FIFTH AMENDMENT
TO CREDIT AGREEMENT
This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is
dated as of April 14, 2000 between HORIZON Pharmacies, Inc., a Delaware
corporation ("BORROWER"), and McKesson HBOC, Inc., a Delaware corporation
formerly known as McKesson Corporation ("MCKESSON").
RECITALS
WHEREAS, Borrower and McKesson are parties to that certain
Credit Agreement dated as of July 2, 1998, as amended by a First Amendment to
Credit Agreement dated as of July 20, 1998, a Second Amendment to Credit
Agreement dated as of August 26, 1998, a Third Amendment to Credit Agreement
dated as of May 14, 1999 and a Fourth Amendment to Credit Agreement dated as of
August 16, 1999 (as so amended, the "CREDIT AGREEMENT"). Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
WHEREAS, Borrower and McKesson wish to amend certain
provisions set forth in the Credit Agreement, upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the promises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. Section 1.1(a) of the Credit Agreement is hereby amended
to read in full as follows:
REVOLVING LOANS. McKesson agrees, on the terms and conditions
hereinafter set forth, to make revolving loans denominated in U.S.
Dollars (each a "REVOLVING LOAN" and, collectively, the "REVOLVING
LOANS") to Borrower from time to time on any Business Day during the
period from the Closing Date until the Revolving Loans Maturity Date,
in an aggregate principal amount up to but not exceeding at any time
outstanding the Revolving Facility Commitment; PROVIDED, HOWEVER, that
immediately after giving effect to any Revolving Loans, the aggregate
principal amount of Revolving Loans then outstanding shall not exceed
the lesser of (i) $8,000,000 and (ii) at any time, the sum of (without
duplication) (A) 70% of Eligible Pharmaceutical Inventory then in
effect, PLUS (B) 50% of Eligible Other Inventory then in effect, PLUS
(C) 85% of Eligible Insurer Accounts Receivable then in effect, PLUS
(D) 50% Eligible Other Accounts Receivable
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then in effect, PLUS (E) the Eligible Rx Files Value then in effect
(except that the Eligible Rx Files Value shall not be included during
the calendar year 2000) LESS (F) the principal and interest outstanding
under the Bank One Facility. Within the foregoing limits, during such
period Borrower may borrow Revolving Loans, repay the Revolving Loans
in whole or in part, and reborrow Revolving Loans, all in accordance
with the terms and conditions hereof.
If the Bank One Facility is not renewed prior to July 1, 2000
and no Event of Default has occurred and is continuing and Borrower is
in full compliance with Section 2.3(b)(ii) without regard to the
proviso contained therein, then McKesson shall negotiate with Borrower
with respect to an amendment of this Agreement to provide for McKesson
either (x) guarantying a replacement line of credit for the Bank One
Facility or (y) increasing the $8,000,000 limit set forth in clause (i)
of the preceding paragraph, in each case with McKesson's total credit
exposure under this Agreement and any guaranty of a replacement line of
credit not to exceed an amount in excess of $15,000,000, it being
understood that both parties reserve the right in their sole discretion
to place terms and conditions upon any such amendment.
B. Section 2.3(b)(ii) of the Credit Agreement as hereby
amended to read in full as follows:
If at any time the aggregate principal amount of the
outstanding Revolving Loans shall exceed the maximum borrowing limits
set forth in Section 1.1(a), Borrower, upon becoming aware of such
excess, shall immediately prepay the outstanding principal amount of
the Revolving Loans in an amount equal to such excess; provided that
any excess amount in existence as of April 6, 2000 shall not need to be
prepaid until September 30, 2000, provided that the Borrower shall
immediately apply as a mandatory prepayment to any such excess any
amount received by Borrower from (x) up to $5,000,000 of the net
proceeds of the issuance by Borrower or its Subsidiaries of any debt or
equity securities on or after April 6, 2000 and (y) up to $1,500,000 of
any funds received from Informed (less amounts received from Informed
used to bring Borrower into compliance with the terms of the Supply
Agreement as amended on March 30, 2000).
