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EXHIBIT 10.1
SECOND AMENDMENT TO FOURTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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THIS SECOND AMENDMENT TO THE FOURTH AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is made as of June 1, 1999, by and among
FLEET CAPITAL CORPORATION, a Rhode Island corporation (the "Lender"), and D&K
HEALTHCARE RESOURCES, INC. ("D & K"), JARON, INC. ("Jaron") and ▇▇▇▇▇▇ DRUG CO.,
a South Dakota corporation ("▇▇▇▇▇▇") (D & K, Jaron and ▇▇▇▇▇▇ are sometimes
hereinafter referred to individually as "Borrower" and collectively as
"Borrowers").
Preliminary Statements
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Lender, D & K and Jaron are parties to that certain Fourth Amended and
Restated Loan and Security Agreement dated as of August 7, 1998 (as amended,
restated or renewed from time to time, the "Loan Agreement"). Capitalized terms
used herein and not otherwise defined shall have the meanings given them in the
Loan Agreement.
D & K has requested that Lender amend certain provisions of the Loan
Agreement and certain other Loan Documents to, among other things, (i) allow for
the acquisition by D&K of all the issued and outstanding shares of capital stock
of ▇▇▇▇▇▇ pursuant to that certain Purchase Agreement (the "Purchase Agreement")
dated June 1, 1999 between D & K and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ (the "Acquisition"),
and (ii) to make ▇▇▇▇▇▇, upon closing of the Acquisition, a Borrower under the
Loan Agreement.
▇▇▇▇▇▇ will derive substantial benefits from becoming a Borrower under
the Loan Agreement, as it will borrow under the Loan Agreement from time to time
for operating capital and equipment purchases as part of its operations.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Addition of ▇▇▇▇▇▇ as Borrower. ▇▇▇▇▇▇ hereby acknowledges that it
has reviewed, and that it understands and agrees to, the terms of that certain
Fourth Amended and Restated Loan and Security Agreement dated as of August 7,
1998 as amended by First Amendment dated as of November 25, 1998, each among
Lender, D & K, and Jaron, and joins in the Loan Agreement and the other Loan
Documents as a party thereto, hereby agreeing that it is jointly and severally
liable thereunder as a Borrower and hereby granting a continuing lien on certain
of its Property as provided therein.
2. Consents. Lender hereby consents to the Acquisition, to ▇▇▇▇▇▇'▇
consolidation with D & K, to the joinder of ▇▇▇▇▇▇ as party to the
Securitization Documents, and D&K's guaranty of ▇▇▇▇▇▇'▇ obligations thereunder,
and to the Borrower's doing business at the locations described on Exhibit A
hereto, subject to the satisfaction of all conditions set forth in this
Amendment. This consent shall in no respect be deemed a consent to the
acquisition by D & K, Jaron, or ▇▇▇▇▇▇ of any property other than as
specifically described in the Purchase Agreement.
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3. Increase in Amount. The amount of the Total Credit Facility is
hereby increased to $95,000,000. Accordingly, all references in the Loan
Agreement to "$75,000,000" are hereby amended to "$95,000,000.
4. Letter of Credit Fees. Section 2.3 of the Loan Agreement [RELATING
TO LETTER OF CREDIT AND L/C GUARANTY FEES] is hereby deleted in its entirety and
replaced with the following new Section 2.3:
2.3 Letter of Credit and LC Guaranty Fees. Borrowers
shall pay to Lender:
(a) for standby Letters of Credit and LC Guaranties
of standby Letters of Credit outstanding from time to time
during the term of this Agreement, a per annum fee equal to
the product of (i) the Applicable Margin for LIBO Rate loans
in effect on the date of issuance of the Letter of Credit or
LC Guaranty times (ii) the aggregate face amount of each such
Letter of Credit and LC Guaranty, which fee shall be deemed
fully earned upon issuance of each such Letter of Credit or LC
Guaranty and shall be due and payable upon the issuance of
such Letter of Credit or execution of such LC Guaranty, plus
all normal and customary charges associated with the issuance
thereof, which charges shall be deemed fully earned upon
issuance of each such Letter of Credit or LC Guaranty, shall
be due and payable on the first Business Day of each month and
shall not be subject to rebate or proration upon the
termination of this Agreement for any reason; and
(b) for documentary Letters of Credit and LC
Guaranties of documentary Letters of Credit outstanding from
time to time during the term of this Agreement, a per annum
fee equal to the product of (i) the Applicable Margin for LIBO
Rate loans in effect on the date of issuance of the Letter of
Credit or LC Guaranty times (ii) the aggregate face amount of
each such Letter of Credit and LC Guaranty, and an additional
per annum fee equal to the product of (x) the Applicable
Margin for LIBO Rate loans in effect on the date of issuance
of the Letter of Credit or LC Guaranty times (y) the aggregate
face amount of each such Letter of Credit and LC Guaranty for
each renewal and each extension thereof plus the normal and
customary charges associated with the issuance and
administration of each such Letter of Credit or LC Guaranty
(which fees and charges shall be fully earned upon issuance,
renewal or extension (as the case may be) of each such Letter
of Credit or LC Guaranty, shall be due and payable on the
first Business Day of each month, and shall not be subject to
rebate or proration upon the termination of this Agreement for
any reason).
