WAIVER, CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT
Exhibit 10.8
WAIVER, CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND
RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT
RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT
This WAIVER, CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AND
SECURITY AGREEMENT (the “Second Amendment”) is made as of this 27th day of September, 2006 by and
between CAPITALSOURCE FINANCE LLC, a Delaware limited liability company, with its chief executive
office located at 0000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000 (“Lender”) and UNITED STATES
PHARMACEUTICAL GROUP, L.L.C. d/b/a NATIONSHEALTH, a Delaware limited liability company (“USPG”),
NATIONSHEALTH HOLDINGS, L.L.C., a Florida limited liability company (“NHH”), and NATIONSHEALTH,
INC., a Delaware corporation (“NationsHealth”) (jointly and severally, the “Borrower").
W I T N E S S E T H:
WHEREAS, Lender and Borrower (other than Nationshealth) entered into a certain Revolving
Credit and Security Agreement dated as of the 30th day of April, 2004 (the “Original
Credit Agreement") whereby Lender agreed to make loans, advances and other extensions of credit to
Borrower thereunder; and
WHEREAS, Lender and Borrower (other than Nationshealth) entered into a certain Amended and
Restated Revolving Credit and Security Agreement dated as of the 29th of June, 2004 (as
amended by the Prior Amendments (defined below), the “First Amended and Restated Agreement")
whereby Lender made available to Borrower (other than Nationshealth) a separate Overadvance
Facility and permitted Borrower (other than Nationshealth) to include its inventory within the
Borrowing Base for the Revolving Facility; and
WHEREAS, Lender and Borrower (other than Nationshealth) amended the First Amended and Restated
Agreement in certain respects pursuant to a certain First Amendment to Amended and Restated
Revolving Credit and Security Agreement dated as of the 10th day of August, 2004 (the
“Prior First Amendment"); and
WHEREAS, on August 31, 2004, Millstream Acquisition Corporation (“MAC”) changed its name to
Nationshealth, Inc.; and
WHEREAS, on August 31, 2004, N Merger, LLC, a wholly owned subsidiary of MAC, was merged with
and into NationsHealth Holdings, L.L.C. and as a result of the merger, NationsHealth Holdings,
L.L.C. continued as the surviving limited liability company; and
WHEREAS, Lender and Borrower amended the First Amended and Restated Agreement in certain
respects pursuant to a certain Joinder and Second Amendment to Amended and Restated Revolving
Credit and Security Agreement dated as of the 14th day of September, 2004 in order to
join Nationshealth, Inc. as a party to the Agreement (the “Prior Second Amendment"); and
WHEREAS, Lender and Borrower amended the First Amended and Restated Agreement in certain
respects pursuant to a certain Third Amendment to Amended and Restated Revolving Credit and
Security Agreement dated as of the 3rd day of November, 2004 (the “Prior Third Amendment”), a
certain Fourth Amendment to Amended and Restated Revolving Credit and Security Agreement dated as
of the 10th day of February, 2005 (the “Prior Fourth Amendment”), a certain Fifth Amendment to
Amended and Restated Revolving Credit and Security Agreement dated as of the 28th day of
February 2005 (the “Prior Fifth Amendment”), certain Sixth Amendment to Amended and Restated
Revolving
Credit and Security Agreement dated as of the 13th day of May, 2005 (the “Prior
Sixth Amendment”), certain Seventh Amendment to Amended and Restated Revolving Credit and Security
Agreement dated as of the 29th day of July, 2005 (the “Prior Seventh Amendment”), and a
certain Eighth Amendment to Amended and Restated Revolving Credit and Security Agreement dated as
of the 23rd day of August, 2005 (the “Prior Eighth Amendment”) and together with the
Prior First Amendment, the Prior Second Amendment, the Prior Third Amendment, the Prior Fourth
Amendment, the Prior Fifth Amendment, the Prior Sixth Amendment, and the Prior Seventh Amendment,
collectively, the “Prior Amendments"); and
WHEREAS, Lender and Borrower entered into a certain Second Amended and Restated Revolving
Credit and Security Agreement dated as of the 21st of March, 2006 (as amended hereby,
and as amended, restated, supplemented or otherwise modified from time to time, the “Agreement");
and
WHEREAS, Lender and Borrower amended the Second Amended and Restated Revolving Credit and
Security Agreement in certain respects pursuant to a certain First Amendment to Second Amended and
Restated Revolving Credit and Security Agreement dated the 11th day of August, 2006 (the
"First Amendment”); and
WHEREAS, Borrower requested and Lender agreed to the further modification of certain
provisions of the Agreement and a waiver of a certain Event of Default which occurred under the
Agreement upon the terms and subject to the conditions set forth herein; and
WHEREAS, Section 12.8 of the Agreement provides that no modification or amendment of the
Agreement shall be effective unless the same shall be in writing and signed by the parties thereto.
NOW, THEREFORE, in consideration of the promises and other mutual covenants contained herein,
the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower agree as follows:
1. Waiver and Consent.
(a) Borrower hereby acknowledges and agrees that pursuant to clause (a) of Section 7.6 of the
Agreement it is prohibited from making payments of severance in excess of $250,000 in the aggregate
during any twelve month period without the prior written consent of Lender. Borrower acknowledges
and agrees that it has made severance payments in excess of $250,000 during the period commencing
January 1, 2006 and continuing through September 15, 2006 in violation of Section 7.6 of the
Agreement which constitutes an Event of Default under the Agreement. Borrower has requested that
Lender agree to a waiver of such Event of Default for the twelve month period ending September 30,
2006. Subject to the terms and conditions of this Section 1, the Lender does hereby waive such
Event of Default.