C. Section 4.2(d) of the Credit Agreement as hereby amended
to read in full as follows:
CERTAIN FINANCIAL TESTS. Borrower's ratio of Consolidated
EBITDA to Sales as at the last day of the fiscal quarter ended
immediately prior to the proposed Loan shall not be less than the ratio
set forth opposite such fiscal quarter:
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FISCAL QUARTER ENDING IN: RATIO
------------------------- -----
any quarter in 1998 .02:1.0
any quarter in 1999 .02:1.0
March 2000 (.015:1.0)
June 2000 .01:1.0
September 2000 .03:1.0
December 2000 .035:1.0
any quarter in 2001 .035:1.0
any quarter in 2002 .035:1.0
any quarter in 2003 .035:1.0
Numbers in parentheses are negative numbers. For the avoidance of
doubt, (12) is less than (10).
D. Section 5.9 of the Credit Agreement as hereby amended to
read in full as follows:
FINANCIAL CONDITION. Maintain the consolidated financial
condition of Borrower and its Subsidiaries according to the following
schedules:
(a) a minimum Current Ratio of 1.3:1.0 as at the end of each
fiscal quarter;
(b) a ratio of Consolidated EBITDA to Consolidated Interest
Expense as at the end of each fiscal quarter of not less than the ratio
set forth opposite such fiscal quarter:
FISCAL QUARTER ENDING IN: RATIO
------------------------- -----
any quarter in 1998 1.3:1.0
any quarter in 1999 1.3:1.0
March 2000 (0.9:1.0)
June 2000 0.5:1.0
September 2000 1.5:1.0
December 2000 2.0:1.0
any quarter in 2001 2.0:1.0
any quarter in 2002 2.0:1.0
any quarter in 2003 2.0:1.0
(c) a minimum Net Worth as at the end of each fiscal quarter
of not less than (i) $12,700,000 PLUS (ii) 50% of cumulative quarterly
Consolidated Net Income (but not losses) after December 31, 1999 PLUS
(iii) 75% of the Net Cash Proceeds received by Borrower or any
Subsidiary from the sale or issuance of equity securities to any Person
after December 31, 1999;
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(d) a maximum ratio of (i) Debt of Borrower and its
Subsidiaries on a consolidated basis to (ii) Capital as at the end of
the fiscal quarter ending March 31, 2000 of not greater than 0.90:1.0,
as at the end of the fiscal quarter ending June 30, 2000 of not greater
than 0.85:1.0, and as at the end of any other fiscal quarter of not
greater than 0.75:1.0.
(e) a minimum Quick Ratio as at the end of each fiscal quarter
of not less than 0.4:1.0.
(f) a ratio of Consolidated EBIT to Consolidated Interest
Expense as at the end of each fiscal quarter set forth below of not
less than the ratio set forth opposite such fiscal quarter:
FISCAL QUARTER ENDING IN: RATIO
------------------------- -----
any quarter in 1998 0.8:1.0
any quarter in 1999 1.0:1.0
March 2000 (1.7:1.0)
June 2000 (0.3:1.0)
September 2000 0.85:1.0
December 2000 1.5:1.0
any quarter in 2001 1.5:1.0
any quarter in 2002 1.5:1.0
any quarter in 2003 1.5:1.0
(g) a ratio of Consolidated EBITDA to Sales as at the end of
each fiscal quarter of not less than the ratio set forth opposite such
fiscal quarter:
FISCAL QUARTER ENDING IN RATIO
------------------------ -----
any quarter in 1998 0
any quarter in 1999 0
March 2000 (.015:1.0)
June 2000 .01:1.0
September 2000 .02:1.0
December 2000 .02:1.0
any quarter in 2001 .02:1.0
any quarter in 2002 .02:1.0
any quarter in 2003 .02:1.0
E. Section 5.12 of the Credit Agreement is hereby amended by
correcting the reference to Section 5.14 in line 8 thereof to Section 5.12.
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F. Exhibit B to the Credit Agreement is hereby amended to
read in full as set forth on Exhibit B hereto.
