<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
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 June 30, 1996
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 1-483
______________________
MALLINCKRODT GROUP INC.
(Exact name of Registrant as specified in its charter)
New York 36-1263901
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization Identification No.)
7733 Forsyth Boulevard
St. Louis, Missouri 63105-1820
(Address of principal (Zip Code)
executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-854-5200
______________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
4% Cumulative Preferred Stock,
par value $100 per share New York Stock Exchange
Common Stock, par value $1 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
9.875% Debentures due March 15, 2011 New York Stock Exchange
7% Debentures due December 15, 2013 New York Stock Exchange
6.75% Notes due September 15, 2005 New York Stock Exchange
6.5% Notes due November 15, 2007 New York Stock Exchange
6% Notes due October 15, 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
______________________
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
--- ---
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.
______________________
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant: $3,009,949,976 as of August 30, 1996.
Market value is based on the August 30, 1996, closing prices of
Registrant's Common Stock and 4% Cumulative Preferred Stock.
Applicable Only To Corporate Registrants: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock:
74,184,397 shares as of August 30, 1996.
Documents Incorporated By Reference: Information required by Items 10,
11, 12, and 13 of Part III is incorporated by reference from pages 1
through 4, pages 5 through 19, pages 7 and 8, and pages 7, 9 and 10,
respectively, of the Registrant's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on October 16, 1996.
<PAGE>
1996 FORM 10-K CONTENTS
Item Page
- ---- ----
Part I:
1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . .1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . .1
General Factors Related to Business Segments. . . . . . . . .2
International Operations. . . . . . . . . . . . . . . . . . .3
Human Healthcare. . . . . . . . . . . . . . . . . . . . . . .3
Specialty Chemicals . . . . . . . . . . . . . . . . . . . . .7
Animal Health . . . . . . . . . . . . . . . . . . . . . . . .9
Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 11
Other Activities. . . . . . . . . . . . . . . . . . . . . . 11
2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . 13
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 13
4. Submission of Matters to a Vote of Security Holders . . . . 15
Executive Officers of the Registrant. . . . . . . . . . . . 16
Part II:
5. Market for the Registrant's Common Stock and
Related Stockholder Matters . . . . . . . . . . . . . . . 19
6. Selected Financial Data . . . . . . . . . . . . . . . . . . 20
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 21
8. Financial Statements and Supplementary Data . . . . . . . . 28
9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 51
Part III:
10. Directors and Executive Officers of the Registrant. . . . . 51
11. Executive Compensation. . . . . . . . . . . . . . . . . . . 51
12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . 51
13. Certain Relationships and Related Transactions. . . . . . . 51
Part IV:
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 51
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
<PAGE>
PART I.
ITEM 1. BUSINESS
INTRODUCTION
Company Profile
- ---------------
Mallinckrodt Group Inc. (Mallinckrodt, the Company, or the Corporation) is an
international company serving specialty markets in human healthcare,
chemicals and animal health.
The Company was incorporated in New York in 1909 under the name International
Agricultural Corporation. The corporate headquarters is located at 7733
Forsyth Boulevard, St. Louis, Missouri 63105-1820, and the telephone number
is (314) 854-5200.
Transition of the Company
- -------------------------
During the past several years, the Company has taken significant steps to
develop its current composition of businesses as follows:
- In February 1986, the Company, then called International Minerals &
Chemical Corporation, purchased Mallinckrodt, Inc. for $675 million in
cash.
- In October 1986, the Company sold its gas and oil segment and its
industrial products segment for $162 million.
- From March 1987 through July 1989, the Company expanded its animal
health business by acquiring Pitman-Moore, Inc., Coopers Animal Health
and the animal health business of Glaxo Holdings for an aggregate
$266 million in cash plus the assumption of certain liabilities.
- In February 1988, IMC Global, Inc. then called IMC Fertilizer
Group, Inc. (IFL), then a wholly owned subsidiary, completed an initial
public offering (IPO) of shares of common stock. The Company owned 10
million shares of IFL common stock until March 1991, which represented
38 percent of the then outstanding common stock. The Company accounted
for its investment in IFL by the equity method. In September 1988, the
Company's holdings of IFL's Preferred Stock, Series A, were redeemed by
IFL for $200 million.
- In June 1990, shareholders approved changing the Company's name from
International Minerals & Chemical Corporation to IMCERA Group Inc.
- In March 1991, the Company entered into a sale and option agreement
with IFL under which IFL purchased, in three stages, all 10 million
shares of IFL common stock which the Company owned for total net
proceeds of $385 million. As of July 1991, the Company no longer owned
any IFL shares.
- In January 1992, Mallinckrodt, Inc., then a wholly owned subsidiary of
IMCERA Group, Inc., divided its principal operations to form two
separate subsidiaries, Mallinckrodt Medical, Inc. and Mallinckrodt
Specialty Chemicals Company.
____________________
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements, so long as they are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying
important factors that could cause actual results to differ materially from
those discussed in the forward-looking statements. This report contains
forward-looking statements within the meaning of the Act. These include
statements concerning: the Company's outlook for fiscal 1997 and subsequent
periods; volume and pricing trends and other forces in the industries in
which the Company's businesses operate; the Company's expectations for the
funding of capital expenditures and operations during fiscal 1997; potential
costs of compliance with environmental and other laws and regulations; and
other statements of future plans and strategies, anticipated events or
trends, expectations, beliefs, and similar expressions regarding matters that
are not historical in nature.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include but are not
limited to the following: the effect of business and economic conditions;
constraints on supplies and/or changes in the cost of raw materials used in
the manufacturing of certain of the Company's products; capacity limiting the
production of certain products; difficulties or delays in the development,
production, testing, and marketing of products; difficulties or delays in
receiving required governmental or regulatory approvals; market acceptance
issues, including the failure of products to generate anticipated sales
levels; the effects of, and changes in, trade, monetary and fiscal policies,
laws and regulations; risks associated with investments and operations in
foreign jurisdictions, including those related to foreign regulatory
requirements, exchange rate fluctuations, and local political, social, and
economic factors; changes in governmental laws and regulations affecting
environmental compliance, taxes, and other matters impacting the Company; the
costs and effects of legal and administrative proceedings, including the
environmental proceedings involving the Company; the ability of the Company
to develop and execute effective marketing and sales strategies for its
products; the potential erosion of prices for certain of the Company's
products as a result of increased competition in its markets; and the risk
factors reported from time to time in the Company's SEC reports.
<PAGE>
- In June 1993, the Company announced the details of a restructuring
program which resulted in a charge of $242 million after taxes, most of
which was for actions taken at Mallinckrodt Veterinary, then called
Pitman-Moore. Further discussion is included in the Specialty
Chemicals and Animal Health business segment discussions and Note 1 of
Notes to Consolidated Financial Statements (Notes).
- On March 15, 1994, shareholders approved changing the Company's name
from IMCERA Group Inc. to Mallinckrodt Group Inc. Simultaneous with the
corporate name change, Mallinckrodt Specialty Chemicals changed its
name to Mallinckrodt Chemical, Inc. and Pitman-Moore changed its name
to Mallinckrodt Veterinary, Inc.
- In March 1994, the Company moved its headquarters from Northbrook,
Illinois to St. Louis, Missouri.
- In June 1994, the Company announced the details of a restructuring
program which resulted in a charge of $59 million after taxes, most of
which related to Mallinckrodt Medical. Further discussion is included
in the Human Healthcare and Animal Health business segment discussions
and Note 1 of the Notes.
- In December 1995, the Company announced a Strategic Change Initiative
which eliminated the management and administrative structures of the
three former operating companies: Mallinckrodt Chemical, Inc.,
Mallinckrodt Medical, Inc. and Mallinckrodt Veterinary, Inc. Those
businesses are now managed through divisions with global responsibility
under a chief operating officer.
Other recent acquisitions, divestitures and continuing investments in each of
Mallinckrodt's businesses are described in the discussions of the business
segments, Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7 on pages 21-27, and Note 1 of the Notes.
General Points
- --------------
In this report:
Mallinckrodt Group Inc. and its subsidiaries, collectively, are called the
"Company," the "Corporation," or "Mallinckrodt," unless otherwise indicated
by the context. The Company has three business segments: Human Healthcare,
Specialty Chemicals and Animal Health.
The term "operating earnings" of a business segment represents that business
segment's revenues, including sales to other Mallinckrodt business segments,
less all operating expenses. Operating expenses of a business segment do not
include interest expense, corporate income or expense and taxes on income.
All references to years are to fiscal years ended June 30 unless otherwise
stated.
Registered trademarks are indicated by an asterisk (*).
GENERAL FACTORS RELATED TO BUSINESS SEGMENTS
Numerous healthcare reform proposals have been introduced in the U.S.
Congress, and various states have also introduced or enacted such reform
measures. Mallinckrodt is unable to predict what effect any healthcare
reform measures might have on its businesses.
None of Mallinckrodt's business segments is dependent upon any single
customer or supplier or group of related or affiliated customers or suppliers
whose loss would have a material effect on its sales and operating results.
In general, Mallinckrodt's business segments, including related working
capital requirements, are not materially affected by seasonal factors.
Mallinckrodt's business segments do not extend long-term credit to customers.
The Company believes this non-extension of credit as well as its working
capital requirements are not materially different from the credit policies
and working capital requirements of its competitors.
Competition with manufacturers and suppliers in Mallinckrodt's business
segments involves price, service, quality and technological innovation.
Competition is strong in all markets served.
Financial information about industry segments is included in Note 18 of the
Notes. Financial information about foreign and domestic operations and
export sales is included in Note 17 of the Notes.
INTERNATIONAL OPERATIONS
The Company operates globally, with manufacturing and distribution facilities
in various countries throughout the world and as such is subject to certain
opportunities and risks, including currency fluctuations and government
actions. Mallinckrodt generates a significant portion of its operating
earnings and cash flows outside the United States and is positioned to
benefit from its use of approximately 26 functional currencies as currency
fluctuations are often offsetting.
Operations in each country are monitored to respond to changing economic and
political environments quickly and take advantage of changing foreign
currencies and interest rates. The Company uses certain derivative financial
instruments, principally purchased options, forward contracts and currency
swaps, to manage its exposure to fluctuations in foreign exchange and
interest rate risk. Additionally, various operational initiatives are
employed to help manage business risks. The net impact of foreign exchange
activities was immaterial for 1996, 1995 and 1994, including the conversion
of certain currencies into functional currencies and the costs of hedging
certain transactions and balance sheet exposures.
The Company does not consider the present rate of inflation to have a
significant impact on the businesses in which it operates.
While future economic events cannot be predicted, the Company does not
believe its current operations and future expansion plans should result in a
significantly different risk profile.
Mallinckrodt sales outside the U.S. represented approximately 40 percent of
consolidated net sales in 1996, 1995 and 1994. Products are manufactured and
marketed through a variety of subsidiaries, affiliates and joint ventures
around the world. See discussions of individual business segments included
below; under Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations; and in Note 17 of the Notes for
additional information.
HUMAN HEALTHCARE
Human healthcare sales were:
Years ended June 30,
------------------------
1996 1995 1994
------ ------ ------
(in millions)
Net sales
Imaging agents. . . . . . . . . . . . . . $ 716 $ 688 $ 622
Critical care products. . . . . . . . . . 338 324 290
Pharmaceutical specialties. . . . . . . . 368 325 281
------ ------ ------
$1,422 $1,337 $1,193
====== ====== ======
Human healthcare products are instrumental in the delivery of healthcare
services and are sold to hospitals, clinical laboratories, pharmaceutical
manufacturers and other customers on a worldwide basis. Human healthcare
products are related by a high degree of innovation and technology, by
regulation from agencies such as the U.S. Food and Drug Administration (FDA),
industry standards and by markets served. They are significantly affected by
conditions within the healthcare industry, including continuing legislative
initiatives and public and private healthcare insurance and reimbursement
programs. An aging population and demand for technologically superior
products to improve the quality of life while lowering the cost of care are
two major factors fueling growth within the industry.
Human healthcare provides advanced, innovative products for radiology,
cardiology, nuclear medicine, anesthesiology, critical care and therapeutic
pharmaceuticals. Principal products of this industry segment are
contrast media for various imaging modalities, radiopharmaceuticals for
medical diagnostic procedures, disposable medical devices, instruments and
systems for use in surgical procedures and in critical care and alternate
site facilities, drug chemicals, high-purity process chemicals and peptides.
During 1994, Mallinckrodt conducted studies to develop strategies to
effectively respond to human healthcare customer needs and compete in a
market that is changing rapidly as the result of healthcare reform. As a
result of these efforts, in the fourth quarter Mallinckrodt recorded a
pre-tax charge of $74 million related to the reengineering process. The key
components of the charge included the reorganization of the medical specialty
oriented U.S. sales structure into a unified organization divided into
geographical districts; reorganization to reduce, centralize and standardize
certain non-sales related functions and management processes; relocation of
the Argyle, New York tracheal tube manufacturing operations to existing
plants in Athlone, Ireland and Irvine, California, and to a new facility in
Juarez, Mexico; and severance costs related to an associated workforce
reduction.
The process of restructuring the U.S. sales force addresses new alliances
being created on a market-by-market basis and the changing dynamics of
existing customers' decision-making processes. Sales organizations for
imaging agents and critical care products have been consolidated into one
team in order to increase responsiveness to the customer. The consolidation
has also created 12 geographic regions to improve planning and strategy
development on a local basis. Emphasis will continue to be placed on contact
with the clinical community within its customer base; however, the sales
structure provides a single point of contact with each purchasing entity,
providing quicker, more efficient and effective customer service.
Cash expenditures for this restructuring should approximate the original
estimate of $65 million, consisting of $28 million for severance costs for
about 500 people at various locations around the world, $15 million for
consulting, $13 million for manufacturing rationalization and $9 million for
other items. Approximately $48 million of the cash expenditures were
incurred through June 30, 1996, the majority of which related to severance
associated with the workforce reduction and consulting costs. The majority
of the remaining cash expenditures of approximately $17 million will be paid
in 1997 and relate to severance for terminated employees. Based on
expenditures to date and those anticipated by the original plan, no material
adjustment to the reserve balance is expected at this time. The noncash
pre-tax portion of the charge should approximate $9 million, primarily
relating to asset value adjustments associated with manufacturing
rationalization. The restructuring action is generating annualized pre-tax
savings at a level approximating $40 million. Management expects incremental
benefits in 1997 and beyond.
The restructuring will assist Mallinckrodt to remain flexible to address
future change, reduce costs, remain competitive and sustain a strong market
presence in an ever changing healthcare environment.
Imaging Agents
- --------------
Imaging agents include the manufacture, sale and distribution of products
used in radiology, cardiology and nuclear medicine.
Radiology products include iodinated contrast media (ionic and nonionic) and
catheters for use in studies of the brain, abdominal organs, renal system,
peripheral vascular system and other areas of the body to aid in diagnosis
and therapy. Pursuant to the 1994 restructuring discussed above, these
products are marketed principally by a geographically organized sales force.
Since its introduction in the U.S. seven years ago, Optiray*, a low osmolar,
nonionic medium, has been widely accepted in both radiology and cardiology
indications. Optiray* began to be introduced outside the U.S. in 1991. To
source growing Optiray* volumes in the international market, the Company
opened a new production facility in Dublin, Ireland during 1994 for the
manufacture of Optiray* in its bulk drug form. In addition, a capacity
expansion at Mallinckrodt's existing plant in St. Louis, Missouri was
completed in 1994. In June 1990, Mallinckrodt introduced Ultraject*, a
patented innovation in contrast media agent administration. This prefilled
syringe provides a more efficient, convenient and safer method of delivering
contrast agents. Ultraject* continues to fuel the growth of Optiray*
by providing advantages over traditional glass syringes because it reduces
handling hazards and the potential for dosage error. In January 1996,
Mallinckrodt acquired Liebel-Flarsheim Company of Cincinnati, Ohio to
enhance its position in the contrast imaging arena. Liebel-Flarsheim's
products include contrast media power injectors for angiography and CT, X-ray
components, and specialized equipment for diagnostic urology procedures.
The cardiology business is directed toward meeting the needs of both invasive
and non-invasive cardiology in diagnosing and treating diseases of the heart
and the cardiovascular system. The business currently offers both ionic and
nonionic contrast agents, and interventional catheters and related supplies.
These products are sold directly to hospitals, primarily by a dedicated sales
organization within Mallinckrodt's geographically organized sales force.
During 1989, Mallinckrodt acquired an equity position of less than two
percent of the then currently outstanding common shares of Molecular
Biosystems, Inc. of San Diego, California, and obtained exclusive marketing
rights in the Western Hemisphere for Albunex*, a new ultrasound contrast
agent. Albunex* was unanimously recommended for approval by the Radiology
Device Advisory Panel of the FDA in July 1992. Molecular Biosystems received
an approvable letter for Albunex* from the FDA in April 1994. Final approval
was received early in August 1994 with Mallinckrodt's launch of the product
occurring in the second quarter of 1995. On September 7, 1995, Mallinckrodt
entered into a new distribution and investment agreement for Albunex* and
FS069, a major new ultrasound contrast agent in development. Under the
September 7, 1995 agreement, Mallinckrodt made an additional equity
investment of $13 million in Molecular Biosystems. In addition, the
agreement also provides for Mallinckrodt to partially fund FS069 clinical
development and make various milestone payments. Mallinckrodt's total equity
position in Molecular Biosystems pursuant to this agreement is under ten
percent of that Company's outstanding and publicly traded common stock.
During 1995, Mallinckrodt entered into a research and license agreement with
OPTIMEDx to develop optical imaging agents designed to aid in the detection
and localization of cancer cells in patients. Pursuant to the agreement,
Mallinckrodt made an equity investment in exchange for licensing rights and
will make payments to OPTIMEDx for achieving certain milestones in
researching, developing and obtaining regulatory approval.
Nuclear medicine products consist of radiopharmaceuticals used to provide
images of numerous body organs' anatomy and function, and to diagnose and
treat diseases. Nuclear medicine products are sold to hospitals and
clinics in the U.S. by both a direct geographically organized sales force and
through a nationwide network of nuclear pharmacies. Internationally, nuclear
medicine products are marketed through direct sales forces and distributors.
In 1995, Mallinckrodt signed an agreement with Medi+Physics to distribute
human healthcare proprietary radiopharmaceutical products through
Medi+Physics' radiopharmacies in the U.S. and Canada. Additionally, in
1995, Mallinckrodt signed a license agreement with Immunomedics for
Mallinckrodt to market CEA-Scan in select European countries subject to
receipt of regulatory approval in those countries. The following year, a
license agreement was signed for the U.S. CEA-Scan is an in vivo diagnostic
imaging product for colorectal cancer.
In June 1994, the FDA authorized U.S. marketing of OctreoScan*. This unique
radiopharmaceutical assists physicians in diagnosing and determining the
extent of spread in certain types of cancers, using a non- invasive procedure
instead of surgical biopsy. OctreoScan* is manufactured at facilities in St.
Louis, Missouri and Petten, Netherlands. Introduction of the product began
in June 1994 through key hospitals specializing in cancer treatment.
Marketing of the product was expanded in 1995 upon FDA approval of
promotional material.
In 1992, Mallinckrodt signed an agreement with the Netherlands Energy
Research Foundation to construct a plant in Petten, Netherlands dedicated to
the manufacture of molybdenum-99 (Mo99), a key raw material used in the
production of the nuclear medicine imaging product technetium-99m.
Production began in June 1996.
In 1990, Mallinckrodt introduced TechneScan* MAG3* for improved imaging of
the kidneys and the renal system. Unlike a standard X-ray based imaging
procedure, a nuclear medicine scan utilizing MAG3* can accurately assess
renal tubular function in addition to providing anatomical information. In
1991, the Company introduced the highly successful UltraTag* RBC blood pool
imaging kit which is used for gated blood pool, "first pass" cardiac studies,
and for the detection of hemangiomas and gastrointestinal bleeding sites. To
meet growing worldwide demand for cyclotron-produced products, Mallinckrodt
brought a new cyclotron on-line at Petten, Netherlands in 1993 and in 1995,
expanded cyclotron capacity at its radiopharmaceutical production facility in
Maryland Heights, Missouri. The Company is also expanding the Maryland
Heights, Missouri manufacturing facility to introduce an improved generator
product in early 1997.
Mallinckrodt's largest developmental effort in the area of cardiology and
radiology is directed toward contrast agents for magnetic resonance imaging,
primarily in neurology, oncology and cardiovascular applications.
Imaging agents manufacturing facilities are located in Angleton, Texas;
Cincinnati, Ohio; Maryland Heights, Missouri; Mexico City, Mexico;
Mulhuddart, Ireland; Petten, Netherlands; Pointe Claire, Canada; Raleigh,
North Carolina; and St. Louis, Missouri. Mallinckrodt owns these facilities.
The Company also operates 36 nuclear pharmacies located in population centers
throughout the U.S.
Critical Care Products
- ----------------------
The critical care business includes products for anesthesiology, respiratory
care and blood analysis. Anesthesiology products include
continuous core temperature monitoring systems; convective warm air
temperature management systems; and airway management products. Continuous
core temperature monitoring and temperature management systems are utilized
both in surgical procedures and postoperatively. The airway management
product line consists of basic and specialty tracheal tubes, breathing
systems and other disposables used in hospitals for maintaining a secure
airway during anesthesia and intensive care, and tracheostomy tubes which are
used in hospitals and alternate site facilities for maintaining airways
during respiratory care. Anesthesiology products are marketed directly
through Mallinckrodt's geographically organized sales force and through
distributors in the U.S. and internationally.
In June 1995, Mallinckrodt acquired Alton Dean, Inc. of Salt Lake City, Utah
to complement its temperature management business. Alton Dean's products
include in-line sterile fluid warmers, pressure infusers, and irrigation
pumps used in operating rooms and intensive care units. These products are
marketed through distributors in the U.S. and Europe.
In 1994, Mallinckrodt acquired DAR S.p.A. of Mirandola, Italy to complement
its tracheal and tracheostomy tube business and expand the core airway
management business into related anesthesia and respiratory disposables. DAR
products include disposable filters, heat/moisture exchanges, masks and
breathing circuits used in operating rooms and intensive care units to
provide respiratory support to critically ill patients.
In 1994, Juarez, Mexico became the new production base for the temperature
monitoring systems products used in emergency and critical care settings.
Mallinckrodt capitalized on the rapid conversion to disposable tracheal tubes
in Europe by expanding its anesthesiology products plant in Athlone, Ireland.
Also, as discussed earlier, the Argyle, New York tracheal tube manufacturing
operations is in the process of being relocated to a new facility in Juarez,
Mexico.
In 1993, Mallinckrodt expanded its airway management product line by
acquiring the tracheostomy products business of Sorin Biomedical in Irvine,
California. This business's products include a broad range of tracheostomy
tubes and related accessories used to maintain the airway after a
tracheostomy surgical procedure.
During 1993, Mallinckrodt acquired the HemoCue businesses; HemoCue A.B. of
Angelholm, Sweden and HemoCue Inc. of Mission Viejo, California. HemoCue
products include blood hemoglobin and glucose analysis systems for use in
hospitals and alternate site facilities. These products are distributed
directly by the Company and through independent distributors in the U.S. and
internationally.
On September 9, 1996, the Company announced an agreement under which
Instrumentation Laboratory Company is to acquire the stock of Mallinckrodt
Sensor Systems, Inc., a Michigan corporation. Mallinckrodt Sensor Systems,
Inc. manufacturers and markets GEM instruments and systems to analyze blood
gases and electrolytes during cardiovascular surgery and in intensive care
units and hospital stat and central laboratories. The June 30, 1996
financial statements include the results of this business; however, the
sales, earnings and assets associated with it are not material to the human
healthcare segment or to Mallinckrodt Group, Inc.
Critical care manufacturing facilities are located in Angelholm, Sweden; Ann
Arbor, Michigan; Argyle, New York; Athlone, Ireland; Irvine, California;
Juarez, Mexico; Mirandola, Italy; and Salt Lake City, Utah. Mallinckrodt
owns the Argyle, Athlone and Mirandola facilities. The remainder are leased.
Pharmaceutical Specialties
- --------------------------
Pharmaceutical specialties products include analgesics such as acetaminophen
(APAP) used to control pain and fever; codeine salts and other opium-based
narcotics and synthetic narcotics used to treat pain and coughs; and peptides
which are used in many new pharmaceuticals. Other pharmaceutical specialties
products include Toleron brand of ferrous fumarate which stimulates the
formation of red blood cells; magnesium stearate for use as a tableting aid
in pharmaceuticals; potassium chloride for use as a potassium supplement in
pharmaceutical and nutritionals; and other salts, chemicals and reagents used
in the production of pharmaceutical and food products.
Mallinckrodt expanded its product offering in human healthcare by acquiring
an analgesic pharmaceutical product line from King Pharmaceuticals, Inc. in
1996. Most pharmaceutical specialties products are sold to the
pharmaceutical industry for use in the manufacture of dosage form drugs.
Narcotic prescription chemicals are also sold directly to drug wholesalers
and chain pharmacies, while opiate addiction products are sold primarily to
clinics. All pharmaceutical specialties are marketed through distributors
and by a direct sales force.
The Company continued to make modifications of its St. Louis, Missouri
peptides facility in 1994 and 1993. The APAP manufacturing and waste
treatment capacity at the Raleigh, North Carolina facility has been expanded
significantly in the past few years, while costs have been reduced. Capacity
of the Derbyshire, England para-aminophenol (PAP, a precursor of APAP)
manufacturing plant has also been significantly increased. In 1993,
Mallinckrodt acquired Contech Laboratories, a facility located in
Greenville, Illinois, which has performed certain processing steps related to
the manufacturing of Compap* and other products. Mallinckrodt is also
working on several projects to expand and upgrade the narcotics facility
in St. Louis, Missouri, to meet growing worldwide demand.
Pharmaceutical specialties are manufactured in Derbyshire, England;
Greenville, Illinois; Mexico City, Mexico; Paris, Kentucky; Phillipsburg, New
Jersey; Raleigh, North Carolina; St. Louis, Missouri; and Torrance,
California.
The Company has distribution locations in Athlone, Ireland; Bondoufle,
France; Brussels, Belgium; Catano, Puerto Rico; Cincinnati, Ohio; El Paso,
Texas; Gemenos, France; Hennef, Germany; Madrid, Spain; Mexico City, Mexico;
Mission Viejo, California; Northampton, United Kingdom; Nottinghill,
Australia; Petten, Netherlands; Pointe Claire, Canada; Singapore;
Tokyo, Japan; Vienna, Austria; and Zurich, Switzerland. Mallinckrodt owns
the facilities in Athlone, Cincinnati, Mexico City, Petten and Pointe Claire.
The remainder are leased.
SPECIALTY CHEMICALS
Specialty chemicals' sales were:
Years ended June 30,
------------------------
1996 1995 1994
------ ------ ------
(in millions)
Net sales . . . . . . . . . . . . . . . . . $ 322 $ 252 $ 156
====== ====== ======
Specialty chemicals products are sold to a variety of markets. These
products possess a higher degree of technology and service than is
characteristic of commodity chemicals. Generally, specialty chemicals
products are sold as chemical intermediates which are used by customers
worldwide as components, ingredients or reagents, rather than as final
consumer products. Many specialty chemicals products are processed in
multi-purpose manufacturing facilities. Specialty chemicals products include
catalysts, performance chemicals, plastic additives and laboratory and
microelectronics chemicals.
Catalysts are sold to the petrochemical and food industries. They include
such products as platinum and palladium on carbon or alumina substrates;
copper chromite; tableted, flaked and droplet shapes of nickel catalysts; and
a variety of custom catalysts. Such catalysts are used to manufacture
plasticizers, detergents, rubber products, insecticides, synthetic motor oil
and edible fats and oils. These catalysts are marketed directly by
Mallinckrodt under the registered trademark Calsicat*.
Catalyst Resources, based in Pasadena, Texas, produces custom and proprietary
catalysts for manufacturers of polypropylene and polyethylene. Catalyst
Resources products are marketed by a direct sales force, with a large
percentage of sales to international customers.
TRIMET, a small specialty chemical business, was reclassified to continuing
operations in 1995. Based in Allentown, Pennsylvania, TRIMET manufactures
specialty additives to enhance the performance of water-based paints and
coatings. Its products are sold internationally through Mallinckrodt's sales
force and selected agents.
Plastic additives include customized additive blends for use as processing
aids in the production of polymers, and calcium stearates and other metal
soaps for use as internal lubricants to facilitate the manufacture of molded
and extruded plastics. Plastic additives are sold internationally to
industrial consumers through a direct sales force and selected agents.
Laboratory chemical products include high-purity reagent chemicals used in
research and development and analytical laboratories. These high-purity
products consist of thousands of reagent chemicals sold primarily through
distributors to medical, industrial, educational and governmental
laboratories.
Microelectronic chemicals encompass high purity acids, solvents, etchants and
photoresist strippers used for the manufacture of semiconductor chips. A
direct sales force is used to offer approximately 500 microelectronic
chemicals and photoresist strippers to world wide semi-conductor chip
producers.
In 1995, Mallinckrodt acquired J.T. Baker Inc., a worldwide manufacturer and
supplier of laboratory, process and microelectronic chemicals. The
acquisition brought an excellent brand name and a strong organization,
including international operations, to specialty chemicals' existing
laboratory chemicals business. To maximize the synergies of the two
businesses, specialty chemicals has combined its laboratory chemicals
business with J.T. Baker's and renamed the business Mallinckrodt Baker, Inc.
Former facilities and offices from both organizations are now being operated
under the Mallinckrodt Baker name.
The restructuring program begun in 1993, in as much as it pertains to
specialty chemicals, is complete at June 30, 1996 with no material
adjustments to the original reserve balance recorded.
Specialty chemicals are manufactured in Allentown, Pennsylvania; Dalum,
Germany; Deventer, Netherlands; Erie, Pennsylvania; Greenville, Illinois;
Hayward, California; Mexico City, Mexico; Paris, Kentucky; Pasadena, Texas;
Phillipsburg, New Jersey; and St. Louis, Missouri.
ANIMAL HEALTH
Animal health sales were:
Years ended June 30,
------------------------
1996 1995 1994
------ ------ ------
(in millions)
Net sales
Animal health . . . . . . . . . . . . . . $ 456 $ 455 $ 429
===== ===== =====
Mallinckrodt's animal health segment initiated the restructure of its global
operations during 1993 to improve operating earnings and growth potential by
strengthening its global distribution and marketing capabilities and
consolidating manufacturing facilities to improve worldwide product sourcing
and increase plant utilization.
Under the 1993 restructuring program, approximately 1,000 positions have been
eliminated; 10 manufacturing facilities have been closed; more than 200 low
margin products have been dropped from the lines offered by the company;
commercial and administrative functions have been streamlined, including the
consolidation of most of the research and development operations into one
global facility located near the corporate headquarters; and non-core
businesses and high risk development projects that have diminished in
potential have been exited, including a project for the development of a
porcine somatotropin (PST) product under the name Grolene*. Restructuring
actions related to the program are complete at June 30, 1996 and no material
adjustments to the original reserve balance have been required.
Cash expenditures for restructuring are expected to approximate the original
1993 estimate of $162 million and 1994 adjustment of $20 million and are
primarily related to manufacturing rationalization, productivity improvement
and organization development costs of $132 million and severance costs of $50
million. The $121 million noncash portion of the charge primarily related to
the write-off of plant facilities. Approximately $119 million of the cash
expenditures were incurred through June 30, 1996, the majority of which
related to severance from a workforce reduction of approximately 1,000 people
and consulting costs. The majority of the remaining cash expenditures
associated with the 1993 restructuring, together with the additional
$20 million pre-tax charge taken as part of the 1994 restructuring,
represents the present value of long-term lease payments to be paid through
2010 related to a closed PST facility.
Mallinckrodt has now concluded that the animal health business will have
greater potential and be more successful through alignment with a company
that possesses core technology more directly related to the development of
animal health products. Therefore, on August 29, 1996, the Company announced
that it has decided to explore all strategic options related to this
business.
The animal health segment of Mallinckrodt ranks in the top eight companies in
the animal health industry worldwide in terms of sales, and continues to have
direct presence in the top 25 animal health markets of the world, with more
than half its net sales originating outside the U.S. Animal health focuses
on pharmaceutical, biological and parasiticide products which represent 80
percent of the $10.6 billion global animal health market.
Animal health operations support a product line approaching 1,000 products.
The Company's strategy calls for the addition of new products, particularly
in biologicals and for geographic expansion into new markets. Animal health
continues to focus its efforts on product areas that offer the greatest
opportunities. Consequently, animal health expects to continue to derive
most of its sales and profit from the food animal sector, while developing
product lines in the faster growing companion animal market. In the
worldwide animal health industry, products for food animals comprise about 78
percent of the market and approximately 85 percent of animal health's
revenues are from products used for food animals.
