereto, shall mean this Agreement in its entirety, including the
Exhibits and other attachments hereto, as amended, modified or supplemented from
time to time in accordance with the terms hereof.
Available Funds shall have the meaning assigned to such term in Section
3.2(a) hereof.
Contributed Receivables shall have the meaning assigned to such term in
Section 1.2(b) hereof.
Cost Discount shall have the meaning assigned to such term in Section
2.1 hereof.
Cost Rate shall have the meaning assigned to such term in Section 2.1
hereof.
Deemed Collection means amounts payable by an Originator pursuant to
Section 3.3.
Earned Discount Rate Percentage shall be equal to a fraction (expressed
as a percentage) (x) the numerator of which is the sum of the products obtained
by multiplying (A) each Earned Discount Rate applicable to any portion of the
Asset Interest as of the first day of such Settlement Period, times (B) the
amount of the Capital (or portion thereof) to which such Earned Discount Rate
5
applied on such first day, and (y) the denominator of which is the Capital on
such first day.
Fair Market Value Discount Factor shall have the meaning assigned to
such term in Section 2.1 hereof.
Ineligible Receivable shall have the meaning assigned to such term in
Section 3.3(b) hereof.
Initial Closing Date shall have the meaning assigned to such term in
Section 1.2(a) hereof.
Initial Contributed Receivables shall have the meaning assigned to such
term in Section 1.1(b) hereof.
Initial Cut-Off Date means the Business Day immediately preceding the
Initial Closing Date.
Initial Purchaser Note shall have the meaning assigned to such term in
Section 3.1 hereof.
LIBO Rate shall have the meaning assigned to such term in Section 2.1
hereof.
Loss Discount shall have the meaning assigned to such term in Section
2.1 hereof.
Originator Loan shall have the meaning assigned to such term in Section
1.6 hereof.
Originator Note shall have the meaning assigned to such term in Section
1.6(a) hereof.
Payment Day means (i) the date hereof and (ii) each Business Day
thereafter that an Originator is open for business.
Purchase Price shall have the meaning assigned to such term in Section
2.1 hereof.
Purchase Report shall have the meaning assigned to such term in Section
2.1 hereof.
Related Rights shall have the meaning assigned to such term in Section
1.1(a) hereof.
Sale Indemnified Amounts shall have the meaning assigned to such term
in Section 7.1 hereof.
Sale Indemnified Party shall have the meaning assigned to such term in
Section 7.1 hereof.
-2-
6
Sale Termination Date shall be the Purchase Termination Date under the
Receivables Purchase Agreement.
Seller Material Adverse Effect means, with respect to any event or
circumstance:
(i) an effect on the assets, business, financial condition or
operations of D&K and its Subsidiaries, taken as a whole, which could
reasonably be expected to have a material adverse effect on the
creditworthiness of D&K;
(ii) a material adverse effect on the ability of any Originator
to perform its obligations under this Agreement or any other
Transaction Document to which such Originator, in its capacity as such,
is a party;
(iii) a material adverse effect on the validity or enforceability
as against any Originator of this Agreement or any other Transaction
Document to which any Originator, in its capacity as such, is a party;
(iv) a material adverse effect on the status, existence,
perfection, priority or enforceability of the Initial Purchaser's
interest in the Receivables Pool and the Related Rights; or
(v) a material adverse effect on the validity, enforceability
or collectibility of a material portion of the Receivables Pool.
PRELIMINARY STATEMENTS
1. The Initial Purchaser is a limited purpose corporation, all of the
issued and outstanding shares of capital stock of which are wholly owned by D&K.
2. Each Originator wishes to sell Receivables that it now owns and from
time to time hereafter will own to the Initial Purchaser, and the Initial
Purchaser is willing, on the terms and subject to the conditions contained in
this Agreement, to purchase such Receivables from such Originator at such time.
3. The Initial Purchaser has entered into the Receivables Purchase
Agreement, pursuant to which, among other things, the Initial Purchaser may sell
to the Administrator, for the benefit of Purchaser, undivided ownership
interests in the Receivables and certain Related Rights.
-3-
7
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Agreement to Purchase and Sell.
(a) On the terms and conditions hereinafter set forth, and in
consideration of the Purchase Price, each Originator agrees to sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from such
Originator, at the times set forth in Section 1.2, but prior to the Sale
Termination Date, all of such Originator's right, title, and interest in and to:
(i) each Receivable (other than Initial Contributed Receivables)
of such Originator that existed and was owing to such Originator as of
the close of such Originator's business on the Initial Cut-Off Date, in
the case of D&K, or on the Business Day immediately preceding the day
on which such Originator became a party hereto pursuant to Section 1.7
in the case of each other Originator;
(ii) each Receivable (other than Contributed Receivables) created
or originated by such Originator from the close of such Originator's
business on the Initial CutOff Date, in the case of D&K, or on the
Business Day immediately preceding the day on which such Originator
became a party hereto pursuant to Section 1.7 in the case of each other
Originator, to and including the Sale Termination Date;
(iii) all rights to, but not the obligations under, all related
Contracts and all Related Security with respect thereto;
(iv) all monies due or to become due with respect to the
foregoing;
(v) all books and records related to any of the foregoing;
(vi) all Lock-Box Accounts, all amounts on deposit therein and
all related agreements between such Originator and the Lock-Box Banks,
in each case to the extent constituting or representing items described
in paragraph (vii) below; and
-4-
8
(vii) all Collections in respect of, and other proceeds of,
Receivables or any other of the foregoing (as defined in the UCC)
received on or after the Initial Cut-Off Date, in the case of D&K, or
on the Business Day immediately preceding the day on which such
Originator became a party hereto pursuant to Section 1.7 in the case of
each other Originator, including, without limitation, all funds which
either are received by such Originator, the Initial Purchaser or the
Servicer from or on behalf of the Obligors in payment of any amounts
owed (including, without limitation, finance charges, interest and all
other charges) in respect of Receivables, or are applied to such
amounts owed by the Obligors (including, without limitation, insurance
payments, if any, that such Originator or the Servicer applies in the
ordinary course of its business to amounts owed in respect of any
Receivable and net proceeds of sale or other disposition of repossessed
goods or other collateral or property of the Obligors or any other
party directly or indirectly liable for payment of such Receivable and
available to be applied thereon).
All purchases and capital contributions hereunder shall be made without
recourse, but shall be made pursuant to and in reliance upon the
representations, warranties and covenants of the Originators set forth in each
Transaction Document. The proceeds and rights described in subsections (iii)
through (vii) of this Section 1.1(a) are herein collectively called the "Related
Rights".
(b) Agreement to Contribute. In consideration of the capital stock of
the Initial Purchaser issued to D&K, D&K agrees to contribute, and does hereby
contribute to the Initial Purchaser, and the Initial Purchaser agrees to accept,
and does hereby accept, from D&K, in each case, on the Initial Closing Date, all
of D&K's right, title and interest in and to (i) Receivables, and the Related
Rights with respect thereto, existing on the Initial Cut-Off Date, starting with
the oldest such Receivables such that the aggregate Unpaid Balance of all such
Receivables shall be as close as possible to, but not less than, $1,000,000 (the
"Initial Contributed Receivables") and (ii) all other Contributed Receivables.
SECTION 1.2. Timing of Purchases.
(a) Initial Closing Date Purchase. On the date of the first Purchase
under the Receivables Purchase Agreement (the "Initial Closing Date") D&K shall
sell to the Initial Purchaser, and the Initial Purchaser shall purchase,
pursuant to Section 1.1, D&K's entire right, title and interest in (i) each
Receivable (other than the Initial Contributed Receivables) that existed and was
owing to D&K as of the close of D&K's business on
-5-
9
the Initial Cut-Off Date, and (ii) all Related Rights with respect thereto.
(b) Regular Purchases and Contributions. After the Initial Closing
Date, and continuing until the Sale Termination Date, each Receivable described
in Section 1.1(a)(ii) hereof, and all the Related Rights with respect thereto,
created or originated by each Originator shall be sold or contributed by such
Originator to the Initial Purchaser (without any further action) upon the
creation or origination of such Receivable. All such Receivables, other than
those Receivables indicated on a Purchase Report as having been contributed by
the related Originator to the Initial Purchaser (such other Receivables,
together with the Initial Contributed Receivables, the "Contributed
Receivables"), shall be sold to the Initial Purchaser on such date; all
Contributed Receivables shall be contributed by the related Originator to the
Initial Purchaser on such date.
SECTION 1.3. No Recourse. Except as specifically provided in this
Agreement, the purchase and sale of Pool Receivables and Related Rights under
this Agreement shall be without recourse to the related Originator; provided
that each Originator shall be liable to the Initial Purchaser for all
representations, warranties, covenants and indemnities made by such Originator
pursuant to the terms of this Agreement, it being understood that such
obligation of such Originator will not arise on account of the failure of the
Obligor for credit reasons to make any payment in respect of a Pool Receivable.
SECTION 1.4. True Sales.
(a) Each of each Originator and the Initial Purchaser intend the
transactions hereunder to constitute true sales (or in the case of Contributed
Receivables, conveyances in the form of capital contributions) of Pool
Receivables and the Related Rights by such Originator to the Initial Purchaser
providing the Initial Purchaser with the full benefits of ownership thereof, and
no party hereto intends the transactions contemplated hereunder to be, or for
any purpose to be characterized as, a loan from the Initial Purchaser to D&K.