SECTION 2. CONDITIONS TO EFFECTIVENESS
This Amendments set forth in Section 1 shall become effective as of the
first date (the "FIFTH AMENDMENT DATE") on or before April 18, 2000 upon which
the following conditions have been satisfied:
(i) Borrower and McKesson shall have delivered to one
another duly executed counterparts of this Amendment;
(ii) all the representations and warranties in Section 3
below (after giving effect to any amendments to the Representation Certificate
delivered to McKesson prior to the date of this Amendment) shall be true and
correct as of the date of this Amendment; and
(iii) no Default shall have occurred and be continuing on the
date of this Amendment or will result from the consummation of this Amendment
(after giving effect to this Amendment).
When and if this Amendment becomes effective, the amendments set forth in
Section 1 shall be deemed effective as of the Fifth Amendment Date.
SECTION 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce McKesson to enter into this Amendment, to amend the
Credit Agreement in the manner provided herein and to grant the waivers
contained herein, Borrower represents and warrants to McKesson that the
following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Borrower.
C. NO CONFLICT. The execution and delivery by Borrower of
this Amendment does not and will not contravene (i) any law or any governmental
rule or regulation applicable to Borrower or any of its Subsidiaries, (ii) the
Certificate of Incorporation or Bylaws of Borrower, (iii) any order, judgment or
decree of any court or other agency of government binding on
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Borrower or any of its Subsidiaries or (iv) any material agreement or instrument
binding on Borrower or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by
Borrower of this Amendment and the performance by Borrower of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by Borrower and are the binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM
CREDIT AGREEMENT. The representations and warranties contained in Article III of
the Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date of this Amendment to the same extent as though
made on and as of such date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is
continuing as of the date of this Amendment or will result from the consummation
of the transactions contemplated by this Amendment that would constitute a
Default or an Event of Default (as determined after giving effect to the
amendments made by this Amendment).
SECTION 4. RESERVATION OF RIGHTS
Borrower acknowledges and agrees that the execution and delivery by
McKesson of this Amendment shall not be deemed to create a course of dealing or
otherwise obligate McKesson to forebear or execute similar amendments under the
same or similar circumstances in the future.
SECTION 5. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the
Other Loan Agreements.
(i) On and after the Fifth Amendment Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.
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(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents and the Supply Agreement
(including the Amendment to Supply Agreement dated March 30, 2000) shall remain
in full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy of
McKesson under, the Credit Agreement or any of the other Loan Documents nor to
create any course of dealing or otherwise obligate McKesson to forebear or
execute similar amendments or any waiver in similar circumstances in the future.
B. COSTS AND EXPENSES. The Company covenants to pay to or
reimburse McKesson, upon demand, for all costs, out-of-pocket expenses and
reasonable attorneys' fees expended or incurred by McKesson in connection with
the development, preparation, negotiation, execution and delivery of this
Amendment and the documents and transactions contemplated hereby.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by a party of a facsimile transmitted document purportedly bearing
the signature of the other party shall bind the other party with the same force
and effect as the delivery of a hard copy original. Any failure by a party to
receive the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of such
document of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
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HORIZON PHARMACIES, INC.
By: /s/ Xxxxx X. XxXxxx
-----------------------------------
Title: President and CEO
--------------------------------
McKESSON CORPORATION
By: /s/ Xxx Xxxxxxx
-----------------------------------
Title: Director Financial SVCS
--------------------------------
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ACKNOWLEDGMENT AND CONSENT OF GUARANTOR
The undersigned in its capacity as a guarantor under that
certain Guaranty dated as of July 2, 1998 made in favor of McKesson hereby (i)
acknowledges and consents to the execution, delivery and performance by Borrower
of the foregoing Fifth Amendment to Credit Agreement (the "Amendment"), (ii)
acknowledges that the undersigned's consent is being sought purely as a
protective measure and understands that the terms of the Credit Agreement dated
as of July 2, 1998 may be amended without prior notice to or consent of the
undersigned and without discharging or otherwise affecting the liability of the
undersigned under the Guaranty, and (iii) reaffirms that it will continue to be
bound by all of the provisions of the Guaranty and that such Guaranty will
remain in full force and effect notwithstanding the execution and delivery by
Borrower of the Amendment referred to above.
HORIZON HOME CARE, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Its: CFO / Treasurer
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