(b) Borrower hereby acknowledges and agrees that it is obligated to make additional payments
of severance during the period commencing as of September 30, 2006 and continuing through December
31, 2007 in the aggregate amount of $582,292 (the “Scheduled Severance Payments”). Borrower has
requested that Lender consent to the payment of the Scheduled Severance Payments under clause (a)
of Section 7.6. Lender hereby consents to the payment of the Scheduled Severance Payments on the
following terms and conditions:
| (i) | The payment of the Scheduled Severance Payments shall be made prior to
December 31, 2007; |
| (ii) | The payment of the Scheduled Severance Payments shall be in lieu of any
payments of severance which Borrower would otherwise be permitted to pay under
clause (a) of
Section 7.6 of the Agreement during the period commencing as of September 30, 2006
and continuing through December 31, 2006; |
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| (iii) | Borrower shall not make any payments of severance other than the
Scheduled Severance Payments without the prior written consent of Lender; |
| (iv) | Borrower shall not make any Scheduled Severance Payments if a Default
or Event of Default shall have occurred and be continuing as of the date of the
making of any such payment; |
| (v) | All payments of severance by Borrower after December 31, 2007 shall be
governed by Section 7.6 of the Agreement; and |
| (vi) | Borrower’s failure to comply with the foregoing terms and conditions
shall constitute an Event of Default. |
(c) Borrower hereby acknowledges and agrees that pursuant to Section 1 of Annex I of the
Agreement it is prohibited from permitting EBITDA to be less than $850,000 for the Test Period
ending July 31, 2006. Borrower acknowledges and agrees that EBITDA was less than $850,000 for the
Test Period ending July 31, 2006 which constitutes an Event of Default under the Agreement.
Borrower has requested that Lender agree to a waiver of such Event of Default. Subject to the
terms and conditions of this Section 1, the Lender does hereby waive such Event of Default.
(d) Borrower hereby acknowledges and agrees that pursuant to Section 2 of Annex I of the
Agreement it is prohibited from permitting the Fixed Charge Coverage Ratio to be less than 1.0 to
1.0 for the Test Period ending July 31, 2006. Borrower acknowledges and agrees that the Fixed
Charge Coverage Ratio was less than 1.0 to 1.0 for the Test Period ending July 31, 2006 which
constitutes an Event of Default under the Agreement. Borrower has requested that Lender agree to a
waiver of such Event of Default. Subject to the terms and conditions of this Section 1, the Lender
does hereby waive such Event of Default.
(e) Borrower hereby acknowledges and agrees that pursuant to Section 3 of Annex I of the
Agreement it is prohibited from permitting its Cash Velocity to be less than $3,500,000 for the
calendar month ending July 31, 2006. Borrower acknowledges and agrees that its Cash Velocity was
less than $3,500,000 for the calendar month ending July 31, 2006 which constitutes an Event of
Default under the Agreement. Borrower has requested that Lender agree to a waiver of such Event of
Default. Subject to the terms and conditions of this Section 1, the Lender does hereby waive such
Event of Default.
(f) Except as set forth in this Section 1, the foregoing waivers and consents do not extend
to the Borrower’s compliance with Section 7.6 or the above referenced sections of Annex I of the
Agreement for any subsequent periods. Further, the foregoing does not constitute an agreement by
Lender to waive the provisions of any affirmative, negative or financial covenant or other
provision of the Agreement at any time in the future or any other Events of Default which may have
occurred but which are not referenced within this Section 1. The foregoing waivers and consents
shall not imply any obligation or commitment of Lender to provide any further waivers or consents
under the Agreement or any of the other Loan Documents to Borrower at any other time and does not
constitute a course of dealing or a course of conduct. Lender hereby reserves all of its rights
under the Agreement and the other Loan Documents except as specifically provided in this Section 1.
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2. Amendment of Agreement. As of the Effective Date (defined below),
Lender and Borrower hereby agree to amend the Agreement as follows:
(a) Subsection (a) of Section 2.1 of the Agreement, entitled “The Revolving Facility”
is hereby amended and restated as follows:
(a) Subject to the provisions of this Agreement, Lender shall continue the
Existing Advances and make Advances to Borrower under the Revolving Facility from
time to time during the Term, provided that, notwithstanding any other
provision of this Agreement, the aggregate amount of all Advances at any one time
outstanding under the Revolving Facility shall not exceed either of (a) the Facility
Cap, or (b) the Availability. The Revolving Facility is a revolving credit
facility, which may be drawn, repaid and redrawn, from time to time as permitted
under this Agreement. Any determination as to whether there is Availability for
Advances shall be made by Lender in its sole discretion and, absent demonstrable
error, is final and binding upon Borrower. Unless otherwise permitted by Lender,
each Advance shall be in an amount of at least $1,000. Subject to the provisions of
this Agreement, Borrower may request Advances under the Revolving Facility up to and
including the value, in U.S. Dollars, of the sum of (i) Eighty-Five percent
(85%) of the Borrowing Base for Eligible Billed Receivables, (ii) Sixty percent
(60%) of the Borrowing Base for Eligible Unbilled Receivables, and (iii) as
determined by Lender in its sole discretion following the completion of the
Inventory Field Examination, either (a) Fifty percent (50%) of the Borrowing Base
for Eligible Finished Goods Inventory valued at the lower of cost basis or market
value or (b) Eighty-Five percent (85%) of the Borrowing Base for Eligible Inventory
valued at orderly liquidation value, minus, if applicable, amounts adjusted
or reserved pursuant to this Agreement (such calculated amount being referred to
herein as the “Availability”); provided, however, that at no time
shall more than Four Hundred Thousand and 00/100 ($400,000.00) of the Availability
be comprised of Eligible Inventory. Advances under the Revolving Facility
automatically shall be made for the payment of interest on the Notes and other
Obligations on the date when due to the extent available and as provided for herein.