(b) In the event (but only to the extent) that the conveyance of Pool
Receivables and Related Rights hereunder is characterized by a court or other
governmental authority as a loan rather than a sale or contribution, each
Originator shall be deemed hereunder to have granted to the Initial Purchaser,
and each Originator hereby grants to the Initial Purchaser, a security interest
in all of such Originator's right, title and interest in, to and under all of
the Pool Receivables and Related Rights originated by it, whether now or
hereafter owned, existing or arising. Such security interest shall secure all of
such
-6-
10
Originator's obligations (monetary or otherwise) under this Agreement and the
other Transaction Documents to which it is a party, whether now or hereafter
existing or arising, due or to become due, direct or indirect, absolute or
contingent. The Initial Purchaser shall have, with respect to the property
described in this Section 1.4(b), and in addition to all the other rights and
remedies available to the Initial Purchaser under this Agreement and applicable
law, all the rights and remedies of a secured party under the UCC, and this
Agreement shall constitute a security agreement under Applicable Law.
SECTION 1.5. Consideration for Purchases. On the terms and subject to
the conditions set forth in this Agreement, the Initial Purchaser agrees to make
all Purchase Price payments to the Originators in accordance with Article III.
SECTION 1.6. Initial Purchaser Agreement to Make Demand Loans. On the
terms and subject to the conditions set forth in this Agreement and in the
Receivables Purchase Agreement, the Initial Purchaser agrees to make demand
loans (each such loan being herein called an "Originator Loan") to D&K prior to
the Sale Termination Date in such amounts as D&K may request from time to time;
provided, however, that:
(a) The Originator Loans made to D&K shall be evidenced by a demand
promissory note in the form of Exhibit C to this Agreement issued by D&K to the
order of the Initial Purchaser (such demand promissory note, as it may be
amended, supplemented, endorsed or otherwise modified from time to time in
accordance with the Transaction Documents, together with all promissory notes
issued from time to time in substitution therefor or renewal thereof in
accordance with the Transaction Documents, being called the "Originator Note");
and
(b) No Originator Loan shall be made to D&K to the extent that the
making of such Originator Loan would violate the Receivables Purchase Agreement.
SECTION 1.7. Addition of Originators. Subsidiaries of D&K may be
added as Originators under this Agreement provided that all of the following
conditions have been met:
(i) the conditions precedent set forth in paragraphs (b) through
(k) of Section 4.1 are satisfied with respect to such Subsidiary;
(ii) such Subsidiary executes a joinder agreement, in form and
substance satisfactory to the Initial Purchaser and Administrator,
pursuant to which such Subsidiary agrees to become an Originator
hereunder, assumes all of the obligations of an Originator hereunder
and under the other
-7-
11
Transaction Documents and makes all of the representations
and warranties set forth in Section 5.1;
(iii) D&K executes and delivers a guaranty of such Subsidiary's
obligations hereunder and under the other Transaction Documents in form
and substance satisfactory to the Initial Purchaser and the
Administrator; and
(iv) the Initial Purchaser and the Administrator consent to such
addition in writing.
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1. Calculation of Purchase Price. On each Reporting Date
(commencing with the first Reporting Date following the Initial Closing Date),
the Servicer shall deliver to the Initial Purchaser, the Administrator, the
Liquidity Agent and D&K (if the Servicer is other than D&K) a report in
substantially the form of Exhibit A (each such report being herein called a
"Purchase Report") with respect to the Initial Purchaser's purchases of
Receivables from the Originators
(a) that arose on or prior to the Initial Cut-Off Date (in the
case of the first Purchase Report to be delivered hereunder) and
(b) that arose during the Settlement Period immediately preceding
such Reporting Date (in the case of each successive Purchase Report).
Each Purchase Report shall designate the amount of such Receivables that were
Eligible Receivables on the date of origination (or, in the case of Receivables
transferred or contributed on the Initial Closing Date, on the Initial Closing
Date).
The "Purchase Price" (to be paid to the Originators in accordance with the terms
of Article III) for the Receivables and the Related Rights shall be determined
in accordance with the following formula:
PP = AUB - (AUB X FMVD)
where:
PP = Purchase Price (to be paid to the Originators in
accordance with the terms of Article III) as calculated
on the relevant Reporting Date;
-8-
12
AUB = (i) for purposes of calculating the Purchase Price on
the Initial Closing Date, the aggregate Unpaid Balance
of all Receivables that existed and were owing to D&K
as measured as at the Initial Cut-Off Date, less an
amount equal to the sum of the aggregate Unpaid Balance
of all Initial Contributed Receivables, and
(ii) for purposes of calculating the Purchase Price for
Receivables on each Reporting Date thereafter, the
aggregate Unpaid Balance of the Receivables described in
Section 1.1(a)(ii) hereof that were generated by the
related Originator during the immediately preceding
Settlement Period, less an amount equal to the sum of
the aggregate Unpaid Balance of all Contributed
Receivables, if any, indicated on the related Purchase
Report; and
FMVD = "Fair Market Value Discount Factor" on the
determination date, which is the sum of the Loss
Discount and the Cost Discount, in each case as
calculated on the most recent Reporting Date as set
forth in the definitions below.
"Loss Discount" as measured on the Initial Closing Date or any
Reporting Date means the ratio, expressed as a percentage, of (i) the losses
(i.e. write-offs to the bad debt reserve or other write-offs consistent with the
Credit and Collection Policy, in each case, net of recoveries) recognized for
all Pool Receivables during the period equal to twelve (12) months ending on the
CutOff Date immediately preceding the Initial Closing Date or such Reporting
Date, as the case may be, divided by (ii) the Collections on all Pool
Receivables received during such period.
"Cost Discount" as measured on the Initial Closing Date or any
Reporting Date means a percentage determined in accordance with the following
formula:
CD = (TD/360) x CR
where:
CD = the Cost Discount as measured on such date;
TD = the Days Sales Outstanding, as set forth in the
most recent Purchase Report; and
CR = the Cost Rate as measured on such Reporting Date.
"Cost Rate" as measured on the Initial Closing Date or any
Reporting Date means a per annum percentage rate equal to the sum
-9-
13
of (i) the LIBO Rate for the Initial Closing Date or the related Settlement
Period, as the case may be, plus (ii) 1.50%.
"LIBO Rate" for the Initial Closing Date or any Settlement Period means
the offered rate per annum (rounded upwards, if necessary, to the nearest 1/16th
of one percent) appearing in The Wall Street Journal for one month LIBOR loans
on the Initial Closing Date or the first Business Day of such Settlement Period,
as the case may be.
"Days Sales Outstanding" means a number of days calculated as (i) Sales
as of the end of the second preceding month divided by the Collections for the
preceding month multiplied by (ii) 30.
ARTICLE III
PAYMENT OF PURCHASE PRICE
SECTION 3.1. The Initial Purchase Price Payment.
(a) On or prior to the Initial Closing Date, the Initial Purchaser
shall pay the Purchase Price for the purchase to be made from D&K with respect
to the Receivables existing on or prior to the Initial Cut-Off Date (other than
the Initial Contributed Receivables) (i) in cash in an amount equal to the
amount received by the Initial Purchaser from the Purchaser in connection with
the first Purchase made pursuant to the Receivables Purchase Agreement and (ii)
by the issuance of a promissory note in the form of Exhibit B to this Agreement
payable to the order of D&K in the initial principal amount equal to the
remainder of the Purchase Price owing after subtracting the amount paid in cash
(such promissory note together with the promissory note issued to any other
Originator hereunder, as it may be amended, supplemented, endorsed or otherwise
modified from time to time, together with any promissory notes issued from time
to time in substitution therefor or renewal thereof in accordance with the
Transaction Documents, being called an "Initial Purchaser Note"), each of which
Initial Purchaser Note shall, in accordance with its terms, be subordinated to
all interests in Pool Receivables and Related Rights and all obligations of the
Initial Purchaser, of any nature, whether now or hereafter arising under or in
connection with the Receivables Purchase Agreement.
(b) The Servicer shall hold the Initial Purchaser Note for the benefit
of the related Originator, and shall make all appropriate record-keeping entries
with respect to the Initial Purchaser Note or otherwise to reflect payments on
and adjustments of the Initial Purchaser Note. The Servicer's books and records
shall constitute rebuttable presumptive evidence of
-10-
14
the principal amount of and accrued and unpaid interest on the Initial Purchaser
Note at any time. Each Originator hereby irrevocably authorizes the Servicer to
▇▇▇▇ its Initial Purchaser Note "CANCELED" and to return such Initial Purchaser
Note to the Initial Purchaser upon the full and final payment thereof after the
Sale Termination Date.
SECTION 3.2. Purchase Price Payments. On each Business Day falling
after the date of the Initial Closing Date until the termination of this
Agreement pursuant to Section 9.4, on the terms and subject to the conditions of
this Agreement, the Initial Purchaser shall pay to each Originator the Purchase
Price for the Pool Receivables and Related Rights purchased from such Originator
during the immediately preceding Settlement Period as follows:
(i) First, by paying to such Originator a portion of the
Purchase Price due pursuant to Section 2.1 by depositing into such
account as such Originator shall specify immediately available funds
from monies held by or on behalf of the Initial Purchaser solely to the
extent that such monies do not constitute Collections that are required
to be segregated and held by the Servicer or distributed to the
Administrator or the Purchaser pursuant to the Receivables Purchase
Agreement on the next Settlement Date or required to be paid to the
Servicer as the Servicer's Fee on the next Settlement Date, or
otherwise necessary to pay current expenses of the Initial Purchaser
(in its reasonable discretion)(such available monies, the "Available
Funds"), subject to the terms of the Receivables Purchase Agreement.