Cross registration, or filing for approval of products already marketed in
other countries, is a key component of animal health's geographic expansion
efforts. Approximately 550 product approvals have resulted from cross
registration through 1996, with additional approvals expected over the next
three to four years.
Operations are currently located in more than 30 countries, with distribution
networks in more than 100 countries. Animal health's organizational
structure of four geographic regions is aligned for increased market focus
and customer responsiveness and enables sales directly to the consumer,
veterinarian, distributor, dealer or agent, depending on the maximum market
opportunity.
Asia Pacific
Animal health's focus is on improving its leading position in sheep and
cattle biological products and ectoparasiticides in Australia and New Zealand
and in poultry and swine biological products and antimicrobials in Southeast
Asia. Its aim is to maintain regional leadership by maximizing cross
registration opportunities and by introducing new products. Animal health is
increasing its presence in Japan and adding resources to take advantage of
the growth potential in developing nations such as China and Vietnam.
Europe
European sales were impacted in the fourth quarter of 1996 by a worldwide ban
on beef exports from the United Kingdom. The ban was a result of a
government-issued report linking Bovine Spongiform Encephalopathy (BSE), a
neurological disease in cattle and Creutzfeldt Jakob Disease (CJD), a disease
in humans. The European Union is currently weighing how to address this
issue.
Animal health intends to build on its leading market positions across the
region through cross registration of existing products and introduction of
new products, by improving leverage and focusing on key regional brands.
France, Germany and Spain represent the greatest potential opportunity and
this strategy is expected to lead to above average market growth. Animal
health is positioned to maximize market opportunities as they evolve in
Eastern Europe, Africa and the Middle East.
Important products in Europe are Paracox*, Rotavec* and Leptavoid*, vaccines
for food animals; Autoworm Pulse Release Bolus*, a de-wormer for cattle; and
Spot-On*, an ectoparasiticide for cattle. The novel anaesthetic Isoflo*
successfully launched in the United Kingdom in April 1996 is expected to
contribute to the expansion of the companion animal business in the region.
Late in 1995, the launch of Exspot*, a flea and tick product for companion
animals, was met with strong customer acceptance in Germany. Launch of
Exspot* in other European markets is expected in 1996 and beyond.
Latin America
In this growing region, animal health maintains a leading position in cattle
products and expects to increase market share from a combination of new
products and cross registration. In August 1995, CBM, a poultry and
companion animal vaccine business located in Brazil was acquired to enhance
the position in the growing poultry market in the region. This acquisition
also helped replace the loss during 1995 of rights to distribute certain
products of other companies.
The foot and mouth disease vaccine continues to be a prominent product in the
region and the Brazilian market accounts for more than half of the region's
earnings.
General economic conditions remained relatively stable, with the exception of
the devaluation of the Venezuelan bolivar in 1996 and the Mexican peso in
1995, neither of which has had a significant impact on operating results.
Although no significant changes to general economic policy or political
conditions are anticipated within the region, the short term economic outlook
remains uncertain.
North America
Animal health has a significant position in North America. Ralgro*, animal
health's long-established and most consistent performer, is the leading
growth promotant for cattle on grass in the U.S. Animal health intends to
leverage cattle knowledge and strong customer service capabilities to build a
strong position for new cattle and swine products. Ralgro Magnum*, a more
potent formulation of Ralgro* for improved gain and efficiency in feedlot
cattle, was launched in late 1995.
In October 1995, Syntro Corporation, a manufacturer of recombinant vaccines,
was acquired for $38.2 million. Syntro is the first company to license a
vectored vaccine in the U.S. The purchase of Syntro provides a proven
technological platform to discover and develop vaccines for all species.
In 1994, the Company committed to build and commenced construction on a
biological production facility in Raleigh, North Carolina. The $48 million,
63,000 square-foot plant is expected to begin commercial production in 1998
and will produce livestock and companion animal vaccines for distribution
around the world.
Manufacturing Facilities
Animal health manufacturing facilities are located in Asuncion, Paraguay;
Baton Rouge, Louisiana; Bray, Ireland; Burgwedel, Germany; Cali, Colombia;
Campinos, Brazil; Compton, United Kingdom; Friesoythe, Germany; Lenexa,
Kansas; Kuala Lumpur, Malaysia; Manila, Philippines; Millsboro, Delaware; Sao
Paulo, Brazil; Terre Haute, Indiana; and Upper Hutt, New Zealand.
Other Actions
In October 1995, the Company sold its feed ingredients business to IMC-Agrico
joint venture of IMC Global Inc. and Freeport-McMoRan Resources Partners,
Limited Partnership. Sale of the feed ingredients business has been
accounted for as a discontinued operation and prior years' statements of
operations and balance sheets have been reclassified to reflect the
disposal.
JOINT VENTURE
In February 1992, a 50/50 joint venture partnership was formed with Hercules
Incorporated to manufacture and market flavor products. The venture, named
Tastemaker, was created by combining Mallinckrodt's Fries & Fries flavors
business with Hercules' PFW Flavors and Citrus Specialties businesses.
Tastemaker is headquartered in Cincinnati, Ohio, and has a major presence in
the world's three largest flavors markets Europe, North America and
Asia/Pacific. It manufactures products for use in convenience foods and
beverages; dry and liquid beverage mixes; cordials, cocktails and wines; ice
cream, cheese and other dairy products; cake and cookie mixes, snacks
and other bakery products; main meals and entrees; and pharmaceutical
products. Production and distribution of these products are subject to
regulation by governmental agencies in various countries. Tastemaker
manufacturing facilities are located in Barneveld, Netherlands; Cincinnati,
Ohio; Lakeland, Florida; Mexico City, Mexico; Milton Keynes, United Kingdom;
St. Louis, Missouri; and Sydney, Australia. Distribution is primarily
through direct sales forces and distributors.
On August 29, 1996, Mallinckrodt announced that it is prepared to sell its
interest in Tastemaker in cooperation with its joint venture partner,
Hercules, Inc., if an acceptable offer is received.
OTHER ACTIVITIES
Research and Development
- ------------------------
The Company performs applied research directed at development of new
products, development of new uses for existing products and improvement of
existing products and processes. Research and development programs include
laboratory research as well as product development and application. The
overall efforts of the Company are under the leadership of the Vice
President, Science and Technology, who is responsible for developing an
integrated technology program to ensure that investments made in
research will support growth objectives. Internal research efforts in each
of its business segments are supplemented with third-party and university
technical agreements.
Human healthcare's various development activities are focused on market-place
needs. Research and development of imaging agents are carried on by a
centralized organization. Research and development for critical care
products and pharmaceutical specialties are performed within these
businesses.
Specialty chemicals' research and development efforts are organized within
its operating divisions to focus technical resources on the development of
new and improved products meeting defined market and customer needs.
Technical personnel for process support are located at each manufacturing
location.
Animal health currently has many products under development that address the
needs of world and regional markets. Its primary research and development
capabilities were consolidated at a single site in the Chicago, Illinois area
in 1993, in conjunction with the restructuring of its businesses. Products
in development include vaccines, growth enhancers and parasiticides for
livestock, poultry and companion animals.
Patents, Trademarks, and Licenses
- ---------------------------------
Mallinckrodt owns a number of patents and trademarks, has a substantial
number of patent applications pending and is licensed under patents owned by
others. No single patent is considered to be essential to the businesses as
a whole, but in the aggregate, the patents are of material importance to the
Company's business.
Environmental and Other Regulatory Matters
- ------------------------------------------
The Company is subject to various environmental protection and occupational
safety and health laws and regulations in the United States and foreign
countries in which it operates. In addition, in its current operations and
over the years, the Company has handled, and will continue to deal in or
otherwise handle, materials and wastes classified as hazardous or toxic by
one or more regulatory agencies. The Company is also subject to the Federal
Food, Drug, and Cosmetic Act, other federal statutes and regulations, various
state statutes and regulations, and laws and regulations of foreign
governments, affecting and involving testing, approval, production, labeling,
distribution, post-market surveillance and advertising of most of the
Company's existing, new and prospective products.
Significant capital expenditures, as well as operating costs, have been
incurred to comply with the laws and regulations governing the protection of
the environment, occupational safety and health, and the handling of
hazardous materials. There are inherent and unquantifiable risks in handling
hazardous or toxic materials and wastes. On the basis of its best
information, the Company does not believe the expenditures and risks
occasioned by these circumstances have become materially adverse to its
financial condition or results of operations; however, no assurance can be
given that this will continue to be true.
Similarly, the manner of interpretation and enforcement of the laws and
regulation pertaining to the Company's products or facilities by government
agencies, such as the U.S. Food and Drug Administration and the U.S.
Environmental Protection Agency (EPA), and state and foreign counterparts,
at any particular production site or in connection with any particular
product or any proposed new or modified product, may be different than
anticipated, and could result in production interruption and product
holds or recalls.
The Company endeavors to comply with all of these laws and regulations, as
well as with all other applicable laws and regulations, but there can be no
assurance that its compliance efforts will always be acceptable. Instances
of non-compliance have occurred in the past and although they have not had a
material adverse impact on the Company, such instances could occur in the
future and possibly have a material adverse impact.
In particular, the Company is unable to predict the extent to which it may be
adversely affected by future regulatory developments such as new or changed
laws or regulations.
Most of the Company's environmental related capital expenditures are in
response to provisions of the Federal Clean Air Act, Water Pollution Control
Act, Resource Conservation and Recovery Act, Comprehensive Environmental
Response, Compensation, and Liability Act, land use, air and water protection
regulations of the various localities and states, and their foreign
counterparts. Capital expenditures worldwide relating to air emission
control, wastewater purification, land reclamation and solid waste disposal
totaled approximately $14 million in 1996 and 1995. The Company currently
estimates that environmental capital expenditures over the next two years
will average about $13 million per year.
During 1996, the Company assumed and was compensated for certain costs to
remediate various sites in the future. In addition, the Company established
additional environmental reserves for discontinued operations. The Company
had accruals of $97 million at June 30, 1996 for costs associated with the
study and remediation of Superfund sites and for study and remediation of
current and former operating sites of the Company. Claims for recovery have
not been netted against the accrued environmental liabilities. While ongoing
litigation may eventually result in recovery of costs expended at certain of
the environmental sites, any gain is contingent upon a successful outcome and
has not been accrued.
Environmental clean up costs are often incurred over extended periods of
time. Nevertheless, to the extent these costs can be reasonably estimated,
and the Company's responsibility is probable, accruals are established
although the costs are not yet payable, and are reflected in the Company's
consolidated financial statements. Based on information presently available,
the Company believes any amounts paid in excess of the accrued liabilities
will not have a material adverse effect on its financial position or results
of operations.
See also Item 3., Legal Proceedings, and Note 20 of the Notes for additional
information.
Employees
- ---------
Mallinckrodt had 10,395 employees at June 30, 1996, consisting of 6,186 U.S.
based employees and 4,209 employees outside the U.S.
Labor Relations
- ---------------
In the U.S., the Company has eleven collective bargaining agreements with ten
U.S. international unions or their affiliated locals covering 846 employees.
Four agreements covering 472 employees were negotiated during 1996, with no
work stoppages. Two agreements covering 136 employees will expire in 1997.
Twelve operating locations outside the U.S. have collective bargaining
agreements and/or work counsel agreements covering approximately 1,170
employees. Recent wage and benefit increases were consistent with
competitive industry and community patterns.
ITEM 2. PROPERTIES
Information regarding the principal plant and properties of Mallinckrodt is
included in the respective business segment discussions in Item 1., Business.
Additionally, Mallinckrodt leases office space in St. Louis, Missouri.
The Company believes its manufacturing and distribution facilities are
adequate, suitable and of sufficient capacity to support its current
operations.
ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
- ---------------------
The Company's operations are subject to a variety of federal, state, and
local environmental laws and regulations that govern, among other things, the
generation, handling, storage, transportation, treatment and disposal of
hazardous substances, discharges to water, and air emissions from equipment
and facilities. The Company is involved in various administrative or
judicial proceedings relating to the environment that have been initiated by
EPA, by state authorities, or by third parties. These proceedings are in
various stages of development and generally include demands for reimbursement
of previously incurred costs and for future investigation or remedial
actions. In many instances, the dollar amount of the claim is not
specified. For some sites, other potentially responsible parties may be
jointly and severally responsible, along with the Company, to pay remediation
and other related expenses. For other sites, the Company may be solely
responsible for remediation and related costs. The Company anticipates that
a portion of these costs will be covered by insurance or third party
indemnities. A number of the currently pending matters relate to
discontinued operations of the Company.
To the extent costs and related liabilities for environmental matters can be
reasonably estimated and the Company's responsibility is probable, accruals
are established although costs are not yet payable. In establishing accruals
the Company considers, among other things: its past experience at the site in
question and at other sites; the probable costs to be paid by other
potentially responsible parties, if any; total projected remediation costs
for the site, if known; existing technology; and the currently enacted laws
and regulations. The Company frequently engages qualified environmental
contractors to assist it in evaluating and developing an appropriate response
to environmental issues.
Although it is not possible to predict with certainty the outcome of such
matters or the total cost of remediation efforts, based on information
presently available the Company does not believe that the ultimate
disposition of pending environmental matters will have a material adverse
effect on the Company's business or financial condition taken as a whole.
The following is a brief discussion of certain pending environmental
proceedings which the Company believes, based on currently available
information, are most significant:
Orrington, ME -- Hanlin Group, Inc. purchased a chemical manufacturing
facility located in Orrington, Maine from the Company in 1982. In 1989,
Hanlin filed suit in the U.S. District Court for the District of Maine
alleging that the Company had operated the facility in violation of federal
and state environmental laws. More specifically, Hanlin asserted that the
Company had allowed the discharge of unlawful amounts of mercury,
contaminating the soil, air, ground water, and adjoining waterways. Hanlin
also alleged that the Company illegally caused carbon tetrachloride
and chloroform contamination at the facility. The parties settled these
claims in 1991. The facility was subsequently sold to HoltraChem
Manufacturing Company, L.L.C.; the settlement agreement was assigned to
HoltraChem as part of the sale. Under the settlement agreement, the Company
agreed to pay specified costs of a study ordered by EPA. Costs of
implementing remedial action at the site will be shared by the Company
and HoltraChem on a yet-to-be agreed basis; if the parties cannot reach
agreement, the matter will be referred to binding arbitration.
Auburn Hills, MI -- The Company is a defendant in an action pending in the
U.S. District Court for the Eastern District of Michigan relating to a drum
reconditioning facility located in Auburn Hills, Michigan, that was leased
and operated by the Company in the 1970s. The State of Michigan and the
present owner of the facility claim that the Company is jointly and severally
liable, along with approximately twenty other former owners and operators of
the facility, for alleged contamination of soil and surface groundwater
resulting from improper disposal practices. The State seeks remedial
measures at the site and reimbursement for costs incurred to date. The
current owner seeks reimbursement for previously incurred clean-up costs and
compensation for damages to the site. The Company denies any violation of
applicable law on its part. The Company has filed a third-party complaint
against approximately 110 parties that sent drums to the facility, seeking
contribution for damages that might be assessed against the Company. The
court has not held any hearings on this case since 1987 and has stayed all
third party proceedings. In March 1995, the State issued a proposed remedial
action plan (PRAP) for public comment. The Company submitted formal comments
on the PRAP in July 1995, and has subsequently developed further site
information it believes could reduce remediation costs. The Company is
presently working with the State to develop a revised or new remedial action
plan.
St. Louis, MO / CT Decommissioning -- The Company also processed certain
ores, columbium and tantalum, under license with the Nuclear Regulatory
Commission (NRC) in the 1960s through 1986. The Company is required to
complete decommissioning of the processing areas, building and soil on the
site where manufacturing occurred pursuant to NRC regulations. The Company
submitted a Phase I Characterization Plan to NRC and has implemented the
characterization plan. The Company will submit a Phase II Characterization
Plan based upon the results of the first plan.
Raleigh, NC -- The Company owns a bulk pharmaceutical facility which has been
operating since the mid-1960s. The facility has a Resource Conservation
Recovery Act (RCRA) Part B permit which requires the facility to undergo
corrective action. There are several phases to the corrective action
process. The Company has worked with federal and state agencies to complete
the Remedial Feasibility Investigation and identified certain Solid Waste
Management Units (SWMUs). The Company received its permit and recently
submitted a Remedial Investigation Work Plan to the North Carolina
Department of Environmental Protection proposing the work plan to investigate
the SWMUs. The Company has not received a response to this Remedial
Investigation.
Springville, UT -- In 1996, the Company entered into an interim settlement
agreement with Ensign-Bickford Industries, Inc. ("EBI") to share certain
costs of remediating groundwater that allegedly has been impacted by nitrates
and explosive compounds emanating from EBI's Springville, Utah explosives
plant. The plant, under a series of owners, has been manufacturing
explosives at the mouth of the Spanish Fork Canyon in Utah since the 1940s.
The Company sold the plant and related assets to the Trojan Corporation in
1982. EBI acquired the Trojan Corporation in 1986 and has operated the
plant since that time. Pursuant to a 1991 stipulation and consent order with
the State of Utah, EBI has conducted a feasibility study of alternatives for
remediating impacted off-site groundwater. EBI also is conducting a
corrective action study under a 1995 consent order with Utah. EBI and the
Company are investigating whether additional parties should share in possible
remediation costs. EBI has notified the Company that a resident with
property bordering the site filed suit against EBI for nuisance and trespass
for contamination that allegedly migrated onto the resident's property, and
that other residents near the plant have threatened to sue EBI for
bodily injuries and property damage which they claim to have suffered as a
result of contamination of their drinking water by chemicals emanating from
the plant. The State also has advised EBI that it is investigating a natural
resource damages claim.
Pierce County, WA -- In 1995, Centrum Properties Corporation filed an action
in the U.S. District Court for the Western District of Washington against the
Company and Olin Corporation concerning property that was owned by Olin
between 1935 and 1963 and by the Company between 1963 and 1976. The suit
alleges that the property's groundwater is contaminated with carbon
tetrachloride, and that this contamination was caused by releases from the
explosives manufacturing facility operated on the property first by Olin and
then by the Company. Centrum seeks to recover the costs of investigating
and remediating the site. In November 1995, the Company answered Centrum's
complaint, denying liability, and filed a third-party complaint against
Boeing Company, the current site owner, seeking contribution. In June 1996,
the court granted Centrum's motion for partial summary judgment against Olin
and the Company regarding liability under CERCLA and the Washington Model
Toxic Act; however, the court did not decide the manner in which
responsibility should be allocated among the parties. A court ordered
mediation is scheduled to address this issue. The Company has also been
named a "potentially liable party" for this site by the Washington
Department of Ecology. The Company, Olin, Centrum and the Department of
Ecology are negotiating an order that would govern remedial activities at the
site.
For additional information relating to environmental matters, see Item 1.,
Business--Environmental and Other Regulatory Matters.
Other Litigation
- ----------------
The Company is a party to a number of other legal proceedings arising in the
ordinary course of business. The Company does not believe that these pending
legal matters will have a material adverse effect on its financial condition
or the results of the Company's operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended June 30,
1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The ages and five-year employment histories of Mallinckrodt's executive
officers at June 30, 1996, were as follows:
C. Ray Holman
Age 53. Chairman of the Company since October 1994; Chief Executive Officer
of the Company since December 1992; President of the Company from 1992-1995;
Vice President of the Company from October 1990 to December 1992; President
and Chief Executive Officer, Mallinckrodt Medical, Inc. from January 1989
until December 1992.
Mack G. Nichols
Age 58. President and Chief Operating Officer of the Company since December
1995; Senior Vice President of the Company since October 1993; Vice President
of the Company from October 1990 to October 1993; President and Chief
Executive Officer of Mallinckrodt Chemical, Inc. from January 1989 to
December 1995.
Barbara A. Abbett
Age 56. Vice President, Communications of the Company since April 1994; Vice
President and Senior Partner with Fleishman-Hillard, Inc., from 1979 to April
1994.
James C. Carlile
Age 44. Vice President of the Company since May 1996; President, Medical
Imaging Division, since December 1995; Senior Vice President, Mallinckrodt
Medical, Inc., 1994-1995; Group Vice President, Imaging, Mallinckrodt
Medical, Inc., 1992-1994; and Vice President and General Manager, Radiology,
Mallinckrodt Medical, Inc., 1990-1992.
Ashok Chawla
Age 46. Vice President, Strategic Management of the Company since July 1991;
Vice President Strategic Planning and Business Development, Mallinckrodt
Veterinary, Inc., August 1990 to July 1991.
Charles R. Clark III
Age 44. Vice President of the Company since May 1996; Vice President,
Strategic Services, since December 1995; Group
Vice President, Mallinckrodt Medical, Inc., 1994-1995; and Vice President and
General Manager, Anesthesiology U.S., Mallinckrodt Medical, Inc., 1988-1994.
Michael J. Collins
Age 43. Vice President of the Company since May 1996; President,
Pharmaceutical Specialties Division since December 1995; Group Vice
President, Pharmaceutical Specialties, Mallinckrodt Chemical, Inc.,
1992-1995; Group Vice President, Analgesics & Pharmaceutical Specialties
Group, Mallinckrodt Chemical, Inc., 1992; and Senior Vice President and
General Manager, Drug and Cosmetic Chemicals Division, Mallinckrodt Chemical,
Inc., 1990-1991.
Paul D. Cottone
Age 48. Senior Vice President of the Company since October 1994; President,
Mallinckrodt Veterinary Division since December 1995; President and Chief
Executive Officer, Mallinckrodt Veterinary, Inc., 1994-1995; Vice President,
U.S. Operations of the Merck AgVet Division from 1993 to October 1994; and
Executive Director, International Operations of the Merck AgVet Division from
1987 to 1993.
Bruce K. Crockett, Ph.D.
Age 52. Vice President, Human Resources of the Company since March 1995; and
Vice President, Organization Development at Eastern Enterprises from 1990 to
February 1995.
J. Eugene Fox, Ph.D.
Age 61. Vice President, Science & Technology of the Company since December
1995; Senior Vice President, New Technology and Chief Scientist, Mallinckrodt
Medical, Inc., since 1995; Senior Vice President, Science and Technology,
Mallinckrodt Medical, Inc., 1992-1995; and Vice President, Science and
Technology, Mallinckrodt Medical, Inc., 1989-1992.
Roger A. Keller
Age 51. Vice President, Secretary and General Counsel of the Company since
July 1993; Senior Vice President and General Counsel, Mallinckrodt Medical,
Inc., March 1992 to July 1993; Vice President and General Counsel,
Mallinckrodt Medical, Inc., September 1989 to March 1992.
Douglas A. McKinney
Age 43. Treasurer of the Company since November 1995; and Assistant
Treasurer July 1991 to November 1995.
Michael K. Milosovich
Age 50. Vice President of the Company since May 1996; President,
Pharmaceutical Chemicals Division since December 1995; Vice President and
General Manager, Bulk Analgesics, Mallinckrodt Chemical, Inc., 1992-1995; and
General Manager, PAP/APAP, Mallinckrodt Chemical, Inc., 1990-1992.
David Morra
Age 40. Vice President of the Company since May 1996; President, Nuclear
Medicine Division since December 1995; Senior Vice President, Europe,
Mallinckrodt Veterinary, Inc., 1995; Group Vice President, Europe/Australia,
New Zealand, Mallinckrodt Veterinary, Inc., 1994-1995; and Vice President and
General Manager, Cardiology, U.S., Mallinckrodt Medical, Inc., 1991-1994.
Robert G. Moussa
Age 49. President, International of the Company since December 1995; Senior
Vice President of the Company since October 1993; Vice President of the
Company 1992-1993; President and Chief Executive Officer, Mallinckrodt
Medical, Inc., 1992-1995; Senior Vice President and Group Executive,
Mallinckrodt Medical, Inc., September-December 1992; and Group Vice
President, International, Mallinckrodt Medical, Inc., January 1989 to
September 1992.
Adeoye Y. Olukotun
Age 51. Vice President, Medical and Regulatory Affairs of the Company since
June 1996; Vice President, Bristol-Meyers Squibb Company 1991 to June 1996.
Michael A. Rocca
Age 51. Senior Vice President and Chief Financial Officer of the Company
since April 1994; Corporate Vice President and Treasurer of Honeywell Inc.,
March 1992 to April 1994; Vice President, Finance, Honeywell Europe,
1990-1992.
William B. Stone
Age 53. Vice President and Controller of the Company since November 1990;
and Vice President of Mallinckrodt, Inc. since April 1983.
Thomas R. Trotter
Age 48. Vice President of the Company since May 1996; President, Critical
Care Division since December 1995; Senior Vice President, U.S. Markets,
Mallinckrodt Medical, Inc., 1994-1995; Group Vice President, Critical Care
and Anesthesiology, Mallinckrodt Medical, Inc., 1992-1994; and Vice President
and General Manager, Mallinckrodt Critical Care, Mallinckrodt Medical, Inc.,
1991-1992.
Fred K. Vogt
Age 51. Vice President of the Company since May 1996; President,
Mallinckrodt Baker Division since December 1995; Group Vice President,
Laboratory & Specialty Chemicals, Mallinckrodt Chemical, Inc., 1992-1995; and
Vice President and General Manager, Performance & Laboratory Chemicals,
Mallinckrodt Chemical, Inc., 1991-1992.
Daniel E. Woods, Jr.
Age 52. Vice President of the Company since May 1996; President, Industrial
Specialties Division since December 1995; Group Vice President, Catalysts &
Chemicals, Mallinckrodt Chemical, Inc., 1993-1995; and Group Vice President,
Catalysts, Performance & Laboratory Chemicals, Mallinckrodt Chemical, Inc.,
1991-1993.
Miscellaneous
All of the Company's officers are elected annually in October. No "family
relationships" exist among any of the listed officers.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Common Stock Prices and Dividends
QUARTER
-------------------------------
First Second Third Fourth
----- ------ ----- ------
Fiscal 1996
Dividends per common share. . . . . . . . $ .14 $.155 $.155 $.155
Common stock prices
High. . . . . . . . . . . . . . . . . . 41.88 39.88 42.00 40.88
Low . . . . . . . . . . . . . . . . . . 35.13 32.50 35.13 36.75
Fiscal 1995
Dividends per common share. . . . . . . . $.125 $ .14 $ .14 $ .14
Common stock prices
High. . . . . . . . . . . . . . . . . . 34.00 34.13 34.63 36.88
Low . . . . . . . . . . . . . . . . . . 28.38 29.00 29.13 33.50
The principal market on which Mallinckrodt's common stock is traded is the
New York Stock Exchange. Common stock prices are from the composite tape for
New York Stock Exchange issues, as reported in The Wall Street Journal. As
of July 31, 1996, the number of registered holders of common stock as
reported by the Company's registrar was 8,734.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in millions except per share amounts)
<CAPTION>
Years ended June 30,
--------------------------------
1996 1995 1994 (1)
-------- -------- ---------
<S> <C> <C> <C>
Net sales...................................$2,210.2 $2,043.2 $1,777.9
Earnings (loss) from continuing operations..$ 191.2 $ 163.9 $ 87.9
Discontinued operations(4).................. 20.7 16.4 15.9
Cumulative effects of accounting changes....
--------- --------- ---------
Net earnings (loss)......................... 211.9 180.3 103.8
Preferred stock dividends................... (.4) (.4) (.4)
--------- --------- ---------
Available for common shareholders...........$ 211.5 $ 179.9 $ 103.4
========= ========= =========
Per Common Share Data (5)
Earnings (loss) from continuing operations..$ 2.50 $ 2.11 $ 1.13
Net earnings (loss)......................... 2.77 2.32 1.33
Dividends declared.......................... .61 .55 .49
Book value.................................. 16.44 15.12 13.05
Weighted average common shares (in millions) 76.3 77.5 77.6
<CAPTION>
Years ended June 30,
--------------------------------
1993(2) 1992(3) 1991
-------- -------- ---------
<S> <C> <C> <C>
Net sales...................................$1,626.8 $1,530.8 $1,456.4
Earnings (loss) from continuing operations..$ (135.4) $ 103.7 $ 66.2
Discontinued operations(4).................. 15.6 23.8 22.0
Cumulative effects of accounting changes.... (80.6)
--------- --------- ---------
Net earnings (loss)......................... (200.4) 127.5 88.2
Preferred stock dividends................... (.4) (.4) (.4)
--------- --------- ---------
Available for common shareholders...........$ (200.8) $ 127.1 $ 87.8
========= ========= =========
Per Common Share Data (5)
Earnings (loss) from continuing operations..$(1.76) $ 1.33 $ .93
Net earnings (loss)......................... 2.60 1.63 1.24
Dividends declared.......................... .43 .38 .33
Book value.................................. 11.77 16.02 14.28
Weighted average common shares (in millions) 77.4 77.8 70.6
OTHER DATA
<CAPTION>
Years ended June 30,
--------------------------------
1996 1995 1994 (1)
-------- -------- ---------
<S> <C> <C> <C>
Total assets................................$3,405.9 $2,677.4 $2,401.0
Working capital............................. 359.1 271.9 261.3
Current ratio............................... 1.3:1 1.4:1 1.4:1
Total debt..................................$1,198.0 $ 609.0 $ 669.8
Shareholders' equity........................ 1,232.2 1,171.5 1,015.9
Return on shareholders'equity............... 16% 15% 9%
Capital expenditures........................$ 169.2 $ 159.6 $ 171.2
Total dividends declared.................... 45.7 42.2 37.7
Common shares outstanding (in millions)..... 74.3 76.8 77.0
Number of employees......................... 10,400 10,200 10,200
<CAPTION>
Years ended June 30,
--------------------------------
1993(2) 1992(3) 1991
-------- -------- ---------
<S> <C> <C> <C>
Total assets................................$2,141.9 $1,992.3 $2,179.8
Working capital............................. 203.7 351.6 409.0
Current ratio............................... 1.3:1 1.8:1 1.6:1
Total debt..................................$ 617.1 $ 373.7 $ 643.4
Shareholders' equity........................ 910.5 1,224.2 1,084.2
Return on shareholders'equity............... (13%) 9% 7%
Capital expenditures........................$ 187.5 $ 148.7 $ 121.5
Total dividends declared.................... 33.2 29.5 23.7
Common shares outstanding (in millions)..... 76.4 75.7 75.2
Number of employees......................... 9,900 9,500 9,700
</TABLE>
(1) See "Management's Discussion and Analysis" for a description of
nonrecurring items.
(2) Results for 1993 included an after-tax charge of $242.2 million, or
$3.13 per share, related to restructuring.
(3) Results for 1992 included an after-tax charge of $2.4 million, or $.03
per share related to the formation of Tastemaker, the flavors joint
venture and an after-tax charge of $3.0 million, or $.04 per share
related to technical manufacturing control problems at an animal health
Kansas City, Kansas, manufacturing facility. These charges were offset
by an after-tax gain of $6.7 million, or $.08 per share from sales of
investments.
(4) See Note 1 of Notes to Consolidated Financial Statements for information
on discontinued operations in 1996, 1995 and 1994. Results for 1993,
1992 and 1991 represent earnings from the feed ingredients business,
partially offset by environmental and related litigation charges.
(5) Presented on a primary per common share basis adjusted for the 3-for-1
stock split in November 1991.
<PAGE>
ITEM 7. MALLINCKRODT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
All references to years are to fiscal years ended June 30 unless otherwise
stated.
1996 vs. 1995
- -------------
Mallinckrodt's earnings from continuing operations for the year ended June
30, 1996, were $191 million, or $2.50 per share. This represents an 18
percent increase in per share earnings from continuing operations compared to
$164 million or $2.11 per share in the prior year. Operating results for
1996 reflect a noncash pre-tax charge of $4 million associated with the
acquisition of Syntro Corporation during the second quarter.
Net earnings for 1996 were $212 million, or $2.77 per share, compared with
$180 million, or $2.32 per share in 1995. Fiscal 1996 net earnings include
the gain resulting from the sale of the feed ingredients business in the
second quarter, partially offset by a second quarter adjustment of provisions
for environmental costs related to discontinued operations. Net earnings for
1996 and 1995 include $4 million and $20 million of earnings net of taxes,
respectively, from the divested feed ingredients business.
Net sales increased 8 percent to $2.2 billion, compared to $2.0 billion a
year ago. Operating earnings were $330 million for 1996, up 11 percent
compared to $297 million in 1995.
During 1996, a Strategic Change Initiative was announced which included major
organizational and operating changes designed to enhance global growth and
improve operational effectiveness. This initiative eliminated the management
and administrative structures of three former operating companies. Those
businesses are now managed through divisions with global responsibility under
a chief operating officer. Mallinckrodt realigned its operating segments to
reflect the customer focus of its divisions. Prior periods for segments have
been reclassified to conform with the 1996 presentation.