5. Leases. Section 8.2.13 [RELATING TO LEASES] is hereby deleted and
replaced with the following:
8.2.13 Leases. Become, or permit any of its
Subsidiaries to become, a lessee under any operating lease
(other than a lease under which a Borrower or any of its
Subsidiaries is lessor) of Property if the aggregate Rentals
payable during any
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current or future period of 12 consecutive months under the
lease in question and all other leases under which Borrowers
or any of their Subsidiaries is then lessee would exceed
$2,000,000. the term "Rentals" means, as of the date of
determination, all payments which the lessee is required to
make by the terms of any Lease.
6. Securitization Document Termination. A new Section 8.2.17 [RELATING
TO TERMINATION OF SECURITIZATION DOCUMENTS] is hereby added to the Loan
Agreement as follows:
8.2.17 Termination of Securitization Documents. Upon
the termination of the Securitization Documents, fail to
execute and deliver at Lender's request therefor any
documents, instruments or agreements, including UCC Financing
Statements or amendments thereto, to ensure that Lender has a
perfected first lien on all of each Borrower's Accounts and
General Intangibles. Such assets had formerly been pledged or
transferred to a third party in connection with the
Securitization Documents, but the parties hereto acknowledge
and agree that all rights thereto should revert to Borrower,
with a first lien in favor of Lender, upon termination of the
Securitization Documents.
7. Financial Covenants. Section 8.3 of the Loan Agreement [RELATING TO
SPECIFIC FINANCIAL COVENANTS] is hereby deleted in its entirety and replaced
with the following new Section 8.3:
Specific Financial Covenants. During the term of this
Agreement, and thereafter for so long as there are any
Obligations to Lender, each Borrower covenants that, unless
otherwise consented to by Lender in writing, it and all other
Borrowers shall (all financial covenants being computed on a
consolidated basis):
(A) Current Ratio. Maintain at all times a ratio of
Consolidated Current Assets to Consolidated Current
Liabilities of not less than 1.25 to 1.0. For purposes of
computing the ratio contemplated herein, (i) the amount of
Borrowers' Inventory comprising Consolidated Current Assets
shall be computed on a first in, first out basis in accordance
with GAAP, and (ii) any transfers of assets made pursuant to
the Securitization Documents shall be ignored.
(B) Interest Coverage Ratio. Maintain at all times
for each period of three (3) consecutive months (computed on a
rolling-basis commencing with the three month period ending
March 31, 1995) a ratio of Net Cash Flow plus Interest Expense
to Interest Expense of not less than 1.75 to 1.00.