Any Collections that have been paid to, or retained by, the related
Originator during such Settlement Period shall be credited towards the
Initial Purchaser's obligation pursuant to this clause first; provided,
however, that, if Collections paid to, or retained by, such Originator
exceed the Purchase Price for Pool Receivables and Related Rights
purchased from such Originator for such Settlement Period, or, absent a
cash payment, the Initial Purchaser shall not have sufficient cash to
meet its payment obligations pursuant to the Receivables Purchase
Agreement, such Originator shall turn over such excess to the Initial
Purchaser;
(ii) Second, to the extent any portion of the Purchase Price
remains unpaid, the principal amount outstanding under the related
Originator Note automatically shall be reduced and deemed paid in an
amount equal to such remaining Purchase Price, until such outstanding
principal amount is reduced to zero; and
-11-
15
(iii) Third, to the extent any portion of the Purchase Price
remains unpaid, the principal amount outstanding under the Initial
Purchaser Note issued to such Originator automatically shall be
increased in an amount equal to such remaining Purchase Price.
To the extent that (x) the amount due pursuant to Section 2.1 with respect to
all Receivables created or originated by an Originator that arose during the
corresponding Settlement Period is exceeded by (y) the amount paid to such
Originator during such Settlement Period pursuant to the foregoing sentences for
such Receivables, such excess shall be treated as a reduction in the principal
amount of the Initial Purchaser Note, effective as of the last day of the
related Settlement Period; provided, however, that if at any time the unpaid
principal amount of the Initial Purchaser Note has been reduced to zero, such
Originator shall pay the Initial Purchaser the remainder owed with respect
thereto in immediately available funds.
SECTION 3.3. Deemed Collections, Etc.
(a) If on any day the Unpaid Balance of any Pool Receivable owed by an
Obligor is reduced or adjusted as a result of any defective, rejected or
returned merchandise or services, any cash discount, any credit, any incorrect
billing, pricing adjustment or any other adjustment by an Originator or any
Affiliate of an Originator, or is reduced or canceled as a result of a setoff in
respect of any claim by the Obligor thereof against an Originator or any
Affiliate of D&K (whether such claim arises out of the same or a related or
unrelated transaction) or as a result of any dispute or any obligation of an
Originator or any Affiliate of an Originator to pay to the related Obligor any
rebate or refund, or to rework any product or service, such Originator shall
deliver to the Servicer in same day funds an amount equal to the amount of such
reduction or adjustment, provided that, prior to the Sale Termination Date, such
amount may be paid by a reduction to the Purchase Price to be paid to such
Originator on the next occurring Reporting Date;
(b) if on any day any of the representations or warranties in Sections
5.1 (i), (k), and (u) hereto is not true with respect to any Pool Receivable
(each such Receivable, an "Ineligible Receivable"), the related Originator shall
deliver to the Servicer in same day funds an amount equal to the Unpaid Balance
of such Pool Receivable for application by the Servicer to the same extent as if
Collections of such Unpaid Balance had actually been received on such date,
provided that prior to the Sale Termination Date, such amount may be paid by a
reduction to the Purchase Price to be paid to such Originator on the next
occurring Reporting Date;
-12-
16
(c) except as provided in paragraph (a) or (b) of this Section 3.3, or
as otherwise required by Applicable Law or the relevant Contract, all
Collections received from an Obligor of any Pool Receivables shall be applied to
the Pool Receivables of such Obligor in the order of the age of such Pool
Receivables, starting with the oldest such Pool Receivable, unless such Obligor
designates in writing its payment for application to specific Pool Receivables;
(d) if and to the extent that the Initial Purchaser shall be required
for any reason to pay over to an Obligor (or any trustee, receiver, custodian or
similar official in any Event of Bankruptcy) any amount received by it
hereunder, such amount shall be deemed not to have been so received but rather
to have been retained by the related Originator and, accordingly, the Initial
Purchaser shall have a claim against such Originator for such amount, payable
when and to the extent that any distribution from or on behalf of such Obligor
is made in respect thereof; and
(e) in the event that an Originator has paid (by effecting a Purchase
Price reduction or otherwise) to the Initial Purchaser the full Unpaid Balance
of any Receivable pursuant to this Section 3.3, the Initial Purchaser shall
reconvey such Receivable and all Related Rights with respect thereto to such
Originator, without recourse, representation or warranty, but free and clear of
all Liens created by the Initial Purchaser; such reconveyed Receivables and all
Related Rights shall no longer be subject to the terms of this Agreement
(including any obligation to turn over Collections with respect thereto).
SECTION 3.4. Payments and Computations, Etc.
(a) All amounts to be paid or deposited by an Originator or the
Servicer hereunder shall be paid or deposited no later than 11:00 a.m. (New York
time) on the day when due in same day funds. All amounts received after 11:00
a.m. (New York time) will be deemed to have been received on the immediately
succeeding Business Day.
(b) Each Originator shall, to the extent permitted by law, pay interest
on any amount not paid or deposited by such Originator (whether as Servicer, or
otherwise) when due hereunder, at an interest rate equal to 2.0% per annum above
the Alternate Base Rate, payable on demand.
(c) All computations of interest under Section 3.4(b) and all
computations of the Purchase Price, fees, and other amounts hereunder shall be
made on the basis of a 360-day year and actual days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business
-13-
17
Day and such extension of time shall be included in the computation of such
payment or deposit.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1. Conditions Precedent to Initial Purchase. The initial
Purchase under this Agreement is subject to the condition precedent that the
Initial Purchaser shall have received each of the following (with copies to the
Administrator), on or before the date of such purchase, each in form and
substance (including the date thereof) satisfactory to the Initial Purchaser and
the Administrator:
(a) The Receivables Purchase Agreement, duly executed by the
parties thereto, together with evidence reasonably satisfactory to the
Initial Purchaser that all conditions precedent to the initial Purchase
of an undivided interest thereunder (other than any condition relating
to the effectiveness of the purchase commitment under this Agreement)
shall have been met;
(b) A certificate of the Secretary of D&K certifying (i) a copy
of the resolutions of its Board of Directors approving this Agreement
and the other Transaction Documents to be delivered by it hereunder and
the transactions contemplated hereby; (ii) the names and true
signatures of the officers authorized on its behalf to sign this
Agreement and the other Transaction Documents to be delivered by it
hereunder (on which certificate the Administrator and Initial Purchaser
may conclusively rely until such time as the Administrator shall
receive from D&K a revised certificate meeting the requirements of this
subsection (b)); (iii) a copy of its by-laws; and (iv) all documents
evidencing other necessary corporate action and governmental approvals,
if any, with respect to this Agreement and the other Transaction
Documents;
(c) The Articles of Incorporation of D&K, duly certified by the
Secretary of State of Delaware, as of a recent date acceptable to
Administrator;
(d) Acknowledgment copies or time stamped receipt copies, of the
proper financing statements (Form UCC-1) that have been duly executed
and name D&K as the debtor and seller and the Initial Purchaser as the
secured party and purchaser (and the Administrator, for the benefit of
the Purchaser, as assignee of the Initial Purchaser) of the Receivables
and the Related Rights or other, similar
-14-
18
instruments or documents, as may be necessary or, in Servicer's or the
Administrators's opinion, desirable under the UCC or any comparable law
of all appropriate jurisdictions to perfect the Initial Purchaser's
ownership interest in all Receivables and Related Rights in which an
ownership interest may be assigned to it hereunder;
(e) A search report provided in writing to and approved by the
Administrator, listing all effective financing statements that name D&K
as debtor or assignor and that are filed in the jurisdictions in which
filings were made pursuant to subsection (d) above and in such other
jurisdictions that Administrator shall reasonably request, together
with copies of such financing statements (none of which shall cover any
Pool Assets), and tax and judgment lien search reports from a Person
satisfactory to Servicer and the Administrator showing no evidence of
such liens filed against D&K;
(f) Duly executed copies of the Lock-Box Agreements with the
Lock-Box Banks;
(g) A pro forma Purchase Report, prepared in respect of the
proposed initial Purchase, assuming an Initial CutOff Date of July 31,
1998;
(h) The Initial Purchaser Note in favor of D&K, duly executed by
the Initial Purchaser;
(i) A certificate from an officer of D&K to the effect that
Servicer and D&K have placed on the most recent, and have taken all
steps reasonably necessary to ensure that there shall be placed on
subsequent, summary master control data processing reports the
following legend (or the substantive equivalent thereof):
THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO D&K
RECEIVABLES CORPORATION PURSUANT TO A PURCHASE AND SALE
AGREEMENT, DATED AS OF AUGUST 7, 1998, AS AMENDED FROM TIME TO
TIME, BETWEEN D&K HEALTHCARE RESOURCES, INC., CERTAIN
SUBSIDIARIES OF D&K AND D&K RECEIVABLES CORPORATION; AND AN
OWNERSHIP AND SECURITY INTEREST IN THE RECEIVABLES DESCRIBED
HEREIN HAS BEEN GRANTED AND ASSIGNED TO FLEET NATIONAL BANK, AS
ADMINISTRATOR, PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT,
DATED AS OF AUGUST 7, 1998, AMONG D&K HEALTHCARE RESOURCES,
INC., D&K RECEIVABLES CORPORATION, BLUE KEEL FUNDING, LLC, AND
FLEET NATIONAL BANK, AS THE ADMINISTRATOR; and
-15-
19
(j) Such other agreements, instruments, UCC financing
statements, certificates, opinions and other documents as the Initial
Purchaser or the Administrator may reasonably request.