Notwithstanding any provision of this subsection (a) to the contrary, Borrower
shall not be permitted to include Eligible Inventory in the Availability unless and
until Lender has completed and reviewed an independent appraisal and field
examination of Borrower’s Inventory at the expense of Borrower and the results of
which are satisfactory to Lender in its sole discretion (the “Inventory Field
Examination”).
(b) Section 2.3 of the Agreement, entitled “Interest” is hereby amended and restated
as follows:
2.3 Interest
Interest on outstanding Advances under the Revolving Note shall be payable monthly
in arrears on the first day of each calendar month at an annual rate of Prime Rate
plus 2.50%, provided, however, that, notwithstanding any provision
of any Loan Document, for the purpose of calculating interest hereunder, the Prime
Rate shall be not less than 4.0%, in each case calculated on the basis of a 360-day
year and for the actual number of calendar days elapsed in each interest calculation
period. Interest accrued on each Advance under the Revolving Note shall be due and
payable on the first day of each calendar month, in accordance with the procedures
provided for in Section 2.6, commencing April 1, 2006, and continuing until
the later of the expiration of the Term and the full performance and irrevocable
payment in full in cash of the Obligations relating to Advances and termination of
this Agreement.
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(c) Section 2.4 of the Agreement, entitled “Revolving Facility Disbursements; Requirement
to Deliver Borrowing Certificate” is hereby amended and restated as follows:
2.4 Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate
So long as no Default or Event of Default shall have occurred and be continuing,
Borrower may give Lender irrevocable written notice requesting an Advance under the
Revolving Facility by delivering to Lender not later than 11:00 a.m. (Eastern
Standard Time) at least one but not more than four Business Days before the proposed
borrowing date of such requested Advance (the “Borrowing Date"), a completed
Borrowing Certificate and relevant supporting documentation satisfactory to Lender,
which shall (i) specify the proposed Borrowing Date of such Advance which shall be a
Business Day, (ii) specify the principal amount of such requested Advance, (iii)
certify the matters contained in Section 4.2, and (iv) specify the amount of
any Medicare or Medicaid recoupments and/or recoupments of any third-party payor
being sought, requested or claimed, or, to Borrower’s knowledge, threatened against
Borrower or Borrower’s Affiliates. Each time a request for an Advance is made, and,
in any event and regardless of whether an Advance is being requested, on Tuesday of
each week during the Term (and so long as a Default or Event of Default exists, more
frequently if Lender shall so request) until the Obligations are indefeasibly paid
in cash in full and this Agreement is terminated, Borrower shall deliver to Lender a
Borrowing Certificate accompanied by a separate detailed aging and categorizing of
Borrower’s accounts receivable and accounts payable and such other supporting
documentation with respect to the figures and information in the Borrowing
Certificate as Lender shall reasonably request from a credit or security perspective
or otherwise. On each Borrowing Date, Borrower irrevocably authorizes Lender to
disburse the proceeds of the requested Advance to the appropriate Borrower’s
account(s) as set forth on Schedule 2.4, in all cases for credit to the
appropriate Borrower (or to such other account as to which the appropriate Borrower
shall instruct Lender) via Federal funds wire transfer no later than 4:00 p.m.
(Eastern Standard Time). Notwithstanding any provision of this Agreement to the
contrary, if the average outstanding balance under the Revolving Facility during any
calendar month is less than $2,500,000 Borrower acknowledges and agrees that Lender
shall be entitled to calculate interest and fees hereunder, including without
limitation, the calculations set forth in Sections 2.3, 2.5 and 3.3, as if
the average outstanding balance for such calendar month was $2,500,000.
(d) Section 2.5 of the Agreement, entitled “Revolving Facility Collections; Repayment;
Borrowing Availability and Lockbox” is hereby amended and restated as follows:
2.5 Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox
Each Borrower shall maintain one or more lockbox accounts (individually and
collectively, the “Lockbox Account") with one or more banks acceptable to Lender
(each, a “Lockbox Bank"), and shall execute with each Lockbox Bank one or more
agreements acceptable to Lender (individually and collectively, the “Lockbox
Agreement"), and such other agreements related thereto as Lender may require. Each
Borrower shall ensure that all collections of their respective Accounts and all
other cash payments received by any Borrower, including CIGNA Receipts, are paid and
delivered directly from Account Debtors and other Persons into the appropriate
Lockbox Account. The Lockbox Agreements shall provide that the Lockbox Banks will
transfer on the same Business Day all funds paid into the Lockbox Accounts into a
depository account or accounts maintained by Lender or an Affiliate of Lender at
such bank as Lender may
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communicate to Borrower and the applicable Lockbox Bank from time to time in
accordance with the Lockbox Agreement (the “Concentration Account"), except, with
respect only to Accounts payable by Medicaid/Medicare Account Debtors, as instructed
by the applicable Borrower to whom such Accounts are payable as permitted pursuant
to the applicable Lockbox Agreement. Notwithstanding and without limiting any other
provision of any Loan Document, Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to the Lockbox Agreement and
this Section 2.5 in such order and manner as determined by Lender. To the
extent that any Accounts are collected by any Borrower or any other cash payments
received by any Borrower are not sent directly to the appropriate Lockbox Account
but are received by any Borrower or any of their Affiliates, such collections and
proceeds shall be held in trust for the benefit of Lender and immediately remitted
(and in any event within two (2) Business Days), in the form received, to the
appropriate Lockbox Account for immediate transfer to the Concentration Account.
