EXHIBIT 10.1

 

THIRD AMENDMENT TO CREDIT AGREEMENT

 

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made and entered
into as of this 1st day of March, 2004, among PSS World Medical, Inc., a Florida
corporation (“PSS”), Gulf South Medical Supply, Inc., a Delaware corporation
(“Gulf South”), and Physician Sales & Services Limited Partnership, a Florida
limited partnership (“PSS LP”; PSS, Gulf South and PSS LP are referred to
hereinafter each individually as a “Borrower” and collectively as “Borrowers”),
PSS Holding, Inc., a Florida corporation (“PSS Holding”), PSS Service, Inc., a
Florida corporation (“PSS Service”), Physician Sales & Service, Inc., a Florida
corporation (“Physician Sales & Service”), Highpoint Healthcare Distribution,
Inc., a Nevada corporation (“Highpoint Healthcare”), ProClaim, Inc., a Tennessee
corporation (“ProClaim”), Ancillary Management Solutions, Inc., a Tennessee
corporation (“Ancillary”), and ThriftyMed, Inc., a Florida corporation
(“ThriftyMed”; PSS Holding, PSS Service, Physician Sales & Service, Highpoint
Healthcare, ProClaim, Ancillary and ThriftyMed are referred to hereinafter each
individually as a “Guarantor” and collectively as “Guarantors”), the Lenders
party to this Amendment (the “Lenders”), and Bank of America, N.A., as Agent for
the Lenders (the “Agent”).

 

W I T N E S S E T H :

 

WHEREAS, Borrowers, Guarantors, the Lenders and the Agent entered into that
certain Amended and Restated Credit Agreement, dated as of May 20, 2003,
pursuant to which the Lenders agreed to make certain loans to Borrowers (as
amended, modified, supplemented and restated from time to time, the “Credit
Agreement”); and

 

WHEREAS, Borrowers, Guarantors, the Lenders and the Agent desire to enter into
this Amendment for the purpose of amending the Credit Agreement in certain
respects.

 

NOW, THEREFORE, in consideration of the foregoing premises, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

1. All capitalized terms used herein and not otherwise expressly defined herein
shall have the respective meanings given to such terms in the Credit Agreement.

 

2. The Agent and the Lenders acknowledge that the issuance of the Senior
Convertible Notes (as hereafter defined) shall not constitute a default under
Section 7.9(c) of the Credit Agreement.

 

3. The Credit Agreement is amended by adding the following new subsection (h) to
Section 7.13 of the Credit Agreement, immediately following subsection (g)
thereof:

 

(h) Debt incurred pursuant to the Senior Convertible Notes and the Senior
Convertible Notes Indenture.

 

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4. The Credit Agreement is amended by deleting Section 7.14 of the Credit
Agreement and replacing it with the following in lieu thereof:

 

7.14 Prepayment. Neither any Obligor nor any Subsidiary shall voluntarily prepay
any Debt, except (a) the Obligations in accordance with the terms of this
Agreement, (b) in connection with Refinancings permitted under Section 7.13(d),
(c) intercompany Debt, provided no such intercompany Debt will be prepaid to any
non-Obligor if an Event of Default exists, (d) non-cash conversions of all or
part of the Debt outstanding under the Senior Convertible Notes into equity
securities of PSS in accordance with the terms of the Senior Convertible Notes
Indenture, and (e) and Permitted SCN Redemptions.