SECTION 4.2. Conditions Precedent to All Purchases. Each purchase under
this Agreement is subject to the condition precedent that the agreement of the
Originator to sell Pool Receivables and Related Rights, and the agreement of the
Initial Purchaser to purchase Pool Receivables and Related Rights, shall not
have terminated pursuant to Section 9.4 of this Agreement, and shall be subject
further to the conditions precedent that:
(a) in the case of each purchase, the Servicer shall have
delivered to the Initial Purchaser on or prior to such purchase, a
completed Purchase Report with respect to the immediately preceding
calendar month, together with such additional information as may be
reasonably requested by the Initial Purchaser; and
(b) the representations and warranties contained in Article V
are correct on and as of such day as though made on and as of such day
and shall be deemed to have been made on such day (except that any such
representation or warranty that is expressly stated as being made only
as of a specified earlier date shall be true and correct in all
material respects as of such earlier date).
SECTION 4.3. Certification as to Representations and Warranties. Each
Originator, by accepting the Purchase Price (whether in cash or by an increase
in the principal amount outstanding under the Initial Purchaser Note or a
reduction of the Originator Note) paid for each purchase of Pool Receivables and
Related Rights on any day, shall be deemed to have certified that its
representations and warranties contained in Article V are true and correct on
and as of such day, with the same effect as though made on and as of such day.
SECTION 4.4. Effect of Payment of Purchase Price. Upon the payment of
the Purchase Price (whether in cash or by an increase in the principal amount
outstanding under an Initial Purchaser Note or a reduction of an Originator
Note) for any purchase of Pool Receivables and Related Rights, title to such
Pool Receivables and Related Rights shall vest in the Initial Purchaser, whether
or not the conditions precedent to such purchase were in fact satisfied;
provided that the Initial Purchaser shall not be deemed to have waived any claim
it may have under this Agreement for the failure by an Originator in fact to
satisfy any such condition precedent.
-16-
20
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Representations and Warranties. In order to induce the
Initial Purchaser to enter into this Agreement and to make purchases
thereunder, D&K hereby represents and warrants as follows:
(a) Organization and Good Standing. D&K has been duly organized
and is validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are presently
owned and such business is presently conducted.
(b) Due Qualification. D&K is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such
qualification, licenses or approvals except where the failure to so
qualify or have such licenses or approvals has not had, and could not
reasonably be expected to have, a Seller Material Adverse Effect.
(c) Power and Authority; Due Authorization. D&K (i) has all
necessary power, authority and legal right to (A) execute and deliver
this Agreement and the other Transaction Documents to which it is a
party, (B) carry out the terms of the Transaction Documents to which it
is a party, and (C) sell and assign the Receivables and Related Rights
on the terms and conditions herein provided and (ii) has duly
authorized by all necessary corporate action the execution, delivery
and performance of this Agreement and the other Transaction Documents
to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each
other Transaction Document to be signed by D&K when duly executed and
delivered will constitute, a legal, valid and binding obligation of D&K
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to
which D&K is a party and the
-17-
21
fulfillment of the terms hereof and thereof will not (i) conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under the D&K's articles of incorporation or by-laws or any Contractual
Obligation of D&K, (ii) result in the creation or imposition of any
Lien upon any of D&K's properties pursuant to the terms of any such
Contractual Obligation, other than this Agreement, or (iii) violate any
Applicable Law.
(f) No Proceedings. There is no litigation, proceedings or
investigations pending or, to the best of D&K's knowledge, threatened,
before any Governmental Authority or arbitrator (i) asserting the
invalidity of this Agreement or any other Transaction Document to which
D&K is a party, (ii) seeking to prevent the sale and assignment of the
Receivables and Related Rights, the collectibility of the Receivables
or the consummation of any of the other transactions contemplated by
this Agreement or any other Transaction Document, or (iii) seeking any
determination or ruling that could reasonably be expected to have a
Seller Material Adverse Effect.
(g) Government Approvals. No Governmental Action is required for
the due execution, delivery and performance by D&K of this Agreement or
any other Transaction Document to which it is a party, other than the
filing of the UCC financing statements referred to in Section 4.1, all
of which, at the time required in Section 4.1, shall have been duly
made and shall be in full force and effect.
(h) Securities Exchange Act. No proceeds of any purchase will be
used to acquire any equity security of a class which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
(i) Quality of Title; Valid Sale; Etc. Upon its creation and
prior to its sale or contribution to the Initial Purchaser under this
Agreement, it is the legal and beneficial owner of each of the
Receivables and the Related Rights originated by it free and clear of
any Lien; and upon each purchase or contribution the Initial Purchaser
shall acquire a valid and enforceable ownership interest in each Pool
Receivable then existing or thereafter arising and in the Related
Rights with respect thereto, free and clear of any Lien, enforceable
against all creditors of, and purchasers from, D&K. Each Pool
Receivable constitutes an "account" as such term is defined in the UCC.
No effective financing statement or other instrument similar in effect
covering any Pool Receivable or Related Rights with respect thereto is
on file in any recording office, except those
-18-
22
filed in favor of the Initial Purchaser pursuant to this Agreement and
in favor of the Administrator pursuant to the Receivables Purchase
Agreement.
(j) Accuracy of Information. Each report, information, exhibit,
financial statement, document, book, record or report furnished or to
be furnished at any time by or on behalf of it to the Initial Purchaser
or the Administrator in connection with this Agreement is or will be
accurate in all material respects as of its date or (except as
otherwise disclosed to the Administrator at such time) as of the date
so furnished, and no such item contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not
materially misleading.
(k) Offices. The principal place of business and chief executive
office of D&K are located at the address of D&K referred to in Section
9.2, and the offices where D&K keeps all its books, records and
documents evidencing or relating to Pool Receivables are located at the
address of D&K referred to in Section 9.2 (or at such other locations,
notified to the Administrator in accordance with Section 6.1(e), in
jurisdictions where all action required by Section 8.4 has been taken
and completed).
(l) Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(m) Margin Regulations. The use of all funds obtained by D&K
under this Agreement will not conflict with or contravene any of
Regulations G, T, U or X promulgated by the Federal Reserve Board from
time to time.
(n) Maintenance of Books and Records. It has accounted for each
sale of Pool Receivables and Related Rights in its books and financial
statements as sales, consistent with GAAP.
(o) Credit and Collection Policy. It has complied in all
material respects with the Credit and Collection Policy with regard to
each Receivable.
(p) Solvency. It is solvent; and at the time of (and immediately
after) each sale pursuant to this Agreement it shall be solvent.
-19-
23
(q) Compliance with Transaction Documents. It, as Servicer or
Originator, has complied with all of the terms, covenants and
agreements contained in this Agreement and the other Transaction
Documents applicable to it.
(r) Corporate Name. D&K's complete corporate name is set forth
in the preamble to this Agreement, and, other than D&K Wholesale Drug,
Inc., D&K does not use and has not during the last six years used any
other corporate name, trade name, doing business name or fictitious
name.
(s) Investment Company Act. It is not, and is not controlled by,
an "investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended.
(t) Eligible Receivables. Each Pool Receivable sold or
contributed by it to the Initial Purchaser hereunder that is designated
as an Eligible Receivable on a Purchase Report is in fact an Eligible
Receivable.
ARTICLE VI
COVENANTS
SECTION 6.1. Affirmative Covenants. From the date hereof
until the Final Payout Date:
(a) Compliance with Laws, Etc. Each Originator will comply in
all material respects with all Applicable Laws, including those with
respect to the Pool Receivables and the related Contracts, except where
noncompliance could not reasonably be expected to have a Seller
Material Adverse Effect.
(b) Preservation of Corporate Existence. Each Originator will
preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its formation, and qualify and remain
qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification could reasonably be
expected to have a Seller Material Adverse Effect.
(c) Audits. (i) Each Originator will at any time and from time
to time during regular business hours, permit the Administrator or any
of its agents or representatives, (A) to examine and make copies of and
abstracts from all books, records and documents (including, without
limitation,
-20-
24
computer tapes and disks) in its possession or under its control
relating to Pool Receivables, (B) to visit its offices and properties
for the purpose of examining such materials described in clause (i)(A)
above, and to discuss matters relating to Pool Receivables or its
performance hereunder with any of its officers or employees having
knowledge of such matters, and (C) to verify the existence and amount
of the Pool Receivables; and (ii) without limiting the provisions of
clause (i) above, from time to time on request of Administrator, permit
certified public accountants or other auditors acceptable to the
Administrator to conduct, at such Originator's expense, a review of its
books and records with respect to the Pool Receivables; provided,
however that, unless a Liquidation Event has occurred and is
continuing, no Originator shall be obligated to pay for more than one
review in each calendar year.
(d) Keeping of Records and Books of Account. Each Originator
will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing Pool Receivables in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records
and other information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without limitation,
records adequate to permit the daily identification of each new Pool
Receivable and all Collections of and adjustments to each existing Pool
Receivable).
(e) Performance and Compliance with Receivables and Contracts.
Each Originator will, at its expense, timely and fully perform and
comply with all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Pool Receivables and
all other agreements related to such Pool Receivables, except where
failure to do so would not materially adversely affect the validity,
enforceability or collectibility of the related Pool Receivable.
(f) Location of Records. Each Originator will keep its principal
place of business and chief executive office, and the offices where it
keeps its records concerning the Pool Receivables and all related
Contracts and all other agreements related to such Pool Receivables
(and all original documents relating thereto), at its address(es)
referred to in Section 9.2 or, upon 30 days' prior written notice to
the Administrator, at such other locations in jurisdictions where all
action required by Section 8.4 shall have been taken and completed.
-21-
25
(g) Credit and Collection Policies. Each Originator, at its own
expense, will timely and fully perform and comply in all material
respects with the Credit and Collection Policy in regard to each Pool
Receivable and the related Contracts.
(h) Collections. Each Originator will instruct (i) all Obligors
to cause all Collections to be sent to a LockBox that is the subject of
a Lock-Box Agreement and (ii) each Lock-Box Bank to deposit all such
Collections directly into a Lock-Box Account that is the subject of a
Lock-Box Agreement. In the event that any Originator receives
Collections directly from any Obligor, any Originator shall deposit
such Collections into a Lock-Box Account within two Business Days of
receipt thereof.