(C) Maintenance of Capital Base. Maintain at all
times during the periods specified below a Capital Base in an
amount not less than the amount shown below for the period
corresponding thereto (excluding any purchases by D & K of its
own stock made between May 20, 1999 and June 1, 2000 pursuant
to a consent letter from Lender dated May 20, 1999):
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PERIOD AMOUNT
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June 1, 1999 through June 29, 2000 $ 3,000,000
June 30, 2000 through June 29, 2001 $10,000,000
June 30, 2001 and thereafter $20,000,000
8. Definitions. Appendix A to the Loan Agreement [RELATING TO
DEFINITIONS] is hereby amended by replacing certain definitions therein with the
new ones set forth below, as follows:
Applicable Margin - For periods before delivery of the Borrowers'
financial statements for the twelve-month period ending June 30, 2000,
the Applicable Margin with respect to the Base Rate shall be 0.25%, and
the Applicable Margin with respect to the LIBO Rate shall be 1.75%. For
any period or date beginning with the delivery of the Borrowers'
financial statements for the twelve-month period ending June 30, 2000
and thereafter, the Applicable Margin with respect to the Base Rate and
the LIBO Rate, as applicable, shall be as set forth in the chart below
corresponding to the Interest Coverage Ratio for the immediately
preceding 12 month period ending each December 31 and June 30, as
reflected by the most recently delivered financial statements for the
period ending on such date, of Borrowers and their Subsidiaries
pursuant to Section 8.1.3(i) (for the twelve month periods ending on
June 30 of each year) and pursuant to Section 8.1.3(ii) (for the twelve
month periods ending on December 31 of each year). The Applicable
Margin shall be effective from and after the date of delivery of such
financial statements:
INTEREST COVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN
FOR PRECEDING TWELVE BASE RATE LIBO RATE
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from 1.75 to 1.0 1.00% 2.50%
to 2.00 to 1.0
from 2.01 to 1.0 0.75% 2.25%
to 2.50 to 1.0
from 2.51 to 1.0 0.50% 2.00%
to 3.00 to 1.0
from 3.01 to 1.0 0.25% 1.75%
to 3.25 to 1.0
from 3.26 to 1.0 0.00% 1.50%
to 3.50 to 1.0
>3.50 to 1.0 0.00% 1.25%
In calculating the Interest Coverage Ratio, Lender will calculate numbers to
hundredths, and amounts of .05 or greater will be rounded up to the next tenth.
For example (and not by way of limitation) 2.45 shall be rounded to 2.5, but
2.44 shall be rounded to 2.4.
Availability - means, on any date, the excess of the Borrowing Base
over the sum of all outstanding Loans hereunder on such date.
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Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(i) $95,000,000; or
(ii) an amount equal to 65% of the value of Eligible
Inventory at such date calculated on the basis of the lower of cost
or market with the cost of raw materials and finished goods
calculated on a first-in, first-out basis,
MINUS
an amount equal to the sum of (A) the face amount of all letters of credit
issued or guaranteed by Lender or any Affiliate of Lender for the account of a
Borrower and outstanding at such date, and (B) any amounts which Lender may be
obligated to pay in the future for the account of a Borrower.
Notwithstanding anything else herein to the contrary, Advances
to or on behalf of Jaron will be limited at all times to the sum of 65% of the
value of Jaron's Eligible Inventory, calculated as set forth above, MINUS the
aggregate amount of Indebtedness of Jaron to D&K; and Advances to or on behalf
of ▇▇▇▇▇▇ will be limited at all times to the sum of 65% of the value of
▇▇▇▇▇▇'▇ Eligible Inventory, calculated as set forth above, MINUS the aggregate
amount of Indebtedness of ▇▇▇▇▇▇ to D&K.
Borrowers - collectively, D & K, Jaron, and ▇▇▇▇▇▇, and
"Borrower" shall mean any one of them.
Default Rate - as defined in Subsection 2.1.7 of the
Agreement.
Net Cash Flow - For any period means Consolidated Adjusted Net
Earnings from Operations during such period, plus amounts deducted in the
computation thereof for depreciation, amortization and taxes, plus or minus, as
the case may be, the net change in the D & K's Consolidated LIFO reserve during
such period.
▇▇▇▇▇▇ - ▇▇▇▇▇▇ Drug Co., a South Dakota corporation.
Total Credit Facility - $95,000,000.
9. Exhibits. Exhibits A and B to the Loan Agreement are hereby updated
to include the new addresses and jurisdictions contained on Exhibit A to this
Amendment.
10. Conditions Precedent. The Lender's consent to the Acquisition is
expressly conditioned upon the satisfaction by Borrowers of the following
conditions. Failure of Borrowers to deliver to Lender such documents,
instruments or agreements, each in form and substance acceptable to Lender, no
later than the delivery dates set forth herein, shall mean that the Lender's
consents and the amendments related thereto contained herein are ineffective and
void, and Borrowers shall be in default under the Loan Agreement:
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(a) Delivery of this Amendment, duly executed by all
Borrowers.