 

5. The Credit Agreement is amended by deleting Section 7.23 of the Credit
Agreement and replacing it with the following in lieu thereof:

 

7.23 Financial Covenants. The Borrowers and their consolidated Subsidiaries
shall:

 

(a) have EBITDA for each period of four consecutive fiscal quarters ending on
the last day of each fiscal quarter set forth below of not less than the
applicable amount set forth below:

 

Period Ending

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   Minimum
EBITDA

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Each four fiscal quarter period ending on or after March 28, 2003 but prior to
the fiscal quarter ending on or about April 2, 2004

   $ 38,000,000

Each four fiscal quarter period ending on or after April 2, 2004 but prior to
the fiscal quarter ending on or about April 1, 2005

   $ 45,000,000

Each four fiscal quarter period ending thereafter

   $ 50,000,000

 

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(b) maintain a Leverage Ratio as of each fiscal quarter ending as of the
applicable date set forth below of not more than the applicable ratio set forth
below:

 

Fiscal Quarter Ending

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   Maximum Leverage
Ratio

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Each four fiscal quarter period ending on or after March 28, 2003 but prior to
the fiscal quarter ending on or about April 1, 2005

   3.5 to 1

Each four fiscal quarter period ending thereafter

   3.25 to 1

 

; provided, however, the Borrowers shall only be required to comply with this
Section 7.23 with respect to any fiscal quarter end if, at any time during such
fiscal quarter then ended, Excess Availability was less than $25,000,000.

 

6. The Credit Agreement is amended by deleting the definition of “Change of
Control” set forth in Appendix A to the Credit Agreement and replacing it with
the following in lieu thereof:

 

“Change of Control” means the occurrence of any of the following: (a) a Person
or “group” of Persons (within the meaning of Section 13(d) of the Exchange Act),
shall acquire, beneficially or of record, 30% or more of the outstanding voting
stock (stock entitled to vote for election of directors) of PSS; (b) during any
period of two consecutive calendar years, individuals who at the beginning of
such period constituted the Board of Directors of PSS (together with any new
directors whose election by the Board of Directors of PSS or whose nomination
for election by the shareholders of PSS, as the case may be, was approved by a
vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors of PSS, as the case may be, then in office; (c) PSS
shall cease to own 100% of the voting stock of any other Obligor or such
ownership shall cease to vest in PSS voting control with respect to any other
Obligor, except as a result of a transaction permitted under this Agreement; or
(d) a “Fundamental Change” shall occur under (and as defined in) the Senior
Convertible Notes Indenture.

 

7. The Credit Agreement is amended by deleting the definition of “Funded Debt”
set forth in Appendix A to the Credit Agreement and replacing it with the
following in lieu thereof:

 

“Funded Debt” means, as of any date of determination, (a) all principal of Debt
under this Agreement, and, without duplication, (b) (i) Debt for money borrowed,
(ii) Debt, whether or not in any such case the same was for money borrowed, (A)
represented by notes payable, and drafts accepted, that represent extensions of
credit, (B) constituting obligations evidenced by bonds, debentures, notes or
similar instruments,

 

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or (C) upon which interest charges are customarily paid or that was issued or
assumed as full or partial payment for property (other than trade credit that is
incurred in the ordinary course of business), including Debt to be paid in one
or more installments under non-compete arrangements entered into in connection
with Permitted Acquisitions, (iii) Debt that constitutes an obligation under a
Capital Lease, and (iv) Debt that is such by virtue of clause (d) of the
definition thereof, but only to the extent that the obligations guaranteed are
obligations that would constitute Funded Debt; provided, however, the amount of
Funded Debt on any date of determination shall be reduced by an amount, not to
exceed the outstanding principal amount of Revolving Loans on such date, equal
to the remainder of (1) the net amount of the Borrowers’ Cash Equivalents (plus
collected funds in bank accounts of the Borrowers at the Bank) as of such date
that are subject to the Agent’s perfected Liens and no prior Liens and that are
capable of being liquidated within two Business Days without any penalty or
premium and available for the general operations of the Borrowers, minus (2) the
aggregate outstanding amount of (y) checks and similar instruments that have
been written against the Borrowers’ bank accounts as of such date but have not
yet cleared, whether or not such checks have been mailed or delivered or are
being held by a Borrower, plus (z) automatic clearing house and other transfers
that are pending against the Borrowers’ bank accounts as of such date, it being
understood that the calculation of both items (1) and (2) above shall be made by
the Borrowers in such detail as the Agent may require and shall be subject to
the final approval of the Agent.