SECTION 6.2. Negative Covenants. From the date hereof until the Final
Payout Date:
(a) Sales, Liens, Etc. No Originator will, except as otherwise
provided herein or in any other Transaction Document, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Lien upon or with respect to, any Pool Receivable
or any interest therein.
(b) Extension or Amendment of Receivables. No Originator will,
except as otherwise permitted in any other Transaction Document,
extend, amend or otherwise modify, or permit Servicer to extend, amend
or otherwise modify, the terms of any Pool Receivable; or amend, modify
or waive, or permit Servicer to amend, modify or waive, any term or
condition of any Contract related to a Pool Receivable.
(c) Change in Business or Credit and Collection Policy. No
Originator will make any change in the character of its business or in
the Credit and Collection Policy, which change could impair the
collectibility of any Pool Receivable or otherwise adversely affect the
interests or remedies of the Administrator, Purchaser or the Initial
Purchaser under this Agreement or any other Transaction Document.
(d) Change in Payment Instructions to Obligors. No Originator
will add or terminate any bank as a Lock-Box Bank or any Lock-Box
Account from those listed in Schedule I or make any change, or permit
Servicer to make any change, in its instructions to Obligors regarding
payments to be made to the Initial Purchaser or Servicer or payments to
be made to any Lock-Box Bank, unless the Administrator shall have
received notice of such addition, termination or change and
-22-
26
duly executed copies of Lock-Box Agreements with each new Lock-Box Bank
or with respect to each new Lock-Box Account, as the case may be.
(e) Mergers, Acquisitions, Sales, etc. No Originator will (i) be
a party to any merger or consolidation, or purchase or otherwise
acquire all or any substantial part of the Properties of any other
Person without the consent of the Administrator (provided that the
consolidation of PBI with D&K shall not constitute a violation of this
covenant so long as such consolidation does not include a merger and so
long as D&K does not become directly or indirectly liable for any
Indebtedness of PBI), or (ii) sell, transfer, convey or lease all or
any substantial part of its assets, or sell or assign with or without
recourse any Receivables or any interest therein (other than pursuant
hereto or to the Receivables Purchase Agreement).
(f) Deposits to Special Accounts. No Originator will deposit or
otherwise credit, or cause or permit to be so deposited or credited, to
any Lock-Box Account cash or cash proceeds other than Collections of
Pool Receivables.
SECTION 6.3. Separate Existence. Each Originator hereby acknowledges
that Purchaser and the Administrator are entering into the transactions
contemplated by the other Transaction Documents in reliance upon the Initial
Purchaser's identity as a legal entity separate from each Originator. Therefore,
from and after the date hereof, each Originator shall take all steps
specifically required by the Transaction Documents or by the Initial Purchaser,
Purchaser or Administrator to continue the Initial Purchaser's identity as a
separate legal entity and to make it apparent to third Persons that the Initial
Purchaser is an entity with assets and liabilities distinct from those of such
Originator and any other Person, and is not a division of such Originator or any
other Person.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnities by the Originators. Without limiting any other
rights which the Initial Purchaser and each of its permitted assigns, officers,
directors, employees and agents (each of the foregoing Persons being
individually called a "Sale Indemnified Party") may have hereunder or under
applicable law, each Originator, jointly and severally, hereby agrees to
indemnify the Initial Purchaser and each Sale Indemnified Party
-23-
27
from and against any and all damages, losses, claims, judgments, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing collectively being called "Sale Indemnified
Amounts") arising out of or resulting from this Agreement (whether directly or
indirectly) or the use of proceeds of purchases or the ownership of any Pool
Receivable or Related Rights, excluding, however, (a) Sale Indemnified Amounts
to the extent resulting from gross negligence or willful misconduct on the part
of the Initial Purchaser or such Sale Indemnified Party, (b) Sale Indemnified
Amounts to the extent the same includes losses in respect of Pool Receivables
and reimbursement therefor that would constitute credit recourse to the
Originators for the amount of any Pool Receivable or Related Rights not paid by
the related Obligor for credit reasons, or (c) any net income taxes or franchise
taxes imposed on the Initial Purchaser or such Sale Indemnified Party by the
jurisdiction under the laws of which such Sale Indemnified Party is organized or
any political subdivision thereof. Without limiting or being limited by the
foregoing, but subject to the exclusions set forth in the immediately preceding
sentence, each Originator, jointly and severally, shall pay on demand to the
Initial Purchaser and each Sale Indemnified Party any and all amounts necessary
to indemnify the Initial Purchaser and such Sale Indemnified Party from and
against any and all Sale Indemnified Amounts relating to or resulting from any
of the following:
(i) the transfer by any Originator of an interest in any
Receivable or Related Rights to any Person other than the Initial
Purchaser;
(ii) the failure of any information provided by any Originator,
as Servicer or otherwise, to the Initial Purchaser, the Purchaser, the
Administrator or the Servicer with respect to Pool Receivables or this
Agreement to be true, correct and complete;
(iii) the failure of any representation or warranty or statement
made or deemed made by any Originator (or any of its officers), as
Servicer or otherwise, under or in connection with this Agreement to
have been true and correct when made;
(iv) the failure by any Originator, as Servicer or otherwise,
to comply with any Applicable Law, with respect to any Pool Receivable
or Related Rights; or the failure of any Pool Receivable or Related
Rights to conform to any such Applicable Law;
(v) the failure to vest and maintain vested in the Initial
Purchaser a valid and enforceable ownership interest
-24-
28
in each Pool Receivable at any time existing and the Related Rights
with respect thereto, free and clear of any Lien, other than a Lien
arising solely as a result of an act of the Initial Purchaser, the
Purchaser, the Liquidity Agent or the Administrator, whether existing
as the time of purchase of such Pool Receivable or at any time
thereafter;
(vi) the failure of any Originator to have filed, or any delay
in filing, financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Pool Receivables and the Related
Rights in respect thereof, whether at the time of any purchase or at
any subsequent time;
(vii) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any Pool
Receivable (including, without limitation, a defense based on such Pool
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the goods or
services related to such Pool Receivable or the furnishing or failure
to furnish such goods or services or relating to collection activities
with respect to such Pool Receivable (if such collection activities
were performed by any Originator or any of its Affiliates, acting as
Servicer or by any agent or independent contractor retained by any
Originator or any of its Affiliates);
(viii) any failure of any Originator, as Servicer or otherwise,
to perform its duties or obligations in accordance with the provisions
hereof or under the Receivables Purchase Agreement or to perform its
duties or obligations under the Contracts;
(ix) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services which are the subject of any
Contract;
(x) the commingling of Collections of Pool Receivables at any
time with other funds;
(xi) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or the ownership of
any Pool Receivable or Related Rights;
(xii) any tax or governmental fee or charge (but not including
taxes upon or measured by net income or
-25-
29
representing a franchise or unincorporated business tax on such Sale
Indemnified Party), all interest and penalties thereon or with respect
thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same,
which may arise by reason of the purchase or ownership of the
Receivables generated by any Originator or any Related Rights connected
with any such Receivables; or
(xiii) any requirement that all or a portion of the
distributions made to the Initial Purchaser pursuant to this Agreement
shall be rescinded or otherwise must be returned to any Originator for
any reason.
SECTION 7.2. Contribution. If for any reason the indemnification
provided above in this Article VII (and subject to the exceptions set forth
therein) is unavailable to the Initial Purchaser or a Sale Indemnified Party or
is insufficient to hold the Initial Purchaser or a Sale Indemnified Party
harmless, then the Originators shall contribute to the maximum amount of Sale
Indemnified Amounts payable or paid by the Initial Purchaser or such Sale
Indemnified Party in such proportion as is appropriate to reflect not only the
relative benefits received by the Initial Purchaser or such Sale Indemnified
Party on the one hand and the Originators on the other hand, but also the
relative fault of such Sale Indemnified Party (if any) and the Originators and
any other relevant equitable considerations.
SECTION 7.3. After-Tax Basis. Indemnification hereunder shall be in an
amount necessary to make the Sale Indemnified Party whole after taking into
account any tax consequences to the Sale Indemnified Party of the receipt of the
indemnity provided hereunder, including the effect of such tax or refund on the
amount of tax measured by net income or profits which is or was payable by the
Sale Indemnified Party.
ARTICLE VIII
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE POOL RECEIVABLES
SECTION 8.1. Servicing of Pool Receivables and Related Rights.
Consistent with the Initial Purchaser's ownership of the Pool Receivables and
the Related Rights, the Initial Purchaser shall have the sole right to service,
administer and collect the Pool Receivables, to assign such right and to
delegate such right to others. In consideration of the Initial Purchaser's
purchase of the Pool Receivables and the Related Rights, each Originator agrees
to cooperate fully with the Initial Purchaser to facilitate the full and proper
performance of such duties and
-26-
30
obligations for the benefit of the Initial Purchaser, the Purchaser, and the
Administrator. To the extent that the Initial Purchaser, individually or
through the Servicer, has granted or grants powers of attorney to the
Administrator under the Receivables Purchase Agreement, each Originator hereby
grants a corresponding power of attorney on the same terms to the Initial
Purchaser. Each Originator hereby acknowledges and agrees that the Initial
Purchaser, in all of its capacities, shall assign to the Administrator for the
benefit of the Purchaser and the Administrator such powers of attorney and
other rights and interests granted by such Originator to the Initial Purchaser
hereunder, and agrees to cooperate fully with the Administrator in the exercise
of such rights.
