EXHIBIT INDEX TOTAL NUMBER OF
FOUND ON PAGE 64. SECURITIES AND EXCHANGE COMMISSION PAGES INCLUDED
Washington, D.C. 20549 IN THIS ANNUAL
REPORT IS 221.
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1994
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to ________________
Commission file number 1-5110
------
BERGEN BRUNSWIG CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1444512
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Metropolitan Drive, Orange, California 92668-3510
- ----------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 385-4000
-------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange on
Title of each class which registered
- ------------------------------------ -------------------------
<S> <C>
Class A Common Stock New York Stock Exchange
Par Value $1.50 per share
6 7/8% Exchangeable Subordinated New York Stock Exchange
Debentures due July 15, 2011
$100,000,000 5 5/8% Senior Notes New York Stock Exchange
due 1996
$150,000,000 7 3/8% Senior Notes New York Stock Exchange
due 2003
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
7% Convertible Subordinated Debentures due March 1, 2006 - Durr-Fillauer
Medical, Inc.
(Cover page continued)
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ].
At November 30, 1994, 37,213,903 shares of Class A Common Stock were
outstanding. The aggregate market value of the voting Class A Common Stock
held by nonaffiliates of the registrant on November 30, 1994 was $676,554,133.
Documents Incorporated by Reference
-----------------------------------
List hereunder the following documents if incorporated by reference and the part
of the Form 10-K into which the document is incorporated:
Portions of the definitive proxy statement relating to the registrant's annual
meeting of shareowners to be held January 26, 1995 to be filed with the
Securities and Exchange Commission not later than 120 days after September 30,
1994 are incorporated herein by reference in Part III.
<PAGE>
TABLE OF CONTENTS
PART I
------
ITEM PAGE
- ---- --------
1. Business I - 1
2. Properties I - 5
3. Legal Proceedings I - 6
4. Submission of Matters to a Vote of Security Holders I - 10
4A. Executive Officers of the Registrant I - 10
PART II
-------
5. Market for the Registrant's Common Equity and II - 1
Related Stockholder Matters
6. Selected Financial Data II - 3
7. Management's Discussion and Analysis of Financial II - 4
Condition and Results of Operations
8. Financial Statements and Supplementary Data II - 11
9. Changes in and Disagreements with Accountants II - 38
on Accounting and Financial Disclosure
PART III
--------
10. Directors and Executive Officers of the Registrant III - 1
11. Executive Compensation III - 1
12. Security Ownership of Certain Beneficial Owners III - 1
and Management
13. Certain Relationships and Related Transactions III - 1
PART IV
-------
14. Exhibits, Financial Statement Schedules, IV - 1
and Reports on Form 8-K
Signatures IV - 8
<PAGE>
PART I
ITEM 1. BUSINESS
A. General Development of Business
-------------------------------
Bergen Brunswig Corporation, a New Jersey corporation formed in
1956, and its subsidiaries (collectively, the "Company"), are a diversified drug
and health care distribution organization and, as such, one of the nation's
largest distributors of products sold by pharmacies.
On February 9, 1994, the Board adopted a Shareowner Rights Plan
pursuant to which a dividend of one Preferred Share Purchase Right (the
"Rights") was declared for each share of Common Stock outstanding at the close
of business on February 18, 1994 as well as for each share of Common Stock
issued between such record date and the Distribution Date (as defined in the
Shareowner Rights Plan). The Shareowner Rights Plan is more fully described in
Item 5 of this Annual Report.
On February 24, 1994, in accordance with the provisions of the
Recapitalization Plan approved by the Company's shareowners on January 31, 1989,
all of the 100,492 then outstanding shares of the Company's Class B Stock were
automatically converted into shares of the Company's Class A Common Stock at the
stated conversion rate of 9.5285 shares of Class A Common Stock for each share
of Class B Common Stock. All Class B Common Stock was subsequently cancelled.
Effective October 1, 1993, the Company changed its fiscal year
from a twelve-month period ending August 31 to a twelve-month period ending
September 30. This change in fiscal year is more fully described in Note 1 of
Notes to Consolidated Financial Statements appearing in Part II, Item 8,
"Financial Statements and Supplementary Data," of this Annual Report.
Effective September 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). The effect of initially adopting SFAS 109 was accounted for as a
cumulative effect of an accounting change of $8.7 million, or $0.24 per share,
recorded in September 1993. The adoption of this Statement is more fully
described in Note 7 of Notes to Consolidated Financial Statements appearing in
Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual
Report.
On September 15, 1992, the Company entered into a credit
agreement (the "Credit Agreement") with a group of banks providing the Company
with a three-year $300 million unsecured revolving line of credit for payment in
connection with the acquisition of Durr-Fillauer Medical, Inc. and subsidiaries
("Durr") and to be used for general working capital purposes of the Company. On
I - 1
<PAGE>
October 7, 1994, the Credit Agreement, was amended to, among other things,
increase the maximum borrowing to $350 million and to extend the maturity date
to September 15, 1997. Borrowings outstanding under the Credit Agreement were
$40 million at September 30, 1994. The maximum outstanding borrowing under the
Credit Agreement for the year ended September 30, 1994 was $270 million.
On April 29, 1994, the Company completed the acquisition of
Southeastern Hospital Supply Corporation ("Southeastern"), a privately held
medical supply distributor located in Fayetteville, North Carolina, for 747,422
shares, previously held as Treasury shares, of the Company's Class A Common
Stock valued at approximately $12.6 million and the assumption of approximately
$6.7 million of debt by the Company, which was paid by the Company on the
acquisition date. The Southeastern acquisition is more fully described in Note
4 of Notes to Consolidated Financial Statements appearing in Part II, Item 8,
"Financial Statements and Supplementary Data" of this Annual Report.
On August 31, 1994, the Company completed the acquisition of
certain net assets of Professional Medical Supply Co., a privately held
medical-surgical supply distributor located in Denver, Colorado, for
approximately $2.4 million in cash.
On November 17, 1994, the Company announced that it had signed a
definitive merger agreement to acquire Biddle & Crowther Company, a
privately-held medical-surgical supply distributor headquartered in Seattle,
Washington, in exchange for the Company's Class A Common Stock valued at
approximately $13.0 million. The Company estimates a closing in early January
1995.
During the fourth quarter of fiscal 1993, the Company approved a
restructuring plan which consists of an accelerated consolidation of
pharmaceutical distribution facilities into larger, more efficient regional
distribution centers, the merging of duplicate operating systems, the reduction
of administrative support in areas not affecting valued services to customers
and the discontinuance of services and programs that do not meet the Company's
strategic and economic return objectives. The estimated pre-tax cost of the
restructuring plan is $33.0 million. The restructuring charge represents the
costs associated with restructure, primarily abandonment and severance. For
those activities or assets where the disposal is expected to result in a gain,
no gain will be recognized until realized. During fiscal 1994, the Company
incurred costs of approximately $13.1 million related to the restructuring plan.
During the quarter ended March 31, 1994, the Company recorded a
pre-tax charge of $1.4 million ($0.8 million after tax) for the uninsured
I - 2
<PAGE>
portion of an earthquake loss sustained by the Company's Valencia, California
Regional Distribution Center on January 17, 1994.
In November 1993, the Company announced that it had applied for a
listing of its Class A Common Stock and various debt securities on the New York
Stock Exchange("NYSE"). Trading on the NYSE began on December 16, 1993 with the
same trading symbol, BBC.
B. Narrative Description of Business
---------------------------------
Bergen Brunswig Drug Company (the "Drug Company") is one of the
largest national distributors of products sold by institutional (hospital) and
retail pharmacies. The Drug Company distributes from 33 locations in 23 states
a full line of products, including pharmaceuticals, proprietary medicines,
cosmetics, toiletries, personal health products, sundries, and home healthcare
supplies and equipment. These products are sold to a large number of hospital
pharmacies, managed care facilities, health maintenance organizations ("HMO's"),
independent retail pharmacies, pharmacy chains, supermarkets, food-drug
combination stores and other retailers located in over 44 states, Guam and
Mexico. During fiscal 1994, no single customer or affiliated group of customers
of the Drug Company accounted for more than 10% of its net sales and other
revenues. However, purchasing groups are expected to represent increasing
percentages of total sales in the future. The Drug Company is required to carry
significant amounts of inventory to meet the rapid delivery requirements of its
customers.
The Drug Company has been an innovator in the development and
utilization of computer-based retailer order entry systems and of electronic
data interchange ("EDI") systems including computer-to-computer ordering systems
with suppliers. During fiscal 1994, substantially all of Bergen Brunswig Drug
Company's orders received from customers were received via electronic order
entry systems. These systems, combined with daily delivery, improve customers'
cash and inventory management and profitability by freeing them from the burden
of maintaining large inventories. Although these systems require capital
expenditures by the Company, benefits from these systems to the Drug Company are
expected to be realized through increased productivity. The Drug Company is
expanding its electronic interface with its suppliers and now electronically
processes a substantial portion of its purchase orders, invoices and payments.
The Drug Company has opened seven regional distribution centers ("RDCs") since
fiscal 1986, replacing 18 older, less efficient facilities. These facilities
will service 45% of the Drug Company sales volume in 1995. The newest RDC was
opened in November 1994 in Richmond, Virginia, and, similar to the Corona and
Valencia, California facilities, exceeds 200,000 square feet and utilizes a
highly automated order-picking system. The Richmond RDC has the ability to
automatically pick 90% of its orders.
I - 3
<PAGE>
In July 1994, the Company introduced AccuSourceTM, a multimedia
communication, product information, and electronic ordering system for
pharmacies. AccuSource was developed jointly by the Drug Company and Apple
Computer and is the first link of its kind between supplier, wholesaler and
retailer in the pharmaceutical distribution process. AccuSource simplifies the
ordering process and gives retailers detailed information on thousands of
products, services and special purchase opportunities as well as prescription
substitution alternatives and Medicaid coverage information. AccuSource's
on-line feature provides retailers with a convenient method for ensuring product
availability by giving immediate information on quantity levels at their Drug
Company distribution center.
The Drug Company also provides a wide variety of promotional,
advertising, merchandising, and marketing assistance to independent community
pharmacies. For example, the Good Neighbor PharmacyTM program utilizes circular
and media advertising to strengthen the consumer image of the independent
pharmacy without sacrificing its local individuality. Other programs for the
independent community pharmacy include in-store merchandising programs, private
label products, shelf management systems, pharmacy computers and a fully
integrated point-of-sale system marketed under the Drug Company's trademark of
OmniPhaseTM.
Hospital and other institutional accounts are offered a wide
variety of inventory management and information services by the Drug Company to
better manage inventory investment and contain costs. Accu NetR allows
customers to customize their own reports and use it to complement the on-line
real-time PRIMELINESM order entry system which was introduced in December 1989.
Durr Medical Corporation, Southeastern and Professional Medical
Supply Co., collectively "Medical", wholly-owned subsidiaries of the Company,
distribute a variety of medical and surgical products to individual hospitals
and alternate site health providers through 20 distribution centers located in
15 states in the southeastern, southwestern and northwestern regions of the
United States.
Medical serves hospital customers and alternate site customers in
39 states. Alternate site customers include outpatient clinics, nursing homes,
surgery centers, dialysis and oncology centers, emergency centers, laboratories
and veterinary clinics. Medical's distribution centers range between 14,000 and
70,000 square feet and average 30,000 square feet. Medical employs
approximately 850 people.
I - 4
<PAGE>
1. Competition
The Drug Company, which is the second largest national
pharmaceutical distributor measured by sales, faces intense competition from
other national pharmaceutical distributors, as well as regional and local
full-line and short-line distributors, direct selling manufacturers, rack
jobbers and specialty distributors. The principal competitive factors of the
Drug Company's business are service and price.
2. Employees
As of November 30, 1994, the Company employed approximately 4,250
people, including Medical. The Company considers its relationship with its
employees and the unions representing certain of its employees to be
satisfactory.
3. Other
While the Company's operations may show quarterly fluctuations,
the Company does not consider its business to be seasonal in nature on a
consolidated basis.
Although the Company's computer service operations expend time
and effort on the development and marketing of computer programs relating to the
services for its subsidiaries, which are described in part elsewhere herein, the
Company has not, during the past three fiscal years, expended any material
amounts on research and development.
ITEM 2. PROPERTIES
Because of the nature of the Company's business, office and
warehousing facilities are operated in widely dispersed locations in the United
States. Some of the facilities are owned by the Company, but most are leased on
a long-term basis. The Company considers its operating properties to be in
satisfactory condition and well utilized with adequate capacity for growth. In
connection with a restructuring plan, which is being implemented over an
approximate 18-month period, certain facilities are being consolidated and
others are being automated to serve a larger geographic area.
For certain financial information regarding the Company's warehouse
and office leases, see Note 6 of Notes to Consolidated Financial Statements
appearing in Part II, Item 8, "Financial Statements and Supplementary Data," of
this Annual Report.
I - 5
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On November 2, 1988, Aline K. Hayle instituted legal proceedings
("Hayle Complaint") in the Orange County Superior Court (State of California),
which was consolidated with related proceedings instituted on November 14, 1988
in the same court by Martin Bergstein. The Hayle Complaint names the Company as
a nominal defendant, and further names as defendants certain officers who are
also directors of the Company as well as seven independent Company directors.
This complaint seeks damages and other relief with respect to actions allegedly
taken by the defendants in connection with the Company's recapitalization plan,
said plan having been approved by the Company's shareowners in January 1989. On
March 16, 1994, the Court gave its preliminary approval for the settlement of
this matter and approved the form of notice to be sent to all shareowners. On
September 7, 1994, an Order and Final Judgment was signed approving the
settlement of the class and derivative litigation. Under the order, the Company
became obligated to pay the plaintiff's attorneys the sum of $446,000 for fees,
expenses and interest, and Robert E. Martini and the Estate of Emil P. Martini,
Jr. each agreed to transfer to the Company 15,000 shares of the Company's Class
A Common Stock. The Estate of Emil P. Martini, Jr. was also given the option,
in lieu of the transfer of 15,000 shares of Class A Common Stock, to pay the
Company in cash the sum of $294,000.
On July 7, 1992, two putative class action complaints were filed in
the Delaware Court of Chancery against Durr and its directors: Steiner v, Adair,
et al., C.A. No. 12634 and Goldwurm v. Adair, et al., C.A. No. 12635. These
actions were consolidated on July 15, 1992. On July 17, 1992, another putative
class action complaint was filed in the Delaware Court of Chancery against Durr
and its directors: Trief v. Adair, et al., C.A. No. 12648. This action was
consolidated with C.A. Nos. 12634 and 12635 on August 7, 1992. The named
plaintiffs in the three complaints (the "Class Action Complaints") allegedly
owned an undisclosed number of shares of Durr common stock. The plaintiffs
sought certification of a class consisting of all public stockholders of Durr
who held Durr stock at the time of the filing of the Class Action Complaints and
who were not affiliated with any of the defendants. The Class Action Complaints
alleged, among other things, that Durr's directors breached their fiduciary
duties in entering into a June 2, 1992, Agreement and Plan of Reorganization
which contemplated the merger of Durr's wholesale drug business with Cardinal
Distribution, Inc. ("Cardinal") and the spin-off of Durr's remaining businesses
into a newly formed entity (the "Cardinal Acquisition"). The Class Action
Complaints sought a variety of relief, including: an injunction requiring the
Durr directors to consider competing offers, damages, attorneys fees and costs.
In connection with the acquisition of Durr, and for the purpose of
settling the expressed concern of the Attorneys General of the States of
I - 6
<PAGE>
Alabama, Florida and Louisiana (collectively, the "Attorneys General") over the
alleged potential lessening of competition in the wholesale distribution of
pharmaceutical products, the Company and Durr entered into an agreement dated
September 18, 1992, with the Attorneys General wherein the Company agreed that
(1) subject to certain exceptions, no existing customer of either the Company or
Durr in Alabama, Florida and Louisiana (the "Customers") will suffer a
diminution of service levels until April 30, 1997, (2) except for price
increases resulting from taxes, fees or governmental charges, neither the
Company nor Durr will increase the markup percentage for the Customers in
Alabama, Florida and Louisiana for a period of two years and from September 1994
through April 1997 will not increase such percentage in excess of the percentage
increase in the Consumer Price Index; (3) Durr will maintain its distribution
facilities in Montgomery and Mobile, Alabama; Lakeland, Florida; and Shreveport,
Louisiana for a period of at least two years; (4) Durr will maintain and enhance
its Accu NetR system for a period of at least two years; and (5) the Company
will reimburse the States of Alabama, Florida and Louisiana for their legal
fees, costs and expenses incurred in the investigation of the acquisition of
Durr by the Company.
Drug Barn, Inc. ("Drug Barn"), a former retail pharmacy chain in the
San Francisco Bay Area, currently with two operating stores, owed the Company
approximately $6.2 million in principal obligations as of October 31, 1994, of
which approximately $1.2 million represents trade receivables and $5.0 million
represents a note which matured on March 25, 1993 and has not been paid to date.
The Company has a security interest in virtually all of Drug Barn's assets, as
well as personal guaranties, which collaterize the note and trade receivables.
In May 1992, Drug Barn requested additional financing which the
Company denied to extend. In December 1992, Drug Barn commenced an action
against the Company in the Santa Clara Superior Court (State of California)
alleging breach of contract, misrepresentation and violations of certain
California antitrust and unfair practices laws. Drug Barn seeks a variety of
damage claims including compensatory, treble and punitive damages, an injunction
against collection on the note, and declaratory judgment as to Drug Barn's
rights under the alleged oral joint venture agreement with the Company.
On April 20, 1993, the Company filed a complaint in the Orange County
Superior Court (State of California), Case No. 709136 against Drug Barn and
Milton Sloban and Barbara Sloban, as guarantors on the defaulted note and open
trade receivables, alleging breach of contract and guaranty, and requesting
judicial foreclosure of and the possession of collateral.
Drug Barn commenced a Chapter 11 case in U.S. Bankruptcy Court for the
Northern District of California, Case No. 93-3-3437 TC, by filing a voluntary
I - 7
<PAGE>
petition for relief under Chapter 11 of the United States Code on July 29, 1993
and remains in possession pursuant to 11 U.S.C. Section 1107. The effect of
this filing is that the Company's action against Drug Barn has been
automatically stayed.
In April 1994, this matter was transferred to the San Francisco County
Superior Court with the California state actions referenced in the next
paragraph and the trial date was vacated.
Between August 3, 1993 and February 14, 1994, the Company, along with
various other pharmaceutical industry-related companies, was named as a
defendant in eight separate state antitrust actions in three courts in
California. These lawsuits are more fully detailed in "Item 3 - Legal
Proceedings" of Part I of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 as filed with the Securities and Exchange Commission
and is incorporated herein by reference. In April 1994, these California state
actions were all coordinated as Pharmaceutical Cases I, II and III, and assigned
to a single judge in San Francisco Superior Court. On August 22, 1994, a
Consolidated Amended Complaint ("California Complaint"), which supersedes and
amends the eight prior complaints, was filed in these actions.
The California Complaint alleges that the Company and 35 other
pharmaceutical industry-related companies violated California's Cartwright Act,
Unfair Practices Act, and the Business and Professions Code unfair competition
statute. The California Complaint alleges that defendants jointly and
separately engaged in secret rebating, price fixing and price discrimination
between plaintiffs and plaintiffs' alleged competitors who sell pharmaceuticals
to patients or retail customers. Plaintiffs seek, on behalf of themselves and a
class of similarly situated California pharmacies, injunctive relief and treble
damages in an amount to be determined at trial. The judge recently struck the
class allegations from the Unfair Practices Act claims.
Between August 12, 1993 and November 29, 1993, the Company was also
named in 11 separate Federal antitrust actions. All 11 actions were
consolidated into one multidistrict action in the Northern District of Illinois
entitled, In Re Brand-Name Prescription Drugs Antitrust Litigation, No. 94 C.
897 (MDL 997). On March 7, 1994, plaintiffs in these 11 actions filed a
consolidated amended class action complaint ("Federal Complaint") which amended
and superseded all previously Federal complaints against the Company. The
Federal Complaint names the Company and 30 other pharmaceutical industry-related
companies. The Federal Complaint alleges, on behalf of a nationwide class of
retail pharmacies, that the Company conspired with other wholesalers and
manufacturers to discriminatorily fix prices in violation of Section 1 of the
I - 8
<PAGE>
Sherman Act. The Federal Complaint seeks injunctive relief and treble damages.
On November 15, 1994, the federal court certified the class defined in the
Federal Complaint for the time period October 15, 1989 to the present. These
lawsuits are more fully detailed in "Item 3 - Legal Proceedings" of Part I of
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
as filed with the Securities and Exchange Commission and is incorporated herein
by reference.
On April 29, 1994, Durr Drug Company (a subsidiary of the Company) was
named as a defendant, along with 17 other parties, in a class action in the
Circuit Court of Bullock County, Alabama entitled Main Drug Company v. The
UpJohn Company, et al., No. CV-94-37. This case was voluntarily dismissed on
October 31, 1994. On May 2, 1994, the Company and Durr Drug Company were named
as defendants, along with 25 other pharmaceutical related-industry companies, in
a state antitrust class action in the Circuit Court of Greene County, Alabama
entitled Durrett v. UpJohn Company, et al., No. 94-029 ("Alabama Complaint").
The Alabama Complaint alleges on behalf of a class of Alabama retail pharmacies
and a class of Alabama consumers that the defendants conspired to
discriminatorily fix prices to plaintiffs at artificially high levels. The
Alabama Complaint seeks injunctive relief and treble damages.
On October 21, 1994, the Company entered into a sharing agreement with
five other wholesalers and 26 pharmaceutical manufacturers. Among other things,
the agreement provides that: (a) if a judgment is entered into against both the
manufacturer and wholesaler defendants, the total exposure for joint and several
liability of the Company is limited to $1,000,000; (b) if a settlement is
entered into by, between, and among the manufacturer and wholesaler defendants,
the Company has no monetary exposure for such settlement amount; (c) the six
wholesaler defendants will be reimbursed by the 26 pharmaceutical defendants for
related legal fees and expenses up to $9,000,000 total (of which the Company
will receive a proportionate share) and (d) the Company is to release certain
claims which it might have had against the manufacturer defendants for the
claims presented by the plaintiffs in these cases. The agreement covers the
Federal court litigation as well as the cases which have been filed in various
state courts. In December 1994, plaintiffs in the Federal action have moved to
set aside the agreement. The Company believes the agreement is enforceable and
intends to vigorously oppose this motion. After discussions with counsel,
management of the Company believes that the allegations of liability set forth
in these lawsuits are without merit as to the wholesaler defendants and that any
attendant liability of the Company, although unlikely, would not have a material
adverse effect on the Company's financial condition.
I - 9
<PAGE>
The Company is involved in various additional items of litigation.
Although the amount of liability at September 30, 1994 with respect to these
items of litigation cannot be ascertained, in the opinion of management, any
resulting future liability will not have a material adverse effect on its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of shareowners during the three
months ended September 30, 1994.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Executive Officers.
The executive officers of the Company are elected by and serve at the
pleasure of the Board of Directors. Each executive officer holds office until
the next annual election of officers held in December or January of each year.
The current executive officers of the Company, and their respective principal
occupations and employment during the last five years ended September 30, 1994,
are listed alphabetically as follows:
John Calasibetta, 89, Senior Vice President since 1974. Mr.
Calasibetta is also a member of the Board of Directors.
Neil F. Dimick, 45, Executive Vice President (since April 1992), Chief
Financial Officer (since 1991); formerly Vice President, Finance (1991-1992);
formerly Partner, Deloitte & Touche LLP (1984-1991), the Company's independent
auditors.
Phillip R. Engle, 54, Executive Vice President, Supplier Relations and
Operations (since February 1994); formerly President, Drug Operations
(1992-1994), President, Bergen Brunswig Drug Company (1985-1994); formerly Vice
President, Pharmaceutical Distribution (1986-1992).
Robert E. Martini, 62, Chairman of the Board (since April 1992) and
Chief Executive Officer (since 1990); formerly President (1981-1992). Mr.
Martini is also a member of the Board of Directors.
John P. Naughton, 56, Vice President and Controller of Bergen Brunswig
Drug Company since 1981.
I - 10
<PAGE>
Milan A. Sawdei, 48, Secretary (since July 1992); Executive Vice
President (since April 1992), Chief Legal Officer (since 1989); formerly Vice
President and Assistant Secretary (1989-1992); formerly Director, Legal
Affairs/Senior Counsel (1987-1989).
Eric J. Schmitt, 44, Vice President, Finance and Treasurer (since
February 1994); Vice President, Financial Planning (1989-1994).
Denny W. Steele, 51, Executive Vice President, Chief Information
Officer (since April 1992); formerly Vice President, Corporate Information
Resources (1990-1992); formerly Group Director, Corporate Information Resources
(1989-1990).
Dwight A. Steffensen, 51, President (since April 1992) and Chief
Operating Officer (since 1990); formerly Executive Vice President (1985-1992).
Mr. Steffensen is also a member of the Board of Directors.
I - 11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
For certain information regarding shares of the Company's Class A
Common Stock, including cash dividends per share, market prices per share, stock
market information and number of shareowners, and cash dividend information for
shares of Class B Common Stock, see "Selected Quarterly Results (unaudited)" as
set forth in Part II, Item 8, "Financial Statements and Supplementary Data," of
this Annual Report. Shares of the Company's Class B Common Stock were not
publicly traded but were convertible into shares of the Company's Class A Common
Stock at a conversion rate of 9.5285 shares of Class A Common Stock for each
share of Class B Common Stock.
On February 24, 1994, in accordance with the provisions of the
Recapitalization Plan approved by the Company's shareowners on January 31, 1989,
all of the 100,492 then outstanding shares of the Company's Class B Common Stock
were automatically converted into shares of the Company's Class A Common Stock
at the stated conversion rate of 9.5285 shares of Class A Common Stock for each
share of Class B Common Stock. All Class B Common Stock was subsequently
cancelled.
On February 9, 1994, the Board adopted a Shareowner Rights Plan
pursuant to which a dividend of one Preferred Share Purchase Right (the
"Rights") was declared for each share of Common Stock outstanding at the close
of business on February 18, 1994 as well as for each share of Common Stock
issued between such record date and the Distribution Date (as defined below).
The Rights, unless earlier redeemed, will expire on February 18, 2004. Prior to
such expiration date, the Rights are redeemable by the Company for $0.01 per
Right at any time prior to 10 days after the Stock Acquisition Date (as defined
below). The Rights are not exercisable until 10 days after the first date (the
"Stock Acquisition Date") of public announcement by the Company or an Acquiring
Person (as defined below) that a person or group has become the beneficial owner
of 15% or more of the Common Stock without the prior approval of the Company's
Board of Directors (an "Acquiring Person") or (unless the Board postpones the
Distribution Date) 10 days after any person or group announces a tender offer as
a result of which, if consummated, there would be an Acquiring Person (a
"Distribution Date"). Upon a Distribution Date, the Rights would separate from
the underlying Common Stock and entitle all holders (except for any Acquiring
Person and its associates, affiliates and transferees) to purchase, for an
initial exercise price (subject to possible future adjustment) of $80.00 (the
"Exercise Price"), either 1/100th of a share of a new series of the Company's
Series A Junior Preferred Stock or, if the Distribution Date occurs as a result
II - 1
<PAGE>
of the occurrence of a Stock Acquisition Date, Common Stock having twice the
aggregate market value of the Exercise Price. All holders of Rights, other than
the Acquiring Person and its affiliates, associates and transferees, would also
be entitled to purchase Common Stock having twice the aggregate market value of
the Exercise Price if the Company was the surviving corporation in a merger with
an Acquiring Person and its Common Stock was not changed, an Acquiring Person
engaged in one or more "self-dealing" transactions or, during such time as there
was an Acquiring Person, an event occurred which increased such Acquiring
Person's ownership interest by more than 1%.
If, at any time after there was an Acquiring Person, the Company was
acquired in a business combination in which it was not the surviving corporation
or 50% or more of its assets or earning power was transferred, all holders of
Rights, other than any Acquiring Person and its affiliates, associates and
transferees, would be entitled to purchase, for the Exercise Price, Common Stock
of the acquiring company having twice the aggregate market value of the Exercise
Price.
II - 2
<PAGE>
<TABLE>
Item 6. SELECTED FINANCIAL DATA (unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except for per share amounts
====================================================================================================================================
September 30, August 31,
-------------------------------------------------------
Years Ended: 1994* 1993 1992 1991 1990
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales and other revenues $7,483,801 $6,823,552 $5,048,309 $4,295,397 $3,872,436
Earnings from continuing operations 56,120*** 28,607**** 53,012 58,061 55,212
Earnings per share from continuing operations (fully diluted) 1.52*** 0.79**** 1.36 1.32 1.25
Cash dividends per share:
Class A Common 0.460 0.400 0.400 0.340 0.288
Class B Common 2.096 3.812 3.812 3.239 2.744
Pre-tax margin** 1.31%*** 0.71%**** 1.65% 2.09% 2.24%
At Years Ended:
====================================================================================================================================
Total assets $1,995,057 $1,772,337 $1,412,177 $1,197,161 $1,238,108
Long-term obligations 342,094 309,781 245,586 240,218 229,134
Shareowners' equity 461,851 417,800 395,262 455,234 445,908
Return on average shareowners' equity** 12.76%*** 7.04%**** 12.47% 12.89% 13.20%
====================================================================================================================================
<FN>
* Reflects change in year-end from August 31 to September 30.
** From continuing operations.
*** Includes gain recognized from sale of investment securities of $2.9 million, net of income tax of $2.2 million and provision
for an earthquake-related charge of $.8 million, net of income tax benefit of $.6 million.
****Includes provision for restructuring charge of $20.8 million, net of income tax benefit of $12.2 million.
II - 3
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations 1994 Compared with 1993.
Net sales and other revenues from continuing operations in fiscal 1994
were 10% higher than 1993 while operating earnings and pre-tax earnings from
continuing operations showed increases of 63% and 103%, respectively. Major
influences which impacted operating and pre-tax earnings from continuing
operations for 1994 were a charge of $1.4 million for the uninsured portion of
an earthquake loss incurred in the second quarter of fiscal 1994, and a gain
recognized from the sale of investment securities of $5.1 million in the third
and fourth quarters of fiscal 1994. See Note 12 of Notes to Consolidated
Financial Statements. Major influences which impacted operating earnings and
pre-tax earnings from continuing operations for 1993 were the unusual provisions
totaling $35.5 million for the restructuring plan announced in September 1993
and the costs associated with the termination of the bid for Office Commercial
Pharmaceutique recorded in the fourth quarter of fiscal 1993.
Of the 10% increase in net sales and other revenues, approximately 1%
in the aggregate is attributable to the acquisitions of Southeastern Hospital
Supply Corporation ("Southeastern") in April 1994, Dr. T.C. Smith Company
("T.C. Smith") in November 1992 and Healthcare Distributors of Indiana, Inc.
("HDI") in January 1993. Approximately 9% of the net sales and other revenues
increase reflects internal growth within the Company's existing pharmaceutical
distribution business.
Primary and fully diluted earnings per share from continuing
operations both increased 92% compared to 1993. The average number of common
and common equivalent shares outstanding increased 1% and decreased 7% for
primary and fully diluted earnings per share computations, respectively. The
uninsured earthquake-related charge and investment gain for 1994 referred to
above were equivalent to $0.06 per fully diluted share from continuing
operations. The unusual charge and costs referred to above for 1993 were
equivalent to $0.59 per fully diluted share from continuing operations. See
Note 12 of Notes to Consolidated Financial Statements. The decrease in the
average number of common and common equivalent shares used for computing fully
diluted earnings per share in 1994 was primarily due to the redemption of the
Company's Liquid Yield OptionTM Notes ("LYONs") in February 1993.
Cost of sales increased 10% compared to 1993 due mainly to the
Company's increased sales levels. The overall gross margin as a percentage of
net sales and other revenues decreased due to continued price competition and
reduced opportunities for investment buying. In the pharmaceutical distribution
II - 4
<PAGE>
industry, it has been customary to pass on to customers price increases from
manufacturers. Investment buying enables distributors such as the Company to
benefit from anticipated price increases. The rate or frequency of future price
increases by manufacturers, or lack thereof, does influence the profitability of
the Company. The effect of reduction in price increases in the comparison of
fiscal 1994 to fiscal 1993 was partially offset by the use of the LIFO method of
accounting for inventory costs.
Management of the Company anticipates further downward pressure on
gross margins in the Company's pharmaceutical distribution business during
fiscal year 1995 because of continued price competition influenced by large
buying groups, reduced opportunities for investment buying and continuing
political pressures on the health care industry. The Company expects that these
pressures on margins may be offset to some extent by continued reductions in
distribution, selling, general and administrative expenses as a percentage of
net sales and other revenues through improved operating efficiencies.
Distribution, selling, general and administrative expenses, including
the earthquake-related charge in 1994 and the unusual charges in 1993, decreased
9% over 1993, while net sales and other revenues increased 10% over the prior
year. These expenses decreased as a percentage of net sales and other revenues
from 5.3% in fiscal 1993 to 4.4% in fiscal 1994. The decrease in the current
year reflects operating efficiencies achieved from the positive effects of the
Company's restructuring plan adopted for its pharmaceutical distribution
business in the fourth quarter of fiscal 1993 and the continuing consolidation
of distribution divisions into larger regional distribution centers.
Net interest expense, excluding the aforementioned unusual investment
gain, increased from $22.7 million in 1993 to $23.0 million in 1994, primarily
due to a lower cash investment base in 1994, partially offset by decreased
interest on borrowings under the Credit Agreement.
The extraordinary after-tax loss for fiscal 1993 of $2.6 million (net
of the related income tax benefit of $1.8 million) was recorded in connection
with the redemption of the LYONs due 2004 as reported in Note 2 of Notes to
Consolidated Financial Statements.
The effective tax rate for 1994 increased to 42.80% from 40.72% in
1993 reflecting, primarily, higher non-deductible goodwill amortization and
lower non-taxable investment income in fiscal 1994.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which will require the Company to classify its
II - 5
<PAGE>
investments in debt securities into three categories and to account for them as
follows: (1) debt securities that the Company has the intent and ability to hold
to maturity will be classified as "held-to-maturity securities" and reported at
amortized cost; (2) debt securities that are bought and held principally for the
purpose of selling them in the near term will be classified as "trading
securities" and reported at fair value, with unrealized gains and losses
included in earnings; and (3) debt securities not classified as held-to-maturity
securities or trading securities will be classified as "available for sale
securities" and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of shareowners'
equity. This Statement became effective for the Company on October 1, 1994. It
is expected that implementation will not result in any material change in the
Company's consolidated financial position or results of operations.
Inflation, while not as significant as in previous years, is a factor
and the Company is continually seeking ways to manage its impact. The Company
uses the LIFO method of accounting for inventory which reduces the effects of
inflation by reporting the cost of products sold at approximate current cost.
Management of the Company has successfully limited the impact of inflation on
operating expense by improving productivity and increasing sales volume.
Results of Operations 1993 Compared with 1992.
Net sales and other revenues from continuing operations in fiscal 1993
were 35% higher than 1992 while operating earnings and pre-tax earnings from
continuing operations showed decreases of 21% and 42%, respectively. Major
influences which impacted operating earnings and pre-tax earnings from
continuing operations for 1993 were the unusual provisions totaling $35.5
million for the restructuring plan announced in September 1993 and the costs
associated with the termination of the bid for Office Commercial Pharmaceutique
recorded in the fourth quarter of fiscal 1993.
Of the 35% increase in net sales and other revenues, approximately 22%
is attributable to the acquisition of Durr-Fillauer Medical, Inc. ("Durr") in
September 1992 and approximately 6% in the aggregate is attributable to the
acquisition of substantially all of the pharmaceutical distribution business of
Owens & Minor, Inc., in February 1992 and the acquisitions of T.C. Smith and HDI
in November 1992 and January 1993, respectively. Approximately 7% of the net
sales and other revenues increase reflects internal growth within the Company's
existing pharmaceutical distribution business.
Primary and fully diluted earnings per share from continuing
operations decreased 44% and 42%, respectively, compared to 1992 on decreases of
II - 6
<PAGE>
4% and 12%, respectively, in the average number of common and common equivalent
shares outstanding. The unusual charge and costs referred to above were
equivalent to $0.59 per fully diluted share from continuing operations. See
Note 12 of Notes to Consolidated Financial Statements. The decrease in the
average number of common and common equivalent shares used for computing fully
diluted earnings per share in 1993 was primarily due to the redemption of the
Company's LYONs in February 1993.
A major influence which impacted operating earnings and pre-tax
earnings from continuing operations for 1992 was a provision of $8.0 million for
probable losses recorded in the first quarter of fiscal 1992 in connection with
credit extended to certain customers. This charge was equivalent to $0.11 per
fully diluted share from continuing operations.
Cost of sales increased 35% compared to 1992 due mainly to the
Company's increased sales levels. The overall gross margin as a percentage of
net sales and other revenues increased as a result of including the higher
margins of Durr's medical supply business, partially offset by a decline in the
Company's pharmaceutical distribution's gross margins. The decline in the
Company's pharmaceutical distribution's gross margins was due to accelerated
price competition and reduced opportunities for investment buying. In the
pharmaceutical distribution industry, it has been customary to pass on to
customers price increases from manufacturers. Investment buying enables
distributors such as the Company to benefit from anticipated price increases.
The rate or frequency of future price increases by manufacturers, or the lack
thereof, does influence the profitability of the Company. The effect of
reduction in price increases in the comparison of fiscal 1993 to fiscal 1992 was
partially offset by the use of the LIFO method of accounting for inventory
costs.
Distribution, selling, general and administrative expenses including
the restructuring charge increased 59% over 1992 while net sales and other
revenues increased 35% over the prior year. These expenses increased as a
percentage of net sales and other revenues from 4.5% in 1992 to 5.3% in 1993.
Had the Company not recorded the above-mentioned $35.5 million pre-tax
provisions in the fourth quarter of fiscal 1993, distribution, selling, general
and administrative expenses during the current year would have been 4.8% of net
sales and other revenues. Had the Company not recorded the above-mentioned $8.0
million pre-tax bad debt provision in the first quarter of fiscal 1992,
distribution, selling, general and administrative expenses during the prior year
would have been 4.4% of net sales and other revenues. The comparable figure of
4.8% in fiscal 1993 reflects a higher rate of distribution, selling, general and
administrative expenses associated with Durr's medical supply business and $6.9
million of expenses attributable to the amortization of goodwill resulting from
II - 7
<PAGE>
the Company's acquisition of Durr, partially offset by improvements in operating
efficiencies.
Net interest expense increased from $6.9 million in 1992 to $22.7
million in 1993, primarily due to interest on borrowings under the Credit
Agreement as well as a lower cash investment base and lower short-term
investment rates in 1993.
Earnings from discontinued operations after taxes on income were $3.9
million in fiscal 1992 and relate to the discontinuance of Commtron Corporation
("Commtron"), the Company's former Home Entertainment business segment, as
reported in Note 10 of Notes to Consolidated Financial Statements. The gain on
disposition of Commtron of $4.0 million was recorded in the fourth quarter of
fiscal 1992.
The extraordinary after-tax loss for fiscal 1993 of $2.6 million (net
of the related income tax benefit of $1.8 million) was recorded in connection
with the redemption of the LYONs due 2004 as reported in Note 2 of Notes to
Consolidated Financial Statements.
The effective tax rate for 1993 increased to 40.72% from 36.49% in
1992 reflecting, primarily, higher non-deductible goodwill amortization and
lower non-taxable investment income in fiscal 1993.
During fiscal 1993, the Company adopted Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," which requires disclosure of fair value of financial instruments
recognized or not recognized in the balance sheet. See Note 13 of Notes to
Consolidated Financial Statements.
Financial Condition.
At September 30, 1994, capitalization consisted of 41% debt and 59%
shareowners' equity, the same as at August 31, 1993. On October 7, 1994, the
Credit Agreement was amended to, among other things, increase the maximum
borrowing to $350 million and to extend the maturity date to September 15, 1997.
Borrowings outstanding under the Credit Agreement were $40.0 million at
September 30, 1994. There were no borrowings outstanding under the Credit
Agreement at August 31, 1993. Cash and cash equivalents of $5.3 million at
September 30, 1994 decreased from $55.0 million at August 31, 1993.
On April 29, 1994, the Company acquired Southeastern, a medical supply
distributor. The transaction included issuance of 747,422 shares, previously
held as Treasury shares, of the Company's Class A Common Stock and the
II - 8
<PAGE>
assumption of certain liabilities. See Note 4 of Notes to Consolidated
Financial Statements.
Effective September 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This
Statement changed the Company's method of accounting for income taxes from the
deferred method to an asset and liability method. The effect of initially
adopting SFAS 109 was accounted for as a cumulative effect of an accounting
change of $8.7 million, or $0.24 per share, recorded in September 1993. See
Notes 1 and 7 of Notes to Consolidated Financial Statements.
On September 1, 1993, the Company also adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106") which requires the cost of postretirement
benefits other than pensions to be recognized on an accrual basis as employees
perform services to earn such benefits. The Company had previously expensed
postretirement benefits as paid. The estimated transition obligation of the
Company, which is the accumulated postretirement benefit obligation at the date
of adoption, amounted to approximately $2.1 million. This obligation is being
recognized over 20 years. The impact of the Company's adoption of SFAS 106 is
to increase each future year's annual benefits expense (assuming amortization of
the transition obligation over 20 years) by $275,000.