Discontinued operations are discussed in Note 1 of the Notes to Consolidated
Financial Statements (Notes).
1995 vs. 1994
- -------------
Mallinckrodt's 1995 earnings from continuing operations were $164 million, or
$2.11 per share. These results, compared with 1994 earnings from continuing
operations, excluding a restructuring charge and minor nonrecurring
adjustments, were up 14 percent.
Net earnings for 1995 were $180 million, or $2.32 per share, compared with
$104 million, or $1.33 per share, in 1994. Included in the 1994 results was
an after-tax restructuring charge totaling $59 million, or $.76 per share.
Net sales for 1995 increased 15 percent to $2.0 billion, compared to $1.8
billion in 1994. Operating earnings for 1995 were $297 million, up 16
percent over comparable 1994 results excluding the restructuring charge.
Each of Mallinckrodt's three segments contributed to sales and earnings
growth in 1995.
Restructuring charges are discussed in the business sections which follow,
and in Note 1 of the Notes.
HUMAN HEALTHCARE
Years ended June 30,
------------------------
1996 1995 1994
------ ------ ------
(in millions)
Net sales...................................$1,422 $1,337 $1,193
====== ====== ======
Operating earnings:
Ongoing operations........................$ 309 $ 276 $ 252
Restructuring charge...................... (74)
------ ------ -------
$ 309 $ 276 $ 178
====== ====== =======
Ongoing operating earnings as a percent
of sales.................................. 21.7% 20.6% 21.1%*
*Excluding restructuring charge
1996 vs. 1995
- -------------
Human healthcare's operating earnings for 1996 were $309 million, up 12
percent compared to $276 million in 1995. Net sales increased 6 percent to
$1.4 billion. Productivity programs initiated during the last several years
helped earnings improve at a faster rate than sales.
Sales for imaging agents were up 4 percent, primarily from the acquisition of
Liebel-Flarsheim in January 1996, and improved nuclear medicine sales in
Europe. Volume gains for contrast media were offset by competitive pricing.
Sales of critical care products increased 5 percent primarily from higher
volume of respiratory therapy products in Japan and Europe.
Pharmaceutical specialties sales improved 13 percent. Sales volume and
pricing for medicinal narcotics were the main contributors to the increase.
Sales also benefited from the acquisition of King Pharmaceuticals' specialty
analgesic pharmaceuticals product line in December 1995.
In January 1996, Liebel-Flarsheim Company, a leading manufacturer of contrast
media power injector systems for diagnostic imaging procedures and equipment
for urology procedures, was acquired. The acquisition enhanced sales
performance but modestly impaired operating earnings. Management believes
this operation will be a positive contributor to 1997 operating results. In
December 1995, King Pharmaceuticals' product line of specialty analgesic
pharmaceuticals was acquired. The business is important to our specialty
pharmaceutical strategy and is expected to have a positive impact on future
periods' results.
Contributing to operating earnings were restructuring actions begun in 1994
which are generating annualized pre-tax savings at a level approximating $40
million. Management expects incremental benefits in 1997 and beyond as the
program is ultimately completed.
1995 vs. 1994
- -------------
Human healthcare's 1995 operating earnings were $276 million, up 10 percent,
excluding the 1994 restructuring charge. Net sales reached $1.3 billion, an
increase of 12 percent from $1.2 billion in 1994.
Contributing to the improved operating earnings were results of actions
related to the restructuring program begun in 1994. Such actions included
reorganization of the U.S. sales structure and non-sales related functions
and management processes, relocation costs for manufacturing operations and a
workforce reduction of approximately 600 positions, 500 of which were
contemplated in the 1994 restructure plan. Pre-tax savings from the
restructuring program approximated $11 million in 1995.
Sales of imaging agents increased 11 percent, benefiting principally from
higher worldwide sales volume of the X-ray contrast medium Optiray*,
partially offset by pricing pressures in the U.S. Increased U.S. sales
volume of TechneScan MAG3*, the introduction of OctreoScan* and higher sales
of nuclear medicine products in Europe due to growth in existing markets,
contributed to the improved results.
Critical care products' sales were up 11 percent for 1995, boosted by the
September 1994 acquisition of DAR S.p.A., higher anesthesia product sales in
Europe and Japan and increased sales volume of hemoglobin testing products in
the U.S. and Europe.
Pharmaceutical specialties sales improved 16 percent in 1995. Continued
strength in sales volume for medicinal narcotics was the main contributor to
the increase. Higher worldwide acetaminophen (APAP) sales volume, improved
plant performance in Raleigh, North Carolina, and higher sales of peptides
also provided benefits in 1995.
SPECIALTY CHEMICALS
Years ended June 30,
------------------------
1996 1995 1994
------ ------ ------
(in millions)
Net sales................................... $332 $252 $156
==== ==== ====
Operating earnings.......................... $ 28 $ 21 $ 13
==== ==== ====
Operating earnings as a percent of sales.... 8.4% 8.2% 8.0%
1996 vs. 1995
- -------------
Specialty chemicals' operating earnings increased 35 percent in 1996, to $28
million. Net sales were $332 million, an improvement of 32 percent compared
to 1995. The 1995 acquisition and subsequent successful integration of J.T.
Baker and existing specialty chemical operations were principal contributors
to year to year growth.
1995 vs. 1994
- -------------
Specialty chemicals achieved earnings of $21 million in 1995. This
represented a 65 percent earnings improvement over 1994. Net sales increased
62 percent to $252 million. Results benefited from the acquisition of
Catalyst Resources, Inc. in March 1994 and the reclassification of a small
specialty chemical business to continuing operations. The acquisition of J.
T. Baker in February 1995 enhanced sales performance, but modestly impaired
operating earnings through normal acquisition accounting adjustments.
Worldwide strength in the existing catalysts business also contributed to the
sales and earnings improvements in 1995. The 1993 restructuring program was
substantially completed during 1995, with the exit of the photochemicals
business.
ANIMAL HEALTH
Years ended June 30,
------------------------
1996 1995 1994
------ ------ ------
(in millions)
Net sales................................... $456 $455 $429
==== ==== ====
Operating earnings:
Ongoing operations........................ $ 35 $ 29 $ 21
Restructuring charge...................... (20)
---- ---- -----
$ 35 $ 29 $ 1
==== ==== =====
Ongoing operating earnings as a percent
of sales.................................. 7.7% 6.3% 4.9%*
*Excluding restructuring charge
1996 vs. 1995
- -------------
Animal health's operating earnings were $35 million, up 22 percent. These
results reflect a noncash pre-tax charge of $4 million for write-off of
purchased research and development associated with the acquisition of Syntro
Corporation. Excluding this charge, operating earnings improved 34 percent.
Net sales were $456 million, up $1 million compared to the prior year,
despite the exit from certain product lines in Latin America. Higher sales
volume due to a new distribution agreement and favorable pricing in Asia
partially offset lower volumes in North America and Latin America. European
operations also contributed to improved operating results. An improved sales
mix toward higher margin animal productivity and biological products,
improved plant performance and lower expenses as a percentage of sales
augmented the improved earnings performance.
Although the results in 1996 and 1995 have substantially improved, the
Company has concluded that the animal health business will have greater
potential and be more successful through alignment with a company that
possesses core technology more directly related to the development of animal
health products. Therefore, the Company has decided to explore all strategic
options related to this business.
1995 vs. 1994
- -------------
Animal health's 1995 operating earnings were $29 million, up 37 percent,
excluding the 1994 restructuring charge. Net sales were $455 million, up 6
percent compared to $429 million in 1994. Sales volume growth was highest in
Europe due to increases across all major product lines. Sales in Asia
improved primarily from higher volumes of biological products. Contributing
to the improved operating earnings were favorable currency effects,
principally in Europe and Latin America, and the favorable impact of actions
related to the restructuring program begun in 1993, which included various
cost control measures, plant closures and a workforce reduction of
approximately 1,000 employees.
CORPORATE MATTERS
A Strategic Change Initiative, announced in December 1995, involves the
consolidation of operations and administrative staff support at the operating
companies with respective corporate staff functions. Several actions have
been taken, but the bulk of the effort will be implemented during 1997 and
beyond. The increase in corporate expense in the fourth quarter and full
year 1996 is primarily attributable to these efforts. The Strategic Change
Initiative is expected to have generally negative effects for the first
quarter and first half of 1997 and accelerating savings for the duration of
the year, resulting in a program which is planned to be earnings neutral for
all of 1997.
Earnings for Tastemaker, the Company's flavors joint venture, were $32
million in 1996, and $25 million in 1995, due to strong worldwide sales
growth and manufacturing cost improvements. These results represented annual
growth of 26 percent and 37 percent for 1996 and 1995, respectively.
Since its inception in 1992, Tastemaker has enjoyed significant success in
its growth and profitability. Now, the Company is ready to realize the value
that has been gained with its investment in Tastemaker. Accordingly, the
Company is prepared to sell its interest in Tastemaker, in cooperation with
our joint venture partner, Hercules, Inc., if an acceptable offer is
received.
Net interest and other nonoperating expense decreased $4 million in 1996 from
1995. This decrease related primarily to higher interest income in 1996 and
the effect of a write-down of an investment and hedging losses in 1995.
Mallinckrodt's effective tax rate for continuing operations was 36.9 percent
in 1996, compared with 37.5 percent in 1995. See Note 9 of the Notes for
further discussion of income taxes.
FINANCIAL CONDITION
Financial resources currently available to the Company are expected to
continue to be adequate to support existing businesses, fund the remaining
cash expenditures of approximately $95 million for the restructuring programs
and fund new opportunities. Any resources generated by the potential
strategic actions associated with animal health and Tastemaker previously
discussed, will be reinvested in new and ongoing growth opportunities,
especially in human healthcare. Growth initiatives in specialty chemicals
and possible additional share repurchases of the company stock will also be
considered.
Since June 30, 1995, cash and cash equivalents increased $485 million.
Operations provided $200 million of cash, while acquisition and capital
spending totaled $323 million, $70 million of which related to the
acquisition of Liebel-Flarsheim Company, $38 million to the acquisition of
Syntro Corporation and $32 million to the acquisition of a product line from
King Pharmaceuticals. In May 1996, the Company established a $600 million
renewable credit agreement available until May 1997. Borrowings under the
credit agreement were $600 million at June 30, 1996. A portion of the cash
was used to retire existing debt, and, at June 30, 1996, $411 million remains
in cash and cash equivalents for additional debt retirement and other general
corporate purposes.
The Company's debt as a percentage of invested capital was 49 percent at June
30, 1996; however, if adjusted for the $411 million of cash and cash
equivalents noted above, this percentage would have been 39 percent. The
Company's current ratio at June 30, 1996, was 1.3:1.
In April 1992, a shelf registration statement was filed with the Securities
and Exchange Commission (SEC) for $250 million of debt securities. As of
June 30, 1996, $50 million of securities under the shelf remain unissued. In
February 1995, a shelf registration statement was filed with the SEC for $250
million of debt securities. In September 1995 and November 1995, the Company
issued $100 million of 6.75% notes due September 15, 2005, and $100 million
of 6.5% notes due November 15, 2007, respectively. As of June 30, 1996, $50
million of securities under the February 1995 shelf remain unissued. Net
proceeds from the sale of any debt securities would be used for general
corporate purposes, except as noted in any prospectus supplement.
The Company also has a $550 million private-placement commercial paper
program. This program is backed by a $550 million credit agreement available
until May 2001. There were no amounts outstanding under the commercial paper
program or the credit agreement at June 30, 1996. Non-U.S. lines of credit
totaling $214 million were also available and borrowings under these lines
were $17 million at June 30, 1996. These non-U.S. lines are cancelable at
any time.
The Company's Board of Directors previously authorized repurchase of a total
of 42 million shares of its common stock. Thirty-three million shares have
been purchased under the previous authorization, 3.5 million during the year
ended June 30, 1996.
Estimated capital spending for the fiscal year ending June 30, 1997, is
approximately $190 million.
ENVIRONMENTAL MATTERS
The Company is subject to various environmental protection and occupational
safety and health laws and regulations in the United States and foreign
countries in which it operates. In addition, in its current operations and
over the years, the Company has handled, and will continue to deal in or
otherwise handle, materials and wastes classified as hazardous or toxic by
one or more regulatory agencies.
Significant capital expenditures, as well as operating costs, have been
incurred to comply with the laws and regulations governing the protection of
the environment, occupational safety and health, and the handling of
hazardous materials. There are inherent and unquantifiable risks in handling
hazardous or toxic materials and wastes. On the basis of its best
information, the Company does not believe the expenditures and risks
occasioned by these circumstances have as yet become materially adverse to
its financial condition or results of operations; however, no assurance can
be given that this will continue to be true. In particular, the Company is
unable to predict the extent to which it may be adversely affected by future
regulatory developments such as new or changed laws or regulations.
Most of the Company's environmental related capital expenditures are in
response to provisions of the Federal Clean Air Act, Water Pollution Control
Act, Resource Conservation and Recovery Act, Comprehensive Environmental
Response, Compensation, and Liability Act, land use, air and water protection
regulations of the various localities and states, and their foreign
counterparts. Capital expenditures worldwide relating to air emission
control, wastewater purification, land reclamation and solid waste disposal
totaled approximately $14 million in 1996 and $14 million in 1995. The
Company currently estimates that environmental capital expenditures over the
next two years will average about $13 million per year.
During 1996, the Company assumed and was compensated for certain costs to
remediate various sites in the future. In addition, the Company established
additional environmental reserves for discontinued operations. The Company
has accruals of $97 million at June 30, 1996 for costs associated with the
study and remediation of Superfund sites and for the Company's current and
former operating sites. Claims for recovery have not been netted against the
accrued environmental liabilities. While ongoing litigation may eventually
result in recovery of costs expended at certain of the environmental sites,
any gain is contingent upon a successful outcome and has not been accrued.
Based on information presently available, the Company believes any amounts
paid in excess of the accrued liabilities will not have a material adverse
effect on its financial position or results of operations.
OTHER MATTERS
The Company operates globally, with manufacturing and distribution facilities
in various countries throughout the world and as such is subject to certain
opportunities and risks, including currency fluctuations and government
actions. Mallinckrodt generates a significant portion of its operating
earnings and cash flows outside the United States and is positioned to
benefit from its use of approximately 26 functional currencies as currency
fluctuations are often offsetting.
Operations in each country are monitored to respond to changing economic and
political environments quickly and take advantage of changing foreign
currencies and interest rates. The Company uses certain derivative financial
instruments, principally purchased options, forward contracts and currency
swaps, to manage its exposure to fluctuations in foreign exchange and
interest rate risk. Additionally, various operational initiatives are
employed to help manage business risks. The net impact of foreign exchange
activities was immaterial for 1996, 1995 and 1994, including the conversion
of certain currencies into functional currencies and the costs of hedging
certain transactions and balance sheet exposures.
The Company does not consider the present rate of inflation to have a
significant impact on the businesses in which it operates.
While future economic events cannot be predicted, the Company believes its
current operations and future expansion plans will not result in a
significantly different risk profile.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . .29
Information by Business Segment . . . . . . . . . . . . . . . . . . . . . .31
Consolidated Statement of Operations. . . . . . . . . . . . . . . . . . . .32
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . .33
Consolidated Statement of Cash Flows. . . . . . . . . . . . . . . . . . . .34
Consolidated Statement of Changes in Shareholders' Equity . . . . . . . . .35
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . .36
Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . . . . . . .50
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors of Mallinckrodt Group Inc.
We have audited the accompanying consolidated balance sheet of Mallinckrodt
Group Inc. as of June 30, 1996 and 1995, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the three years in the period ended June 30, 1996, appearing on
pages XX through XX. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mallinckrodt
Group Inc. at June 30, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
St. Louis, Missouri
August 7, 1996
<PAGE>
Responsibility for Financial Reporting
The financial statements included in this report are the responsibility of
management. The statements have been prepared in conformity with generally
accepted accounting principles and include amounts based on our best
estimates and judgments. Financial information appearing elsewhere in this
report is consistent with that in the financial statements.
Management is also responsible for maintaining systems of internal accounting
control with the objectives of providing reasonable assurance at reasonable
cost that the Company's assets are safeguarded against material loss from
unauthorized use or disposition and that transactions are properly authorized
and recorded to permit reliance on the Company's financial data and records.
In addition, the Company maintains a program for communicating corporate
policy throughout the organization and, as a further safeguard, an internal
audit staff monitors compliance with policies and systems of internal
accounting control.
Mallinckrodt's financial statements have been audited by Ernst & Young LLP.
To express their opinion as to the fairness of the statements in conformity
with generally accepted accounting principles, they review and evaluate
Mallinckrodt's accounting controls and conduct such tests and other
procedures as they deem necessary. The Audit Committee of the Board of
Directors regularly meets with the independent auditors -- both jointly and
separately -- to review financial reporting matters and audit and control
functions.
William B. Stone
Vice President and Controller
August 7, 1996
Michael A. Rocca
Senior Vice President and Chief Financial Officer
August 7, 1996
<PAGE>
<TABLE>
INFORMATION BY BUSINESS SEGMENT
NET SALES
(In millions)
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Human healthcare................................. $1,422.7 $1,336.8 $1,193.2
Specialty chemicals.............................. 332.0 251.8 155.9
Animal health.................................... 455.8 454.9 429.5
Intersegment sales (.3) (.3) (.7)
--------- --------- ---------
Consolidated $2,210.2 $2,043.2 $1,777.9
========= ========= =========
</TABLE>
<TABLE>
EARNINGS AND ASSETS
(In millions)
<CAPTION>
Earnings from
Continuing Operations
Before Income Taxes Identifiabe Assets
------------------------ ------------------------------
1996 1995 1994 1996 1995 1994
------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Human healthcare..................$309.0 $276.0 $178.1 $1,797.8 $1,591.1 $1,443.0
Specialty chemicals............... 27.9 20.6 12.5 339.3 299.8 177.6
Animal health..................... 34.9 28.7 1.0 773.0 735.5 697.1
Corporate......................... (41.4) (28.8) (30.2) 623.7 205.9 200.2
Eliminations...................... (.3) .2 .1 (127.9) (154.9) (116.9)
------- ------- ------- --------- --------- ---------
Operating earnings.............. 330.1 296.7 161.5
Equity in pre-tax earnings of
joint venture................... 31.9 25.3 18.5
Interest and other nonoperating
expense, net.................... (.3) (4.3) (.4)
Interest expense.................. (58.7) (55.5) (40.0)
------- ------- ------- --------- --------- ---------
Consolidated....................$303.0 $262.2 $139.6 $3,405.9 $2,677.4 $2,401.0
======= ======= ======= ========= ========= =========
</TABLE>
<TABLE>
PROPERTY, PLANT AND EQUIPMENT
(In millions)
<CAPTION>
Capital Expenditures Depreciation and Amortization
------------------------ ------------------------------
1996 1995 1994 1996 1995 1994
------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Human healthcare..................$100.2 $117.4 $135.0 $ 94.9 $ 82.0 $ 66.7
Specialty chemicals............... 24.6 9.6 6.0 18.2 13.5 7.5
Animal health..................... 40.2 30.0 27.0 31.8 25.9 26.3
Corporate......................... 4.2 2.6 3.2 4.2 1.6 2.5
------ ------ ------ ------- ------- -------
Consolidated....................$169.2 $159.6 $171.2 $ 149.1 $ 123.0 $ 103.0
====== ====== ====== ======= ======= =======
(See Note 18 of the Notes to Consolidated Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
<CAPTION>
Years Ended June 30,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales............................................... $2,210.2 $2,043.2 $1,777.9
Operating costs and expenses:
Cost of goods sold.................................... 1,192.8 1,102.8 931.9
Selling, administrative and general expenses.......... 584.9 552.8 496.7
Research and development expenses..................... 116.2 97.8 95.3
Restructuring charge.................................. 93.9
Other operating income, net........................... (13.8) (6.9) (1.4)
--------- --------- ---------
Total operating costs and expenses 1,880.1 1,746.5 1,616.4
--------- --------- ---------
Operating earnings.................................... 330.1 296.7 161.5
Equity in pre-tax earnings of joint venture............. 31.9 25.3 18.5
Interest and other nonoperating expense, net............ (.3) (4.3) (.4)
Interest expense........................................ (58.7) (55.5) (40.0)
--------- --------- ---------
Earnings from continuing operations before
income taxes........................................ 303.0 262.2 139.6
Income tax provision.................................... 111.8 98.3 51.7
--------- --------- ---------
Earnings from continuing operations................... 191.2 163.9 87.9
Discontinued operations................................. 20.7 16.4 15.9
--------- --------- ---------
Net earnings.......................................... 211.9 180.3 103.8
Preferred stock dividends............................... (.4) (.4) (.4)
--------- --------- ---------
Available for common shareholders..................... $211.5 $179.9 $103.4
========= ========= =========
EARNINGS PER COMMON SHARE
Continuing operations................................... $2.50 $2.11 $1.13
Discontinued operations................................. .27 .21 .20
--------- --------- ---------
Net earnings............................................ $2.77 $2.32 $1.33
========= ========= =========
(The accompanying Notes are an integral part of the Consolidated Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(In millions, except share and per share amounts)
<CAPTION>
At June 30,
---------------------
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 546.2 $ 60.9
Trade receivables, less allowances of $12.8 in 1996 and 1995... 453.9 392.5
Inventories.................................................... 470.2 415.5
Deferred income taxes.......................................... 42.9 53.2
Other current assets........................................... 57.7 56.9
--------- ---------
Total current assets............................................. 1,570.9 979.0
Investments and long-term receivables, less allowances
of $8.1 in 1996 and $17.0 in 1995.............................. 150.0 165.5
Property, plant and equipment, net............................... 1,036.4 978.0
Intangible assets................................................ 647.5 527.6
Net noncurrent assets of discontinued operations................. 26.6
Deferred income taxes............................................ 1.1 .7
--------- ---------
Total assets..................................................... $3,405.9 $2,677.4
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt................................................ $ 622.2 $ 107.5
Accounts payable............................................... 194.6 182.8
Accrued liabilities............................................ 314.8 332.1
Income taxes payable........................................... 38.5 7.7
Net current liabilities of discontinued operations............. 38.4 74.3
Deferred income taxes.......................................... 3.3 2.7
--------- ---------
Total current liabilities........................................ 1,211.8 707.1
Long-term debt, less current maturities.......................... 575.8 501.5
Deferred income taxes............................................ 97.9 76.9
Postretirement benefits.......................................... 156.0 142.7
Other noncurrent liabilities and deferred credits................ 132.2 77.7
--------- ---------
Total liabilities................................................ 2,173.7 1,505.9
Shareholders' equity:
4 Percent cumulative preferred stock........................... 11.0 11.0
Common stock, par value $1, authorized 300,000,000 shares;
issued 87,116,289 shares in 1996 and 1995.................... 87.1 87.1
Capital in excess of par value................................. 283.5 274.1
Reinvested earnings............................................ 1,150.7 984.5
Foreign currency translation................................... (15.3) (9.3)
Treasury stock, at cost.......................................... (284.8) (175.9)
--------- ---------
Total shareholders' equity....................................... 1,232.2 1,171.5
--------- ---------
Total liabilities and shareholders' equity....................... $3,405.9 $2,677.4
========= =========
(The accompanying Notes are an integral part of the Consolidated Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Years Ended June 30,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net earnings............................................ $ 211.9 $ 180.3 $ 103.8
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization......................... 149.1 125.0 104.6
Restructuring charge.................................. 93.0
Postretirement benefits............................... 10.9 12.1 8.3
Increase in other noncurrent liabilities and
deferred credits................................... 49.7 2.4 .7
Undistributed equity in earnings of joint venture..... (25.0) (19.1) (14.4)
(Gains) losses on asset disposals..................... (55.1) .5 (.6)
Deferred income taxes................................. 30.5 66.6 (5.2)
Other, net............................................ (10.2) (7.7) (7.7)
-------- -------- --------
361.8 360.1 282.5
Changes in noncash operating working capital:
Accounts receivable................................. (62.5) (44.1) (12.6)
Inventories......................................... (49.5) (16.3) (11.4)
Accounts payable, accrued liabilities and
income taxes, net................................. (47.6) (12.8) (32.1)
Other, net.......................................... (2.7) (3.2) .9
-------- -------- --------
Net cash provided by operating activities............... 199.5 283.7 227.3
======== ======== ========
CASH FLOWS - INVESTING ACTIVITIES
Capital expenditures.................................... (169.2) (160.8) (172.3)
Acquisition spending.................................... (153.9) (111.5) (95.5)
IFL dividend receivable................................. 51.9
Proceeds from asset disposals........................... 120.5 21.2 8.6
Other, net.............................................. 26.1 (22.8) 7.2
-------- -------- --------
Net cash used by investing activities................... (176.5) (273.9) (200.1)
======== ======== ========
CASH FLOWS - FINANCING ACTIVITIES
Increase (decrease) in short-term debt.................. 511.7 19.9 (58.6)
Proceeds from long-term debt............................ 199.5 3.2 196.4
Payments on long-term debt.............................. (103.7) (10.3) (101.6)
Issuance of Mallinckrodt common stock................... 31.0 8.0 10.9
Acquisition of treasury stock........................... (130.5) (15.4)
Dividends paid.......................................... (45.7) (42.2) (37.7)
-------- -------- --------
Net cash provided (used) by financing activities........ 462.3 (36.8) 9.4
-------- -------- --------
Increase (decrease) in cash and cash equivalents........ 485.3 (27.0) 36.6
Cash and cash equivalents at beginning of period........ 60.9 87.9 51.3
-------- -------- --------
Cash and cash equivalents at end of period.............. $ 546.2 $ 60.9 $ 87.9
======== ======== ========
(The accompanying Notes are an integral part of the Consolidated Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions, except per share amounts)
<CAPTION>
Capital in
Preferred Common Excess of Reinvested Treasury
Stock Stock Par Value Earnings Other Stock
--------- ------ ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1993.... $11.0 $87.1 $262.4 $ 780.3 $(58.6) $(171.7)
Net earnings.............. 103.8
Dividends:
4 Percent cumulative
preferred stock ($4.00
a share) (.4)
Common stock ($.485
a share) (37.3)
Stock option exercises.... 4.0 6.9
Translation adjustment.... 24.4
Other..................... 1.8 2.2
--------- ------ ---------- ---------- ------- --------
BALANCE, JUNE 30, 1994.... 11.0 87.1 268.2 846.4 (34.2) (162.6)
Net earnings.............. 180.3
Dividends:
4 Percent cumulative
preferred stock ($4.00
a share).............. (.4)
Common stock ($.545
a share).............. (41.8)
Stock option exercises.... 2.0 6.2
Acquisition of treasury
stock................... (15.4)
Translation adjustment.... 24.9
Other..................... 3.9 (4.1)
--------- ------ ---------- ---------- ------- --------
BALANCE, JUNE 30, 1995.... 11.0 87.1 274.1 984.5 (9.3) (175.9)
Net earnings.............. 211.9
Dividends:
4 Percent cumulative
preferred stock ($4.00
a share).............. (.4)
Common stock ($.605
a share).............. (45.3)
Stock option exercises.... 8.1 21.6
Acquisition of treasury
stock................... (130.5)
Translation adjustment.... (6.0)
Other..................... 1.3
--------- ------ ---------- ---------- ------- --------
BALANCE, JUNE 30, 1996.... $11.0 $87.1 $283.5 $1,150.7 $(15.3) $(284.8)
========= ====== ========== ========== ======= ========
(The accompanying Notes are an integral part of the Consolidated Financial Statements.)
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions except per share amounts)
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Financial statements of all majority owned subsidiaries are consolidated.
Investments in 20 to 50 percent owned affiliates are reported on the equity
method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the revenues and expenses during the reporting period, as well as amounts
included in the Notes. While the Company uses its best estimates and
judgments, actual results could differ from these estimates.
Foreign Currency Translation
The financial statements of most of the Company's international affiliates
are translated into U.S. dollars using current exchange rates for balance
sheets and weighted average rates for income statements. Unrealized
translation adjustments are included in shareholders' equity in the
Consolidated Balance Sheet.
The financial statements of international affiliates that operate in
hyperinflationary economies in certain Latin American countries are
translated at either current or historical exchange rates, as appropriate.
Unrealized translation adjustments are included in operating results for
these affiliates.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of certificates of deposit, time
deposits and other short-term securities with maturities of three months or
less from the date of purchase.
Inventories
Inventories are valued at the lower of cost or market. Cost for inventories
is determined on either an average or first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is based
upon estimated useful lives of 15 to 45 years for buildings and 3 to 15 years
for machinery and equipment, using principally the straight-line method.
Derivative Financial Instruments
The Company hedges a significant portion of its foreign exchange exposure
using certain derivative financial instruments, primarily purchased options,
forward contracts, and currency swaps. Premiums on purchased options are
recorded as assets and amortized to match the anticipated cash flows being
hedged. Forward contracts and currency swaps are carried off-balance-sheet
with gains and losses included in the measurement and recording of the hedged
transactions. See also Note 8.
Stock-Based Compensation
The Company currently accounts for its stock-based compensation plans using
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25).
Advertising Costs
All advertising costs are expensed as incurred and included in selling,
administrative and general expenses. Advertising expense was $36.9 million,
$ 41.0 million and $34.9 million in 1996, 1995 and 1994, respectively.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS No. 121), which is effective for fiscal years beginning after December
15, 1995. This standard requires that long-lived assets and certain
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that their carrying
value may not be recoverable. If the assets are determined to be impaired
based upon their undiscounted future cash flows, such assets are to be
reported at the lower of their carrying amount or fair value. SFAS No. 121
also addresses the accounting for long-lived assets that are expected to be
disposed. The Company has adopted the provisions of the statement effective
July 1, 1996. The Company regularly assesses all of its long-lived assets
for impairment and does not anticipate a material adverse effect on its
results of operations or financial position upon adoption.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). Under the
provisions of SFAS 123, companies can elect to account for stock-based
compensation plans using a fair-value-based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in APB 25. SFAS 123 requires that companies electing to continue
using the intrinsic value method make pro forma disclosures of net income and
earnings per share as if the fair-value-based method of accounting had been
applied. The adoption of the disclosure requirements of SFAS 123 will be
reflected in the Company's fiscal 1997 consolidated financial statements.
As the Company anticipates continuing to account for stock-based compensation
using the intrinsic value method, SFAS 123 will not have an impact on the
Company's results of operations or financial position.
Reclassifications
Certain amounts in prior years have been reclassified to conform to the
current year presentation.
NOTE 1 - CHANGES IN BUSINESS
RESTRUCTURING PROGRAMS
In the fourth quarter of 1994, the Company recorded a restructuring charge of
$93.9 million, $58.8 million after taxes, or $.76 per share, relating to its
human healthcare and animal health operations. Restructuring actions related
to the program are substantially complete at June 30, 1996. The human
healthcare pre-tax restructuring charge of $73.9 million included the
reorganization of the medical specialty oriented U.S. sales structure into a
unified organization divided into geographical districts; reorganization to
reduce, centralize and standardize certain non-sales related functions and
management processes; rationalization of manufacturing operations for
substantial worldwide cost and sourcing improvements; and severance costs
related to an associated workforce reduction. Pre-tax cash expenditures for
this restructuring are expected to approximate the original estimate of $65
million, consisting of $28 million for severance costs for about 500 people
at various locations around the world, $15 million for consulting, $13
million for manufacturing rationalization and $9 million for other items. The
$9 million noncash pre-tax portion of the charge primarily related to
manufacturing rationalization. Approximately $48 million of cash
expenditures were incurred through June 30, 1996, the majority of which
related to severance associated with the workforce reduction and consulting
costs. The majority of the remaining cash expenditures of approximately $17
million will be paid in 1997 and relate to severance for terminated
employees. Based on the expenditures to date and those anticipated by the
original plan, no material adjustment to the reserve balance is expected at
this time. Also included in the restructuring was a $20 million pre-tax
charge to adjust a prior year provision associated with the animal health
business' decision to discontinue development of porcine somatotropin (PST)
in May 1993.
With respect to the fourth quarter of 1993 pre-tax restructuring charge of
$334.1 million, cash expenditures are expected to approximate the original
estimate of $173 million primarily related to severance costs of $54 million,
lease costs related to a closed facility of $55 million, consulting costs of
$15 million, and manufacturing rationalization and other costs of $49
million. The $161 million noncash portion of the charge primarily related to
the write-off of plant facilities. Restructuring actions related to the
program are complete at June 30, 1996 and no material adjustments to the
original reserve balance have been required. The Company has incurred cash
expenditures through June 30, 1996 of approximately $125 million. The
majority of the remaining cash expenditures associated with the 1993
restructuring together with the additional $20 million pre-tax charge taken
as part of the 1994 restructuring represents the present value of long-term
lease payments to be paid through 2010 related to the closed PST facility.