Borrower acknowledges and agrees that compliance with the terms of this Section
2.5 is an essential term of this Agreement, and that, in addition to and
notwithstanding any other rights Lender may have hereunder, under any other Loan
Document, under applicable law or at equity, upon each and every failure by any
Borrower or any of their Affiliates to comply with any such terms Lender shall be
entitled to assess a non-compliance fee which shall operate to increase the
Applicable Rate by two percent (2.0%) per annum during any period of non-compliance,
whether or not a Default or an Event of Default occurs or is declared, provided that
nothing shall prevent Lender from considering any failure to comply with the terms
of this Section 2.5 to be a Default or an Event of Default. All funds
transferred to the Concentration Account for application to the Obligations under
the Revolving Facility shall be applied to reduce the Obligations under the
Revolving Facility, but, for purposes of calculating interest hereunder shall be
subject to a five (5) Business Day clearance period. If as the result of
collections of Accounts and/or any other cash payments received by any Borrower
pursuant to this Section 2.5 a credit balance exists with respect to the
Concentration Account, such credit balance shall not accrue interest in favor of a
Borrower, but shall be available to Borrower upon Borrower’s written request. If
applicable, at any time prior to the execution of all or any of the Lockbox
Agreements and operation of all or any of the Lockbox Accounts, each Borrower and
their Affiliates shall direct all collections or proceeds it receives on Accounts or
from other Collateral to the accounts(s) and in the manner specified by Lender in
its sole discretion.
(e) Section 6.4 of the Agreement, entitled “Compliance with Legal and Other
Obligations” is hereby amended and restated as follows:
6.4 Compliance with Legal and Other Obligations
Borrower shall (i) comply in all material respects with all laws, statutes, rules,
regulations, ordinances and tariffs of all Governmental Authorities applicable to it
or its business, assets or operations, including applicable requirements of the
Standards for Privacy of Individually Identifiable Health Information which were
promulgated pursuant to HIPAA; (ii) pay all taxes, assessments, fees, governmental
charges, claims for labor, supplies, rent and all other obligations or liabilities
of any kind, except liabilities being contested in good faith and against which
adequate reserves have been established in accordance with GAAP, (iii) perform in
accordance with its terms each contract, agreement or other arrangement to which it
is a party or by which it or any of the Collateral is bound, except where the
failure to comply, pay or perform would not reasonably be expected to have a
Material Adverse Effect, (iv) maintain and comply with
all material Permits necessary to conduct its business and comply with any new or
additional requirements that may be imposed on it or its business, and (v) properly
file all Medicaid/Medicare cost reports.
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(f) Section 6.6 of the Agreement, entitled “True Books” is hereby amended and restated
as follows:
6.6 True Books
Borrower shall (i) keep true, complete and accurate books of record and account in
accordance with commercially reasonable business practices in which true and correct
entries are made of all of its and their dealings and transactions in all material
respects; and (ii) set up and maintain on its books such reserves as may be required
by GAAP with respect to doubtful accounts and all taxes, assessments, charges,
levies and claims and with respect to its business, and include such reserves in its
quarterly as well as year end financial statements.
(g) Section 7.2 of the Agreement, entitled “Permitted Indebtedness” is hereby amended
and restated as follows:
7.2 Permitted Indebtedness
Borrower shall not create, incur, assume or suffer to exist any Indebtedness, except
the following (collectively, “Permitted Indebtedness"): (i) Indebtedness under the
Loan Documents, (ii) any Indebtedness set forth on Schedule 7.2, (iii)
Capitalized Lease Obligations incurred after April 30, 2004 and Indebtedness
incurred pursuant to purchase money Liens permitted by Section 7.3(v),
provided that the aggregate amount of such Capitalized Lease Obligations and
purchase money indebtedness outstanding at any time shall not exceed $75,000, (iv)
Indebtedness in connection with advances made by a stockholder in order to cure any
default of the financial covenants set forth on Annex I; provided,
however, that such Indebtedness shall be on an unsecured basis, subordinated
in right of repayment and remedies to all of the Obligations and to all of Lender’s
rights pursuant to a subordination agreement in form and substance satisfactory to
Lender; (v) accounts payable to trade creditors and current operating expenses
(other than for borrowed money) which are not aged more than 120 calendar days from
the billing date or more than 30 days from the due date, in each case incurred in
the ordinary course of business and paid within such time period, unless the same
are being contested in good faith and by appropriate and lawful proceedings and such
reserves, if any, with respect thereto as are required by GAAP and deemed adequate
by Borrower’s independent accountants shall have been reserved; (vi) borrowings
incurred in the ordinary course of business and not exceeding $10,000 individually
or in the aggregate outstanding at any one time, provided, however,
that such Indebtedness shall be on an unsecured basis, subordinated in right of
repayment and remedies to all of the Obligations and to all of Lender’s rights
pursuant to a subordination agreement in form and substance satisfactory to Lender;
(vii) Permitted Subordinated Debt or Indebtedness to US Bioservices
Corporation as permitted under the Joint Venture Dissolution Consent. Borrower
shall not make prepayments on any existing or future Indebtedness in excess of
$10,000 to any Person other than to Lender or to the extent specifically permitted
by this Agreement or any subsequent agreement between Borrower and Lender.