During 1994, the Company incurred costs of approximately $13.1 million
related to the restructuring plan announced in September 1993.
Capital expenditures for 1994 were $24.9 million and related
principally to the expansion of the Company into new locations, the expansion of
existing locations, the acquisition of automated warehouse equipment and
additional investments in data processing equipment. Capital expenditures for
1995 are estimated to be approximately $27 million and will include additional
investments in data processing and automated warehouse equipment as well as
investments related to the consolidation and relocation of existing locations.
On February 24, 1994, in accordance with the provisions of the
Recapitalization Plan approved by the Company's shareowners on January 31, 1989,
all of the 100,492 then outstanding shares of the Company's Class B Stock were
automatically converted into shares of the Company's Class A Common Stock at the
stated conversion rate of 9.5285 shares of Class A Common Stock for each share
of Class B Common Stock.
Dividends on Class A and Class B Common Stock amounted to $17.0
million in 1994 compared to $14.5 million in 1993, and $14.9 million in 1992,
reflecting, primarily, a 20% increase in the quarterly dividend rate on both the
II - 9
<PAGE>
Class A and Class B Common Stock during the second quarter of fiscal 1994.
While the Company has no policy with regard to the payment of dividends, during
the three-year period ended September 30, 1994, dividends have averaged 34% of
earnings from continuing operations.
The Company's working capital increased from $186.1 million at August
31, 1993 to $254.3 million at September 30, 1994 and represented 13% of total
assets at September 30, 1994. The Company's current ratio was 1.21 at September
30, 1994, compared to 1.18 at August 31, 1993. Trade receivables outstanding
were 19 days for both 1994 and 1993. The inventory turnover rate on a FIFO
basis was 6.9 times for 1994 and 7.5 times for 1993.
The Company believes that internally generated funds, funds available
under the existing Credit Agreement and funds available under the existing shelf
registration will be sufficient to meet anticipated cash and capital needs.
II - 10
<PAGE>
<TABLE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
a. Supplementary Data
SELECTED QUARTERLY RESULTS (unaudited)
Dollars in thousands, except for per share amounts
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Fiscal
Year Ended September 30, 1994(a) Quarter Quarter Quarter Quarter Year
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales and other revenues $1,834,936 $1,845,449 $1,878,548 $1,924,868 $7,483,801
Gross margin 104,419 113,584 111,372 118,177 447,552
Net earnings 10,331 14,529(b) 15,027(c) 16,233(c) 56,120
Earnings per share (fully diluted) 0.28 0.40(b) 0.41(c) 0.43(c) 1.52
Cash dividends per share:
Class A Common 0.100 0.120 0.120 0.120 0.460
Class B Common 0.953 1.143 - - 2.096
Market prices per Class A Common share $18 5/8-14 1/4 $19 7/8-15 7/8 $18 1/4-14 5/8 $16 3/4-13 3/4 $19 7/8-13 3/4
Year Ended August 31, 1993
==================================================================================================================================
Net sales and other revenues $1,600,257 $1,702,278 $1,764,608 $1,756,409 $6,823,552
Gross margin 103,614 111,268 113,440 106,486 434,808
Earnings (loss) from continuing operations 11,928 15,356 14,451 (13,128)(e) 28,607
Extraordinary loss - (2,570)(d) - - (2,570)
Net earnings (loss) 11,928 12,786 14,451 (13,128)(e) 26,037
Earnings (loss) per share (fully diluted)(f):
Continuing operations 0.32 0.40 0.40 (0.36)(e) 0.79
Extraordinary loss - (0.06)(d) - - (0.07)
Net earnings (loss) 0.32 0.34 0.40 (0.36)(e) 0.72
Cash dividends per share:
Class A Common 0.100 0.100 0.100 0.100 0.400
Class B Common 0.953 0.953 0.953 0.953 3.812
Market prices per Class A Common share $20 3/8-17 1/8 $24 3/8-18 1/2 $21 5/8-17 1/8 $19 3/8-14 3/8 $24 3/8-14 3/8
==================================================================================================================================
<FN>
(a) Reflects change in year-end from August 31 to September 30.
(b) Includes provision for an earthquake-related charge of $.8 million, net of income tax benefit of $.6 million, or $.02
per share.
(c) Includes gain recognized from sale of investment securities of $.5 million (net of income tax of $.5 million), or $.02
per share, and $2.4 million (net of income tax of $1.7 million), or $.06 per share for the third quarter and fourth
quarter, respectively.
(d) Represents extraordinary loss from early extinguishment of debt of $2.6 million, net of income tax benefit of $1.8
million.
(e) Includes provision for restructuring charge of $20.8 million, net of income tax benefit of $12.2 million.
(f) Sum of quarterly fully diluted EPS does not equal the EPS for the year due to anti-dilution in the fiscal year
computation.
Bergen Brunswig Corporation Class A Common Stock is listed on the New York Stock Exchange. There were approximately 3,000
Class A Common Stock shareowners of record on September 30, 1994.
II - 11
</TABLE>
<PAGE>
<TABLE>
b. Financial Statements
STATEMENTS OF CONSOLIDATED EARNINGS AND RETAINED EARNINGS
Dollars in thousands, except for per share amounts
<CAPTION>
=======================================================================================================
September 30, August 31, August 31,
Years Ended: 1994 1993 1992
=======================================================================================================
<S> <C> <C> <C>
Consolidated Earnings
Net sales and other revenues $7,483,801 $6,823,552 $5,048,309
--------------------------------------
Costs and expenses:
Cost of sales 7,036,249 6,388,744 4,729,038
Distribution, selling, general and administrative expenses 331,530 330,825 228,857
Restructuring charge - 33,000 -
--------------------------------------
Total costs and expenses 7,367,779 6,752,569 4,957,895
--------------------------------------
Operating earnings from continuing operations 116,022 70,983 90,414
Net interest expense 17,910 22,723 6,944
--------------------------------------
Earnings from continuing operations before taxes on income 98,112 48,260 83,470
Taxes on income from continuing operations 41,992 19,653 30,458
--------------------------------------
Earnings from continuing operations 56,120 28,607 53,012
Discontinued operations, net of taxes on income:
Earnings from operations - - 3,876
Gain on disposition - - 3,976
--------------------------------------
Earnings before extraordinary loss 56,120 28,607 60,864
Extraordinary loss from early extinguishment of debt,
net of income tax benefit of $1,786 - (2,570) -
--------------------------------------
Net earnings $ 56,120 $ 26,037 $ 60,864
======================================
Earnings per common and common equivalent share
Primary:
Continuing operations $ 1.52 $ 0.79 $ 1.41
Discontinued operations:
Earnings from operations - - 0.10
Gain on disposition - - 0.11
--------------------------------------
Earnings before extraordinary loss 1.52 0.79 1.62
Extraordinary loss - (0.07) -
--------------------------------------
Net earnings $ 1.52 $ 0.72 $ 1.62
======================================
Fully diluted:
Continuing operations $ 1.52 $ 0.79 $ 1.36
Discontinued operations:
Earnings from operations - - 0.08
Gain on disposition - - 0.09
--------------------------------------
Earnings before extraordinary loss 1.52 0.79 1.53
Extraordinary loss - (0.07) -
--------------------------------------
Net earnings $ 1.52 $ 0.72 $ 1.53
======================================
Consolidated Retained Earnings
Balance at beginning of year $ 342,166 $ 337,857 $ 291,865
Net earnings 56,120 26,037 60,864
Excess cost of Treasury shares issued for an acquisition (2,457) - -
Cash dividends on Class A Common Stock ($0.460 in 1994,
$0.400 in 1993 and $0.400 in 1992 per share) (16,751) (14,127) (14,489)
Cash dividends on Class B Common Stock ($2.096 in 1994,
$3.812 in 1993 and $3.812 in 1992 per share) (211) (383) (383)
--------------------------------------
Balance at end of year $ 378,867 $ 349,384 $ 337,857
======================================
=======================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
II - 12
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
<CAPTION>
============================================================================================
September 30, August 31,
1994 1993
============================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,264 $ 54,960
Accounts and notes receivable, less allowance for
doubtful receivables: 1994, $18,423 ; 1993, $14,539 523,202 471,248
Inventories 904,809 684,234
Income taxes receivable 1,788 7,925
Deferred income taxes - 6,151
Prepaid expenses 10,305 6,310
--------------------------
Total current assets 1,445,368 1,230,828
--------------------------
Property - at cost:
Land 10,923 11,287
Buildings and leasehold improvements 77,107 71,187
Equipment and fixtures 127,037 110,303
--------------------------
Total property 215,067 192,777
Less accumulated depreciation and amortization 78,725 66,079
--------------------------
Property - net 136,342 126,698
--------------------------
Other assets:
Excess of cost over net assets of acquired companies 322,374 324,409
Other investments 22,063 25,221
Noncurrent receivables 9,384 10,438
Deferred charges and other assets 59,526 54,743
--------------------------
Total other assets 413,347 414,811
--------------------------
Total assets $1,995,057 $1,772,337
==========================
============================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
II - 13
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
<CAPTION>
============================================================================================
September 30, August 31,
1994 1993
============================================================================================
<S> <C> <C>
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 995,030 $ 876,584
Accrued liabilities 111,043 94,051
Customer credit balances 82,787 71,992
Deferred income taxes 945 -
Current portion of long-term obligations 1,307 2,129
--------------------------
Total current liabilities 1,191,112 1,044,756
--------------------------
Long-term obligations:
7 3/8% senior notes 149,078 148,958
5 5/8% senior notes 99,926 99,864
Revolving bank loan payable 40,000 -
7% convertible subordinated debentures 20,934 23,146
6 7/8% Exchangeable subordinated debentures 10,575 10,905
Deferred income taxes 3,903 12,553
Other 17,678 14,355
--------------------------
Total long-term obligations 342,094 309,781
--------------------------
Shareowners' equity:
Capital stock:
Preferred - Authorized 3,000,000 shares; issued: none - -
Class A Common - Authorized 100,000,000 shares;
issued: 1994, 44,058,659 shares; 1993, 43,026,082 shares 66,088 64,539
Class B Common - Convertible, 1993, Authorized and
issued: 100,492 shares - 151
Paid-in capital 155,079 156,312
Retained earnings 378,867 349,384
--------------------------
Total 600,034 570,386
Less Treasury shares, at cost: 1994, 6,844,057 shares;
1993, 7,553,028 shares 138,183 152,586
--------------------------
Total shareowners' equity 461,851 417,800
--------------------------
Total liabilities and shareowners' equity $1,995,057 $1,772,337
==========================
============================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
II - 14
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Dollars in thousands
<CAPTION>
=======================================================================================================================
September 30, August 31, August 31,
Years Ended: 1994 1993 1992
=======================================================================================================================
<S> <C> <C> <C>
Operating Activities
Net earnings including extraordinary loss in 1993 $ 56,120 $ 26,037 $ 60,864
Adjustments to reconcile net earnings including extraordinary loss
in 1993, to net cash flows from operating activities:
Provision for doubtful accounts 7,060 5,213 10,007
Depreciation and amortization of property 19,065 17,752 11,867
Deferred compensation 949 1,350 (4,428)
Amortization of customer lists 1,749 1,749 1,654
Amortization of excess of cost over net assets of acquired companies 8,696 8,575 1,525
Deferred income taxes (3,545) (15,364) (5,533)
Amortization of original issue discount on senior notes 168 102 -
Amortization of deferred financing costs 926 846 379
(Gain) loss on dispositions of property (1,229) 85 239
Interest accretion on convertible zero coupon-subordinated notes - 6,304 13,468
Discontinued operations - - 18,328
Effects of changes, net of acquisitions and dispositions:
Receivables (49,625) (37,832) (38,034)
Inventories (241,585) 70,133 (117,302)
Prepaid expenses and other assets (1,234) 9,363 8,017
Accounts payable 109,890 72,558 232,415
Accrued liabilities 9,736 (2,854) 7,462
Customer credit balances 12,542 15,022 18,217
Income taxes payable 5,509 (9,407) 1,457
------------------------------------------
Net cash flows from operating activities (64,808) 169,632 220,602
------------------------------------------
Investing Activities
Short-term investments - - 94,650
Purchase of other investments (1,769) (1,303) (22,918)
Proceeds from sale of notes receivable with recourse 14,831 4,097 9,870
Property acquisitions (24,876) (33,934) (18,856)
Proceeds from dispositions of property 2,204 652 952
Acquisition of businesses, less cash acquired (2,701) (343,127) (51,776)
Proceeds from sale of business - 9,034 -
Sale of discontinued operations - (4,880) (10,390)
------------------------------------------
Net cash flows from investing activities (12,311) (369,461) 1,532
------------------------------------------
Financing Activities
Proceeds from revolving bank loan 30,000 - -
Repayment of other obligations (14,370) (24,992) (467)
Redemption of convertible subordinated debentures (2,212) (45,854) -
Redemption of exchangeable subordinated debentures (330) - -
Proceeds from issuance of senior notes - 246,536 -
Early extinguishment of convertible zero coupon-subordinated notes - (215,952) -
Shareowners' equity transactions:
Exercise of stock options 495 1,956 971
Cash dividends on Common Stock (16,962) (14,444) (15,429)
Acquisition of Treasury shares - - (106,935)
------------------------------------------
Net cash flows from financing activities (3,379) (52,750) (121,860)
------------------------------------------
Net (decrease) increase in cash and cash equivalents (80,498) (252,579) 100,274
Cash and cash equivalents at beginning of year 85,762 307,539 207,265
------------------------------------------
Cash and cash equivalents at end of year $ 5,264 $ 54,960 $307,539
==========================================
=======================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
II - 15
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended September 30, 1994, August 31, 1993 and 1992
1. Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of Bergen
Brunswig Corporation and its subsidiaries (the "Company"), after elimination of
the effect of intercompany transactions and balances.
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Other
investments include primarily debt instruments, primarily variable rate demand
notes having maturities of more than one year, and are stated at cost plus
accrued interest.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which will require the Company to classify its
investments in debt securities into three categories and to account for them as
follows: (1) debt securities that the Company has the intent and ability to hold
to maturity will be classified as "held-to-maturity securities" and reported at
amortized cost; (2) debt securities that are bought and held principally for the
purpose of selling them in the near term will be classified as "trading
securities" and reported at fair value, with unrealized gains and losses
included in earnings; and (3) debt securities not classified as held-to-maturity
securities or trading securities will be classified as "available for sale
securities" and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of shareowners'
equity. This Statement became effective for the Company on October 1, 1994. It
is expected that implementation will not result in any material change in the
Company's consolidated financial position or results of operations.
Inventories are valued at the lower of cost or market, determined on the
last-in, first-out (LIFO) method. If the Company had used the first-in,
first-out (FIFO) method of inventory valuation, which approximates current
replacement cost, inventories would have been higher than reported at September
30, 1994, by $150,361,000 and at August 31, 1993, by $151,504,000.
Depreciation and amortization of property are computed principally on a
straight-line basis over estimated useful lives. Generally, the estimated
useful lives are 15 to 40 years for buildings and leasehold improvements, and 3
to 10 years for equipment and fixtures.
The excess of cost over net assets of acquired companies (net of
amortization of $29,002,000 at September 30, 1994; $19,547,000 at August 31,
II - 16
<PAGE>
1993) is amortized on a straight-line basis principally over 40 years. Customer
lists, included in deferred charges and other assets, ($12,254,000 at September
30, 1994 , net of accumulated amortization of $13,977,000; $14,149,000 at August
31, 1993, net of accumulated amortization of $12,082,000) are amortized on a
straight-line basis over 15 years.
Noncurrent receivables include notes receivable from employees and officers
due at the Company's discretion in the amount of $3,840,000 and $3,471,000 at
September 30, 1994 and August 31, 1993, respectively.
Net sales and other revenues of the Company include service fees of $4.4
million, $2.9 million and $2.6 million for the years ended September 30, 1994,
August 31, 1993 and 1992, respectively, related to bulk shipments of
pharmaceuticals.
Effective October 1, 1993, the Company changed its fiscal year from a
twelve-month period ending August 31 to a twelve-month period ending September
30. The Statements of Consolidated Earnings and Retained Earnings and Cash
Flows are presented for the twelve months ended September 30, 1994, exclusive of
September 1993 results, and for the twelve-month periods ended August 31, 1993
and 1992.
The Statement of Consolidated Earnings for the month of September 1993 is
as follows:
<TABLE>
<CAPTION>
Dollars in thousands,
except for per share amounts
-------------------------------------------------------------------------------------
<S> <C>
Net sales and other revenues $598,147
----------
Costs and expenses:
Cost of sales 566,796
Distribution, selling, general and administrative expenses 27,175
----------
Total costs and expenses 593,971
----------
Operating earnings 4,176
Net interest expense 1,541
----------
Earnings before taxes on income 2,635
Taxes on income 1,140
----------
Earnings before cumulative effect of a change in accounting principle 1,495
Cumulative effect on prior years (as of September 1, 1993)
of a change in method of accounting for income taxes (8,713)
----------
Net loss $ (7,218)
==========
Earnings (loss) per common and common equivalent share:
Earnings before cumulative effect of a change in accounting principle $ .04
Cumulative effect on prior years (as of September 1, 1993)
of a change in method of accounting for income taxes (.24)
----------
Net loss per share $ (.20)
==========
Weighted average number of common and common equivalent shares 36,496,019
==========
</TABLE>
II - 17
<PAGE>
During the month of September 1993, net cash and cash equivalents of $27.1
million and $6.2 million was provided by operations and financing activities,
respectively, and net cash and cash equivalents of $2.5 million was used for
investing activities. The resulting $30.8 million net increase in cash and cash
equivalents during the period increased the $55.0 million of cash and cash
equivalents at September 1, 1993 to $85.8 million at September 30, 1993.
Certain reclassifications have been made in the consolidated financial
statements and notes to conform to fiscal 1994 presentations.
2. Borrowing Arrangements
On September 15, 1992, the Company entered into a credit agreement (the
"Credit Agreement") with a group of banks providing the Company with a
three-year $300 million unsecured revolving line of credit to be used to fund
the fiscal 1993 acquisition of Durr-Fillauer Medical, Inc. and subsidiaries
("Durr") and to be used for general working capital purposes of the Company. On
October 7, 1994, the Credit Agreement was amended to, among other things,
increase the maximum borrowing to $350 million and to extend the maturity date
to September 15, 1997. Borrowings outstanding under the Credit Agreement were
$40.0 million at September 30, 1994. The maximum outstanding borrowings under
the Credit Agreement for the year ended September 30, 1994 were $270.0 million.
On January 14, 1993, the Company publicly sold $100 million aggregate
principal amount of 5 5/8% Senior Notes due January 15, 1996 and $150 million
aggregate principal amount of 7 3/8% Senior Notes due January 15, 2003,
collectively the "Senior Notes." The Senior Notes were issued pursuant to the
$400 million shelf registration filed by the Company in December 1992. Interest
on the Senior Notes is payable semi-annually on January 15 and July 15 of each
year, beginning July 15, 1993. The Senior Notes are not redeemable prior to
maturity and are not entitled to any sinking fund. The carrying value of the
Senior Notes represents gross proceeds plus amortization of the original issue
discount ratably over the life of each issue.
In connection with the acquisition of Durr, the Company assumed $69.0
million of Durr's 7% Convertible Subordinated Debentures due March 1, 2006 (the
"7% Debentures"). The acquisition of Durr by the Company resulted in each
holder receiving the right, at such holder's option, to require Durr to redeem,
on November 23, 1992, all or any portion of such holder's 7% Debentures for cash
equal to the principal amount plus accrued interest to that date. As a result,
the Company redeemed $45.6 million aggregate principal amount on November 23,
II - 18
<PAGE>
1992. Since that date an additional $2.5 million aggregate principal amount has
been redeemed. The remaining outstanding 7% Debentures receive interest on
March 1 and September 1 of each year.
On February 10, 1993, the Company redeemed for cash $471,429,000 of the
outstanding principal amount of its Liquid Yield OptionTM Notes ("LYONs") due
2004 at a redemption price of $458.08 per $1,000 principal amount at maturity
(representing the issue price plus accrued original issue discount to February
10, 1993). The balance of $71,000 principal amount was converted into 1,169
shares of the Company's Class A Common Stock. The redemption resulted in an
extraordinary after-tax loss of $2.6 million, net of related income tax benefit
of $1.8 million.
In July 1986, the Company issued $43.0 million of 6 7/8% Exchangeable
Subordinated Debentures due July 2011 (the "Debentures") and during March 1990,
$32.1 million principal amount of the Debentures was tendered and purchased
pursuant to an offer from the Company. Since that date an additional $0.3
million aggregate principal amount has been redeemed. See Note 10 for the
effect of the fiscal 1992 disposition of Commtron Corporation ("Commtron") on
the Debentures.
Scheduled future principal payments of long-term obligations, excluding
deferred income taxes, for the next five years are $1,307,000 in 1995,
$101,006,000 in 1996, $40,933,000 in 1997, $933,000 in 1998 and $909,000 in
1999.
3. Capital Stock, Paid-in Capital and Stock Options
The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common, par value $1.50 per share (the "Common Stock") and 3,000,000
shares of Preferred Stock without nominal or par value (the "Preferred Stock").
The Board of Directors (the "Board") is authorized to divide the Preferred
Stock into one or more series, to determine the relative rights, preferences and
limitations of the shares of any class or of any such series. In addition, the
Board may give the Preferred Stock (or any series), special, limited, multiple
or no voting rights.
Subject to the preferences and other rights of the Preferred Stock, the
Common Stock may receive stock or cash dividends as declared by the Board and
each share of Common Stock is entitled to one vote per share at every meeting of
shareowners. In the event of any liquidation, dissolution or winding up of the
affairs of the Company, after payment to the owners of the Preferred Stock of
the full amounts to which they have a liquidation preference, the owners of
Common Stock shall be entitled to receive a distribution of all assets then
remaining.
II - 19
<PAGE>
No owner of stock of any class of the Company shall have any preemptive
right to purchase or subscribe for, or to receive rights or warrants to purchase
or subscribe for, any shares of the Company, whenever authorized, which the
Company may issue or sell or any obligations which the Company may issue or sell
that shall be convertible into or exchanged for any shares of any class of stock
of the Company.
The Company shall not be obligated to issue any fractional shares of Common
Stock and if any interest in a fractional share would otherwise be deliverable,
the Company shall make adjustment for that fractional share interest by payment
of an amount in cash equal to the same fraction of the market value of a full
share of Common Stock.
On February 9, 1994, the Board adopted a Shareowner Rights Plan which
provided that a dividend of one Preferred Share Purchase Right (the "Rights")
was declared for each share of Common Stock outstanding at the close of business
on February 18, 1994. The Rights are generally not exercisable until 10 days
after a person or group acquires 15% of the Common Stock or announces a tender
offer which could result in a person or group owning 15% or more of the Common
Stock (an "Acquisition"). Each Right, should it become exercisable, will
entitle the owner to buy 1/100th of a share of a new series of the Company's
Series A Junior Preferred Stock at an exercise price of $80.00.
In the event of an Acquisition without the approval of the Board, each
Right will entitle the owner, other than an acquiror, to buy at the Rights' then
current exercise price a number of shares of Common Stock with a market value
equal to twice the exercise price. In addition, if at the time when there was a
15% shareowner, the Company were to be acquired by merger, shareowners with
unexercised Rights could purchase common stock of the acquiror with a value of
twice the exercise price of the Rights. The Board may redeem the Rights for
$0.01 per Right at any time prior to an Acquisition. Unless earlier redeemed,
the Rights will expire on February 18, 2004.
In addition to the Shareowner Rights Plan, the staggered election of the
Board of Directors, the possible impact of the anti-trust laws and the New
Jersey Shareholders Protection Act ("NJSPA") may deter a hostile takeover of the
Company.
The NJSPA could discourage a hostile takeover of the Company because it
could significantly delay the ability of a person who acquires control of the
Company to consummate a merger with the Company. The NJSPA provides that no
"Resident Domestic Corporation" shall engage in any "Business Combination" with
any "Interested Stockholder" of such corporation for a period of five years
following that "Interested Stockholder's" "Stock Acquisition Date" unless that
II - 20
<PAGE>
"Business Combination" is approved by the Board of Directors of the "Resident
Domestic Corporation" prior to that "Interested Stockholder's" "Stock
Acquisition Date."
The NJSPA defines a "Resident Domestic Corporation" as a corporation
incorporated in, and having its principal executive offices or significant
business operations located in, the State of New Jersey. The Company believes
that it is a Resident Domestic Corporation because it has significant business
operations located in New Jersey. A "Business Combination" includes (i) a
merger of a Resident Domestic Corporation with an Interested Stockholder or any
corporation which is an affiliate of such Interested Stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more
of the assets of a Resident Domestic Corporation to or with an Interested
Stockholder or any affiliate thereof; and (iii) other specified extraordinary
transactions between a Resident Domestic Corporation and an Interested
Stockholder or any affiliate thereof. "Interested Stockholder" is defined, in
pertinent part, as any person that is the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding voting stock
of a Resident Domestic Corporation. "Stock Acquisition Date" is defined as the
date that a person becomes an Interested Stockholder.
The Securities and Exchange Commission (the "Commission") has argued that
statutes similar to the NJSPA are invalid. The United States Court of Appeals
for the Seventh Circuit has upheld a Wisconsin statute which is similar to the
NJSPA. The Company has not solicited or received any legal opinion as to the
validity of the NJSPA.
The NJSPA imposes additional restrictions on the ability of an Interested
Stockholder to consummate a Business Combination with a Resident Domestic
Corporation even after the five year period has expired. The NJSPA requires the
affirmative vote of the holders of two-thirds of the shares not beneficially
owned by an Interested Stockholder to approve a Business Combination with the
Interested Stockholder unless (i) the Business Combination is approved by the
Company's Board of Directors prior to the Interested Stockholder's Stock
Acquisition Date or (ii) a "fair price" consideration, determined pursuant to
criteria specified in the NJSPA, is paid to holders of shares and certain other
specified conditions are met.
Under the New Jersey Business Corporation Act ("NJBCA"), a merger would
generally require the approval of the Board of Directors of the Company and the
affirmative vote of a majority of the votes cast by the holders of capital stock
of the Company entitled to vote on the merger assuming the presence of a quorum
which would be a majority of all shares entitled to vote. Any merger would have
to comply with the applicable procedural and substantive requirements of the
NJBCA, including the NJSPA and any duties to other shareholders imposed upon a
II - 21
<PAGE>
controlling or, if applicable, majority shareholder.
Any merger would also have to comply with any applicable federal law. In
particular, an Interested Stockholder may be required to comply with Rule 13e-3
promulgated by the Commission under the Exchange Act. Rule 13e-3 requires,
among other things, that certain financial information concerning the Company
and certain information relating to the fairness of such merger or other similar
business combination and the consideration offered to minority shareholders be
filed with the Commission and distributed to minority shareholders prior to the
consummation of any such transaction.
On February 24, 1994 (the "Conversion Date"), in accordance with the
provisions of the Recapitalization Plan approved by the Company's shareowners on
January 31, 1989, all of the 100,492 then outstanding shares of the Company's
Class B Stock were automatically converted into shares of the Company's Class A
Common Stock at the stated conversion rate of 9.5285 shares of Class A Common
Stock for each share of Class B Common Stock. All Class B Common Stock was
subsequently cancelled.
During fiscal years 1991 and 1992, the Board of Directors authorized total
expenditures of $200,000,000 to purchase shares of the Company's capital stock
on the open market. During fiscal year 1992, 5,252,625 shares of Class A Common
Stock were purchased for Treasury at a cost of approximately $106.9 million.
The Company has discontinued the stock repurchase program.
Changes in Class A and Class B Common Stock, Paid-in capital and Treasury
shares for the years ended September 30, 1994, August 31, 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
Class A Common Class B Common Paid-in Treasury
Dollars and shares in thousands Shares Amount Shares Amount Capital Shares
========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1991 42,187 $63,280 101 $151 $143,455 $(43,517)
Exercise of stock options 90 135 - - 867 (31)
Acquisition of Treasury shares - - - - - (106,935)
----------------------------------------------------------------
Balance, August 31, 1992 42,277 63,415 101 151 144,322 (150,483)
Exercise of stock options 277 415 - - 3,235 (1,694)
Conversion of LYONs 1 2 - - 31 -
Acquisition of Healthcare
Distributors of Indiana, Inc. ("HDI") 471 707 - - 8,724 (409)
----------------------------------------------------------------
Balance, August 31, 1993
and September 30, 1993 43,026 64,539 101 151 156,312 (152,586)
Exercise of stock options 75 113 - - 733 (351)
Conversion of Class B Common
Stock into Class A Common Stock 958 1,436 (101) (151) (1,286) -
Recapitalization costs - - - - (680) -
Acquisition of Southeastern
Hospital Supply Corporation - - - - - 15,098
Adjustment of HDI acquisition price - - - - - (344)
----------------------------------------------------------------
Balance, September 30, 1994 44,059 $66,088 - $ - $155,079 $(138,183)
================================================================
</TABLE>
II - 22
<PAGE>
The Company has a 1983 stock option plan which authorizes the granting of
options to key employees to purchase, within a period of ten years from date of
grant, up to 1,345,830 shares of Class A Common Stock at prices per share not
less than the fair market value on the dates the options are granted. At
September 30, 1994, there were 29,839 shares available for grant under the 1983
plan.
The Company has a 1989 stock incentive plan which authorizes the granting
of options to key employees, non-employee directors and certain other recipients
to purchase, within a period of ten years from date of grant, up to 1,875,000
shares, of which 187,500 may be utilized for grants to non-employee directors,
of Class A Common Stock at prices per share as may be set by the Company's
Compensation/Stock Option Committee (except for non-employee director options
which may not be less than the fair market value on the date the options are
granted). At September 30, 1994, there were 883,061 shares available for grant
under the 1989 plan.
Stock appreciation rights may be offered to some or all of the employees,
but not non-employee directors, who hold or receive options granted under the
stock option plans. The stock appreciation rights entitle the optionee, in lieu
of exercising stock options, and without payment to the Company, to receive an
amount representing the value in shares of the stock appreciation rights. Such
value is related to the increase in market value of the Company's Class A Common
Stock and may be paid in shares of Class A Common Stock or up to 50% in cash.
Stock appreciation rights become exercisable and expire on the same dates as the
related options. No stock appreciation rights were outstanding as of September
30, 1994, August 31, 1993 or 1992.
Changes in the number of shares represented by outstanding options during
the years ended September 30, 1994, August 31, 1993 and 1992 are summarized as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
========================================================================================================
<S> <C> <C> <C>
Outstanding at beginning of year 885,500 947,743 873,064
Options granted (1994, $15.00 to $17.75 per share; 1993,
$19.69 to $21.13 per share; 1992, $16.94 to $22.25 per share) 516,500 259,668 172,050
Options exercised (1994, $7.80 to $13.04 per share; 1993,
$7.80 to $19.95 per share; 1992, $6.14 to $19.00 per share) (75,039) (276,906) (89,861)
Options cancelled (105,072) (45,005) (7,510)
----------------------------------
Outstanding at end of year (1994, $7.80 to $22.35 per share) 1,221,889 885,500 947,743
==================================
</TABLE>
At September 30, 1994, options for 454,123 shares were exercisable. The
remaining options become exercisable in the following fiscal years: 1995,
198,574 shares; 1996, 209,171 shares; 1997, 216,171 shares; 1998, 143,850
shares.
II - 23
<PAGE>
At September 30, 1994, an aggregate of 2,759,789 shares of Class A Common
Stock was reserved for the exercise of stock options and for issuance under the
elective retirement savings plan (see Note 8).
4. Acquisitions
On April 29, 1994, the Company completed the acquisition of Southeastern
Hospital Supply Corporation ("Southeastern"), a privately held medical supply
distributor located in Fayetteville, North Carolina, for 747,422 shares,
previously held as Treasury shares, of the Company's Class A Common Stock valued
at approximately $12.6 million, incurred expenses of $0.4 million and assumed
approximately $6.7 million of debt, which was paid by the Company on the
acquisition date. The Company recorded an excess of cost over net assets
acquired of approximately $5.4 million in the transaction.
On August 31, 1994, the Company completed the acquisition of certain net
assets of Professional Medical Supply Co., a privately held medical supply
distributor located in Denver, Colorado, for approximately $2.4 million in cash
including excess of cost over net assets acquired and other intangible assets of
$1.9 million.
On September 18, 1992, the Company completed its $33 per share cash tender
offer for the outstanding shares of common stock of Durr. The total cost of the
acquisition was approximately $395.3 million in cash plus expenses of $16.7
million and the assumption of long-term debt of approximately $72.1 million.
The acquisition, which has been accounted for as a purchase, was financed from
borrowings under the Credit Agreement (as described in Note 2) and from funds
generated internally. Durr is a distributor of pharmaceuticals and medical
supplies based in Montgomery, Alabama.
An excess of cost over net assets acquired of approximately $279.1 million
was recorded based upon the fair value of assets acquired and liabilities
assumed in the transaction. The operating results of Durr have been included in
the Statements of Consolidated Earnings and Retained Earnings from the date of
the acquisition.
II - 24
<PAGE>
If the acquisition of Durr had occurred as of the beginning of the year
ended August 31, 1992, the Company's unaudited pro forma net sales and other
revenues, earnings from continuing operations before taxes on income, earnings
from continuing operations, net earnings and earnings per common and common
equivalent share from continuing operations, primary and fully diluted, would
have been as follows:
<TABLE>
<CAPTION>
Dollars in millions, except for per share amount 1992
=======================================================================
<S> <C>
Net sales and other revenues $6,075
======
Earnings from continuing operations before taxes on income 85
======
Earnings from continuing operations 50
======
Net earnings 58
======
Earnings per common and common equivalent share
from continuing operations, primary and fully diluted $1.30
======
</TABLE>
The pro forma operating results above include Durr's results of operations
for fiscal 1992 with increased depreciation and amortization of property, plant
and equipment and excess of cost over net assets acquired along with other
relevant adjustments to reflect fair value of the acquired assets, and pro forma
interest expense on the assumed acquisition borrowings.
The results of operations reflected in the pro forma information above are
not necessarily indicative of the results which would have been reported if the
Durr acquisition had been effected at the beginning of fiscal 1992.
On March 16, 1993, the Company sold Durr-Fillauer Orthopedic, Inc., an
indirect wholly-owned subsidiary of Durr, and a manufacturer and distributor of
orthotic and prosthetic devices, for approximately $9.0 million in cash.
On November 18, 1992, the Company completed the acquisition of the stock of
Dr. T. C. Smith Company, a privately-held pharmaceutical distributor, located
in Asheville and Raleigh, North Carolina, for approximately $8.2 million in cash
plus expenses of $1.3 million and the assumption of approximately $9.7 million
of bank debt which was paid by the Company on the acquisition date. The Company
recorded an excess of cost over net assets acquired of approximately $1.5
million in the transaction.
On January 29, 1993, the Company completed the acquisition of substantially
all of the assets of Healthcare Distributors of Indiana, Inc.("HDI"), a
privately-held pharmaceutical distributor located in South Bend, Indiana, for
433,957 shares, net of 37,608 shares subsequently reacquired, of the Company's
Class A Common Stock valued at approximately $8.7 million, incurred expenses of
$0.9 million and assumed approximately $7.3 million of debt which was paid by
II - 25
<PAGE>
the Company on the acquisition date. The Company recorded an excess of cost
over net assets acquired of approximately $2.9 million in the transaction.
On February 28, 1992, the Company acquired substantially all of the net
assets and business of the pharmaceutical distribution segment of Owens & Minor,
Inc. for approximately $51.8 million in cash, including excess of cost over net
assets acquired and other intangible assets of $9.9 million.
The inclusion of each of the preceding acquisitions would not materially
affect the foregoing pro forma amounts.
5. Earnings per Common and Common Equivalent Share
Earnings per common and common equivalent share are based on the weighted
average number of shares of Class A Common Stock outstanding during each year,
the assumed conversion of the weighted average number of shares of Class B
Common Stock outstanding during each year through the Conversion Date (see Note
3) and the assumed exercise of dilutive employees' stock options (less the
number of Treasury shares assumed to be purchased from the proceeds using the
average market price or, for fully diluted earnings per share, the greater of
the average market price or year-end market price of the Company's Class A
Common Stock). Primary earnings per share are based upon 36,841,690 shares in
1994, 36,313,436 shares in 1993 and 37,644,849 shares in 1992. Fully diluted
earnings per share are based upon 36,848,580 shares in 1994 and 45,416,860
shares in 1992 and assume conversion of the LYONs in 1992. In 1993, the
computation of fully diluted earnings per share was anti-dilutive.
6. Leases
The Company conducts certain of its operations from leased warehouse and
office facilities and uses certain data processing, transportation, and other
equipment under lease agreements expiring at various dates during the next 14
years, excluding renewal options. Future minimum rental commitments at
September 30, 1994, under operating leases having noncancelable lease terms in
excess of one year, aggregated $56,571,000, with rental payments during the five
succeeding years of $14,148,000, $10,640,000, $9,123,000, $6,993,000 and
$5,549,000, respectively. Future minimum rentals to be received under
noncancelable subleases at September 30, 1994 totaled $15,000. Net rental
expense for the years ended September 30, 1994, August 31, 1993 and 1992, was
$15,871,000, $15,978,000 and $13,988,000, respectively, after deducting sublease
income of $187,000, $675,000 and $967,000, respectively.
II - 26
<PAGE>
7. Taxes on Income
Effective September 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The
effect of initially adopting SFAS 109 was accounted for as a cumulative effect
of an accounting change of $8.7 million, or $0.24 per share, recorded in
September 1993.
This Statement changed the Company's method of accounting for income taxes
from the deferred method to an asset and liability method. Under the deferred
method, annual income tax expense is matched with pre-tax accounting income by
providing deferred taxes at current rates for timing differences between the
determination of net income for financial reporting and tax purposes. Under the
asset and liability method, deferred tax assets and liabilities are established
for temporary differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities at tax rates expected to be in
effect when such assets or liabilities are realized or settled.
Total Federal and State taxes on income for the years ended September 30,
1994, August 31, 1993 and 1992 are summarized as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
=======================================================================
<S> <C> <C> <C>
Continuing operations:
Currently payable
Federal $36,818 $29,342 $30,063
State 6,588 5,675 5,928
Deferred (principally Federal) (1,414) (15,364) (5,533)
-----------------------------
Total $41,992 $19,653 $30,458
=============================
Discontinued operations:
Currently payable
Federal $ - $ - $ 4,939
State - - 854
Deferred (principally Federal) - - (2,743)
-----------------------------
Total $ - $ - $ 3,050
=============================
Extraordinary loss:
Currently payable
Federal $ - $(1,481) $ -
State - (305) -
-----------------------------
Total $ - $(1,786) $ -
=============================
</TABLE>
II - 27
<PAGE>
Discontinued operations include Federal and State taxes on income for both
the net results of operations and the gain on disposition of Commtron.
Deferred taxes result from temporary differences in the recognition of
revenues and expenses for tax and financial reporting purposes. The sources of
these temporary differences and the tax effects from continuing operations are
as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
================================================================
<S> <C> <C> <C>
Accelerated depreciation $ (476) $ 1,067 $ 1,752
Inventory transactions (2,699) (1,787) (5,875)
Restructuring charge 4,936 (12,735) -
Receivables transactions (2,307) (1,277) (1,934)
Vacation pay transactions (218) (457) (296)
Other differences (650) (175) 820
-------------------------------
Total $(1,414) $(15,364) $(5,533)
===============================
</TABLE>
The principal sources of timing differences from discontinued operations
are accelerated depreciation, inventory transactions and receivables
transactions.
Taxes on income from continuing operations vary from the statutory Federal
income tax rate applied to earnings from continuing operations before taxes on
income as the result of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
====================================================================================
<S> <C> <C> <C>
Statutory Federal income tax rate applied to earnings
from continuing operations before taxes on income $34,340 $16,732 $28,380
Increase (decrease) in taxes resulting from:
Amortization of excess of cost over net
assets of acquired companies 2,912 2,895 465
State income taxes - net of Federal benefits 4,141 1,977 3,856
Governmental investment income (348) (893) (3,007)
Effects of purchase accounting - (1,679) -
Other 947 621 764
---------------------------
Total taxes on income from continuing operations $41,992 $19,653 $30,458
===========================
</TABLE>
II - 28
<PAGE>
The tax effects of significant items comprising the Company's net deferred
tax liability as of September 30, 1994 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred tax liabilities:
Inventory basis difference due to LIFO
method and uniform capitalization $ 30,713
Accelerated depreciation 7,871
Other 2,709
--------
Total 41,293
--------
Deferred tax assets:
Reserves for doubtful receivables (9,646)
Restructuring charge not currently deductible (7,732)
Vacation pay not currently deductible (2,012)
Accrued liabilities not currently deductible (13,212)
Other (3,843)
--------
Total (36,445)
--------
Net deferred tax liability $ 4,848
========
</TABLE>
In the opinion of management of the Company, no valuation reserve related
to recorded deferred tax assets is deemed necessary.