ACQUISITIONS
In January 1996, the Company acquired Liebel-Flarsheim Company, a
manufacturer of contrast media power injector systems for diagnostic imaging
procedures, X-ray components and specialized equipment for diagnostic urology
procedures for $70.3 million and in December 1995, King Pharmaceuticals'
product line of specialty analgesic pharmaceuticals was acquired for $32.4
million. In October 1995, Syntro Corporation, a manufacturer of recombinant
vaccines for the animal health market was acquired for $38.2 million and in
September 1995, CBM Laboratories, a manufacturer of poultry vaccines was
acquired for $7.5 million.
Alton Dean, Inc., a manufacturer of products that warm sterile intravenous
and irrigation solutions used during and after surgery, was acquired in June
1995 for $8.5 million. In February 1995, the Company acquired J.T. Baker
Inc., a manufacturer of laboratory, process and microelectronic chemicals for
$95.0 million.
Catalyst Resources, Inc., a manufacturer of polymerization and chemical
catalysts, was acquired for $61.2 million in March 1994. DAR S.p.A., a
manufacturer of anesthesiology and respiratory care products was acquired in
September 1993 for $28.0 million.
The above acquisitions were accounted for as purchases and results of
operations were included in the consolidated financial statements from their
respective acquisition dates. Results of operations for the periods prior to
acquisition were not material to Mallinckrodt.
DISCONTINUED OPERATIONS
In October 1995, the Company sold its feed ingredients business to the
IMC-Agrico joint venture of IMC Global Inc. and Freeport-McMoRan Resource
Partners, Limited Partnership. Feed ingredients operations and the gain on
the disposal of this business have been accounted for as discontinued
operations and prior years' Consolidated Statement of Operations and
Consolidated Balance Sheet have been reclassified to reflect this
presentation. The gain on sale, net of taxes, was $35.4 million and
earnings, net of taxes, from the divested business for 1996, 1995 and 1994
were $4.4 million, $20.2 million and $19.5 million, respectively.
Discontinued operations for 1996, 1995, and 1994 also included other charges,
primarily for environmental and litigation costs related to operations
previously disposed, of $19.1 million, $3.8 million and $3.6 million,
respectively.
NOTE 2 - EARNINGS PER COMMON SHARE
Earnings per common share amounts were computed on the basis of the weighted
average number of common and common equivalent shares outstanding. Such
weighted average shares used in the computations were 76,343,392 for 1996;
77,458,114 for 1995; and 77,607,416 for 1994.
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
1996 1994 1994
----- ----- -----
Interest paid................................ $48.6 $47.9 $33.0
Income taxes paid............................ 65.0 42.5 37.8
Noncash investing and financing activities:
Assumption of liabilities related
to acquisitions.......................... 21.5 42.4 27.9
Issuance of common stock for
restricted stock awards.................. 4.0
NOTE 4 - INVENTORIES
AT JUNE 30, 1996 1995
--------- ---------
Raw materials and supplies........................ $ 159.9 $ 127.4
Work in process................................... 102.1 101.8
Finished goods.................................... 208.2 186.3
--------- ---------
$ 470.2 $ 415.5
========= =========
NOTE 5 - INVESTMENTS AND LONG-TERM RECEIVABLES
AT JUNE 30, 1996 1995
--------- ---------
Tastemaker joint venture.......................... $ 110.7 $ 92.3
Other investments, net............................ 35.6 21.6
Other long-term receivables, net.................. 3.7 51.6
--------- ---------
$ 150.0 $ 165.5
========= =========
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
AT JUNE 30, 1996 1995
--------- ---------
Land.............................................. $ 71.7 $ 71.8
Buildings and leasehold improvements.............. 405.3 381.3
Machinery and equipment........................... 983.4 942.1
Construction in progress.......................... 120.6 67.9
--------- ---------
1,581.0 1,463.1
Accumulated depreciation.......................... (544.6) (485.1)
--------- ---------
$1,036.4 $ 978.0
========= =========
Capitalized interest costs were $3.2 million in 1996, $1.6 million in 1995
and $3.7 million in 1994.
NOTE 7 - INTANGIBLE ASSETS
At June 30, 1996 1995
--------- ---------
Goodwill and other intangibles.................... $ 716.3 $ 573.9
Patents and technology............................ 70.3 67.0
--------- ---------
786.6 640.9
Accumulated amortization.......................... (164.4) (131.6)
--------- ---------
622.2 509.3
Deferred charges, net............................. 25.3 18.3
--------- ---------
$ 647.5 $ 527.6
========= =========
Goodwill and other intangibles are amortized primarily on a straight-line
basis over 10 to 40 years (weighted average life of 26 years). Patents and
technology are amortized over estimated useful lives of 8 to 25 years
(weighted average life of 11 years).
The carrying amount of goodwill is reviewed if facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will
not be recoverable, as determined based on the estimated undiscounted cash
flows of the entity acquired over the remaining amortization period, the
carrying amount of the goodwill is reduced by the estimated shortfall of cash
flows.
NOTE 8 - FINANCIAL INSTRUMENTS
Derivative Financial Instruments
- --------------------------------
In the ordinary course of business, Mallinckrodt purchases materials and
sells finished products denominated in various currencies. The Company uses
certain derivative financial instruments to manage its exposure to foreign
currency exchange risk, principally purchased options, forward contracts and
currency swaps. These contracts reduce the Company's overall exposure to
exchange rate fluctuations by effectively fixing the transaction cost to the
Company.
Carrying and fair values for derivative financial instruments are summarized
below.
At June 30, 1996 At June 30, 1995
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
Forward foreign currency contracts
and swaps hedging short-term
intercompany and third-party
financing by international
operations, notional value $169.1
million and $151.6 million for
1996 and 1995, respectively........ $ -- $1.1 $ -- $(.4)
Forward foreign currency contracts
and swaps hedging anticipated
cross currency sales and
purchases, notional value $70.5
million for 1995................... -- -- -- .5
Forward foreign currency options
hedging anticipated cross currency
sales and purchases, notional
value $67.4 million and $97.5
million for 1996 and 1995,
respectively....................... -- (.6) -- (2.0)
Interest rate swap related to the
long-term lease obligation on a
closed facility, pay fixed rate,
receive floating rate, notional
value $36.9 million and $38.2
million for 1996 and 1995,
respectively....................... -- -- -- --
Anticipated transactions include purchases of raw materials or other
inventory, collection of accounts receivable, settlement of accounts payable,
and periodic debt service by international subsidiaries. Purchased options
and forward foreign exchange contracts generally have initial terms of less
than two years. Deferred gains and losses are recognized in income when the
underlying transaction is settled.
Fair Value of Financial Instruments
- -----------------------------------
Non-derivative financial instruments included in the Consolidated Balance
Sheet are cash, short-term investment vehicles, short-term debt including
commercial paper and long-term debt. In the aggregate, these instruments
were carried at amounts approximating fair value at June 30, 1996 and 1995.
The fair value of long-term debt was estimated based on future cash flows
discounted at current interest rates available to the Company for debt with
similar maturities and characteristics. See Note 12 for the disclosure of
fair value of long-term debt.
Concentrations of Credit Risk
- -----------------------------
Financial instruments which expose Mallinckrodt to credit risk are short-term
investments (cash equivalents), trade receivables and derivatives. The
Company mitigates the risk that counterparties to short-term investments and
derivatives will fail to perform by contracting only with major financial
institutions having high credit ratings, and considers the likelihood of
counterparty failure to be remote.
Trade receivables stem from the Company's worldwide operations and reflect
Mallinckrodt's diverse customer base. The Company periodically assesses the
financial strength of its customers and obtains proof of credit worthiness,
as necessary, prior to extending credit. Consequently, Mallinckrodt does not
have a material concentration of credit risk, either by transaction type,
product line or geographic region.
NOTE 9 - INCOME TAXES
Income taxes included in the Consolidated Statement of Operations were:
1996 1995 1994
------- ------- -------
Continuing operations............................. $111.8 $ 98.3 $ 51.7
Discontinued operations:
Feed ingredients operations..................... 2.2 12.2 12.3
Sale of feed ingredients........................ 19.3
Other........................................... (10.3) (2.1) (2.0)
------- ------- -------
11.2 10.1 10.3
------- ------- -------
$123.0 $108.4 $ 62.0
======= ======= =======
The geographical sources of earnings from continuing operations before income
taxes were:
1996 1995 1994
------- ------- -------
U.S............................................... $130.4 $125.0 $ 56.3
Outside U.S....................................... 172.6 137.2 83.3
------- ------- -------
$303.0 $262.2 $139.6
======= ======= =======
The components of the income tax provision charged (credited) to continuing
operations follow:
1996 1995 1994
------- ------- -------
Current:
U.S. Federal.................................... $ 20.7 $ (6.9) $ 26.9
U.S. State and local............................ 5.6 3.6 6.5
Outside U.S..................................... 48.5 35.0 23.5
------- ------- -------
74.8 31.7 56.9
Deferred:
U.S. Federal.................................... 26.2 42.5 (12.7)
U.S. State and local............................ 3.0 5.2 .8
Outside U.S..................................... 7.8 18.9 6.7
------- ------- -------
37.0 66.6 (5.2)
------- ------- -------
$111.8 $ 98.3 $ 51.7
====== ======= ======
The Company had the following deferred tax balances at June 30, 1996 and
1995:
1996 1995
--------- ---------
Deferred tax assets:
Restructuring accruals......................... $ 28.5 $ 51.3
Employee benefits.............................. 30.4 71.6
Net operating losses........................... 19.2 21.8
Alternative minimum tax credit................. 7.7 8.3
Environmental accruals......................... 16.1 9.7
Other, net..................................... 10.7 6.6
--------- ---------
Gross deferred tax assets........................ 112.6 169.3
Valuation allowance............................ (21.7) (24.7)
--------- ---------
Total deferred tax assets........................ 90.9 144.6
Deferred tax liabilities:
Property, plant and equipment.................. 86.6 85.5
Receivables.................................... 38.7 58.2
Intangible assets.............................. 22.8 26.6
--------- ---------
Total deferred tax liabilities................... 148.1 170.3
--------- ---------
Net deferred tax liabilities..................... $ 57.2 $ 25.7
========= =========
The alternative minimum tax credit of $7.7 million is available to reduce
future Federal taxes payable and has an unlimited carryforward period.
The tax benefit of the Company's net operating loss carryforwards of $19.2
million relates primarily to its non-U.S. operations.
Factors causing the effective tax rate for continuing operations to differ
from the U.S. Federal statutory rate were:
1996 1995 1994
------- ------- -------
Computed tax at the U.S. Federal statutory rate.... $106.1 $ 91.8 $ 48.9
Statutory rate changes............................. (3.0)
State income taxes, net of Federal benefit......... 5.6 5.7 4.7
Other items........................................ .1 .8 1.1
------- ------- --------
Income tax provision............................... $111.8 $ 98.3 $ 51.7
======= ======= ========
Effective tax rate................................. 36.9% 37.5% 37.0%
The effective rate for 1994 before the net tax benefit from the restructuring
charge and statutory rate changes was 38.5 percent.
Undistributed earnings of certain subsidiaries outside the U.S. are
considered to be permanently invested. Accordingly, no provision for income
taxes was made for undistributed earnings of such subsidiaries which
aggregated $261.7 million at June 30, 1996.
NOTE 10 - ACCRUED LIABILITIES
AT JUNE 30, 1996 1995
--------- ---------
Restructuring accruals............................ $113.4 $139.0
Other............................................. 201.4 193.1
--------- ---------
$314.8 $332.1
========= =========
NOTE 11 - LINES OF CREDIT
The Company has a $600 million renewable credit agreement available until May
1997. Under the terms of this agreement, interest rates are determined at
the time of borrowing. The borrowing cost would be based on London Interbank
Offered Rates plus .24 percent, or other alternative rates. Borrowings under
the credit agreement were $600 million at June 30, 1996.
The Company has a $550 million private-placement commercial paper program.
This program is backed by a $550 million credit agreement available until May
2001. Under the terms of this agreement, interest rates are determined at
the time of borrowing and are dependent on the Company's senior debt ratings
and usage level of the facility. At current usage level and senior debt
ratings, the borrowing cost would be based on London Interbank Offered Rates
plus .165 percent, or other alternative rates. There were no amounts
outstanding under either the commercial paper program or the credit agreement
at June 30, 1996.
Non-U.S. lines of credit totaling $213.7 million were also available and
borrowings under these lines were $16.9 million at June 30, 1996. These
non-U.S. lines are cancelable at any time.
NOTE 12 - DEBT
The components of short-term debt were:
AT JUNE 30, 1996 1995
--------- ---------
Notes payable..................................... $616.9 $ 35.7
Commercial paper.................................. 53.3
Current maturities of long-term debt.............. 5.3 18.5
--------- ---------
$622.2 $107.5
========= =========
The components of long-term debt were (market value shown parenthetically):
AT JUNE 30, 1996 1995
--------- ---------
9.875% debentures due in annual installments of
$15.0 million, beginning in 2002, with final
payment of $12.8 million in 2011 ($153.2)....... $134.9 $134.8
8.75% promissory note; paid January 1996.......... 10.8
7% debentures due 2013 ($89.9).................... 98.6 98.5
6.75% notes due 2005 ($95.7)...................... 99.4
6.5% notes due 2007 ($90.7)....................... 98.5
6% notes due 2003 ($93.1)......................... 99.4 99.3
Commercial paper.................................. 100.0
Other ($50.3)..................................... 50.3 76.6
--------- ---------
581.1 520.0
Less current maturities........................... 5.3 18.5
--------- ---------
$575.8 $501.5
========= =========
The 9.875% debentures are redeemable at the option of Mallinckrodt at 100
percent in 2001 and thereafter.
At June 30, 1995, commercial paper totaling $100.0 million, was classified as
long-term debt as it was backed by irrevocable long-term lines of credit.
Maturities of long-term debt for the next five years are: 1997-$5.3 million;
1998-$2.5 million; 1999-$33.4 million; 2000-$1.3 million; and 2001-$.8
million.
The weighted average interest rate on short-term borrowings at June 30, 1996
and 1995 was 5.8% and 6.3%, respectively.
NOTE 13 - PENSION AND INVESTMENT PLANS
The Company has pension plans covering substantially all of its employees
that provide for retirement benefits based on years of service and the level
of compensation for the highest three to five years occurring generally
within a period of up to 10 years prior to retirement. Contributions to the
U.S. plans meet ERISA minimum funding requirements.
The components of net periodic pension costs are as follows:
1996 1995 1994
------- ------- -------
Service cost...................................... $20.4 $18.9 $18.1
Interest cost on projected benefit obligation..... 35.3 31.7 30.8
Earnings on plan assets........................... (64.3) (24.0) (21.2)
Net amortization of initial unrecognized asset
and deferral of subsequent unrecognized net
gains and losses................................ 37.6 (5.7) (7.5)
------ ------ ------
$29.0 $20.9 $20.2
====== ====== ======
U.S. pension expense in 1996, 1995 and 1994 was $25.8 million, $17.9 million
and $16.2 million, respectively.
Assumptions used in determining the actuarial present value of benefit
obligations follow:
1996 1995 1994
------- ------- -------
Discount rate..................................... 7.75% 8.5% 8.0%
Long-term rate of return on plan assets........... 9.0% 9.5% 10.0%
Compensation increase rate........................ 5.0% 5.5% 5.5%
The plans' assets mostly relate to U.S. plans and consist primarily of
corporate equities, U.S. government debt securities and units of
participation in a collective short-term investment fund.
The Company also sponsors three defined contribution investment plans.
Participation in these plans is voluntary, with substantially all employees
eligible to participate. Expenses related to the plans consist primarily of
Company contributions which are based on percentages of certain employee
contributions, plus discretionary amounts determined on an annual basis.
Defined contribution expense for 1996, 1995 and 1994 was $14.0 million, $12.4
million and $10.6 million, respectively.
The funded status of U.S. and non-U.S. pension plans and amounts recognized
in the balance sheet follow:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
Plans With Plans With Plans With Plans With
Assets In Accumulated Assets In Accumulated
Excess of Benefits Excess of Benefits
Accumulated In Excess Accumulated In Excess
Benefits Of Assets Benefits Of Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C>
Assets at fair value............... $377.3 $ 30.4 $307.2 $ 48.8
Actuarial present value
of benefit obligation:
Vested benefits................ 303.3 59.7 254.6 61.0
Nonvested benefits............. 9.0 3.1 4.8 6.7
------- ------- ------- -------
Accumulated benefit obligation... 312.3 62.8 259.4 67.7
Projected future salary
increases...................... 88.1 17.1 69.8 19.4
------- ------- ------- -------
Projected benefit obligation..... 400.4 79.9 329.2 87.1
------- ------- ------- -------
Projected benefit obligation in
excess of plan assets............ (23.1) (49.5) (22.0) (38.3)
Items not yet recognized in earnings:
Unrecognized net (gain) loss..... 13.0 2.8 23.1 (2.3)
Unamortized transition (asset)
liability...................... (1.4) 8.3 (2.6) 10.8
------- ------- ------- -------
Accrued pension liability.......... $(11.5) $(38.4) $ (1.5) $(29.8)
======= ======= ======= =======
</TABLE>
NOTE 14 - POSTRETIREMENT BENEFITS
Mallinckrodt provides certain healthcare benefits for U.S. salaried and
hourly retired employees. Employees may become eligible for healthcare
benefits if they retire after attaining specified age and service
requirements while they worked for the Company. Healthcare benefits are paid
directly by Mallinckrodt.
The components of periodic postretirement benefits costs are as follows:
1996 1995 1994
------- ------- -------
Service cost for benefits earned during the year.. $ 4.8 $ 4.9 $ 3.6
Interest cost on benefit obligation............... 13.0 13.0 10.4
Amortization of unrecognized net loss............. .6
------- ------- -------
$17.8 $18.5 $14.0
The following table presents the plan's funded status reconciled with amounts
recognized in the Company's statement of financial position:
1996 1995
--------- ---------
Accumulated postretirement benefit
obligation (APBO):
Retiree....................................... $ 88.1 $ 90.3
Active employees.............................. 66.0 62.8
--------- ---------
Accumulated postretirement benefit obligation
in excess of plan assets........................ 154.1 153.1
Unrecognized net gain (loss)...................... 7.7 (10.4)
Unrecognized prior service cost................... (5.8)
--------- ---------
Accrued postretirement benefit cost............... $156.0 $142.7
========= =========
The discount rate used in determining the APBO for 1996 and 1995 was 7.75
percent and 8.5 percent, respectively.
The assumed medical plan cost trend rate used in measuring the APBO for 1996
was 9.0 percent, gradually declining to 4.75 percent in 2006 and thereafter.
The rate for 1995 was 10.0 percent gradually declining to 5.0 percent in 2006
and thereafter. A one percentage point increase in the healthcare cost trend
rate would increase the APBO for 1996, by $19.3 million and the aggregate
service and interest cost by $2.7 million.
NOTE 15 - STOCK PLANS
Three non-qualified stock option plans provide for granting options to
purchase shares of common stock at prices not less than 100 percent of market
price (as defined) at the date of grant. Options under these plans are
exercisable over nine years beginning one year after the date of grant and
are limited to 50 percent during the first year of eligibility.
Information on stock option activity follows:
PRICE
NUMBER OF OPTIONS RANGE 1996 1995
--------- ----------- ----------
Outstanding, beginning of year.......... $10-40 6,126,649 5,351,732
Granted................................. 35-39 1,449,622 1,419,656
Canceled................................ 14-40 (242,145) (272,826)
Exercised............................... 10-39 (1,071,373) (371,913)
----------- ----------
Outstanding, end of year................ 10-40 6,262,753 6,126,649
=========== ==========
At June 30,
Exercisable........................... 4,300,204 4,214,583
Reserved for future option grants..... 2,642,164 3,833,618
The average exercise price of outstanding stock options at June 30, 1996, was
$31.54 a share, based on an aggregate exercise price of about $198 million.
Outstanding stock options will expire over a period ending no later than June
17, 2006.
The 1973 non-qualified stock option and award plan also provides for the
award of restricted shares of Mallinckrodt's common stock to executive
officers. Under provisions of the plan, the grantee makes no cash payment
for the award and the shares are held in escrow until vested, with the
grantee being unable to dispose of the restricted shares until vested. Upon
forfeiture of any share of restricted stock in accordance with the stock
option and award plan, or the terms and conditions of the award, the shares
would automatically be transferred to and reacquired by the Company at no
cost. In 1995, the Company issued from its treasury stock 109 restricted
shares. In 1996, the Company reacquired 1,873 shares of unrestricted stock
in lieu of payment of withholding taxes on 5,000 shares of restricted stock
which expired and vested on April 3, 1996.
NOTE 16 - CAPITAL STOCK
The Company has authorized and issued 100,000 shares, 98,330 outstanding at
June 30, 1996, par value $100, 4 Percent cumulative preferred stock. This
stock, with voting rights, is redeemable at the Company's option at $110 a
share. During the three years ended June 30, 1996, the number of issued and
outstanding shares did not change.
At June 30, 1996, the Company has authorized 1,400,000 shares, par value $1,
of series preferred stock, none of which is outstanding.
Each outstanding common share includes a non-voting common stock purchase
right. If a person or group acquires or has the right to acquire 20 percent
or more of the common stock or commences a tender offer for 30 percent or
more of the common stock, the rights become exercisable by the holder who may
then purchase $320 worth of common stock for $160 unless, in lieu thereof,
the Board of Directors causes the exchange of each outstanding right for one
share of common stock (in either case exclusive of the rights held by the
acquiring person or group which are voided). In the event of a merger or
sale of 50 percent or more of the Company's assets, the rights may in
certain circumstances entitle the holder to purchase $320 worth of stock in
the surviving entity for $160. The rights may be redeemed by the Board at a
price of $.05 per right at any time before they become exercisable, and
unless they become exercisable, they will expire February 28, 2006.
The Company has a three year incentive award program for executive officers
which expires June 30, 1997. There are 1,000,000 common shares reserved for
issuance under this plan.
Common shares reserved at June 30, 1996, consisted of the following:
Exercise of common stock purchase rights...................... 84,185,485
Exercise of stock options and granting of stock awards........ 9,904,917
----------
94,090,402
==========
Changes in the number of shares of common stock issued and in treasury were
as follows:
1996 1995 1994
------------ ------------ ------------
Common stock issued........... 87,116,289 87,116,289 87,116,289
Treasury common stock:
Balance, beginning of year.. 10,365,203 10,110,056 10,671,514
Stock options exercised..... (1,071,373) (371,913) (429,645)
Purchased................... 3,540,018 499,854 19
(Awards) cancellations of
restricted shares......... 1,873 127,206 (131,832)
------------ ------------ ------------
Balance, end of year........ 12,835,721 10,365,203 10,110,056
------------ ------------ ------------
Common stock outstanding,
end of year................. 74,280,568 76,751,086 77,006,233
============ ============ ============
NOTE 17 - INTERNATIONAL OPERATIONS
Export sales to unaffiliated customers included in U.S. sales were:
1996 1995 1994
------- ------- -------
Europe............................................ $ 57.5 $ 23.5 $ 14.0
Asia/Pacific...................................... 63.1 42.6 27.7
Latin America..................................... 29.4 22.1 14.7
Canada............................................ 6.3 6.3 5.1
------- ------- -------
Total............................................. $ 156.3 $ 94.5 $ 61.5
======= ======= =======
Net sales, earnings from continuing operations before income taxes, and
identifiable assets by geographic areas follow:
1996 United Asia/ Latin
- ---- States Europe Pacific America Canada Total
-------- ------ ------- ------- ------ --------
Gross Sales $1,481.3 $637.8 $179.3 $115.8 $94.6 $2,508.8
Intercompany 100.3 129.6 8.9 3.5 56.3 298.6
-------- ------ ------- ------- ------ --------
Net Sales $1,381.0 $508.2 $170.4 $112.3 $38.3 $2,210.2
======== ====== ======= ======= ====== ========
1995 United Asia/ Latin
- ---- States Europe Pacific America Canada Total
-------- ------ ------- ------- ------ --------
Gross Sales $1,357.1 $588.1 $175.8 $117.3 $85.1 $2,323.4
Intercompany 113.4 111.6 5.2 4.0 46.0 280.2
-------- ------ ------- ------- ------ --------
Net Sales $1,243.7 $476.5 $170.6 $113.3 $39.1 $2,043.2
1994 United Asia/ Latin
- ---- States Europe Pacific America Canada Total
-------- ------ ------- ------- ------ --------
Gross Sales $1,196.8 $453.7 $153.2 $118.6 $68.4 $1,990.7
Intercompany 108.9 68.9 3.2 2.1 29.7 212.8
-------- ------ ------- ------- ------ --------
Net Sales $1,087.9 $384.8 $150.0 $116.5 $38.7 $1,777.9
EARNINGS 1996 1995 1994
--------- --------- ---------
United States............................. $ 203.9 $ 180.0 $ 192.0
Europe.................................... 132.8 114.2 65.4
Asia/Pacific.............................. 13.5 11.4 13.7
Latin America............................. 19.5 22.9 17.5
Canada.................................... 6.5 4.4 3.6
Restructuring charge...................... (93.9)
Corporate................................. (41.4) (28.8) (30.2)
Eliminations.............................. (4.7) (7.4) (6.6)
--------- --------- ---------
Operating earnings........................ 330.1 296.7 161.5
Equity in pre-tax earnings of
joint venture........................... 31.9 25.3 18.5
Interest and other nonoperating expense,
net..................................... (.3) (4.3) (.4)
Interest expense.......................... (58.7) (55.5) (40.0)
--------- --------- ---------
Consolidated.............................. $ 303.0 $ 262.2 $ 139.6
========= ========= =========
ASSETS
United States............................. $1,596.5 $1,474.3 $1,303.5
Europe.................................... 903.0 799.9 736.3
Asia/Pacific.............................. 250.0 225.4 168.1
Latin America............................. 103.6 82.4 80.5
Canada.................................... 57.0 44.4 29.3
Corporate................................. 623.7 205.9 200.2
Eliminations.............................. (127.9) (154.9) (116.9)
--------- --------- ---------
Consolidated.............................. $3,405.9 $2,677.4 $2,401.0
========= ========= =========
Transfers of product between geographic areas are at prices approximating
those charged to unaffiliated customers. All such transfers are fully
eliminated.
Net foreign exchange translation gains (losses) from businesses in
hyperinflationary economies aggregated $(1.4) million, $.7 million, and
$(4.2) million in 1996, 1995 and 1994, respectively, and have been included
in "Other operating income expense, net" in the Consolidated Statement of
Operations. These translation effects were primarily from animal health
operations in Latin America. Translation effects for all of Mallinckrodt's
businesses were not material.
NOTE 18 - BUSINESS SEGMENTS
In December 1995, the company announced a Strategic Change Initiative which
included major organizational and operating changes designed to enhance
growth and effectiveness. The management and administrative structures of
the three operating companies were eliminated. In conjunction with these
changes, operating company designations as segments were replaced with three
segments that are more closely aligned with customers served and with our new
management structure. Prior periods for segments have been reclassified to
conform with the 1996 presentation. The three industry segments are as
follows:
HUMAN HEALTHCARE
Production and sale of products used primarily in hospitals, including X-ray
contrast media, interventional products, diagnostic and therapeutic
radiopharmaceuticals, airway management products, temperature monitoring
products, blood gas and vital sign monitoring systems, analgesics and
medicinal narcotics.
SPECIALTY CHEMICALS
Production and sale of catalysts, specialty inorganics, stearates and
laboratory and microelectronic chemicals used by industry and research
organizations.
ANIMAL HEALTH
Production and sale of pharmaceuticals, biologicals, veterinary specialties
and other health-related products for livestock and companion animals.
NONRECURRING CHARGES
Restructuring charges of $93.9 million recorded in the United States in 1994
are discussed in Note 1.
NOTE 19 - COMMITMENTS
The Company leases office space, data processing equipment, buildings, and
machinery and equipment. Rent expense for continuing operations in 1996, 1995
and 1994 related to operating leases was $26.6 million, $27.3 million and
$31.7 million, respectively.
Minimum rent commitments for continuing operations at June 30, 1996, under
operating leases with a remaining noncancellable period exceeding one year
follow:
YEARS ENDING JUNE 30,
1997............................................................... $ 31.3
1998............................................................... 24.2
1999............................................................... 18.8
2000............................................................... 15.4
2001............................................................... 14.0
Later years........................................................ 51.6
------
$155.3
NOTE 20 - CONTINGENCIES
The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the ordinary
course of its business activities. In addition, in connection with laws and
regulations pertaining to the protection of the environment, the Company is a
party to several environmental remediation investigations and clean-ups and,
along with other companies, has been named a "potentially responsible party"
for certain waste disposal sites. Each of these matters is subject to
various uncertainties, and it is possible that some of these matters will be
decided unfavorably against the Company. The Company had accruals of $97.3
million and $27.1 million at June 30, 1996 and June 30, 1995, respectively,
for costs associated with the study and remediation of Superfund sites and
for the Company's current and former operating sites for matters that are in
its view probable and reasonably estimable. The significant increase
resulted from the assumption of certain costs to remediate various sites in
the future for which the Company was compensated and the establishment of
additional environmental reserves for discontinued operations. Based on
information presently available, management believes any amounts paid in
excess of the accrued liabilities will not have a material effect on its
financial position or results of operations.
<PAGE>
QUARTERLY RESULTS (UNAUDITED)
(In millions, except per share amounts)
FISCAL 1996
Quarter
--------------------------------------
First Second Third Fourth Year
-------- ------- ------- ------- ---------
Net sales................. $492.1 $528.2 $572.6 $617.3 $2,210.2
Gross margins............. 223.8 239.1 261.6 292.9 1,017.4
Earnings from continuing
operations.............. 35.7 38.3 50.7 66.5 191.2
Discontinued operations... 3.5 19.0 (2.3) .5 20.7
------- ------- ------- ------- ---------
Net earnings.............. 39.2 57.3 48.4 67.0 211.9
Preferred stock dividends. (.1) (.1) (.1) (.1) (.4)
------- ------- ------- ------- ---------
Available for common
shareholders............ $ 39.1 $ 57.2 $ 48.3 $ 66.9 $ 211.5
======= ======= ======= ======= =========
Earnings per common share:
Continuing operations... $ .46 $ .50 $ .67 $ .88 $2.50
Discontinued operations. .04 .25 (.03) .01 .27
======= ======= ====== ======= =========
Net earnings.............. $ .50 $ .75 $ .64 $ .89 $2.77
======= ======= ====== ======= =========
Results for the second quarter included a noncash charge for write-off of
purchased research and development of $3.7 million, $2.3 million after taxes,
or $.03 per share, relating to the acquisition of Syntro Corporation.
During the second quarter the animal feed ingredients business was sold.
Results for the feed ingredients business have been accounted for as a
discontinued operation, and accordingly, prior year results have been
restated. Other principal factors affecting discontinued operations were an
after tax gain of $35.4 million on the sale of the feed ingredients business
and an after tax provision for additional environmental costs of $15.6
million.
Earnings per share for the four quarters of 1996 are more than full year per
share results by $.01 from a decrease in common shares outstanding.
FISCAL 1995
Quarter
--------------------------------------
First Second Third Fourth Year
-------- ------- ------- ------- ---------
Net sales................. $448.6 $471.5 $529.2 $593.9 $2,043.2
Gross margins............. 200.3 221.5 242.3 276.3 940.4
Earnings from continuing
operations.............. 30.5 35.3 43.1 55.0 163.9
Discontinued operations... 3.4 4.5 3.9 4.6 16.4
------- ------- ------- ------- ---------
Net earnings.............. 33.9 39.8 47.0 59.6 180.3
Preferred stock dividends. (.1) (.1) (.1) (.1) (.4)
------- ------- ------- ------- ---------
Available for common
shareholders............ $ 33.8 $ 39.7 $ 46.9 $ 59.5 $179.9
======= ======= ======= ======= =========
Earnings per common share:
Continuing operations... $ .40 $ .45 $ .56 $ .70 $2.11
Discontinued operations. .04 .06 .05 .06 .21
------- ------- ------- ------- ---------
Net earnings.............. $ .44 $ .51 $ .61 $ .76 $2.32
======= ======= ======= ======= =========
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning directors of the Registrant, see pages 1 through
4, incorporated herein by reference, of Mallinckrodt's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on October 16,
1996. For information concerning executive officers of the Registrant, see
Part I of this report and pages 9 and 10, incorporated herein by reference,
of Mallinckrodt's definitive Proxy Statement for the Annual Meeting of the
Stockholders to be held on October 16, 1996.