 

8. The Credit Agreement is amended by deleting the definition of “Permitted
Stock Redemptions” set forth in Appendix A to the Credit Agreement and replacing
it with the following in lieu thereof:

 

“Permitted Stock Redemptions” means redemptions of capital stock of PSS so long
as: (a) the aggregate redemption price for such redemptions occurring on or
after the Closing Date does not exceed $42,000,000, (b) no Default or Event of
Default exists before or after giving effect to any such redemption, (c) after
giving effect to the consummation of any such redemption (including any Loans
made hereunder to finance such redemption), Excess Availability is greater than
$20,000,000; (d) after giving effect to the consummation of any such redemption,
the Obligors are in compliance with the financial covenants set forth in Section
7.23 on a pro forma basis (it being understood that this requirement shall apply
whether or not Excess Availability is greater than $25,000,000 after giving
effect to the consummation of any such redemption), provided, that such
financial covenants shall be measured as of the most recently ended fiscal month
for which the Borrowers have delivered the financial statements required under
Section 5.2(b) or (c), as the case may be, for the twelve fiscal month period
then ended; (e) the Accounts Payable Turnover,

 

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calculated as of the date of any such proposed redemption and as of the most
recently ended fiscal month for which the Borrowers have delivered the financial
statements required under Section 5.2(b) or (c), as the case may be, shall not
in either case exceed 45 days; (f) after giving effect to the consummation of
such redemption (including any Loans made hereunder to finance such redemption)
the Aggregate Revolver Outstandings shall not exceed the Maximum Revolver Amount
minus $20,000,000; and (g) a Responsible Officer delivers to the Agent a
certificate (i) demonstrating compliance with clauses (a), (c), (d), (e) and (f)
above, and (ii) stating that no Default or Event of Default exists before or
after giving effect to any such redemption; provided, that, in the case of a
series of redemptions over consecutive Business Days, unless otherwise required
by the Agent, the Borrowers shall only be required to deliver the foregoing
certificate as of the first date of such series of redemptions (such certificate
to be delivered on the first date of such series of redemptions) and as of the
last date of such series of redemptions (such certificate to be delivered within
two Business Days after the last date of such series of redemptions).

 

9. The Credit Agreement is amended by adding the following new definition of
“Permitted SCN Redemptions” to Annex A to the Credit Agreement, in proper
alphabetical sequence:

 

“Permitted SCN Redemptions” means cash redemptions or conversions of Senior
Convertible Notes so long as: (a) the aggregate redemption or conversion price
does not exceed $50,000,000, (b) no Default or Event of Default exists before or
after giving effect to any such redemption or conversion, (c) after giving
effect to the consummation of any such redemption or conversion (including any
Loans made hereunder to finance such redemption or conversion), Excess
Availability is greater than $25,000,000; (d) after giving effect to the
consummation of any such redemption or conversion, the Obligors are in
compliance with the financial covenants set forth in Section 7.23 on a pro forma
basis (it being understood that this requirement shall apply whether or not
Excess Availability is greater than $25,000,000 after giving effect to the
consummation of any such redemption or conversion), provided, that such
financial covenants shall be measured as of the most recently ended fiscal month
for which the Borrowers have delivered the financial statements required under
Section 5.2(b) or (c), as the case may be, for the twelve fiscal month period
then ended; (e) the Accounts Payable Turnover, calculated as of the date of any
such proposed redemption or conversion and as of the most recently ended fiscal
month for which the Borrowers have delivered the financial statements required
under Section 5.2(b) or (c), as the case may be, shall not in either case exceed
45 days; (f) after giving effect to the consummation of such redemption or
conversion (including any Loans made hereunder to finance such redemption or

 

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conversion) the Aggregate Revolver Outstandings shall not exceed the Maximum
Revolver Amount minus $20,000,000; and (g) a Responsible Officer delivers to the
Agent a certificate (i) demonstrating compliance with clauses (a), (c), (d), (e)
and (f) above, and (ii) stating that no Default or Event of Default exists
before or after giving effect to any such redemption or conversion.