8. Retirement and Savings Plans
The Company provides for retirement benefits through an elective retirement
savings plan and supplemental retirement plans.
The Company has an elective retirement savings plan generally available to
all employees with six months of service. Under the terms of the plan, the
Company guarantees a contribution of $0.50 for each $1.00 invested by the
participant up to the participant's investment of 6% of salary, subject to plan
and regulatory limitations. The Company may also make additional cash or stock
contributions to the plan at its discretion. The Company's contributions are
vested to participants over five years. The Company made contributions of
$4,146,000, $4,219,000 and $2,760,000 to the plan in 1994, 1993 and 1992,
respectively.
The Company terminated its defined benefit contributory retirement plan on
December 31, 1991. The Company's general funding policy with respect to the
defined benefit contributory retirement plan was to contribute amounts which
were sufficient to satisfy legal funding requirements and were deductible for
Federal income tax purposes. No contributions were made in 1992. Upon
termination of the plan, all participants became fully vested and received their
II - 29
<PAGE>
benefits through the purchase of annuity contracts or by cash distribution.
The supplemental retirement plans provide benefits for certain officers and
key employees. Effective January 1991, the Company approved a new Supplemental
Executive Retirement Plan ("SERP") for officers and key employees. SERP is a
"target" benefit plan, with the annual lifetime benefit based upon a percentage
of salary during the final five years of pay at age 62, offset by several other
sources of income including benefits payable under a prior supplemental
retirement plan.
The components of net periodic pension cost for the supplemental retirement
plans for 1994 and the defined benefit contributory and supplemental retirement
plans for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
===================================================================
<S> <C> <C> <C>
Service cost $ 131 $ 218 $ 389
Interest cost 1,643 1,544 3,334
Return on plan assets - actual - - (1,786)
- deferred - - (128)
Amortization of prior service cost 397 424 379
Amortization of initial unrecognized
(net asset) net obligation 286 264 (39)
--------------------------
Total $2,457 $2,450 $2,149
==========================
</TABLE>
Assumptions used to develop the net periodic pension cost for the defined
benefit contributory and supplemental retirement plans were:
<TABLE>
<CAPTION>
1994 1993 1992
===================================================================================
<S> <C> <C> <C>
Discount rate 7.25%-8.25% 7.25% 8.00%-8.50%
Rate of increase in salary levels 5.50% 5.25% 6.00%
Expected long-term rate of return on
defined benefit contributory plan assets - - 9.00%
</TABLE>
II - 30
<PAGE>
The funded status of the supplemental retirement plans as of September 30,
1994 and August 31, 1993 is as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993
==========================================================================================
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $15,506 $17,983
Nonvested benefits 76 403
------------------
Accumulated benefit obligation 15,582 18,386
Effect of assumed increase in future compensation levels 2,427 2,856
------------------
Projected benefit obligation 18,009 21,242
Assets of plans at fair value (2,520) (3,170)
------------------
Excess of projected benefit obligation over assets 15,489 18,072
Unrecognized prior service cost (3,266) (3,657)
Unrecognized net loss (2,962) (3,561)
Unrecognized net obligation remaining
from date of adoption (4,106) (4,369)
------------------
Pension liability recognized in the consolidated balance sheets $ 5,155 $ 6,485
==================
</TABLE>
At September 30, 1994, the Company owns life insurance in the aggregate
amount of $43 million covering substantially all the participants in a
supplemental retirement plan. The Company intends to keep this life insurance
in force until the demise of the participants.
Contributions are also made to multi-employer defined benefit plans
administered by labor unions for certain union employees. Amounts charged to
pension expense and contributed to these plans were $297,000, $284,000 and
$331,000, in 1994, 1993 and 1992, respectively.
On September 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106") which requires the cost of postretirement benefits other
than pensions to be recognized on an accrual basis as employees perform services
to earn such benefits. The Company had previously expensed postretirement
benefits as paid. The estimated transition obligation of the Company, which is
the accumulated postretirement benefit obligation at the date of adoption,
amounted to approximately $2.1 million. This obligation is being recognized
over 20 years. The impact of the Company's adoption of SFAS 106 was to increase
each future year's annual benefits expense (assuming amortization of the
transition obligation over 20 years) by $275,000.
II - 31
<PAGE>
9. Supplemental Cash Flow Disclosures
<TABLE>
<CAPTION>
Dollars in thousands September 30, August 31, August 31,
Years Ended: 1994 1993 1992
==========================================================================
<S> <C> <C> <C>
Cash paid during the year for:
Interest, net of amounts capitalized
($466 in 1994 and $264 in 1993) $ 24,097 $ 19,387 $ 2,073
Income taxes 38,960 38,812 26,734
</TABLE>
On April 29, 1994, the Company completed the acquisition of Southeastern
Hospital Supply Corporation ("Southeastern"), a privately held medical supply
distributor located in Fayetteville, North Carolina, for 747,422 shares,
previously held as Treasury shares, of the Company's Class A Common Stock valued
at approximately $12.6 million, incurred expenses of $0.4 million and assumed
approximately $6.7 million of debt, which was paid by the Company on the
acquisition date. The Company recorded an excess of cost over net assets
acquired of approximately $5.4 million in the transaction.
On August 31, 1994, the Company completed the acquisition of certain net
assets of Professional Medical Supply Co., a privately held medical supply
distributor located in Denver, Colorado, for approximately $2.4 million in cash,
including excess of cost over net assets acquired, and other intangible assets
of $1.9 million.
During fiscal 1993, the Company paid approximately $412.0 million in cash,
acquired assets at fair value of approximately $370.9 million and assumed
liabilities of approximately $238.0 million in connection with the Durr
acquisition. Also during fiscal 1993, the Company paid approximately $8.2
million in cash plus expenses of $1.3 million, acquired assets at fair value of
approximately $32.4 million and assumed liabilities of approximately $24.4
million in connection with the acquisition of the Dr. T.C. Smith Company.
Additionally, during fiscal 1993, the Company issued 433,957 shares, net of
37,608 shares subsequently reacquired, of the Company's Class A Common Stock
valued at approximately $8.7 million, incurred expenses of $0.9 million,
acquired assets at fair value of approximately $30.1 million and assumed
liabilities of approximately $23.1 million in connection with the acquisition of
HDI.
During the fourth quarter of fiscal 1993, the Company approved a
restructuring plan which resulted in a charge of $33.0 million to earnings from
continuing operations before taxes on income(see Note 12). In the second
quarter of fiscal 1993, the Company redeemed for cash the outstanding LYONs,
which resulted in an extraordinary after-tax loss of $2.6 million, net of
related income tax benefit of $1.8 million (see Note 2).
II - 32
<PAGE>
In fiscal 1992, the Company transferred assets totaling $145.5 million,
excluding intercompany advances, and liabilities of $142.9 million in connection
with the sale of Commtron (see Note 10).
10. Discontinued Operations
On June 19, 1992, the Company sold its 81%-owned subsidiary, Commtron, to
Ingram Industries, Inc. ("Ingram"). On that date, the Company received
aggregate consideration of $7.75 per share for each of the 3,246,000 shares of
Commtron Class A Common Stock and 5,000,000 shares of Class B Common Stock owned
by the Company. Of the approximate $63.9 million of aggregate consideration
received by the Company, approximately $58.2 million was paid outright to the
Company with respect to shares of Commtron's outstanding Common Stock owned by
the Company free of escrow, and approximately $5.7 million was paid in escrow
with respect to 732,863 shares of Commtron Class A Common Stock registered in
the name of the Company but held in escrow for issuance in exchange for the
Company's Debentures (see Note 2). As a result of the sale, each $1,000
principal amount of Debentures which, prior to the sale, was exchangeable for
67.20 shares of Commtron Class A Common Stock, is now exchangeable for
approximately $520.83 cash, less applicable taxes, plus interest accrued on the
net amount ("Escrow Amount Per Debenture"). Unless exchanged for the Escrow
Amount Per Debenture, or otherwise acquired or redeemed by the Company, each
Debenture will remain an outstanding obligation of the Company until maturity.
On the closing date, the Company also repaid net advances made to the Company by
Commtron of approximately $68.6 million. The Company recorded an after-tax gain
of $4.0 million on the transaction.
The net results of operations of Commtron have been reclassified and shown
separately for the year ended August 31, 1992 in the Statements of Consolidated
Earnings and Retained Earnings as earnings from discontinued operations and,
accordingly, have been omitted from the various categories as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1992
============================================================================
<S> <C>
Net sales and other revenues $438,402
--------
Costs and expenses 433,195
Net interest income (2,877)
--------
Total costs and expenses 430,318
--------
Earnings before taxes on income 8,084
Taxes on income 3,234
--------
Earnings before minority interest in net earnings of subsidiary 4,850
Minority interest in net earnings of subsidiary (974)
--------
Earnings from discontinued operations $ 3,876
========
</TABLE>
II - 33
<PAGE>
11. Contingencies
The Company received proceeds of $14,831,000 and $4,097,000 in 1994 and
1993, respectively, from receivables sold with recourse by the Company to
financial institutions and is contingently liable as guarantor of $29,439,000
and $36,068,000 at September 30, 1994 and August 31, 1993 of such receivables.
In December 1992, a customer of the Company commenced a legal action
against the Company in the Superior Court of the State of California alleging
breach of contract, misrepresentation and violations of certain California
antitrust and unfair practices laws. This customer seeks a variety of damage
claims in substantial amounts including compensatory, treble and punitive
damages, an injunction against collection on a note, and declaratory judgement
as to the customer's rights under an alleged oral joint venture agreement with
the Company. As of October 31, 1994, this customer owed the Company
approximately $6.2 million, of which approximately $1.2 million represents trade
receivables and $5.0 million represents a loan.
On July 29, 1993, this customer filed a voluntary petition for relief under
Chapter 11 of the United States Code and the complaint filed by the Company
against the customer has been stayed. An additional action brought by the
Company against two individuals as guarantors of the customer's obligations has
been transferred to the Superior Court in San Francisco County, with the
California State antitrust actions referenced in the next paragraph.
In addition, the Company has been named as a defendant along with several
pharmaceutical industry-related companies in several State antitrust actions in
California and Alabama and a Federal multidistrict antitrust action. The
California State action purports to be a coordinated class action under
California's Cartwright Act, Unfair Practices Act and Business and Professions
Code. (The State court judge recently struck the class allegations from the
Unfair Practices Act claims). The Alabama State complaint purports to be a
class action under Alabama antitrust law. The Federal class action complaint
alleges that the Company and numerous manufacturers and other wholesalers
violated the Sherman Act. Plaintiffs seek injunctive relief and treble damages
in an amount to be determined at trial.
On October 21, 1994, the Company entered into a sharing agreement with five
other wholesalers and 26 pharmaceutical manufacturers. Among other things, the
agreement provides that: (a) if a judgement is entered into against both the
manufacturer and wholesaler defendants, the total exposure for joint and several
liability of the Company is limited to $1,000,000; (b) if a settlement is
entered into by, between, and among the manufacturer and wholesaler defendants,
the Company has no monetary exposure for such settlement amount; (c) the six
II - 34
<PAGE>
wholesaler defendants will be reimbursed by the 26 pharmaceutical defendants for
related legal fees and expenses up to $9,000,000 total (of which the Company
will receive a proportionate share) and (d) the Company is to release certain
claims which it might have had against the manufacturer defendants for the
claims presented by the plaintiffs in these cases. The agreement covers the
Federal court litigation as well as the cases which have been filed in the
various State courts. After discussions with counsel, management of the Company
believes that the allegations of liability set forth in these lawsuits are
without merit as to the wholesaler defendants and that any attendant liability
of the Company, although unlikely, would not have a material adverse effect on
the Company's financial condition.
On November 2, 1988 and November 14, 1988, two class action and derivative
suits were filed naming the Company and certain Directors and Officers as
defendants and seeking damages and relief as a result of the Recapitalization
Plan approved by the shareowners at the January 31, 1989 Annual Meeting. On
April 5, 1989, the two actions were consolidated. On September 7, 1994, an
Order and Final Judgement was signed approving the settlement of the class and
derivative litigation. Under the order, the Company became obligated to pay the
plaintiff's attorneys the sum of $446,000 for fees, expenses and interest and
Mr. Robert E. Martini and the Estate of Emil P. Martini, Jr. each agreed to
transfer to the Company 15,000 shares of the Company's Class A Common Stock.
The Estate of Emil P. Martini, Jr. was also given the option, in lieu of the
transfer of 15,000 shares of Class A Common Stock, to pay the Company in cash
the sum of $294,000.
The Company is involved in various additional items of litigation.
Although the amount of liability at September 30, 1994 with respect to these
items of litigation cannot be ascertained, in the opinion of management, any
resulting future liability will not have a material adverse effect on its
financial position or results of operations.
12. Restructuring and Other Unusual Items
During the fourth quarter of fiscal 1993, the Company approved a
restructuring plan which consists of an accelerated consolidation of
pharmaceutical distribution facilities into larger, more efficient regional
distribution centers, the merging of duplicate operating systems, the reduction
of administrative support in areas not affecting valued services to customers,
and the discontinuance of services and programs that do not meet the Company's
strategic and economic return objectives. The estimated pre-tax cost of the
restructuring plan is $33.0 million. The restructuring charge represents the
costs associated with restructure, primarily abandonment and severance. For
II - 35
<PAGE>
those activities or assets where the disposal is expected to result in a gain,
no gain will be recognized until realized. During fiscal 1994, the Company
incurred costs of approximately $13.1 million related to the restructuring plan.
During fiscal 1994, the Company recognized a gain from the sale of
investment securities of $5.1 million before income taxes of $2.2 million.
During the second quarter of fiscal 1994, the Company recorded a pre-tax
charge of $1.4 million ($0.8 million after tax) for the uninsured portion of an
earthquake loss sustained by the Company's Valencia, California Regional
Distribution Center on January 17, 1994.
On June 18, 1993, the Company announced that a joint bid which the Company
had made in April 1993 with the French company, Cooperation Pharmaceutique
Francaise, to acquire the largest French pharmaceutical distribution company,
Office Commercial Pharmaceutique, had been withdrawn. Accordingly, expenses of
$2.5 million, before income tax benefit of $1.0 million associated with the
transaction, were recorded in the fourth quarter of fiscal 1993.
13. Disclosures About Fair Value of Financial Instruments
The recorded amounts of the Company's cash and cash equivalents, the
Debentures and the 7% Debentures at September 30, 1994, approximate fair value.
The fair values of the Company's other investments and the Senior Notes are
estimated as follows, based on the market prices of these instruments at
September 30, 1994:
<TABLE>
<CAPTION>
Dollars in thousands
=================================================================
Recorded
Amount Fair Value
--------- ----------
<S> <C> <C>
Other investments $ 22,063 $ 21,694
7 3/8% Senior Notes 149,078 142,557
5 5/8% Senior Notes 99,926 98,937
</TABLE>
II - 36
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareowners of
Bergen Brunswig Corporation:
We have audited the accompanying consolidated balance sheets of Bergen Brunswig
Corporation and subsidiaries as of September 30, 1994 and August 31, 1993, and
the related statements of consolidated earnings and retained earnings and cash
flows for the year ended September 30, 1994 and the years ended August 31, 1993
and 1992. Our audits also included the financial statement schedule listed in
the index at Item 14(a)(2). These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bergen Brunswig
Corporation and subsidiaries at September 30, 1994 and August 31, 1993, and the
results of their operations and their cash flows for the year ended September
30, 1994 and the years ended August 31, 1993 and 1992, in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in Note 7 of Notes to Consolidated Financial Statements, the
Company changed its method of accounting for income taxes in September 1993.
/s/ Deloitte & Touche LLP
- ----------------------------------
Costa Mesa, California
October 31, 1994
II - 37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
II - 38
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors.
Information required by this item is set forth under the caption
"Election of Directors" on pages 2 through 5 of the registrant's definitive
proxy statement dated December 22, 1994 for its January 26, 1995 Annual Meeting
of Shareowners, as filed with the Securities and Exchange Commission, and is
incorporated herein by reference.
Identification of Executive Officers.
Information required by this item is contained in Item 4A captioned
"Executive Officers of Registrant" and is included in Part I of this Annual
Report.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is set forth under the captions
"Directors Compensation," "Compensation of Executive Officers," "Employment and
Severance Agreements," "Stock Option Grants and Exercises," "Retirement
Benefits," "Report of the Compensation / Stock Option Committee," "Compensation
/ Stock Option Committee Interlocks and Insider Participation," "Performance
Graphs" and "Certain Transactions" on pages 6 and 7 and pages 9 through 19,
respectively, of the registrant's definitive proxy statement dated December 22,
1994 for its January 26, 1995 Annual Meeting of Shareowners, as filed with the
Securities and Exchange Commission, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by this item is set forth under the caption
"Beneficial Ownership of Securities" on pages 7 through 9 of the registrant's
definitive proxy statement dated December 22, 1994 for its January 26, 1995
Annual Meeting of Shareowners, as filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth as to certain
transactions with management and others under the caption "Director
Compensation" and as to management indebtedness under the caption "Certain
Transactions," and certain arrangements with respect to the indemnification of
Directors and Officers under the caption "Indemnification of Directors and
Officers" on pages 6 and 7, 18 and 19, and 26, respectively, of the registrant's
definitive proxy statement dated December 22, 1994 for its January 26, 1995
Annual Meeting of Shareowners, as filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
III - 1
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Page No.
--------
(a) Documents filed as part of this report:
1. Financial Statements
The following Consolidated Financial
Statements of Bergen Brunswig Corporation
and Subsidiaries are included in Part II,
Item 8:
Statements of Consolidated Earnings and
Retained Earnings for the Years Ended
September 30, 1994 and August 31, 1993
and 1992
Consolidated Balance Sheets, September 30,
1994 and August 31, 1993
Statements of Consolidated Cash Flows for
the Years Ended September 30, 1994
and August 31, 1993 and 1992
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedule
Schedule:
II Amounts Receivable from Employees IV - 10
Financial statements and schedules not listed are omitted because of the
absence of the conditions under which they are required or because all
material information is included in the consolidated financial statements
or notes thereto.
IV - 1
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits
--------
3(a) The By-Laws as amended and restated and dated December
16, 1994.
3(b) Amendment to By-Laws dated December 16, 1994.
*3(c) The Restated Certificate of Incorporation dated March 26, 1969, as
amended, and the following Amendments thereto dated:
February 14, 1994
September 5, 1991
December 14, 1989
October 11, 1989
April 10, 1989
February 24, 1989
July 9, 1987
March 15, 1985
January 6, 1982
September 14, 1973
August 28, 1972
December 16, 1970
December 17, 1969
are set forth as Exhibit 3(c) in the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1991, except for
the Amendment dated February 14, 1994 which is set forth as
Exhibit A of Exhibit 1 to the Company's Registration Statement on
Form 8-A dated February 14, 1994.
*4(a) The Senior Indenture for $400,000,000 of Debt Securities dated as
of December 1, 1992 between the Company and Chemical Trust Company
of California as Trustee is set forth as Exhibit 4.1 to the
Company's Registration Statement on Form S-3 dated December 1,
1992 (file no. 33-55136).
The Company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each instrument with respect
to other issues of long-term debt of the Company, the authorized
principal amount of which does not exceed 10% of the total assets
of the Company on a consolidated basis.
IV - 2
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
*4(b) Rights Agreement, dated as of February 8, 1994, between Bergen
Brunswig Corporation and Chemical Trust Company of California, as
Rights Agent, including all exhibits thereto, is incorporated
herein by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A dated February 14, 1994.
*10(a) Agreement among Emil P. Martini, Jr., Robert E. Martini and Bergen
Brunswig Corporation, (the "Martini Agreement") dated February 24,
1989 is set forth as Exhibit 28.2 in the Company's Current Report
on Form 8-K dated February 24, 1989.
*10(b) Amendment to Martini Agreement dated April 18, 1991 is set forth
as Exhibit 2(b) in the Company's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1991.
*10(c) Agreement by Emil P. Martini, Jr. and Plan of Recapitalization
dated August 10, 1988 are set forth as Exhibit 10(b) in the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1988.
*10(d) Agreement by Robert E. Martini and Plan of Recapitalization dated
August 10, 1988 are set forth as Exhibit 10(c) in the Company's
Annual Report on Form 10-K for the fiscal year ended August 31,
1988.
*10(e) Agreement by Emil P. Martini, Jr. dated December 13, 1988 is set
forth as Exhibit 10(h) in Form 8, Amendment No. 1 to Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1988.
*10(f) Agreement by Robert E. Martini dated December 13, 1988 is set
forth as Exhibit 10(i) in Form 8, Amendment No. 1 to Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1988.
**10(g) Bergen Brunswig Corporation Deferred Compensation Plan.
IV - 3
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
**10(h) Director Indemnification Agreement and Amendment to Director
Indemnification Agreement.
*10(i) Bergen Brunswig Corporation Bonus Plan as adopted September 1,
1977, amended October 19, 1990, is set forth as Exhibit 10(i) in
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1991.
**10(j) Bergen Brunswig Corporation Stock Option Plans, other than the
1989 Stock Incentive Plan.
*10(k) 1989 Stock Incentive Plan of Bergen Brunswig Corporation is set
forth as Exhibit 10(j) in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1989.
*10(l) Executive Loan Program is set forth as Exhibit 10(k) in the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1990.
*10(m) Non-Solicitation Agreement dated as of September 4, 1992 among
W.A. Williamson, Jr., Durr-Fillauer Medical, Inc. and Bergen
Brunswig Corporation is set forth as Exhibit (c)(2) to Amendment
No. 16 to Bergen Brunswig Corporation's and BBC Acquisition
Corp.'s Tender Offer Statement pursuant to Section 14(d)(1) of the
Securities and Exchange Act of 1934.
*10(n) Non-Solicitation Agreement dated as of September 4, 1992 among
Charles E. Adair, Durr-Fillauer Medical, Inc. and Bergen Brunswig
Corporation is set forth as Exhibit (c)(3) to Amendment No. 16 to
Bergen Brunswig Corporation's and BBC Acquisition Corp.'s Tender
Offer Statement pursuant to Section 14(d)(1) of the Securities and
Exchange Act of 1934.
IV - 4
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
*10(o) Non-Solicitation Agreement dated as of September 4, 1992 among
Winfield Cotton, Durr-Fillauer Medical, Inc. and Bergen Brunswig
Corporation is set forth as Exhibit (c)(4) to Amendment No. 16 to
Bergen Brunswig Corporation's and BBC Acquisition Corp.'s Tender
Offer Statement pursuant to Section 14(d)(1) of the Securities
Exchange Act of 1934.
*10(p) Agreement dated as of September 18, 1992 by and among Bergen
Brunswig Corporation, Durr-Fillauer Medical, Inc. and the
Attorneys General of the States of Alabama, Florida and Louisiana
is set forth as Exhibit 10(p) in the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1992.
10(q) Employment Agreement and Schedule.
10(r) Severance Agreement and Schedule.
11 Computation of primary earnings per share and computation of
earnings per share assuming full dilution for the five years ended
September 30, 1994, August 31, 1993, 1992, 1991 and 1990.
21 List of subsidiaries of Bergen Brunswig Corporation.
23 Independent Auditors' Consent.
24 Power of Attorney is set forth on the Signature pages in Part IV
of this Annual Report.
27 Financial Data Schedule for the year ended September 30, 1994.
*99(a) Split Dollar Life Insurance Plan with Emil P. Martini, Jr. and
Robert E. Martini.
*99(b) Capital Accumulation Plan and Amendment No. 1 thereto.
Exhibits 99(a) and (b) above are set forth as Exhibits 19(a) and
(b) in the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1989.
IV - 5
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
*99(c) Credit Agreement dated as of September 15, 1992 by and among
Bergen Brunswig Drug Company, Bergen Brunswig Corporation and
Continental Bank N.A. (the "Credit Agreement") is set forth as
Exhibit (b)(4) to the Final Amendment to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer Statement
pursuant to Section 14(d)(1) of the Securities Exchange Act of
1934.
*99(d) First Amendment to Credit Agreement dated December 23, 1992 is set
forth as Exhibit 28(b) in the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1993.
*99(e) Second Amendment to Credit Agreement dated May 18, 1993 is set
forth as Exhibit 28(c) in the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 1993.
*99(f) Third Amendment to Credit Agreement dated August 27, 1993 is set
forth as Exhibit 99(f) in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1993.
*99(g) Fourth Amendment to Credit Agreement dated as of September 1, 1993
is set forth as Exhibit 99(e) in the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1993.
99(h) Amended and Restated Credit Agreement dated as of September 30,
1994 among Bergen Brunswig Drug Company, Bergen Brunswig
Corporation and Bank of America National Trust and Savings
Association.
*99(i) Item 1 - Legal Proceedings of Part II of the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1989 and Item
3-Legal Proceedings of Part I of the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1988 as filed with
the Securities and Exchange Commission, are incorporated herein by
reference in Part I, Item 3 of this Annual Report.
IV - 6
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
*99(j) Agreement and Plan of Merger dated as of September 4, 1992 by and
among Bergen Brunswig Corporation, BBC Acquisition Corp. and
Durr-Fillauer Medical, Inc. is set forth as Exhibit (c)(1) to
Amendment No. 16 to Bergen Brunswig Corporation's and BBC
Acquisition Corp.'s Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities and Exchange Act of 1934.
* Document has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
** Incorporated herein by reference to the exhibits filed as part of the
Company's Registration Statement on Form S-3 (Registration No. 33-5530) and
Amendment Nos. 1 and 2 thereto relating to an offering of $43,000,000
principal amount of 6-7/8% Exchangeable Subordinated Debentures due 2011,
filed with the Securities and Exchange Commission on May 8, July 1, and
July 8, 1986, respectively.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the three months ended
September 30, 1994.
IV - 7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BERGEN BRUNSWIG CORPORATION
December 21, 1994 By /s/ Robert E. Martini
--------------------------------------
Robert E. Martini
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below, hereby constitutes and appoints Robert E. Martini, Dwight A. Steffensen
and Milan A. Sawdei and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including pre-effective amendments and post-effective
amendments) to this Annual Report on Form 10-K, and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Robert E. Martini Chairman of the Board December 21, 1994
- ------------------------- and Chief Executive
Robert E. Martini Officer and Director
(Principal Executive
Officer)
/s/ Dwight A. Steffensen President and Chief December 21, 1994
- ------------------------- Operating Officer
Dwight A. Steffensen and Director
/s/ Neil F. Dimick Executive Vice President, December 21, 1994
- ------------------------- Chief Financial Officer
Neil F. Dimick (Principal Financial
Officer and Principal
Accounting Officer)
IV - 8
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John Calasibetta Senior Vice President December 21, 1994
- ----------------------------- and Director
John Calasibetta
/s/ Jose E. Blanco, Sr. Director December 21, 1994
- -----------------------------
Jose E. Blanco, Sr.
/s/ Rodney H. Brady Director December 21, 1994
- -----------------------------
Rodney H. Brady
/s/ Charles C. Edwards, M.D. Director December 21, 1994
- -----------------------------
Charles C. Edwards, M.D.
/s/ Charles J. Lee Director December 21, 1994
- -----------------------------
Charles J. Lee
/s/ George R. Liddle Director December 21, 1994
- -----------------------------
George R. Liddle
/s/ James R. Mellor Director December 21, 1994
- -----------------------------
James R. Mellor
/s/ George E. Reinhardt, Jr. Director December 21, 1994
- -----------------------------
George E. Reinhardt, Jr.
/s/ Francis G. Rodgers Director December 21, 1994
- -----------------------------
Francis G. Rodgers
IV - 9
<PAGE>
<TABLE>
SCHEDULE II
BERGEN BRUNSWIG CORPORATION
---------------------------
AMOUNTS RECEIVABLE FROM EMPLOYEES
FOR THE YEARS ENDED SEPTEMBER 30, 1994, AUGUST 31, 1993 AND 1992
(in thousands)
<CAPTION>
- -----------------------------------------------------------------------------------
BALANCE, BALANCE,
BEGINNING AMOUNTS AMOUNTS END OF YEAR
NAME OF DEBTOR OF YEAR ADVANCED COLLECTED (Noncurrent) (1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended September 30, 1994:
Robert E. Martini $1,400 $ - $ - $1,400
Dwight A. Steffensen 481 - - 481
Phillip R. Engle 300 - - 300
Michael W. Fipps 169 - 169 -
Milan A. Sawdei 200 - - 200
Denny W. Steele 200 - - 200
Leo R. Granucci 171 - - 171
Eric J. Schmitt 156 - - 156
Neil F. Dimick 219 62 - 281
Michael J. Quinn - 500 - 500
Year ended August 31, 1993:
Robert E. Martini $1,400 $ - $ - $1,400
John T. Fay, Jr. 150 - 150 -
Dwight A. Steffensen 385 119 23 481
Phillip R. Engle 237 63 - 300
Jerold O. Gutman 122 - 122 -
Michael W. Fipps 122 47 - 169
Richard G. Gerlach 122 - 122 -
Milan A. Sawdei 131 69 - 200
Robert W. Teal 116 - 116 -
Denny W. Steele 169 31 - 200
Leo R. Granucci 144 27 - 171
Eric J. Schmitt 106 50 - 156
Neil F. Dimick 219 - - 219
Year ended August 31, 1992:
Emil P. Martini, Jr. $1,550 $ - $1,550 $ -
Robert E. Martini 1,400 - - 1,400
John T. Fay, Jr. 150 - - 150
George E. Reinhardt, Jr. 161 - 161 -
Dwight A. Steffensen 417 - 32 385(2)
Phillip R. Engle 237 - - 237
Jerold O. Gutman 122 - - 122
Michael W. Fipps 122 - - 122
Richard G. Gerlach 122 - - 122
Richard W. Mora 168 - 168 -
Milan A. Sawdei 131 - - 131
Robert W. Teal 116 - - 116
Denny W. Steele 169 - - 169
Leo R. Granucci 144 - - 144
Eric J. Schmitt 106 - - 106
Neil F. Dimick - 219 - 219
<FN>
NOTES:
(1) The loans are each evidenced by a secured promissory note made payable by
the borrower to the Company in the principal amount of the loan and bear
no interest with the exception of the item described in Note (2) below.
Each note is due and payable upon demand.
(2) Includes $23 to be repaid over five years at an interest rate of 9% per
annum with the final payment due April 1, 1993.
</TABLE>
IV - 10
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
- ----------- --------
3(a) The By-Laws as amended and restated and dated 70
December 16, 1994.
3(b) Amendment to By-Laws dated December 16, 1994. 98
*3(c) The Restated Certificate of Incorporation dated March 26,
1969, as amended, and the following Amendments thereto
dated:
February 14, 1994
September 5, 1991
December 14, 1989
October 11, 1989
April 10, 1989
February 24, 1989
July 9, 1987
March 15, 1985
January 6, 1982
September 14, 1973
August 28, 1972
December 16, 1970
December 17, 1969
are set forth as Exhibit 3(c) in the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1991, except for the Amendment dated February 14, 1994
which is set forth as Exhibit A of Exhibit 1 to the
Company's Registration Statement on Form 8-A dated
February 14, 1994.
*4(a) The Senior Indenture for $400,000,000 of Debt Securities
dated as of December 1, 1992 between the Company and
Chemical Trust Company of California as Trustee is set
forth as Exhibit 4.1 to the Company's Registration
Statement on Form S-3 dated December 1, 1992 (file no.
33-55136).
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of each
instrument with respect to other issues of long-term debt
of the Company, the authorized principal amount of which
does not exceed 10% of the total assets of the Company on
a consolidated basis.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT NO. PAGE NO.
- ----------- --------
*4(b) Rights Agreement, dated as of February 8, 1994, between
Bergen Brunswig Corporation and Chemical Trust Company of
California, as Rights Agent, including all exhibits
thereto, is incorporated herein by reference to Exhibit 1
to the Company's Registration Statement on Form 8-A dated
February 14, 1994.
*10(a) Agreement among Emil P. Martini, Jr., Robert E. Martini
and Bergen Brunswig Corporation, (the "Martini Agreement")
dated February 24, 1989 is set forth as Exhibit 28.2 in
the Company's Current Report on Form 8-K dated February
24, 1989.
*10(b) Amendment to Martini Agreement dated April 18, 1991 is set
forth as Exhibit 2(b) in the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1991.
*10(c) Agreement by Emil P. Martini, Jr. and Plan of
Recapitalization dated August 10, 1988 are set forth as
Exhibit 10(b) in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1988.
*10(d) Agreement by Robert E. Martini and Plan of
Recapitalization dated August 10, 1988 are set forth as
Exhibit 10(c) in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1988.
*10(e) Agreement by Emil P. Martini, Jr. dated December 13, 1988
is set forth as Exhibit 10(h) in Form 8, Amendment No. 1
to Item 14 of the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1988.
*10(f) Agreement by Robert E. Martini dated December 13, 1988 is
set forth as Exhibit 10(i) in Form 8, Amendment No. 1 to
Item 14 of the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1988.
**10(g) Bergen Brunswig Corporation Deferred Compensation Plan.
**10(h) Director Indemnification Agreement and Amendment to
Director Indemnification Agreement.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT NO. PAGE NO.
- ----------- --------
*10(i) Bergen Brunswig Corporation Bonus Plan as adopted
September 1, 1977, amended October 19, 1990, is set forth
as Exhibit 10(i) in the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 1991.
**10(j) Bergen Brunswig Corporation Stock Option Plans, other than
the 1989 Stock Incentive Plan.
*10(k) 1989 Stock Incentive Plan of Bergen Brunswig Corporation
is set forth as Exhibit 10(j) in the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1989.
*10(l) Executive Loan Program is set forth as Exhibit 10(k) in
the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1990.
*10(m) Non-Solicitation Agreement dated as of September 4, 1992
among W.A. Williamson, Jr., Durr-Fillauer Medical, Inc.
and Bergen Brunswig Corporation is set forth as Exhibit
(c)(2) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement pursuant to Section 14(d)(1) of the Securities
and Exchange Act of 1934.
*10(n) Non-Solicitation Agreement dated as of September 4, 1992
among Charles E. Adair, Durr-Fillauer Medical, Inc. and
Bergen Brunswig Corporation is set forth as Exhibit (c)(3)
to Amendment No. 16 to Bergen Brunswig Corporation's and
BBC Acquisition Corp.'s Tender Offer Statement pursuant to
Section 14(d)(1) of the Securities and Exchange Act of
1934.
*10(o) Non-Solicitation Agreement dated as of September 4, 1992
among Winfield Cotton, Durr-Fillauer Medical, Inc. and
Bergen Brunswig Corporation is set forth as Exhibit (c)(4)
to Amendment No. 16 to Bergen Brunswig Corporation's and
BBC Acquisition Corp.'s Tender Offer Statement pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT NO. PAGE NO.
- ----------- --------
*10(p) Agreement dated as of September 18, 1992 by and among
Bergen Brunswig Corporation, Durr-Fillauer Medical, Inc.
and the Attorneys General of the States of Alabama,
Florida and Louisiana is set forth as Exhibit 10(p) in the
Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1992.
10(q) Employment Agreement and Schedule. 101
10(r) Severance Agreement and Schedule. 114
11 Computation of primary earnings per share and 124
computation of earnings per share assuming full dilution
for the five years ended September 30, 1994, August 31,
1993, 1992, 1991 and 1990.
21 List of subsidiaries of Bergen Brunswig 126
Corporation.
23 Independent Auditors' Consent. 127
24 Power of Attorney is set forth on the Signature pages in
Part IV of this Annual Report.
27 Financial Data Schedule for the year ended September 30, 128
1994.
*99(a) Split Dollar Life Insurance Plan with Emil P. Martini,
Jr. and Robert E. Martini.
*99(b) Capital Accumulation Plan and Amendment No. 1 thereto.
Exhibits 99(a) and (b) above are set forth as Exhibits
19(a) and (b) in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1989.
*99(c) Credit Agreement dated as of September 15, 1992 by and
among Bergen Brunswig Drug Company, Bergen Brunswig
Corporation and Continental Bank N.A. (the "Credit
Agreement") is set forth as Exhibit (b)(4) to the Final
Amendment to Bergen Brunswig Corporation's and BBC
Acquisition Corp.'s Tender Offer Statement pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT NO. PAGE NO.
- ----------- --------
*99(d) First Amendment to Credit Agreement dated December 23,
1992 is set forth as Exhibit 28(b) in the Company's
Quarterly Report on Form 10-Q for the quarter ended
February 28, 1993.
*99(e) Second Amendment to Credit Agreement dated May 18, 1993 is
set forth as Exhibit 28(c) in the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1993.
*99(f) Third Amendment to Credit Agreement dated August 27, 1993
is set forth as Exhibits 99(f) in the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1993.
*99(g) Fourth Amendment to Credit Agreement dated as of September
1, 1993 is set forth as Exhibit 99(e) in the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1993.
99(h) Amended and Restated Credit Agreement dated as 129
of September 30, 1994 among Bergen Brunswig Drug Company,
Bergen Brunswig Corporation and Bank of America National
Trust and Savings Association.
*99(i) Item 1 - Legal Proceedings of Part II of the Company's
Quarterly Report on Form 10-Q for the quarter ended May
31, 1989 and Item 3-Legal Proceedings of Part I of the
Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988 as filed with the Securities and
Exchange Commission, are incorporated herein by reference
in Part I, Item 3 of this Annual Report.
*99(j) Agreement and Plan of Merger dated as of September 4, 1992
by and among Bergen Brunswig Corporation, BBC Acquisition
Corp. and Durr-Fillauer Medical, Inc. is set forth as
Exhibit (c)(1) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement Pursuant to Section 14(d)(1) of the Securities
and Exchange Act of 1934.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT NO. PAGE NO.
- ----------- --------
* Document has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
** Incorporated herein by reference to the exhibits filed as part of the
Company's Registration Statement on Form S-3 (Registration No. 33-5530) and
Amendment Nos. 1 and 2 thereto relating to an offering of $43,000,000
principal amount of 6-7/8% Exchangeable Subordinated Debentures due 2011,
filed with the Securities and Exchange Commission on May 8, July 1, and
July 8, 1986, respectively.
AMENDED BY-LAWS
BERGEN BRUNSWIG CORPORATION
AS OF DECEMBER 16, 1994
---------------------------
ARTICLE I
Office
------
Section 1. Principal Office. The principal office of the corporation is
hereby fixed and located at 4000 Metropolitan Drive, in the City of Orange,
County of Orange, and State of California. The board of directors is hereby
granted full power and authority to change said principal office to another
office within or without the State of California.
Section 2. Other Offices. Branch or subordinate offices may at any time
be established by the board of directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
Meetings of Shareholders
------------------------
Section 1. Place of Meetings. All meetings of shareholders shall be held
at the principal office of the corporation or at such other place in the States
of New Jersey, California or New York as may be designated by the board of
directors or its executive committee and stated in the notice of the meeting.
<PAGE>
Section 2. Annual Meetings. An annual meeting of the shareholders of the
corporation shall be held on such day during the months of December or January
of each year, and at such hour, as shall be fixed by the board of directors and
designated in the notice of the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may be
called for any purpose and at any time, by the president or by the board of
directors, or by one or more shareholders holding not less than twenty percent
(20%) of the voting power of a class, or combined voting power of two or more
classes which vote as one class at such shareholders' meeting, or as provided in
the certificate of incorporation.
Section 4. Notice of Meetings. Written notice of the time, place and
purposes of annual and special meetings of shareholders shall be given to each
shareholder entitled to vote at such meeting at least ten (10) and not more than
sixty (60) days before the date of such meeting, either personally or by mail,
charges prepaid, addressed to such shareholder at his address appearing on the
books of the corporation.
Section 5. Record Date. The board of directors shall fix the record date
for determination of shareholders entitled to notice of and to vote at any
annual or special meeting of shareholders. Such record date shall not be more
than sixty (60) days nor less than ten (10) days before the date of such
meeting.
Section 6. Quorum. Except as otherwise provided in the certificate of
incorporation, the presence in person or by proxy of the holders of a majority
- 2 -
<PAGE>
of any class or series voting separately at a meeting and a majority of any two
or more classes voting together as a class at such meeting shall constitute a
quorum for the transaction of business; if any matter to come before the meeting
requires a vote of less than all the outstanding classes, then the presence in
person or by proxy of the holders of a majority of the class or classes or
series having the right to vote on such matter or matters shall constitute a
quorum for the transaction of such business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Section 7. Adjourned Meetings and Notice Thereof. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares the holders of which
are either present in person or represented by proxy at such meeting, but in the
absence of a quorum no other business may be transacted at such meeting;
provided, however, that if a quorum of any class or series is present and
objects to such adjournment, the meeting shall not be adjourned.
When any shareholders' meeting, either annual or special, is adjourned for
more than thirty days, notice of the adjourned meeting shall be given as in the
case of an original meeting. If any such meeting is adjourned for thirty days
or less, however, and the time and place of the adjourned meeting is announced
- 3 -
<PAGE>
at the meeting at which the adjournment is taken, and the only business
transacted at the adjourned meeting is such as might have been transacted at the
original meeting, no further notice of the adjourned meeting need be given to
shareholders. If after the adjournment, the board of directors fixes a new
record date for the adjourned meeting, however, a notice of the adjourned
meeting shall be given to each shareholder of record on the new record date.