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(h) Section 7.3 of the Agreement, entitled “Permitted Liens” is hereby amended and
restated as follows:
7.3 Permitted Liens
Borrower shall not create, incur, assume or suffer to exist any Lien upon, in or
against, or pledge of, any of the Collateral, or any of its properties or assets or
any of its authorized but unissued or treasury shares, securities or other equity or
ownership or partnership interests, whether now owned or hereafter acquired, except
the following (collectively, “Permitted Liens”): (i) Liens under the Loan Documents
or otherwise arising in favor of Lender, (ii) Liens imposed by law for taxes (other
than payroll taxes), assessments or charges of any Governmental Authority for claims
not yet due or which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves or other appropriate provisions are
being maintained by such Person in accordance with GAAP to the satisfaction of
Lender in its sole discretion, (iii) (A) statutory Liens of landlords (provided that
any such landlord has executed a Landlord Waiver and Consent in form and substance
satisfactory to Lender) and of carriers, warehousemen (provided that any such
warehousemen have executed a Warehouse Waiver and Consent in form and substance
satisfactory to Lender), mechanics, materialmen, and (B) other Liens imposed by law
or that arise by operation of law in the ordinary course of business from the date
of creation thereof, in each case only for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained by such
Person in accordance with GAAP to the satisfaction of Lender in its sole discretion,
(iv) Liens (A) incurred or deposits made in the ordinary course of business
(including, without limitation, surety bonds and appeal bonds) in connection with
workers’ compensation, unemployment insurance and other types of social security
benefits or to secure the performance of tenders, bids, leases, contracts (other
than for the repayment of Indebtedness), statutory obligations and other similar
obligations, or (B) arising as a result of progress payments under government
contracts, (v) purchase money Liens (A) securing Indebtedness permitted under
Section 7.2(iii), or (B) in connection with the purchase by such Person of
equipment in the normal course of business, provided that such payables
shall not exceed any limits on Indebtedness provided for herein and shall otherwise
be Permitted Indebtedness hereunder, (vi) Liens securing the MHR Subordinated Debt,
and (vii) Liens disclosed on Schedule 7.3; provided, that the Lien in favor
of Gilbraltar Bank, FSB shall not extend to any additional collateral or secure any
Indebtedness in excess of $300,000.
(i) Section 7.4 of the Agreement, entitled “Investments; New Facilities or Collateral;
Subsidiaries” is hereby amended and restated as follows:
7.4 Investments; New Facilities or Collateral; Subsidiaries
Borrower, directly or indirectly, shall not (i) purchase, own, hold, invest in or
otherwise acquire obligations or stock or securities of, or any other interest in,
or all or substantially all of the assets of, any Person or any joint venture, or
(ii) make or permit to exist any loans, advances or guarantees to or for the benefit
of any Person or assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable for or upon or incur any obligation of the Joint Venture or
any other Person (other than those created by the Loan Documents and Permitted
Indebtedness and other than (A) trade credit extended in the ordinary course of
business, (B) advances for business travel and similar temporary advances made in
the ordinary course of business to officers, directors and employees, and (C) the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business). Borrower, directly or indirectly,
shall not purchase, own, operate, hold, invest in or otherwise acquire any facility,
property or
assets or allow the warehousing, location or storage of any Collateral other than at
the locations set forth on Schedule 5.18B unless Borrower shall provide to
Lender at least thirty (30) Business Days prior written notice. Borrower shall have
no Subsidiaries other than those Subsidiaries, if any, existing on the Restatement
Date and set forth in Schedule 5.3.
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(j) Section 7.6 of the Agreement, entitled “Transactions with Affiliates” is hereby
amended and restated as follows:
7.6 Transactions with Affiliates
Borrower shall not enter into or consummate any transaction of any kind with (i) any
of its Affiliates, (ii) any Guarantor or any of their respective Affiliates or (iii)
the Joint Venture other than: (a) salary, bonus, severance, employee stock option
and other compensation and employment arrangements with directors or officers in the
ordinary course of business, provided, that no payment of any bonus or
severance shall be permitted if a Default or Event of Default has occurred and
remains in effect or would be caused by or result from such payment and provided
further that, regardless of whether a Default or Event of Default shall have
occurred and remain in effect or would be caused by or result from such payment, no
payment of any severance shall be made, individually or in the aggregate, in excess
of $250,000 in any twelve (12) month period, (b) Distributions and dividends
permitted pursuant to Section 7.5, (c) transactions with Lender or any
Affiliate of Lender, (d) payments permitted under and pursuant to written agreements
entered into by and between Borrower and one or more of its Affiliates that both (A)
reflect and constitute transactions on overall terms at least as favorable to
Borrower as would be the case in an arm’s-length transaction between unrelated
parties of equal bargaining power, and (B) are subject to such terms and conditions
as determined by Lender in its sole discretion; provided, that
notwithstanding the foregoing clauses (A) and (B) above Borrower shall not (Y) enter
into or consummate any transaction or agreement pursuant to which it becomes a party
to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any of
its Affiliates or otherwise to become responsible or liable, as a guarantor, surety
or otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, or
(Z) make any payment to any of its Affiliates in excess of $10,000 without the prior
written consent of Lender and (e) notwithstanding subsection (a) above, payments of
salary, bonus, severance and deferred compensation under the Xxxxx Separation
Agreement; provided however that payments in respect of “Put Right(s)” under the
Xxxxx Separation Agreement shall continue to be governed by the Employee
Subordination Agreement.
(k) Subsection (e) of Section 7.10 of the Agreement is hereby deleted in its entirety and of
no further force and effect.