SECTION 8.2. Rights of the Initial Purchaser; Enforcement
Rights.
(a) The Initial Purchaser shall have no obligation to account for, to
replace, to substitute or to return any Receivables and Related Rights to any
Originator. The Initial Purchaser shall have no obligation to account for, or to
return to any Originator, Collections, or any interest or other finance charge
collected pursuant thereto, without regard to whether such Collections and
charges are in excess of the Purchase Price for such Pool Receivables and
Related Rights.
(b) The Initial Purchaser shall have the unrestricted right to further
assign, transfer, deliver, hypothecate, subdivide or otherwise deal with the
Pool Receivables and Related Rights, and all of the Initial Purchaser's right,
title and interest in, to and under this Agreement, on whatever terms the
Initial Purchaser shall determine, pursuant to the Receivables Purchase
Agreement or otherwise.
(c) The Initial Purchaser shall have the sole right to retain any gains
or profits created by buying, selling or holding the Pool Receivables and
Related Rights and, except as expressly set forth in the Transaction Documents,
shall have the sole risk of and responsibility for losses or damages created by
such buying, selling or holding.
(d) At any time following the designation of a Servicer (other than
D&K) in accordance with the Receivables Purchase Agreement:
(i) the Administrator may direct the Obligors that payment of
all amounts payable under any Pool Receivable be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct D&K to give notice of the
Initial Purchaser's interest in the Pool Receivables
-27-
31
or the Purchaser's interest in Pool Receivables to each Obligor, which
notice shall direct that payments with respect to Pool Receivables be
made directly to the Administrator or its designee, and upon such
instruction from the Administrator D&K shall give such notice at its
expense; provided, that if D&K fails to so notify each Obligor, the
Administrator may so notify the Obligors; and
(iii) the Administrator may request D&K to, and upon such
request D&K shall, (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Rights
(including, without limitation, computer programs, tapes and disks,
other than excluded data), and make the same available to the
Administrator or its designee at a place selected by the Administrator,
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections with respect to the Pool
Receivables in a manner acceptable to the Administrator and, promptly
upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the
Administrator or its designee.
(e) Each Originator hereby authorizes the Initial Purchaser, and
irrevocably appoints the Initial Purchaser as its attorney-in-fact with full
power of substitution and with full authority in the place and stead of such
Originator, which appointment is coupled with an interest, to take any and all
steps in the name of such Originator and on behalf of such Originator necessary
or desirable, in the determination of the Initial Purchaser, to collect any and
all amounts or portions thereof due under any and all Pool Receivables or
Related Rights, including, without limitation, endorsing the name of such
Originator on checks and other instruments representing Collections and
enforcing such Pool Receivables and Related Rights.
SECTION 8.3. Responsibilities of the Originator. Anything
herein to the contrary notwithstanding:
(a) each Originator agrees to deliver directly to the Servicer (for the
Initial Purchaser's account), within two (2) Business Days of receipt thereof,
any Collections that it receives, in the form so received, and agrees that all
Collections shall be deemed to be received in trust for the Initial Purchaser
and shall be maintained and segregated separate and apart from all other funds
and moneys of such Originator until delivery of the Collections to the Servicer;
(b) each Originator agrees to instruct (i) all Obligors to cause all
Collections to be sent to a Lock-Box that is the subject of a Lock-Box Agreement
and (ii) each Lock-Box Bank to
-28-
32
deposit all such Collections directly into a Lock-Box Account that is the
subject of a Lock-Box Agreement; and
(c) each Originator shall (i) perform all of its obligations hereunder
and under the Contracts related to the Pool Receivables and Related Rights (and
under its agreements with the Lock-Box Banks) to the same extent as if the Pool
Receivables and Related Rights had not been sold hereunder, and the exercise by
the Initial Purchaser or its designee or assignee of the Initial Purchaser's
rights hereunder or in connection herewith shall not relieve such Originator
from such obligations and (ii) pay when due any taxes, including, without
limitation, any sales taxes payable in connection with the Pool Receivables and
their creation and satisfaction. Notwithstanding anything to the contrary in
this Agreement, none of the Initial Purchaser, the Administrator or the
Purchaser shall have any obligation or liability with respect to any Receivable
or Related Rights nor shall any of them be obligated to perform any of the
obligations of any Originator under any of the foregoing.
SECTION 8.4. Further Action Evidencing Purchases. Each Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action, in
order to perfect, protect or more fully evidence the purchase of the Pool
Receivables and the Related Rights by the Initial Purchaser hereunder, or to
enable the Initial Purchaser to exercise or enforce any of its rights hereunder
or under any other Transaction Document. Each Originator further agrees from
time to time, at its expense, promptly to take all action that the Initial
Purchaser, the Servicer or the Administrator may reasonably request in order to
perfect, protect or more fully evidence such purchase of the Pool Receivables
and the Related Rights or to enable the Initial Purchaser or the Purchaser (as
assignee of the Initial Purchaser) or the Administrator to exercise or enforce
any of its or their respective rights hereunder or under any other Transaction
Document in respect of the Pool Receivables and the Related Rights. Without
limiting the generality of the foregoing each Originator will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as the Initial Purchaser or the Administrator may reasonably determine
to be necessary or appropriate; and
(b) ▇▇▇▇ the master data processing records evidencing the Pool
Receivables and, if requested by the Initial Purchaser or the Administrator, to
the extent reasonably practicable, legend the related Contracts, to reflect the
sale of the Pool
-29-
33
Receivables and Related Rights pursuant to this Agreement and the Receivables
Purchase Agreement.
Each Originator hereby authorizes the Initial Purchaser or its designee
or assignee to file one or more financing or continuation statements, and
amendments thereto and assignments thereof, relative to all or any of the Pool
Receivables and Related Rights of such Originator, in each case whether now
existing or hereafter generated. If an Originator fails to perform any of its
agreements or obligations under this Agreement, the Initial Purchaser or its
designee or assignee may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the reasonable expenses of the
Initial Purchaser or its designee or assignee incurred in connection therewith
shall be payable by the Originator under Section 7.1.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by any Originator therefrom shall
be effective unless in a writing signed by the Initial Purchaser, and consented
to in writing by the Administrator, and any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Initial Purchaser or the Administrator to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
SECTION 9.2. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise expressly stated herein, be in
writing (including facsimile communication) and shall be personally delivered or
sent by certified mail, postage prepaid, or by facsimile, to the intended party
at the address or facsimile number of such party set forth on Schedule 9.2 or at
such other address or facsimile number as shall be designated by such party in a
written notice to the other parties hereto. All such notices and communications
shall be effective, (a) if personally delivered, when received, (b) if sent by
certified mail, three (3) Business Days after having been deposited in the mail,
postage prepaid, (c) if sent by overnight courier, one (1) Business Day after
having been given to such courier, and (d) if transmitted by facsimile, when
sent, receipt confirmed by telephone or electronic means.
-30-
34
SECTION 9.3. Acknowledgment and Consent.
(a) Each of D&K, as an Originator and as initial Servicer, and each
other Originator acknowledges that, contemporaneously herewith or at any time
hereafter, the Initial Purchaser is assigning or will assign to the
Administrator, for the benefit of the Purchaser, pursuant to the Receivables
Purchase Agreement, one or more undivided interests in all of the Initial
Purchaser's rights, title and interest in, to and under the Pool Receivables and
Related Rights, and all of the Initial Purchaser's right, title and interest in,
to and under this Agreement, it being understood that such assignment shall not
relieve any party hereto from (or require the Purchaser or the Administrator to
undertake) the performance of any term, covenant or agreement on the part of any
party hereto to be performed or observed under or in connection with this
Agreement. Each of D&K, as Originator and as initial Servicer, and each other
Originator hereby consents to such assignments, including, without limitation,
the assignment by the Initial Purchaser of (i) the right of the Initial
Purchaser, at any time, to enforce this Agreement against the Originators and
the obligations of the Originators hereunder, (ii) the right to appoint a
successor to the Servicer as set forth in the Receivables Purchase Agreement,
(iii) the right, at any time, to give or withhold any and all consents,
requests, notices, directions, approvals, demands, extensions or waivers under
or with respect to this Agreement, any other Transaction Document or the
obligations in respect of the Originators thereunder to the same extent as the
Initial Purchaser may do, and (iv) all of the Initial Purchaser's rights,
remedies, powers and privileges, and all claims of the Initial Purchaser against
each Originator, under or with respect to this Agreement and the other
Transaction Documents (whether arising pursuant to the terms of this Agreement
or otherwise available at law or in equity). Each of the parties hereto
acknowledges and agrees that the Purchaser, the Administrator and the other
Indemnified Parties are third party beneficiaries of the rights of the Initial
Purchaser arising hereunder and under the other Transaction Documents to which
any Originator is a party.
(b) Each Originator hereby agrees to execute all agreements,
instruments and documents, and to take all other action, that the Initial
Purchaser or the Administrator determines is necessary or reasonably desirable
to evidence its consent described in Section 9.3(a).
(c) Each Originator hereby acknowledges that its obligations to the
Purchaser and the Administrator as assignees of the Initial Purchaser are and
shall be, to the extent permitted by Applicable Law or not prohibited by any
order of any court or administrative or regulatory authority, absolute and
unconditional under any and all circumstances and shall be
-31-
35
unaffected by any claims, offsets or other defenses such Originator may have
against the Initial Purchaser, and each Originator agrees that it shall not
assert or interpose any such claims, offsets or defenses as a defense to its
performance of its obligations under the Transaction Documents to which it is a
party.