Section 8. Voting. Shareholders shall vote their stock in the manner
provided in the certificate of incorporation as amended from time to time.
Shares held by the corporation shall not be voted at any meeting of shareholders
for any purpose.
Section 9. Proxies. Every shareholder entitled to vote at a meeting of
shareholders may authorize another person or persons to act for him by proxy.
Every proxy shall be executed in writing by the shareholder or his agent, except
that a proxy may be given by a shareholder or his agent by telegram or cable or
by any means of electronic communication which results in a writing. No proxy
shall be valid after eleven months from the date of its execution unless a
longer time is expressly provided therein. Unless it states that it is
irrevocable and is coupled with an interest either in the stock itself or in the
corporation, a proxy shall be revocable at will. A proxy shall not be revoked
by the death or incapacity of the shareholder but the proxy shall continue to be
in force until revoked by the personal representative or guardian of the
shareholder. The presence at a meeting of any shareholder who has given a proxy
does not revoke the proxy unless the shareholder files written notice of the
- 4 -
<PAGE>
revocation with the secretary of the meeting prior to the voting of the proxy or
votes the shares subject to the proxy by written ballot. A person named in a
proxy as the attorney or agent of a shareholder may, if the proxy so provides,
substitute another person to act in his place, including any other person named
as an attorney or agent in the same proxy. The substitution shall not be
effective until an instrument effecting it is filed with the secretary of the
corporation.
Section 10. Officers of Meetings. The chairman of the board, if present,
shall preside at all meetings of shareholders. In his absence, the president,
if present, shall preside. In his absence, the vice president of the
corporation who has held that office for the longest period of those present at
the meeting shall preside. The secretary of the corporation shall, if present,
act as secretary of all meetings of shareholders. In his absence, any assistant
secretary of the corporation who is present shall act as secretary of the
meeting. If no assistant secretary is present, a temporary secretary for that
particular meeting shall be elected.
Section 11. Order of Business. The order of business at all meetings of
the shareholders, unless changed by a majority vote of the shares entitled to
vote at such meeting, shall be as follows: (i) call to order; (ii) proof of
mailing of notice of meeting, proxy and proxy statement; (iii) report on
presence of a quorum; (iv) reading or waiver of minutes of preceding meeting;
(v) election of directors; (vi) vote on, other proposals; (vii) report of
- 5 -
<PAGE>
officers; and (viii) other business and adjournment.
Section 12. Voting List. The secretary or any assistant secretary shall
produce at each shareholders' meeting a list of shareholders entitled to vote at
the meeting, or any adjournment thereof. Such list shall (a) be arranged
alphabetically within each class and series, with the address of, and the number
of shares held by, each shareholder, (b) be subject to the inspection of any
shareholder for reasonable periods during the meeting, and (c) be prima facie
evidence as to persons who are the shareholders entitled to examine such list or
to vote at the meeting.
ARTICLE III
Board of Directors
------------------
Section 1. Number of Directors. The board of directors of the corporation
shall be composed of not less than nine (9) nor more than fifteen (15) until
changed by an amendment of the certificate of incorporation duly adopted by the
shareholders of the corporation.
The board of directors, following the adoption of these amended by-laws,
shall initially consist of twelve (12) members. The number of directors may be
increased or decreased within the foregoing limitations by an amendment to this
Section 1 of Article III duly adopted by the board of directors.
Section 2. Term of Office; Classification of Directors. The board shall
be divided into three classes, which shall be denominated Classes I, II and III,
- 6 -
<PAGE>
respectively. The number of directors in each class shall be as nearly equal as
possible. All persons who are now Class A directors shall continue in office
until the expiration of the terms for which they were elected and thereafter
until their successors shall have been elected and qualified. All other
directors shall continue in office until the first meeting of shareholders
following the conversion of all Class B Common Stock into Class A Common Stock
pursuant to the certificate of incorporation (the "First Meeting"), and
thereafter until their successors shall have been elected and qualified.
At the First Meeting, Class I directors shall be elected for a term ending
at the third annual meeting of shareholders thereafter; Class II directors shall
be elected for a term ending at the first annual meeting of shareholders
thereafter; and Class III directors shall be elected for a term ending at the
second annual meeting of shareholders thereafter. Persons who previously had
been elected by holders of Class B Common Stock shall be divided, as evenly as
possible, among the three classes. Management shall recommend, and the board of
directors shall determine, which directors shall be nominated for each such
Class.
At each meeting of shareholders after the First Meeting, directors shall be
elected to fill the directorships of the Class of directors whose terms have
expired. Those directors shall hold office until the third successive annual
meeting of shareholders after their election and until their successors shall
have been elected and qualified, so that directors elected at annual meetings of
- 7 -
<PAGE>
shareholders subsequent to the First Meeting shall each be elected for a three
year term, and that the term of one class of directors shall expire at each
annual meeting.
Section 3. Resignation and Removal. Any director may resign at any time.
Any director may be removed with or without cause as provided in the certificate
of incorporation. A special meeting for the purpose of removing a director may
be called for by the holders of thirty percent (30%) of the issued and
outstanding shares of Class A Common Stock. Notice of such meeting shall be
given to all the shareholders of Class A Common Stock in the manner provided by
these by-laws for any annual or special meeting. A new director may be elected
at the special meeting called for the purpose of removing such director or at
any subsequent annual or special meeting of shareholders. If such director is
elected at a special meeting of shareholders, he shall serve until the term of
the removed director would have expired and thereafter until his successor shall
have been elected and qualified.
Section 4. Vacancies. If any vacancy should occur in the board of
directors for any reason whatsoever, such vacancy may be filled by a majority of
the remaining directors. Each director so elected shall hold office until the
next succeeding annual or special meeting of the shareholders and thereafter
until his successor shall have been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
in the case of the death, resignation or removal of any director, or if the
- 8 -
<PAGE>
authorized number of directors be increased, or if the shareholders fail at any
special meeting of the shareholders at which any director or directors are
elected to elect the authorized number of directors to be voted for at that
meeting. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Subject to the provisions of the certificate of incorporation, the
shareholders may elect a director or directors at any time to fill any vacancy
or vacancies not filled by the directors. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board or
the shareholders shall have the power to elect a successor to take office when
the resignation is to become effective.
If the holders of thirty percent (30%) of the outstanding shares of Class A
Common Stock shall so request in writing filed with the secretary of the
corporation, the secretary shall promptly call a special meeting of shareholders
to elect a director to fill such vacancy. Any director so elected shall hold
office for a term which is not inconsistent with Section 2 of Article III of
these by-laws, and thereafter until his successor shall have been elected and
qualified.
If a vacancy of all directors shall occur, the president or secretary shall
promptly call a special meeting of the shareholders to elect directors to fill
such vacancies. The persons so elected shall hold office until the next annual
- 9 -
<PAGE>
meeting of shareholders and thereafter until their respective successors shall
have been elected and qualified.
Section 5. Place of Meeting. The board of directors may hold its meetings
at such place or places within or without the State of New Jersey as the board
may from time to time determine.
Section 6. Regular Meetings. Regular meetings of the board of directors
shall be held on such day in March or April, June or July and September or
October as shall be determined from time to time by the board, at 10:00 a.m. or
at such other time designated by the board on such day; provided, however, that
should said day fall upon a legal holiday, then any such meeting shall be held
at the same hour and place on the next succeeding day which is not a legal
holiday. A fourth regular meeting of the board of directors shall take place
immediately following the conclusion of the annual meeting of shareholders. At
the regular meeting of the board held immediately following the annual meeting
of shareholders, the board of directors shall organize and elect officers.
Section 7. Special Meetings. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board, the president, or by any three (3) directors.
Section 8. Notice of Meetings. Notice of the place of each regular
meeting of the board, and notice of the time and place of each such special
meeting of the board, shall be given in writing to each director personally, by
mail or telegram addressed to him at his address as it is shown upon the records
- 10 -
<PAGE>
of the corporation. If such notice is mailed, it shall be sent airmail if sent
outside the state of mailing and shall be deposited in the United States Mails
at least one week prior to the time of the holding of the meeting. In case such
notice is delivered personally, it shall be delivered at least seventy-two (72)
hours prior to the time of the holding of the meeting. In case such notice is
telegraphed, it shall be delivered to a telegraph company for such purpose not
less than seventy-two (72) hours prior to the time of the holding of the
meeting. Such mailing, delivery or telegraphing as above provided shall be due,
legal and personal notice to such director.
Section 9. Waiver of Notice and Consent. The transactions of any meeting
of the board, however called and noticed or wherever held, shall be as valid as
though such meeting had been duly held after a regular call and notice, if a
quorum be present and if, before or after the meeting, each of the directors not
present signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 10. Action without Meeting. Any action required or permitted to
be taken by the board of directors by law or these by-laws may be taken without
a meeting, if, prior or subsequent to such action, all members of the board
shall individually or collectively consent in writing to such action. Each such
- 11 -
<PAGE>
written consent or consents shall be filed with the minutes of the proceedings
of the board. Such action by written consent shall have the same force and
effect as a unanimous vote of such directors, for all purposes. Any certificate
or other document which relates to action so taken shall state that the action
was taken by unanimous written consent of the board of directors without a
meeting, and that the by-laws authorize the directors so to act.
Section 11. Quorum. A majority of the entire board of directors shall
constitute a quorum for the transaction of business.
Section 12. Voting. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the board of directors. In determining the presence
of a quorum and the result of a vote taken by the board, no distinction shall be
made among the directors with respect to the class or classes or series of
shareholders which elected them.
Section 13. Presiding Officer. The chairman of the board shall preside at
all meetings of the board at which he is present. In the absence of the
chairman of the board, the president shall preside. If the secretary of the
corporation or any assistant secretary is present, he shall record the minutes
of the meeting, and if neither of them is present the board shall designate a
secretary to record the minutes of the meeting.
- 12 -
<PAGE>
Section 14. Adjournment. A quorum of the directors may adjourn any
directors' meeting to meet again at a time and place fixed in the resolutions
adjourning such meeting, and no notice of the time and place of the adjourned
meeting need be given if the period of adjournment does not exceed ten days in
any one adjournment. A meeting of directors at which less than a quorum is
present may also be adjourned until the next regular meeting of the board.
Section 15. Directors Emeritus. The title of director emeritus may be
conferred by the board of directors upon any former director of the corporation
or of a corporation acquired by the corporation who, in the judgment of the
board, has brought credit and distinction to this corporation, or such acquired
corporation, through long and faithful service. The title hereby created is
honorary only and does not carry with it the powers, duties or obligations of a
director of this corporation or any other power, duty or obligation. The title
may be conferred upon as many persons as the board deems appropriate. A
director emeritus shall not be deemed a director or member of the board of
directors but may attend meetings of the board and, upon invitation of the
chairman, may take part in the deliberative proceedings of the board, but may
not vote.
Section 16. Fees and Compensation. Directors shall receive for attendance
at each regular or special meeting of the board a fixed sum and expenses of
attendance, if any, and an annual fee for serving as a director, such as may be
allowed by resolution of the board. The board of directors may, if it so
- 13 -
<PAGE>
desires, fix one fee for directors who are officers or employees of the
corporation (or who are receiving retirement benefits from it or a subsidiary or
under a pension trust of a subsidiary) and a higher fee for other directors.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
Committees
----------
Section 1. Establishment of Committees. The board of directors may, by
resolution adopted by a majority of the entire board, designate an executive
committee, consisting of the president and three (3) or more other directors,
and may at any time designate additional committees, each of which shall consist
of two (2) or more directors. Subject to the limitations contained in Section 8
of this Article IV, the executive committee shall have the maximum authority
permitted by law in effect at the time of the exercise of such authority and
each other committee shall have such authority, not exceeding the authority of
the executive committee, as is provided by the board of directors in the
resolutions creating such committee.
Section 2. Presiding officer and Secretary. The president shall be
chairman of the executive committee. In the absence of the president, the
chairman of the board shall preside. Each other committee shall choose one of
- 14 -
<PAGE>
its members to act as chairman. Each committee shall from time to time
designate a secretary of the committee who shall keep a record of its
proceedings.
Section 3. Vacancies. Vacancies occurring from time to time in the
membership of any committee may be filled by a majority of the entire board for
the unexpired term of the member whose death, resignation, removal or disability
causes such vacancy, and shall be so filled, if, as the result of such vacancy,
there shall be less than three (3) directors on the executive committee or less
than two (2) directors on any other committee, or, in the case of the executive
committee, if the chairman of the board or president should be the one whose
death, resignation, removal or disability causes such vacancy.
Section 4. Meetings. Each committee shall adopt its own rules of
procedure and shall meet at such stated times as it may, by resolution, appoint,
and shall also meet whenever called together by the chairman of the board or the
president.
Section 5. Notice of Meetings. If the committee establishes regular
meeting dates, it shall not be necessary to give notice of any such regular
meeting. Notice of every special meeting shall be given in the manner and
within the time periods specified in Section 8 of Article III with respect to
notices of special meetings of the board of directors. Notice of any special
meeting may be waived in writing by all of the absent members of the committee
either before or after the meeting.
- 15 -
<PAGE>
Section 6. Quorum. A quorum at any meeting of any committee shall be not
less than one-half (1/2) of the entire committee. In the case of the executive
committee, however, a quorum shall be not less than three (3) members. Every
act or decision done or made by a majority of the directors present at a
committee meeting duly held at which a quorum is present shall be regarded as
the act of the committee.
Section 7. Reports. Actions taken at a meeting of any committee shall be
reported to the board at its next meeting following such committee meeting,
except that when the meeting of the board is held within two (2) days after the
committee meeting, such report shall, if not made at the first meeting, be made
to the board at the second meeting following such committee meeting.
Section 8. Limitation of Powers. No committee of the board of directors
shall have authority to do any of the following:
(a) make, alter or repeal any by-law of the corporation;
(b) elect or appoint any director, or remove any officer or director;
(c) submit to shareholders any action that requires shareholders'
approval;
(d) amend or repeal any resolution theretofore adopted by the board which
by its terms is amendable or repealable only by the board;
(e) fix the compensation of any officer who is a member of the committee
for serving as an officer of the corporation.
- 16 -
<PAGE>
Section 9. Additional Powers of the Board. The board shall have the
power, with respect to existing committees, to
(a) fill any vacancy in any such committee;
(b) appoint one or more directors to serve as alternate members of any
such committee to act in the absence or disability of members of any such
committee with all the powers of such absent or disabled members;
(c) abolish any such committee at its pleasure; and
(d) remove any director from membership on such committee at any time,
with or without cause.
ARTICLE V
Officers
--------
Section 1. Officers Enumerated. The board of directors shall designate
and elect the officers of the corporation which shall include but shall not be
limited to a chairman of the board, a president, one or more vice presidents, a
treasurer, one or more assistant treasurers, a secretary, and one or more
assistant secretaries. Any two or more off ices may be held by the same person,
except that no one person may hold the offices of president and secretary. The
chairman of the board and the president shall be directors.
Section 2. Additional Officers. The board of directors may from time to
time elect such other officers as it shall deem necessary, who shall hold their
offices for such terms and have such powers and perform such duties as shall be
- 17 -
<PAGE>
prescribed from time to time by the board.
Section 3. Election and Term of Office. Each officer shall hold office
until the next annual election of officers, and until his successor has been
elected and has qualified, unless he is earlier removed. All officers of the
corporation shall hold office at the pleasure of the board of directors, except
as otherwise provided by contract between the corporation and any such officer.
Section 4. Vacancies. Any vacancy in an enumerated office or in any other
office may be filled by the board of directors.
Section 5. Removal and Resignation. Except as provided by contract
between the corporation and any officer, any officer may be removed, either with
or without cause, by a majority of the directors at any regular or special
meeting of the board or by any officer upon whom such power of removal may be
conferred by the board. Any officer may resign at any time by giving written
notice to the board or to the president. Any such resignation shall take effect
at the date of the receipt of such notice or at any later time specified therein
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 6. Powers and Duties. The officers shall each have such authority
and perform such duties in the management of the corporation as from time to
time may be prescribed by the board of directors or the executive committee and
- 18 -
<PAGE>
as may be delegated by the chairman of the board or president. Without limiting
the foregoing,
(a) Chairman of the Board. The chairman of the board shall be the chief
executive officer of the corporation. He shall preside at all meetings of the
shareholders and at all meetings of the directors. He shall, subject only to
the direction and control of the board of directors, have general charge of,
supervision over and responsibility for the business and affairs of the
corporation. He shall generally possess such powers and perform such duties as
usually pertain to his office or to the office of the president.
(b) President. The president shall generally possess such powers and
perform such duties as usually are incident to the office of the president,
including power to supervise the business and activities of the corporation and
to instruct, direct and control its other officers, agents and employees, and
shall perform such other duties as the chairman of the board shall direct. In
the absence of the chairman of the board, he shall preside at all meetings of
shareholders and of the board of directors.
(c) Vice President. The corporation shall have one or more vice
presidents as determined by the board of directors. The board of directors may
designate one or more of such vice presidents as executive vice president or
- 19 -
<PAGE>
senior vice president. All vice presidents shall have such authority and shall
perform such duties as may be delegated from time to time by the chairman of the
board, the president or the board of directors. Unless otherwise ordered by the
board of directors, any vice president may sign contracts or other instruments
authorized either generally or specifically by the board of directors.
(d) Secretary. The secretary or any assistant secretary shall cause
notices of all meetings to be served as prescribed in these by-laws and shall
keep the minutes of all meetings of the shareholders, board of directors and all
committees of the board of directors or shareholders, and shall have charge of
the seal of the corporation. He shall perform such other duties and possess
such other powers as are incident to his office or as are assigned to him by the
chairman of the board, the president or the board of directors.
(e) Treasurer. The treasurer shall have the custody of the funds and
securities of the corporation and shall keep or cause to be kept regular books
of account for the corporation. He shall account to the chairman of the board,
the president or the board of directors whenever they may require concerning all
his transactions as treasurer and concerning the financial condition of the
- 20 -
<PAGE>
corporation. The treasurer shall perform such other duties and possess such
other powers as are incident to his office or as shall be assigned to him by the
chairman of the board, the president or the board of directors.
(f) Controller. The Controller shall have the immediate responsibility
for the corporation's accounting practices, maintenance of its fiscal records,
preparation of its financial reports and the responsibility for general
accounting, cost accounting, budgetary controls and insurance functions of the
corporation. He shall be under the broad administrative direction of the Vice
President, Finance and Chief Financial officer, and shall perform such other
duties and possess such other powers as are incident to his office or as shall
be assigned to him by the chairman of the board, the president or the board of
directors.
ARTICLE VI
Capital Stock and Other Securities
----------------------------------
Section 1. Issuance of Stock and Other Securities. Certificates of any
class of capital stock of the corporation and certificates representing any
other securities of the corporation shall be signed by the president or any vice
president and may be countersigned by the secretary or the treasurer or the
assistant secretary. Any or all signatures upon a certificate may be a
- 21 -
<PAGE>
facsimile. Such certificates shall be sealed with the seal of the corporation,
or shall bear a facsimile of such seal; and such certificates shall be
registered in such manner as the board of directors may by resolution prescribe.
Section 2. Lost, Stolen and Destroyed Certificates. In case of lost,
stolen or destroyed certificates, new certificates may be issued to take their
place upon receipt by the corporation of such bond of indemnity and under such
regulations as shall be prescribed by the board of directors, but the giving of
a bond of indemnity may be waived by the board.
Section 3. Transfer of Securities. Shares of capital stock or any other
registered securities of the corporation shall be transferable on the books of
the corporation by the holder thereof in person or by his authorized attorney
upon surrender for cancellation to the transfer agent for such security of an
outstanding certificate or certificates for the same number of shares or other
security with an assignment and authorization to transfer endorsed thereon or
attached thereto, duly executed, together with such proof of the authenticity of
the signature and of the power of assignor to transfer such securities as the
corporation or its agents may require.
Section 4. Record Date for Dividends or Rights. The board of directors
may fix a record date in advance as of which shares of stock shall be held of
record to entitle a shareholder to the payment of any dividend, to the allotment
of rights, or to exercise rights in respect to any change, conversion or
- 22 -
<PAGE>
exchange of capital stock of the corporation. Such record date shall not
precede by more than sixty (60) days the date of such dividend payment, or such
allotment of rights, or the date when such change, conversion or exchange of
capital stock shall take effect. only shareholders of record on such record date
shall be entitled to receive or exercise such rights or benefits when they shall
accrue, notwithstanding any transfer of any stock on the books of the
corporation subsequent to the record date which is fixed.
Section 5. Issue of New Shares or Sale of Treasury Stock. Shares of the
capital stock of the corporation which have been authorized but not issued and
treasury shares may be issued or sold from time to time and for such
consideration as may be determined by the board of directors. This amendment
shall be effective as of December 1, 1988.
ARTICLE VII
Corporate Seal
--------------
Section 1. Form and Use. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its incorporation, and the words
"Corporate Seal, New Jersey". The seal may be used by causing it or a facsimile
thereof to be impressed or reproduced on a document or instrument, or affixed
thereto.
- 23 -
<PAGE>
ARTICLE VIII
Fiscal Year
-----------
Section 1. Time. The fiscal year of the corporation shall commence on
October 1 of each calendar year.
ARTICLE IX
Amendments
----------
Section 1. Amendments by Shareholders. These by-laws may be altered,
amended or repealed and new by- laws may be added by the shareholders.
Section 2. Amendments by the Board of Directors.
Subject to the right of the shareholders provided in Section 1 of this
Article IX to adopt, amend or repeal the by-laws, the board of directors may
adopt, amend or repeal these by-laws; provided, however, that a by-law or
amendment thereto changing the number of directors may be adopted, amended or
repealed by the board of directors only for the purpose of fixing the exact
number of directors within the limits specified in Article III, Section 1,
hereof.
ARTICLE X
Miscellaneous
-------------
Section 1. Inspection of Corporate Records. The share register, or
duplicate share register, the books of accounts and minutes of proceedings of
the shareholders, directors and of the executive committee may be examined for
any proper purpose upon the written demand of any person who shall have been a
- 24 -
<PAGE>
shareholder of record or holder of a voting trust certificate for at least six
(6) months immediately preceding his demand, or any person holding, or so
authorized in writing by the holders of, at least five percent (5%) of the
outstanding shares of any class. Such inspection shall be made at any
reasonable time not less than five (5) days after such person shall have given
written notice of his demand to the corporation. Such inspection may be made in
person or by an agent or attorney and shall include the right to make extracts.
Demand for inspection other than at a shareholders' meeting shall be made in
writing upon the president or secretary of the corporation.
Section 2. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner, manually or by facsimile signature, as
shall be determined from time to time by the board of directors.
Section 3. Execution of Contracts. The board of directors may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances and, unless so
authorized by the board of directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
- 25 -
<PAGE>
Section 4. Voting Shares of Other Corporations. The chairman of the
board, the president or any vice president is hereby authorized to vote,
represent and exercise on behalf of this corporation all rights incident to any
and all shares of stock of any other corporation or corporations standing in the
name of this corporation. The authority herein granted may be exercised by such
officers either in person or by proxy or by power of attorney duly executed by
said officer.
Section 5. Employee Benefit Plans. The corporation, by resolution of the
board of directors, may adopt any one or more of the following plans for the
benefit of some or all employees, as hereinafter defined, and their families,
dependents or beneficiaries:
(a) plans providing for the sale or distribution of its shares of any
class or series, held by it or issued or purchased by it for the purpose,
including stock option, stock purchase, stock bonus, profit-sharing, savings,
pension, retirement, deferred compensation and other plans of similar nature,
whether or not such plans also provide for the distribution of cash or property
other than its shares;
(b) plans providing for payments solely in cash or property other than
shares of the corporation, including profit-sharing, bonus, savings, pension,
- 26 -
<PAGE>
retirement, deferred compensation and other plans of similar nature; and
(c) plans for the furnishing of medical service, life, sickness, accident,
disability or unemployment insurance or benefits; education; housing; social and
recreational services; and other similar aids and services.
The term "employees" as used in this Section means employees, officers,
directors, and agents of the corporation or any subsidiary thereof, or other
persons who are or have been actively engaged in the conduct of the business of
the corporation or any subsidiary thereof, including any who have retired,
become disabled or died prior to the establishment of any plan heretofore or
hereafter adopted.
Section 6. Director Loans. The corporation may lend money to or guarantee
any obligation of, or otherwise assist any director of the corporation or of any
subsidiary, whenever, in the judgment of the board of directors, such loan,
guarantee or assistance may reasonably be expected to benefit the corporation.
Any such loan, guarantee or other assistance may be made only when authorized by
a majority of the entire board of directors and may be made with or without
interest and whether unsecured or secured in such manner as the board shall
approve, including, without limitation, by a pledge of shares of the
corporation, and may be made upon such other terms and conditions as the board
may determine. A director shall be disqualified from voting on any loan,
- 27 -
<PAGE>
guarantee or other assistance proposed to be made to him or her pursuant to this
section. The statutory power of the board of directors to make such loans and
guarantees and to provide other assistance to employees of the corporation other
than directors shall not in any way be limited by this section.
- 28 -
AMENDMENT TO BY-LAWS
--------------------
(12/16/94)
Section 2. Term of Office; Classification of Directors. The board shall
be divided into three classes, which shall be denominated Classes I, II and III,
respectively. The number of directors in each class shall be as nearly equal as
possible. All persons who are now Class A directors shall continue in office
until the expiration of the terms for which they were elected and thereafter
until their successors shall have been elected and qualified. All other
directors shall continue in office until the first meeting of shareholders
following the conversion of all Class B Common Stock into Class A Common Stock
pursuant to the certificate of incorporation (the "First Meeting"), and
thereafter until their successors shall have been elected and qualified.
At the First Meeting, Class I directors shall be elected for a term ending
at the third annual meeting of shareholders thereafter; Class II directors shall
be elected for a term ending at the first annual meeting of shareholders
thereafter; and Class III directors shall be elected for a term ending at the
second annual meeting of shareholders thereafter. Persons who previously had
been elected by holders of Class B Common Stock shall be divided, as evenly as
possible, among the three classes. Management shall recommend, and the board of
directors shall determine, which directors shall be nominated for each such
Class.
At each meeting of shareholders after the First Meeting, directors shall be
elected to fill the directorships of the Class of directors whose terms have
expired. Those directors shall hold office until the third successive annual
meeting of shareholders after their election and until their successors shall
have been elected and qualified, so that directors elected at annual meetings of
shareholders subsequent to the First Meeting shall each be elected for a three
year term, and that the term of one class of directors shall expire at each
annual meeting.
Section 3. Resignation and Removal. Any director may resign at any time.
Any director may be removed with or without cause as provided in the certificate
of incorporation. A special meeting for the purpose of removing a director may
be called for by the holders of thirty percent (30%) of the issued and
outstanding shares of Class A Common Stock. Notice of such meeting shall be
<PAGE>
given to all the shareholders of Class A Common Stock in the manner provided by
these by-laws for any annual or special meeting. A new director may be elected
at the special meeting called for the purpose of removing such director or at
any subsequent annual or special meeting of shareholders. If such director is
elected at a special meeting of shareholders, he shall serve until the term of
the removed director would have expired and thereafter until his successor shall
have been elected and qualified.
Section 4. Vacancies. If any vacancy should occur in the board of
directors for any reason whatsoever, such vacancy may be filled by a majority of
the remaining directors. Each director so elected shall hold office until the
next succeeding annual or special meeting of the shareholders and thereafter
until his successor shall have been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
in the case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at any
special meeting of the shareholders at which any director or directors are
elected to elect the authorized number of directors to be voted for at that
meeting. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Subject to the provisions of the certificate of incorporation, the
shareholders may elect a director or directors at any time to fill any vacancy
or vacancies not filled by the directors. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board or
the shareholders shall have the power to elect a successor to take office when
the resignation is to become effective.
If the holders of thirty percent (30%) of the outstanding shares of Class A
Common Stock shall so request in writing filed with the secretary of the
corporation, the secretary shall promptly call a special meeting of shareholders
to elect a director to fill such vacancy. Any director so elected shall hold
office for a term which is not inconsistent with Section 2 of Article III of
these by-laws, and thereafter until his successor shall have been elected and
qualified.
If a vacancy of all directors shall occur, the president or secretary shall
promptly call a special meeting of the shareholders to elect directors to fill
<PAGE>
such vacancies. The persons so elected shall hold office until the next annual
meeting of shareholders and thereafter until their respective successors shall
have been elected and qualified.
EXHIBIT 10(q)
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of April 21, 1994
by and between BERGEN BRUNSWIG CORPORATION, a New Jersey corporation (the
"Company"), and Milan A. Sawdei (the "Executive").
RECITALS
--------
WHEREAS, the Executive is currently employed by the Company as
Executive Vice President, Chief Legal Officer and Secretary and in such capacity
he has acquired outstanding and special skills and abilities and an extensive
background in and knowledge of the Company's business and the industry in which
it is engaged; and
WHEREAS, the Board of Directors of the Company approved the principal
terms of this Agreement at a meeting of the Board of Directors on April 21,
1994; and
WHEREAS, the Company desires to be assured of the continued association
and services of the Executive in order to retain for the benefit of the Company
his experience, skills, abilities, background, knowledge, and to facilitate long
range planning and the execution of the Company's business in the most orderly
and efficient manner, and is therefore willing to engage the Executive's
services upon the terms and to compensate him in the manner provided herein; and
WHEREAS, the Executive has and will continue to learn special and
particular knowledge of the business of the Company and the Company desires to
provide for the Executive's maintenance of the confidentiality of such
proprietary information; and
WHEREAS, the Executive desires to continue in the employ of the Company
upon the terms provided herein; and
WHEREAS, the Company desires to employ the Executive upon the terms
provided herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Employment. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to serve the Company, on the terms and conditions
hereinafter set forth.
2. Effective Date and Term. The effective date of this Agreement
("Effective Date") shall be April 21, 1994. Unless sooner terminated as
provided herein, the Company shall employ the Executive for a three (3) year
1
<PAGE>
term commencing on the Effective Date and expiring April 20, 1997, extended in
the manner set forth in the next sentence (the "term of this Agreement"). The
term of this Agreement shall automatically be extended for an additional one
month period upon the completion of each one-month period of service provided by
the Executive under this Agreement unless notice is given by either the
Executive or the Company to the other, at least 30 days prior to the expiration
of such one-month period, that such party does not wish to extend the term of
this Agreement, in which case the term of this Agreement shall expire at the end
of the last month through which this Agreement had previously been extended.
The date upon which this Agreement terminates in accordance with this Section 2
shall be referred to herein as the "Expiration Date".
3. Position and Duties. During the term of this Agreement, the
Executive and the Company agree:
(a) Position. The Executive shall during the term of this
Agreement serve as Executive Vice President, Chief Legal Officer and Secretary
("Chief Legal Officer") and, as such, the Executive hereby promises to perform
and discharge well and faithfully the duties that may be assigned to him from
time to time that are appropriate for a Chief Legal Officer of an organization
the size of the Company that is engaged in the type of business engaged in by
the Company, and the Company agrees to assign to him only such duties. As Chief
Legal Officer, the Executive shall report to the Company's Board of Directors
("Board" or "Board of Directors"), to any committee of the Board ("Committee of
the Board") that the Board may establish and direct the Executive to report to,
or to such other senior corporate officer of the Company as the Board or
Committee of the Board may designate; provided that the person or persons to
whom Executive reports is at least at the same level of importance or
responsibility within the Company as the person or persons to whom Executive is
reporting as of the Effective Date.
(b) Full Time Employment. The Executive shall devote his time,
attention and effort during regular business hours to the business of the
Company and shall not during the term of this Agreement be engaged in any other
substantial business activity whether or not such business activity is pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing the Executive from investing his personal assets in businesses
which do not compete with the Company in such form or manner as will not require
substantial services on the part of the Executive in the operation of the
affairs of the companies in which such investments are made. Notwithstanding
the foregoing, the Executive may purchase securities in any corporation whose
securities are regularly traded, provided that such purchases shall not result
in his owning beneficially at any time more than 1% of any class of securities
of any corporation engaged in a business competitive with that of the Company.
2
<PAGE>
4. Place of Performance. In connection with his employment under
this Agreement, the Executive shall be based at the Executive's employment
location as of the Effective Date or such other location to which he may be
assigned within a radius of 25 miles of said location. The Executive shall not
be required to travel outside of said 25 mile radius on anything other than
infrequent business trips of short duration reasonably required in the
performance of the Executive's responsibilities.
5. Compensation. As remuneration to the Executive for his services
hereunder, the Company shall compensate the Executive as follows:
(a) Base Salary. Commencing on the Effective Date, the Executive
shall receive a bi-weekly base salary (as may be adjusted from time to time, the
"Base Salary") of $6,153.85 payable in conformity with the Company's then
current payroll practice as modified from time to time. The Base Salary will be
reviewed annually by the same person or persons who conduct such review as of
the Effective Date (or a person or persons at the same level of importance or
responsibility within the Company) prior to the end of the Company's fiscal
year, and shall be increased as a result of said review if and to the extent
such person or persons, in his(their) sole discretion may determine. In no
event, however, shall the Base Salary be reduced below the previous year's
annual Base Salary at anytime during the term of this Agreement.
(b) Bonus. The Company shall pay to the Executive such annual
bonus as may be determined by the person or persons who conduct such review as
of the Effective Date (or a person or persons at the same level of importance or
responsibility within the Company) in accordance with the criteria used by the
Company for its senior executives at the same level of importance as Executive
on the Effective Date; provided however that in no event shall such annual bonus
be less than 50 percent (50%) of the average of the Executive's previous two
annual bonuses. In the event Executive has not been employed with the Company
for two years, the minimal bonus shall be calculated using fifty percent (50%)
of the last bonus awarded to the Executive.
(c) Expenses. The Executive shall be entitled to receive prompt
reimbursement, in accordance with the Company's expense reimbursement policies
applicable to senior executives of the Company at the same level of importance
as Executive on the Effective Date, for all reasonable travel and other expenses
incurred by Executive.
(d) Employee Benefit Programs. The Executive shall be entitled
to participate in all employee health and benefit programs of the Company from
time to time in effect for senior executives of the Company at the same level of
importance as Executive as of the Effective Date, including, but not limited to,
health, life, disability and dental insurance and retirement plan benefit
3
<PAGE>
programs, subject to a determination of Executive's eligibility under the terms
of said plans and otherwise in accordance with their respective terms.
(e) Automobile Allowance. The Company shall provide to the
Executive a minimum automobile allowance of $800.00 per month, which shall be
reviewed and increased as necessary to remain comparable with the automobile
allowances of senior executives of the Company at the same level of importance
as Executive as of the Effective Date.
(f) Vacation. The Executive shall be entitled to no less than
three weeks of paid vacation for each twelve-month period. Vacation days taken
during the Executive's term of employment will be charged to Executive's then
accrued days and recompensed at Executive's then current daily Base Salary rate.
The Executive shall receive no compensation for accrued and unused vacation
days. The Executive may not accrue and carryover to the next fiscal year of the
Company more than three (3) weeks vacation.
(g) Holidays. The Executive will be entitled to all paid
holidays given the Company's employees.
(h) Sick Pay. The Executive shall be entitled to paid
noncumulative sick leave for the duration of the illness so long as the
Executive does not become disabled under the provisions of subsection 6(b).
(i) Car Telephone/Insurance. The Executive shall be reimbursed
for the monthly charges for a car telephone and all toll charges incurred
thereon and the Company shall provide Executive with comprehensive automobile
insurance for Executive's primary automobile.
(j) Financial Planning. The Executive shall be entitled to be
promptly reimbursed each year for tax and estate planning services provided by a
certified public accounting or law firm, or both.
(k) Home Security System. The Executive shall be entitled to be
promptly reimbursed for the installation of a home security system and all
monthly charges associated therewith.
(l) Retired Officer Program. Executive shall be entitled to
participate in all the benefits granted under the Company's Retired Officers
Health Program.
(m) Other. The Executive shall be entitled to receive and/or
participate in all other benefits and programs made available, from time to
time, to other senior executives of the Company at the same level of importance
as Executive as of the Effective Date.
4
<PAGE>
6. Termination and Compensation Upon Termination. This Agreement may
be terminated prior to the Expiration Date only in accordance with the following
provisions:
(a) Death. In the event of the Executive's death, the
Executive's employment with the Company shall be deemed to be terminated as of
the date of death. Upon death, the Executive's estate or other legal
representative shall be entitled to receive:
(i) any Base Salary installments, vacation and auto
allowance due during the calendar month in which the Date of Termination occurs;
and
(ii) a death benefit equal to 100% of the Base Salary and
Bonus that would have otherwise been paid to the Executive had the Executive
remained employed through the Expiration Date (measured as if the Company gave
notice of its wish not to extend the term of this Agreement 30 days prior to the
date of death), calculated using the same Base Salary being paid at the date of
death and a Bonus equal to the average of the last three Bonuses received by the
Executive prior to the date of death, and payable.
Upon payment of the amounts set forth in this subsection, the Company shall have
no further obligation to the Executive under this Agreement.
(b) Disability. In the event that the Executive becomes totally
and permanently disabled so as to be eligible for benefit payments under the
group long-term disability plan of the Company, the Company shall continue to
pay the Base Salary and Bonus provided in subsections 5(a) and 5(b),
respectively, for the term of this Agreement, measured as if the Company gave
notice of its wish not to extend the term of this Agreement thirty days prior to
the date it is determined that the Executive is totally and permanently disabled
so as to be eligible for benefits under the group long-term disability plan of
the Company; provided that the amount of such payments shall be reduced by any
amounts paid to and received by the Executive or on his behalf by his personal
representative under the group long-term disability plan(s) of the Company. In
the event the Executive dies prior to the full payment of the amounts under this
subsection, the remaining payments shall be made to Executive's estate or other
legal representative. Upon payment of the amounts set forth in this subsection,
the Company shall have no further obligation to the Executive under this
Agreement.
(c) Termination by the Executive Without Good Reason or Upon the
Expiration Date. The Executive can terminate this Agreement without Good Reason
by giving 30 days notice of termination to the Company. In addition, this
Agreement shall terminate upon the Expiration Date, as defined in Section 2.
Such terminations shall be without liability to the Executive and, upon such
termination and payment of any accrued and unpaid compensation through the date
5
<PAGE>
of termination, the Company shall have no further obligation to the Executive
under this Agreement.
(d) Termination by the Company for Cause. Except as provided in
Section 2 and this subsection 6(d), the Company shall not have the right to
terminate the Executive's employment except in breach of this Agreement. The
Company shall have the right to terminate this Agreement at any time and without
liability to the Executive if such termination is for cause. For purposes of
this Agreement, "cause" shall mean a determination by the Board that either of
the following has occurred (i) an act or acts of dishonesty by the Executive
constituting a felony under applicable law and resulting or intending to result
directly or indirectly in gain to or personal enrichment of the Executive at the
Company's expense; or (ii) a material breach of subsection 3(b) or section 7 or
8. Notice of termination pursuant to this subsection shall be accompanied by a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of a quorum of the Board which shall include the affirmative vote of at
least a majority of the Board's disinterested outside directors, finding that,
in the good faith opinion of the Board, the Executive was guilty of conduct
amounting to cause and specifying the particulars thereof. Upon such
termination, and payment of any accrued and unpaid compensation, the Company
shall have no further obligation to the Executive under this Agreement.
(e) Termination by the Executive With Good Reason. "Good Reason"
shall mean any of the following:
(i) without the express written consent of Executive, any
material change by the Company in Executive's function, duties, or
responsibilities which change would cause Executive's position with the
Company to become of less dignity, responsibility, importance, or scope from
the position and attributes that applied to him immediately prior to the
Effective Date;
(ii) any material failure by the Company to comply with any
of the provisions of this Agreement;
(iii) the Company's requiring Executive to be based at any
office or location more than 25 miles from the office at which Executive is
based on the Effective Date, other than infrequent business trips of short
duration reasonably required in the performance of the Executive's
responsibilities under this Agreement; or
(iv) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company.
If Executive determines that Good Reason exists, Executive shall notify the
Company in the manner provided in Section 13. The Company shall have the ten
(10) day period set forth in Section 13 to remedy the facts and circumstances
that provided Good Reason. Executive shall make a good faith reasonable
6
<PAGE>
determination immediately after such ten (10) day period whether such facts and
circumstances have been remedied and shall communicate Executive's determination
in writing to the Company. If Executive determines that adequate remedy has
occurred, Executive shall continue in the employ of the Company as if no notice
had been given. If Executive determines that adequate remedy has not occurred,
Executive, at Executive's option, may treat this Agreement as constructively
involuntarily terminated by the Company, and the Company shall be liable for
damages as set forth in Section 13. Any determination by Executive that Good
Reason exists and that adequate remedy has not occurred shall be presumed
correct and shall govern unless the Company shows by a clear preponderance of
the evidence that it was not a good faith reasonable determination.
7. Unauthorized Disclosure. During the term of the Executive's
employment hereunder, and for a period of two (2) years thereafter, the
Executive shall not, without the written consent of the Company's Board of
Directors or the Executive Committee, disclose to any person, other than as
required by law or court order, or other than to an employee of the Company or
any of its affiliated corporations, or other than to a person to whom disclosure
is necessary or appropriate in connection with the performance by the Executive
of his duties as Chief Legal Officer of the Company (including but not limited
to disclosure to the Company's outside accountants, attorneys or bankers of
information properly requested by such persons), any confidential information
obtained by the Executive while the Executive is in the employ of the Company.