(l) Subsection (a) of Section 9.1 of the Agreement, entitled “Rights and Remedies” is
hereby amended and restated as follows:
(a) In addition to the acceleration provisions set forth in Article
VIII above, upon the occurrence and continuation of an Event of Default, Lender
shall have the right to exercise any and all rights, options and remedies provided
for in the Loan Documents, under the UCC or at law or in equity, including, without
limitation, the right to (i) apply any property of any Borrower held by Lender to
reduce the Obligations, (ii) foreclose the Liens created under the Security
Documents, (iii) realize upon, take possession of and/or sell any Collateral or
securities pledged (other than Collateral consisting of Accounts
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owed or owing by Medicaid/Medicare Account Debtors absent a court order or
compliance with applicable law) with or without judicial process, (iv) exercise all
rights and powers with respect to the Collateral as any Borrower, as applicable,
might exercise (other than with respect to Collateral consisting of Accounts owed or
owing by Medicaid/Medicare Account Debtors absent a court order or compliance with
applicable law), (v) collect and send notices regarding the Collateral (other than
with respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare
Account Debtors absent a court order or compliance with applicable law), with or
without judicial process, (vi) by its own means or with judicial assistance, enter
any premises at which Collateral and/or pledged securities are located, or render
any of the foregoing unusable or dispose of the Collateral and/or pledged securities
on such premises without any liability for rent, storage, utilities, or other sums,
and no Borrower shall resist or interfere with such action, (vii) at Borrower’s
expense, require that all or any part of the Collateral be assembled and made
available to Lender at any place designated by Lender, (viii) reduce or otherwise
change the Facility Cap, (ix) relinquish or abandon any Collateral or securities
pledged or any Lien thereon and/or (x) continue to charge all interest, fees and
other amounts provided under this Agreement on the Minimum Balance regardless of
whether Advances are made or outstanding. Notwithstanding any provision of any Loan
Document, Lender shall have the right, at any time that Borrower fails to do so, and
from time to time, without prior notice, to: (i) obtain insurance covering any of
the Collateral to the extent required hereunder or Lender to the extent required
under Landlord Waiver and Consent or Warehouse Waiver and Consent; (ii) pay for the
performance of any of Obligations; (iii) discharge taxes or Liens on any of the
Collateral that are in violation of any Loan document unless Borrower is in good
faith with due diligence by appropriate proceedings contesting those items; and (iv)
pay for the maintenance and preservation of the Collateral, including the payment of
rent, warehouse fees or other per diem charges if required under any Landlord Waiver
and Consent or Warehouse Waiver and Consent. Such expenses and advances shall be
added to the Obligations until reimbursed to Lender and shall be secured by the
Collateral, and such payments by Lender shall not be construed as a waiver by Lender
of any Event of Default or any other rights or remedies of Lender.
(m) Section 1 of Annex I of the Agreement, entitled “Minimum EBITDA,” is hereby
amended as follows:
| 1) | Minimum EBITDA |
At no time shall Borrower permit EBITDA to be less than the amounts set forth across from such
month or month(s) for the Test Period most recently ended:
| Test Period Ending | Minimum EBITDA | |
| August 31, 2006 | $900,000 | |
| September 30, 2006 | $756,000 | |
| October 31, 2006 | $1,080,000 | |
| November 30, 2006 | $450,000 | |
| December 31, 2006 | $90,000 | |
| January 31, 2007 | ($50,000) | |
| February28, 2007 | $180,000 | |
| March 31, 2007 | $360,000 |
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| Test Period Ending | Minimum EBITDA | |
| April 30, 2007 | $360,000 | |
| May 31, 2007 | $450,000 | |
| June 30, 2007 | $540,000 | |
| July 31, 2007 | $630,000 | |
| August 31, 2007 | $720,000 | |
| September 30, 2007 | $810,000 | |
| October 31, 2007 | $990,000 | |
| November 30, 2007 | $1,170,000 | |
| December 31, 2007 | $1,260,000 | |
| January 31, 2008 and thereafter | $1,500,000 |
(n) Section 2 of Annex I of the Agreement, entitled “Fixed Charge Coverage Ratio
(EBITDA/Fixed Charge),” is hereby amended by amending such covenant as follows:
| 2) | Fixed Charge Coverage Ratio (EBITDA/Fixed Charges) |
At no time shall Borrower permit Fixed Charge Coverage Ratio to be less than the following as
at the end of the following calendar months:
| Test Period Ending | Minimum Fixed Charge Coverage Ratio | |
| August 31, 2006 | 1.0 to 1.0 | |
| September 30, 2006 | .95 to 1.0 | |
| October 31, 2006 | 1.0 to 1.0 | |
| November 30, 2006 | .56 to 1.0 | |
| December 31, 2006 | .11 to 1.0 | |
| January 31, 2007 | Not Applicable | |
| February 28, 2007 | .23 to 1.0 | |
| March 31, 2007 | .45 to 1.0 | |
| April 30, 2007 | .45 to 1.0 | |
| May 31, 2007 | .56 to 1.0 | |
| June 30, 2007 | .68 to 1.0 | |
| July 31, 2007 | .79 to 1.0 | |
| August 31, 2007 | .90 to 1.0 | |
| September 30, 2007 | 1.0 to 1.0 | |
| October 31, 2007 | 1.25 to 1.0 | |
| November 30, 2007 | 1.25 to 1.0 | |
| December 31, 2007 and thereafter | 1.50 to 1.0 |
(o) Section 3 of Annex I of the Agreement, entitled “Cash Velocity,” is hereby
amended as follows:
| 3) | Cash Velocity |
Collections of Borrower’s Accounts (which shall not include CIGNA Receipts for purposes of
this covenant) for each Test Period shall not be less than the amount set forth below for each
Test Period during the Term; provided, that upon any violation of or failure to comply with
this covenant Lender shall have the right, in its sole discretion, to consider for all purposes
under the Agreement as though Borrower actually collected Accounts equal to such minimum required
amount.