(b) Delivery of a Pledge Agreement from D&K pledging (i) all
the stock of D&K Receivables Corporation ("Receivables"), together with
all certificates of such stock and a stock power for each certificate,
duly endorsed in blank, and (ii) that certain Non-Negotiable Promissory
Note dated August 7, 1998 from Receivables to D&K, together with the
original of such Note, duly endorsed to the order of Lender, and any
and all replacements therefor and any additional notes executed and
delivered from time to time by Receivables to D&K pursuant to the
Securitization Documents.
(c) Delivery of a Pledge Agreement from D&K pledging all the
stock of ▇▇▇▇▇▇, together with all certificates of such stock and a
stock power for each certificate, duly endorsed in blank.
(d) Delivery of such executed documents from ▇▇▇▇▇▇ or other
third parties as Lender may require to provide for a perfected first
lien in favor of Lender on all Collateral owned by ▇▇▇▇▇▇ or on
Collateral of any Borrower kept at any location where ▇▇▇▇▇▇ does
business, including, without limitation, (A) UCC-1 financing statements
from all Borrowers for all locations in which ▇▇▇▇▇▇ will do business,
(B) terminations of all liens on ▇▇▇▇▇▇'▇ assets other than those in
favor of Lender and those which would be Permitted Liens under the Loan
Agreement, and (C) executed processor's, warehouseman's, landlord's or
mortgagee's waivers for all locations at which ▇▇▇▇▇▇ does business.
(e) Delivery of evidence that each Borrower is qualified to do
business in the State of South Dakota, or evidence that such
qualification is not necessary.
(f) Delivery of a copy of the Purchase Agreement, all transfer
documents, the employment agreement between D & K and ▇▇▇ ▇▇▇▇▇▇▇▇, and
all other opinions, consents, documents, instruments and agreements
signed or received by D & K in connection with the Acquisition,
including, without limitation ▇▇▇▇▇▇'▇ articles of incorporation and
by-laws, together with all amendments thereto, authorizing resolutions
of ▇▇▇▇▇▇ and D & K executed in connection therewith, and any
instruments of transfer.
(g) Lender's satisfaction that all the terms and conditions of
the Acquisition, including, without limitation, all legal and tax
aspects thereof, the value and nature of the assets and liabilities of
▇▇▇▇▇▇, and any liabilities which D & K may have assumed, directly or
indirectly, thereunder, shall be as has been described to Lender upon
Lender's approval of the Acquisition, and shall be satisfactory in form
and substance to Lender.
(h) Without limiting the generality of the foregoing, Lender's
satisfaction with any existing and potential liability of ▇▇▇▇▇▇ with
respect to any environmental matters, including compliance with all
laws and regulations relating to environmental protection.
(i) Lender's satisfaction with the corporate and legal
structure of ▇▇▇▇▇▇ and all other Borrowers after the Acquisition,
including, without limitation, the articles of incorporation and bylaws
of each of them, and each agreement or instrument (including
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any shareholder's agreements, warrants, or similar documents) relating
thereto.
(j) No later than the effective date of the Acquisition,
delivery to Lender of an opinion or opinions of Borrowers' counsel as
to, among other things, the due organization and good standing of
▇▇▇▇▇▇, the authorization of ▇▇▇▇▇▇ to execute and deliver this
Amendment, and any and all other documents, instruments and agreements
executed and delivered in connection therewith, the enforceability of
all such documents, instruments and agreements against ▇▇▇▇▇▇ in
accordance with their respective terms, the enforceability of the
Purchase Agreement against ▇▇▇▇▇▇ and D & K, and the compliance of the
Acquisition with the articles of incorporation and by-laws of each of
them, and such other matters (including, without limitation, the tax
aspects thereof and compliance with all applicable securities laws) as
Lender shall require.
(k) Delivery of duly executed amendments and/or consents by
the parties to the Securitization Documents, containing such terms as
are acceptable to Lender to incorporate ▇▇▇▇▇▇ into the Securitization
and to allow for the Acquisition and for the amendments set forth
herein.