For purposes of this Agreement, "confidential information" shall mean any
information of the Company that the Company treats as confidential as well as
any information that a prudent officer of the Company would consider to be
proprietary or confidential to the Company, including without limitation,
information with respect to any of the Company's services, customers, suppliers,
techniques, patents and patent applications, methods (including manufacturing
methods), products, designs, financial projections, industry projections or
analyses, planned or pending agreements or future plans; provided, however, that
"confidential information" shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the Executive)
or any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company.
8. Work For Hire Acknowledgement; Assignment. The Executive
acknowledges that all of the Executive's work on and contributions to the
Company's products (the "Products"), including, without limitation, any and all
patterns, designs, artworks and other expressions in any tangible medium
(collectively, the "Works") are within the scope of the Executive's employment
and are a part of the services, duties and responsibilities of the Executive.
All of the Executive's work on and contributions to the Works will be rendered
7
<PAGE>
and made by the Executive for, at the instigation of, and under the overall
direction of the Company, and all of the Executive's said work and
contributions, as well as the Works, are and at all times shall be regarded as
"work made for hire" as that term is used in the United States Copyright Laws.
Without curtailing or limiting this acknowledgement, the Executive hereby
assigns, grants, and delivers exclusively to the Company, as to work on and
contribution to the Products pursuant hereto all rights, titles, and interests
in and to any such Works, and all copies and versions, including all copyrights
and renewals. The Executive will execute and deliver to the Company, or its
successors and assigns, such other and further assignments, instruments and
documents as it from time to time reasonably may request for the purpose of
establishing, evidencing, and enforcing or defending its complete, exclusive
perpetual, and worldwide ownership of all rights, titles, and interests of every
kind and nature whatsoever, including all copyrights, in and to the Works. The
Executive hereby constitutes and appoints the Company as its agent and
attorney-in-fact, with full power of substitution, to execute and deliver said
assignments, instruments or documents as the Executive may fail or refuse to
execute and deliver, this power and agency being coupled with an interest and
being irrevocable.
9. Indemnity. During the term hereof, the Company agrees to
indemnify and hold the Executive harmless to the fullest extent permitted under
the law from any and all suits, actions, proceedings, claims or settlements
arising out of the performance of the Executive's duties hereunder, including
all activities as an officer and director of the Company if applicable. The
Company further agrees to pay all costs which are incurred by the Executive in
preparing and defending against such claims, including all attorneys' fees,
witness fees, court costs, settlement costs and other similar fees. The costs
and expenses incurred by Executive in investigating, defending or appealing any
threatened, pending or completed suit, action, proceeding, or claim covered
hereunder, shall be paid by the Company in advance as may be appropriate
properly to defend any such action, suit, proceeding and/or paid in advance at
the request of the Executive, and any judgments, fines or amounts paid in
settlement shall be paid by the Company in advance, with the understanding and
agreement hereby made and entered into by Executive and the Company that in the
event it shall ultimately be determined as provided hereunder that Executive was
not entitled to be indemnified, or was not entitled to be fully indemnified,
that Executive shall repay to the Company such amount, or the appropriate
portion thereof, so paid or advanced.
10. Successors; Binding Agreement.
(a) This Agreement is fully assignable by the Company to any
successor only upon the written consent of the Executive, which shall not
unreasonably be withheld; provided, however, that said successor shall be
obligated to perform this Agreement in accordance with its terms.
8
<PAGE>
(b) As to the Executive, this is a personal service contract and
the Executive may not assign this Agreement or any part hereof without the prior
written consent of the Company, which consent may reasonably be withheld by the
Company.
11. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person or two (2) days after
being when placed in the United States mails, by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Company:
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92668
Attn: Executive Vice President,
Chief Legal Officer & Secretary
If to the Executive:
Milan A. Sawdei
6109 Costa del Ray
Long Beach, California 90803
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Injunctive Relief. If there is a breach or threatened breach of
the provisions of this Agreement, the non-breaching party shall be entitled to
an injunction restraining the breaching party from such breach. Nothing herein
shall be construed as prohibiting either party from pursuing any other remedies
for a breach or threatened breach of this Agreement.
13. Breach By the Company; Damages; Attorneys Fees.
(a) If the Company breaches any term or condition of this
Agreement, the Executive shall give notice to the Company setting forth the
alleged breach, requesting that the Company remedy or cure its breach and
offering to continue to provide the Executive's services to the Company in
accordance with this Agreement assuming such breach is remedied or cured. The
Company shall have 10 days to remedy or cure such breach. Executive shall make
a good faith reasonable determination immediately after such ten (10) day period
whether the Company has remedied such breach and shall communicate Executive's
determination in writing to the Company. If Executive determines that adequate
remedy has occurred, Executive shall continue in the employ of the Company as if
no notice had been given. If Executive determines that adequate remedy has not
occurred, the Executive, at Executive's option, may treat this Agreement as
9
<PAGE>
constructively involuntarily terminated by the Company in breach of this
Agreement. Any determination by Executive that breach has occurred and that
adequate remedy has not occurred shall be presumed correct and shall govern
unless the Company shows by a clear preponderance of the evidence that it was
not a good faith reasonable determination.
(b) For purposes of calculating damages due to the Executive as a
result of any breach of this Agreement by the Company, damages (i) shall not
exceed, and (ii) in the case of a termination by the Company other than for
cause, including without limitation a constructive involuntary termination,
shall equal, the present value (determined on the date such damages are
received) of the compensation the Executive would otherwise have received under
this Agreement for the remaining term of this Agreement (calculated as if the
notice provided for in Section 2 was given on the date of the breach). Present
value shall be determined by using a discount rate equal to 120% of the
"applicable Federal rate" determined under Section 1274(d) of the Internal
Revenue Code of 1986, as amended, or its successor, determined as of the later
of the date of the breach or the termination, compounded semiannually. Damages,
as calculated above, shall be reduced by any "earned income", as that term is
defined in section 911(d)(2)(A) of the Internal Revenue Code of 1986, as
amended, received by the Executive during the remainder of what would otherwise
have been the term of this Agreement (calculated in the manner provided in the
first sentence of this subsection 13(b)). If earned income is received during
such period but after the payment of damages to the Executive by the Company,
the Executive shall pay an amount equal to such earned income back to the
Company as soon as practicable after receipt. No other mitigation of damages
shall be required of the Executive.
(c) Notwithstanding any dispute concerning whether a breach
exists or whether adequate remedy has occurred, the Company shall pay
Executive's damages. Executive may be required to repay such amounts to the
Company if any such dispute is finally determined adversely to Executive.
(d) The Company shall pay to the Executive all reasonable
attorneys' fees and necessary costs and disbursements incurred by or on behalf
of the Executive in connection with or as a result of a dispute under this
Agreement, whether or not the Executive ultimately prevails. Attorneys' fees
shall be paid by the Company within 30 days of presentment by the Executive to
the Company of an invoice received by the Executive from the Executive's
attorneys. Any late payments under this subsection shall bear interest at a
rate of twenty percent (20%) per month.
14. Prior Agreements; Modification; Waiver. This Agreement (and the
exhibits hereto) constitute the entire agreement between the parties regarding
the subject matter hereof, and supersede any prior or contemporaneous
agreements, letters of intent, or other understandings between the parties. No
10
<PAGE>
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company officer or director as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of any
similar or dissimilar provision or condition at the same or any prior or
subsequent time.
15. Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (excluding principles of conflicts of law).
16. Severability. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business activities
covered by, any provision of this Agreement be in excess of that which is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, extent or activities which may validly and enforceably
be covered.
17. Withholding. Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company hereunder to
the Executive or his estate or beneficiaries shall be subject to the withholding
of such amounts relating to taxes as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
18. Headings. Headings to sections hereof are for convenience of
reference only and shall not be construed to alter or affect the meaning of any
provision of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"The Company"
BERGEN BRUNSWIG CORPORATION,
a New Jersey corporation,
By /s/ Dwight A. Steffensen
--------------------------------------------
Dwight A. Steffensen
Its President and Chief Operating Officer
"Executive"
/s/ Milan A. Sawdei
--------------------------------------------
Milan A. Sawdei
<PAGE>
Schedule 10(q)
--------------
The Company has entered into identical three year employment agreements, a form
of which is affixed as Item 10(q), with each of the following executive officers
except that their respective bi-weekly base salary amount is set forth below:
Robert E. Martini (Chairman of the Board and Chief Executive Officer) - $19,807
Dwight A. Steffensen (President and Chief Operating Officer) - $14,807
Neil F. Dimick (Executive Vice President and Chief Financial Officer) - $8,653
Milan A. Sawdei (Executive Vice President, Chief Legal Officer and Secretary) -
$6,153
Denny W. Steele (Executive Vice President, Chief Information Officer) - $6,153
In addition, the Company has entered into identical employment agreements with
eight other officers, except such agreements that provide for a rolling two year
term with an aggregate (for such eight officers) bi-weekly base salary and
annual bonus amounts (subject to the minimum bonus calculation detailed in the
agreement affixed as Exhibit 10(q)) of $45,965 and $341,000, respectively, as of
the effective date of the agreements.
Finally, the Company has entered into identical employment agreements with
fifteen other officers, except that such agreements provide for a rolling one
year term with an aggregate (for such fifteen officers) bi-weekly base salary
and annual bonus amounts (subject to the calculation detailed in the agreement
affixed as Exhibit 10(q)) of $65,487 and $450,000, respectively, as of the
effective date of the agreements.
EXHIBIT 10(r)
SEVERANCE AGREEMENT
-------------------
This Severance Agreement (the "Agreement") is made and entered into by
and between BERGEN BRUNSWIG CORPORATION, a New Jersey corporation (the
"Company"), and Milan A. Sawdei ("Executive") as of this 21st day of April,
1994.
RECITALS
--------
1. The Company and Executive have heretofore entered into an employment
relationship. The Company considers the continued services of Executive to be
in the best interest of the Company and its shareholders and desires to assure
the continued services of Executive on an objective and impartial basis and
without distraction or conflict of interest in the event of an attempt to obtain
control of the Company.
2. Executive is willing to remain in the employ of the Company upon the
understanding that the Company will provide income security upon the terms and
subject to the conditions contained herein if Executive's employment is
terminated voluntarily for Good Reason (defined below) or involuntarily after a
Change in Control (defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto agree as follows:
I. Definitions. For purposes of this Agreement the following capitalized
terms shall have the following meanings:
A. Base Amount. "Base Amount" shall have the same meaning as set
forth in Code Section 280G(b)(3).
B. Change in Control. A "Change in Control" shall be deemed to occur
90 days prior to the occurrence of any of the following events:
a. any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), shall become
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities, provided
however that for purposes of this calculation, purchases by employee benefit
plans of the Company and purchases by the Company itself shall be disregarded;
1
<PAGE>
b. there shall be consummated:
(i) any consolidation, merger or transaction in the nature
of a Code Section 351 transaction (whether or not it meets the requirements for
nonrecognition of gain under Code Section 351) of the Company in which either
the Company is not the continuing or surviving corporation, the majority of the
common stock of the Company is no longer held by holders of the Company common
stock immediately prior to the transaction or pursuant to which shares of the
Company's common stock would be converted into cash, securities or other
property; provided however, that a consolidation, merger or transaction in the
nature of a Code Section 351 transaction in which the holders of the Company's
common stock immediately prior to the merger own, on a proportionate basis, at
least 80% of the common stock of the surviving corporation immediately after the
transaction shall not be considered a Change in Control; or
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the operating assets of the Company;
c. the stockholders of the Company approve a plan or proposal
for the liquidation or dissolution of the Company; or
d. during any rolling period of two consecutive years ending on
any date after the date of this Agreement, individuals who at the beginning of
such period constitute the Board of Directors of the Company and any new
director whose election or nomination for election was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; provided, however, that no director shall be considered to
have been so approved if such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the 1934 Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest.
C. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
D. day(s). "day(s)" shall mean calendar day(s).
E. For Cause. "For Cause" shall mean an act or acts of dishonesty by
Executive constituting a felony under applicable law and resulting or intending
to result directly or indirectly in gain to or personal enrichment of Executive
at the Company's expense. In addition, "For Cause" shall include anything
2
<PAGE>
defined as "for cause" or "cause" under any written employment with Executive.
Without limiting the foregoing, For Cause shall not include (i) the termination
of Executive because of or arising from Executive's permanent disability, or
(ii) the voluntary termination or retirement of Executive.
F. 4999 Amount. "4999 Amount" shall mean the amount of excise tax
that Executive, in Tax Counsel's Opinion, shall be liable for under Code Section
4999, or any successor provision, after taking into consideration all
compensation includable in the Code Section 280G (or its successor) computation
other than compensation or benefits specifically contractually excluded from
this computation under terms set forth in the applicable benefit plan or other
written agreement between the Company and Executive. Without limiting the
foregoing, the Code Section 280G computation shall take into account all
Gross-up Bonus payments received or to be received by Executive under this
Agreement.
G. Good Reason. "Good Reason" shall mean any of the following:
a. without the express written consent of Executive, any
material change by the Company in Executive's function, duties, or
responsibilities which change would cause Executive's position with the Company
to become of less dignity, responsibility, importance, or scope from the
position and attributes that applied to him immediately prior to the Change in
Control;
b. any material failure by the Company to comply with any of the
provisions of this Agreement;
c. the Company's requiring Executive to be based at any office
or location more than 25 miles from the office at which Executive is based on
the date immediately preceding the Change in Control, except for travel
reasonably required in the performance of Executive's responsibilities and
commensurate with the amount of travel required of Executive prior to the Change
in Control; or
d. any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
H. Gross-up Bonus. "Gross-up Bonus" shall mean a lump sum bonus,
payable to Executive in accordance with the terms of this Agreement, equal to
the amount, in Tax Counsel's Opinion, necessary to provide Executive an
"after-income tax" dollar amount equal to the 4999 Amount. For purposes of this
Agreement, the "after-income tax" dollar amount shall be computed as an
after-income tax, before Code Section 4999 excise tax dollar amount, the intent
being that Executive shall have sufficient after-income tax dollars to pay the
Code Section 4999 excise tax. The calculation shall take into account any
Gross-up Bonus that will be paid to the extent that such bonus increases the
3
<PAGE>
4999 Amount, thereby increasing the bonus necessary to provide Executive with
sufficient after-income tax dollars to pay the increased Code Section 4999
excise tax. The maximum combined marginal federal and applicable state(s)
income tax rate in effect for the year in which the Gross-up Bonus is to be paid
shall be used in computing the Gross-up Bonus.
I. Notice of Termination. "Notice of Termination" shall mean a
written notice setting forth in reasonable detail (i) the specific reasons for
termination, including the facts and circumstances claimed to provide a basis
for termination of employment and, where applicable, the provisions in this
Agreement relied upon, and (ii) the date of Executive's termination of
employment, which shall be no earlier than 30 days after such Notice is received
by the other party.
J. Severance Benefit Multiple. The "Severance Benefit Multiple"
shall be the number set forth in the following schedule for the period of time
that has elapsed from the occurrence of a Change in Control to the effective
date of Executive's termination of employment.
<TABLE>
<CAPTION>
No. of Years From
Occurrence of Severance Benefit
Change in Control Multiple
------------------- --------------------
<S> <C>
From zero to three 2.99
More than three 0.00
</TABLE>
K. Severance Payment. "Severance Payment" shall have the meaning set
forth in Section IV, Paragraph A.
L. Tax Counsel. "Tax Counsel" shall mean an attorney at law or
certified public accountant who (i) is a partner at a law firm of at least 25
attorneys or at a "Big 6" national accounting firm, and such firm has not
provided services to the Company or any person described in subsection I.B.a
above, or any affiliate of the Company or such person, within the last year,
(ii) is experienced in matters concerning Code Section 280G, and (iii) is
retained pursuant to Section VI below.
II. Employment Relationship.
A. Except as specifically provided herein, nothing in this Agreement
shall confer upon Executive any right to be retained in the service of the
Company.
B. After a Change in Control and during the term of this Agreement,
Executive may terminate employment with the Company at any time if Executive has
made a good faith reasonable determination that Good Reason exists for this
termination. Except as otherwise provided in any written employment agreement
between Executive and the Company, any such termination shall not be treated as
4
<PAGE>
a breach of Executive's employment relationship with the Company.
III. Term of Agreement.
Prior to a Change in Control, this Agreement shall terminate upon
Executive's termination of employment with the Company for any reason
whatsoever. After a Change in Control, this Agreement shall terminate (i) in
the case of a termination described in Section IV, Paragraph A below, upon
payment to Executive of all amounts owed pursuant to this Agreement; (ii) in all
other cases, one and one-half years after Executive's termination of employment
with the Company, unless notice pursuant to Section VI, Paragraph A has been
given, in which case upon payment to Executive of all amounts owed pursuant to
this Agreement. In all events, this Agreement shall terminate three years and
one day after a Change in Control unless Executive becomes entitled to a payment
under Section IV, Paragraph A or Section V within such period.
IV. Severance Payment Upon Termination of Employment.
A. If Executive's employment with the Company is terminated after a
Change in Control (i) by the Company other than For Cause, (ii) by Executive,
based on a good faith reasonable determination that Good Reason exists, or (iii)
by Executive, for any reason, within 180 days after a Change in Control, the
Company shall pay to Executive within ten (10) days of the effective date of
termination, a cash lump sum payment equal to the Severance Benefit Multiple
multiplied by Executive's Base Amount (Executive's "Severance Payment").
B. Any termination of Executive's employment by the Company or by
Executive shall be communicated by a Notice of Termination to the other party.
At the option of Executive, any purported termination of Executive's employment
by the Company that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section I, Paragraph I shall not be effective.
C. If Executive gives the Company a Notice of Termination which
states that the basis for Executive's termination of employment is Good Reason,
the Company shall have ten (10) days after receipt of such Notice to remedy the
facts and circumstances that provided Good Reason. Executive shall make a good
faith reasonable determination immediately after such ten (10) day period
whether such facts and circumstances have been remedied and shall communicate
Executive's determination in writing to the Company. If Executive determines
that adequate remedy has occurred, Executive's termination, and the Notice of
Termination, shall become null and void and Executive shall continue in the
employ of the Company as if no Notice of Termination had been given. If
Executive determines that adequate remedy has not occurred, then Executive's
initial Notice of Termination shall remain in effect. Any determination by
Executive that Good Reason exists for Executive's termination of employment and
5
<PAGE>
that adequate remedy has not occurred shall be presumed correct and shall govern
unless the party contesting the determination shows by a clear preponderance of
the evidence that it was not a good faith reasonable determination.
D. Notwithstanding any dispute concerning whether Good Reason exists
for termination of employment or whether adequate remedy has occurred, the
Company shall pay Executive's Severance Payment in accordance with this Section
IV. Executive may be required to repay some or all of such amounts to the
Company if any such dispute is finally determined adversely to Executive; the
Company may be required to pay additional amounts to Executive if such dispute
is finally determined adversely to the Company.
V. Gross-up Bonus.
A. The Company shall pay to Executive within ten (10) days of the
receipt of Tax Counsel's Opinion described in Section VI below, a cash lump sum
payment equal to the Gross-up Bonus, along with a copy of Tax Counsel's opinion.
B. Notwithstanding any dispute that arises with respect to Tax
Counsel's calculation of the Gross-up Bonus, the Company shall pay a bonus at
least equal to the Gross-up Bonus as calculated in Tax Counsel's Opinion in
accordance with this Section V. Executive may be required to repay some or all
of such amounts to the Company if any such dispute is finally determined
adversely to Executive; the Company may be required to pay additional amounts to
Executive if such dispute is finally determined adversely to the Company.
VI. Retention of Tax Counsel; Tax Counsel's Opinion.
A. If the Company or Executive believes that Code Section 4999 will
apply to Executive, such party shall notify the other party. Within three (3)
days of such notice, the Company shall request the Company's independent
auditors to select Tax Counsel to calculate the 4999 Amount and the Gross-up
Bonus. Such Tax Counsel shall be retained by the Company within ten (10) days
of the notice described in the first sentence of this Section VI, Paragraph A.
Tax Counsel's fees and other costs shall be paid by the Company.
B. Within thirty (30) days of retention, Tax Counsel shall prepare a
written opinion addressed to both the Company and Executive, setting forth its
determination of the 4999 Amount and the Gross-up Bonus applicable to Executive.
Tax Counsel's opinion shall set forth his or her calculations and factual
assumptions used in arriving at his or her opinion.
C. For purposes of Tax Counsel's opinion, Tax Counsel may take into
account such facts and circumstances as he or she deems relevant. Tax Counsel
also may take into account such authorities as he or she deems relevant, and
6
<PAGE>
shall not be limited to those items that constitute "substantial authority"
under Section 6661 of the Code.
D. Unless it can be shown that the factual assumptions or the
mathematical calculations are erroneous, Tax Counsel's written opinion shall be
binding on the Company and Executive for all purposes under this Agreement.
VII. Damages.
Executive shall not be required to mitigate damages with respect to the
amount of any payment provided under this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment provided under this Agreement
be reduced by any compensation earned by Executive as a result of employment by
another employer or by retirement benefits or deferred compensation.
VIII. Successor to the Company.
The Company shall require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor or
assign to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
IX. Heirs of Executive.
This Agreement shall inure to the benefit of and be enforceable by
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other designee or, if there be no
such designee, to Executive's estate.
X. Notice.
For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered by messenger or in person, or two (2) days after
being mailed by the United States registered or certified mail, return receipt
requested, postage prepaid, as follows:
7
<PAGE>
If to the Company:
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92668
Attn: Executive Vice President,
Chief Legal Officer & Secretary
If to Executive:
Milan A. Sawdei
6109 Costa del Ray
Long Beach, California 90803
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
XI. Legal Costs. The Company shall pay to Executive all reasonable
attorneys' fees and necessary costs and disbursements incurred by or on behalf
of Executive in connection with or as a result of a dispute under this
Agreement, whether or not Executive ultimately prevails. Attorneys' fees shall
be paid by the Company within 30 days of presentment by Executive to the Company
of an invoice received by Executive from the Executive's attorneys. Any late
payments under this Section shall bear interest at a rate of twenty percent
(20%) per month.
XII. Miscellaneous.
A. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California (excluding principles of
conflicts of law).
B. Entire Agreement; Amendment. This Agreement contains the full and
complete understanding of the parties with respect to the subject matter hereof
and supersedes all prior representations and understandings, whether oral or
written. This Agreement may only be amended by a writing signed by the Company,
acting through its board of directors, and Executive.
C. Severability. In the event that any provision hereof or any
obligation or grant of rights herein is found invalid or unenforceable pursuant
to judicial decree or decision, any such provision, obligation or grant of
rights shall be deemed and construed to extend only to the maximum extent
permitted by law, and the remainder of this Agreement shall remain valid and
enforceable according to its terms.
D. Waiver. The waiver, express or implied, by any party of any right
hereunder or with respect to any failure to perform or breach hereof, shall not
constitute or be deemed a waiver of any other rights hereunder or of any other
failure to perform or breach hereof, whether of a similar or dissimilar nature
thereto.
8
<PAGE>
E. Headings. Headings to sections hereof are for convenience of
reference only and shall not be construed to alter or affect the meaning of any
provision of this Agreement.
F. Claims Procedure. The Company shall establish a claims procedure
in accordance with Section 503 of the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder ("ERISA"), to the extent
necessary to comply with ERISA.
G. Withholding. Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company hereunder to
Executive or his estate or beneficiaries shall be subject to the withholding of
such amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation.
H. Injunctive Relief. If there is a breach or threatened breach of
the provisions of this Agreement, the non-breaching party shall be entitled to
an injunction restraining the breaching party from such breach. Nothing herein
shall be construed as prohibiting either party from pursuing any other remedies
for a breach or threatened breach of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"The Company"
BERGEN BRUNSWIG CORPORATION,
a New Jersey corporation,
By /s/ Dwight A. Steffensen
----------------------------------------
Dwight A. Steffensen
Its President and Chief Operating Officer
"Executive"
By /s/ Milan A. Sawdei
----------------------------------------
Milan A. Sawdei
9
<PAGE>
Schedule 10(r)
--------------
The Company has entered into the identical severance agreements, a form of which
is affixed as Item 10(r) with the following executive officers:
Robert E. Martini (Chairman of the Board and Chief Executive Officer)
Dwight A. Steffensen (President and Chief Operating Officer)
Neil F. Dimick (Executive Vice President and Chief Financial Officer)
Milan A. Sawdei (Executive Vice President, Chief Legal Officer and Secretary)
Denny W. Steele (Executive Vice President, Chief Information Officer)
In addition, the Company has entered into identical severance agreements with
six other officers, except that the severance benefit multiple of such
agreements is equal to 1.0. These six officers are also part of the group of
eight officers referenced in the second paragraph of Schedule 10(q).
<TABLE>
EXHIBIT 11
BERGEN BRUNSWIG CORPORATION
---------------------------
COMPUTATION OF PRIMARY EARNINGS PER SHARE
FOR THE YEAR ENDED SEPTEMBER 30, 1994
AND FOUR YEARS ENDED AUGUST 31, 1993
(in thousands except for share and per share amounts)
<CAPTION>
=======================================================================================================================
August 31,
September 30, ---------------------------------------------------
YEARS ENDED: 1994 1993 1992 1991 1990
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
DATA AS TO EARNINGS
Earnings from continuing operations $56,120 $28,607 $53,012 $58,061 $55,212
Discontinued operations, net of taxes
on income:
Earnings from operations - - 3,876 6,076 7,354
Gain on disposition - - 3,976 - -
--------------------------------------------------------------
Earnings before extraordinary gain (loss) 56,120 28,607 60,864 64,137 62,566
Extraordinary gain (loss) from early
extinguishment of debt, net of taxes
on income (income tax benefit) - (2,570) - - 3,497
--------------------------------------------------------------
Net earnings applicable to common
and common equivalent shares $56,120 $26,037 $60,864 $64,137 $66,063
==============================================================
DATA AS TO NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Weighted average number of shares
outstanding:
Class A Common Stock 36,377,081 35,244,274 36,474,857 41,434,795 41,660,230
Class B Common Stock 40,675 100,492 100,492 109,992 110,825
Shares of Class A Common Stock to be issued
from assumed conversion of remainder
of Class B Common Stock 346,900 857,046 857,046 925,362 945,166
Common equivalent shares assuming issuance
of shares represented by outstanding
employees' stock options:
Additional shares assumed to be issued 482,620 438,934 727,967 975,549 1,133,664
Reduction of such additional shares
assuming proceeds invested in
treasury stock (at average market
prices during each year) (405,586) (327,310) (515,513) (788,339) (873,616)
--------------------------------------------------------------
Average number of common and common
equivalent shares outstanding 36,841,690 36,313,436 37,644,849 42,657,359 42,976,269
==============================================================
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE OUTSTANDING:
Continuing operations $ 1.52 $ 0.79 $ 1.41 $ 1.36 $ 1.29
Discontinued operations:
Earnings from operations - - .10 .14 .17
Gain on disposition - - .11 - -
--------------------------------------------------------------
Earnings before extraordinary gain (loss) 1.52 .79 1.62 1.50 1.46
Extraordinary gain (loss) - (.07) - - .08
--------------------------------------------------------------
Net earnings $ 1.52 $ 0.72 $ 1.62 $ 1.50 $ 1.54
==============================================================
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11.1
BERGEN BRUNSWIG CORPORATION
---------------------------
COMPUTATION OF EARNINGS PER SHARE ASSUMING FULL DILUTION
FOR THE YEAR ENDED SEPTEMBER 30, 1994
AND FOUR YEARS ENDED AUGUST 31, 1993
(in thousands except for share and per share amounts)
<CAPTION>
=================================================================================================================================
August 31,
September 30, ---------------------------------------------------
YEARS ENDED: 1994 1993 1992 1991 1990
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
NET EARNINGS APPLICABLE TO COMMON AND
COMMON EQUIVALENT SHARES (see Exhibit 11) $56,120 $26,037 $60,864 $64,137 $66,063
Interest on Convertible Zero Coupon-Subordinated
Notes (6 3/4% yield to maturity), net of tax effect - 3,812 8,735 8,324 6,135
--------------------------------------------------------------
Net earnings applicable to common and common
equivalent shares assuming full dilution $56,120 $29,849 $69,599 $72,461 $72,198
==============================================================
DATA AS TO NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES ASSUMING FULL DILUTION:
Average number of common and common equivalent
shares outstanding (see Exhibit 11) 36,841,690 36,313,436 37,644,849 42,657,359 42,976,269
Additional shares of Class A Common Stock resulting
from assumed conversion of Convertible Zero
Coupon-Subordinated Notes (6 3/4% yield to maturity) - 3,468,770 7,767,491 7,767,491 6,149,264
Excess of incremental shares assumed to be issued under
stock options (using market prices at the end of each
year) over shares used in computing primary earnings
per share (using average market prices during each year) 6,890 608 4,520 9,206 4,932
--------------------------------------------------------------
Average number of common and common equivalent
shares outstanding assuming full dilution 36,848,580 39,782,814 45,416,860 50,434,056 49,130,465
==============================================================
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE OUTSTANDING ASSUMING FULL DILUTION:
Continuing operations $ 0.81
Discontinued operations:
Earnings from operations -
Gain on disposition -
----------
Earnings before extraordinary gain (loss) .81
Extraordinary gain (loss) (.06)
----------
Net earnings as computed $ 0.75 (2)
==========
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE OUTSTANDING ASSUMING FULL DILUTION:
Continuing operations $ 1.52 $ 0.79 $ 1.36 $ 1.32 $ 1.25
Discontinued operations:
Earnings from operations - - .08 .12 .15
Gain on disposition - - .09 - -
--------------------------------------------------------------
Earnings before extraordinary gain (loss) 1.52 .79 1.53 1.44 1.40
Extraordinary gain (loss) - (.07) - - .07
--------------------------------------------------------------
Net earnings for Statements of
Consolidated Earnings (1) $ 1.52 $ 0.72 $ 1.53 $ 1.44 $ 1.47
==============================================================
<FN>
(1) For the years ended August 31, 1992, 1991 and 1990, the Company assumed conversion of the Convertible Zero
Coupon-Subordinated Notes (6 3/4% yield to maturity) (which are note "common stock equivalents") because the effect of
such assumed conversion is dilutive in computing earnings per share assuming full dilution. In 1993, the computation of
earnings per share assuming full dilution does not assume conversion of the Convertible Zero Coupon-Subordinated Notes
because the effect would be anti-dilutive.
(2) This computation is submitted in accordance with Regulation S-K, Item 601(b)(11) although it is contrary to paragraph 40
of Accounting Principles Board Opinion No. 15 because it produces an anti-dilutive result.
</TABLE>
EXHIBIT 21
BERGEN BRUNSWIG CORPORATION AND SUBSIDIARIES
============================================
SUBSIDIARIES OF REGISTRANT
The following is a list of the significant subsidiaries of registrant
as of November 30, 1994:
<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
STATE OF OWNED BY
NAME INCORPORATION REGISTRANT
- ------------------------------- ------------- -----------
<S> <C> <C>
Durr-Fillauer Medical, Inc. Delaware 100%
Bergen Brunswig Drug Company California (1)
Durr Medical Corporation Alabama (1)
<FN>
(1) 100% owned by Durr-Fillauer Medical, Inc.
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-54345, 2-63803, 2-75715, 2-88474, 2-96491 and 33-32465 on Form S-8 and in
Registration Statement No. 33-55136 on Form S-3 of our report dated October 31,
1994, appearing in and incorporated by reference in this Annual Report on Form
10-K of Bergen Brunswig Corporation for the fiscal year ended September 30,
1994.
/s/ Deloitte & Touche LLP
- --------------------------
Costa Mesa, California
December 21, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> QTR-4 YEAR
<FISCAL-YEAR-END> SEP-30-1994 SEP-30-1994
<PERIOD-START> JUL-1-1994 OCT-1-1993
<PERIOD-END> SEP-30-1994 SEP-30-1994
<EXCHANGE-RATE> 1 1
<CASH> 0 5,264
<SECURITIES> 0 0
<RECEIVABLES> 0 523,202
<ALLOWANCES> 0 18,423
<INVENTORY> 0 904,809
<CURRENT-ASSETS> 0 1,445,368
<PP&E> 0 215,067
<DEPRECIATION> 0 78,725
<TOTAL-ASSETS> 0 1,995,057
<CURRENT-LIABILITIES> 0 1,191,112
<BONDS> 0 342,094
<COMMON> 0 66,088
0 0
0 0
<OTHER-SE> 0 395,763
<TOTAL-LIABILITY-AND-EQUITY> 0 1,995,057
<SALES> 0 0
<TOTAL-REVENUES> 1,924,868 7,483,801
<CGS> 1,806,691 7,036,249
<TOTAL-COSTS> 1,895,525 7,367,779
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,517 17,910
<INCOME-PRETAX> 27,826 98,112
<INCOME-TAX> 11,593 41,992
<INCOME-CONTINUING> 16,233 56,120
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 16,233 56,120
<EPS-PRIMARY> 0.43 1.52
<EPS-DILUTED> 0.43 1.52
</TABLE>
EXHIBIT 99(h)
COMPOSITE EXECUTION COPY
U.S. $350,000,000
- --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of September 30, 1994,
among
BERGEN BRUNSWIG DRUG COMPANY,
as the Borrower,
BERGEN BRUNSWIG CORPORATION,
as the Parent,
and
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as the Agent for the Lenders
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION..................... 2
SECTION 1.1. Defined Terms............................................... 2
SECTION 1.2. Use of Defined Terms........................................ 2
SECTION 1.3. Interpretation.............................................. 2
SECTION 1.4. Accounting and Financial Determinations..................... 3
SECTION 1.5. Conflict in Credit Documents................................ 3
SECTION 1.6. Legal Representation of Parties............................. 4
SECTION 1.7. Amendment Not Novation...................................... 4
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES.............. 4
SECTION 2.1. Commitments................................................. 4
SECTION 2.1.1. Commitment of Each Lender................................... 4
SECTION 2.1.2. Lenders Not Permitted or Required To Make Contract Loans.... 4
SECTION 2.2. Reduction of Commitments.................................... 5
SECTION 2.2.1. Optional.................................................... 5
SECTION 2.2.2. Mandatory................................................... 5
SECTION 2.3. Contract Borrowing Procedure................................ 5
SECTION 2.4. Contract Continuation and Conversion Elections;
Contract Loans Comprising Funding........................... 6
SECTION 2.5. Swing Line.................................................. 7
SECTION 2.6. Notes....................................................... 9
SECTION 2.6.1. Contract Note............................................... 9
SECTION 2.6.2. Bid Note.................................................... 9
SECTION 2.6.3. Swing Note.................................................. 9
SECTION 2.6.4. Notations................................................... 9
SECTION 2.7. Bid Procedure............................................... 10
SECTION 2.7.1. Bid Requests................................................ 10
SECTION 2.7.2. Bid Offers.................................................. 11
SECTION 2.7.3. Acceptance by Borrower of Bid Offers........................ 12
SECTION 2.7.4. Acknowledgment of Bid Borrowings............................ 13
SECTION 2.7.5. Bid Loan Funding............................................ 13
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES............... 14
SECTION 3.1. Repayments and Prepayments.................................. 14
SECTION 3.1.1. Contract Loans.............................................. 14
SECTION 3.1.2. Bid Loans................................................... 15
SECTION 3.2. Interest Provisions......................................... 15
SECTION 3.2.1. Contract Rates.............................................. 15
- i -
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
SECTION 3.2.2. Post-Default Contract Rates................................. 16
SECTION 3.2.3. Payment Dates............................................... 16
SECTION 3.2.4. Bid Rates................................................... 16
SECTION 3.3. Fees........................................................ 17
SECTION 3.3.1. Facility Fee................................................ 17
SECTION 3.3.2. Other Fees.................................................. 17
ARTICLE IV
CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS.............. 17
SECTION 4.1. Eurodollar Rate Lending Unlawful............................ 17
SECTION 4.2. Deposits Unavailable........................................ 17
SECTION 4.3. Increased Eurodollar Rate Loan Costs, etc................... 18
SECTION 4.4. Funding Losses.............................................. 18
SECTION 4.5. Increased Capital Costs..................................... 19
SECTION 4.6. Taxes....................................................... 19
SECTION 4.7. Payments, Computations, etc................................. 21
SECTION 4.8. Sharing of Payments......................................... 21
SECTION 4.9. Setoff...................................................... 22
SECTION 4.10. Mitigation of Certain Costs; Lender Replacement; etc........ 22
SECTION 4.11. Use of Proceeds............................................. 24
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND BORROWING................ 24
SECTION 5.1. Effectiveness and Initial Borrowing......................... 24
SECTION 5.1.1. Agreement Counterparts, etc................................. 24
SECTION 5.1.2. Resolutions, etc............................................ 24
SECTION 5.1.3. Delivery of Notes........................................... 24
SECTION 5.1.4. Delivery of Guaranty........................................ 24
SECTION 5.1.5. Material Adverse Change..................................... 25
SECTION 5.1.6. Opinions of Counsel......................................... 25
SECTION 5.1.7. Closing Fees, Expenses, etc................................. 25
SECTION 5.1.8. Accrued Interest, etc....................................... 25
SECTION 5.2. All Borrowings.............................................. 25
SECTION 5.2.1. Compliance with Warranties, No Default, etc................. 25
SECTION 5.3. Borrowing Request........................................... 26
SECTION 5.4. Satisfactory Legal Form..................................... 26
- ii -
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE VI
REPRESENTATIONS AND WARRANTIES..................... 26
SECTION 6.1. Organization, etc........................................... 26
SECTION 6.2. Due Authorization, Non-Contravention, etc................... 26
SECTION 6.3. Government Approval, Regulation, etc........................ 27
SECTION 6.4. Validity, etc............................................... 27
SECTION 6.5. Financial Information....................................... 27
SECTION 6.6. No Material Adverse Change.................................. 28
SECTION 6.7. Litigation, Labor Controversies, etc........................ 28
SECTION 6.8. Subsidiaries................................................ 28
SECTION 6.9. Compliance with Law......................................... 28
SECTION 6.10. Ownership of Properties..................................... 28
SECTION 6.11. Taxes....................................................... 29
SECTION 6.12. Pension and Welfare Plans................................... 29
SECTION 6.13. Environmental Warranties.................................... 29
SECTION 6.14. Regulations G, U and X...................................... 31
SECTION 6.15. Accuracy of Information..................................... 31
ARTICLE VII
COVENANTS............................... 32
SECTION 7.1. Affirmative Covenants....................................... 32
SECTION 7.1.1. Financial Information, Reports, Notices, etc................ 32
SECTION 7.1.2. Compliance with Laws, etc................................... 34
SECTION 7.1.3. Maintenance of Properties................................... 34
SECTION 7.1.4. Insurance................................................... 34
SECTION 7.1.5. Books and Records........................................... 35
SECTION 7.1.6. Environmental Covenant...................................... 35
SECTION 7.2. Negative Covenants.......................................... 36
SECTION 7.2.1. Indebtedness................................................ 36
SECTION 7.2.2. Liens....................................................... 37
SECTION 7.2.3. Financial Condition......................................... 38
SECTION 7.2.4. Consolidation, Merger, etc.................................. 38
SECTION 7.2.5. Transactions with Affiliates................................ 39
SECTION 7.2.6. Business Activities......................................... 39
ARTICLE VIII
EVENTS OF DEFAULT............................ 39
SECTION 8.1. Events of Default........................................... 39
SECTION 8.1.1. Non-Payment of Obligations.................................. 39
SECTION 8.1.2. Breach of Warranty.......................................... 39
- iii -
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations........ 40
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.......... 40
SECTION 8.1.5. Default on Other Indebtedness............................... 40
SECTION 8.1.6. Judgments................................................... 40
SECTION 8.1.7. Pension Plans............................................... 41
SECTION 8.1.8. Bankruptcy, Insolvency, etc................................. 41
SECTION 8.1.9. Change of Control........................................... 42
SECTION 8.1.10.Credit Document Ceases to Bind.............................. 42
SECTION 8.2. Action if Bankruptcy........................................ 42
SECTION 8.3. Action if Other Event of Default............................ 42
ARTICLE IX
THE AGENT............................... 43
SECTION 9.1. Actions..................................................... 43
SECTION 9.2. Funding Reliance, etc....................................... 43
SECTION 9.3. Exculpation................................................. 44
SECTION 9.4. Successor................................................... 44
SECTION 9.5. Loans by Agent.............................................. 45
SECTION 9.6. Credit Decisions............................................ 45
SECTION 9.7. Copies, etc................................................. 45
ARTICLE X
MISCELLANEOUS PROVISIONS........................ 46
SECTION 10.1. Waivers, Amendments, etc.................................... 46
SECTION 10.2. Notices..................................................... 47
SECTION 10.3. Payment of Costs and Expenses............................... 47
SECTION 10.4. Indemnification............................................. 48
SECTION 10.5. Survival.................................................... 49
SECTION 10.6. Severability................................................ 49
SECTION 10.7. Headings.................................................... 49
SECTION 10.8. Execution in Counterparts................................... 50
SECTION 10.9. Governing Law; Entire Agreement............................. 50
SECTION 10.10. Successors and Assigns...................................... 50
SECTION 10.11. Sale and Transfer of Contract Loans and
Commitment; Participations in Contract Loans................ 50
SECTION 10.11.1. Assignments............................................ 50
SECTION 10.11.2. Participations......................................... 52
SECTION 10.11.3. Federal Reserve Bank Assignments....................... 53
SECTION 10.12. Confidentiality............................................. 53
SECTION 10.13. Other Transactions.......................................... 54
- iv -
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
SECTION 10.14. Forum Selection and Consent to Jurisdiction................. 54
SECTION 10.15. Waiver of Jury Trial........................................ 55
SECTION 10.16. Governmental Regulation..................................... 55
SECTION 10.17. Bid Trust Agreement Terminated.............................. 55
SCHEDULES
SCHEDULE I - Defined Terms
SCHEDULE II - Disclosure Schedule
EXHIBITS
EXHIBIT A-1 - Contract Note
EXHIBIT A-2 - Bid Note
EXHIBIT A-3 - Swing Note
EXHIBIT B-1 - Bid Borrowing Request
EXHIBIT B-2 - Bid Offer
EXHIBIT B-3 - Bid Acknowledgement
EXHIBIT C-1 - Contract Borrowing Request
EXHIBIT C-2 - Contract Continuation/Conversion Notice
EXHIBIT D - Guaranty
EXHIBIT E - Matters for Opinion of Counsel to Parent and Borrower
EXHIBIT F - Opinion of Counsel of Agent
EXHIBIT G - Assignment Agreement
- v -
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 30, 1994
(the "Amendment Effective Date"), among BERGEN BRUNSWIG DRUG COMPANY, a
California corporation (the "Borrower"), BERGEN BRUNSWIG CORPORATION, a New
Jersey corporation (the "Parent"), the various financial institutions as are or
may become parties hereto (collectively, the "Lenders"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association
("BankAmerica"), as agent (in such capacity, the "Agent") for the Lenders,
W I T N E S S E T H:
WHEREAS, the Parent is engaged directly and through its various
Subsidiaries in the distribution business; and
WHEREAS, the Borrower desires to obtain Commitments from the Lenders
pursuant to which Contract Loans, in a maximum aggregate principal amount not
to exceed $350,000,000, would be made to the Borrower prior to the Commitment
Termination Date; and
WHEREAS, in addition to such Commitments, the Borrower may from time to
time request that one or more of the Lenders make Bid Loans to the Borrower and
desires to establish a procedure therefor; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
Commitments and make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used for General Corporate
Purposes of the Borrower;
WHEREAS, the Parent, the Borrower, certain Lenders and Continental Bank,
as predecessor Agent, are parties to that certain Credit Agreement, dated as of
September 15, 1992 (as amended or modified and in effect on the Amendment
Effective Date, the "Existing Credit Agreement") and the parties thereto and
hereto wish to amend and restate the Existing Credit Agreement in its entirety
as set forth herein;
NOW, THEREFORE, the parties hereto, intending legally to be bound hereby,
agree that the Existing Credit Agreement is hereby amended and restated in its
entirety as set forth herein and further agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Defined Terms. Certain capitalized terms (whether or not
underscored) when used in this Agreement and the other Credit Documents,
including its preamble and recitals, shall have the respective meanings assigned
thereto in Schedule I.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Contract Continuation/Conversion Notice, Credit
Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Credit Document.