ITEM 11. EXECUTIVE COMPENSATION
For information concerning executive compensation, see pages 9 and 10 and
pages 12 through 19, incorporated herein by reference, of Mallinckrodt's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
on October 16, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information concerning security ownership of certain beneficial owners
and management, see pages 7 and 8, incorporated herein by reference, of
Mallinckrodt's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on October 16, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning certain relationships and related transactions,
see pages 7, 9 and 10, incorporated herein by reference, of Mallinckrodt's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
on October 16, 1996.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1)(2) See index on page 58 for a listing of financial statements and
financial statement schedules filed with this report.
(3) Exhibits filed with this report.
Incorporated Filed With
Exhibit Herein Electronic
Number Description by Reference to Submission
- -------- ------------------------------------- --------------- ----------
3.1 Restated Certificate of Incorporation Exhibit 3.1 to
of Mallinckrodt, dated June 22, 1994. 1994 Form 10-K.
3.2 By-Laws of Mallinckrodt as amended Exhibit 3.3 to
April 18, 1990. 1990 Form 10-K,
Commission File
No. 1-483.
4.1 Rights of the holders of Exhibit 3.1 to
Mallinckrodt's equity securities are 1994 Form 10-K.
stated in the Company's Restated
Certificate of Incorporation, dated
June 22, 1994.
4.2 Form 8-A Registration Statement under Exhibit 4.6 to
Section 12 of the Securities Exchange 1989 Form 10-K,
Act of 1934, dated April 10, 1987 Commission File
defining the rights of holders of No. 1-483.
Mallinckrodt's 4% Cumulative Preferred
Stock and Common Stock.
4.3 Amended and Restated Rights Agreement Exhibit 2 to
dated as of February 19, 1996. Amendment to
Registration
Statement on
Form 8-A/A
dated February
26, 1996.
4.4 Indenture dated as of March 15, 1985, Exhibit 4.1 to
as amended and restated as of Form S-3
February 15, 1995, between Registration
Mallinckrodt and First Trust of New Statement
York, National Association. No. 33-57821.
4.5 No class of long-term debt of
Mallinckrodt exceeds 10% of the total
assets of Mallinckrodt and its
subsidiaries on a consolidated basis.
Mallinckrodt agrees to furnish copies
of agreements defining the rights of
debt holders to the Securities and
Exchange Commission upon request.
10.1 Agreement with Paul D. Cottone dated Exhibit 10.4 to
October 1, 1994. (1) December 31,
1994 Form 10-Q.
10.2 Consulting Agreement with Herve M. Exhibit 10.1 to
Pinet for the period December 1, December 31,
1995 to November 30, 1996. (1) 1995 Form 10-Q.
10.3 Mallinckrodt Executive Life Exhibit 10.2 to
Insurance Program adopted 1989 Form 10-K,
May 20, 1987. (1) Commission File
No. 1-483.
10.4 Restated Mallinckrodt Executive Exhibit 10.3 to
Long-Term Disability Plan 1989 Form 10-K,
effective January 1, 1987. (1) Commission File
No. 1-483.
10.5(a) Supplemental Benefit Plan for Exhibit 10.6(a)
Participants in the Mallinckrodt to 1989 Form
Retirement Plan as amended and 10-K, Commission
restated effective January 1, File No. 1-483.
1980. (1)
10.5(b) Amendment No. 1 dated June 20, 1989 Exhibit 10.6(b)
to Supplemental Benefit Plan for to 1989 Form
Participants in the Retirement Plan 10-K, Commission
for Salaried Employees of File No. 1-483.
Mallinckrodt. (1)
10.5(c) Amendment No. 2 dated April 20, 1990 Exhibit 10.6(c)
to Supplemental Benefit Plan for to 1990 Form
Participants in the Mallinckrodt 10-K, Commission
Retirement Plan. (1) File No. 1-483.
10.6(a) Mallinckrodt Supplemental Executive Exhibit 10.7(a)
Retirement Plan restated effective to 1989 Form
April 19, 1988. (1) 10-K, Commission
File No. 1-483.
10.6(b) Amendment No. 1 effective December 6, Exhibit 10.7(c)
1989, to Supplemental Executive to 1990 Form 10-K,
Retirement Plan. (1) Commission File
No. 1-483.
10.6(c) Amendment No. 2 effective April 19, X
1996, to Supplemental Executive
Retirement Plan. (1)
10.7(a) Mallinckrodt Management Incentive Exhibit 10.9(b)
Compensation Program as amended and to 1991 Form
restated effective July 1, 1991. (1) 10-K, Commission
File No. 1-483.
10.7(b) Amendment No. 1 to the Management X
Incentive Compensation Plan,
effective April 16, 1996. (1)
10.8(a) Mallinckrodt 1973 Stock Option and Post-Effective
Award Plan as amended effective Amendment No. 1
February 21, 1990. (1) to Form S-8
Registration
Statement
No. 33-32109.
10.8(b) Amendment No. 1 to the Mallinckrodt Form S-8
1973 Stock Option and Award Plan Registration
dated June 19, 1991. (1) Statement
No. 33-43925.
10.9 Mallinckrodt Directors Retirement Exhibit 10.10 to
Services Plan as amended and 1993 Form 10-K.
restated effective April 21, 1993. (1)
10.10(a) Mallinckrodt 1981 Stock Option Plan Post-Effective
as amended through April 19, 1988. (1) Amendment No. 3
to Form S-8
Registration
Statement
No. 2-80553.
10.10(b) Amendment to the 1981 Stock Option Exhibit 10.12(b)
Plan effective February 15, 1989. (1) to 1989 Form
10-K, Commission
File No. 1-483.
10.10(c) Amendment to the 1981 Stock Option Exhibit 10.12(c)
Plan effective June 19, 1991. (1) to 1991 Form
10-K, Commission
File No. 1-483.
10.11(a) Intercorporate Agreement dated as Exhibit 10.1 to
of July 1, 1987 by and between IMC Fertilizer
Mallinckrodt and IMC Fertilizer Group, Inc.'s
Group, Inc., subsequently called Form S-1
IMC Global, Inc., with Exhibits, Registration
including the Restated Certificate Statement
of Incorporation of IMC Fertilizer No. 33-17091.
Group, Inc., as amended; By-Laws of
IMC Fertilizer Group, Inc.;
Preliminary Agreement for K-2
Advances; Registration Rights
Agreement; Services Agreement;
Management Services Agreement;
Agreement regarding Pollution
Control and Industrial Revenue Bonds;
License Agreement; office lease and
sublease; management agreements;
supply agreements; and transportation
service agreements.
10.12(a) Management Compensation and Benefit Exhibit 10.30 to
Assurance Program. (1) 1988 Form 10-K,
Commission File
No. 1-483.
10.12(b) Amendments to Management X
Compensation and Benefit Assurance
Program.(1)
10.13 Agreement of Trust dated August 16, X
1996, between Mallinckrodt and
Wachovia Bank of North Carolina,
N.A., incident to the program in
Exhibits 10.13(a) and 10.13(b).(1)
10.14(a) Corporate Staff Employee Severance Exhibit 10.33 to
and Benefit Assurance Policy. (1) 1988 Form 10-K,
Commission File
No. 1-483.
10.14(b) Mallinckrodt Group Inc. Corporate X
Staff Change in Control Severance
Plan. (1)
10.15 Supplemental Life Plan of Exhibit 10.21 to
Mallinckrodt, Inc. effective July 1989 Form 10-K,
15, 1984. (1) Commission File
No. 1-483.
10.16 Mallinckrodt Directors' Stock Exhibit 4(a) to
Option Plan effective October 17, Form S-8
1990. (1) Exhibit 4(a) to Registration
Statement
No. 33-40246.
10.17(a) Consulting Agreement with Ronald G. Exhibit 10.27 to
Evens, M.D., for the period from Amendment No. 1
January 1, 1987, through December to 1992
31, 1989; extended for the calendar Form 10-K.
years 1990, 1991 and 1992. (1)
10.17(b) Amendment dated December 17, 1992 Exhibit 10.26(b)
to Consulting Agreement with Ronald to 1993 Form
G. Evens, M.D., described in Exhibit 10-K.
10.25(a). (1)
10.17(c) Amendment dated January 7, 1994 to Exhibit 10.9 to
Consulting Agreement with Ronald G. December 31,
Evens, M.D., extending Agreement 1994 Form 10-Q.
through December 31, 1994. (1)
10.17(d) Amendment dated February 1, 1995 to Exhibit 10.10 to
Consulting Agreement with Ronald G. December 31,
Evens, M.D., extending Agreement 1994 Form 10-Q.
through December 31, 1995. (1)
10.17(e) Amendment dated January 10, 1996 to Exhibit 10.2 to
Consulting Agreement with Ronald G. December 31,
Evens, M.D., extending Agreement 1995 Form 10-Q.
through December 31, 1996. (1)
10.18 Credit Agreement dated May 22, 1996, X
among Mallinckrodt and Morgan Guaranty
Trust Company of New York, as
Administrative Agent and Citibank,
N.A., as Documentation Agent ($550
million facility).
10.19 Credit Agreement dated May 22, 1996 X
among Fries & Fries, Inc. with
Mallinckrodt and Morgan Guaranty Trust
Company of New York, as Administrative
Agent and Co-Agent and Citibank, N.A.,
as Documentation Agent $600 million
facility).
10.20 Offering Memorandum by J.P. Morgan Exhibit 10.29 to
for sale of the commercial paper 1993 Form 10-K.
(CP) notes of Mallinckrodt. The CP
program is backed by credit
agreement included at 10.18.
10.21(a) Deferral Election Plan for Non- Exhibit 10.29 to
Employee Directors, effective 1994 Form 10-K.
June 30, 1994. (1)
10.21(b) Amendment of Deferral Election Exhibit 10.22(b)
Plan for Non-Employee Directors, to 1995 Form 10-K.
effective February 15, 1995. (1)
10.22 Long-Term Incentive Compensation Exhibit 10.30 to
Plan, effective July 1, 1994. (1) 1994 Form 10-K.
10.23 Form of Severance Agreement X
referenced in Exhibit 10.12(b), as
entered into with the named executive
officers in Mallinckrodt's 1996 proxy
statement and with other executives
and key employees. (1)
10.24 Form of Executive Life Insurance Plan X
Participation Agreement, as entered
into with the named executive officers
in Mallinckrodt's 1996 proxy statement
and with other executives and key employees.
11.1 Primary earnings per share computation for X
the three years ended June 30, 1996.
11.2 Fully diluted earnings per share X
computation for the three years ended
June 30, 1996.
21 Subsidiaries of the Registrant. X
23.1 Consent of Ernst & Young LLP. X
27 Financial data schedule for the year X
ended June 30, 1996.
___________
(1) Management contract or compensatory plan required to be filed pursuant
to Item 601 of Regulation S-K.
(b) Reports on Form 8-K
During the quarter and through the date of this report, the following reports
on Form 8-K were filed.
- Report dated April 1, 1996, under Item 5 regarding the completion of
Phase 3 clinical trial on ultrasound contrast agent, FS069.
- Report dated August 29, 1996, under Item 5 regarding seeking a buyer
for the Tastemaker flavors business and exploring all strategic
options for the animal health division.
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
------
Consolidated Balance Sheet at June 30, 1996 and 1995....... 33
For the years ended June 30, 1996, 1995 and 1994:
Information by Business Segment.......................... 31
Consolidated Statement of Operations..................... 32
Consolidated Statement of Cash Flows..................... 34
Consolidated Statement of Changes in
Shareholders' Equity................................... 35
Notes to Consolidated Financial Statements................. 36-49
Quarterly Results (Unaudited).............................. 50
___________
All other schedules are omitted as the required information is not present in
sufficient amounts or the required information is included in the
consolidated financial statements or notes thereto.
Financial statements and schedules and summarized financial information of 50
percent or less owned entities are omitted, as none of such entities are
individually or in the aggregate significant under the tests specified in
Regulation S-X under Article 3-09 of General Instructions as to Financial
Statements.
<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.
Mallinckrodt Group Inc.
- -------------------------------
Registrant
By: MICHAEL A. ROCCA BY: WILLIAM B. STONE
---------------------------- -----------------------------
Michael A. Rocca William B. Stone
Senior Vice President and Vice President and Controller
Chief Financial Officer
Date: September 26, 1996
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
- --------- ----- ----
C. RAY HOLMAN Chief Executive Officer and Director September 26, 1996
- -------------------
C. Ray Holman
MACK G. NICHOLS President, Chief Operating Officer September 26, 1996
- ------------------- and Director
Mack G. Nichols
MICHAEL A. ROCCA Senior Vice President and Chief September 26, 1996
- ------------------- Financial Officer
Michael A. Rocca
WILLIAM B. STONE Vice President and Controller September 26, 1996
- ------------------- (Chief Accounting Officer)
William B. Stone
RAYMOND F. BENTELE Director September 26, 1996
- -------------------
Raymond F. Bentele
GARETH C. C. CHANG Director September 26, 1996
- -------------------
Gareth C. C. Chang
WILLIAM L. DAVIS Director September 26, 1996
- -------------------
William L. Davis
RONALD G. EVENS Director September 26, 1996
- -------------------
Ronald G. Evens
ALEC FLAMM Director September 26, 1996
- -------------------
Alec Flamm
ROBERTA S. KARMEL Director September 26, 1996
- -------------------
Roberta S. Karmel
CLAUDINE B. MALONE Director September 26, 1996
- -------------------
Claudine B. Malone
MORTON MOSKIN Director September 26, 1996
- -------------------
Morton Moskin
HERVE M. PINET Director September 26, 1996
- -------------------
Herve M. Pinet
BRIAN M. RUSHTON Director September 26, 1996
- -------------------
Brian M. Rushton
DANIEL R. TOLL Director September 26, 1996
- -------------------
Daniel R. Toll
ANTHONY VISCUSI Director September 26, 1996
- -------------------
Anthony Viscusi
<PAGE>
Exhibit 10.6(c)
AMENDMENT NUMBER TWO
to the
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
for
MALLINCKRODT GROUP INC.
The Supplemental Executive Retirement Plan of Mallinckrodt Group
Inc. as restated April 19, 1988, and as amended effective December 6, 1989
(the "Plan"), is hereby amended, effective as of April 19, 1996, as set forth
below:
1. Section 6.11(a) is amended in its entirety to read as
follows:
(a) For purposes of the Plan, the following terms are defined as
follows:
(i) CHANGE IN CONTROL means the occurrence of any one of the
following events:
(A) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes
a "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the
election of the Board of Directors (the "Company Voting Securities");
PROVIDED, HOWEVER, that the event described in this paragraph (A)
shall not be deemed to be a change in control by virtue of any of the
following acquisitions: (1) by the Company or any subsidiary of the
Company, (2) by any employee benefit plan sponsored or maintained by
the Company or any subsidiary of the Company, (3) by any underwriter
temporarily holding securities pursuant to an offering of such
securities, (4) pursuant to a Non-Control Transaction (as defined in
paragraph (C)), (5) with respect to any specific participant,
pursuant to any acquisition by the participant or any group of
persons including the participant; or (6) except as provided in (C)
below, in which Company Voting Securities are acquired from the
Company, if a majority of the Board approves a resolution providing
expressly that such acquisition does not constitute a change in
control under this paragraph (A);
(B) individuals who, on April 19, 1996, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to April 19, 1996, whose election, or nomination
for election, by the Company's stockholders was approved by a vote of
at least a majority of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, HOWEVER, that no individual initially
elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or
any other actual or threatened solicitation of proxies or consents by
or on behalf of any person other than the Board of Directors shall be
deemed to be a member of the Incumbent Board;
(C) the consummation of a merger, consolidation, share exchange
or similar form of corporate reorganization of the Company or any
such type of transaction requiring the approval of the Company's
stockholders (whether for such transaction or the issuance of
securities in the transaction or otherwise), or the consummation of
the direct or indirect sale or other disposition of all or
substantially all of the assets, of the Company (a "Business
Combination"), unless immediately following such Business
Combination: (1) more than 50% of the total voting power of the
publicly traded corporation resulting from such Business Combination
(including, without limitation, any corporation which directly or
indirectly has beneficial ownership of 100% of the Company Voting
Securities or all or substantially all of the Company's assets)
eligible to elect directors of such corporation is represented by
shares that were Company Voting Securities immediately prior to such
Business Combination (either by remaining outstanding or being
converted), and such voting power is in substantially the same
proportion as the voting power of such Company Voting Securities
immediately prior to the Business Combination, (2) no person (other
than any publicly traded holding company resulting from such Business
Combination, any employee benefit plan sponsored or maintained by the
Company (or the corporation resulting from such Business
Combination), or any person which beneficially owned, immediately
prior to such Business Combination, directly or indirectly, 20% or
more of the Company Voting Securities (a "Company 20% Stockholder"))
becomes the beneficial owner, directly or indirectly, of 20% or more
of the total voting power of the outstanding voting securities
eligible to elect directors of the corporation resulting from such
Business Combination and no Company 20% Stockholder increases its
percentage of such total voting power, and (3) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at
the time of the approval of the Board of Directors of the execution
of the initial agreement providing for such Business Combination (a
"Non-Control Transaction"); or
(D) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a change in control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than 20% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; PROVIDED, THAT if a change in control of
the Company would occur as a result of such an acquisition by the Company (if
not for the operation of this sentence), and after the Company's acquisition
such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, then a change in control of the
Company shall occur.
(ii) "Good Reason" with respect to a participant means, without
such participant's express written consent, the occurrence of any of the
following events after a change in control:
(A) (1) the assignment to such participant of any duties or
responsibilities (including reporting responsibilities) inconsistent
in any material and adverse respect with the participant's duties and
responsibilities with the Company immediately prior to such change in
control (including any material and adverse diminution of such duties
or responsibilities); PROVIDED, HOWEVER, that Good Reason shall not
be deemed to occur upon a change in duties or responsibilities that
is solely and directly a result of the Company no longer being a
publicly traded entity, and does not involve any other event set
forth in this paragraph (ii) or (2) a material and adverse change in
such participant's titles or offices with the Company as in effect
immediately prior to such change in control.
(B) a reduction by the Company in such participant's rate of
annual base salary or target annual bonus opportunity as in effect
immediately prior to such change in control or as the same may be
increased from time to time thereafter;
(C) any requirement of the Company that such participant (1)
notwithstanding his objection, be based anywhere more than fifty (50)
miles from the location where the participant's employment is located
at the time of the change in control or (2) travel on Company
business to an extent substantially greater than the travel
obligations of the participant immediately prior to such change in
control; or
(D) the failure of the Company to (1) continue in effect any
employee benefit plan or compensation plan in which such participant
is participating immediately prior to such change in control
(including the taking of any action by the Company which would
adversely affect the participant's participation in or materially
reduce the participant benefits under any such plan), unless the
participant is permitted to participate in other plans providing the
participant with substantially comparable benefits, (2) provide such
participant and the participant's dependents with welfare benefits in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for
the participant immediately prior to such change in control or
provide substantially comparable benefits at a substantially
comparable cost to the participant, (3) provide fringe benefits in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for
such participant immediately prior to such change in control, or
provide substantially comparable fringe benefits, or (4) provide such
participant with paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the participant immediately
prior to such change in control (including crediting the participant
with all service credited to him for such purpose prior to the change
in control), unless the failure to provide such paid vacation is a
result of a policy uniformly applied by the entity acquiring the
Company to its employees;
Notwithstanding the foregoing, an isolated and inadvertent action
taken in good faith and which is remedied by the Company within ten days
after receipt of notice thereof given by the participant shall not constitute
Good Reason. The Participant must notify the Company of an event
constituting Good Reason within ninety days following his knowledge of its
existence or such event shall not constitute Good Reason under the Plan.
(iii) "Cause" means with respect to a participant (A) the
willful and continued failure of such participant substantially to
perform his duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for substantial
performance is delivered to him by the Committee which specifically
identifies the manner in which the Committee believes he has not
substantially performed his duties or (B) willful misconduct
materially and demonstrably injurious to the Company. No act or
failure to act by a participant shall be considered "willful" unless
done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Company. The unwillingness of a participant to
accept any condition or event which would constitute Good Reason
under paragraph (ii) of this Section 6.11(a) may not be considered by
the Committee to be a failure to perform or misconduct by a
participant. The Company must notify the participant of an event
constituting Cause within ninety days following its knowledge of the
event's existence or such event shall not constitute Cause under the
Plan.
2. The first sentence of Section 6.11(c) is amended to read in
its entirety as follows:
(a) Notwithstanding any other provision of the Plan to the
contrary, if, during the three-year period immediately following a change in
control, a participant's employment with the Company and its subsidiaries
is terminated (i) by the Company (other than for Cause, disability (within
the meaning set forth in the Company's long-term disability plan) or
mandatory retirement) or (ii) by the participant for Good Reason, such
participant shall be fully and nonforfeitably vested in his benefits accrued
to the date of termination and in any service and benefit accrued as a result
of any employment agreement or severance pay policy, if applicable.
3. Section 11.2 is amended to add the following sentence to the
end thereof:
In the event of a change in control, the provisions of Section
6.11 are specifically applicable to the executives listed in Section 11.1.
<PAGE>
Exhibit 10.7(b)
AMENDMENT NUMBER ONE
to the
MANAGEMENT INCENTIVE COMPENSATION PLAN
for
MALLINCKRODT GROUP INC.
The Management Incentive Compensation Plan for Mallinckrodt Group
Inc. (the "Plan") is hereby amended, effective as of April 19, 1996, by adding
a new Section 11 as set forth below:
11. CHANGE IN CONTROL. (a) For purposes of the Plan, "Change in Control"
means the occurrence of any one of the following events:
(i) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board of Directors
(the "Company Voting Securities"); PROVIDED, HOWEVER, that the event
described in this paragraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the
Company or any subsidiary of the Company, (B) by any employee benefit
plan sponsored or maintained by the Company or any subsidiary of the
Company, (C) by any underwriter temporarily holding securities pursuant
to an offering of such securities, (D) pursuant to a Non-Control
Transaction (as defined in paragraph (iii)), (E) with respect to any
specific participant, pursuant to any acquisition by the participant or
any group of persons including the participant; or (6) except as provided
in (iii) below, in which Company Voting Securities are acquired from the
Company, if a majority of the Board approves a resolution providing
expressly that such acquisition does not constitute a Change in Control
under this paragraph (i);
(ii) individuals who, on April 19, 1996, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to April 19, 1996, whose election, or nomination for election,
by the Company's stockholders was approved by a vote of at least a
majority of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without objection
to such nomination) shall be, for purposes of this paragraph (ii),
considered as though such person were a member of the Incumbent Board;
PROVIDED, HOWEVER, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other
than the Board of Directors shall be deemed to be a member of the
Incumbent Board;
(iii) the consummation of a merger, consolidation, share exchange
or similar form of corporate reorganization of the Company or any such
type of transaction requiring the approval of the Company's stockholders
(whether for such transaction or the issuance of securities in the
transaction or otherwise), or the consummation of the direct or indirect
sale or other disposition of all or substantially all of the assets, of
the Company (a "Business Combination"), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of the
publicly traded corporation resulting from such Business Combination
(including, without limitation, any corporation which directly or
indirectly has beneficial ownership of 100% of the Company Voting
Securities or all or substantially all of the Company's assets) eligible
to elect directors of such corporation is represented by shares that were
Company Voting Securities immediately prior to such Business Combination
(either by remaining outstanding or being converted), and such voting
power is in substantially the same proportion as the voting power of such
Company Voting Securities immediately prior to the Business Combination,
(B) no person (other than any publicly traded holding company resulting
from such Business Combination, any employee benefit plan sponsored or
maintained by the Company (or the corporation resulting from such
Business Combination), or any person which beneficially owned,
immediately prior to such Business Combination, directly or indirectly,
20% or more of the Company Voting Securities (a "Company 20%
Stockholder")) becomes the beneficial owner, directly or indirectly, of
20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the corporation resulting from
such Business Combination and no Company 20% Stockholder increases its
percentage of such total voting power, and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the approval of the Board of Directors of the execution of the initial
agreement providing for such Business Combination (a "Non-Control
Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; PROVIDED, THAT if a Change in Control of the
Company would occur as a result of such an acquisition by the Company (if not
for the operation of this sentence), and after the Company's acquisition such
person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control of the Company
shall occur.
(b) For purposes of the Plan, "Good Reason" with respect to a
participant means, without such participant's express written consent, the
occurrence of any of the following events after a Change in Control:
(1) (i) the assignment to such participant of any duties or
responsibilities (including reporting responsibilities) inconsistent in any
material and adverse respect with the participant's duties and responsibilities
with the Company immediately prior to such Change in Control (including any
material and adverse diminution of such duties or responsibilities); PROVIDED,
HOWEVER, that Good Reason shall not be deemed to occur upon a change in duties
or responsibilities that is solely and directly a result of the Company no
longer being a publicly traded entity, and does not involve any other event set
forth in this paragraph (b) or (ii) a material and adverse change in such
participant's titles or offices with the Company as in effect immediately prior
to such Change in Control.
(2) a reduction by the Company in such participant's rate of
annual base salary or target annual bonus opportunity as in effect immediately
prior to such Change in Control or as the same may be increased from time to
time thereafter;
(3) any requirement of the Company that such participant (i)
notwithstanding his objection, be based anywhere more than fifty (50) miles
from the location where the participant's employment is located at the time of
the Change in Control or (ii) travel on Company business to an extent
substantially greater than the travel obligations of the participant
immediately prior to such Change in Control; or
(4) the failure of the Company to (i) continue in effect any
employee benefit plan or compensation plan in which such participant is
participating immediately prior to such Change in Control (including the taking
of any action by the Company which would adversely affect the participant's
participation in or materially reduce the participant benefits under any such
plan), unless the participant is permitted to participate in other plans
providing the participant with substantially comparable benefits, (ii) provide
such participant and the participant's dependents with welfare benefits in
accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the participant
immediately prior to such Change in Control or provide substantially comparable
benefits at a substantially comparable cost to the participant, (iii) provide
fringe benefits in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
such participant immediately prior to such Change in Control, or provide
substantially comparable fringe benefits, or (iv) provide such participant with
paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and its affiliated companies as in effect for the
participant immediately prior to such Change in Control (including crediting
the participant with all service credited to him for such purpose prior to the
Change in Control), unless the failure to provide such paid vacation is a
result of a policy uniformly applied by the entity acquiring the Company to its
employees;
Notwithstanding the foregoing, an isolated and inadvertent action
taken in good faith and which is remedied by the Company within ten days after
receipt of notice thereof given by the participant shall not constitute Good
Reason. The participant must notify the Company of an event constituting Good
Reason within ninety days following his knowledge of its existence or such
event shall not constitute Good Reason under the Plan.
(c) For purposes of the Plan, "Cause" means with respect to a
participant (i) the willful and continued failure of such participant
substantially to perform his duties with the Company (other than any failure
due to physical or mental incapacity) after a demand for substantial
performance is delivered to him by the Committee which specifically identifies
the manner in which the Committee believes he has not substantially performed
his duties or (ii) willful misconduct materially and demonstrably injurious to
the Company. No act or failure to act by a participant shall be considered
"willful" unless done or omitted to be done by him not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company. The unwillingness of a participant to accept any condition or
event which would constitute Good Reason under paragraph (b) of this Section 11
may not be considered by the Committee to be a failure to perform or misconduct
by a participant. The Company must notify the participant of an event
constituting Cause within ninety days following its knowledge of the event's
existence or such event shall not constitute Cause under the Plan.
(d) If, during the one-year period immediately following a Change
in Control of the Company, a participant's employment with the Company and its
subsidiaries is terminated (1) by the Company (other than for Cause, disability
(within the meaning of the Company's long-term disability plan) or mandatory
retirement) or (2) by the participant for Good Reason, such participant shall
be paid, within ten days following such termination of employment, a lump sum
cash amount equal to the product of (A) the greater of such participant's
Target Award for the Fiscal Year in which his termination of employment occurs
or the Fiscal Year in which the Change in Control occurs and (B) the quotient
obtained by dividing (i) the number of months for which the participant
performed services in the Fiscal Year of his termination (rounded up to the
nearest whole number), divided by (ii) twelve.
(e) In the event of a Change in Control of the Company, each
participant who remains employed by a Business Group as of the end of the
Fiscal Year in which such Change in Control occurs shall receive an annual
incentive award with respect to such Fiscal Year at least equal to his Target
Award for such Fiscal Year.
(f) Notwithstanding anything in this Plan to the contrary, this
Section 11 may not be amended, modified or terminated in a manner adverse to
participants during the one-year period immediately following a Change in
Control of the Company.
(g) Notwithstanding anything in Section 6(c) to the contrary,
during the remainder of the Fiscal Year in which a Change in Control of the
Company occurs, the Committee may not adjust Performance Objectives or Target
Awards in any manner adverse to participants.
<PAGE>
Exhibit 10.12(b)
April 17, 1996
MALLINCKRODT GROUP INC.
RESOLUTION
Amendments to the
Management Compensation and
Benefit Assurance Program
_______________________________________________________________________________
WHEREAS, the Company's management has proposed that the Management
Compensation and Benefit Assurance Program, as approved by the Board of
Directors on April 19, 1988, as previously amended (the "Program"), be amended
to reflect certain changes in law, compensation practices and other
circumstances since the date of its adoption; and
WHEREAS, the Organization and Compensation Committee has reviewed the
proposed amendments to the Program and has recommended approval of such
amendments by the Board of Directors.
NOW, THEREFORE BE IT RESOLVED that the form of Severance Agreement
presented to and reviewed by the Organization and Compensation Committee be and
the same hereby is approved, subject to such changes and modifications as may
hereafter by approved by such Committee; and
FURTHER RESOLVED, that the Company's Corporate Staff Severance Policy be
amended to (i) exclude from participation officers with severance agreements and
(ii) provide for severance of one month per year of service with a maximum of
twelve-months severance and no minimum amount of severance; and
FURTHER RESOLVED, that the Company's Management Incentive Compensation
Plan (the "MICP") be amended to (i) provide for pro rata target benefits
under the MICP if a participant's employment is terminated, during the one-
year period following a Change in Control of the Company, by the Company
(other than for cause, disability or retirement) or by the participant for
"good reason," (ii) provide for minimum payment of target benefits with respect
to the plan year in which a Change in Control of the Company occurs and
(iii) permit the Organization and Compensation Committee, prior to the
effectuation of a Change in Control of the Company, to make appropriate
equitable adjustments to targets with respect to the plan year in which a
Change in Control of the Company occurs; and
FURTHER RESOLVED, that the use of rabbi trusts to fund benefits under the
Program be modified to: (i) consolidate the rabbi trusts into a single trust
using a modified form of the model rabbit trust promulgated by the Internal
Revenue Service, (ii) limit rabbi trust funding to the Company's supplemental
executive retirement plans and deferred incentive awards and (iii) provide for
funding of the rabbi trusts immediately prior to a Change in Control of the
Company, reserving discretion for the Board of Directors of the Company to
determine that funding is unnecessary; and
FURTHER RESOLVED, that the Company's Supplemental Executive Retirement
Plans be amended to (i) provide for a definition of (a) "good reason" (for
constructive termination) and (b) "cause" as set forth in proposed severance
agreement and (ii) provide for a three-year trigger period following a Change in
Control of the Company for vesting of benefits and additional credited service
upon termination of employment by the Executive for "good reason" or termination
of employment of the Executive by the Company for other than "cause"; and
FURTHER RESOLVED, that pursuant to the terms of the Company's 1981
Incentive Stock Option Plan (the "1981 Plan") and 1973 Stock Option and Award
Plan (the "1973 Plan"), the Organization and Compensation Committee hereby
exercises its discretion, effective as of the occurrence of any of the
"change in control" events set forth in the third paragraph of Section 3(b)
of the 1981 Plan and first paragraph of Section 3(c) of the 1973 Plan,
respectively, to provide for accelerated exercisability of all stock options
and stock appreciation rights under such plans (except to the extent
acceleration is prohibited pursuant to the terms of the 1981 and 1973 Plans,
respectively), PROVIDED THAT, in the event of a tender offer as described in
the 1981 and 1973 Plans, the Organization and Compensation Committee shall
determine at the time of such tender offer the period of time during which
such options and stock appreciation rights shall remain subject to
accelerated exercisability; and
FURTHER RESOLVED, that the Company's tax-qualified Retirement Plan for
Salaried Employees be amended to provide that upon a Change in Control of the
Company all employees shall be vested in their benefits under the Plan
(notwithstanding whether employment is terminated), but no additional years of
service will be credited to employees in the event of termination of employment;
and
FURTHER RESOLVED, that the definition of Change in Control of the Company
in the various plans, agreements and arrangements constituting the Program be
modified to conform to the definition set forth in Section 1(c) of the proposed
Severance Agreement (other than to the extent such modification would require
shareholder approval); and
FURTHER RESOLVED, that the officers of the Company and any of them, with
the advice of counsel, are authorized and directed to take any actions necessary
or convenient to implement the amendments to the Program hereby approved,
including without limitation and subject to the approval of the Organization and
Compensation Committee, the execution and delivery on behalf of the Company of
such amendments of any employee benefit plan of the Company or any of its
subsidiaries, and the execution and delivery on behalf of the Company of such
amendments of any employee benefit plan of the Company or any of its
subsidiaries, and the execution and delivery on behalf of such other agreements
and instruments, as may be necessary or advisable in connection therewith.
