Attached files
| file | filename |
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| EX-10.1 - DERMA SCIENCES, INC. | v179810_ex10-1.htm |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): March 26, 2010
Derma
Sciences, Inc.
(Exact
name of registrant as specified in its charter)
|
Pennsylvania
|
1-31070
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23-2328753
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(State
or other jurisdiction
|
(Commission
|
(IRS
employer
|
|
of
incorporation)
|
File
Number)
|
identification
number)
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214
Carnegie Center, Suite 300
Princeton,
NJ 08540
(609)
514-4744
(Address
including zip code and telephone
number,
of principal executive offices)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.03. Creation
of a Direct Financial Obligation
On
November 8, 2007 the Registrant entered into a five year credit and security
agreement comprising a term loan and a revolving loan (the “Agreement”) with
Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services,
Inc., for a maximum principal amount of $14.0 million. The term and
revolving loans (collectively, the “Loan”) are described in the Registrant’s
current report on Form 8-K filed November 15, 2007.
Effective
March 28, 2008, the Registrant and GE Business Financial Services Inc. (the
“Lender”), successor to Merrill Lynch Business Financial Services, Inc., amended
the Agreement in the manner described in the Registrant’s current report on Form
8-K filed April 2, 2008. Effective August 13, 2008, the Registrant
and the Lender amended the Agreement in the manner described in the Registrant’s
current report on Form 8-K filed August 19, 2008. Effective March 31,
2009, the Registrant and the Lender amended the Agreement in the manner
described in the Registrant’s current report on Form 8-K filed April 6,
2009. Effective February 26, 2010, the Registrant and the Lender
amended the Agreement in the manner described in the Registrant’s current report
on Form 8-K filed March 1, 2010. Effective March 26, 2010 the
Registrant and the Lender amended the Agreement (the “Fifth Amendment”) for the
reasons and in the manner described below:
The
Registrant has paid in full the balance of the term loan. As a
result, the Registrant and the Lender have agreed to liberalize or delete those
provisions of the Agreement hereinbelow described:
1. Section 1.1 – Base Rate
Definition. Section 1.1 of the Agreement was amended to define
the “Base Rate” as “the greater of: 1.50% or the LIBOR
Rate”. The effect of this amendment is to reduce the variable
interest rate under the Agreement, effective March 28, 2010, from 7.25% to
5.75%.
2. Section 1.1 – Borrowing Base
Definition. Section 1.1 of the Agreement was amended to define
“Borrowing Base” as “$1,000,000” vice “$1,500,000”. The effect of
this amendment, combined with the amendment described in paragraph 3 below, is
to increase the Registrant’s borrowing capacity under the Agreement by
$500,000.
3. Section 1.1 – Minimum Excess
Availability Reserve Definition. Section 1.1 of the Agreement
was amended to define “Minimum Excess Availability Reserve” as “$1,000,000” vice
“$1,500,000”. The effect of this amendment, combined with the
amendment described in paragraph 2 above, is to increase the Registrant’s
borrowing capacity under the Agreement by $500,000.
4. Section 5.10 – Payments and
Modifications of Subordinated Debt. Section 5.10 of the
Agreement was amended to permit the Registrant to pay to Western Medical, Inc.
the $500,000 balance due to Western Medical in respect of the Registrant’s
April, 2006 purchase from Western Medical of its line of wound care
products.
5. Section 6.2 – Minimum
EBITDA. Section 6.2 of the Agreement was amended by deleting
same in its entirety.
2
6. Section 6.3 – Fixed Charge Coverage
Ratio. Section 6.3 of the Agreement was amended, effective
January 1, 2010, by deleting same and replacing it with the
following:
“Section 6.3 Fixed Charge Coverage Ratio.
Borrowers will not permit the Fixed Charge Coverage Ratio for any period
set forth below to be less than the ratio set forth below for such
period:
| Period | Ratio | ||
|
As
of the end of any given calendar quarter,
after
January 1, 2010, as measured on
a
trailing 12-month basis
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1.50 to 1.00 |
For
clarity, the Defined Period for calculation of Operating Cash Flow and Fixed
Charges shall be for the same period as the corresponding EBITDA for such
Defined Period.”
7. Section 6.4 – Service – Leverage
Ratio. Section 6.4 of the Agreement was amended by deleting
same in its entirety.
8. Section 6.5 – Total Leverage
Ratio. Section 6.5 of of the Agreement was amended, effective
January 1, 2010, by deleting same and replacing it with the
following:
“Section 6.5 Total Leverage
Ratio. Borrowers shall not permit the Total Leverage Ratio for
any period set forth below to exceed the ratio set forth below for such
period:
| Period | Ratio | ||
|
As
of the end of any given calendar quarter,
after
January 1, 2010, as measured on
a
trailing 12-month
basis
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2.0 to 1.0” |
Implementation
of the amendments described in paragraphs 2 and 3 above are conditioned upon the
satisfactory completion by the Lender of a field examination of the
Registrant.
The
foregoing description of the Fifth Amendment is qualified in its entirety by
reference to the Fifth Amendment a copy of which is attached hereto as Exhibit
10.01.
Item
9.01. Financial Statements and Exhibits
(d)
Exhibits
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10.01
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Fifth
Amendment to Credit and Security
Agreement
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3
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
| DERMA SCIENCES, INC. | |||
|
|
By:
|
/s/ John E. Yetter | |
| John E. Yetter, CPA | |||
| Vice President and Chief Financial Officer | |||