SECTION 9.4. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Initial Purchaser, each Originator
and their respective successors and permitted assigns. No Originator may assign
its rights hereunder or any interest herein without the prior written consent of
the Initial Purchaser, the Administrator and the Liquidity Agent; subject to
Section 9.3, the Initial Purchaser may not assign its rights hereunder or any
interest herein without the prior written consent of D&K, the Administrator and
the Liquidity Agent. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the date after the Sale Termination Date on which
each Originator has received payment in full for all of its Receivables and
Related Rights conveyed pursuant to Section 1.1 hereof and has paid and
performed all of its obligations hereunder in full. The rights and remedies with
respect to any breach of any representation and warranty made by any Originator
pursuant to Article V shall be continuing and shall survive any termination of
this Agreement.
SECTION 9.5. Costs, Expenses and Taxes. In addition to the rights of
indemnification granted under Article VII, each Originator, jointly and
severally, agrees to pay on demand all costs and expenses in connection with the
preparation, execution, delivery and administration (including, without
limitation, periodic auditing of Pool Receivables) of this Agreement and the
other Transaction Documents, and any amendment, modification or waiver of or
consent to any of the foregoing, including, without limitation, attorneys' fees
for the Administrator, the Initial Purchaser and their respective Affiliates and
agents with respect thereto and with respect to advising the Administrator, the
Initial Purchaser and their respective Affiliates and agents as to their rights
and remedies under this Agreement and the other Transaction Documents, and all
costs and expenses, if any (including, without limitation, attorneys' fees
(including the allocated fees of in-house counsel)), of the Administrator, the
Initial Purchaser and their respective Affiliates and agents, in connection with
the enforcement of this Agreement and the other Transaction Documents.
SECTION 9.6. No Proceedings; Limitation on Payments.
(a) Each Originator hereby agrees that it will not institute against,
or join any other Person in instituting
-32-
36
against, the Initial Purchaser any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after the latest
maturing Commercial Paper Note is paid in full. The foregoing shall not limit
any Originator's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person other
than an Originator.
(b) Notwithstanding any provisions contained in this Agreement to the
contrary, the Initial Purchaser shall not, and shall not be obligated to, pay
any amount pursuant to this Agreement unless the Initial Purchaser has excess
cash flow from operations or has received funds with respect to such obligation
which may be used to make such payment and, in each case, such payment is
permitted by the Receivables Purchase Agreement.
SECTION 9.7. GOVERNING LAW AND JURISDICTION.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE
EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE INITIAL
PURCHASER IN THE POOL RECEIVABLES AND THE RELATED RIGHTS IS GOVERNED BY THE LAWS
OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY UNITED STATES FEDERAL
COURT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY TRANSACTION DOCUMENT. EACH
PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 9.8. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
-33-
37
SECTION 9.9. Survival of Termination. The provisions of Section 1.4,
Article VII, Section 9.3, Section 9.5, Section 9.6, Section 9.7, Section 9.10
and this Section 9.9 shall survive any termination of this Agreement.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH
OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
SECTION 9.11. Entire Agreement. This Agreement and the other
Transaction Documents embodies the entire agreement and understanding of the
parties hereto, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof. The Exhibits, Schedules and Annexes to this Agreement
shall be deemed incorporated by reference into this Agreement as if set forth
herein.
SECTION 9.12. Headings. The captions and headings of this Agreement and
in any Exhibit hereto are for convenience of reference only and shall not affect
the interpretation hereof or thereof.
-34-
38
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
D&K HEALTHCARE RESOURCES, INC., as
Originator and as an initial
Servicer
By:________________________________
Name:
Title:
D&K RECEIVABLES CORPORATION, as
Initial Purchaser
By:________________________________
Name:
Title:
PURCHASE AND
SALE AGREEMENT
39
SCHEDULE I
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank Lock-Box Account
40
EXHIBIT A
FORM OF PURCHASE REPORT
PURCHASE REPORT
D&K Healthcare Resources, Inc.
D&K Receivables Corporation
As of____________________________________
Cut-Off Date
Total Receivables UPB $ - Input
Initial Contributed Receivables $ Fixed
Aggregate Unpaid Balance of Receivables AUB $ Calculated
LIBOR 0.0000% Input
Days Sales Outstanding TD 0 Input
12 Month Losses $ - Input
12 Month Collections $ - Input
Purchaser's Total Investment PTI $ Fixed
Cost Rate (LIBOR +1.50%) CR Calculated
Cost Discount (TD/360)*CR CD 0 Calculated
Loss Discount (12 Month Losses/12 Month Coll) LD #DIV/0! Calculated
Fair Market Value Discount (LD+CD) FMVD #DIV/0! Calculated
Purchase Price (AUB-(AUB*FMVD)) PP #DIV/0! Calculated
Eligible Receivables $ - Input
Ineligible Receivables $ - Input
A-1
41
EXHIBIT B
FORM OF INITIAL PURCHASER NOTE
NON-NEGOTIABLE PROMISSORY NOTE
August 7, 1998
FOR VALUE RECEIVED, the undersigned, D&K RECEIVABLES CORPORATION, a
Delaware corporation (the "Initial Purchaser"), promises to pay to [NAME OF
ORIGINATOR], a _________________________________________________________________
_______ corporation (the "Originator"), at its office at _______________________
___________________________________________________ , on the terms and subject
to the conditions set forth herein and in the Purchase and Sale Agreement
referred to below, the aggregate unpaid Purchase Price of all Pool Receivables
and Related Rights of the Originator purchased and to be purchased by the
Initial Purchaser pursuant to the Purchase and Sale Agreement (subject to
adjustment pursuant to Section 3.3 of such Purchase and Sale Agreement). Such
amount as shown in the records of the Servicer will be rebuttable presumptive
evidence of the principal amount owing under this Note.
1. Purchase and Sale Agreement. This Note is an "Initial Purchaser
Note" described in, and is subject to the terms and conditions set forth in,
that certain Purchase and Sale Agreement, dated as of August 7, 1998 (as the
same may be amended, supplemented, or otherwise modified in accordance with its
terms, the "Purchase and Sale Agreement"), among the Originator and the Initial
Purchaser. Reference is hereby made to the Purchase and Sale Agreement for a
statement of certain other rights and obligations of the Initial Purchaser and
the Originator. In the case of any conflict between the terms of this Note and
the terms of the Purchase and Sale Agreement, the terms of the Purchase and Sale
Agreement shall control.
2. Definitions. Capitalized terms used (but not defined) herein have
the meanings ascribed thereto in the Purchase and Sale Agreement. In addition,
as used herein, the following terms have the following meanings:
"Final Maturity Date" means the date that falls ninety one (91)
days after the later of (x) the Sale Termination Date and (y) the Final
Payout Date.
"Junior Liabilities" means all obligations of the Initial
Purchaser to the Originator under this Note.
"Senior Agent" means the Administrator.
B-1
42
"Senior Interests" means (a) the undivided percentage ownership
interests acquired by the Administrator pursuant to the Receivables
Purchase Agreement, and (b) all obligations of the Initial Purchaser to
the Senior Interest Holders, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due on or before the Final Maturity Date.
"Senior Interest Holders" means, collectively, the Purchaser, the
Administrator and the other Indemnified Parties.
"Subordination Provisions" means, collectively, clauses (a)
through (k) of Section 7 hereof.
3. Interest. Subject to the Subordination Provisions, the Initial
Purchaser promises to pay interest on the aggregate unpaid principal amount of
this Note outstanding on each day (a) prior to the final payment in full and in
cash of the Senior Interests, at a variable rate per annum equal to the Earned
Discount Rate Percentage, determined as of the then most recent Reporting Date,
and (b) after such final payment, at a variable rate per annum equal to the
Alternate Base Rate, as determined by the Servicer.
4. Interest Payment Dates. Subject to the Subordination Provisions,
the Initial Purchaser shall pay accrued interest on this Note on each Settlement
Date and on the Final Maturity Date (or, if any such day is not a Business Day,
the next succeeding Business Day). The Initial Purchaser also shall pay accrued
interest on the principal amount of each prepayment hereof on the date of each
such prepayment.
5. Basis of Computation. Interest accrued hereunder shall be
computed for the actual number of days elapsed on the basis of a 360-day year.
6. Principal Payment Dates. Subject to the Subordination Provisions,
any unpaid principal of this Note shall be paid on the Final Maturity Date (or,
if such date is not a Business Day, the next succeeding Business Day). Subject
to the Subordination Provisions, the principal amount of and accrued interest on
this Note may be prepaid on any Business Day without premium or penalty.
7. Subordination Provisions. The Initial Purchaser covenants and
agrees, and the Originator, by its acceptance of this Note, likewise covenants
and agrees, that the payment
B-2
43
of all Junior Liabilities is hereby expressly subordinated in right of payment
to the payment and performance of the Senior Interests to the extent and in the
manner set forth in the following clauses of this Section 7:
(a) No payment or other distribution of the Initial Purchaser's
assets of any kind or character, whether in cash, securities, or other
rights or property, shall be made on account of this Note except to the
extent such payment or other distribution is (i) permitted under the
Receivables Purchase Agreement or (ii) made pursuant to Sections 4 or 6
of this Note;
(b) (i) In the event of any Event of Bankruptcy involving the
Initial Purchaser, and (ii) on and after the occurrence of the Sale
Termination Date, the Senior Interests shall first be paid and
performed in full and in cash before the Originator shall be entitled
to receive and to retain any payment or distribution in respect of the
Junior Liabilities. In order to implement the foregoing: (x) all
payments and distributions of any kind or character in respect of the
Junior Liabilities to which the Originator would be entitled except for
this subsection 7(b) shall be made directly to the Senior Agent (for
the benefit of the Senior Interest Holders); and (y) the Originator
hereby irrevocably agrees that the Senior Agent, in the name of the
Originator or otherwise, may demand, ▇▇▇ for, collect, receive and
receipt for any and all such payments or distributions, and file, prove
and vote or consent in any such proceeding with respect to any and all
claims of the Originator relating to the Junior Liabilities, in each
case until the Senior Interests shall have been paid and performed in
full and in cash.
