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FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED
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LOAN AND SECURITY AGREEMENT
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THIS FOURTH AMENDMENT TO THE THIRD AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is made as of May 23, 1997, by and
among FLEET CAPITAL CORPORATION, a Rhode Island corporation (the "Lender"),
and D&K WHOLESALE DRUG, INC. ("D & K") and KRELITZ INDUSTRIES, INC. ("KII"),
individually and as successor by merger to NORTHERN DRUG COMPANY ("NDC")
(D & K and KII are sometimes hereinafter referred to individually as
"Borrower" and collectively as "Borrowers").
Preliminary Statements
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A. Lender and Borrowers are parties to that certain Third Amended and
Restated Loan and Security Agreement dated as of March 3, 1995 (as amended,
the "Loan Agreement"). Capitalized terms used herein and not otherwise defined
shall have the meanings given them in the Loan Agreement.
B. Borrowers and Lender now desire to amend certain provisions of
the Loan Agreement on and subject to the terms hereof.
Terms of Agreement
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NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Consent. The Lender hereby consents to the Borrowers' changing
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their fiscal years from March 31 to June 30, which consent shall be effective
for the 1997 fiscal year. This consent is conditioned upon the Borrowers
delivering to Lender an audited year-end financial statement for the fiscal
year ending March 28, 1997, and any other audited financial statements prepared
for the Borrowers. After June 30, 1997, all year-end statements shall be for
the June 30 fiscal year of Borrower.
2. Amendments to Loan Agreement. The Loan Agreement is hereby amended
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as follows:
(a) Section 1.1 [relating to Defined Terms] is hereby
amended by deleting the definition of LIBO Rate and
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replacing it with the following new definition:
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LIBO Rate - With respect to any Revolving Credit Loan
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(or portion thereof) means an interest rate per annum
equal to the highest rate of interest per annum (adjusted
to reflect reserve, deposit insurance or other similar
requirements to which Bank may be subject) at which
deposits in United States dollars are offered to the
Bank for a thirty-day period, in London, England, by
prime banks in the London interbank market at or about
11:00 a.m. (London time) two Business Days before the date
upon which the LIBO Rate will be effective for such Loans
in an amount approximately equal to the principal amount
of such Revolving Credit Loan (or portion thereof).
(b) Section 3.1 [relating to Interest and Charges] is hereby
deleted in its entirety and replaced by the following new
Section 3.1:
3.1. Interest and Charges.
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(A) Interest Rate. The Borrowers shall pay interest
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on the unpaid principal amount of each Revolving Credit Loan
and any other Obligation for payment of money from the due date
at the applicable interest rates set forth below.
(B) LIBO Rate Loans. So long as no Default or Event
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of Default exists hereunder, and except to the extent that D & K,
on its own behalf and/or as agent for KII, shall elect to pay
interest on any Revolving Credit Loan pursuant to subsection (C)
of this Section 3.1, the Borrowers shall pay interest on (i) each
Revolving Credit Loan, from and including the date of such Loan
and (ii) any other Obligation for the payment of money from the
due date thereof, in either case at a fluctuating interest rate
per annum in effect from time to time equal to the LIBO Rate plus
one and seven-tenths of one percent (1.70%) per annum, subject,
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however, to adjustment semi-annually as set forth in Section
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3.1(D) hereof; provided, however, that, for LIBO Rate Loans
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outstanding on May 23, 1997, such LIBO Rate Loans will only
accrue interest at the rate set forth above upon the expiration
of the interest periods governing such LIBO Rate Loans.
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After the effective date of this Amendment, the foregoing
rate of interest shall be increased or decreased, as the case may
be, by an amount equal to any increase or decrease in the LIBO
Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the LIBO Rate
becomes effective. The LIBO Rate in effect on the date of this
Amendment shall be the LIBO Rate effective as of the opening of
business on such date.
(C) Base Rate Loans. D & K, on its own behalf and/or as
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agent for KII, may from time to time elect to have the interest
on all (but not a portion of) the outstanding Revolving Credit
Loans determined and payable at a floating rate equal to the Base
Rate plus one-half percent (0.50%) per annum, (subject, however,
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to adjustment semi-annually as set forth in Section 3.1(D) hereof)
by written notice to the Lender, such notice to be received by the
Lender before 10:00 a.m. (Milwaukee, Wisconsin time) on the day
on which such conversion is to take effect. If D & K, on its own
behalf and/or as agent for KII, has made such election, Borrowers
shall pay interest on the Revolving Credit Loans as provided in
Section 3.7. Notwithstanding any election by Borrowers, upon and
after the occurrence of an Event of Default, and during the
continuation thereof, Lender may at its sole option elect to have
the interest of the outstanding Revolving Credit Loans determined
and payable pursuant to this Subsection 3.1(C), plus the additional
percentage set forth in Subsection 3.1(H).