- 11 -
| Test Period Ending | Cash Velocity | |
| August 31, 2006 | $10,500,000 | |
| September 30, 2006 | $9,500,000 | |
| October 31, 2006 | $9,500,000 | |
| November 30, 2006 | $9,300,000 | |
| December 31, 2006 | $9,100,000 | |
| January 31, 2007 | $9,400,000 | |
| February 28, 2007 | $10,200,000 | |
| March 31, 2007 | $11,000,000 | |
| April 30, 2007 | $11,600,000 | |
| May 31, 2007 | $12,000,000 | |
| June 30, 2007 | $12,400,000 | |
| July 31, 2007 | $13,000,000 | |
| August 31, 2007 | $13,600,000 | |
| September 30, 2007 | $14,100,000 | |
| October 31, 2007 | $14,300,000 | |
| November 30, 2007 | $14,500,000 | |
| December 31, 2007 | $14,700,000 | |
| January 31, 2008 and thereafter | $15,200,000 |
(p) The definition of “Total Debt Service”, located in Annex I of the Agreement, entitled
“DEFINITIONS”, is hereby deleted in its entirety and replaced with the following:
“Total Debt Service” shall mean, for any Test Period the sum of (i)
scheduled or other required payments of principal on Indebtedness, and (ii) Interest
Expense (excluding interest which shall not be paid in cash), in each case for such
Test Period.
(q) The last paragraph contained in the definitions section of Annex I of the Agreement, which
begins “Borrower acknowledges and agrees” is hereby deleted in its entirety and of no further force
and effect.
(r) The definition of “Joint Venture Consent”, contained in Appendix A of the Agreement,
entitled “DEFINITIONS”, is hereby deleted in its entirety and replaced with the following:
“Joint Venture Dissolution Consent” means that certain consent letter issued
by Lender to Borrower dated September 27, 2006 in connection with the dissolution of
the Joint Venture.
3. Conditions to Effectiveness. This Amendment shall be effective on the date (the
“Effective Date") upon which the following conditions precedent are satisfied:
(a) Borrower shall have delivered to Lender an executed copy of this Amendment duly executed
by an authorized officer of Borrower and each other agreement, document or instrument
reasonably requested by the Lender in connection with this Amendment, each in form and
substance reasonably satisfactory to Lender;
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(b) the representations and warranties contained herein and in all other Loan Documents shall
be true and correct;
(c) no Default or Event of Default shall be in existence (except to the extent cured by this
Amendment); and
(d) Lender shall have received all fees, charges and expenses payable to in connection with
this Amendment and the documentation related hereto, including, but not limited to, legal fees and
out-of-pocket costs (including in-house counsel fees and expenses).
4. Representations and Warranties.
(a) Notwithstanding any other provision of this Amendment, Borrower hereby confirms and makes
all of the representations and warranties set forth in the Agreement and other Loan Documents with
respect to such Borrower and this Amendment as of the date hereof and as of the Effective Date and
confirms that they are true and correct and no Default or Event of Default has occurred and is
continuing as of the date hereof.
(b) Borrower hereby represents and warrants as of the date of this Amendment and as of the
Effective Date as follows: (i) it is duly incorporated or organized, validly existing and in good
standing under the laws of its jurisdiction of organization; (ii) the execution, delivery and
performance by it of this Amendment, as applicable, are within its powers, have been duly
authorized, and do not contravene (A) its articles of organization, operating agreement, or other
organizational documents, or (B) any applicable law; (iii) no consent, license, permit, approval or
authorization of, or registration, filing or declaration with any Governmental Authority or other
Person, is required in connection with the execution, delivery, performance, validity or
enforceability of this Amendment, as applicable, by or against it; (iv) this Amendment has been
duly executed and delivered by it; (v) this Amendment constitutes its legal, valid and binding
obligations enforceable against it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally or by general principles of equity; and (vi) after
giving effect to this Amendment, it is not in default under the Agreement and no Default or Event
of Default exists, has occurred or is continuing.
5. Expenses. Borrower shall pay all costs and expenses incurred by Lender or any of
its Affiliates, including, without limitation, documentation and diligence fees and expenses, all
search, audit, appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses and reasonable attorneys’ fees and expenses, in connection with
entering into, negotiating, preparing, reviewing and executing this Amendment contemplated hereby
and all related agreements, documents and instruments, and all of the same, to the extent incurred
and not promptly reimbursed by Borrower, may be charged to Borrower’s account and shall be part of
the Obligations. If Lender or any of its Affiliates uses in-house counsel for any of the purposes
set forth above Borrower expressly agrees that its Obligations include reasonable charges for such
work commensurate with the fees that would otherwise be charged by outside legal counsel selected
by Lender or such Affiliate in its sole discretion for the work performed.
6. Effect of Amendment. Lender and Borrower hereby acknowledge and agree that except
as provided in this Amendment, the Agreement, the Note and the other Loan Documents remain in full
force and effect and have not been modified or amended in any respect, it being the intention of
Lender
and Borrower that this Amendment and the Agreement be read, construed and interpreted as one
and the same instrument. The foregoing amendments are subject to Borrower executing and delivering
this Amendment and all additional documents required to be executed and delivered herein. In
addition, the foregoing does not constitute a waiver by Lender of any Default or Event of Default.
- 13 -
7. Confirmation of Agreements. Lender and Borrower hereby acknowledge and agree that,
except as provided in this Amendment, the Agreement, the Note and the other Loan Documents, and the
grant of the liens, security interests and other encumbrances thereunder, and their agreements,
covenants, obligations, representations and warranties thereunder and therein, are hereby expressly
ratified, confirmed and restated as of the date hereof.