<PAGE>
Exhibit 10.13
AGREEMENT OF TRUST
This Agreement made as of August 16, 1996 (the "EFFECTIVE DATE"),
by and between Mallinckrodt Group Inc. (the "COMPANY") and Wachovia Bank of
North Carolina, N.A. (the "TRUSTEE").
WHEREAS, the Company has adopted the following nonqualified
deferred compensation plans and arrangements: the Supplemental Executive
Retirement Plan of Mallinckrodt Group Inc., the Supplemental Executive
Retirement Plan for Officers of International Minerals & Chemical Corporation
and the deferral arrangements under the Management Incentive Compensation Plan
(the "PLANS"), copies of which are attached hereto as Appendix A;
WHEREAS, the Company has incurred or expects to incur liability
under the terms of such Plans with respect to the individuals participating in
such Plans;
WHEREAS, the parties have previously established trusts and entered
into trust agreements (the "Prior Trust Agreements") with respect to the Plans
and with respect to the following plans and arrangements of the Company: Long
Term Performance Incentive Plan, Contingent Employment Agreements, Gross Up of
Excess Compensation Agreements, 1973 Stock Option and Award Plan and the 1981
Incentive Stock Option Plan (the "Additional Plans");
WHEREAS, the Company desires to terminate the trust and Trust
Agreements with respect to the Additional Plans;
WHEREAS, the Company wishes to combine the Prior Trust Agreements
and trust with respect to the Plans and to adopt this Agreement and establish a
new trust (hereinafter called the "TRUST") and, in accordance with the terms of
the Trust, to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event the Company
becomes "Insolvent" (as defined in Section 3(a)), until paid to Plan
participants and their beneficiaries in such manner and at such times as
specified in the Plans; and
WHEREAS, it is the intention of the parties that the Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded plans maintained for the purpose of providing deferred compensation
for a select group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 1. ESTABLISHMENT OF TRUST
(a) The Company hereby deposits with the Trustee in trust
$100, which shall become the principal of the Trust to be held, administered
and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust hereby established is revocable by the Company. The
Trust shall become irrevocable upon a "Change in Control" (as defined below in
Section 1(g)) unless, pursuant to Section 1(f), the Trust is not funded.
Following a "Potential Change in Control" (as defined below in Section 1(h)),
the Trust may not be revoked unless a Change in Control has not occurred during
the one (1) year period following such Potential Change in Control or the Trust
is revoked pursuant to Section 1(f).
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust shall be held separate and apart
from other funds of the Company and shall be used exclusively for the uses and
purposes of participants in the Plans and their beneficiaries (collectively,
the "PARTICIPANTS"), for fees and reasonable expenses of the Trustee and for
general creditors of the Company as herein set forth. Participants shall have
no preferred claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plans and this Trust Agreement shall
be mere unsecured contractual rights of Participants against the Company. Any
assets held by the Trust will be subject to the claims of the Company's general
creditors under federal and state law in the event the Company becomes
"Insolvent" (as defined in Section 3(a)).
(e) The Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property (of the type
specified in Section 5(a)) in trust with the Trustee to augment the principal
to be held, administered and disposed of by the Trustee as provided in this
Trust Agreement. Except as provided herein, neither the Trustee nor any
Participant shall have any right to compel additional deposits.
(f) Immediately prior to or upon a Change in Control, the Company
shall make an irrevocable contribution to the Trust in an amount in cash or
other property (of the type specified in Section 5(a)) that is sufficient to
pay each Participant (determined by allocations to separate accounts for each
Participant) the accrued benefits (the "BENEFITS") to which such Participant
and such Participant's spouse would be entitled under the Plans as of such date
(the "REQUIRED FUNDING AMOUNT"), unless prior to such Change in Control, a
majority of the remaining members of the "Incumbent Board" (as defined below)
shall have approved a resolution (the "BOARD RESOLUTION") stating that, in
light of the circumstances relating to the specific Change in Control in
question (including any other contractual steps taken to protect benefits), the
Board of Directors of the Company (the "BOARD) has determined that it is not
necessary to fund the Trust to protect the Participants' benefits under the
Plans. In the event that the Required Funding Amount is not contributed to the
Trust, pursuant to a Board Resolution as set forth in the immediately preceding
sentence, unless the Board Resolution provides otherwise the Trust shall
terminate, and any assets in the Trust shall be distributed to the Company,
unless otherwise required by applicable law. Upon making such distribution,
the Trustee shall be relieved from all further liability to make payments from
the Trust. In the event the Board Resolution permits the Trust to remain in
effect following a Change in Control pursuant to which the Trust is not funded,
the Trust may become irrevocable with respect to a subsequent Change in Control
of the Company. Concurrently with the contribution of the Required Funding
Amount, the Company shall also deposit $250,000 in cash to a separate account
of the Trust (the "TRUSTEE EXPENSE ACCOUNT"), which account shall be used to
reimburse the Trustee for its fees and reasonable expenses hereunder as
provided in Section 9.
(g) For purposes of this Agreement, "CHANGE IN CONTROL" means the
occurrence of any one of the following events:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities eligible to
vote for the election of the Board (the "COMPANY VOTING SECURITIES"); PROVIDED,
HOWEVER, that the event described in this paragraph (i) shall not be deemed to
be a Change in Control by virtue of any of the following acquisitions: (A) by
the Company or any Subsidiary of the Company, (B) by any employee benefit plan
sponsored or maintained by the Company or any Subsidiary of the Company, (C) by
any underwriter temporarily holding securities pursuant to an offering of such
securities, (D) pursuant to a Non-Control Transaction (as defined in paragraph
(iii)), or (E) except as provided in (iii) below, in which Company Voting
Securities are acquired from the Company, if a majority of the Board approves a
resolution providing expressly that such acquisition does not constitute a
Change in Control under this paragraph (i);
(ii) individuals who, on April 19, 1996, constitute the Board
(the "INCUMBENT BOARD") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to April 19,
1996, whose election, or nomination for election, by the Company's stockholders
was approved by a vote of at least a majority of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
paragraph (ii), considered as though such person were a member of the Incumbent
Board; PROVIDED, HOWEVER, that no individual initially elected or nominated as
a director of the Company as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than
the Board shall be deemed to be a member of the Incumbent Board;
(iii) the consummation of a merger, consolidation, share
exchange or similar form of corporate reorganization of the Company or any such
type of transaction requiring the approval of the Company's stockholders
(whether for such transaction or the issuance of securities in the transaction
or otherwise), or the consummation of the direct or indirect sale or other
disposition of all or substantially all of the assets, of the Company (a
"BUSINESS COMBINATION"), unless immediately following such Business
Combination: (A) more than 50% of the total voting power of the publicly
traded corporation resulting from such Business Combination (including, without
limitation, any corporation which directly or indirectly has beneficial
ownership of 100% of the Company Voting Securities or all or substantially all
of the Company's assets) eligible to elect directors of such corporation is
represented by shares that were Company Voting Securities immediately prior to
such Business Combination (either by remaining outstanding or being converted),
and such voting power is in substantially the same proportion as the voting
power of such Company Voting Securities immediately prior to the Business
Combination, (B) no person (other than any publicly traded holding company
resulting from such Business Combination, any employee benefit plan sponsored
or maintained by the Company (or the corporation resulting from such Business
Combination), or any person which beneficially owned, immediately prior to such
Business Combination, directly or indirectly, 20% or more of the Company Voting
Securities (a "COMPANY 20% STOCKHOLDER") becomes the beneficial owner, directly
or indirectly, of 20% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the corporation resulting from
such Business Combination and no Company 20% Stockholder increases its
percentage of such total voting power, and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
approval of the Board of the execution of the initial agreement providing for
such Business Combination (a "NON-CONTROL TRANSACTION"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company. Notwithstanding the
foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 20% of the
Company Voting Securities as a result of the acquisition of Company Voting
Securities by the Company which, by reducing the number of Company Voting
Securities outstanding, increases the percentage of shares beneficially owned
by such person; PROVIDED, THAT if a Change in Control of the Company would
occur as a result of such an acquisition by the Company (if not for the
operation of this sentence), and after the Company's acquisition such person
becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially
owned by such person, then a Change in Control of the Company shall occur.
(h) For purposes of this Agreement, a "POTENTIAL CHANGE in
Control" means a potential Change in Control of the Company, which shall be
deemed to have occurred if the conditions set forth in any one of the following
three (3) paragraphs shall have been satisfied:
(1) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control of the
Company;
(2) any person publicly announces an intention to take actions
which, if consummated, would constitute a Change in Control of the
Company; or
(3) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control of the Company has
occurred.
The Chief Executive Officer or the General Counsel of the Company
(or any designee) shall notify the Trustee of the occurrence of a Change in
Control or Potential Change in Control, and the Trustee may rely on such
notice. The Trustee may in its sole discretion determine that a Change in
Control or Potential Change in Control has occurred based on any other actual
notice of such a Change in Control or Potential Change in Control which the
Trustee may receive.
(i) Within thirty (30) days following the end of each calendar
year ending after the Trust has become irrevocable pursuant to Section 1(b)
hereof, the Company shall be required to irrevocably deposit additional cash or
other property (of the type specified in Section 5(a)) to the Trust in an
amount so that each Participant's separate account is allocated an amount
sufficient to pay such Participant's Benefits accrued as of the end of such
calendar year pursuant to the terms of the Plans. In the event any fees or
expenses are paid from the Trust (pursuant to Section 9(a)), the Company shall
repay such amounts to the Trust within five (5) business days of such payment.
Section 2. PAYMENT SCHEDULE; PAYMENTS TO PARTICIPANTS
(a) Within thirty (30) days following the Effective Date, the
Company shall deliver to the Trustee a schedule (the "PAYMENT SCHEDULE") that
indicates the amounts payable in respect of each Participant (and provides a
formula or other instructions acceptable to the Trustee for determining the
amounts so payable), the form in which such amount is to be paid (as provided
for or available under the Plan), and the time of commencement for payment of
such amounts. Such Payment Schedule shall be updated on an annual basis prior
to the delivery of the Required Funding Amount. The Trustee shall make
provision for the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The Company shall deliver to the Trustee, concurrently with
its delivery of the Required Funding Amount pursuant to Section 1(f) hereof, a
revised Payment Schedule indicating the amounts being transferred in respect of
each Participant. The Payment Schedule (or the portion thereof relating to the
respective Participant) also shall be delivered by the Company to each such
Participant. A modified Payment Schedule shall be delivered by the Company (x)
to the Trustee and to each Participant at each funding date specified by
Section 1(i) for the determination of whether additional amounts must be
contributed to the Trust, and (y) to the Trustee and to the affected
Participant upon the occurrence of any event requiring a modification of the
Payment Schedule (e.g., the termination of the employment of a Participant).
Except as otherwise provided herein, the Trustee shall make payments of
Benefits under the Plans to the Participants, in cash, in accordance with such
Payment Schedule.
(c) Subsequent to the delivery of modified Payment Schedules under
Section 2(b), the Trustee shall have the responsibility of reviewing such
Payment Schedules within forty-five (45) days following receipt and, if it
determines that any such Payment Schedules are inaccurate, modifying such
Payment Schedules accordingly. Additionally, if a Payment Schedule is
modified, the Company shall be required to irrevocably deposit additional cash
to the Trust in an amount sufficient to provide the Benefits set forth on such
Payment Schedule, as modified by the Trustee. The Company shall assist the
Trustee, and the Trustee may seek assistance from independent third parties,
including but not limited to actuaries retained by the Trustee, as may be
necessary in order to permit distributions from the Trust to be made in
accordance with this Agreement or to determine the accuracy of any Payment
Schedule. The Company shall keep accurate books and records with respect to
the eligibility of employees to participate in the Plans and the Benefits due
under the Plans which may be payable under the Trust, provide such information
to the Trustee and any independent third party referred to in the immediately
preceding sentence and provide access to such books and records at such time or
times as the Trustee shall reasonably request. In addition to the review by
the Trustee described above, in the event that a Participant reasonably
believes that the Payment Schedule, as modified upon a Change in Control
pursuant to Section 2(b), does not properly reflect the amount payable to such
Participant or the time or form of payment from the Trust corpus in respect of
the Plan, such Participant shall be entitled to deliver to the Trustee an
affidavit (the "PARTICIPANT'S NOTICE") setting forth payment instructions for
the amount the Participant believes will be or is due under the relevant terms
of the Plan. The Participant shall also deliver a copy of the Participant's
Notice to the Company within five (5) business days following the date the
Participant's Notice is delivered to the Trustee. Unless the Trustee receives
written objection from the Company within ten (10) business days after receipt
by the Trustee of the Participant's Notice, or the Trustee determines in its
sole and absolute discretion that the Participant's Notice is incorrect, the
Trustee shall require the Company to deliver to the Trust amounts in addition
to the Required Funding Amount (or make the distribution of Benefits) in
accordance with the instructions set forth in the Participant's Notice. If the
Company makes an objection during the ten (10) business days referred to in the
preceding sentence, the Trustee shall not require additional contributions
and/or shall retain any disputed amounts pending the determination of an
arbitrator pursuant to Section 14 hereof.
(d) The entitlement of a Participant to Benefits under the Plan
shall initially be determined by the Company or such party as it shall
designate under the Plan, and any claim for such Benefits by a Participant
shall be considered and reviewed by the Trustee in connection with its duties
hereunder; PROVIDED, HOWEVER, that subsequent to a Change in Control which
results in the Trust becoming irrevocable, the Trustee shall have sole
discretion in determining the entitlement of Participants to Benefits.
(e) The Company may make payment of Benefits directly to
Participants as Benefits become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of Benefits directly
prior to the time amounts are payable to Participants. In addition, if the
principal of the Trust, and any earnings thereon, are not sufficient to make
payments of Benefits in accordance with the terms of the Plan, the Company
shall make the balance of each such payment as it falls due. The Trustee shall
notify the Company when principal and earnings are not sufficient.
(f) Except as otherwise provided herein, in the event of any final
determination by the Internal Revenue Service or a court of competent
jurisdiction which determination is not appealable or the time for appeal or
protest of which has expired, or the receipt by the Trustee of a substantially
unqualified opinion of tax counsel selected by the Trustee, which determination
determines, or which opinion opines, that any Participant is subject to Federal
income taxation on amounts held in trust hereunder prior to the distribution to
the Participant of such amounts, the Trustee shall, on receipt by the Trustee
of such opinion or notice of such determination, pay to such Participant the
portion of the Trust corpus includible in such Participant's Federal gross
income and, to the extent of such payment, the Company's obligation to the
Participant for Benefits under the Plan shall be cancelled.
Section 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
PARTICIPANTS WHEN THE COMPANY IS INSOLVENT
(a) The Trustee shall cease payment of Benefits to Participants if
and when the Company becomes Insolvent. The Company shall be considered
"INSOLVENT" for purposes of this Trust Agreement if (i) the Company is unable
to pay its debts as they become due, or (ii) the Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of the Company under federal and state law as
set forth below.
(1) The Company's Chief Executive Officer shall have the duty to
inform the Trustee in writing of the Company's Insolvency. If a person
claiming to be a creditor of the Company alleges in writing to the
Trustee that the Company has become Insolvent, the Trustee shall
determine by written inquiry to the Chief Executive Officer whether the
Company is Insolvent and, pending such determination, the Trustee shall
discontinue payment of Benefits to Participants.
(2) Unless the Trustee has actual knowledge that the Company is
Insolvent, or has received notice from the Company or a person claiming
to be a creditor alleging that the Company is Insolvent, the Trustee
shall have no duty to inquire whether the Company is Insolvent. The
Trustee may in all events rely on such evidence concerning the
Company's solvency as may be furnished to the Trustee and that provides
the Trustee with a reasonable basis for making a determination
concerning the Company's solvency.
(3) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Participants and
shall hold the assets of the Trust for the benefit of the Company's
general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Participants to pursue their rights as general
creditors of the Company with respect to Benefits due under the Plan or
otherwise.
(4) The Trustee shall resume the payment of Benefits to
Participants in accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is not Insolvent or
is no longer Insolvent.
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of Benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants under the terms of the Plan for the period of such discontinuance,
less the aggregate amount of any payments made to Participants by the Company
in lieu of the payments provided for hereunder during any such period of
discontinuance.
Section 4. PAYMENTS TO THE COMPANY
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before the
payment of all Benefits have been made to Participants pursuant to the terms of
the Plans; PROVIDED, THAT, upon the completion of payments to a Participant
under the Plans, Trust assets attributable to such Participant shall be
returned to the Company unless Trust assets attributable to any other
Participant are insufficient to pay such Participant's accrued Benefits, in
which case assets necessary to provide for such Benefits shall be allocated to
such other Participants and the remainder shall be returned to the Company.
Section 5. TRUSTEE INVESTMENT AND ADMINISTRATIVE AUTHORITY
(a) The Trust corpus shall be held, invested and reinvested as
determined by the Trustee in cash or marketable securities only in accordance
with the parameters set forth in this Section 5. The Trustee shall use its
good faith efforts to invest or reinvest from time to time all or such part of
the Trust corpus as it believes prudent under the circumstances (taking into
account, among other things, anticipated cash requirements for the payment of
Benefits) in either one or a combination of the following investments:
(1) direct obligations of the United States of America or agencies
of the United States of America or obligations unconditionally and
fully guaranteed as to principal and interest by the United States of
America, in each case maturing within one year or less from the date of
acquisition;
(2) negotiable certificates of deposit (in each case maturing
within one (1) year or less from the date of acquisition) issued by a
commercial bank organized and existing under the laws of the United
States of America or any state thereof having a combined capital and
surplus of at least $1,000,000,000; and
(3) mutual or commingled funds comprised of the investments set
forth in paragraphs (1) and (2) or comprised of such investments, but
for longer maturity periods;
PROVIDED, HOWEVER, that the Trustee shall not be liable for any failure to
maximize the income earned on that portion of the Trust corpus as is from time
to time invested or reinvested as set forth above, nor for any loss of income
due to liquidation of any investment which the Trustee, in its sole discretion,
believes necessary to make payments or to reimburse expenses under the terms of
this Trust.
(b) Subject to paragraph (a) above, the Trustee shall have, with
respect to the Trust, the power in its discretion:
(1) To retain any property at any time received by it;
(2) To extend the time of payment of any obligation held in the
Trust;
(3) To invest and reinvest all or any specified portion of the
Trust through the medium of any common, collective or commingled trust
fund which has been or may hereafter be established and maintained by
the Trustee, provided that prior to investing any portion of the Trust
for the first time in any such common, collective or commingled trust
fund, the Trustee shall advise the Company of its intent to make such
an investment and furnish to the Company any information it may
reasonably request with respect to such common, collective or
commingled trust fund;
(4) To collect and receive any and all money and other property
due to the Trust and to give full discharge therefor;
(5) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust; to commence or
defend suits or legal proceedings to protect any interest of the Trust;
and to represent the Trust in all suits or legal proceedings in any
court or before any other body or tribunal;
(6) To determine how all receipts and disbursements shall be
credited, charged or apportioned as between income and principal, and
the decision of the Trustee shall be final and not subject to question
by the Company or any Participant; and
(7) To the extent provided in Section 2, to keep the Payment
Schedule accurate and current after a Change in Control, to review and
determine the amount and time of payments of Benefits and to engage
such independent third parties as the Trustee may deem necessary to
assist in making payment determinations and/or maintaining the Payment
Schedule.
(c) The Trustee shall have the power and duty generally to do all
acts, whether or not expressly authorized, which the Trustee may deem necessary
or desirable for the protection of the Trust or the functioning of the Trust
pursuant to this Agreement.
(d) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly provided otherwise
herein; PROVIDED, HOWEVER, that if an insurance policy is held as an asset of
the Trust, the Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(e) Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Internal Revenue
Code.
Section 6. TRUST INCOME
During the term of the Trust prior to a Change in Control, all
income received by the Trust for such year, net of expenses and taxes, shall be
returned to the Company within sixty (60) days following the end of each
calendar year. During the term of the Trust subsequent to a Change in Control,
all income of the Trust shall remain in the Trust, subject to distribution to
Participants.
Section 7. ACCOUNTING BY THE TRUSTEE
(a) The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing
between the Company and the Trustee. Within sixty (60) days following the end
of each calendar year and within sixty (60) days following the removal or
resignation of the Trustee, the Trustee shall deliver to the Company a written
account of its administration of the Trust during such year, or during the
period from the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.
(b) The Trustee will at all times maintain a separate bookkeeping
account for each Participant in which it will record each asset delivered by
the Company to the Trustee with respect to such Participant and each amount
paid by the Trustee to each such Participant in accordance with the Payment
Schedule. Within three (3) months following the delivery of the Required
Funding Amount and/or any additional amounts pursuant to Section 1(f) and/or
Section 1(i) hereof, the Trustee shall deliver to each Participant and the
Company a current written report setting forth (a) the present value of such
Participant's unpaid Benefits; (b) the aggregate present value of all unpaid
Benefits; (c) the aggregate fair market value of the Trust corpus; (d) the
amount deemed allocable to such Participant's account for bookkeeping purposes,
computed by multiplying item (c) by the quotient of item (a) divided by item
(b); (e) a record of the contributions made by the Company with respect to such
Participant; and (f) a record of any amounts paid by the Trustee to such
Participant in accordance with a Payment Schedule or Participant's Notice. In
preparing such report, the Trustee may hire experts to assist in its efforts
and rely on their advice.
Section 8. RESPONSIBILITY OF THE TRUSTEE
(a) The Trustee shall act with care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of the Plan or the Trust and is given in
writing by the Company. In the event of a dispute between the Company and a
party, the Trustee may apply to an arbitrator pursuant to Section 14 to resolve
the dispute.
(b) The Company shall indemnify and hold the Trustee harmless from
and against any and all losses, damages, costs, expenses or liabilities,
including reasonable attorneys' fees and other costs of litigation, to which
the Trustee may become subject pursuant to, arising out of, occasioned by,
incurred in connection with carrying out its responsibilities under this
Agreement, except for any act or omission constituting gross negligence or
willful misconduct of the Trustee.
(c) The Trustee may consult with legal counsel (who may also be
counsel for the Company generally) with respect to any of its duties or
obligations hereunder, and have the reasonable expenses of such consultation
paid out of the Trust or by the Company.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder and have its
reasonable expenses paid out of the Trust or by the Company.
Section 9. COMPENSATION AND EXPENSES OF THE TRUSTEE
(a) Prior to the Company's contribution to the Trustee Expense
Account, the Company shall pay all reasonable administrative expenses and the
Trustee's fees (in accordance with the Trustee's regular schedule of fees for
services, as in effect from time to time, unless the Trustee and Company
otherwise agree). If not so paid by the Company, such fees and expenses shall
be paid from the Trust, and the Trustee shall demand reimbursement from the
Company on behalf of the Trust.
(b) Subsequent to the Company's contribution to the Trustee
Expense Account, payment of reasonable administrative expenses and the
Trustee's fees shall be made from the Trustee Expense Account; PROVIDED,
HOWEVER, that if the amounts in the Trustee Expense Account are insufficient
for such payments, payment shall be made by the Company (or from the Trust) in
the manner set forth in paragraph (a) of this Section 9.
Section 10. RESIGNATION AND REMOVAL OF THE TRUSTEE
(a) The Trustee may resign upon ninety (90) days' prior written
notice to the Company, except that any such resignation shall not be effective
until the Company has appointed in writing a successor Trustee, and such
successor has accepted the appointment in writing. The Company shall make a
good faith effort, following receipt of notice of resignation from the Trustee,
to find and appoint a successor Trustee who will adhere to the obligations
imposed on such successor under the terms of this Trust Agreement.
(b) Subject to the following paragraph, the Company may remove the
Trustee upon ninety (90) days' prior written notice to the Trustee, except that
any such removal shall not be effective until the close of such notice period
and (i) delivery by the Company to the Trustee of an instrument in writing
appointing a successor Trustee, and (ii) an acceptance of such appointment in
writing executed by such successor.
(c) Upon a Change in Control, the Trustee may not be removed by
the Company for three (3) years, except for fraud or gross negligence, without
the approval of 80% or more of the Participants (who were employees of the
Company as of the Change in Control).
Section 11. APPOINTMENT OF SUCCESSOR
(a) If the Trustee resigns or is removed in accordance with
Section 10(a) or (b) hereof, the Company may appoint, by the effective date of
the Trustee's resignation or removal, any third party such as a bank trust
department or other party that may be granted corporate trustee powers under
state law and has equity in excess of one hundred million dollars
($100,000,000), as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the
new Trustee, who shall have all of the rights and powers of the former Trustee.
(b) Notwithstanding Section 11(a) above, if the Trustee resigns or
is removed for fraud or gross negligence following a Change in Control, the
Company may appoint such third party only with the approval of 80% or more of
the Participants (who were employees of the Company as of the Change in
Control). If the Company and such Participants are unable to agree on a
successor trustee within forty-five (45) days following notice of the Trustee's
resignation or removal, the Trustee shall be entitled to petition a court of
competent jurisdiction to appoint its successor. All reasonable expenses of
the Trustee in connection with the proceeding shall be allowed as administra-
tive expenses of the Trust.
(c) Upon resignation or removal of the Trustee and appointment of
a successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within ninety (90) days
after receipt of notice of resignation, removal or transfer, unless the Company
extends the time limit. The former Trustee shall execute any instrument
necessary or reasonably requested by the Company or the successor Trustee to
evidence the transfer.
Section 12. AMENDMENT OR TERMINATION
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plans or shall make the
Trust revocable after it has become irrevocable in accordance with Section 1(b)
hereof. Following a Change in Control, this Trust Agreement, except for
amendments necessary to meet legal or regulatory requirements which are
necessary to maintain tax-deferred status for Participants, may be amended in a
manner adverse to Participants only by an instrument in writing executed by the
Trustee and the Company, together with the consent of 80% of the remaining
Participants (who were employees of the Company as of the Change in Control).
(b) The Trust shall not terminate until the date on which
Participants are no longer entitled to Benefits pursuant to the terms of the
Plan unless sooner terminated in accordance with Section 1(f) hereof. Upon
termination of the Trust, any assets remaining in the Trust shall be returned
to the Company.
(c) Upon written approval of all Participants entitled to payment
of Benefits pursuant to the terms of the Plans, the Company may terminate the
Trust prior to the time all payment of Benefits under the Plan have been made.
All assets in the Trust at termination shall be returned to the Company.
Section 13. MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants under this Trust Agreement
may not be anticipated, assigned (either at law or in equity), alienated,
pledged, encumbered or subjected to attachment, garnishment, levy, execution or
other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Section 14. ARBITRATION
Any dispute between the Participants and the Company or the Trustee
as to the interpretation or application of the provisions of this Trust, and
any questions concerning Benefits payable hereunder, shall be determined
exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Such determination shall be final,
conclusive and binding upon the parties. Judgment may be entered on the
arbitrator's award in any court of competent jurisdiction. All fees and
expenses of such arbitration reasonably incurred (including, without
limitation, those incurred by the Participants that are not determined by
arbitration to be in connection with a claim by the Participant that is
frivolous or not in good faith) shall be reimbursed by the Company.
Section 15. PRIOR TRUST AGREEMENTS. Each of the Prior Trust
Agreements shall be terminated as of the Effective Date and, to the extent
applicable, shall be superseded by this Agreement.
Section 16. EFFECTIVE DATE
The Effective Date of this Trust Agreement shall be August 16,
1996.
IN WITNESS WHEREOF, this Agreement has been entered into by the
parties hereto as of the 16th day of August, 1996.
MALLINCKRODT GROUP INC.
Date:______________________ By:______________________
Name:
Title:
WACHOVIA BANK OF NORTH
CAROLINA, N.A.
Date:______________________ By:______________________
Name:
Title:
<PAGE>
Exhibit 10.14(b)
MALLINCKRODT GROUP INC.
CORPORATE STAFF CHANGE IN CONTROL
SEVERANCE PLAN
The Board of Directors has determined that it is in the best
interests of the Company and its stockholders to secure the continued services
of its corporate staff personnel and to ensure the continued and undivided
dedication and objectivity of such personnel in the event of any threat or
occurrence of, or negotiation or other action that could lead to, or create the
possibility of, a Change in Control (as defined in Section 1(b)) of the
Company. To encourage the full attention and dedication to the Company by such
employees, the Board of Directors has authorized the Company to adopt the
Mallinckrodt Group Inc. Corporate Staff Change in Control Severance Plan (the
"Plan").
1. DEFINITIONS. As used in this Plan, the following terms shall
have the respective meanings set forth below:
(a) "Cause" with respect to a Participant means (i) the willful
and continued failure of such Participant substantially to perform his duties
with the Company (other than any failure due to physical or mental incapacity)
after a demand for substantial performance is delivered to him by the Company
which specifically identifies the manner in which the Company believes he has
not substantially performed his duties or (ii) willful misconduct materially
and demonstrably injurious to the Company. No act or failure to act by a
Participant shall be considered "willful" unless done or omitted to be done by
him not in good faith and without reasonable belief that his action or omission
was in the best interests of the Company. The unwillingness of a Participant
to accept any condition or event which would constitute Good Reason under
Section 1(g) may not be considered by the Company to be a failure to perform or
misconduct by the Participant. The Company must notify a Participant of an
event constituting Cause within ninety (90) days following the Company's
knowledge of its existence or such event shall not constitute Cause under this
Plan.
(b) "Change in Control" means the occurrence of any one of the
following events:
(i) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board of Directors
(the "Company Voting Securities"); PROVIDED, HOWEVER, that the event
described in this paragraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the
Company or any Subsidiary of the Company, (B) by any employee benefit
plan sponsored or maintained by the Company or any Subsidiary of the
Company, (C) by any underwriter temporarily holding securities pursuant
to an offering of such securities, (D) pursuant to a Non-Control
Transaction (as defined in paragraph (iii)), (E) with respect to a
Participant, pursuant to any acquisition by the Participant or any
group of persons including the Participant; or (F) except as provided
in (iii) below, in which Company Voting Securities are acquired from
the Company, if a majority of the Board of Directors approves a
resolution providing expressly that such acquisition does not
constitute a Change in Control under this paragraph (i);
(ii) individuals who, on April 19, 1996, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to April 19, 1996, whose election, or nomination for
election, by the Company's stockholders was approved by a vote of at
least a majority of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (ii), considered as though such person were a member of the
Incumbent Board; PROVIDED, HOWEVER, that no individual initially
elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors shall be deemed
to be a member of the Incumbent Board;
(iii) the consummation of a merger, consolidation, share exchange
or similar form of corporate reorganization of the Company or any such
type of transaction requiring the approval of the Company's
stockholders (whether for such transaction or the issuance of
securities in the transaction or otherwise), or the consummation of the
direct or indirect sale or other disposition of all or substantially
all of the assets, of the Company (a "Business Combination"), unless
immediately following such Business Combination: (A) more than 50% of
the total voting power of the publicly traded corporation resulting
from such Business Combination (including, without limitation, any
corporation which directly or indirectly has beneficial ownership of
100% of the Company Voting Securities or all or substantially all of
the Company's assets) eligible to elect directors of such corporation
is represented by shares that were Company Voting Securities
immediately prior to such Business Combination (either by remaining
outstanding or being converted), and such voting power is in
substantially the same proportion as the voting power of such Company
Voting Securities immediately prior to the Business Combination, (B) no
person (other than any publicly traded holding company resulting from
such Business Combination, any employee benefit plan sponsored or
maintained by the Company (or the corporation resulting from such
Business Combination), or any person which beneficially owned,
immediately prior to such Business Combination, directly or indirectly,
20% or more of the Company Voting Securities (a "Company 20%
Stockholder")) becomes the beneficial owner, directly or indirectly, of
20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the corporation resulting
from such Business Combination and no Company 20% Stockholder increases
its percentage of such total voting power, and (C) at least a majority
of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at
the time of the approval of the Board of the execution of the initial
agreement providing for such Business Combination (a "Non-Control
Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; PROVIDED, THAT if a Change in Control of the
Company would occur as a result of such an acquisition by the Company (if not
for the operation of this sentence), and after the Company's acquisition such
person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control of the Company
shall occur. Notwithstanding anything in this Plan to the contrary, if a
Participant's employment is terminated prior to a Change in Control, and the
Participant reasonably demonstrates that such termination was at the request of
a third party who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control (a "Third Party") and who effectuates
a Change in Control, then for all purposes of this Plan, the date of a Change
in Control shall mean the date immediately prior to the date of such
termination of employment.