After the date hereof, the foregoing rate of interest shall be
increased or decreased, as the case may be, by an amount equal
to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the
day that any such change in the Base Rate becomes effective. The
Base Rate in effect on the date of the election to have the
Revolving Credit Loans bear interest at the Base Rate plus a
percentage as set forth herein shall be the Base Rate effective
as of the opening of business on such date.
(D) Semiannual Adjustment in Interest Rate. Notwithstanding
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anything else herein to the contrary, however, the interest rate
payable hereunder shall be
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subject to a semiannual change upon the Borrowers' achieving
certain Interest Coverage Ratios for any prior twelve-month period,
determined based upon financial statements for the year-to-date
periods ending June 30 and December 31 of each year. The adjustment
in interest rate shall occur on the date of the Lender's receipt
of Borrowers' audited and certified financial statements for the
period ending on June 30 of each year, and on internally-prepared
financial statements certified by the Borrowers for the period
ending December 31 of each year, with the initial rate adjustment
to be considered for the period ending December 31, 1997. Such rate
changes shall be effective only for the period after such receipt.
The rates of interest achieved with each Interest Coverage Ratio
shall automatically be adjusted up or down in accordance with the
following schedule:
Ratio Rate Payable
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between 1.50 to 1 and 1.74 to 1.0 Base Rate plus 1.00%
LIBO Rate plus 2.25%
between 1.75 to 1 and 1.99 to 1.0 Base Rate plus 0.75%
LIBO Rate plus 2.00%
between 2.00 to 1 and 2.49 to 1.0 Base Rate plus 0.50%
LIBO Rate plus 1.70%
2.50 to 1 or greater Base Rate plus 0.00%
LIBO Rate plus 1.50%
In calculating the 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."
(E) Illegality; Impracticality. If it shall become unlawful
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for Bank, Lender or any Participating Lender to obtain funds in the
London interbank market in order to fund or maintain LIBO Rate Loans
or otherwise to perform its obligations hereunder with respect to
any such Loans, upon at least five (5)
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Business Days' notice by Lender to D & K the rate of interest on all
such LIBO Rate Loans shall thereupon be determined under Subsection
(D) of this Section 3.1, and the right of D & K, on its own behalf
and/or as agent for KII, to have interest accrue on any Loan at
the LIBO Rate plus the percentage set forth herein shall thereupon
terminate. Notwithstanding any other provision of this Agreement
to the contrary, if, during any period in which interest at the
LIBO Rate plus a percentage is to be charged on any Loan, (i)
deposits in U.S. dollars for thirty-day periods are not available
to the Bank in the London interbank market, or (ii) the LIBO Rate
plus the percentage set forth herein will not adequately and fairly
reflect the cost to Lender or any Participating Lender of making or
maintaining the related LIBO Rate Loan, or (iii) by reason of
national or international financial, political or economic
conditions or by reason of any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in
effect, or the interpretation or administration thereof by any
governmental authority, or compliance by the Bank, Lender or any
Participating Lender with any request or directive of such authority
(whether or not having the force of law), including without
limitation exchange controls, it is impracticable, unlawful or
impossible for Bank, Lender or any Participating Lender to make or
continue the relevant LIBO Rate Loan, then D & K, on its own
behalf and/or as agent for KII, shall not be entitled, so long as
such circumstances continue, to continue to have interest accrue
on any Loan be at the LIBO Rate plus a percentage as set forth
herein.
(F) Increased Costs. If, on or after the date hereof,
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the introduction of or any change in, or in the interpretation of,
any law or regulation or the compliance by Lender or any
Participating Lender with any guideline or request from any central
bank or other governmental authority (whether or not having the
force of law) shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against all or any assets held by,
deposits or accounts with, or credit extended by or to, Lender or
any Participating Lender, or impose on Bank, Lender, any
Participating Lender or the London interbank
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market any other condition affecting the LIBO Rate Loans, or its
obligation to make LIBO Rate Loans; or
(ii) subject Bank, Lender or any Participating Lender to, or
cause the termination or reduction of a previously granted
exemption with respect to, any tax, levy, impost, deduction,
charge or withholding with respect to the LIBO Rate Loans, the
Note or Lender's obligation to make LIBO Rate Loans, or change the
basis of taxation of payment to Lender or any Participating Lender
of the principal of or interest on its Loans or any other amounts
under this Agreement (except for a change in the rate of tax on the
overall net income of Lender or any Participating Lender imposed
by any applicable jurisdiction),
and the result of any of the foregoing events is to increase the
cost to Bank, Lender or any Participating Lender of agreeing to
make or making, funding, or maintaining its LIBO Rate Loans, or
to reduce the amount of any sums received or receivable by Lender
under this Agreement or the Note, then, the Borrowers shall from
time to time, not later than thirty (30) days after Lender's demand
therefor, pay such additional amounts as will compensate Lender
for such increased cost or reduced amount. A certificate of Lender
submitted to D & K, setting forth the amounts of such increased
costs or reduced amount and the additional amounts to be paid to
Lender or any Participating Lender (as applicable) under this
Section shall be conclusive in the absence of manifest error.