SECTION 1.3. Interpretation. In this Agreement and each other Credit
Document, unless a clear contrary intention appears:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's predecessors,
successors and assigns but, if applicable, only if such predecessors,
successors and assigns are permitted by this Agreement, and reference to a
Person in a particular capacity excludes such Person in any other capacity
or individually;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement and the
Schedules and Exhibits hereto), document or instrument means such
agreement, document or instrument as amended or modified and in effect from
time to time in accordance with the terms thereof and, if applicable, the
terms hereof and reference to any promissory note includes any promissory
note which is an extension or renewal thereof or a substitute or
replacement therefor;
(e) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any Applicable Law means that provision of such Applicable Law from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other
provision;
- 2 -
<PAGE>
(f) reference to any Article, Section, Schedule or Exhibit means such
Article or Section hereof or Schedule or Exhibit hereto;
(g) "hereunder", "hereof", "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;
(h) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(i) "or" is not exclusive; and
(j) relative to the determination of any period of time, "from" means
"from and including", "to" means "to but excluding", and "through means "to
and including".
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used in this Agreement or in any other Credit
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.3) shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared in accordance with GAAP as applied in the preparation of the financial
statements referred to in Section 7.1.1; provided, that for purposes of
determining compliance with Section 7.2, accounting terms shall be interpreted,
and accounting determinations and computations shall be made, in accordance with
GAAP as in effect from time to time; and provided, further, that if either (x)
the Parent or any of its Subsidiaries shall change its method of accounting from
a basis consistent with any prior financial statement thereof or (y) there is
any change in GAAP after the date hereof, which in either such case the Agent
determines affects the effectiveness of compliance with Section 7.2, then the
Parent, the Borrower, the Agent and the Lenders shall negotiate in good faith
for a period of 30 days to reach agreement regarding changes to Section 7.2
which retain the effectiveness of compliance therewith, but if no such agreement
is reached within such 30-day period accounting terms shall be interpreted, and
accounting determinations and computations shall be made, under GAAP as in
effect on the date hereof for purposes of determining compliance with Section
7.2.
SECTION 1.5. Conflict in Credit Documents. If there is any conflict
between this Agreement and any other Credit Document, this Agreement and such
- 3 -
<PAGE>
other Credit Document shall be interpreted and construed, if possible, so as to
avoid or minimize such conflict but, to the extent (and only to the extent) of
such conflict, this Agreement shall prevail and control.
SECTION 1.6. Legal Representation of Parties. This Agreement and the
other Credit Documents were negotiated by the parties with the benefit of legal
representation and any rule of construction or interpretation otherwise
requiring this Agreement or any other Credit Document to be construed or
interpreted against any party shall not apply to any construction or
interpretation hereof or thereof.
SECTION 1.7. Amendment Not Novation. This Agreement amends and restates
the Existing Credit Agreement and the terms and conditions of the Commitments of
the Lenders and the Loans made to the Borrower and the covenants, agreements and
obligations of the Parent and the Borrower with respect thereto and is not
intended, and shall not be deemed or construed, to constitute a novation
thereof.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Article V), each Lender severally agrees to make
Contract Loans pursuant to the Commitments described in this Section 2.1.
SECTION 2.1.1. Commitment of Each Lender. On any Business Day occurring
on or after the Amendment Effective Date and prior to the Commitment Termination
Date, each Lender will make loans under this Agreement (relative to such Lender
under this Section 2.1.1, and of any type, its "Contract Loans") to the Borrower
equal to such Lender's Percentage of the aggregate amount of the Contract
Borrowing of Contract Loans of the same type requested by the Borrower to be
made on such day. The commitment of each Lender described in this Section 2.1.1
is herein referred to as its "Commitment". On the terms and subject to the
conditions hereof, the Borrower may from time to time before the Commitment
Termination Date borrow, prepay and reborrow Contract Loans.
SECTION 2.1.2. Lenders Not Permitted or Required To Make Contract Loans.
No Lender shall be required to make any Contract Loan if, after giving effect
thereto, the then aggregate outstanding principal amount of all Contract Loans
made by
- 4 -
<PAGE>
(a) all Lenders would, when added to the then aggregate outstanding
principal amount of all Bid Loans and Swing Loans, exceed the Total
Commitment Amount, or
(b) such Lender would exceed its Percentage (after giving effect to
all Contract Loans (whether or not made by any particular Lender) as if
each Lender had made its Contract Loans in accordance with the terms
hereof) of the then aggregate outstanding principal amount of all Contract
Loans made by all Lenders.
SECTION 2.2. Reduction of Commitments. The Commitments are subject to
reduction from time to time pursuant to this Section 2.2.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day, voluntarily reduce the Total Commitment Amount; provided that all
such reductions shall require at least 3 Business Days' prior notice to the
Agent and be permanent, and any partial reduction of the Total Commitment
Amount, as the case may be, shall be in a minimum amount of $10,000,000 and in
an integral multiple of $5,000,000; and provided, further, that the Total
Commitment Amount may not be reduced below the sum of (x) the then aggregate
outstanding principal amount of all Loans of all Lenders and (y) the then Swing
Line Commitment.
SECTION 2.2.2. Mandatory. The Total Commitment Amount shall, without any
further action, automatically and permanently be reduced by an amount equal to
the amount of each required prepayment on each date when a mandatory prepayment
pursuant to Section 3.1.1(c) is required or would have been required had
Contract Loans been then outstanding in a sufficient aggregate principal amount.
SECTION 2.3. Contract Borrowing Procedure. By delivering a Contract
Borrowing Request to the Agent on or before 12:00 noon, Chicago time, on a
Business Day, the Borrower may from time to time irrevocably request, on, in the
case of any proposed Contract Borrowing of Base Rate Loans, not less than 1 nor
more than 3 Business Days' notice, and in the case of any proposed Contract
Borrowing of Eurodollar Rate Loans, not less than 3 nor more than 5 Business
Days' notice, that a Contract Borrowing be made in a minimum amount of
$10,000,000 and an integral multiple of $5,000,000 or in the unused amount of
the Commitments in the case of any proposed Contract Borrowing of Base Rate
Loans, and a minimum amount of $10,000,000 and an integral multiple of
$5,000,000 in the case of any proposed Borrowing of Eurodollar Rate Loans. On
the terms and subject to the conditions of this Agreement, each Contract
Borrowing shall be comprised of the same type of Contract Loans from all
Lenders, and shall be made on the Business Day,
- 5 -
<PAGE>
specified in such Contract Borrowing Request. On or before 11:00 a.m., Chicago
time, on such Business Day each Lender shall deposit with the Agent same day
funds in an amount equal to such Lender's Percentage of the requested Contract
Borrowing. Such deposit will be made to an account which the Agent shall
specify from time to time by notice to the Lenders. To the extent same day
funds are received from the Lenders, the Agent shall make such same day funds
available to the Borrower by wire transfer to the accounts the Borrower shall
have specified in its Borrowing Request. The obligations of the Lenders under
this Article II are several and not joint and no Lender's obligation to make any
Contract Loan shall be affected by any other Lender's failure to make any
Contract Loan.
SECTION 2.4. Contract Continuation and Conversion Elections; Contract
Loans Comprising Funding. (a) By delivering a Contract Continuation/Conversion
Notice to the Agent on or before 12:00 noon, Chicago time, on a Business Day,
the Borrower may from time to time irrevocably elect, on, in the case of any
proposed conversion into Base Rate Loans, not less than 1 nor more than 3
Business Days' notice, and in the case of any proposed continuation as, or
conversion into, Eurodollar Rate Loans, not less than 3 nor more than 5 Business
Days' notice, that all, or any portion in an aggregate minimum amount of
$10,000,000 and an integral multiple of $5,000,000 in the case of any proposed
continuation as, or conversion into, Eurodollar Rate Loans, and a minimum
aggregate amount of $10,000,000 and an integral multiple of $5,000,000 in the
case of any proposed continuation as, or conversion into, Base Rate Loans, of
any Contract Loans be, in the case of Base Rate Loans, converted into Eurodollar
Rate Loans or, in the case of Eurodollar Rate Loans, converted into a Base Rate
Loan or continued as a Eurodollar Rate Loan (in the absence of delivery of a
Contract Continuation/Conversion Notice with respect to any Eurodollar Rate Loan
at least 3 Business Days before the last day of the then current Interest Period
with respect thereto, such Eurodollar Rate Loan shall, on such last day,
automatically be continued as a Eurodollar Rate Loan with an initial Interest
Period of one month if permitted hereunder and, if not then permitted hereunder,
converted to a Base Rate Loan); provided that (i) each such conversion or
continuation shall be pro rata among the applicable outstanding Contract Loans
of the same type of all Lenders, and (ii) no portion of the outstanding
principal amount of any Contract Loans may be continued as, or be converted
into, Eurodollar Rate Loans when any Default has occurred and is continuing.
(b) Each Lender may, if it so elects, fulfill its obligation to make,
continue or convert Contract Loans comprising Eurodollar Rate Loans hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by such Lender) to make or maintain such Eurodollar Rate Loan;
- 6 -
<PAGE>
provided that such Eurodollar Rate Loan shall nonetheless be deemed to have been
made and to be held by such Lender, and the obligation of the Borrower to repay
such Eurodollar Rate Loan shall nevertheless be to such Lender for the account
of such foreign branch, Affiliate or international banking facility. In
addition, the Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall
be conclusively assumed that each Lender elected to fund all Eurodollar Rate
Loans by purchasing Dollar deposits in its Eurodollar Office's interbank
eurodollar market.
SECTION 2.5. Swing Line. (a) Subject to the terms and conditions of this
Agreement, the Swing Line Lender shall, on and after the Amendment Effective
Date, and prior to the Commitment Termination Date, provide to the Borrower a
swing line credit facility (the "Swing Line") of up to $10,000,000; provided
that the Agent shall not in any event be obligated to make any Loan (each a
"Swing Loan") under the Swing Line if, after giving effect to such Swing Loan,
(x) the aggregate principal amount of the outstanding Swing Loans would exceed
the lesser of (i) $10,000,000 and (ii) the then Total Commitment Amount and (y)
the aggregate principal amount of all then outstanding Loans would exceed the
then Total Commitment Amount. The commitment of the Swing Line Lender described
in this Section 2.5(a) is herein called the "Swing Line Commitment".
(b) Each request for Swing Loans shall be made from time to time on or
after the Amendment Effective Date by either
(i) delivering or telecopying a Swing Loan Request therefor to the
Agent who shall promptly notify the Swing Line Lender of the same, or
(ii) giving telephonic notice thereof to the Agent at or before 12:00
noon, Chicago time, on any Business Day and promptly confirming such notice
by delivering or telecopying a Swing Loan Request therefor, signed by an
Authorized Officer of the Borrower, to the Agent who shall promptly notify
the Swing Line Lender of the same.
On the terms and subject to the conditions of this Agreement, each Swing
Loan shall be disbursed on the Business Day on which the Swing Loan Request
therefor was timely made, in same day funds by wire transfer to such
transferee(s), or to such account(s) of the Borrower, as the Borrower shall have
specified in the Swing Loan Request therefor. Swing Loans shall be made as Base
Rate Loans, shall be in an aggregate minimum principal amount of $1,000,000 and
an integral multiple of $100,000.
- 7 -
<PAGE>
(c) The highest principal amount outstanding on any day under the Swing
Line shall accrue interest for that day at a rate equal to the rate which would
be applicable to Contract Loans which are Base Rate Loans on such day. Such
interest shall be payable quarterly in arrears on each Quarterly Payment Date,
unless demand therefor is made earlier, and shall be payable solely for the
account of the Swing Line Lender.
(d) The principal and interest outstanding under the Swing Line shall be
due and payable (i) on demand made at any time, without prior notice to the
Borrower (which the Borrower hereby waives to the fullest extent permitted by
law), and (ii) in any event on the Commitment Termination Date; provided that,
if no Default shall have occurred and be continuing at the time of such demand,
then the Borrower shall, immediately after the Borrower learns of such demand,
if and to the extent that the Borrower is permitted to borrow Contract Loans
under the terms of this Agreement at the time of such demand, be deemed to have
submitted a Contract Borrowing Request for Contract Loans in an amount necessary
to repay the amount demanded. The provisions of Section 2.3 concerning the
integral multiples required for Contract Borrowings of Contract Loans shall not
apply to the Contract Borrowings of Contract Loans described in the foregoing
proviso.
(e) The Borrower may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal amount
of any Swing Loans, without incurring any premium or penalty; provided that
(i) each such voluntary prepayment shall require prior written notice
given to the Agent (who shall promptly notify the Swing Line Lender of the
same) no later than 12:00 noon, Chicago time, on the day on which the
Borrower intends to make a voluntary prepayment, and
(ii) each such voluntary prepayment shall be in a minimum amount of
$1,000,000 and an integral multiple of $100,000 (or, if less, the
outstanding principal amount of all Swing Loans then outstanding);
(f) Each Lender shall be deemed to have unconditionally and irrevocably
purchased an undivided interest and risk participation from the Swing Line
Lender, without recourse or warranty (except that the outstanding Swing Loans in
fact were made, have not been repaid, and have not been sold, assigned or
encumbered by the Swing Line Lender) in an amount equal to that Lender's
Percentage of the Swing Line Commitment and the principal and interest
outstanding from time to time under the Swing Line.
- 8 -
<PAGE>
(g) Upon the occurrence of an Event of Default, the Swing Line Lender may,
but is not required to, without notice to or the consent of the Borrower,
terminate the Swing Line and cause Contract Loans to be made by the Lenders
under the Commitments in an aggregate amount equal to the amount of principal
outstanding under the Swing Line and, for this purpose, the conditions precedent
set forth in Article VI shall not apply. The proceeds of such Contract Loans
shall be paid to the Agent for the account of the Swing Line Lender to repay the
principal amounts outstanding under the Swing Line.
(h) The Swing Line Lender shall not, without the approval of all Lenders,
make a Swing Loan if the Agent or the Swing Line Lender then has actual
knowledge that an Event of Default has occurred and is then continuing.
SECTION 2.6. Notes. The Loans of the Lenders shall be evidenced by the
Notes pursuant to this Section 2.6.
SECTION 2.6.1. Contract Note. All Contract Loans made or deemed made by
the Lenders shall be evidenced by a promissory note (the "Contract Note") of the
Borrower, dated the Amendment Effective Date and substantially in the form of
Exhibit A-1, payable to the order of the Agent for the account of the Lenders
ratably in accordance with their respective Percentages and in a maximum
principal amount equal to the original Total Commitment Amount on the Amendment
Effective Date.
SECTION 2.6.2. Bid Note. All Bid Loans made by the Lenders shall be
evidenced by a promissory note of the Borrower, dated the Amendment Effective
Date and substantially in the form of Exhibit A-2 (the "Bid Note"), payable to
the order of the Agent for the account of the Lenders ratably in accordance with
the aggregate principal amount of their respective Bid Loans and in a maximum
principal amount equal to the original Total Commitment Amount on the Amendment
Effective Date.
SECTION 2.6.3. Swing Note. All Swing Loans made by the Agent shall be
evidenced by a promissory note of the Borrower, dated the Amendment Effective
Date and substantially in the form of Exhibit A-3, payable to the order of the
Agent for the account of the Swing Line Lender and in a maximum principal amount
equal to $10,000,000.
SECTION 2.6.4. Notations. The Borrower hereby irrevocably authorizes the
Agent to make (or cause to be made) appropriate notations in its records or, at
the option of the Agent, on the grid attached to each Note (or on a continuation
of such grid attached to such Note and made a part thereof), which notations
shall evidence, inter alia, the date of, the outstanding principal amount of,
and the interest rate (including any conversions thereof pursuant to Section
- 9 -
<PAGE>
4.2) applicable to, the Loans evidenced thereby. The notations on such records
or each such grid (and on each such continuation) indicating the outstanding
principal amount of the Loans shall, in the absence of manifest error, be
conclusive evidence of the principal amount thereof owing and unpaid, but the
failure to record, or any error in recording, any such amount in such records or
on such grid (or on such continuation) shall not limit or otherwise affect the
obligations of the Borrower hereunder or under such Note to make payment of
principal of or interest on such Loans when due or increase or otherwise affect
the rights of the Borrower in respect of payments of principal of or interest on
such Loans actually made. The Agent will, upon request by any Lender, furnish
such Lender with copies of such Note, and will hold the original Notes available
for inspection by duly authorized representatives of any Lender on reasonable
notice during normal business hours.
SECTION 2.7. Bid Procedure. The Borrower may request Bid Offers from the
Lenders to make Bid Loans in accordance with Section 2.7.1 from time to time on
any Business Day prior to the date occurring seven days prior to the Commitment
Termination Date; provided that, after giving effect to each Bid Borrowing, the
then aggregate principal amount of (a) all outstanding Bid Loans shall not
exceed an amount equal to the then Total Commitment Amount and (b) all then
outstanding Loans and Swing Loans shall not exceed the Total Commitment Amount.
All Lenders, or any lesser number thereof (including any Lender individually),
may, but shall have no obligation to, make Bid Offers so requested, and the
Borrower may, but shall have no obligation to, accept any Lender's Bid Offer.
SECTION 2.7.1. Bid Requests. The Borrower may request from all Lenders a
Bid Borrowing by a telephonic Bid Borrowing Request to the Agent, not later than
12:00 noon, Chicago time, at least one Business Day prior to the date for the
proposed Bid Borrowing, which notice shall be immediately confirmed by a
facsimile Bid Borrowing Request specifying:
(a) the date and aggregate amount of the proposed Bid Borrowing
(which shall be in a minimum aggregate principal amount of $10,000,000 and
in an integral multiple of $5,000,000); and
(b) the maturity date (or dates) (relative to each Bid Loan, its
"Stated Maturity Date") for repayment of each Bid Loan to be made as part
of such Bid Borrowing (which Stated Maturity Date may not be earlier than
the date occurring seven days after the date of such Bid Borrowing or later
than the earlier of (x) the date occurring 270 days after the date of such
Bid Borrowing and (y) the Commitment Termination Date);
- 10 -
<PAGE>
The Agent shall promptly (but in any event on the same Business Day) notify each
Lender by telephone (confirmed by facsimile) of each Bid Borrowing Request. The
Borrower shall not request more than 2 Bid Borrowings within any 5 Business Day
period.
SECTION 2.7.2. Bid Offers. If any Lender, in its sole discretion, elects
to offer to make a Bid Loan to the Borrower as part of a proposed Bid Borrowing,
which would bear interest at a rate (or rates) selected by such Lender in its
sole discretion, it shall deliver a Bid Offer by facsimile to the Agent before
8:45 a.m., Chicago time, on the date of such proposed Bid Borrowing; provided
that Bid Offers submitted by the Agent (or any Affiliate of the Agent) in its
capacity as a Lender must be submitted to the Agent no later than 8:30 a.m.,
Chicago time, which Bid Offer shall specify:
(a) the amount(s) and Stated Maturity Date(s) of the Bid Loans which
such Lender would be willing to make as part of such proposed Bid
Borrowing, which amount shall be in a minimum principal amount of
$5,000,000 and in an integral multiple of $1,000,000, and may exceed such
Lender's Percentage of the Total Commitment Amount; and
(b) the Bid Rate(s) therefor.
Bid Offers submitted pursuant to this Section 2.7.2 shall be irrevocable,
subject to the terms and conditions of this Agreement. If a Bid Offer submitted
pursuant to this Section 2.7.2 is determined by the Agent (whose determination
shall be conclusive in the absence of manifest error) to:
(c) be not substantially in the form of Exhibit B-2,
(d) omit any required information,
(e) be conditional or qualified in any respect,
(f) propose terms other than or in addition to those set forth in the
Bid Borrowing Request,
(g) not have been delivered to the Agent by 8:45 a.m., Chicago time,
or
(h) be otherwise inconsistent with the provisions hereof,
the Agent will reject the offer made by such Bid Offer and give telephonic
notice (confirmed in writing) of such rejection to the Lender which submitted
- 11 -
<PAGE>
such Bid Offer. Promptly thereafter, and in any case, no later than 9:00 a.m.,
Chicago time, the Agent will give telephonic notice (confirmed in writing) to
the Borrower of all conforming Bid Offers and the terms thereof.
SECTION 2.7.3. Acceptance by Borrower of Bid Offers. The Borrower shall,
before 9:30 a.m., Chicago time, on the date of such proposed Bid Borrowing, in
its sole discretion either:
(a) irrevocably cancel the Bid Borrowing Request that requested such
Bid Borrowing by giving the Agent telephonic notice (confirmed promptly
thereafter in writing) to that effect; or
(b) irrevocably accept one or more of the Bid Offers by giving
telephonic notice to the Agent of the amount of the Bid Borrowing to be
made on such date, specifying the amount of the Bid Loan(s) to be made by
each Lender as part of such Bid Borrowing, which amount shall not be
greater than the amount offered by such Lender in its Bid Offer, the Stated
Maturity Date(s) and the Bid Rate(s) therefor;
provided that:
(c) the Borrower shall not accept any Lender's conforming Bid Offer
to make a Bid Loan at a particular Bid Rate for the same Stated Maturity
Date if the Borrower has decided to reject any other Lender's conforming
Bid Offer to make a Bid Loan at a lower Bid Rate;
(d) the aggregate principal amount of all Bid Offers accepted by the
Borrower shall not, after giving effect to all reductions made pursuant to
clause (e) below, exceed the principal amount specified in the Bid
Borrowing Request;
(e) if the Borrower shall accept any Bid Offer to make a Bid Loan at
a particular Bid Rate, then the Borrower shall accept all offers to make
Bid Loans at such Bid Rate for the same Stated Maturity Date; provided
that, if the aggregate principal amount of all Bid Loans offered at such
Bid Rate, together with the aggregate principal amount of all Bid Loans
offered at lower Bid Rates, shall exceed the amount specified in the Bid
Borrowing Request, then the Borrower shall (notwithstanding the
requirements of clause (f) below)
(i) accept only a portion of all Bid Offers made at such higher
Bid Rate so as to eliminate such excess, and
(ii) allocate such excess among all Lenders offering Bid Offers
at such higher Bid Rate as nearly as possible in proportion to the
- 12 -
<PAGE>
respective amounts of the Bid Loans offered thereby; provided if the
portion of the principal amount of such Bid Loans to be so allocated
is not sufficient to enable Bid Loans to be so allocated to each such
Lender in a minimum principal amount of $5,000,000 and in an integral
multiple of $1,000,000, the Borrower shall select the Lenders to be
allocated such Bid Loans in a minimum principal amount of $1,000,000
and round allocations up to the next higher multiple of $1,000,000 if
necessary; and
(f) with respect to each Stated Maturity Date, the Borrower shall not
accept a Bid Offer in a principal amount of less than $5,000,000 (except as
provided in clause (e) above) or other than in an integral multiple of
$1,000,000.
Subject to the foregoing requirements, the Borrower may accept or reject, at the
Borrower's sole discretion, the offer to make any Bid Loan contained in any Bid
Offer. Each notice given by the Borrower pursuant to this Section 2.7.3 shall
be irrevocable. Failure by the Borrower to accept a Bid Offer in accordance
with the provisions of this Section 2.7.3 shall constitute a rejection of such
Bid Offer.
SECTION 2.7.4. Acknowledgment of Bid Borrowings. Promptly after
acceptance of a Bid Offer by the Borrower pursuant to Section 2.7.3(b):
(a) in any case no later than 10:00 a.m., Chicago time, on the date
of such Bid Borrowing, the Borrower shall deliver to the Agent a Bid
Acknowledgment confirming, with respect to each Bid Loan to be made to the
Borrower, the Stated Maturity Date, amount, and Bid Rate therefor; and
(b) in any case no later than 9:30 a.m., Chicago time, on the date of
the proposed Bid Borrowing, the Agent will give telephonic notice to each
Lender submitting a Bid Offer of each Stated Maturity Date, amount, and Bid
Rate so accepted by the Borrower and promptly thereafter written notice of
the same to all Lenders.
SECTION 2.7.5. Bid Loan Funding. On or before 12:00 noon, Chicago time,
on the Business Day specified for each Bid Borrowing, each Lender whose Bid
Offer in respect thereof the Borrower accepted pursuant to Section 2.7.3(b)
shall deposit with the Agent same day funds in an amount equal to the principal
amount of such Lender's Bid Loan. Such deposit will be made to an account which
the Agent shall from time to time specify by notice to the Lenders. To the
extent same day funds are received from such Lenders, the Agent shall make such
same day funds available to the Borrower by wire transfer to the accounts the
- 13 -
<PAGE>
Borrower shall have specified in its Bid Acknowledgement. No Lender's
obligation to make any Bid Loan shall be affected by any other Lender's failure
to make any Bid Loan.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in full
the unpaid principal amount of each Loan as provided in this Section 3.1.
SECTION 3.1.1. Contract Loans. The Borrower shall repay in full the
unpaid principal amount of each Contract Loan upon the Final Maturity Date.
Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Contract Loans; provided that:
(i) any such prepayment shall be made pro rata among Contract
Loans of the same type and, if applicable, having the same Interest
Period of all Lenders;
(ii) no such prepayment of any Eurodollar Rate Loan may be made
on any day other than the last day of the Interest Period for such
Loan, unless the Borrower pays to each Lender the amount, if any, due
in respect thereof to such Lender pursuant to Section 4.4;
(iii) all such voluntary prepayments shall require at least 3
but no more than 5 Business Days' prior telephonic notice to the Agent
(confirmed by prompt written notice);
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $10,000,000 and an integral multiple of
$5,000,000; and
(v) no such prepayment of less than all of any Eurodollar Rate
Loan may be made if, after giving effect thereto, the aggregate amount
of any Eurodollar Rate Loans having the same Interest Period would be
less than $10,000,000 or other than an integral multiple of
$5,000,000;
(b) shall, immediately upon any acceleration of the Final Maturity
Date of any Contract Loans pursuant to Section 8.2 or 8.3, repay all
- 14 -
<PAGE>
Contract Loans, unless, pursuant to Section 8.3, only a portion of all
Contract Loans is so accelerated; and
(c) shall, not later than 10 days after the receipt by the Borrower
of any Net Asset Sale Proceeds in connection with a Permitted Asset Sale of
the kind described in clause (a) of the definition thereof, make a
mandatory prepayment of the outstanding aggregate principal amount of all
Contract Loans then outstanding, if any, in an amount equal to the
applicable amount of such Net Asset Sale Proceeds.
Each prepayment of any Contract Loans made pursuant to this Section 3.1.1 shall
be without premium or penalty, except as may be required by Section 4.4.
SECTION 3.1.2. Bid Loans. The Borrower shall repay in full the unpaid
principal amount of each Bid Loan upon the Stated Maturity Date therefor. Prior
thereto, the Borrower:
(a) may not prepay any Bid Loan; and
(b) shall, immediately upon any acceleration of the Stated Maturity
Date of any Bid Loan pursuant to Section 8.2 or 8.3, repay or prepay all
Bid Loans unless, pursuant to Section 8.3, only a portion of all Bid Loans
is so accelerated.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Contract Rates. Pursuant to a duly completed and delivered
Contract Borrowing Request or Contract Continuation/Conversion Notice, the
Borrower may elect that Contract Loans comprising a Contract Borrowing accrue
interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate Loan,
equal to the sum of the Base Rate from time to time in effect plus the
Applicable Margin, if any; and
(b) on that portion maintained as a Eurodollar Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the Eurodollar Rate
for such Interest Period plus the Applicable Margin.
All Eurodollar Rate Loans shall bear interest from the first day of the
applicable Interest Period to the last day of such Interest Period at the
interest rate determined as applicable to such Eurodollar Rate Loan.
- 15 -
<PAGE>
SECTION 3.2.2. Post-Default Contract Rates. After the occurrence of any
Event of Default and for so long (but only for so long) as such Event of Default
shall be continuing, the Borrower shall pay, but only to the extent permitted by
Applicable Law, interest (after as well as before judgment) at a rate per annum
which is 2% per annum in excess of any applicable interest rate hereunder prior
to such Event of Default and, if no such interest rate is otherwise applicable,
at a rate per annum on any monetary Obligation then due and payable equal to the
Base Rate from time to time in effect plus a margin of 2.0% per annum.
SECTION 3.2.3. Payment Dates. Interest accrued on each Contract Loan
shall be payable, without duplication:
(a) on the Final Maturity Date;
(b) with respect to the principal amount paid or prepaid, on the date
of any payment or prepayment, in whole or in part, of principal outstanding
on such Loan;
(c) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the Amendment Effective Date;
(d) with respect to Eurodollar Rate Loans, on the last day of each
applicable Interest Period and, if such Interest Period is of six months
duration, on the date which would have been the last day of an Interest
Period of three months duration;
(e) with respect to any Base Rate Loans converted into Eurodollar
Rate Loans on a day when interest would not otherwise have been payable
pursuant to clause (c), on the date of such conversion; and
(f) on that portion of any Contract Loans the Final Maturity Date of
which is accelerated pursuant to Section 8.2 or 8.3, immediately upon such
acceleration.
Interest accrued on Contract Loans or other monetary Obligations arising under
this Agreement or any other Credit Document after the date such amount is due
and payable (whether on the Final Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.2.4. Bid Rates. Interest on the outstanding principal amount of
Bid Loans shall accrue at a rate per annum equal to the applicable Bid Rate for
each such Bid Loan and shall be payable at the time(s) specified in the Bid
Offer for each such Bid Loan or, if no such time is so specified, on the Stated
Maturity Date thereof.
- 16 -
<PAGE>
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Facility Fee. The Borrower agrees to pay to the Agent for
the account of each Lender, for the period (including any portion thereof when
its Commitment is suspended by reason of the Borrower's inability to satisfy any
condition of Article V) from the Amendment Effective Date through the Commitment
Termination Date, a facility fee at the Facility Rate on such Lender's
respective Commitment (whether or not used). Such facility fees shall be
payable by the Borrower in arrears on each Quarterly Payment Date, commencing
with the first such day following the Amendment Effective Date, and on the
Commitment Termination Date.
SECTION 3.3.2. Other Fees. The Borrower agrees to pay to the Agent for
the account of the Agent certain fees provided in the Agent's Fee Letter.
ARTICLE IV
CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS
SECTION 4.1. Eurodollar Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower, the
Agent and the Lenders, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any Applicable Law
makes it unlawful, or any central bank or other governmental authority asserts
that it is unlawful, for such Lender to make, continue or maintain any Loan as,
or to convert any Loan into, a Eurodollar Rate Loan, the obligations of such
Lender to make, continue, maintain or convert any such type of Loans shall, upon
such determination, forthwith be suspended until such Lender shall notify the
Agent that the circumstances causing such suspension no longer exist, and all
Eurodollar Rate Loans shall automatically convert into Base Rate Loans at the
end of the then current Interest Periods with respect thereto or sooner, if
required by such Applicable Law or assertion.
SECTION 4.2. Deposits Unavailable. If the Agent shall have determined
(which determination shall, upon notice thereof to the Borrower and the Lenders,
be conclusive and binding on the Borrower) that, by reason of circumstances
affecting the Reference Lenders' relevant market, adequate means do not exist
for ascertaining the interest rate applicable hereunder to Eurodollar Rate
Loans, then, upon notice from the Agent to the Borrower and the Lenders, the
obligations of all Lenders under Sections 2.3 and 2.4 to make or continue any
Loans as, or to convert any Loans into, Eurodollar Rate Loans shall forthwith be
- 17 -
<PAGE>
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 4.3. Increased Eurodollar Rate Loan Costs, etc. The Borrower
agrees to reimburse each Lender for (a) any reserve requirement (including all
basic, supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
applicable to such Lender, including reserve requirements for "Eurocurrency
liabilities" pursuant to Regulation D of the F.R.S. Board, and (b) any increase
in the cost to such Lender of, or any reduction in the amount of any sum
receivable by such Lender, in either such case after the date hereof in respect
of making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, Eurodollar Rate Loans. Such Lender shall promptly notify the Agent
and the Borrower in writing of the occurrence of any such event, such notice to
state, in reasonable detail, the reasons therefor and the additional amount
(including calculation thereof) required fully to compensate such Lender for
such increased cost or reduced amount. Such additional amounts shall be payable
by the Borrower directly to such Lender within 5 Business Days of its receipt of
such notice, and such notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower; provided that the Borrower shall have no
obligation to reimburse any Lender for any such additional amount attributable
to any point or period of time more than 9 months before the date on which such
Lender shall first have given notice to the Borrower of its claim to be entitled
to the benefits of this Section 4.3 in respect of such additional amount.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a Eurodollar Rate
Loan) as a result of:
(a) any conversion or repayment or prepayment of the principal amount
of any Eurodollar Rate Loans on a date other than the scheduled last day of
the Interest Period applicable thereto, whether pursuant to Section 3.1 or
otherwise;
(b) any Loans not being made as Eurodollar Rate Loans in accordance
with the Borrowing Request therefor (other than solely as a result of the
- 18 -
<PAGE>
failure of such Lender to duly and punctually perform its obligations under
Section 2.3 or 2.4); or
(c) any Loans not being continued as, or converted into, Eurodollar
Rate Loans in accordance with the Continuation/Conversion Notice therefor
(other than solely as a result of the failure of such Lender to duly and
punctually perform its obligations under Section 2.3 or 2.4),
then, upon the written notice of such Lender to the Borrower (with a copy to the
Agent), the Borrower shall, within 5 days of its receipt thereof, pay directly
to such Lender such amount as will (in the reasonable determination of such
Lender) reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any Applicable Law or guideline, decision or request (whether or
not having the force of law) of any court, central bank, regulator or other
governmental authority affects or would affect the amount of capital required or
expected to be maintained by any Lender or any Person controlling such Lender,
and such Lender determines (in its sole and absolute discretion) that the rate
of return on its or such controlling Person's capital as a consequence of its
Commitment or the Loans made by such Lender is reduced to a level below that
which such Lender or such controlling Person could have achieved but for the
occurrence of any such circumstance, then, in any such case upon notice from
time to time by such Lender to the Borrower, the Borrower shall immediately pay
directly to such Lender additional amounts sufficient to compensate such Lender
or such controlling Person for such reduction in rate of return. A statement of
such Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such amount, such Lender
may use any reasonable method of averaging and attribution; provided that the
Borrower shall have no obligation to reimburse any Lender for any such
additional amount attributable to any point or period of time more than 9 months
before the date on which such Lender shall first have given notice to the
Borrower of its claim to be entitled to the benefits of this Section 4.5 in
respect of such additional amount.
SECTION 4.6. Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
- 19 -
<PAGE>
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or net receipts (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
Applicable Law, then the Borrower will:
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder, the
Agent or such Lender may pay such Taxes and the Borrower, upon presentation of
reasonable evidence of the payment of such Taxes by the Agent or such Lender, as
the case may be, will promptly pay such additional amounts (including any
penalties, interest or expenses, unless such penalties, interest or expenses
result solely from the negligence of such Person) as is necessary in order that
the net amount received by such Person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
person would have received had such Taxes not been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Lenders, the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
Each Lender that is incorporated under the laws of any jurisdiction other
than the United States of America or any state or other political subdivision
thereof represents and warrants to the Borrower and to the Agent that, in the
case of the Lenders party hereto on the date hereof, on the date hereof, and, in
the case of each other Lender, on the date of its execution and delivery of the
- 20 -
<PAGE>
Assignment Agreement that first makes it a party hereto, its Domestic Office and
its Eurodollar Office are entitled to receive payments in respect of its Loans,
including principal, interest and commitment fees, without deduction or
withholding for or on account of Taxes.
Upon the request of the Borrower or the Agent, each Lender that is
organized under the laws of a jurisdiction other than the United States shall,
prior to the due date of any payments under the Note, execute and deliver to the
Borrower and the Agent, on or about the first scheduled payment date in each
Fiscal Year, one or more (as the Borrower or the Agent may reasonably request)
United States Internal Revenue Service Forms 4224 or Forms 1001 or such other
forms or documents (or successor forms or documents), appropriately completed,
as may be applicable to establish the extent, if any, to which a payment to such
Lender is exempt from withholding or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Note or
any other Credit Document shall be made by the Borrower to the Agent for the pro
rata account of the Lenders entitled to receive such payment. All such payments
required to be made to the Agent shall be made, without setoff, deduction or
counterclaim, not later than 12:00 noon, Chicago time, on the date due, in same
day or immediately available funds, to such account as the Agent shall specify
from time to time by notice to the Borrower. Funds received after that time
shall be deemed to have been received by the Agent on the next succeeding
Business Day. The Agent shall promptly remit in same day funds to each Lender
its share, if any, of such payments received by the Agent for the account of
such Lender. All interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over a year
comprised of 360 days. Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall (except as otherwise
required by the definition of the term "Interest Period" with respect to
Eurodollar Rate Loans) be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Contract Loan (other than pursuant to Sections 4.1,
4.3, 4.4, 4.5 and 4.6) in excess of its pro rata share of payments then or
therewith obtained by all Lenders on account of Contract Loans, such Lender
shall purchase from such other Lenders such participations in such Loans made by
them as shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided that if all or any
- 21 -
<PAGE>
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and each Lender which
has sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender's ratable share (according to the
proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 4.8
may, to the fullest extent permitted by Applicable Law, exercise all its rights
of payment (including pursuant to Section 4.9) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
or collateral in lieu of a setoff to which this Section applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim or collateral in a manner consistent with the rights of the Lenders
entitled under this Section 4.8 to share in the benefits of any recovery on such
secured claim or collateral.
SECTION 4.9. Setoff. The Agent and each Lender shall, upon the occurrence
of any Default described in Section 8.1.8 or any Event of Default, have the
right to appropriate and apply to the payment of the Obligations owing to it
(whether or not then due) any and all balances, credits, deposits, accounts or
moneys of the Borrower then or thereafter with such Lender; provided that any
such appropriation and application shall be subject to the provisions of Section
4.8. Each Lender agrees promptly to notify the Borrower and the Agent after any
such setoff and application made by such Lender; provided that the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of each Lender under this Section 4.9 are in addition to other rights
and remedies (including other rights of setoff under Applicable Law or
otherwise) which such Lender may have.