 

10. The Credit Agreement is amended by adding the following new definition of
“Senior Convertible Notes” to Annex A to the Credit Agreement, in proper
alphabetical sequence:

 

“Senior Convertible Notes” means those certain [Convertible Senior Notes] by PSS
dated March     , 2004, due                     , 2024, in the aggregate
original principal amount of up to $150,000,000, issued pursuant to the Senior
Convertible Notes Indenture.

 

11. The Credit Agreement is amended by adding the following new definition of
“Senior Convertible Notes Indenture” to Annex A to the Credit Agreement, in
proper alphabetical sequence:

 

“Senior Convertible Notes Indenture” means that certain [Indenture] dated March
    , 2004, between PSS and Wachovia Bank, N.A., as trustee, that provides for
the issuance of the Senior Convertible Notes.

 

12. Notwithstanding anything to the contrary set forth in the Credit Agreement
or any other Loan Document, the Applicable Margins shall be set at Level V
(0.00% for Base Rate Loans and 2.00% for LIBOR Loans) until the scheduled
adjustment thereto based on the Leverage Ratio for the fiscal year ending on or
about April 1, 2005, provided that the foregoing shall not limit the application
of the Default Rate as set forth in the Credit Agreement during the existence of
an Event of Default.

 

13. The effectiveness of this Amendment is expressly conditioned upon the
following:

 

(a) the due execution and delivery of this Amendment by each of the parties
hereto;

 

(b) the delivery to the Agent of duly executed originals of each of the
documents set forth on the Closing Checklist, a copy of which is attached hereto
as Exhibit A;

 

(c) the payment by the Borrowers of the amendment fee described in Section 14 of
this Amendment; and

 

(d) the Agent shall have received a true and correct copy of the Senior
Convertible Notes Indenture, substantially in conformance with the most recent
Description

 

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of Notes delivered to the Agent prior to the execution and delivery of this
Amendment by the Agent.

 

14. In consideration of the Agent’s and the Lenders’ willingness to enter into
this Amendment, Borrowers jointly and severally agree to pay to the Agent an
amendment fee in the amount of $250,000, in immediately available funds on the
date hereof, to be distributed by the Agent to the Lenders who are party to this
Amendment based upon such Lenders’ Pro Rata Share of the Commitments.

 

15. To induce the Agent and the Lenders to enter into this Amendment, Borrowers
and Guarantors hereby represent and warrant that, as of the date hereof, there
exists no Default or Event of Default under the Credit Agreement.

 

16. Borrowers and Guarantors hereby restate, ratify, and reaffirm each and every
term, condition, representation and warranty heretofore made by each of them
under or in connection with the execution and delivery of the Credit Agreement,
as modified hereby, and the other Loan Documents, as fully as though such
representations and warranties had been made on the date hereof and with
specific reference to this Amendment, except to the extent that any such
representation or warranty relates solely to a prior date.

 

17. Except as expressly set forth herein, the Credit Agreement and the other
Loan Documents shall be and remain in full force and effect as originally
written, and shall constitute the legal, valid, binding and enforceable
obligations of Borrowers and Guarantors to the Agent and the Lenders.

 

18. Borrowers agree to pay on demand all reasonable costs and expenses of the
Agent in connection with the preparation, execution, delivery and enforcement of
this Amendment and all other Loan Documents and any other transactions
contemplated hereby, including, without limitation, the reasonable fees and
out-of-pocket expenses of legal counsel to the Agent.

 

19. Borrowers and Guarantors agree to take such further action as the Agent
shall reasonably request in connection herewith to evidence the agreements
herein contained.