8. References to Loan Documents. Each of the other Loan Documents are hereby modified
in such a manner as to be consistent with all modifications and agreements contained herein and to
the extent that all references therein to and descriptions therein of the Agreement and the Note
shall be deemed to refer to and describe the Agreement.
9. Capitalized Terms. All capitalized terms not otherwise defined in this Amendment
shall have the meanings ascribed to such terms in the Agreement.
10. Benefit. This Amendment shall inure to the benefit of and bind the parties hereto
and their respective successors and assigns.
11. Amendments. This Amendment may not be changed, modified, amended, restated,
waived, supplemented, discharged, canceled or terminated orally or by any course of dealing or in
any other manner other than by the written agreement of Lender and Borrower. This Amendment shall
be considered part of the Agreement for all purposes under the Agreement.
12. Headings and Counterparts. The captions in this Amendment are intended for
convenience and reference only and do not constitute and shall not be interpreted as part of this
Amendment and shall not affect the meaning or interpretation of this Amendment. This Amendment may
be executed in one or more counterparts, all of which taken together shall constitute but one and
the same instrument. This Amendment may be executed by facsimile transmission, which facsimile
signatures shall be considered original executed counterparts for all purposes, and each party to
this Amendment agrees that it will be bound by its own facsimile signature and that it accepts the
facsimile signature of each other party to this Amendment.
13. Governing Law; JURY TRIAL WAIVER. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE AGREEMENT AND SHALL BE SUBJECT TO THE
WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE AGREEMENT.
14. RELEASE BY BORROWER. By execution of this Amendment, Borrower acknowledges and
confirms that Borrower does not have any offsets, defenses or claims against Lender, or any of its
present or former subsidiaries, affiliates, officers, directors, shareholders, employees, agents,
representatives, attorneys, predecessors, successors or assigns whether asserted or unasserted. To
the extent that Borrower may have such offsets, defenses or claims, Borrower and each of its
successors, assigns, parents, subsidiaries, affiliates, predecessors, employees, agents, heirs,
executors, as applicable, jointly and severally, knowingly, voluntarily and intentionally waive,
release and forever discharge Lender, its subsidiaries, affiliates, officers, directors,
shareholders, employees, agents, attorneys,
- 14 -
predecessors, successors and assigns, both present and former (collectively the “Lender
Affiliates”) of and from any and all actual or potential claims, demands, damages, actions,
requests for sanctions and causes of action, torts, obligations, suits, debts, controversies,
damages, judgments, executions, claims and demands whatsoever, all other liabilities whether known
or unknown, matured or unmatured, contingent or absolute, of any kind or description whatsoever,
either in law or in equity, asserted or unasserted which against Lender and/or Lender Affiliates
they ever had, now have, claim to have or may later have or which any of any Borrower’s successors,
assigns, parents, subsidiaries, affiliates, predecessors, employees, agents, heirs, executors, as
applicable, both present and former ever had, now has, claim to have or may later have, upon or by
reason of any manner, cause, causes or thing whatsoever, including, without limitation, any
presently existing claim or defense whether or not presently suspected, contemplated or
anticipated, and Borrower hereby agrees that Borrower is collaterally estopped from asserting any
claims against Lender or any of the Lender Affiliates relating to the foregoing.
15. Entire Agreement. This Amendment, the Agreement, and the other Loan Documents
constitute the entire agreement between the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and understandings, if any, relating to the subject
matter hereof and thereof and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements between the parties. There are no unwritten oral agreements between the
parties.
16. Miscellaneous. Whenever the context and construction so require, all words used
in the singular number herein shall be deemed to have been used in the plural, and vice versa, and
the masculine gender shall include the feminine and neuter and the neuter shall include the
masculine and feminine. This Amendment shall inure to the benefit of Lender, all future holders of
any Note, any of the Obligations or any of the Collateral and all Transferees, and each of their
respective successors and permitted assigns. No Borrower may assign, delegate or transfer this
Amendment or any of its rights or obligations under this Amendment without the prior written
consent of Lender. No rights are intended to be created under this Amendment for the benefit of
any third party donee, creditor or incidental beneficiary of Borrower or any Guarantor. Nothing
contained in this Amendment shall be construed as a delegation to Lender of any Borrower’s or any
Guarantor’s duty of performance, including, without limitation, any duties under any account or
contract in which Lender has a security interest or Lien. This Amendment shall be binding upon
Borrowers and their respective successors and assigns.
- 15 -
Exhibit 10.8
[intentionally left blank — signature page follows]
Exhibit 10.8
[signature page to Second Amendment]
IN WITNESS WHEREOF, Lender and Borrower have executed this Second Amendment as of the
date first above written.
| LENDER: | CAPITALSOURCE FINANCE LLC |
|||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Director | |||
BORROWER:
| UNITED STATES PHARMACEUTICAL GROUP, L.L.C. d/b/a NATIONSHEALTH |
||||
| By: | /s/ Xxxxxxx Xxxxxxxxx | |||
| Name: | Xxxxxxx Xxxxxxxxx | |||
| Title: | CFO | |||
| NATIONSHEALTH HOLDINGS, L.L.C. |
||||
| By: | /s/ Xxxxxxx Xxxxxxxxx | |||
| Name: | Xxxxxxx Xxxxxxxxx | |||
| Title: | CFO | |||
| NATIONSHEALTH, INC. |
||||
| By: | /s/ Xxxxxxx Xxxxxxxxx | |||
| Name: | Xxxxxxx Xxxxxxxxx | |||
| Title: | CFO | |||