(G) Minimum Interest Rate. Notwithstanding the foregoing,
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in no event shall the per annum rate of interest on any Revolving
Credit Loan be less than six percent (6.0%). Interest in all cases
shall be calculated on a daily basis (computed on the actual
number of days elapsed over a year of 360 days), commencing on
the date hereof.
(H) Default Rate. Upon and after the occurrence of an
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Event of Default, and during the continuation thereof, the principal
amount of the Obligations shall bear interest, calculated daily
(computed on the actual days elapsed over a year of 360 days), at a
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fluctuating rate per annum equal to three and one-quarter percent
(3.25%) above the interest rate that would otherwise apply under
Sections 3.1(B), (C), or (D) hereof (the "Default Rate").
(I) Usury. In no contingency or event whatsoever shall the
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aggregate of all amounts deemed interest hereunder or under the
Note and charged or collected pursuant to the terms of this
Agreement or the Note exceed the highest rate permissible under
any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a
court determines that Lender has charged or received interest
hereunder in excess of th highest applicable rate, Lender shall
apply any such excess to any other Obligation then due and payable
and shall promptly refund amounts not so applied to Borrowers and
such rate shall automatically be reduced to the maximum rate
permitted by such law.
(c) Section 3.6(B) [relating to Termination] is hereby deleted in
its entirety and replaced by the following new Section 3.6(B):
(B) At the effective date of any termination prior to the
end of the Original Term, Borrowers shall pay to Lender (in
addition to the then outstanding principal, accrued interest and
other charges owing under the terms of this Agreement and any of
the other Loan Documents) a termination fee equal to one percent
(1.0%) of the average of each month's Average Monthly Loan Balance
for the period from March 3, 1995 through the effective date of
such termination, provided, however, that the termination fee shall
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not be less than $400,000 or more than $450,000, regardless of the
Average Monthly Loan Balance.
(d) Section 3.7(B) [relating to Payments] is hereby amended by deleting
it in its entirety and replacing it with the following:
(B) Interest accrued on the Obligations shall be due on the
earliest to occur of (i) the first day of each month (for the
immediately preceding month), computed through the last calendar
day of the preceding month, (ii) the occurrence of an Event of
Default in consequence of which Lender elects to accelerate the
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maturity and payment of the Obligations, and (iii) termination
of this Agreement for any reason; provided, however, that Borrowers
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hereby irrevocably authorize Lender, in Lender's sole discretion,
to advance to Borrowers, and to charge to Borrowers' Loan Account
hereunder as a Revolving Credit Loan, a sum sufficient each month
to pay all interest accrued on the Obligations during the immediately
preceding month;
(e) Section 9.2(W) of the Loan Agreement [relating to Leases] is hereby
amended by deleting it in its entirety and replacing it with the
following:
(W) Leases. Become a lessee under any operating lease (other
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than a lease under which Borrower is a lessor) of Property if the
aggregate Rentals payable during any current or future period of
twelve (12) consecutive months under the lease in question and all
other leases under which Borrowers are then a lessee would exceed
$1,000,000. 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.
(f) Section 9.3(D) [relating to Maintenance of Capital Base] is hereby
deleted in its entirety and replaced by the following new Section 9.3(D):
(D) Maintenance of Capital Base. Maintain at all times
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during the periods specified below a Capital Base in an amount not
less than the amount shown below for the period corresponding
thereto:
Period Amount
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As of 3/31/97 $1,976,000
4/1/97 through 6/29/97 $3,000,000
6/30/97 through 9/29/97 $3,400,000
9/30/97 through 12/30/97 $3,800,000
12/31/97 through 3/30/98 $4,200,000
3/31/98 through 6/30/98 $4,600,000
The Capital Base for all periods after 6/30/98 through the
end of the Original Term, and for each Renewal Term, shall be
established on or before 6/30/98 by the mutual agreement of the
Lender and Borrowers
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based on the Borrowers' financial forecasts. If the parties are
unable to reach agreement on the Capital Base for such periods on
or before such date, then, notwithstanding anything contained herein
or elsewhere to the contrary, such failure to so agree shall
constitute an Event of Default hereunder by Borrowers.
3. No Claims. Borrowers acknowledge that there are no existing
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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.
4. Miscellaneous. Except as expressly set forth herein, there are no
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agreements or understandings, written or oral, between Borrowers and Lender
relating to the Loan Agreement 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 hereby
are 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: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
D & K WHOLESALE DRUG, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
KRELITZ INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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