 

20. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.

 

21. This Amendment shall be binding upon and inure to the benefit of the
successors and permitted assigns, and legal representatives and heirs, of the
parties hereto.

 

22. This Amendment shall be governed by, and construed in accordance with, the
laws of the State of Georgia.

 

[Signatures commence on following page.]

 

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IN WITNESS WHEREOF, Borrowers, Guarantors, the Agent and the Lenders have caused
this Amendment to be duly executed as of the date first above written.

 

BORROWERS:

 

PSS WORLD MEDICAL, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

GULF SOUTH MEDICAL SUPPLY, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

PHYSICIAN SALES & SERVICE

LIMITED PARTNERSHIP

By:

 

PSS World Medical, Inc.,

Its general partner

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

GUARANTORS:

 

PSS HOLDING, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

PSS SERVICE, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

PHYSICIAN SALES & SERVICE, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

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THRIFTYMED, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

HIGHPOINT HEALTHCARE

DISTRIBUTION, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

PROCLAIM, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

ANCILLARY MANAGEMENT

SOLUTIONS, INC.

By:   /s/    DAVID D. KLARNER            

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Name:

  David D. Klarner

Title:

  Vice President

 

LENDERS:

 

BANK OF AMERICA, N.A.

By:   /s/    MARK HERDMAN            

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Name:

  Mark Herdman

Title:

  Vice President

 

GENERAL ELECTRIC CAPITAL CORPORATION By:   /s/    STEVEN WAGNBLAS            

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Name:

  Steven Wagnblas

Title:

  Duly Authorized Signatory

 

FLEET CAPITAL CORPORATION

By:   /s/    W. REED PADEN            

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Name:

  W. Reed Paden

Title:

  Vice President

 

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WACHOVIA BANK, NATIONAL ASSOCIATION

By:   /s/    ERIC BUTLER            

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Name:

  Eric Butler

Title:

  Managing Director

 

THE CIT GROUP/BUSINESS CREDIT, INC.

By:   /s/    ARTHUR R. CORDWELL, JR.            

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Name:

  Arthur R. Cordwell, Jr.

Title:

  Vice President

 

AGENT:

 

BANK OF AMERICA, N.A.

By:   /s/    MARK HERDMAN            

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Name:

  Mark Herdman

Title:

  Vice President

 

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EXHIBIT A

 

Third Amendment

 

relating to

 

Amended and Restated Credit Agreement dated May 20, 2003 among PSS

World Medical, Inc. and the other borrowers listed on Appendix 1

(“Borrowers”)

 

and

 

The Guarantors listed on Appendix 1

(“Guarantors”)

 

and

 

A syndicate of lenders party thereto (the “Lenders”)

 

and

 

Bank of America, N.A., as agent for the Lenders

(“Agent”)

 

March 1, 2004

 

Document

 

1. Third Amendment

 

2. Bringdown Secretary’s Certificate of PSS World Medical, Inc., including
Exhibit A – Good Standing Certificate

 

3. Bringdown Certificate of Physician Sales and Service Limited Partnership,
including Exhibit A – Good Standing Certificate

 

4. Bringdown Secretary’s Certificate for Gulf South Medical Supply, Inc.,
including Exhibit A – Good Standing Certificate

 

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5. Opinion of Counsel

 

6. Affidavit regarding Out of State Delivery

 

7. Certificate regarding Senior Convertible Notes Indenture

 

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Appendix 1

 

Borrowers

 

PSS World Medical, Inc.

Physician Sales & Service Limited Partnership

Gulf South Medical Supply, Inc.

 

Guarantors

 

Physician Sales & Services, Inc.

PSS Holding, Inc.

PSS Service, Inc.

ThriftyMed, Inc.

Highpoint Healthcare Distribution, Inc.

ProClaim, Inc.

Ancillary Management Solutions, Inc.