(l) Delivery of duly executed amendments and/or consents by
all participants in the Loans, containing such terms as are acceptable
to Lender to allow for the amendments set forth herein, including,
without limitation, an aggregate participation of $27,500,000 or more
in the Loans.
(m) After funding of any Advances made in connection with the
closing of the Acquisition, (including in such sum the full amount of
any closing costs, whether or not paid at closing and the L/C Amount on
the date thereof), there shall exist no Default or Event of Default
under the Loan Agreement, and Borrowers shall have Availability of not
less than $10,000,000.
(n) There shall have occurred no material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of any Borrower or any of their
Subsidiaries, taken as a whole, since December 31, 1998.
(o) No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before
any court, governmental agency or legislative body to enjoin, restrain
or prohibit, or to obtain damages in respect of, or which is related to
or arises out of the Loan Agreement, the Purchase Agreement, or the
consummation of the transactions contemplated thereby.
(p) Lender's satisfaction with the amount, types and terms and
conditions of all insurance maintained by the Borrowers and their
Subsidiaries, and the Lender shall have received loss payable
endorsements for such insurance satisfactory to Lender.
(q) Delivery of a Landlord's Waiver for Jaron's facility
located in Sunrise, Florida.
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11. Representations and Warranties.
(a) Each Borrower hereby represents and warrants that no consent of
any federal, state or local governmental agency or entity is required
for the acquisition by D&K of all the issued and outstanding stock of
▇▇▇▇▇▇, or the continuing operation of ▇▇▇▇▇▇'▇ business as a
subsidiary of D&K, and that such acquisition and operation do not
violate any federal or applicable state antitrust laws, rules or
regulations, or any laws, rules or regulations relating to business
combinations, restraints of trade, or other similar matters.
(b) ▇▇▇▇▇▇ hereby joins in all the representations and warranties
set forth in the Loan Agreement with respect to it and its business,
each made as of the date of this Amendment. Without limiting the
generality of the foregoing, ▇▇▇▇▇▇ represents and warrants that it as
a South Dakota corporation, in good standing under the laws of its
state of incorporation, and duly qualified to do business in all states
where the nature of its business and properties makes such
qualification necessary or appropriate.
(c) D & K and Jaron hereby represent and warrant to Lender that all
the representations and warranties set forth in the Loan Agreement are
still true, complete and correct as if made as of the date of this
Amendment.
12. No Claims. Borrowers acknowledge that there are no existing claims,
defenses (personal or otherwise) or rights of set-off or recoupment whatsoever
with respect to any of the Loan Documents. Borrowers agree that this Amendment
in no way acts as a release or relinquishment of any Liens in favor of the
Lender securing payment of the Obligations.
13. Miscellaneous. Except as expressly set forth herein, there are no
agreements or understandings, written or oral, between any Borrower and Lender
relating to the Loan Agreement and the other Loan Documents that are not fully
and completely set forth herein or therein. Except to the extent specifically
waived or amended herein or in any of the documents, instruments, or agreements
delivered in connection herewith, all terms and provisions of the Loan Agreement
and the other Loan Documents are hereby ratified and reaffirmed and shall remain
in full force and effect in accordance with the respective terms thereof. This
Agreement may be executed in one or more counterparts, and by different parties
on different counterparts. All such counterparts shall be deemed to be original
documents and together shall constitute one and the same agreement. A signature
of a party delivered by facsimile or other electronic transmission shall be
deemed to be an original signature of such party.
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IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the duly authorized representatives of the parties as of the date first above
written.
FLEET CAPITAL CORPORATION
By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
D & K HEALTHCARE RESOURCES, INC.
By:
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Name:
Title:
JARON, INC.
By:
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Name:
Title:
▇▇▇▇▇▇ DRUG CO.
By:
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Name:
Title:
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Exhibit A
Supplemental List of Additional Business Locations and Jurisdictions Where Qualified
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▇▇▇▇▇▇: Chief Executive Office: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Other Locations for Collateral: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Jurisdictions Qualified: South Dakota, North Dakota
D & K: Other Locations for Collateral: none
Other Jurisdictions Qualified: none
Jaron: Other Locations for Collateral: none
Other Jurisdictions Qualified: none