(c) "Company" means Mallinckrodt Group Inc., a New York
corporation.
(d) "Date of Termination" means the date on which a Participant's
employment with the Company terminates. In the event a Participant's
employment is terminated in connection with a request by a Third Party (as
described in Sections 1(b) and 1(g)) and such Participant becomes entitled upon
the effectuation of a Change in Control by the Third Party to severance
payments and/or benefits under Sections 2(a) and/or 2(b), the date the Change
in Control is effectuated by the Third Party shall be treated as the
Participant's Date of Termination for purposes of determining the timing of
payments and benefits under Sections 2(a) and 2(b).
(e) "Disability" means physical or mental incapacity qualifying
the Participant for long-term disability under the Company's long-term
disability plan.
(f) "Effective Date" shall mean April 19, 1996.
(g) "Good Reason" means, without a Participant's express written
consent, the occurrence of any of the following events after a Change in
Control:
(1) (i) the assignment to a Participant of any duties or
responsibilities (including reporting responsibilities) inconsistent in any
material and adverse respect with the Participant's duties and responsibilities
with the Company immediately prior to such Change in Control (including any
material and adverse diminution of such duties or responsibilities); PROVIDED,
HOWEVER, that Good Reason shall not be deemed to occur upon a change in duties
or responsibilities that is solely and directly a result of the Company no
longer being a publicly traded entity, and does not involve any other event set
forth in this paragraph (g) or (ii) a material and adverse change in the
Participant's titles or offices with the Company as in effect immediately prior
to such Change in Control.
(2) a reduction by the Company in the Participant's rate of annual
base salary or target annual bonus opportunity as in effect immediately prior
to such Change in Control or as the same may be increased from time to time
thereafter;
(3) any requirement of the Company that the Participant (i)
notwithstanding the Participant's objection, be based anywhere more than fifty
(50) miles from the location where the Participant's employment is located at
the time of the Change in Control or (ii) travel on Company business to an
extent substantially greater than the travel obligations of the Participant
immediately prior to such Change in Control;
(4) the failure of the Company to (i) continue in effect any
employee benefit plan or compensation plan in which the Participant is
participating immediately prior to such Change in Control (including the taking
of any action by the Company which would adversely affect the Participant's
participation in or materially reduce the Participant's benefits under any such
plan), unless the Participant is permitted to participate in other plans
providing the Participant with substantially comparable benefits, (ii) provide
the Participant and the Participant's dependents with welfare benefits in
accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or provide substantially comparable
benefits at a substantially comparable cost to the Participant, (iii) provide
fringe benefits in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Participant immediately prior to such Change in Control, or provide
substantially comparable fringe benefits, or (iv) provide the Participant with
paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and its affiliated companies as in effect for the
Participant immediately prior to such Change in Control (including crediting
the Participant with all service credited to the Participant for such purpose
prior to the Change in Control), unless the failure to provide such paid
vacation is a result of a policy uniformly applied by the entity acquiring the
Company to its employees; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 6(b).
Notwithstanding the foregoing, an isolated and inadvertent action
taken in good faith and which is remedied by the Company within ten (10) days
after receipt of notice thereof given by a Participant shall not constitute
Good Reason for such Participant. Any event or condition described in this
Section 1(g)(1) through (4) which occurs prior to a Change in Control, but was
at the request of a Third Party who effectuates a Change in Control, shall
constitute Good Reason following a Change in Control for purposes of this
Agreement notwithstanding that it occurred prior to the Change in Control. A
Participant must notify the Company of an event constituting Good Reason within
ninety (90) days following such Participant's knowledge of its existence or
such event shall not constitute Good Reason under this Agreement.
(h) "Nonqualifying Termination" means a termination of a
Participant's employment (1) by the Company for Cause, (2) by the Participant
for any reason other than Good Reason, (3) as a result of the Participant's
death, (4) by the Company due to the Participant's Disability or (5) as a
result of the Participant's Retirement.
(i) "Participant" shall mean each full-time salaried employee of
the Company (other than any such employee who has entered into a Change in
Control Severance Agreement with the Company) who, as of immediately prior to a
Change in Control, is assigned to the staff of any corporate officer serving on
the "Corporate Staff Team" of the Company. If, following a Change in Control,
a Participant remains employed by the Company, but ceases to be assigned to the
staff of a member of the "Corporate Staff Team"(other than due to an event
which constitutes Good Reason hereunder), such employee shall cease to be a
Participant hereunder.
(j) "Retirement" means termination of employment by either the
Participant or the Company (other than for Cause) on or after the Participant's
normal retirement date under the terms of the Retirement Plan (other than if
any such Retirement also constitutes Good Reason).
(k) "Retirement Plan" means The Mallinckrodt Retirement Plan or
any successor or substitute plan or plans of the Company.
(l) "Subsidiary" means any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities of such
corporation or other entity entitled to vote generally in the election of
directors.
(m) "Termination Period" means the period of time beginning with a
Change in Control and ending three (3) years following such Change in Control.
(n) "Year of Service" means a 12-month continuous period of
employment with the Company or any Subsidiary (or any entity with respect to
which service credit is given under this Plan).
2. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
If during the Termination Period the employment of a Participant
shall terminate other than by reason of a Nonqualifying Termination, then the
Company shall provide the following payments and benefits to such Participant:
(a) Commencing with the first payroll period following the
Participant's Date of Termination, the Company shall pay such Participant's
base salary (at the highest annual rate of base salary earned by the
Participant during the 12-month period immediately preceding such Participant's
Date of Termination), for a period equal to one (1) month for each full Year of
Service of the Participant (as of such Participant's Date of Termination), up
to a maximum of twelve (12) months, pursuant to the Company's normal payroll
practices.
(b) During the Severance Period, the Company shall provide the
Participant (and the Participant's dependents, if applicable) with the same
level of medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including cost of coverage) as
existed immediately prior to the Participant's Date of Termination (or, if more
favorable to the Participant, as such benefits and terms and conditions existed
immediately prior to the Change in Control); PROVIDED, THAT, if the Participant
cannot continue to participate in the Company plans providing such benefits,
the Company shall otherwise provide such benefits on the same after-tax basis
as if continued participation had been permitted. Notwithstanding the
foregoing, if the Participant becomes reemployed with another employer and is
eligible to receive welfare benefits from such employer, the welfare benefits
described herein shall be secondary to such benefits during the period of the
Participant's eligibility, but the Company shall reimburse the Participant for
any increased cost and provide any additional benefits necessary to give the
Participant the benefits promised hereunder.
(c) Reasonable outplacement services will be provided to the
Participant.
3. WITHHOLDING TAXES. The Company may withhold from all payments
due to a Participant (or his beneficiary or estate) hereunder all taxes which,
by applicable federal, state, local or other law, the Company is required to
withhold therefrom.
4. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall
arise under this Plan involving termination of a Participant's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by the Participant in connection with such contest or dispute
regardless of the result thereof; provided, that the Participant signs a
written agreement to the effect that in the event it is determined in an
arbitration proceeding that such Participant's basis for a contest or dispute
was frivolous and not advanced in good faith, the Participant shall be
obligated to return to the Company any such reimbursed legal fees and expenses
within sixty (60) days following the determination.
5. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle
any Participant to continued employment with the Company or its Subsidiaries.
6. SUCCESSORS.
(a) This Plan shall not be terminated by any Business Combination.
In the event of any Business Combination, the provisions of this Plan shall be
binding upon the surviving or resulting corporation or the person or entity to
which such assets are transferred.
(b) The Company agrees that concurrently with any Business
Combination, it will cause any successor or transferee unconditionally to
assume all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any Business
Combination that does not constitute a Non-Control Transaction shall constitute
Good Reason hereunder and shall entitle each Participant to compensation and
other benefits from the Company in the same amount and on the same terms as the
Participant would be entitled hereunder if the Participant's employment were
terminated following a Change in Control other than by reason of a
Nonqualifying Termination. For purposes of implementing the foregoing, the
date on which any such Business Combination becomes effective shall be deemed
the date Good Reason occurs, and shall be the Date of Termination if requested
by any Participant.
(c) If a Participant shall die following his Date of Termination
while any amounts would be payable to the Participant hereunder had the
Participant continued to live (i.e., the payments due for the balance of the
Severance Period), all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Plan to such person or persons
appointed in writing by the Participant to receive such amounts or, if no
person is so appointed, to the Participant's estate.
7. FULL SETTLEMENT. The Company's obligation to make any payments
provided for under this Plan and otherwise to perform its obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment, defense or
other claim, right or action which the Company may have against a Participant
or others. In no event shall the Participant be obligated to seek other
employment or take other action by way of mitigation of the amounts payable to
such Participant under any of the provisions of this Plan and, except as
provided in Section 2(b), such amounts shall not be reduced whether or not such
Participant obtains other employment.
8. TERMINATION OR AMENDMENT OF PLAN.
(a) Subject to paragraph (b) below, this Plan shall be in effect
as of the Effective Date and shall terminate upon the fifth anniversary of the
Effective Date unless terminated at an earlier date by the Board of Directors;
PROVIDED, HOWEVER, that the Plan shall be renewed automatically for subsequent
annual periods unless the Board of Directors, by resolution adopted at least
six (6) months prior to such fifth anniversary of the Effective Date (or any
subsequent anniversary thereof), takes action not to renew the Plan.
(b) The Board of Directors shall have the right prior to a Change
in Control to approve the termination or amendment of this Plan, in its sole
discretion; PROVIDED, HOWEVER, that no such action which would adversely affect
the rights or potential rights of Participants (including any resolution not to
renew the Plan) shall be taken by the Board of Directors during any period of
time when the Board of Directors has knowledge that any person has taken steps
reasonably calculated to effect a Change in Control until, in the opinion of
the Board of Directors, such person has abandoned or terminated its efforts to
effect a Change in Control; PROVIDED, FURTHER, that notwithstanding anything in
paragraph (a) of this Section 8 to the contrary, in no event shall this Plan be
terminated or amended within the three-year period following a Change in
Control in any manner which would adversely affect the rights or potential
rights of Participants, and in no event shall this Plan be amended or
terminated at any time subsequent to a Change in Control in any manner which
would adversely affect the rights of Participants who have become entitled to
benefits under this Plan.
9. GOVERNING LAW; VALIDITY. The validity, interpretation, and
enforcement of this Plan shall be governed by the law of the State of New York.
The invalidity or unenforceability of any provision of this Plan shall not
affect the validity or enforceability of any other provision of this Plan,
which other provisions shall remain in full force and effect.
10. ARBITRATION. If elected or consented to by a Participant in
writing, any dispute or controversy under this Plan shall be settled
exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitration award in any court having jurisdiction. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 10.
<PAGE>
<TABLE>
Exhibit 11.2
<CAPTION>
EARNINGS PER SHARE
FULLY DILUTED COMPUTATION
Years Ended June 30, 1996, 1995 and 1994
($ in millions except share and per share amounts)
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Basis for computation of earnings per
common and common equivalent shares:
Earnings from continuing operations $191.2 $163.9 $ 87.9
Deduct dividends on 4 Percent
cumulative preferred stock (.4) (.4) (.4)
------- ------- -------
Earnings from continuing operations
available for common shareholders 190.8 163.5 87.5
Discontinued operations 20.7 16.4 15.9
------- ------- -------
Available for common shareholders $211.5 $179.9 $103.4
======= ======= =======
Number of common and common equivalent
shares:
Weighted average shares outstanding 75,183,729 76,687,154 76,809,532
Shares issuable upon exercise of
stock options, net of shares
assumed to be repurchased 1,309,994 1,089,504 882,368
---------- ---------- ----------
76,493,723 77,776,658 77,691,900
========== ========== ==========
Earnings per common and common
equivalent share:
Continuing operations $2.49 $2.10 $1.13
Discontinued operations .27 .21 .20
------ ------ ------
Net earnings $2.76 $2.31 $1.33
====== ====== ======
</TABLE>
<PAGE>
Exhibit 21
Mallinckrodt Group Inc. Exhibit 21
1996 LEGAL ENTITY MASTER FILE
LEGAL NAME JURISDICTION
- -------------------------------------------- --------------------------
Alton Dean Medical, Inc. UTAH
Ark Products Limited UNITED KINGDOM
Beheersmaatschappij Fijneman B.V. (B.V. 1) NETHERLANDS
Carnforth Limited BERMUDA
Commerical Solvents de Mexico S.A. de C.V. MEXICO
Coopers Animal Health Limited UNITED KINGDOM
Coopers Animal Health (Holdings) Limited UNITED KINGDOM
Coopers Uruguay S.A. URUGUAY
Coromandel Fertilisers Ltd. INDIA
Creative Solutions Industria e Comercio Ltda. BRAZIL
Dittander Limited IRELAND
Dritte CORSA Verwaltungsgesellshaft GmbH GERMANY
Fries & Fries Holdings (U.K.) Ltd. UNITED KINGDOM
Fries & Fries, Inc. DELAWARE
HemoCue AB SWEDEN
HemoCue, Inc. CALIFORNIA
IMC Exploration Company MARYLAND
IMCERA Ltd. UNITED KINGDOM
Laboratoires Mallinckrodt Medical S.A. FRANCE
LF International BARBADOS
Liebel-Flarsheim DELAWARE
Malinckrodt Baker B.V. NETHERLANDS
Mallinckrodt Athlone Holdings, Inc. DELAWARE
Mallinckrodt Baker Distribution BV NETHERLANDS
Mallinckrodt Baker S.A. de C.V. MEXICO
Mallinckrodt Baker, Inc. NEW JERSEY
Mallinckrodt Chemical Australia Pty. Limited AUSTRALIA
Mallinckrodt Chemical Belgium B.V.B.A. BELGIUM
Mallinckrodt Chemical Canada Inc. CANADA
Mallinckrodt Chemical GmbH GERMANY
Mallinckrodt Chemical Holdings GmbH GERMANY
Mallinckrodt Chemical Holdings (U.K.) Ltd. UNITED KINGDOM
Mallinckrodt Chemical Limited UNITED KINGDOM
Mallinckrodt Chemical, Inc. DELAWARE
Mallinckrodt FSC Inc. BARBADOS
Mallinckrodt Group Inc. DELAWARE
Mallinckrodt Group Inc. NEW YORK
Mallinckrodt Iberica S.A. SPAIN
Mallinckrodt International Corporation MISSOURI
Mallinckrodt Medical IRELAND
Mallinckrodt Medical AG SWITZERLAND
Mallinckrodt Medical Argentina Limited UNITED KINGDOM
Mallinckrodt Medical Asia Pacific Pte. Ltd. SINGAPORE
Mallinckrodt Medical B.V. HOLLAND
Mallinckrodt Medical Caribe, Inc. DELAWARE
Mallinckrodt Medical Co., Ltd. JAPAN
Mallinckrodt Medical do Brasil, Ltda. BRAZIL
Mallinckrodt Medical GmbH GERMANY
Mallinckrodt Medical Holdings GmbH GERMANY
Mallinckrodt Medical Holdings Ireland IRELAND
Mallinckrodt Medical Holdings (U.K.) Limited UNITED KINGDOM
Mallinckrodt Medical Holdings (U.K.) Ltd. UNITED KINGDOM
Mallinckrodt Medical Imaging - Ireland IRELAND
Mallinckrodt Medical International Holdings IRELAND
Mallinckrodt Medical Isle of Man ISLE OF MAN
Mallinckrodt Medical Lda. PORTUGAL
Mallinckrodt Medical PMC NEVADA
Mallinckrodt Medical Pty. Ltd. AUSTRALIA
Mallinckrodt Medical S.A. FRANCE
Mallinckrodt Medical S.A. SPAIN
Mallinckrodt Medical S.A. de C.V. MEXICO
Mallinckrodt Medical S.A./N.V. BELGIUM
Mallinckrodt Medical S.p.A. ITALY
Mallinckrodt Medical Vertriebs-GmbH AUSTRIA
Mallinckrodt Medical (U.K.) Limited UNITED KINGDOM
Mallinckrodt Medical, Inc. CANADA
Mallinckrodt Medical, Inc. DELAWARE
Mallinckrodt Radiopharma GmbH GERMANY
Mallinckrodt Sensor Systems, Inc. DELAWARE
Mallinckrodt TMH NEVADA
Mallinckrodt Vet GmbH GERMANY
Mallinckrodt Vet Limitada BRAZIL
Mallinckrodt Vet S.A. PARAGUAY
Mallinckrodt Veterinaire S.A. FRANCE
Mallinckrodt Veterinaria Limitada PORTUGAL
Mallinckrodt Veterinaria SpA ITALY
Mallinckrodt Veterinaria S.A. SPAIN
Mallinckrodt Veterinary Aps DENMARK
Mallinckrodt Veterinary Asia, Inc. DELAWARE
Mallinckrodt Veterinary BV NETHERLANDS
Mallinckrodt Veterinary Colombia Holdings, Inc. PANAMA
Mallinckrodt Veterinary Holdings Limited UNITED KINGDOM
Mallinckrodt Veterinary International
Colombia Holdings, Inc. PANAMA
Mallinckrodt Veterinary International, Inc. DELAWARE
Mallinckrodt Veterinary Limited AUSTRALIA
Mallinckrodt Veterinary Limited HONG KONG
Mallinckrodt Veterinary Limited IRELAND
Mallinckrodt Veterinary Limited NEW ZEALAND
Mallinckrodt Veterinary Limited THAILAND
Mallinckrodt Veterinary Limited UNITED KINGDOM
Mallinckrodt Veterinary NV BELGIUM
Mallinckrodt Veterinary Operations SDN. BHD. MALAYSIA
Mallinckrodt Veterinary Operations Ltd. IRELAND
Mallinckrodt Veterinary Operations, Inc. DELAWARE
Mallinckrodt Veterinary Pensions Limited IRELAND
Mallinckrodt Veterinary Pensions Limited UNITED KINGDOM
Mallinckrodt Veterinary PTE Ltd. SINGAPORE
Mallinckrodt Veterinary SA GREECE
Mallinckrodt Veterinary SDN. BHD. MALAYSIA
Mallinckrodt Veterinary Superannuation
PTY Limited AUSTRALIA
Mallinckrodt Veterinary Superannuation
PTY Limited NEW ZEALAND
Mallinckrodt Veterinary (UK) Limited UNITED KINGDOM
Mallinckrodt Veterinary, Inc. CANADA
Mallinckrodt Veterinary, Inc. DELAWARE
Mallinckrodt Veterinary, Inc. PHILIPPINES
Mallinckrodt Veterinary, Inc. TAIWAN
Mallinckrodt Vet, S. A. COLOMBIA
Mallinckrodt Vet, S.A. ARGENTINA
Mallinckrodt Vet, S.A. VENEZUELA
Mallinckrodt Vet, S.A.de C.V. MEXICO
MMHC, Inc. DELAWARE
MMI, Inc. DELAWARE
MMJ S.A. de C.V. MEXICO
Molecular Biosystems, Inc. DELAWARE
MSCH Company DELAWARE
National Catheter Corporation NEW YORK
Paracet Laboratories, Inc. DELAWARE
Pitman-Moore Animal Health Limited NEW ZEALAND
Pitman-Moore Argentina S.A. ARGENTINA
Sterlington Land Co. DELAWARE
Synbiotics Corporation CALIFORNIA
Syntro Corporation DELAWARE
Syntro Zeon, L.C. KANSAS
SyntroVenture Corporation KANSAS
SyntroVet Incorporated KANSAS
Tastemaker DELAWARE
Tastemaker Holdings Ltd. UNITED KINGDOM
Tastemaker Limited UNITED KINGDOM
Tastemaker, Inc. CANADA
Tastemaker, S.A. MEXICO
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following
registration statements and related prospectuses filed by Mallinckrodt
Group Inc. under the Securities Act of 1933 of our report dated August
7, 1996 with respect to the consolidated financial statements of
Mallinckrodt Group Inc. included in this Annual Report on Form 10-K
for the year ended June 30, 1996:
Commission File No.
---------------------------
Form S-8, No. 2-65727
Form S-8, No. 2-72455
Form S-8, No. 2-70868
Form S-8, No. 2-80553
Form S-8, No. 2-90910
Form S-8, No. 2-94151
Form S-8, No. 33-10381
Form S-8, No. 33-32109
Form S-8, No. 33-40246
Form S-3, No. 33-43925
Form S-3, No. 33-47081
Form S-3, No. 33-57821
St. Louis, Missouri
September 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance
sheet and income statement, and is qualified in its entirety by reference to
such financial schedules.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 546
<SECURITIES> 0
<RECEIVABLES> 467
<ALLOWANCES> 13
<INVENTORY> 470
<CURRENT-ASSETS> 1,571
<PP&E> 1,581
<DEPRECIATION> 545
<TOTAL-ASSETS> 3,406
<CURRENT-LIABILITIES> 1,212
<BONDS> 576
0
11
<COMMON> 87
<OTHER-SE> 1,134
<TOTAL-LIABILITY-AND-EQUITY> 3,406
<SALES> 2,210
<TOTAL-REVENUES> 2,210
<CGS> 1,193
<TOTAL-COSTS> 1,880
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> 303
<INCOME-TAX> 112
<INCOME-CONTINUING> 191
<DISCONTINUED> 21
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.76
</TABLE>
<PAGE>
EXHIBIT 10.18
EXECUTION COPY
$550,000,000
CREDIT AGREEMENT
dated as of
May 22, 1996
among
Mallinckrodt Group Inc.
The Banks Listed Herein
Morgan Guaranty Trust Company of New York,
as Administrative Agent
Citibank, N.A.
as Documentation Agent
_________________________
Bank of America Illinois, The Chase Manhattan Bank, N.A. and
The First National Bank of Chicago
Co-Agents
J.P. Morgan Securities Inc. and Citibank Securities, Inc.
Co-Syndication Agents
J.P. Morgan Securities Inc.
Arranger
<PAGE>
<PAGE>
TABLE OF CONTENTS*
(*The Table of Contents is not a part of this Agreement.)
Page
ARTICLE 1
DEFINITIONS
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms and Determinations . . . . . . . . . . . . . . 15
1.3. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 2
THE CREDITS
2.1. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . 16
2.2. Notice of Committed Borrowing . . . . . . . . . . . . . . . . . 16
2.3. Money Market Borrowings . . . . . . . . . . . . . . . . . . . . 17
2.4. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . 21
2.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . 23
2.7. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . 23
2.8. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.9. Optional Termination or Reduction of Commitments. . . . . . . . 27
2.10. Method of Electing Interest Rates . . . . . . . . . . . . . . . 27
2.11. Scheduled Termination of Commitments. . . . . . . . . . . . . . 29
2.12. Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . 29
2.13. General Provisions as to Payments . . . . . . . . . . . . . . . 29
2.14. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . 30
2.15. Computation of Interest and Fees. . . . . . . . . . . . . . . . 31
2.16. Regulation D Compensation . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3
CONDITIONS
3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2. Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . 33
4.2. Financial Condition . . . . . . . . . . . . . . . . . . . . . . 33
4.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.4. No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.5. Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.6. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.7. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.9. Investment Company Act. . . . . . . . . . . . . . . . . . . . . 36
4.10. Public Utility Holding Company Act. . . . . . . . . . . . . . . 36
4.11. True and Complete Disclosure. . . . . . . . . . . . . . . . . . 36
4.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5
COVENANTS
5.1. Financial Statements, Etc. . . . . . . . . . . . . . . . . . . 37
5.2. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3. Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . 41
5.6. Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.7. Change in Nature of Business. . . . . . . . . . . . . . . . . . 44
5.8. Total Debt to Total Capital Ratio . . . . . . . . . . . . . . . 44
5.9. Indebtedness of Subsidiaries. . . . . . . . . . . . . . . . . . 44
5.10. Transactions with Affiliates. . . . . . . . . . . . . . . . . . 44
5.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 45
5.12. Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . 45
5.13. Most Favored Lender . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6
DEFAULTS
6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 46
6.2. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
THE AGENTS
7.1. Appointment and Authorization . . . . . . . . . . . . . . . . . 49
7.2. Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . . 49
7.4. Consultation with Experts . . . . . . . . . . . . . . . . . . . 50
7.5. Liability of Agent. . . . . . . . . . . . . . . . . . . . . . . 50
7.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 50
7.7. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . 51
7.8. Successor Administrative Agent. . . . . . . . . . . . . . . . . 51
7.9. Agents' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.10. Documentation Agent and Co-Agents . . . . . . . . . . . . . . . 51
ARTICLE 8
CHANGE IN CIRCUMSTANCES
8.1. Basis for Determining Interest Rate Inadequate or Unfair. . . . 52
8.2. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.3. Increased Cost and Reduced Return . . . . . . . . . . . . . . . 53
8.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.5. Base Rate Loans Substituted for Affected Fixed Rate Loans . . . 57
8.6. Substitution of Bank. . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 9
MISCELLANEOUS
9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.2. No Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.3. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . 59
9.4. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . 59
9.5. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 60
9.6. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 60
9.7. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.8. Governing Law; Submission to Jurisdiction . . . . . . . . . . . 62
9.9. Counterparts; Integration; Effectiveness. . . . . . . . . . . . 63
9.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . 63
9.11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 63
9.12. Termination of Existing Credit Agreements . . . . . . . . . . . 63
PRICING SCHEDULE
EXHIBIT A - Note . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT B - Money Market Quote Request . . . . . . . . . . . . . . . . 1
EXHIBIT C - Invitation for Money Market Quotes . . . . . . . . . . . . 1
EXHIBIT D - Money Market Quote . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT E - Opinion of Counsel for the Borrower. . . . . . . . . . . . 1
EXHIBIT F - Opinion of Special Counsel for the Agents. . . . . . . . . 1
EXHIBIT G - Assignment and Assumption Agreement. . . . . . . . . . . . 1
<PAGE>
AGREEMENT dated as of May 22, 1996 among MALLINCKRODT GROUP INC.,
the BANKS party hereto from time to time, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Administrative Agent and CITIBANK, N.A., as Documentation Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Adjusted CD Rate" has the meaning set forth in Section 2.7(b).
"Administrative Agent" means Morgan Guaranty Trust Company of
New York, in its capacity as administrative agent for the Banks hereunder,
and its successors in such capacity.
"Administrative Questionnaire" means, with respect to each
Bank, an administrative questionnaire in the form prepared by the
Administrative Agent and submitted to the Administrative Agent (with a copy
to the Borrower) duly completed by such Bank.
"Affiliate" means any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Borrower
and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children and siblings) of such individual and any
trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member
or trust. As used in this definition, "CONTROL" (including, with its
correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise),
PROVIDED that, in any event, any Person that owns directly or indirectly
securities having 15% or more of the voting power for the election of
directors or other governing body of a corporation or 15% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, (a) no
individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Borrower or any of its Subsidiaries and
(b) none of the Subsidiaries of the Borrower shall be Affiliates.
"Agent" means each of the Administrative Agent and the
Documentation Agent.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii)
in the case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.7(b).
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.6(c), and their
respective successors.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended from time to time.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means (i) a Committed Loan which bears
interest at the Base Rate pursuant to the applicable Notice of Committed
Borrowing or Notice of Interest Rate Election or the provisions of Article 8
or (ii) an overdue amount which was a Base Rate Loan immediately before it
became overdue.
"Borrower" means Mallinckrodt Group Inc., a New York
corporation, and its successors.
"Borrowing" has the meaning set forth in Section 1.3.
"Capital Lease Obligations" means, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP (including Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board), and, for purposes of this Agreement, the amount of such obligations
shall be the capitalized amount thereof, determined in accordance with GAAP
(including such Statement No. 13).
"CD Base Rate" has the meaning set forth in Section 2.7(b).
"CD Loan" means (i) a Committed Loan which bears interest at a
CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or (ii) an overdue amount which was a CD Loan
immediately before it became overdue.
"CD Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"CD Rate" means a rate of interest determined pursuant to
Section 2.7(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means The Chase Manhattan Bank N.A.,
Citibank, N.A., The First National Bank of Chicago and Morgan Guaranty Trust
Company of New York.
"Closing Date" means the date on or after the Effective Date on
which the Administrative Agent shall have received the documents specified in
or pursuant to Section 3.1.
"Co-Agents" means Bank of America Illinois, The Chase Manhattan
Bank, N.A., and The First National Bank of Chicago, in their capacity as
co-agents hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" means, with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite the name of such Bank
on the signature pages hereof, and with respect to any Bank which becomes a
party to this Agreement pursuant to Section 9.6(c), the amount of the
Commitment thereby assumed by such Bank, in each case as such amount may be
reduced from time to time pursuant to Sections 2.9 and 9.6(c) or increased
pursuant to Section 9.6(c).
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.1; PROVIDED that, if any such loan or loans (or portions thereof)
are combined or subdivided pursuant to a Notice of Interest Rate Election,
the term "Committed Loan" shall refer to the combined principal amount
resulting from such combination or to each of the separate principal amounts
resulting from such subdivision, as the case may be.
"Consolidated Net Worth" means, as at any date, the sum, for
the Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of capital stock, PLUS
(b) the amount of capital in excess of par value, PLUS
(c) the amount of reinvested earnings (or in the case of a
reinvested earnings deficit, MINUS the amount of such deficit), MINUS
(d) the cost of treasury stock.
"Covenant" means, with respect to any agreement or instrument
representing or governing Indebtedness, any covenant (whether expressed as a
covenant or an event of default) contained therein.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of the foregoing transactions) or any combination of the
foregoing transactions.
"Documentation Agent" means Citibank, N.A. in its capacity as
documentation agent for the Banks hereunder.
"Domestic Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized by law
to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Borrower and the Agent; PROVIDED
that any Bank may so designate separate Domestic Lending Offices for its Base
Rate Loans, on the one hand, and its CD Loans, on the other hand, in which
case all references herein to the Domestic Lending Office of such Bank shall
be deemed to refer to either or both of such offices, as the context may
require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.7(b).
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 9.9.
"Environmental Claim" means, with respect to any Person, (a)
any written or oral notice, claim, demand or other communication
(collectively, a "claim") by any other Person alleging or asserting such
Person's liability for investigatory costs, cleanup costs, governmental
response costs, damages to natural resources or other Property, personal
injuries, fines or penalties arising out of, based on or resulting from (i)
the presence, or Release into the environment, of any Hazardous Material at
any location, whether or not owned by such Person, or (ii) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law. The term "Environmental Claim" shall include, without
limitation, any claim by any governmental authority for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or the
environment.
"Environmental Laws" means any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders
or decrees, in each case as now or hereafter in effect, relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes into the
indoor or outdoor environment, including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Affiliate" means any corporation or trade or business
that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which the Borrower is a member and (ii) solely
for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of
the Code of which the Borrower is a member.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including
dealings in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative
Questionnaire as its Euro-Dollar Lending Office) or such other office, branch
or affiliate of such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means (i) a Committed Loan which bears
interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed
Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which
was a Euro-Dollar Loan immediately before it became overdue.
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined pursuant
to Section 2.7(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London
offices of The Chase Manhattan Bank N.A., Citibank, N.A., The First National
Bank of Chicago and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank
of the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents).
"Event of Default" has the meaning set forth in Section 6.1.
"Existing Credit Agreement" has the meaning specified in
Section 3.1(e).
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, PROVIDED that (i) if such day
is not a Domestic Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Domestic Business Day as
so published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Administrative Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.1) or any combination of the foregoing.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with those which, in accordance with Section 1.2
hereof, are to be used in making the calculations for purposes of determining
compliance with this Agreement.
"Group of Loans" means at any time a group of Loans consisting
of (i) all Committed Loans which are Base Rate Loans at such time, (ii) all
Euro-Dollar Loans having the same Interest Period at such time or (iii) all
CD Loans having the same Interest Period at such time, provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Section 8.2 or 8.5, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it had
not been so converted or made.
"Guarantee" means a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of,
or otherwise directly or indirectly to be or become contingently liable under
or with respect to, the Indebtedness of any Person, but excluding
endorsements for collection or deposit in the ordinary course of business.
The terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.
"Hazardous Material" means collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam insulation,
and transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic pollutants", "contaminants", "pollutants" or words
of similar import under any Environmental Law and (c) any other chemical or
other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Indebtedness" means, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property, other than trade
accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within one year of the date the respective goods
are delivered; (c) Indebtedness of others secured by a Lien on the Property
of such Person, whether or not the respective indebtedness so secured has
been assumed by such Person; (d) obligations of such Person under any
contract for the purchase of materials, supplies or other Property or the
rendering of services if such contract (or any related document) requires
that payment for such materials, supplies or other Property or services shall
be made regardless of whether or not delivery of such materials, supplies or
other Property is ever made or tendered or such services are ever rendered;
(e) obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
account of such Person (other than commercial documentary letters of credit);
(f) Capital Lease Obligations of such Person; and (g) Indebtedness of others
Guaranteed by such Person; PROVIDED, that Indebtedness of the Borrower and
its Subsidiaries shall not include obligations of the Borrower and its
Subsidiaries in respect of unfunded liabilities of the Borrower in respect of
postretirement health and welfare benefits under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 106
("Employers' Accounting for Postretirement Benefits Other Than Pensions") not
in excess of $96,000,000 in the aggregate.