(c) In the event that the Originator receives any payment or other
distribution of any kind or character from the Initial Purchaser or
from any other source whatsoever, in respect of the Junior Liabilities,
other than as expressly permitted by the terms of this Note, such
payment or other distribution shall be received in trust for the Senior
Interest Holders and shall be turned over by the Originator to the
Senior Agent (for the benefit of the Senior Interest Holders) forthwith
until the Senior Interests have been paid in full. All payments and
distributions received by the Senior Agent in respect of this Note, to
the extent received in or converted into cash, may be applied by the
Senior Agent (for the benefit of the Senior Interest Holders) first to
the payment of any and all reasonable expenses (including, without
limitation, reasonable attorneys'
B-3
44
fees and other legal expenses) paid or incurred by the Senior Agent or
the Senior Interest Holders in enforcing these Subordination
Provisions, or in endeavoring to collect or realize upon the Junior
Liabilities, and any balance thereof shall, solely as between the
Originator and the Senior Interest Holders, be applied by the Senior
Agent toward the payment of the Senior Interests in a manner determined
by the Senior Agent to be in accordance with the Receivables Purchase
Agreement; but as between the Initial Purchaser and its creditors, no
such payments or distributions of any kind or character shall be deemed
to be payments or distributions in respect of the Senior Interests.
(d) Upon the final payment in full and in cash of all Senior
Interests, the Originator shall be subrogated to the rights of the
Senior Interest Holders to receive payments or distributions from the
Initial Purchaser that are applicable to the Senior Interests until the
Junior Liabilities are paid in full.
(e) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of the Originator, on the one
hand, and the Senior Interest Holders, on the other hand. Nothing
contained in the Subordination Provisions or elsewhere in this Note is
intended to or shall impair, as between the Initial Purchaser, its
creditors (other than the Senior Interest Holders) and the Originator,
the Initial Purchaser's obligation, which is unconditional and
absolute, to pay the Junior Liabilities as and when the same shall
become due and payable in accordance with the terms hereof and of the
Purchase and Sale Agreement or to affect the relative rights of the
Originator and creditors of the Initial Purchaser (other than the
Senior Interest Holders).
(f) The Originator shall not, until the Senior Interests have been
finally paid and performed in full and in cash, (i) cancel, waive,
forgive, transfer or assign, or commence legal proceedings to enforce
or collect, or subordinate to any obligation of the Initial Purchaser,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to
become due, other than the Senior Interests, the Junior Liabilities, or
any rights in respect thereof or (ii) convert the Junior Liabilities
into an equity interest in the Initial Purchaser, unless, in the case
of each of clauses (i) and (ii) above, the Originator shall have
B-4
45
received the prior written consent of the Administrator
in each case.
(g) The Originator shall not, without the advance written consent
of the Administrator, commence, or join with any other Person in
commencing, any proceedings related to an Event of Bankruptcy with
respect to the Initial Purchaser until at least one year and one day
shall have passed since the Senior Interests shall have been finally
paid and performed in full and in cash.
(h) If, at any time, any payment (in whole or in part) made with
respect to any Senior Interest is rescinded or must be restored or
returned by a Senior Interest Holder (whether in connection with any
Event of Bankruptcy or otherwise), these Subordination Provisions shall
continue to be effective or shall be reinstated, as the case may be, as
though such payment had not been made.
(i) Each of the Senior Interest Holders may, from time to time, at
its sole discretion, without notice to the Originator, and without
waiving any of its rights under these Subordination Provisions, take
any or all of the following actions: (i) retain or obtain an interest
in any property to secure any of the Senior Interests; (ii) retain or
obtain the primary or secondary obligations of any other obligor or
obligors with respect to any of the Senior Interests; (iii) extend or
renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Senior Interests, or release or
compromise any obligation of any nature with respect to any of the
Senior Interests; (iv) amend, supplement, or otherwise modify any
Transaction Document; and (v) release its security interest in, or
surrender, release or permit any substitution or exchange for all or
any part of any rights or property securing any of the Senior
Interests, or extend or renew for one or more periods (whether or not
longer than the original period), or release, compromise, alter or
exchange any obligations of any nature of any obligor with respect to
any such rights or property.
(j) The Originator hereby waives: (i) notice of acceptance of
these Subordination Provisions by any of the Senior Interest Holders;
(ii) notice of the existence, creation, non-payment or non-performance
of all or any of the Senior Interests; and (iii) all diligence in
enforcement, collection or protection of,
B-5
46
or realization upon the Senior Interests, or any thereof, or any
security therefor.
(k) These Subordination Provisions constitute a continuing offer
from the Initial Purchaser to all Persons who become the holders of, or
who continue to hold, Senior Interests; and these Subordination
Provisions are made for the benefit of the Senior Interest Holders, and
the Administrator may proceed to enforce such provisions on behalf of
each of such Persons.
8. Amendments, Etc. No failure or delay on the part of the Originator
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Note shall in any event be effective unless (a) the same shall
be in writing and signed and delivered by the Initial Purchaser and the
Originator, and (b) all consents required for such actions under the Transaction
Documents shall have been received by the appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note to
the contrary, the Initial Purchaser shall never be required to pay unearned
interest on any amount outstanding hereunder, and shall never be required to pay
interest on the principal amount outstanding hereunder, at a rate in excess of
the maximum interest rate that may be contracted for, charged or received
without violating applicable federal or state law.
10. No Negotiation. This Note is not negotiable.
11. GOVERNING LAW. THIS NOTE SHALL GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF).
12. Captions. Paragraph captions used in this Note are provided solely
for convenience of reference only and shall not affect the meaning or
interpretation of any provision of this Note.
B-6
47
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its officer thereunto duly authorized on the date first above written.
D&K RECEIVABLES CORPORATION
By:_______________________________
Title:____________________________
B-7
48
EXHIBIT C
FORM OF ORIGINATOR NOTE
DEMAND NOTE
August 7, 1998
The undersigned, [NAME OF ORIGINATOR], a ____________________________
________________corporation (the "Originator"), for value received, promises to
pay to the order of D&K RECEIVABLES CORPORATION, a Delaware corporation (the
"Initial Purchaser"), ON DEMAND, the aggregate unpaid principal amount of all
loans made by the Initial Purchaser to the Originator (the "Originator Loans")
together with accrued interest on such amounts from time to time outstanding
hereunder at the rate provided below. Such amounts as shown in the records of
the Servicer (as such term is defined in the Purchase and Sale Agreement
referred to below) will be rebuttable presumptive evidence of the principal
amount owing under this Demand Note.
The unpaid principal amount of each Originator Loan from time to time
outstanding shall bear interest (which also shall be payable ON DEMAND) from
(and including) the date on which such Originator Loan was made to (but
excluding) the date on which such Originator Loan is paid in full (a) prior to
the final payment in full and in cash of the Senior Interests (as such term is
defined in the Initial Purchaser Note), at a variable rate per annum equal to
the Earned Discount Rate Percentage, determined as of the then most recent
Payment Date, and (b) after such final payment, at a variable rate per annum
equal to the Alternative Base Rate, as determined by the Servicer. Interest
hereunder shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
This Demand Note is an Originator Note described in, and is subject to
the terms and conditions set forth in, that certain Purchase and Sale Agreement,
dated as of August 7, 1998 (as the same may at any time be amended,
supplemented, or otherwise modified from time to time in accordance with its
terms, the "Purchase and Sale Agreement"), between the Initial Purchaser and the
Originator. Reference is hereby made to the Purchase and Sale Agreement for a
statement of certain other rights and obligations of the Initial Purchaser. All
capitalized terms used but not otherwise defined herein have the meanings
assigned thereto in the Purchase and Sale Agreement.
C-1
49
All payments of principal and interest hereunder are to be made in
lawful money of the United States of America in same day funds to the account
designated from time to time by the Servicer to the Initial Purchaser.
In addition to and not in limitation of the foregoing, the Originator
further agrees, subject to any limitation imposed by applicable law, to pay all
expenses, including without limitation reasonable attorney fees, incurred by the
holder of this Demand Note in seeking to collect any amounts payable hereunder
which are not paid when due.
No failure or delay on the part of the Initial Purchaser or any other
holder of this Demand Note in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Originator
shall entitle it to any notice or demand in similar or other circumstances. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Demand Note shall in any event be effective unless (i) the same shall be
in writing and signed and delivered by the holder hereof and (ii) all consents
required for such action under the Transaction Documents shall have been given
by the appropriate Persons.
Upon the occurrence of any Event of Bankruptcy with respect to the
Originator, the principal balance hereof and all interest accrued hereon shall
be immediately due and payable, without demand, presentment, protest or notice
of dishonor.
Notwithstanding anything in this Demand Note to the contrary, the
Originator shall never be required to pay unearned interest on any amount
outstanding hereunder, and shall never be required to pay interest on the
principal amount outstanding hereunder, at a rate in excess of the maximum
nonusurious interest rate that may be contracted for, charged or received under
applicable federal or state law.
THIS DEMAND NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF).
[NAME OF ORIGINATOR]
By:_______________________________
Title:____________________________
C-2
50
PAY TO THE ORDER OF Fleet National Bank, as Administrator, pursuant to that
certain Receivables Purchase Agreement dated as of August 7, 1998, as the same
may be further amended, supplemented, or otherwise modified from time to time.
D&K RECEIVABLES CORPORATION
By:________________________________
Title:_____________________________
C-3