SECTION 4.10. Mitigation of Certain Costs; Lender Replacement; etc. (a)
Each Affected Lender will, if requested in writing by the Borrower, and only to
the extent not inconsistent with such Affected Lender's internal policies, use
- 22 -
<PAGE>
its best efforts to make, fund, or maintain such Affected Lender's Loans of the
affected type through another lending office of such Affected Lender if, as a
result thereof, the Affecting Event would be eliminated or materially reduced
and if, as determined by such Affected Lender in its sole discretion, the
making, funding, or maintaining of such Loans through such other lending office
would not otherwise adversely affect such Affected Lender or such Affected
Lender's rights in respect of such Loans and, if such Affected Lender determines
that another lending office would eliminate or materially reduce such Affecting
Event and would not otherwise adversely affect such Affected Lender or such
Affected Lender's rights in respect of such Loans, such Affected Lender shall
give notice thereof to the Borrower and the Agent, such notice to state, in
reasonable detail, why such lending office would eliminate or materially reduce
such Affecting Event and the costs and expenses expected to be incurred by such
Affected Lender in utilizing such lending office. The Borrower hereby agrees to
pay all reasonable costs and expenses incurred by such Affected Lender
(including legal costs and expenses) in utilizing another lending office of such
Affected Lender pursuant to this Section 4.10(a).
(b) If (i) the Borrower has requested an Affected Lender to change its
lending office and such Affected Lender has not changed its lending office
within 30 days of such request, or (ii) a change in the lending office of an
Affected Lender would not eliminate the Affecting Event, and the Affecting Event
is still continuing and is not applicable to all other Lenders, or (iii) an
Affected Lender willfully fails to make any Loan required to be made hereunder,
then the Borrower may designate another lender which is reasonably acceptable to
the Agent (a "Replacement Lender") to purchase all (but not less than all) of
the Loans and interest in the Contract Note, and to assume the Commitment and
other obligations hereunder, of such Affected Lender, without recourse to or
warranty by, or expense to, such Affected Lender, for a purchase price equal to
the sum of (x) the outstanding aggregate principal amount of such Affected
Lender's Contract Loans plus (y) all accrued but unpaid interest and fees
payable to such Affected Lender to the date on which such Affected Lender
receives payment of such purchase price, together with payment to such Affected
Lender of all other amounts then payable to such Affected Lender hereunder,
including amounts accrued pursuant to Section 4.3, 4.4, 4.5, or 4.6. Any such
purchase and assumption shall be made in accordance with Section 10.11. Upon
such purchase, such Affected Lender shall no longer be a party hereto or have
any rights or obligations hereunder (other than rights in respect of Bid Loans
and rights which would survive the payment of such Affected Lender's Contract
- 23 -
<PAGE>
Loans in accordance with this Agreement) and such Replacement Lender shall
succeed to the rights and obligations of such Affected Lender hereunder.
SECTION 4.11. Use of Proceeds. The Borrower shall apply the proceeds of
each Borrowing in accordance with the fifth recital.
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND BORROWING
SECTION 5.1. Effectiveness and Initial Borrowing. The effectiveness of
this Agreement and the obligations of the Lenders to fund the initial Borrowing
after the Amendment Effective Date shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in this Section 5.1.
SECTION 5.1.1. Agreement Counterparts, etc. The Agent shall have received
one or more counterparts of this Agreement duly executed by the Borrower, the
Parent, the Agent and each of the Lenders.
SECTION 5.1.2. Resolutions, etc. The Agent shall have received from each
of the Borrower and the Parent a certificate, dated the Amendment Effective
Date, of its Secretary or Assistant Secretary as to:
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Agreement and each other Credit Document to be executed by it;
(b) true and complete copies of its Organic Documents attached to such
certificate; and
(c) the incumbency and signatures of those of its officers authorized
to act with respect to this Agreement and each other Credit Document
executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary or an Assistant Secretary of the
Borrower or the Parent, as the case may be, canceling or amending such prior
certificate.
SECTION 5.1.3. Delivery of Notes. The Agent shall have received the Notes
duly executed and delivered by the Borrower.
SECTION 5.1.4. Delivery of Guaranty The Agent shall have received the
Guaranty duly executed and delivered by the Parent.
- 24 -
<PAGE>
SECTION 5.1.5. Material Adverse Change Except as disclosed in Item
5.1.5/6.6 ("Potential MACs") of the Disclosure Schedule, there shall have
occurred no material adverse change in the consolidated condition (financial or
otherwise), business, operations, properties, performance or prospects of the
Parent and its Subsidiaries since September 30, 1993 taken as a whole.
SECTION 5.1.6. Opinions of Counsel The Agent shall have received opinions,
dated the Amendment Effective Date and addressed to the Agent and all Lenders,
from:
(a) counsel to the Parent and the Borrower, who shall be reasonably
satisfactory to the Agent, covering the matters set forth in Exhibit E and
such other matters as the Agent shall reasonably deem appropriate; and
(b) Mayer, Brown & Platt, counsel to the Agent, substantially in the
form of Exhibit F.
SECTION 5.1.7. Closing Fees, Expenses, etc. The Agent shall have received
for the account of the Agent or for the account of each Lender, as the case may
be, all fees, costs and expenses due and payable pursuant to Sections 3.3 and
10.3, if then invoiced.
SECTION 5.1.8. Accrued Interest, etc. The Agent shall have received for
the account of the Agent or for the account of each Lender, as the case may be,
all accrued interest, fees, expenses and other amounts due under the Existing
Credit Agreement through the Amendment Effective Date.
SECTION 5.2. All Borrowings. The obligation of each Lender to fund any
Loan on the occasion of any Borrowing (including the initial Borrowing) shall be
subject to the satisfaction of each of the conditions precedent set forth in
this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Borrowing and the application of the proceeds
thereof (but, if any Default of the nature referred to in Section 8.1.5 shall
have occurred with respect to any other Indebtedness, without giving effect to
the application, directly or indirectly, of the proceeds thereof, unless the
proceeds of such Borrowing are applied to pay such other Indebtedness in full)
the following statements shall be true and correct:
(a) the representations and warranties set forth in Article VI shall
be true and correct in all material respects with the same effect as if
then made (unless stated to relate solely to an earlier date, in which case
- 25 -
<PAGE>
such representations and warranties shall be true and correct as of such
earlier date); and
(b) no Default shall have then occurred and be continuing.
SECTION 5.3. Borrowing Request. The Agent shall have received a Borrowing
Request for such Borrowing. Each of the delivery of a Borrowing Request and the
acceptance by the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) the statements made in Section 5.2.1 are
true and correct.
SECTION 5.4. Satisfactory Legal Form All documents executed or submitted
pursuant to this Article V in respect of such Borrowing shall be reasonably
satisfactory in form and substance to the Agent and, as to legal matters, its
counsel; and the Agent and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Agent, including any Lender
through the Agent, or its counsel may reasonably request with respect to any
proposed Borrowing hereunder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this Agreement
and to make Loans hereunder, the Parent and the Borrower represent and warrant
unto the Agent and each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. The Parent and each of its Significant
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the State of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification, and
has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under this
Agreement and each other Credit Document and to own and hold under lease its
property and to conduct its business substantially as currently conducted by it,
except where the failure to be so qualified or hold any such license, permit or
approval, singly or in the aggregate, would not have a Materially Adverse
Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each of the Parent and the Borrower of this
- 26 -
<PAGE>
Agreement and each other Credit Document executed or to be executed by it are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not:
(a) contravene the Organic Documents of the Borrower or the Parent;
(b) constitute a breach or default under any contractual restriction
or violate or contravene any law or governmental regulation or court decree
or order binding on or affecting the Borrower or the Parent which
individually or in the aggregate does or could reasonably be expected to
have a Materially Adverse Effect, except as identified in Item 6.2
("Potential Contravention") of the Disclosure Schedule; or
(c) result in, or require the creation or imposition of, any Lien on
any of the Borrower's properties.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Parent or the Borrower of this Agreement or any
other Credit Document. Neither the Parent nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940.
Neither the Parent nor any of its Subsidiaries is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935.
SECTION 6.4. Validity, etc. This Agreement constitutes, and each other
Credit Document executed by the Parent or the Borrower will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of the Parent or the Borrower, as the case may be, enforceable in
accordance with their respective terms.
SECTION 6.5. Financial Information. (a) The audited consolidated balance
sheets of the Parent and its Subsidiaries as at September 30, 1993, and the
related audited consolidated statements of earnings and cash flow of the Parent
and its Subsidiaries, copies of which have been furnished to the Agent and each
Lender, have been prepared in accordance with GAAP consistently applied, and
present fairly the consolidated financial condition of the corporations covered
thereby as at the dates thereof and the results of their operations for the
periods then ended.
- 27 -
<PAGE>
(b) The unaudited condensed consolidated balance sheets of the Parent and
its Subsidiaries as at June 30, 1994, and related condensed consolidated
statements of earnings and cash flow of the Parent and its Subsidiaries, copies
of which have been furnished to the Agent and each Lender, have been prepared in
accordance with GAAP consistently applied, and, subject to usual and customary
annual audit adjustments, present fairly the consolidated financial condition of
the corporations covered thereby as at the dates thereof and the results of
their operations for the periods then ended.
SECTION 6.6. No Material Adverse Change. Except as disclosed in Item
5.1.5/6.6 ("Potential MACs") of the Disclosure Schedule, since September 30,
1993, there has been no material adverse change in the consolidated condition
(financial or otherwise), operations, business, properties, performance or
prospects of the Parent and its Subsidiaries taken as a whole.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Parent or the Borrower, threatened litigation,
action, proceeding, or labor controversy affecting the Parent or any of its
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which has resulted in, or could reasonably be expected to result in, a
Materially Adverse Effect or which purports to affect the legality, validity or
enforceability of this Agreement or any other Credit Document, except as
disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Parent has no Subsidiaries, except those
Subsidiaries:
(a) which are identified in Item 6.8 ("Existing Subsidiaries") of the
Disclosure Schedule; or
(b) which have been organized after the date hereof or which were
permitted to be acquired pursuant to and in accordance with Section 7.2.4.
SECTION 6.9. Compliance with Law. Without limiting Section 6.2, the
Parent and each of its Significant Subsidiaries is in compliance with Applicable
Law, except where such non-compliance, singly or in the aggregate, does not and
could not reasonably be expected to result in a Materially Adverse Effect.
SECTION 6.10. Ownership of Properties. The Parent and each of its
Significant Subsidiaries owns good and marketable title to all of its material
properties and assets, real and personal, tangible and intangible, of any nature
whatsoever (including patents, trademarks, trade names, service marks and
- 28 -
<PAGE>
copyrights), free and clear of all Liens, charges or claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like), except as permitted pursuant to Section 7.2.2 and where such charges,
claims or infringement do not and could not reasonably be expected to result in
a Materially Adverse Effect.
SECTION 6.11. Taxes. The Parent and each of its Subsidiaries has filed
all material tax returns and reports required by law to have been filed by it
and has paid all material taxes and governmental charges thereby shown to be
owing, except any such taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.
SECTION 6.12. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Borrowing hereunder, no steps
have been taken by the PBGC to terminate any Pension Plan, and no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise to
a Lien under section 302(f) of ERISA. No condition exists or event or
transaction has occurred with respect to any Pension Plan which might result in
the incurrence by the Parent or any member of the Controlled Group of any
material liability, fine or penalty. Except as disclosed in Item 6.12
("Employee Benefit Plans") of the Disclosure Schedule, neither the Parent nor
any member of the Controlled Group has any contingent liability with respect to
any post-retirement benefit under a Welfare Plan that has or could reasonably be
expected to have a Materially Adverse Effect, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.13. Environmental Warranties. Except as set forth in Item 6.13
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Parent or any of its Subsidiaries have been, and
continue to be, owned or leased by the Parent and its Subsidiaries in
compliance with all Environmental Laws, except where such non-compliance,
singly or in the aggregate, does not and could not reasonably be expected
to result in a Materially Adverse Effect;
(b) there have been no past, and there are no pending or, to the
knowledge of the Parent, threatened
(i) claims, complaints, notices or requests for information
received by the Parent or any of its Subsidiaries with respect to any
alleged violation of any Environmental Law, or
- 29 -
<PAGE>
(ii) complaints, notices or inquiries to the Parent or any of its
Subsidiaries regarding potential liability under any Environmental Law,
which, singly or in the aggregate, have or could reasonably be expected to
have a Materially Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Parent or any
of its Subsidiaries that, singly or in the aggregate, have, or could
reasonably be expected to have, a Materially Adverse Effect;
(d) the Parent and its Subsidiaries have been issued and are in
compliance with all permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and necessary or desirable
for their businesses, except where such non-compliance, singly or in the
aggregate, does not and could not reasonably be expected to result in a
Materially Adverse Effect;
(e) no property now owned or leased, or, to the best knowledge of the
Parent and its Subsidiaries, previously owned or leased, by the Parent or
any of its Subsidiaries is listed or, to the knowledge of the Borrower,
proposed for listing (with respect to owned property only) on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state
list of sites requiring investigation or clean-up, and neither the Parent
nor any of its Subsidiaries has received any notice or other communication
that any property previously owned or leased by the Parent or any of its
Subsidiaries is listed or proposed for listing on any such list;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Parent or any of its Subsidiaries that,
singly or in the aggregate, have, or could reasonably be expected to have,
a Materially Adverse Effect;
(g) neither the Parent nor any Subsidiary of the Parent has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or, to the knowledge of the
Parent, proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list or which is the subject
of Federal, state or local enforcement actions or other investigations
- 30 -
<PAGE>
which may lead to claims against the Parent or such Subsidiary thereof for
any remedial work, damage to natural resources or personal injury,
including claims under CERCLA, which, singly or in the aggregate, have or
could reasonably be expected to have a Materially Adverse Effect;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Parent or
any Subsidiary that, singly or in the aggregate, have or could reasonably
be expected to have a Materially Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Parent or any of its Subsidiaries which,
with the passage of time, or the giving of notice or both, would give rise
to liability under any Environmental Law that, singly or in the aggregate,
have or may reasonably be expected to have a Materially Adverse Effect.
SECTION 6.14. Regulations G, U and X. The Parent is not engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock, and no proceeds of any Loans will be used in violation of, or would be
inconsistent with, F.R.S. Board Regulation G, U or X. Terms for which meanings
are provided in F.R.S. Board Regulation G, U or X or any regulations substituted
therefor, as from time to time in effect, are used in this Section 6.14 with
such meanings.
SECTION 6.15. Accuracy of Information All factual information heretofore
or contemporaneously furnished by or on behalf of the Parent or the Borrower in
writing to the Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Parent or the Borrower to
the Agent or any Lender will be, true and accurate in every material respect on
the date as of which such information is dated or certified and as of the date
of execution and delivery of this Agreement by the Agent and such Lender, and
such information is not, or shall not be, as the case may be, when taken as a
whole, incomplete by omitting to state any material fact necessary to make such
information not misleading.
- 31 -
<PAGE>
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants The Parent and the Borrower agree with
the Agent and each Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Parent and the Borrower
will perform the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Parent
and the Borrower will furnish, or will cause to be furnished, to each Lender and
the Agent copies of the following financial statements, reports, notices and
information:
(a) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of the Parent, unaudited (i)
condensed consolidated balance sheets of the Parent and its Subsidiaries as
of the end of such Fiscal Quarter and (ii) condensed consolidated
statements of earnings and cash flow of the Parent and its Subsidiaries for
such Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified by the chief financial Authorized Officer of the Parent;
(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year of the Parent, a copy of the annual audit report
for such Fiscal Year for the Parent and its Subsidiaries including a
consolidated balance sheet of the Parent and its Subsidiaries as of the end
of such Fiscal Year and consolidated statements of earnings and cash flow
of the Parent and its Subsidiaries for such Fiscal Year, in each case
certified (without any Impermissible Qualification) by Deloitte & Touche or
other independent public accountants acceptable to the Agent and the
Required Lenders;
(c) as soon as available and in any event within 45 days after the
end of the first three Fiscal Quarters of each Fiscal Year and within 90
days after the end of each Fiscal Year, commencing after the Initial
Borrowing Date, a certificate, executed by the chief financial Authorized
Officer of the Parent, showing (in reasonable detail and with appropriate
calculations and computations in all respects reasonably satisfactory to
the Agent) compliance with the financial covenants set forth in Section
7.2.3 and stating that such Authorized Officer is not aware of any Default
that has occurred and is continuing or, if such Authorized Officer is aware
of any such Default, describing such Default and the action, if any, which
the Parent is taking and proposes to take with respect thereto;
- 32 -
<PAGE>
(d) as soon as possible and in any event within 3 days after any
Responsible Officer of the Parent obtains knowledge of the occurrence of
each Default, a statement of the chief financial Authorized Officer of the
Parent setting forth details of such Default and the action which the
Parent has taken and proposes to take with respect thereto;
(e) as soon as possible and in any event (i) within 3 Business Days
after any Responsible Officer of the Parent obtains knowledge of the
occurrence of any litigation, action, proceeding, or labor controversy
which purports to affect the legality, validity or enforceability of this
Agreement or any other Credit Document, or of any adverse development
therein, notice thereof and, upon the request of the Agent (including any
Lender reasonably through the Agent), copies of all documentation relating
thereto, and (ii) within 45 days after the end of each Fiscal Quarter a
report of the Parent regarding all litigation, actions, proceedings and
labor controversies affecting the Parent or any of its Subsidiaries, or any
of their respective properties, businesses, assets or revenues which have
resulted in, or could reasonably be expected to result in, a Materially
Adverse Effect;
(f) promptly after the sending or filing thereof, copies of all
reports which the Parent sends to its securityholders generally, and all
reports, statements, notices and other communications which the Parent or
any of its Subsidiaries files with the Securities and Exchange Commission
or any national securities exchange;
(g) immediately upon becoming aware of the institution of any steps
by the Parent or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such failure
is sufficient to give rise to a Lien under section 302(f) of ERISA, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that the Parent furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan which could result in the incurrence by the Parent or the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Parent or the Borrower with
respect to any post-retirement Welfare Plan benefit, notice thereof and
copies of all documentation relating thereto;
(h) to the extent not otherwise required under any of the preceding
clauses of this Section 7.1.1, concurrently when received by the Parent or
the Borrower from, or furnished by the Parent or the Borrower to, any
- 33 -
<PAGE>
holder of any of its Indebtedness, copies of any written communication
received by the Parent or the Borrower from, and information furnished by
the Parent or the Borrower to, any such holder in respect of any default or
alleged default with respect to such Indebtedness; and
(i) such other information respecting the condition or operations,
financial or otherwise, of the Parent or any of its Subsidiaries as any
Lender through the Agent may from time to time reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Parent will, and will cause
each of its Significant Subsidiaries to, comply with all Applicable Law,
including:
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation, except as otherwise expressly
permitted by Section 7.2.4; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books;
in each such case where such non-compliance, singly or in the aggregate, has
resulted or could be reasonably expected to result in a Materially Adverse
Effect.
SECTION 7.1.3. Maintenance of Properties. The Parent will, and will cause
each of its Significant Subsidiaries to, maintain, preserve, protect and keep
its material properties in good repair, working order and condition, normal wear
and tear and damage by the elements or casualty excepted, and make necessary and
proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times unless the Parent
determines in good faith that the continued maintenance of any of its properties
is no longer economically desirable.
SECTION 7.1.4. Insurance. The Parent will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance, including self-insurance in such amounts as is customary in
the case of similar businesses, with respect to its properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in the case of similar businesses from time to time and, in any
event, as required by any Applicable Law and will, within 90 days after the end
of each Fiscal Year, furnish to each Lender a certificate of an Authorized
- 34 -
<PAGE>
Officer of the Parent setting forth the nature and extent of all insurance
maintained by the Parent and its Subsidiaries in accordance with this Section
7.1.4.
SECTION 7.1.5. Books and Records. The Parent will, and will cause each of
its Subsidiaries to, keep books and records which accurately reflect in all
material respects all of its business affairs and transactions and permit the
Agent and each Lender or any of their respective representatives, at reasonable
times and intervals and, so long as no Default has occurred and is continuing,
upon prior reasonable notice, to visit all of its offices, to discuss its
financial matters with its officers and its independent public accountant (and
the Parent hereby authorizes such independent public accountant to discuss the
Parent's financial matters with each Lender or its representatives whether or
not any representative of the Parent is present) and to examine (and, at the
expense of the Parent, photocopy extracts from) any of its books or other
corporate records; provided that unless a Default has occurred and is
continuing, the Parent will only be required to pay the expenses of the Agent
for one visit per year. The Parent shall pay any fees of such independent
public accountant incurred in connection with the Agent's or any Lender's
exercise of its rights pursuant to this Section 7.1.5.
SECTION 7.1.6. Environmental Covenant The Parent will, and will cause each
of its Subsidiaries to,
(a) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws, except where such non-compliance, singly or in the
aggregate, does not and could not reasonably be expected to result in a
Materially Adverse Effect;
(b) promptly notify the Agent and provide copies upon receipt of all
written claims, complaints, notices or inquiries relating to the condition
of its facilities and properties as they relate to compliance with or
liability under Environmental Laws; and
(c) provide such information and certifications which the Agent
(including any Lender reasonably through the Agent) may reasonably request
from time to time to evidence compliance with this Section 7.1.6.
- 35 -
<PAGE>
SECTION 7.2. Negative Covenants. The Parent and the Borrower agree with
the Agent and each Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Parent and the Borrower
will perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Indebtedness. The Borrower will not, and will not permit
any Subsidiary thereof to, create, incur, assume or be or become otherwise
liable for any Indebtedness, except (without duplication) the following:
(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness identified in Item 7.2.1(b) ("Ongoing Indebtedness")
of the Disclosure Schedule;
(c) Indebtedness identified in Item 7.2.1(c) ("Indebtedness to be
Paid") of the Disclosure Schedule until the date, if any, therein
identified for the payment in full thereof or, if no such date is therein
identified, the Amendment Effective Date;
(d) secured Indebtedness to finance or refinance the acquisition of
items of equipment or distribution facilities (including related real
property and improvements thereto) in the ordinary course of business in a
principal amount not exceeding an amount equal to the total acquisition
cost thereof;
(e) unsecured Indebtedness in the ordinary course of business (other
than Indebtedness for or in respect of borrowed money), including trade
credit on normal and customary terms and Hedging Obligations;
(f) Indebtedness in respect of Capitalized Lease Liabilities;
(g) secured Indebtedness of any Person acquired under Section 7.2.4
(other than any such Indebtedness incurred in anticipation of such
acquisition) that cannot then be refinanced without material premium or
other cost;
(h) Indebtedness consisting of recourse obligations in respect of any
Permitted Receivables Transaction;
(i) intercompany Indebtedness;
(j) secured Indebtedness in the ordinary course of business in an
aggregate principal amount at any time, when added to then outstanding
Indebtedness of the kind described in clause (d) or (g), not to exceed an
- 36 -
<PAGE>
amount equal to 10% of the Net Worth of the Parent at the end of the most
recently ended Fiscal Quarter;
(k) unsecured Indebtedness under one or more uncommitted lines of
credit with one or more Lenders in an aggregate principal amount at any
time not exceeding $50,000,000;
(l) secured Indebtedness under Reverse Repos in an aggregate
principal amount at any time not exceeding $50,000,000;
(m) Indebtedness in respect of letters of credit (other than letters
of credit supporting Indebtedness for or in respect of borrowed money)
issued for the account of the Borrower or any Subsidiary in the ordinary
course of business;
(n) Indebtedness in respect of commercial paper issued and sold in
the commercial paper market in an aggregate principal or face amount not to
exceed the then Total Commitment Amount at any time outstanding; and
(o) other unsecured Indebtedness in the ordinary course of business
in an aggregate principal amount at any time if, after giving pro forma
effect to such Indebtedness as if such Indebtedness and all other
Indebtedness incurred since the first day of the most recently ended
12-month period for which the Agent has received financial statements under
Section 7.1.1 had been incurred, and proceeds thereof had been applied, on
such first day, there would not be a Default under Section 7.2.3;
provided that Indebtedness permitted under clauses (d) and (g) of this Section
7.2.1 shall not exceed $30,000,000 in the aggregate outstanding at any time.
SECTION 7.2.2. Liens. The Parent will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of
its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens securing payment of the Obligations;
(b) Liens outstanding on the date hereof as set forth in Item
7.2.2(b) ("Existing Liens") of the Disclosure Schedule;
(c) Liens granted to secure payment of Indebtedness (x) of the kind
described in Section 7.2.1(d) covering only those items of equipment or
- 37 -
<PAGE>
distribution facilities acquired, (y) of the kind described in Section
7.2.1(g) or (l) covering only those properties acquired or to be
repurchased, as the case may be, or (z) of the kind described in Section
7.2.1(j);
(d) Liens incurred or arising in the ordinary course of business
(other than securing Indebtedness for or in respect of borrowed money),
which, singly or in the aggregate, do not and could not be reasonably
expected to result in a Materially Adverse Effect;
(e) judgment Liens in respect of any judgment or order for the
payment of money of not greater than $10,000,000 or, if greater than
$10,000,000, in existence less than 20 days after the entry thereof or with
respect to which execution has been stayed or the payment of which is
covered in full by insurance maintained with responsible insurance
companies which have acknowledged such coverage thereof in writing;
(f) Liens arising in connection with any Permitted
Receivables Transaction; and
(g) Liens arising in connection with any Capitalized Lease
Liabilities.
SECTION 7.2.3. Financial Condition. The Parent will not permit on
or after the Initial Borrowing Date:
(a) its Net Worth on the last day of any Fiscal Quarter to be less
than the Minimum Net Worth Target;
(b) its Leverage Ratio on the last day of any Fiscal Quarter to be
more than 55%; and
(c) its Interest Coverage Ratio on the last day of any Fiscal Quarter
for the four (4) consecutive Fiscal Quarters then ended to be less than
3.0:1.0.
SECTION 7.2.4. Consolidation, Merger, etc. The Parent will not, and will
not permit any of its Significant Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, or purchase or
otherwise acquire all or substantially all of the assets of any Person (or of
any division thereof), or sell, lease or otherwise dispose of all or any of the
assets of the Parent or any Subsidiary thereof, except that, so long as no
Default has occurred and is continuing or would occur after giving effect
thereto, (x) the Parent and its Subsidiaries may make Permitted Asset Sales and
any Permitted Receivables Transaction and (y) the Borrower or any of its
Subsidiaries may liquidate or dissolve voluntarily into, merge with and into, or
- 38 -
<PAGE>
purchase all or substantially all of the assets of any Person, or acquire such
Person by merger, if after giving pro forma effect to such transaction as if
such transaction had occurred on the first day of the most recently ended
12-month period for which the Agent has received financial statements under
Section 7.1.1, there would not be a Default under Section 7.2.3 and, in the case
of any merger of the Parent, if it or the Borrower is the survivor thereof and,
in the case of any merger of the Borrower, if the survivor thereof is the Parent
or a wholly-owned Subsidiary of the Parent.
SECTION 7.2.5. Transactions with Affiliates. The Parent will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Parent or such
Subsidiary and is an arrangement or contract of the kind which would be entered
into by a prudent Person in the position of the Parent or such Subsidiary with a
Person which is not one of its Affiliates; provided that the Parent may enter
into, or cause, suffer or permit to exist any arrangement or contract regarding
executive compensation (including executive loans) or stock repurchases if such
arrangement or contract shall have been previously approved by a majority of
disinterested directors of the Parent.
SECTION 7.2.6. Business Activities. The Parent will not, and will not
permit any of its Subsidiaries to, engage in any business activity, except those
described in the first recital and other activities in the healthcare industry.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default. Each of the following events or
occurrences described in this Section 8.1 shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations The Parent or the Borrower shall
default in the payment or prepayment when due of any principal of any Loan, the
Parent or the Borrower shall default (and such default shall continue unremedied
for a period of 3 Business Days) in the payment when due of any interest on any
Loan, or the Parent or the Borrower shall default (and such default shall
continue unremedied for a period of 5 Business Days) in the payment when due of
any commitment fee or of any other Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the
Parent or the Borrower made or deemed to be made hereunder or in any other
- 39 -
<PAGE>
Credit Document or any other writing or certificate furnished by or on behalf of
the Parent or the Borrower to the Agent or any Lender for the purposes of or in
connection with this Agreement or any such other Credit Document (including any
certificates delivered pursuant to Article V) is or shall be incorrect when made
in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The
Parent or the Borrower shall default in the due performance and observance of
any of its obligations under Section 4.11, 7.1.1(d) or 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The
Parent or the Borrower shall default in the due performance and observance of
any other agreement contained herein or in any other Credit Document, and such
default shall continue unremedied for a period of 10 Business Days after the
earlier of (a) the date on which any Responsible Officer of the Parent or the
Borrower became aware of such default, and (b) notice thereof shall have been
given to the Parent and the Borrower by the Agent or any Lender.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any amount in respect of any Indebtedness (other
than Indebtedness described in Section 8.1.1 and, if timely repaid in full to
avoid default with respect thereto or repurchased as required by the terms
thereof, Indebtedness Required to be Refinanced) of the Parent or any of its
Subsidiaries in an aggregate principal amount of more than $10,000,000, or a
default shall occur in the performance or observance of any obligation or
condition with respect to such Indebtedness (other than any Indebtedness
Required to be Refinanced contemporaneously repaid in full or repurchased as
required by the terms thereof) in an aggregate principal amount of more than
$10,000,000 if the effect of such default is to accelerate the maturity of any
such Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of money
in excess of $10,000,000 shall be rendered against the Parent or any of its
Subsidiaries and shall remain unsatisfied and either:
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order and shall not have been stayed; or
- 40 -
<PAGE>
(b) there shall be any period of 20 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan:
(a) the institution of any steps by the Parent, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Parent or any such member could be required
to make a contribution to such Pension Plan, or could reasonably expect to
incur a liability or obligation to such Pension Plan, which would or could
be reasonably expected to result in a Materially Adverse Effect; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Bankruptcy, Insolvency, etc. The Parent, the Borrower or
any of its Significant Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit in writing
its inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
of its Subsidiaries or any property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any of its Subsidiaries
or for a substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged within 60
days; provided that the Parent and each Subsidiary hereby expressly
authorizes the Agent and each Lender to appear in any court conducting any
relevant proceeding during such 60-day period to preserve, protect and
defend their rights under the Credit Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Parent or any of its Subsidiaries, and, if
- 41 -
<PAGE>
any such case or proceeding is not commenced by the Parent or such
Subsidiary, such case or proceeding shall be consented to or acquiesced in
by the Parent or such Subsidiary or shall result in the entry of an order
for relief or shall remain for 60 days undismissed; provided that the
Parent and each Subsidiary hereby expressly authorizes the Agent and each
Lender to appear in any court conducting any such case or proceeding during
such 60-day period to preserve, protect and defend their rights under the
Credit Documents; or
(e) take any corporate action authorizing, or in furtherance of, any
of the foregoing.
SECTION 8.1.9. Change of Control. An Impermissible Change of Control
shall occur.
SECTION 8.1.10. Credit Document Ceases to Bind. Any Credit Document
ceases to be the legal, valid and binding obligation of the Parent or the
Borrower, as the case may be, enforceable against the Parent or the Borrower, as
the case may be, in accordance with its terms, for any reason.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described in
Section 8.1.8 shall occur with respect to the Parent or any Subsidiary, the
Commitments (if not theretofore terminated) shall automatically terminate, the
Stated Maturity Date shall automatically be accelerated and the outstanding
principal amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 8.1.8 with respect to the
Parent or any Subsidiary thereof) shall occur for any reason, whether voluntary
or involuntary, and be continuing, the Agent, upon the direction of the Required
Lenders, shall by notice to the Parent and the Borrower declare all or any
portion of the outstanding principal amount of the Loans and other Obligations
to be due and payable, the Stated Maturity Date to be accelerated and/or the
Commitments (if not theretofore terminated) to be terminated, whereupon the full
unpaid amount of such Loans and other Obligations which shall be so declared due
and payable shall be and become immediately due and payable, and/or, as the case
may be, the Commitments shall terminate, without further notice, demand or
presentment, which the Parent and the Borrower hereby waive to the fullest
extent permitted by Applicable Law.
- 42 -
<PAGE>
ARTICLE IX
THE AGENT
SECTION 9.1. Actions. Each Lender hereby appoints BankAmerica as its
Agent under and for purposes of this Agreement and each other Credit Document.
Each Lender authorizes the Agent to act on behalf of such Lender under this
Agreement and each other Credit Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agent
(with respect to which the Agent agrees that it will comply, except as otherwise
provided in this Section 9.1 or as otherwise advised by counsel), to exercise
such powers hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Each Lender hereby indemnifies (which
indemnity shall survive any termination of this Agreement) the Agent, pro rata
according to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted
against, the Agent in any way relating to or arising out of this Agreement and
any other Credit Document, including reasonable attorneys' fees, and as to which
the Agent is not reimbursed by the Parent and the Borrower. The Agent shall not
be required to take any action hereunder or under any other Credit Document, or
to prosecute or defend any suit in respect of this Agreement or any other Credit
Document, unless it is indemnified hereunder to its satisfaction. If any
indemnity in favor of the Agent shall be or become, in the determination of the
Agent inadequate, the Agent may call for additional indemnification from the
Lenders and cease to do the acts indemnified against hereunder until such
additional indemnity is given. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent.
SECTION 9.2. Funding Reliance, etc. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., Chicago
time, on the day prior to a Borrowing that such Lender will not make available
the amount which would constitute its Percentage of such Borrowing on the date
specified therefor, the Agent may assume that such Lender has made such amount
available to the Agent and, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If and to the extent that such Lender
shall not have made such amount available to the Agent, (a) such Lender agrees
- 43 -
<PAGE>
to repay the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date the Agent made such amount
available to the Borrower to the date such amount is repaid to the Agent, at an
interest rate equal for the first 3 days of such period to the Federal Funds
Rate from time to time in effect and thereafter at the interest rate applicable
at the time to Loans comprising such Borrowing, together with such other
compensatory amounts as may be required to be paid by such Lender to the Agent
under the Rules for Interbank Cooperation of the Council on International
Banking or the Clearinghouse Compensation Committee, as the case may be, as in
effect from time to time and (b) the Borrower agrees to repay to the Agent
forthwith upon demand such corresponding amount together with interest thereon,
for each day from the date the Agent made such amount available to the Borrower
to the date such amount is repaid to the Agent, at the interest rate applicable
at the time to Loans comprising such Borrowing.
SECTION 9.3. Exculpation. Neither the Agent nor any of its respective
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other
Credit Document, or in connection herewith or therewith, except for their own
willful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Credit Document nor to
make any inquiry respecting the performance by the Parent or the Borrower of
their respective obligations hereunder or under any other Credit Document. Any
such inquiry which may be made by the Agent shall not obligate it to make any
further inquiry or to take any action. The Agent shall be entitled to rely upon
advice of counsel concerning legal matters and upon any notice, consent,
certificate, statement or writing which the Agent believes to be genuine and to
have been presented by a proper Person.
SECTION 9.4. Successor. The Agent may resign as such at any time upon at
least 30 days' prior notice to the Parent and the Borrower and all Lenders, such
resignation to be effective upon the appointment of a successor Agent as
provided below. If the Agent at any time shall resign, the Required Lenders may
appoint another Lender, which (so long as no Default has occurred and is
continuing) shall be reasonably acceptable to the Parent and the Borrower, as a
successor Agent which shall thereupon become the Agent hereunder. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which (so long as no Default has occurred and is
continuing) shall be reasonably acceptable to the Parent and the Borrower, and
- 44 -
<PAGE>
which shall be one of the Lenders or a commercial banking institution organized
under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of
a commercial banking institution, and having a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as the Agent, the provisions of:
(a) this Article IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Agent under this Agreement;
and
(b) Sections 10.3 and 10.4 shall continue to inure to its benefit.
SECTION 9.5. Loans by Agent. The Agent shall have the same rights and
powers with respect to the Loans made by it or any of its Affiliates as any
other Lender and may exercise the same as if it were not the Agent. The Agent
and its Affiliates may accept deposits from, lend money to, and generally engage
in any kind of business with the Parent or the Borrower or any Subsidiary or
Affiliate thereof as if BankAmerica was not the Agent hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Parent and the Borrower, this
Agreement, the other Credit Documents (the terms and provisions of which being
satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitment. Each Lender also acknowledges that it will,
independently of the Agent and each other Lender, and based on such other
documents, information and investigations as it shall deem appropriate at any
time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Credit Document.
SECTION 9.7. Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Parent or the Borrower pursuant to this Agreement (unless concurrently
delivered to the Lenders by the Parent or the Borrower). The Agent will
distribute to each Lender each document or instrument received for its account
- 45 -
<PAGE>
and copies of all other communications received by the Agent from the Parent or
the Borrower for distribution to the Lenders by the Agent in accordance with the
terms of this Agreement. To the extent otherwise permitted hereunder, the Agent
will request of the Parent or the Borrower any information reasonably requested
by any Lender.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Credit Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Parent and the Borrower and the Required Lenders; provided that no such
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective
unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of "Required
Lenders", increase the Total Commitment Amount or the Percentage of any
Lender, reduce or extend the due date of any fees described in Article III
or extend the Commitment Termination Date or the Final Maturity Date shall
be made without the consent of each Lender;
(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on any Contract Loan
(or reduce the principal amount of or rate of interest on any Contract
Loan) shall be made without the consent of each Lender; or
(d) affect adversely the interests, rights or obligations of the
Agent qua the Agent shall be made without consent of the Agent.
No failure or delay on the part of the Agent, any Lender or the holder of
any Note in exercising any power or right under this Agreement or any other
Credit Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Parent or the Borrower in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or approval by the
Agent, any Lender or the holder of any Note under this Agreement or any other
Credit Document shall, except as may be otherwise stated in such waiver or
- 46 -
<PAGE>
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder. All remedies of the Agent and the Lenders under the
Credit Documents and Applicable Law are cumulative and remain available until
the Obligations shall have been paid in full.
SECTION 10.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Credit Document shall be in
writing or by Telex or by facsimile and addressed, delivered or transmitted to
such party at its address, Telex or facsimile number set forth below its
signature hereto or set forth in the Assignment Agreement or at such other
address, Telex or facsimile number as may be designated by such party in a
notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by Telex or
facsimile, shall be deemed given when transmitted (if such transmittal is
confirmed by answerback in the case of Telexes and telephone in the case of
facsimiles).
SECTION 10.3. Payment of Costs and Expenses. The Parent and the Borrower
agree to pay on demand all reasonable expenses of the Agent (including the
reasonable fees and charges of counsel to the Agent and of local counsel, if
any, who may be retained by counsel to the Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Credit Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Credit Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(b) the preparation and review of the form of this Agreement or any
other Credit Document.
The Parent and the Borrower further agree to pay, and to save the Agent and the
Lenders harmless from all liability for, any stamp, documentary or other similar
taxes which may be payable in connection with the execution or delivery of this
Agreement, the borrowings hereunder, or the issuance of the Notes or any other
Credit Document. The Parent and the Borrower also agree to reimburse the Agent
and each Lender upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and legal expenses) incurred by the Agent or such
Lender in connection with (x) the negotiation of any restructuring or
- 47 -
<PAGE>
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Parent and the Borrower hereby indemnify, exonerate and hold the Agent and
each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, whether arising at law or by statute, and reasonable expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and charges (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and any other
Credit Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Parent or the Borrower as the result of any
determination by the Required Lenders pursuant to Article V not to fund any
Borrowing but excluding any otherwise Indemnified Liabilities in respect of
which the Parent or the Borrower, as the case may be, shall have finally
prevailed in an action or other proceeding by or against any Lender in
respect of any additional or other amount claimed by such Lender under
Article IV) or which solely arise from or are solely attributable to a
Lender's willful failure to make a Loan required to be made hereunder;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Parent or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not the Agent or such Lender is party thereto of which
investigation, litigation or proceeding each Indemnified Party shall notify
the Parent or the Borrower reasonably promptly after a Responsible Officer
of such Indemnified Party shall learn thereof;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Parent or the Borrower
- 48 -
<PAGE>
or any Subsidiary thereof of any Hazardous Material of which investigation,
litigation or proceeding each Indemnified Party shall notify the Parent or
the Borrower reasonably promptly after a Responsible Officer of such
Indemnified Party shall learn thereof; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Parent or any Subsidiary thereof of any
Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Parent or
such Subsidiary,
except for any such Indemnified Liabilities finally determined by a court of
competent jurisdiction to have arisen for the account of a particular
Indemnified Party by reason of the relevant Indemnified Party's gross negligence
or willful misconduct. Where two or more Indemnified Parties are subject to the
same action or proceeding they will, to the extent practicable and permitted
under applicable professional legal ethical rules, engage but one law firm to
represent such Indemnified Parties. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Parent and the Borrower
hereby agree to make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under Applicable Law.
SECTION 10.5. Survival. The obligations of the Parent and the Borrower
under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the
Lenders under Section 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments. The representations and warranties made by the Parent and the
Borrower in this Agreement and in each other Credit Document shall survive the
execution and delivery of this Agreement and each such other Credit Document.
SECTION 10.6. Severability. Any provision of this Agreement or any other
Credit Document which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Credit Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of
each other Credit Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Credit
- 49 -
<PAGE>
Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be executed
by the Borrower and the Agent and be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT AND EACH
OTHER CREDIT DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement and the other
Credit Documents constitute the entire understanding among the parties hereto
with respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided that:
(a) neither the Parent nor the Borrower may assign or transfer its
rights or obligations hereunder without the prior written consent of the
Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Contract Loans and Commitment;
Participations in Contract Loans. Each Lender may assign, or sell
participations in, its Contract Loans and Commitment to one or more other
Persons in accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Any Lender,
(a) with notice to the Parent and the Borrower and the Agent and with
the written consent of the Agent (which consent shall not be unreasonably
delayed or withheld), may at any time assign and delegate to one or more
Eligible Assignees, and
(b) with notice to the Parent and the Borrower and the Agent, but
without the consent of the Agent, may assign and delegate to any of its
Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any portion of such Lender's Commitment and the
- 50 -
<PAGE>
rights and obligations related thereto under this Agreement and the other Credit
Documents; provided that
(i) any such Assignee Lender will comply, if applicable, with
the provisions contained in the last sentence of Section 4.6,
(ii) no such assignment and delegation of a portion of such
Lender's Commitment or Contract Loans shall be in a principal amount
of less than the Minimum Assignment Amount, unless such assignment and
delegation is made to another Lender or the Parent and the Borrower
shall consent thereto,
(iii) no Lender may make any assignment and delegation unless
after giving effect thereto such Lender either (A) has no Commitment
or (B) would continue to have a Commitment of not less than the
Minimum Retained Amount unless the Parent and the Borrower shall
consent thereto,
(iv) each such assignment and delegation shall be of a constant,
and not a varying, percentage of the assigning Lender's Commitment and
Contract Loans and such Lender's rights and assignable obligations
with respect thereto; and
(v) the Borrower and the Agent shall be entitled to continue to
deal solely and directly with such assigning Lender in connection with
the interests so assigned and delegated to an Assignee Lender until
(A) written notice of such assignment and delegation,
together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall have been
given to the Parent and the Borrower and the Agent by such Lender
and such Assignee Lender,
(B) such Assignee Lender shall have executed and delivered
to the Borrower and the Agent an Assignment Agreement, accepted
by the Agent, which acceptance the Agent shall not unreasonably
withhold or delay, and
(C) the processing fees described below shall have been
paid.
From and after the date that the Agent accepts such Assignment Agreement, (x)
the Assignee Lender thereunder shall be deemed automatically to have become a
party hereto and to the Bid Trust Agreement and to the extent of the Commitment
- 51 -
<PAGE>
and, if any, Contract Loan(s) and related rights and obligations assigned and
delegated to such Assignee Lender in connection with such Assignment Agreement,
shall have the rights and obligations of a Lender hereunder and under the other
Credit Documents, and (y) the assignor Lender, to the extent of the Commitment
and, if any, Contract Loan(s) and related rights and obligations assigned and
delegated by it in connection with such Assignment Agreement, shall be released
from its obligations hereunder and under the other Credit Documents. Accrued
interest on assigned Obligations, and accrued fees, shall be paid as provided in
the Assignment Agreement or, if the Assignment Agreement does not so provide, to
the relevant Assignee Lender. Accrued interest and accrued fees shall be paid
at the same time or times provided in the Note and in this Agreement. Such
assignor Lender or such Assignee Lender must also pay a processing fee to the
Agent upon delivery of any Assignment Agreement in the amount of $2,500. Any
attempted assignment and delegation not made in accordance with this Section
10.11.1 shall be null and void.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one
or more Persons (each such Person being herein called a "Participant")
participating interests in any of the Contract Loans, Commitment, or other
interests of such Lender hereunder; provided that
(a) no participation contemplated in this Section 10.11 shall relieve
such Lender from its Commitment or its other obligations hereunder or under
any other Credit Document and such Lender shall be fully entitled to the
benefits of this Agreement, including under Articles IV and X, as if no
such participation had been sold,
(b) such Lender shall remain solely responsible for the performance
of its Commitment and such other obligations,
(c) the Parent and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the other Credit
Documents,
(d) such Lender may not agree with any Participant, unless such
Participant is an Affiliate of such Lender, or is itself a Lender, that
such Participant shall be entitled to require such Lender to take or
refrain from taking any action hereunder or under any other Credit
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any action which
would modify Section 10.1, change the definition of "Required Lenders",
- 52 -
<PAGE>
increase the Total Commitment Amount or the Percentage of any Lender,
reduce any fees described in Article III, or extend the final scheduled due
date for, or reduce the amount of, principal of or interest on any Contract
Loan, and
(e) the Borrower shall not be required to pay any amount under
Sections 4.3, 4.5 and 4.6 that is greater than the amount which it would
have been required to pay had no participating interest been sold.
SECTION 10.11.3. Federal Reserve Bank Assignments. Notwithstanding
anything to the contrary contained or implied herein, any Lender may assign and
pledge all or any portion of its Commitment and Loans, if any, and other rights
related thereto to a Federal Reserve Bank; provided that such an assignment
shall not relieve such Lender from its obligations hereunder. If, in order to
effect such an assignment or pledge, a Lender requires a promissory note
evidencing such Loans, then the Borrower will execute and deliver to such Lender
a promissory note payable to the order of such Lender in a maximum principal
amount equal, in the case of Contract Loans, to such Lender's then Commitment,
and in the case of Bid Loans, the aggregate principal amount thereof and
otherwise in the form of Exhibit A-1 or A-2, as the case may be, promptly
following such Lender's request therefor. From and after the execution and
delivery of such promissory note, such Lenders' Contract Loans or Bid Loans, as
the case may be, shall be evidenced thereby and not by the Contract Note or the
Bid Note, as the case may be.
SECTION 10.12. Confidentiality. The Agent and the Lenders shall hold all
non-public information (which has been identified as such by the Parent or the
Borrower) obtained pursuant to the requirements of this Agreement in accordance
with their customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure to any of their examiners, Affiliates, outside auditors,
counsel and other professional advisors in connection with this Agreement or as
reasonably required by any bona fide prospective Eligible Assignee or
Participant or any other Person acquiring an interest in any Loan by operation
of law (a "Transferee") or as required or requested by any governmental agency
or representative thereof or pursuant to legal process; provided that:
(a) unless specifically prohibited by Applicable Law, each Lender
shall notify the Parent and the Borrower of any request by any governmental
agency or representative thereof (other than any such request in connection
with an examination of the financial condition of such Lender by such
- 53 -
<PAGE>
governmental agency) for disclosure of any such non-public information
prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this Section 10.12, each
Lender shall require any such bona fide prospective Eligible Assignee or
Participant or Transferee receiving a disclosure of non-public information
to agree in writing:
(i) to be bound by this Section 10.12; and
(ii) to require such Person to require any other Person to whom
such Person discloses such non-public information to be similarly
bound by this Section 10.12; and
(c) except as may be required by an order of a court of competent
jurisdiction and to the extent set forth therein, no Lender shall be
obligated or required to return any materials furnished by the Parent or
the Borrower or any Subsidiary thereof.
SECTION 10.13. Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Credit Document,
with the Parent or the Borrower or any Affiliate thereof in which the Parent or
the Borrower or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE PARENT OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE, SITTING IN NEW YORK CITY; PROVIDED
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE
FOUND. THE PARENT AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH
CASE, SITTING IN NEW YORK CITY FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE PARENT AND THE BORROWER FURTHER
IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
- 54 -
<PAGE>
PARENT AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY OR EITHER OF THEM MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE PARENT OR THE BORROWER
HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR
ITS PROPERTY, THE PARENT AND THE BORROWER HEREBY IRREVOCABLY WAIVE SUCH IMMUNITY
IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE
PARENT AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE PARENT
OR THE BORROWER. THE PARENT AND THE BORROWER ACKNOWLEDGE AND AGREE THAT THEY
HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER CREDIT DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER CREDIT DOCUMENT.
SECTION 10.16. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any Applicable Law.
SECTION 10.17. Bid Trust Agreement Terminated. The Bid Trust Agreement
(as defined in the Existing Credit Agreement) is hereby terminated.
- 55 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BORROWER:
--------
BERGEN BRUNSWIG DRUG COMPANY
By /s/ Eric J. Schmitt
---------------------------------
Title: Vice President, Treasurer
Address:
4000 Metropolitan Drive
Orange, California 92668
Telephone No.: (714) 385-4000
Facsimile No.: (714) 385-8808
Telex No.: _________________________
(Answerback _____________)
Attention: Eric J. Schmitt
Vice President, Treasurer
PARENT:
-------
BERGEN BRUNSWIG CORPORATION
By /s/ Neil F. Dimick
---------------------------------
Title: Executive Vice President,
Chief Financial Officer
Address:
4000 Metropolitan Drive
Orange, California 92668
Telephone No.: (714) 385-4000
Facsimile No.: (714) 978-7415
Telex No.: _________________________
(Answerback _____________)
Attention: Neil F. Dimick
Executive Vice President,
Chief Financial Officer
- 56 -
<PAGE>
AGENT:
------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/ James Hinson
---------------------------------
Title: Vice President
Address:
Global Agency #5596
1455 Market Street
12th Floor
San Francisco, California 94103
Telephone No.: (415) 622-6188
Facsimile No.: (415) 622-4894
Attention: James Hinson
Agency Management Services
S - 2
<PAGE>
LENDERS:
-------
PERCENTAGE
- ----------
13.142857143% BANK OF AMERICA ILLINOIS
By /s/ Brian Jackson
---------------------------------
Title: Executive Vice President
Domestic Office:
231 South LaSalle Street
Chicago, Illinois 60697
Telephone No.: (312) 828-8938
Facsimile No.: (312) 987-5896
(312) 987-5891
Telex No.: _________________________
(Answerback _____________)
Attention: Virginia Marroquin
Eurodollar Office:
231 South LaSalle Street
Chicago, Illinois 60697
Telephone No.: (312) 828-8938
Facsimile No.: (312) 987-5896
(312) 987-5891
Telex No.: _________________________
(Answerback _____________)
Attention: Virginia Marroquin
S - 3
<PAGE>
PERCENTAGE
- ----------
7.142857143% THE BANK OF NEW YORK
By /s/ Lisa Y. Brown
---------------------------------
Title: Vice President
Domestic Office:
One Wall Street
22nd Floor
New York, New York 10286
Telephone No.: (212) 635-6743
Facsimile No.: (212) 635-6877
Telex No.: _________________________
(Answerback _____________)
Attention: Rebecca S. Kyman
Eurodollar Office:
One Wall Street
22nd Floor
New York, New York 10286
Telephone No.: (212) 635-6743
Facsimile No.: (212) 635-6877
Telex No.: _________________________
(Answerback _____________)
Attention: Rebecca S. Kyman
S - 4
<PAGE>
PERCENTAGE
- ----------
7.142857143% CHEMICAL BANK
By /s/ Hans B. Von Nolde
---------------------------------
Title:
Domestic Office:
270 Park Avenue
10th Floor
New York, New York 10017
Telephone No.: (212) 270-3052
Facsimile No.: (212) 270-3279
Telex No.: _________________________
(Answerback _____________)
Attention: Robert L. Parker
Eurodollar Office:
270 Park Avenue
10th Floor
New York, New York 10017
Telephone No.: (212) 270-3052
Facsimile No.: (212) 270-3279
Telex No.: _________________________
(Answerback _____________)
Attention: Robert L. Parker
S - 5
<PAGE>
PERCENTAGE
- ----------
7.142857143% CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By /s/ Thierry F. Vincent
---------------------------------
Title: Authorized Signature
CREDIT LYONNAIS LOS ANGELES BRANCH
By /s/ Thierry F. Vincent
---------------------------------
Title: Vice President
Domestic Office:
Credit Lyonnais Los Angeles Branch
515 South Flower Street
22nd Floor
Los Angeles, California 90071
Telephone No.: (213) 362-5957
Facsimile No.: (213) 623-3437
Telex No.: _____6831990_____________
(Answerback _CREDLAUW____)
Attention: Steven Yoon
Eurodollar Office:
Credit Lyonnais Cayman Island
Branch
c/o Credit Lyonnais Los Angeles
Branch
515 South Flower Street
22nd Floor
Los Angeles, California 90071
Telephone No.: (213) 362-5957
Facsimile No.: (213) 623-3437
Telex No.: _____6831990_____________
(Answerback __CREDLAUW___)
Attention: Steven Yoon
S - 6
<PAGE>
PERCENTAGE
- ----------
7.142857143% CREDIT SUISSE
By /s/ Marilou Palenzuela /s/ Deborah Shea
-------------------------------------------
Title: Member of Senior Associate
Management
Domestic Office:
633 West Fifth Street
Los Angeles, California 90071
Telephone No.: (213) 955-8276
Facsimile No.: (213) 955-8245
Telex No.: _________________________
(Answerback _____________)
Attention: Deborah Shea
Eurodollar Office:
633 West Fifth Street
Los Angeles, California 90071
Telephone No.: (213) 955-8276
Facsimile No.: (213) 955-8245
Telex No.: _________________________
(Answerback _____________)
Attention: Deborah Shea
S - 7
<PAGE>
PERCENTAGE
- ----------
6.571428571% FIRST INTERSTATE BANK OF CALIFORNIA
By /s/ Daniel H. Hom /s/ Gregory P. Brown
-------------------------------------------
Title: Vice President Vice President
Domestic Office:
FICAL Commercial Loan Service
Center
1055 Wilshire Boulevard
B10-6
Los Angeles, California 90017
Telephone No.: (213) 614-3368
Facsimile No.: (213) 614-2569
Telex No.: _________________________
(Answerback _____________)
Attention: Daniel H. Hom
Eurodollar Office:
FICAL Commercial Loan Service
Center
1055 Wilshire Boulevard
B10-6
Los Angeles, California 90017
Telephone No.: (213) 614-3368
Facsimile No.: (213) 614-2569
Telex No.: _________________________
(Answerback _____________)
Attention: Daniel H. Hom
S - 8
<PAGE>
PERCENTAGE
- ----------
10.285714286% PNC BANK, NATIONAL ASSOCIATION
By /s/ Anthony L. Trunzo
-------------------------------------------
Title: Vice President
Domestic Office:
55 South Lake Avenue
Suite 650
Pasadena, California 91101
Telephone No.: (818) 568-9423
Facsimile No.: (818) 568-0653
Telex No.: _________________________
(Answerback _____________)
Attention: Anthony L. Trunzo
Eurodollar Office:
55 South Lake Avenue
Suite 650
Pasadena, California 91101
Telephone No.: (818) 568-9423
Facsimile No.: (818) 568-0653
Telex No.: _________________________
(Answerback _____________)
Attention: Anthony L. Trunzo
S - 9
<PAGE>
PERCENTAGE
- ----------
7.142857143% SOCIETE GENERALE, LOS ANGELES BRANCH
By /s/ George Chen
-------------------------------------------
Title: V.P.
Domestic Office:
2029 Century Park East
Suite 2900
Los Angeles, California 90067
Telephone No.: (310) 788-7105
Facsimile No.: (310) 551-1537
Telex No.: _________________________
(Answerback _____________)
Attention: George Chen
David Bird
Eurodollar Office:
2029 Century Park East
Suite 2900
Los Angeles, California 90067
Telephone No.: (310) 788-7105
Facsimile No.: (310) 551-1537
Telex No.: _________________________
(Answerback _____________)
Attention: George Chen
David Bird
S - 10
<PAGE>
PERCENTAGE
- ----------
10.285714286% TORONTO DOMINION (TEXAS), INC.
By /s/ Warren Finlay
-------------------------------------------
Title: Vice President
Domestic Office:
909 Fannin Street
17th Floor
Houston, Texas 77010
Telephone No.: (713) 653-8244
Facsimile No.: (713) 951-9921
Attention: Jano Mott
Eurodollar Office:
909 Fannin Street
17th Floor
Houston, Texas 77010
Telephone No.: (713) 653-8244
Facsimile No.: (713) 951-9921
Attention: Jano Mott
S - 11
<PAGE>
PERCENTAGE
7.142857143% TRUST COMPANY BANK
- ------------
By /s/ Frank Bennett
-------------------------------------------
Title: Vice President
By /s/ Kim Coleman
-------------------------------------------
Title: Banking Officer
Domestic Office:
25 Park Place
Mail Center 124
Atlanta, Georgia 30303
Telephone No.: (404) 588-7715
Facsimile No.: (404) 827-6270
Telex No.: _________________________
(Answerback _____________)
Attention: Frank Bennett
Eurodollar Office:
25 Park Place
Mail Center 124
Atlanta, Georgia 30303
Telephone No.: (404) 588-7715
Facsimile No.: (404) 827-6270
Telex No.: _________________________
(Answerback _____________)
Attention: Frank Bennett
S - 12
<PAGE>
PERCENTAGE
10.285714286% WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Dave Gaines
-------------------------------------------
Title: Senior Vice President
Domestic Office:
191 Peachtree Street NE
Mail Code 370
Atlanta, Georgia 30303
Telephone No.: (404) 332-5760
Facsimile No.: (404) 332-6898
Telex No.: _________________________
(Answerback _____________)
Attention: William H. Duncan
Eurodollar Office:
191 Peachtree Street NE
Mail Code 370
Atlanta, Georgia 30303
Telephone No.: (404) 332-5760
Facsimile No.: (404) 332-6898
Telex No.: _________________________
(Answerback _____________)
Attention: William H. Duncan
S - 13
<PAGE>
PERCENTAGE
- -----------
6.571428571% WELLS FARGO BANK, N.A.
By /s/ David Neuman
-------------------------------------------
Title:
Domestic Office:
420 Montgomery Street
MAC 0101-091
San Francisco, California 94163
Telephone No.: (415) 396-4067
Facsimile No.: (415) 421-1352
Telex No.: ___184904________________
(Answerback ___WELLS UT__)
Attention: David Neumann
Eurodollar Office:
420 Montgomery Street
MAC 0101-091
San Francisco, California 94163
Telephone No.: (415) 396-4067
Facsimile No.: (415) 421-1352
Telex No.: ___184904________________
(Answerback ___WELLS UT__)
Attention: David Neumann
____
100%
S - 14
<PAGE>
SCHEDULE I
DEFINED TERMS
-------------
Affected Lender" means (x) any Lender that has given notice to the Borrower
pursuant to or is entitled to the benefits of Section 4.1, 4.3, 4.4, 4.5 or 4.6
if, as a result thereof, the Parent and the Borrower have become obligated to
pay such Lender material amounts, or the obligations of such Lender to make or
continue, or convert Loans into, Eurodollar Rate Loans has been suspended, (y)
any Lender that the Parent and the Borrower reasonably believe will not make its
Loan(s) as a result of such Lender's determination that the conditions precedent
to a Borrowing will not be satisfied, or (z) any Lender that has willfully
failed to make any Loan required to be made hereunder if such failure shall
continue for at least 2 Business Days after the Parent and the Borrower shall
have given written notice thereof to such Lender.
"Affecting Event" means the event or condition giving rise to a notice
under Section 4.1, 4.3, 4.4, 4.5 or 4.6 from any Affected Lender.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). For purposes of this definition of the term
"Affiliate", a Person shall be deemed to be "controlled by" any other Person if
such other Person possesses, directly or indirectly, power:
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Agent" is defined in the preamble and includes each other Person as shall
have subsequently been appointed as the successor Agent pursuant to Section 9.4.
"Agent's Fee Letter" means the fee letter agreement between the Parent and
the Borrower and BankAmerica, dated October 6, 1994.
<PAGE>
"Agreement" means the Credit Agreement to which this Schedule is attached,
including this Schedule and the other Schedules and Exhibits thereto.
"Amendment Effective Date" is defined in the preamble.
"Applicable Law" means, relative to any Person or matter, any law, rule,
regulation, order, decree, subpoena or other requirement having the force of law
relating to such Person or matter and, if applicable, any interpretation thereof
by any Person having jurisdiction with respect thereto or charged with the
administration or interpretation thereof.
"Applicable Margin" means, relative to any Base Rate Loan or Eurodollar
Rate Loan, the applicable margin percentage per annum set forth in the table
below based on the Parent's then Senior Debt Rating:
<TABLE>
<CAPTION>
Base Rate Eurodollar
Senior Debt Rating Loan % Rate Loan %
------------------ --------- -----------
Moody's S&P
------- ----
<S> <C> <C> <C>
A2 or higher A or higher 0 0.175
A3 A- 0 0.200
Baa1 BBB+ 0 0.225
Baa2 BBB 0 0.250
Baa3 BBB- 0 0.300
Below Baa3 Below BBB- 0.5 0.450
</TABLE>
; provided that, for purposes of determining such applicable margin, if Moody's
and S&P have split Senior Debt Ratings with a difference of only one rating
tier, the higher Senior Debt Rating will be determinative and the lower Senior
Debt Rating will be disregarded; and provided, further, that if Moody's and S&P
have split Senior Debt Ratings with a difference of more than one rating tier,
one rating tier below the higher Senior Debt Rating will be determinative and
both Senior Debt Ratings will be disregarded.
"Assignee Lender" is defined in Section 10.11.1.
"Assignment Agreement" means an Assignment Agreement substantially in the
form of Exhibit F.
"Authorized Officer" means, relative to the Parent or the Borrower, as the
case may be, those of its officers whose signatures and incumbency shall have
been certified to the Agent and the Lenders pursuant to Section 5.1.1.
"BankAmerica" is defined in the preamble.
- 2 -
<PAGE>
"Base Rate" means, on any date and with respect to all Base Rate Loans, a
fluctuating rate of interest per annum equal to the higher of:
(a) the rate of interest most recently announced by BankAmerica at
its Domestic Office as its reference rate for Dollar loans; and
(b) the Federal Funds Rate most recently determined by the Agent plus
0.50%.
The Base Rate is not necessarily intended to be the lowest rate of interest in
connection with extensions of credit. Changes in the rate of interest on that
portion of any Loans maintained as Base Rate Loans will take effect
simultaneously with each change in the Base Rate. The Agent will give notice
promptly to the Parent and the Borrower and the Lenders of changes in the Base
Rate.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Base Rate.
"Beneficial Owner" shall have the meaning assigned thereto in Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of 1934
as in effect on the date hereof.
"Bid Acknowledgement" means an acknowledgement, duly completed and executed
by an authorized Officer of the Borrower, of the Borrower's acceptance of a Bid
Offer, substantially in the form of Exhibit B-3.
"Bid Borrowing" means Bid Loans having the same Stated Maturity Date and
made on the same Business Day by one or more Lenders pursuant to the same Bid
Borrowing Request.
"Bid Borrowing Request" means a Bid Offer request and certificate, duly
completed and executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit B-1.
"Bid Loan" means a Loan made by a Lender to the Borrower as a result of the
procedure set forth in Section 2.7 and includes any Bid Loan outstanding on the
Amendment Effective Date.
"Bid Offer" means an Offer by a Lender to make a Bid Loan, substantially in
the form of Exhibit B-2.
"Bid Note" is defined in Section 2.6.2.
"Bid Rate" means, relative to any Bid Loan of any Lender, the fixed rate of
interest (expressed to the nearest 1/10,000 of 1%) offered by such Lender in its
Bid Offer to make such Bid Loan.
- 3 -
<PAGE>
"Borrower" is defined in the preamble.
"Borrowing" means a Bid Borrowing, a Contract Borrowing or a Swing
Borrowing, as the context may require or allow.
"Borrowing Request" means a Bid Borrowing Request, a Contract Borrowing
Request or a Swing Borrowing Request, as the context may require or allow.
"Business Day" means:
(a) any day which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in Chicago, Illinois
or New York, New York; and
(b) relative to the making, continuing, prepaying or repaying of any
Eurodollar Rate Loans, any day on which dealings in Dollars are carried on
in the New York interbank market.
"Capitalized Lease Liabilities" means all monetary obligations of the
Parent and its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, are or would be classified as capitalized leases.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Code" means the Internal Revenue Code of 1986.
"Commitment" is defined in Section 2.1.1.
"Commitment Termination Date" means the earliest of:
(a) September 30, 1997;
(b) the date on which the Total Commitment Amount is terminated in
full or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event occurs.
- 4 -
<PAGE>
Upon the occurrence of any event described above, the Commitments of all Lenders
shall terminate automatically and without any further action.
"Commitment Termination Event" means:
(a) the occurrence of any Event of Default described in Section 8.1.8
with respect to the Parent, the Borrower or any Significant Subsidiary; or
(b) the occurrence and continuance of any other Event of Default
which has not been cured and either
(i) the declaration of the Contract Loans to be due and payable
pursuant to Section 8.3, or
(ii) in the absence of such declaration, the giving of notice by
the Agent, acting at the direction of the Required Lenders, to the
Parent and the Borrower that the Commitments have been terminated.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor or purchaser of assets against loss)
the debt, obligation or other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person
or undertakes or agrees (contingently or otherwise) to purchase, repurchase, or
otherwise acquire any Indebtedness, obligation or liability or any security
therefor, or to provide funds for the payment or discharge thereof (whether in
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain solvency, assets, level of income, or other financial condition,
or to make payment or pledge other than for value received. The amount of any
Person's obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be determined in accordance with GAAP.
"Continuing Director" means a director of the Parent who either (a) was a
member of the Parent's board of directors before the Amendment Effective Date
and has been such continuously thereafter or (b) became a director after the
Amendment Effective Date and whose election or nomination for election was
approved by a vote of the majority of the Continuing Directors then members of
the Parent's board of directors.
- 5 -
<PAGE>
"Contract Borrowing" means Contract Loans of the same type and, in the case
of Eurodollar Rate Loans, having the same Interest Period made by all Lenders on
the same Business Day pursuant to the same Contract Borrowing Request pursuant
to Section 2.1.
"Contract Borrowing Request" means a loan request and certificate, duly
completed and executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit C-1.
"Contract Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly completed and executed by an Authorized Officer
of the Borrower, substantially in the form of Exhibit C-2.
"Contract Loan" is defined in Section 2.1.1.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Parent, are treated
as a single employer under section 414(b) or 414(c) of the Code or section 4001
of ERISA.
"Credit Document" means this Agreement, each Note, the Guaranty and each
other agreement, document or instrument delivered in connection with this
Agreement, each Note and the Guaranty.
"Debt" of any Person means any Indebtedness of such Person of the type
described in clause (a) or (c) of the definition thereof or any Contingent
Liability of such Person in respect of such Indebtedness.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disclosure Schedule" means the Disclosure Schedule attached to the
Agreement as Schedule II, as it may be amended, supplemented or otherwise
modified from time to time by the Parent and the Borrower with the written
consent of the Agent and the Required Lenders.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Assignment
Agreement or such other office of a Lender within the United States as may be
- 6 -
<PAGE>
designated from time to time by notice from such Lender to the Parent and the
Borrower and the Agent.
"EBIT" means, for any period, consolidated earnings before interest and
taxes of the Parent and its Subsidiaries for such period.
"Eligible Assignee" means a bank, thrift, insurance company, finance
company, investment fund, money market mutual fund or similar Person
incorporated or organized under the laws of the United States of America, any
state or other political subdivision thereof or another member country of the
OECD.
"Environmental Laws" means all applicable Federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Eurodollar Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the
Assignment Agreement or such other office of a Lender as designated from time to
time by notice from such Lender to the Parent and the Borrower and the Agent,
whether or not outside the United States, which shall be making or maintaining
Eurodollar Rate Loans of such Lender hereunder.
"Eurodollar Rate" means, relative to any Contract Loan to be made,
continued or maintained as, or converted into, a Eurodollar Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) equal to the average of the rates per annum at which Dollar deposits
in immediately available funds are offered to each Reference Lender's Eurodollar
Office in the New York interbank market as at or about 10:00 a.m., Chicago time,
two Business Days prior to the beginning of such Interest Period for delivery on
the first day of such Interest Period, and in an amount approximately equal to
the amount of such Reference Lender's Eurodollar Rate Loan and for a period
approximately equal to such Interest Period.
"Eurodollar Rate Loan" means a Loan bearing interest, at all times during
an Interest Period applicable to such Loan, at a fixed rate of interest
determined by reference to the Eurodollar Rate.
"Event of Default" is defined in Section 8.1.
- 7 -
<PAGE>
"Facility Rate" means, at any time, the percentage rate set forth in the
table below based on the Parent's then Senior Debt Rating:
<TABLE>
<CAPTION>
Senior Debt Rating Percentage Rate
------------------------------- ---------------
Moody's S&P
-------- -----------
<S> <C> <C>
A2 or higher A or higher 0.075
A3 A- 0.100
Baa1 BBB+ 0.125
Baa2 BBB 0.150
Baa3 BBB- 0.200
Below Baa3 Below BBB- 0.300
</TABLE>
; provided that, for purposes of determining such percentage rate, if Moody's
and S&P have split Senior Debt Ratings with a difference of only one rating
tier, the higher Senior Debt Rating shall be determinative and the lower Senior
Debt Rating shall be disregarded; and provided, further, if Moody's and S&P have
split Senior Debt Ratings with a difference of more than one rating tier, one
rating tier below the higher Senior Debt Rating will be determinative and both
Senior Debt Ratings will be disregarded.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to:
(a) the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations at 10:00 a.m., New York time, for such
day on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Maturity Date" means the earlier of:
(a) September 30, 1997; and
(b) the date to which the Final Maturity Date may be accelerated
pursuant to Section 8.2 or 8.3.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months ending
on September 30; references to a Fiscal Year with a number corresponding to any
- 8 -
<PAGE>
calendar year (e.g. the "1994 Fiscal Year") refer to the Fiscal Year ending on
the September 30 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System.
"Funded Debt" means, on any date, the consolidated long-term Debt of the
Parent and its Subsidiaries including current maturities of such long-term Debt,
but excluding intercompany Debt, on such date.
"GAAP" means generally accepted accounting principles applied in the
preparation of the financial statements of the Parent and its Subsidiaries
required pursuant to Section 7.1.1(b).
"General Corporate Purposes" means, subject to the terms and conditions of
this Agreement, making or financing any payment for or in respect of working
capital, capital expenditures, acquisitions, stock repurchases, refinancing
Indebtedness or any other general corporate purpose.
"Guaranty" means a guaranty of the Parent, in the form of Exhibit D, of the
Indebtedness and other Obligations of the Borrower under this Agreement, each
Note and the other Credit Documents to which it is a party.
"Hazardous Material" means:
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other applicable
Federal, state or local statute, law, regulation, ordinance or requirement
(including consent decrees and administrative orders) relating to or
imposing liability or standards of conduct concerning any hazardous, toxic
or dangerous waste, substance or material, all as amended or hereafter
amended.
"Hedging Obligations" means all monetary obligations under any interest
rate protection agreement or currency exchange agreement or similar agreement
providing for the protection against fluctuations in interest or currency
exchange rates.
- 9 -
<PAGE>
"Impermissible Change in Control" means any of the following shall occur:
(a) the Borrower shall cease for any reason to be a wholly-owned
Subsidiary of the Parent;
(b) any Person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) shall be or become the Beneficial Owner of issued and outstanding
capital stock of the Parent representing 20% or more of the voting power in
elections for directors of the Parent on a fully diluted basis (other than
(x) Robert E. Martini or the estate of Emil Martini or (y) solely as a
result of the conversion of the Parent's Class B common stock outstanding
on the date hereof into Class A common stock of the Parent);
(c) a majority of the Parent's board of directors shall cease to be
comprised of Continuing Directors; or
(d) any event or condition relating to a change of control of the
Parent or the Borrower which requires or permits the holder or holders of
Indebtedness of the Parent or any of its Subsidiaries in an aggregate
principal amount of $10,000,000 or more, or any agent or trustee for such
holders, to require the purchase or repurchase of such Indebtedness prior
to its expressed maturity from such holder or holders.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of the Parent, any qualification or exception to such opinion or certification:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
the Borrower to be in default of any of its obligations under Section
7.2.3.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
- 10 -
<PAGE>
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services (other than trade payables incurred in the ordinary
course of business), and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of any of
the foregoing.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Interest Coverage Ratio" means, for any period, the ratio of
(i) EBIT for such period
to
(ii) interest expense for such period.
"Interest Period" means, relative to any Eurodollar Rate Loans, the period
from the date on which such Eurodollar Rate Loan is made or continued as, or
converted into, a Eurodollar Rate Loan pursuant to Section 2.3 or 2.4 to the day
which numerically corresponds to such date that is one, two, three or six months
thereafter (or, if such month has no numerically corresponding day, on the last
Business Day of such month), as the Borrower may select in its relevant notice
pursuant to Section 2.3 or 2.4; provided that:
(a) the Borrower shall not be permitted to select Interest Periods to
- 11 -
<PAGE>
be in effect at any one time which have expiration dates occurring on more
than 5 different dates in respect of Eurodollar Rate Loans;
(b) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless, if such Interest Period applies to Eurodollar Rate
Loans, such next following Business Day is the first Business Day of the
next calendar month, in which case such Interest Period shall end on the
Business Day next preceding such numerically corresponding day); and
(c) no Interest Period may end later than the Final Maturity Date.
"Lenders" is defined in the preamble.
"Leverage Ratio" means, on any date, the ratio of Funded Debt of the Parent
and its Subsidiaries on such date to Total Capital of the Parent and its
Subsidiaries on such date.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
lessor's interest under a capitalized lease, charge against or interest in
property to secure payment of a debt or performance of an obligation or other
priority or preferential arrangement of any kind or nature whatsoever.
"Loan" means a Bid Loan or a Contract Loan, as the context may require or
allow.
"Margin Stock" means "margin stock" within the meaning of Regulation U of
the F.R.S. Board.
"Materially Adverse Effect" means a materially adverse change (i) in the
consolidated condition (financial or otherwise), business, operations or
prospects of the Parent and its Subsidiaries taken as a whole since September
30, 1993 or (ii) in the ability of the Parent or the Borrower to duly and
punctually pay and perform their respective Obligations.
"Minimum Assignment Amount" means $10,000,000 (or, if less, 5% of the
Commitments then in effect of all Lenders).
"Minimum Net Worth Target" means, on any date, the sum of (a) $350,000,000
plus (b) an amount equal to 50% of cumulative consolidated positive earnings of
the Parent and its Subsidiaries after August 31, 1992.
"Minimum Retained Amount" means $10,000,000 or, if less, 5% of the
Commitments then in effect of all Lenders.
- 12 -
<PAGE>
"Moody's" means Moody's Investors Service, Inc.
"Net Asset Sale Proceeds" means the net cash proceeds (i.e., gross cash
proceeds minus reasonable related costs and expenses and related taxes thereon)
received in connection with a Permitted Asset Sale described in clause (a) of
the definition thereof.
"Net Worth" means, on any date, the consolidated net worth of the Parent
and its Subsidiaries as is or would be shown on the consolidated balance sheet
of the Parent and its Subsidiaries as of such date in accordance with GAAP.
"Note" means the Bid Note, the Contract Note or the Swing Note, as the
context may require or allow.
"Obligations" means all obligations (monetary or otherwise) of the Parent
and the Borrower arising under or in connection with this Agreement, the Notes,
the Guaranty and each other Credit Document.
"OECD" means the Organization for Economic Cooperation and Development.
"Organic Document" means, relative to the Parent or the Borrower, as the
case may be, its certificate of incorporation, its by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
authorized shares of capital stock.
"Participant" is defined in Section 10.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Parent or any
corporation, trade or business that is, along with the Parent, a member of a
Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender at any time, the portion
(expressed as a percentage) of the then Total Commitment Amount representing
such Lender's then Commitment, being initially the percentage set forth against
its signature hereto or, if such Lender has executed an Assignment Agreement, as
- 13 -
<PAGE>
indicated on the most recent Assignment Agreement executed by such Lender.
"Permitted Asset Sale" means any of the following:
(a) any sale or other disposition by the Parent and its Subsidiaries
the proceeds of which, when added to the aggregate proceeds of all other
such sales or dispositions (other than any Permitted Receivables
Transaction or any sale or disposition of the kind described in clause (c)
or (d) of this definition) after the date hereof, exceeds an amount equal
to 15% of the Parent's Net Worth on the Amendment Effective Date, if an
amount equal to 75% of the Net Asset Sale Proceeds therefrom is used to
repay Loans pursuant to Section 3.1.1(c) and/or results in a reduction of
the Total Commitment Amount pursuant to Section 2.2.2;
(b) any sale or other disposition by the Parent and its Subsidiaries
the proceeds of which, when added to the aggregate proceeds of all other
such sales or dispositions (other than any Permitted Receivables
Transaction or any sale or disposition of the kind described in clause (c)
or (d) of this definition) after the date hereof, does not exceed an amount
equal to 15% of the Parent's Net Worth on the Amendment Effective Date;
(c) any sale or other disposition of inventory in the ordinary course
of business; and
(d) any sale or other disposition of any property which is obsolete
or replaced with similar property substantially contemporaneously
therewith.
"Permitted Receivables Transaction" means any sale or financing pursuant to
that certain Receivables Purchase Agreement, dated as of August 29, 1991,
between the Borrower and Continental Bank or that certain Note Purchase
Agreement, dated as of February 1, 1992, among the Parent, the Borrower and
Trust Company Bank, in each case as amended or modified and in effect or
replaced, refunded or refinanced from time to time.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Quarterly Payment Date" means the last day of each February, May, August
and November or, if any such day is not a Business Day, the next succeeding
Business Day.
- 14 -
<PAGE>
"Reference Lender" means BankAmerica and up to two other Lenders nominated
as Reference Lenders from time to time by BankAmerica.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" is defined in Section 4.10(b).
"Required Lenders" means, at any time when the Commitments shall remain in
effect, Lenders holding at least 66-2/3% of the then aggregate outstanding
principal amount of the Contract Note, or, if no such principal amount is then
outstanding, Lenders having Commitments constituting at least 66-2/3% of the
Total Commitment Amount or, at any time when the Commitments of the Lenders
shall have terminated pursuant to Section 8.2 or 8.3, Lenders holding at least
66-2/3% of the aggregate principal amount of the Loans then outstanding.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 690, et seq.
"Responsible Officer" means, relative to any event or condition (x)
affecting or otherwise relating to the Parent or the Borrower, an officer or
employee thereof who in the ordinary course of business has or exercises
responsibility for events and conditions similar to such event or condition and
(y) affecting or otherwise relating to any Lender, a senior officer (such as,
for example, senior vice president) who in the ordinary course of business has
and exercises responsibility for events and conditions similar to such event or
condition and who has customer relationship responsibility for the Parent or the
Borrower.
"Reverse Repos" means an agreement providing for the transfer of funds
against the delivery at a date certain (not later than one year after such
transfer) or on demand of, or a short term loan having a maturity of less than
one year secured by, certificates of deposit, eligible bankers' acceptances or
securities that are direct unconditional obligations of, or that are fully
guaranteed as to principal and interest by, the United States of America or any
agency thereof or a State or other political subdivision thereof and such other
securities as may be accepted for transfer by a reputable counterparty or
acceptable collateral for a loan by a financial institution.
"S&P" means Standard & Poor's Corporation.
"Senior Debt Rating" means, on any date, (a) the senior debt rating
assigned to the Parent by Moody's and S&P or (b) if no senior debt rating has
been so assigned, the Agent shall determine the Senior Debt Rating (which
- 15 -
<PAGE>
determination shall, absent manifest error) be conclusive and binding on the
Parent and the Borrower.
"Significant Subsidiary" means, with respect to any Person, any Subsidiary
of such Person which would be a "significant subsidiary" of such Person under
Regulation S-X as in effect on the date hereof of the Securities and Exchange
Commission if such Person were the registrant referred to therein and the
references to "10 percent" in clauses (1) and (2) of the definition thereof were
to 3 percent and to "10 percent" in clause (3) of such definition were to 5
percent.
"Stated Maturity Date" is defined in Section 2.7.1(b).
"Subsidiary" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person or otherwise, directly or indirectly,
controlled by such Person, by such Person and one or more other Subsidiaries of
such Person or by one or more other Subsidiaries of such Person and includes any
similar entity (other than a corporation) so owned or controlled.
For purposes of this definition of "Subsidiary", a Person shall be deemed
to be "controlled by" any other Person if such other Person possesses, directly
or indirectly, power to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Swing Borrowing" means Swing Loans made by the Agent on the same Business
Day pursuant to the same Swing Borrowing Request.
"Swing Borrowing Request" means a loan request and certificate, duly
completed and executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit C-3.
"Swing Line" is defined in Section 2.5(a).
"Swing Line Commitment" is defined in Section 2.5(a).
"Swing Line Lender" means Bank of America Illinois.
"Swing Loan" is defined in Section 2.5(a).
- 16 -
<PAGE>
"Taxes" is defined in Section 4.6.
"Total Capital" means, on any date, the sum of (x) the consolidated Funded
Debt plus (y) the Net Worth on such date.
"Total Commitment Amount" means, on any date, $350,000,000, as such amount
may be reduced from time to time pursuant to Section 2.2.
"Transferee" is defined in Section 10.12.
"type" means, relative to any Contract Loan, the portion thereof, if any,
being maintained as a Base Rate Loan or a Eurodollar Rate Loan.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
- 17 -