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Loan, the period commencing on the date of borrowing specified in the
applicable Notice of Borrowing or on the date specified in the applicable
Notice of Interest Rate Election and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable notice; PROVIDED
that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause (c) below,
end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(2) with respect to each CD Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30,
60, 90 or 180 days thereafter, as the Borrower may elect in the applicable
notice; PROVIDED that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(3) with respect to each Money Market LIBOR Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such whole number of months thereafter (but not less than 1 month) as
the Borrower may elect in accordance with Section 2.3; PROVIDED that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause (c) below,
end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date; and
(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 7
days) as the Borrower may elect in accordance with Section 2.3; PROVIDED
that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.3.
"Lien" means, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any Property that it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement (other than an operating
lease) relating to such Property.
"Loan" means a Domestic Loan, a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans, Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.7(c).
"Margin Stock" means "margin stock" within the meaning of
Regulations U and X.
"Material Adverse Effect" means a material adverse effect on
(a) the financial condition, operations or business taken as a whole of the
Borrower and its Subsidiaries, (b) the ability of the Borrower to perform its
obligations hereunder and under the Notes, (c) the validity or enforceability
of this Agreement or of the Notes or (d) the rights and remedies of the Banks
and the Agents hereunder and under the Notes.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.3(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Money Market Lending Office by
notice to the Borrower and the Administrative Agent; PROVIDED that any Bank
may from time to time by notice to the Borrower and the Administrative Agent
designate separate Money Market Lending Offices for its Money Market LIBOR
Loans, on the one hand, and its Money Market Absolute Rate Loans, on the
other hand, in which case all references herein to the Money Market Lending
Office of such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 8.1).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.3(d)(ii)(C).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.3.
"Multiemployer Plan" means a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.2) or a Notice of Money Market Borrowing (as defined in
Section 2.3(f)).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.10.
"Operating Lease Amount" means, at any time, an amount equal to
seven times the amount by which (i) the minimum rental commitments under
non-cancelable operating leases of the Borrower and its Subsidiaries for the
fiscal year of the Borrower and its Subsidiaries following the most recent
fiscal year for which audited financial statements are available at such
time, as reflected in the notes to such financial statements, exceed (ii)
$50,000,000.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Plan" means an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and that is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Pricing Schedule" means the Schedule attached hereto
identified as such.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time
as its Prime Rate.
"Property" means any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Date" means the last day of March, June, September
and December in each year, the first of which shall be the first such day
after the date of this Agreement; PROVIDED that if any such day is not a
Euro-Dollar Business Day, then such Quarterly Date shall be the next
succeeding Euro-Dollar Business Day (unless such Euro-Dollar Business Day
falls in a subsequent calendar month, in which event such Quarterly Date
shall be the next preceding Euro-Dollar Business Day).
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require, and "Reference Bank"
means any one of such Reference Banks.
"Regulations U and X" mean, respectively, Regulations U and X
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation, the
movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"Required Banks" means at any time Banks having at least 51% of
the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 51% of the aggregate
unpaid principal amount of the Loans.
"Revolving Credit Period" means the period from and including
the Effective Date to and excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation, limited
liability company partnership or other entity of which at least a majority of
the securities or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions of such corporation, partnership or
other entity (irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such corporation,
partnership or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly
owned or controlled by such Person or one or more Subsidiaries of such Person
or by such Person and one or more Subsidiaries of such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"Termination Date" means May 22, 2001 or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar Business Day.
"Total Capital" means, at any time, Consolidated Net Worth plus
Total Debt.
"Total Debt" means, at any time, the aggregate outstanding
principal amount of all Indebtedness of the Borrower and its Subsidiaries at
such time (determined on a consolidated basis without duplication in
accordance with GAAP).
"Wholly-Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
the Borrower.
"United States" means the United States of America, including
the States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower's independent public accountants) with the most recent
audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks; PROVIDED that, if the
Borrower notifies the Administrative Agent that the Borrower wishes to amend
any covenant in Article 5 to eliminate the effect of any change in generally
accepted accounting principles on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the Required Banks wish to
amend Article 5 for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
SECTION 1.3. TYPES OF BORROWINGS. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to the
Borrower pursuant to Article 2 on the same date, all of which Loans are of
the same type (subject to Article 8) and, except in the case of Base Rate
Loans, have the same initial Interest Period. Borrowings are classified for
purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (e.g., a "Fixed Rate Borrowing" is a Euro-Dollar
Borrowing, a CD Borrowing or a Money Market Borrowing (excluding any such
Borrowing consisting of Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.1), and a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article
2 under which participation therein is determined (i.e., a "Committed
Borrowing" is a Borrowing under Section 2.1 in which all Banks participate in
proportion to their Commitments, while a "Money Market Borrowing" is a
Borrowing under Section 2.3 in which the Bank participants are determined on
the basis of their bids in accordance therewith).
ARTICLE 2
THE CREDITS
SECTION 2.1. COMMITMENTS TO LEND. During the Revolving
Credit Period, each Bank severally agrees, on the terms and conditions set
forth in this Agreement, to make loans to the Borrower pursuant to this
Section from time to time in amounts such that the aggregate principal amount
of Committed Loans by such Bank at any one time outstanding shall not exceed
the amount of its Commitment. Each Borrowing under this Section shall be in
an aggregate principal amount of $10,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.2(c)) and shall be made from the
several Banks ratably in proportion to their respective Commitments. Within
the foregoing limits, the Borrower may borrow under this Section, prepay
Loans to the extent permitted by Section 2.12 and reborrow at any time during
the Revolving Credit Period under this Section.
SECTION 2.2. NOTICE OF COMMITTED BORROWING. The Borrower
shall give the Administrative Agent notice (a "Notice of Committed
Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of
each Base Rate Borrowing, (y) the second Domestic Business Day before each CD
Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar
Borrowing, (A) specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to
bear interest initially at the Base Rate, a CD Rate or a Euro-Dollar
Rate; and
(iv) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period; and
(B) certifying that each of the conditions precedent to such Borrowing has
been satisfied.
SECTION 2.3. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET
OPTION. In addition to Committed Borrowings pursuant to Section 2.1, the
Borrower may, as set forth in this Section, request the Banks during the
Revolving Credit Period to make offers to make Money Market Loans to the
Borrower. The Banks may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers
in the manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall
transmit to the Administrative Agent by telex or facsimile transmission a
Money Market Quote Request substantially in the form of Exhibit B hereto so
as to be received not later than 10:30 A.M. (New York City time) on (x) the
fifth Euro-Dollar Business Day prior to the date of Borrowing proposed
therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Borrower and
the Administrative Agent shall have mutually agreed and shall have notified
to the Banks not later than the date of the Money Market Quote Request for
the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest Period,
and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for
more than one Interest Period in a single Money Market Quote Request. No
Money Market Quote Request shall be given within five Euro-Dollar Business
Days (or such other number of days as the Borrower and the Administrative
Agent may agree) of any other Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt
of a Money Market Quote Request, the Administrative Agent shall send to the
Banks by telex or facsimile transmission an Invitation for Money Market
Quotes substantially in the form of Exhibit C hereto, which shall constitute
an invitation by the Borrower to each Bank to submit Money Market Quotes
offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each
Bank may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes.
Each Money Market Quote must comply with the requirements of this subsection
(d) and must be submitted to the Administrative Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 9.1 not later
than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business
Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction
or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in
the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Administrative Agent shall have mutually agreed
and shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective); PROVIDED that Money Market Quotes
submitted by the Administrative Agent (or any affiliate of the Administrative
Agent) in the capacity of a Bank may be submitted, and may only be submitted,
if the Administrative Agent or such affiliate notifies the Borrower of the
terms of the offer or offers contained therein not later than (x) one hour
prior to the deadline for the other Banks, in the case of a LIBOR Auction or
(y) 15 minutes prior to the deadline for the other Banks, in the case of an
Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote
so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan
for which each such offer is being made, which principal amount
(w) may be greater than or less than the Commitment of the quoting
Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000,
(y) may not exceed the principal amount of Money Market Loans for
which offers were requested, (z) may be subject to an aggregate
limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate (the "Money
Market Margin") offered for each such Money Market Loan, expressed
as a percentage (specified to the nearest 1/10,000th of 1%) to be
added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the
rate of interest per annum (specified to the nearest 1/10,000th of
1%) (the "Money Market Absolute Rate") offered for each such Money
Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by
the quoting Bank with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit
D hereto or does not specify all of the information required by
subsection (d)(ii);
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money Market
Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(e) NOTICE TO BORROWER. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous
Money Market Quote submitted by such Bank with respect to the same Money
Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Administrative Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Borrower shall
specify (A) the aggregate principal amount of Money Market Loans for which
offers have been received for each Interest Period specified in the related
Money Market Quote Request, (B) the respective principal amounts and Money
Market Margins or Money Market Absolute Rates, as the case may be, so offered
and (C) if applicable, limitations on the aggregate principal amount of Money
Market Loans for which offers in any single Money Market Quote may be
accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30
A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to
the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not
later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective),
the Borrower shall notify the Administrative Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection (e).
In the case of acceptance, such notice (a "Notice of Money Market Borrowing")
shall specify the aggregate principal amount of offers for each Interest
Period that are accepted. The Borrower may accept any Money Market Quote in
whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the principal amount of each Money Market Borrowing
must be $10,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be; and
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply with
the requirements of this Agreement.
(g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by
two or more Banks with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect of which such
offers are accepted shall be allocated by the Administrative Agent among such
Banks as nearly as possible (in multiples of $1,000,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the Administrative Agent
of the amounts of Money Market Loans shall be conclusive in the absence of
manifest error.
SECTION 2.4. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon
receipt of a Notice of Borrowing, the Administrative Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date
of each Borrowing, each Bank participating therein shall make available its
share of such Borrowing, in Federal or other funds immediately available in
New York City, to the Administrative Agent at its address referred to in
Section 9.1. Unless the Administrative Agent determines that any applicable
condition specified in Article 3 has not been satisfied, the Administrative
Agent will make the funds so received from the Banks available to the
Borrower at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing,
the Administrative Agent may assume that such Bank has made such share
available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (b) of this Section and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not
have so made such share available to the Administrative Agent, such Bank and
the Borrower severally agree to repay to the Administrative Agent forthwith
on demand such corresponding amount together with interest thereon, for each
day from the date such amount is made available to the Borrower until the
date such amount is repaid to the Administrative Agent, at (i) in the case of
the Borrower, a rate per annum equal to the higher of the Federal Funds Rate
and the interest rate applicable thereto pursuant to Section 2.7 and (ii) in
the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Administrative Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Loan included in such Borrowing for purposes of
this Agreement.
SECTION 2.5. NOTES. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account
of its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the
Administrative Agent, request that its Loans of a particular type be
evidenced by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Loans. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact
that it evidences solely Loans of the relevant type. Each reference in this
Agreement to the "Note" of such Bank shall be deemed to refer to and include
any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.1(a),
the Administrative Agent shall forward such Note to such Bank. Each Bank
shall record the date, amount, type and maturity of each Loan made by it and
the date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Bank so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; PROVIDED that the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as
and when required.
SECTION 2.6. MATURITY OF LOANS. (a) Each Committed Loan
shall mature, and the principal amount thereof shall be due and payable, on
the Termination Date.
(b) Each Money Market Loan included in any Money Market
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.7. INTEREST RATES. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day from
the date such Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be payable quarterly in
arrears on each Quarterly Date and, with respect to the principal amount of
any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on each date
a Base Rate Loan is so converted. Any overdue principal of or interest on
any Base Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the rate otherwise
applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the CD Margin for such day
plus the Adjusted CD Rate applicable to such Interest Period; PROVIDED that
if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of
the definition of Interest Period, have an Interest Period of less than 30
days, such portion shall bear interest during such Interest Period at the
rate applicable to Base Rate Loans during such period. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, at intervals of 90 days after the
first day thereof. Any overdue principal of or interest on any CD Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such
day, PROVIDED that until the end of the Interest Period applicable to such CD
Loan, any such overdue principal shall bear interest at the higher of the
foregoing rate and 2% plus the sum of the CD Margin plus the Adjusted CD Rate
applicable to such Loan at the date such payment was due.
The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate
of interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at
face value from each CD Reference Bank of its certificates of deposit in an
amount comparable to the principal amount of the CD Loan of such CD Reference
Bank to which such Interest Period applies and having a maturity comparable
to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of new non-personal time deposits in dollars in New York City
having a maturity comparable to the related Interest Period and in an amount
of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on
and as of the effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or
a comparable successor assessment risk classification) within the meaning of
12 C.F.R. Section 327.3(e) (or any successor provision) to the Federal
Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and
as of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which deposits in dollars
are offered to each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and for
a period of time comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for
such day, provided that until the end of the Interest Period applicable to
such Euro-Dollar Loan, any such overdue principal shall bear interest at the
higher of the foregoing rate and the sum of 2% plus the Euro-Dollar Margin
for such day plus the London Interbank Offered Rate applicable to such Loan
at the date such payment was due.
(e) Subject to Section 8.1, each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance
with Section 2.7(c) as if the related Money Market LIBOR Borrowing were a
Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin
quoted by the Bank making such Loan in accordance with Section 2.3. Each
Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a
rate per annum equal to the Money Market Absolute Rate quoted by the Bank
making such Loan in accordance with Section 2.3. Such interest shall be
payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of three months
after the first day thereof. Any overdue principal of or interest on any
Money Market Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the Base Rate for such
day.
(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the participating Banks of each rate of
interest so determined, and its determination thereof shall be conclusive in
the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to
furnish quotations to the Administrative Agent as contemplated by this
Section. If any Reference Bank does not furnish a timely quotation, the
Administrative Agent shall determine the relevant interest rate on the basis
of the quotation or quotations furnished by the remaining Reference Bank or
Banks or, if none of such quotations is available on a timely basis, the
provisions of Section 8.1 shall apply.
SECTION 2.8. FEES. (a) FACILITY FEE. The Borrower shall
pay to the Administrative Agent for the account of the Banks ratably a
facility fee at the Facility Fee Rate (determined daily in accordance with
the Pricing Schedule). Such facility fee shall accrue (i) from and including
the Effective Date to but excluding the date of termination of the
Commitments in their entirety, on the daily aggregate amount of the
Commitments (whether used or unused) and (ii) from and including such date of
termination to but excluding the date the Loans shall be repaid in their
entirety, on the daily aggregate outstanding principal amount of the Loans.
(b) PAYMENTS. Accrued fees under this Section shall be payable
quarterly in arrears on each Quarterly Date until the date of termination of
the Commitments in their entirety (and, if later, the date the Loans shall be
repaid in their entirety).
SECTION 2.9. OPTIONAL TERMINATION OR REDUCTION OF
COMMITMENTS. During the Revolving Credit Period, the Borrower may, upon at
least three Domestic Business Days' notice to the Administrative Agent, (i)
terminate the Commitments at any time, if no Loans are outstanding at such
time or (ii) ratably reduce from time to time by an aggregate amount of
$10,000,000 or any larger multiple of $1,000,000, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amounts of the
Loans.
SECTION 2.10. METHOD OF ELECTING INTEREST RATES. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the
type of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in
each case to the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert such Loans to CD Loans as of any Domestic Business Day
or to Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.14 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or CD Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest
Period, subject to Section 2.14 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice
of Interest Rate Election") to the Administrative Agent not later than 10:30
A.M. (New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective (unless
the relevant Loans are to be converted to Domestic Loans of the other type or
are CD Rate Loans to be continued as CD Rate Loans for an additional Interest
Period, in which case such notice shall be delivered to the Administrative
Agent not later than 10:30 A.M. (New York City time) on the second Domestic
Business Day before such conversion or continuation is to be effective). A
Notice of Interest Rate Election may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Group of Loans;
PROVIDED that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and
the remaining portion to which it does not apply, are each $10,000,000 or any
larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with the
applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be
converted, the new type of Loans and, if the Loans being converted are
to be Fixed Rate Loans, the duration of the next succeeding Interest
Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate
Election shall comply with the provisions of the definition of Interest
Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans
on the last day of the then current Interest Period applicable thereto.
(d) An election by the Borrower to change or continue the rate
of interest applicable to any Group of Loans pursuant to this Section 2.10
shall not constitute a "Borrowing" subject to the provisions of Section 3.2.
SECTION 2.11. SCHEDULED TERMINATION OF COMMITMENTS. The
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.12. OPTIONAL PREPAYMENTS. (a) Subject in the case
of any Fixed Rate Loans to Section 2.14, the Borrower may, upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay the Group
of Base Rate Loans (or any Money Market Borrowing bearing interest at the
Base Rate pursuant to Section 8.1), upon at least three Domestic Business
Days' notice to the Administrative Agent, prepay any Group of CD Loans, or
upon at least three Euro-Dollar Business Days' notice to the Administrative
Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any
time, or from time to time in part in amounts aggregating $10,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the
several Banks included in such Group or Borrowing.
(b) Except as provided in subsection (a) above the Borrower may
not prepay all or any portion of the principal amount of any Money Market
Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share (if any) of such prepayment
and such notice shall not thereafter be revocable by the Borrower.
SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of fees hereunder, not later than 12:00 Noon (New York City time) on the
date when due, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 9.1.
The Administrative Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Administrative Agent for the
account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans or the Money Market LIBOR Loans shall be
due on a day which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. Whenever any payment of principal of, or interest
on, the Money Market Absolute Rate Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to
the next succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each Bank
on such due date an amount equal to the amount then due such Bank. If and to
the extent that the Borrower shall not have so made such payment, each Bank
shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from
the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.14. FUNDING LOSSES. If the Borrower makes any
payment of principal with respect to any Fixed Rate Loan or any Fixed Rate
Loan is converted (pursuant to Article 2, 6 or 8 or otherwise) on any day
other than the last day of an Interest Period applicable thereto, or the last
day of an applicable period fixed pursuant to Section 2.7(d), or if the
Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been
given to any Bank in accordance with Section 2.4(a) or 2.12(c), the Borrower
shall reimburse each Bank within 15 days after demand for any resulting loss
or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or conversion
or failure to borrow or prepay, PROVIDED that such Bank shall have delivered
to the Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.15. COMPUTATION OF INTEREST AND FEES. Interest
based on the Prime Rate hereunder shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day).
SECTION 2.16. REGULATION D COMPENSATION. For so long as any
Bank maintains reserves against "Eurocurrency liabilities" (or any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of such Bank to United States residents), and as a result the
cost to such Bank (or its Applicable Lending Office) of making or maintaining
its Euro-Dollar Loans is increased, then such Bank may require the Borrower
to pay, contemporaneously with each payment of interest on the Euro-Dollar
Loans, additional interest on the related Euro-Dollar Loan of such Bank at a
rate per annum determined by such Bank up to but not exceeding the excess of
(i) (A) the applicable London Interbank Offered Rate divided by (B) one MINUS
the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank
Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Administrative Agent, in
which case such additional interest on the Euro-Dollar Loans of such Bank
shall be payable to such Bank at the place indicated in such notice with
respect to each Interest Period commencing at least three Euro-Dollar
Business Days after the giving of such notice and (y) shall furnish to the
Borrower at least five Euro-Dollar Business Days prior to each date on which
interest is payable on the Euro-Dollar Loans an officer's certificate setting
forth in reasonable detail the amount to which such Bank is then entitled
under this Section 2.16 (which shall be consistent with such Bank's good
faith estimate of the level at which the related reserves are maintained by
it).
ARTICLE 3
CONDITIONS
SECTION 3.1. CLOSING. The closing hereunder shall occur upon
receipt by the Administrative Agent of the following documents, each dated
the Closing Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on
or before the Closing Date complying with the provisions of Section 2.5;
(b) an opinion of the General Counsel of the Borrower,
substantially in the form of Exhibit E hereto;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agents, substantially in the form of Exhibit F hereto;
(d) all documents the Administrative Agent may reasonably
request relating to the existence of the Borrower, the corporate authority
for and the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Administrative
Agent; and
(e) receipt by the Administrative Agent of evidence satisfactory
to it that the principal and interest on all loans and accrued fees under the
Existing Credit Agreement dated as of November 30, 1994 (the "Existing Credit
Agreement") among the Borrower, the banks party thereto from time to time and
Morgan Guaranty Trust of New York, as agent have been paid in full.
The Administrative Agent shall promptly notify the Borrower and
the Banks of the Closing Date, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 3.2. BORROWINGS. The obligation of any Bank to make
a Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) the fact that the Closing Date shall have occurred on or
prior to May 24, 1996;
(b) receipt by the Administrative Agent of a Notice of Borrowing
as required by Section 2.2 or 2.3, as the case may be;
(c) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
(d) the fact that, immediately before and after such Borrowing,
no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the
Borrower contained in this Agreement (except those contained in the last
sentence of Section 4.2, in Section 4.3(i) and in the last sentence of
Section 4.12 hereof) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (c), (d) and (e) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.1. CORPORATE EXISTENCE. Each of the Borrower and
its Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents
and approvals, necessary to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business and
is in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify could have a Material Adverse Effect.
SECTION 4.2. FINANCIAL CONDITION. (a) The Borrower has
heretofore furnished to each of the Banks the consolidated balance sheet of
the Borrower and its Subsidiaries as at June 30, 1995 and the related
consolidated statements of earnings, cash flows and changes in shareholders'
equity of the Borrower and its Subsidiaries for the fiscal year ended on said
date, with the opinion thereon of Ernst & Young LLP. All such financial
statements fairly present, in all material aspects, the consolidated
financial condition of the Borrower and its Subsidiaries, as at said date,
and the consolidated results of their operations for the fiscal year ended on
said date, all in accordance with GAAP.
(b) The Borrower has heretofore furnished to each of the Banks
the unaudited consolidated balance sheet of the Borrower and its Subsidiaries
as at December 31, 1995 and the related unaudited consolidated statements of
earnings, cash flows and changes in shareholders' equity of the Borrower and
its Subsidiaries for the six month period ended on said date. All such
financial statements fairly present, in all material aspects, the
consolidated financial condition of the Borrower and its Subsidiaries, as at
said date, and the consolidated results of their operations for the six month
period ended on said date, all in accordance with GAAP.
(c) Since December 31, 1995, there has been no material adverse
change, and nothing has occurred that is reasonably likely to result in any
material adverse change, in the consolidated financial condition, operations
or business taken as a whole of the Borrower and its Subsidiaries from that
set forth in the financial statements referred to in clause (b) above as at
the date referred to therein.
SECTION 4.3. LITIGATION. Except as may be disclosed in
regular periodic reports filed with the Securities and Exchange Commission
prior to the date of this Agreement (copies of which reports have heretofore
been furnished to the Banks), there are no legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or
agency, now pending or (to the knowledge of the Borrower) threatened against
the Borrower or any of its Subsidiaries (i) which, if adversely determined,
is reasonably likely to have a Material Adverse Effect or (ii) which in any
manner draws into question the validity of this Agreement or the Notes.
SECTION 4.4. NO BREACH. None of the execution and delivery
of this Agreement and the Notes, the consummation of the transactions herein
contemplated or compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent under, the charter or
by-laws of the Borrower, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency,
or any agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any
such agreement or instrument.
SECTION 4.5. ACTION. The Borrower has all necessary
corporate power, authority and legal right to execute, deliver and perform
its obligations under this Agreement and the Notes; the execution, delivery
and performance by the Borrower of this Agreement and the Notes have been
duly authorized by all necessary corporate action on its part (including,
without limitation, any required shareholder approvals); and this Agreement
has been duly and validly executed and delivered by the Borrower and
constitutes, and each of the Notes when executed and delivered for value will
constitute, its legal, valid and binding obligation, enforceable against the
Borrower in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement
of creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 4.6. APPROVALS. No authorizations, approvals or
consents of, and no filings or registrations with, any governmental or
regulatory authority or agency, or any securities exchange, are necessary for
the execution, delivery or performance by the Borrower of this Agreement or
the Notes or for the legality, validity or enforceability hereof.
SECTION 4.7. ERISA. Each Plan, and, to the knowledge of the
Borrower, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with,
the applicable provisions of ERISA, the Code and any other Federal or State
law, and no event or condition has occurred and is continuing as to which the
Borrower would be under an obligation to furnish a report to the Banks under
Section 5.1(e) hereof.
SECTION 4.8. TAXES. The Borrower and its Subsidiaries are
members of an affiliated group of corporations filing consolidated returns
for Federal income tax purposes, of which the Borrower is the "common parent"
(within the meaning of Section 1504 of the Code) of such group. The Borrower
and its Subsidiaries have filed all Federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by
the Borrower or any of its Subsidiaries. The charges, accruals and reserves
on the books of the Borrower and its Subsidiaries in respect of taxes and
other governmental charges are, in the opinion of the Borrower, adequate.
The Borrower has not given or been requested to give a waiver of the statute
of limitations relating to the payment of Federal, state, local and foreign
taxes or other impositions, the payment of which is reasonably likely to have
a Material Adverse Effect.
SECTION 4.9. INVESTMENT COMPANY ACT. Neither the Borrower
nor any of its Subsidiaries is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or an
"affiliate" of a "holding company," or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of
1935, as amended.
SECTION 4.11. TRUE AND COMPLETE DISCLOSURE. The information,
reports, financial statements, exhibits and schedules furnished in writing by
or on behalf of the Borrower to either Agent or any Bank in connection with
the negotiation, preparation or delivery of this Agreement or included herein
or delivered pursuant hereto, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to
make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished
after the date hereof by the Borrower and its Subsidiaries to the
Administrative Agent or any Bank in connection with this Agreement and the
transactions contemplated hereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to the Borrower that could have a Material Adverse
Effect that has not been disclosed herein or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Banks for use in connection with the transactions contemplated hereby.
SECTION 4.12. ENVIRONMENTAL MATTERS. In the ordinary course
of its business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in accordance with customary industry practice. On the
basis of this review, the Borrower has reasonably concluded that the costs of
compliance with Environmental Laws are unlikely to have a Material Adverse
Effect.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.1. FINANCIAL STATEMENTS, ETC. The Borrower will
deliver to each of the Banks:
(a) as soon as available and in any event within 60 days after
the end of each of the first three quarterly fiscal periods of each fiscal
year of the Borrower, consolidated statements of earnings, cash flows and
changes in shareholders' equity of the Borrower and its Subsidiaries for such
period and for the period from the beginning of the respective fiscal year to
the end of such period, and the related consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such period, setting forth in
each case in comparative form the corresponding consolidated figures for the
corresponding period in the preceding fiscal year, accompanied by a
certificate of a senior financial officer of the Borrower, which certificate
shall state that said consolidated financial statements fairly present, in
all material respects, the consolidated financial condition and results of
operations of the Borrower and its Subsidiaries, in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrower, consolidated statements of
earnings, cash flows and changes in shareholders' equity of the Borrower and
its Subsidiaries for such fiscal year and the related consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal year,
setting forth in each case in comparative form the corresponding consolidated
figures for the preceding fiscal year, and accompanied by an opinion thereon
of independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements fairly
present, in all material respects, the consolidated financial condition and
results of operations of the Borrower and its Subsidiaries as at the end of,
and for, such fiscal year in accordance with generally accepted accounting
principles;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Borrower shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within ten days after
the Borrower knows or has reason to believe that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial officer of the
Borrower setting forth details respecting such event or condition and the
action, if any, that the Borrower or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Borrower or an ERISA Affiliate with respect to
such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as
to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of
such event (provided that a failure to meet the minimum funding standard
of Section 412 of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of ERISA,
shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a
waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by the
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Borrower or any ERISA Affiliate that results
in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by the Borrower or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which such
Plan is a part if the Borrower or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of said
Sections;
(f) promptly after the Borrower knows or has reason to believe
that any Default has occurred, a notice of such Default describing the same
in reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Borrower has taken or proposes
to take with respect thereto; and
(g) from time to time such other information regarding the
financial condition, operations, business or prospects of the Borrower or any
of its Subsidiaries (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be filed under ERISA)
as any Bank or the Agent may reasonably request.
The Borrower will furnish to each Bank, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Borrower (i) to the effect
that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action that the Borrower has taken or proposes to take with
respect thereto) and (ii) setting forth in reasonable detail the computations
necessary to determine whether the Borrower is in compliance with Sections
5.8 and 5.9 hereof as of the end of the respective quarterly fiscal period or
fiscal year.
SECTION 5.2. LITIGATION. The Borrower will promptly give to
each Bank notice of all legal or arbitral proceedings, and of all proceedings
by or before any governmental or regulatory authority or agency, and any
material development in respect of such legal or other proceedings, affecting
the Borrower or any of its Subsidiaries, except proceedings which, if
adversely determined, would not have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Borrower will give to each Bank
notice of the assertion of any Environmental Claim by any Person against, or
with respect to the activities of, the Borrower or any of its Subsidiaries
and notice of any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations, other than any
Environmental Claim or alleged violation which, if adversely determined,
would not have a Material Adverse Effect.
SECTION 5.3. EXISTENCE, ETC. The Borrower will, and will
cause each of its Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (PROVIDED that
nothing in this Section 5.3 shall prohibit any transaction expressly
permitted under Sections 5.6 and 5.7 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements could have a Material Adverse
Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or
on any of its Property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge or levy the
payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP; and
(f) subject to Section 9.11 hereof, permit representatives of
any Bank, during normal business hours, to examine, copy and make
extracts from its books and records, to inspect any of its Properties,
and to discuss its business and affairs with its officers, all to the
extent reasonably requested by such Bank.
SECTION 5.4. INSURANCE. The Borrower will, and will cause
each of its Subsidiaries to, keep insured by financially sound and reputable
insurers all Property of a character usually insured by corporations engaged
in the same or similar business similarly situated against loss or damage of
the kinds and in the amounts customarily insured against by such corporations
and carry such other insurance as is usually carried by such corporations.
SECTION 5.5. LIMITATION ON LIENS. The Borrower will not, nor
will it permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon any of its Property, whether now owned or hereafter
acquired, except:
(a) Liens in existence on the date hereof securing Indebtedness
outstanding on the date hereof in an aggregate principal amount not exceeding
$50,000,000;
(b) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good faith
and by appropriate proceedings if, unless the amount thereof is not material
with respect to it or its financial condition, adequate reserves with respect
thereto are maintained on the books of the Borrower or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings;
(d) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any of
its Subsidiaries;
(g) Liens on Property of any corporation which becomes a
Subsidiary of the Borrower after the date of this Agreement; PROVIDED that
such Liens are in existence at the time such corporation becomes a Subsidiary
of the Borrower, were not created in anticipation thereof and do not at any
time secure any Indebtedness other than Indebtedness which was secured by
such Liens at the time such corporation became a Subsidiary;
(h) Liens upon real and/or tangible personal Property acquired
after the date hereof (by purchase, construction or otherwise) by the
Borrower or any of its Subsidiaries, each of which Liens either (A) existed
on such Property before the time of its acquisition and was not created in
anticipation thereof, or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including the cost of construction) of such Property; PROVIDED that no
such Lien shall extend to or cover any Property of the Borrower or such
Subsidiary other than the Property so acquired and improvements thereon;
(i) Liens incidental to the conduct of its business or the
ownership of its Property which were not incurred in connection with the
borrowing of money, the obtaining of credit or Derivatives Obligations, and
which do not in the aggregate materially detract from the value of its
Property or materially impair the use thereof in the operation of its
business;
(j) Liens arising from judgments, decrees or attachments not in
excess of $25,000,000 in the aggregate and in circumstances not constituting
an Event of Default under Section 6.1(h) hereof;
(k) leases or subleases granted to others otherwise permitted by
this Agreement;
(l) UCC financing statements and other similar filings regarding
leases and other Liens otherwise permitted by this Agreement;
(m) rights to receive income in connection with consignment
arrangements or licensing agreements in the ordinary course of the Borrower's
or such Subsidiary's business, as the case may be;
(n) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $50,000,000; and
(o) any extension, renewal or replacement of the foregoing,
PROVIDED, however, that the Liens permitted hereunder shall not be spread to
cover any additional Indebtedness or Property (other than a substitution of
like Property).
Notwithstanding the foregoing, nothing in this Section 5.5 shall
restrict the ability of the Borrower or any of its Subsidiaries to sell or
assign its accounts receivable.
SECTION 5.6. MERGERS, ETC. The Borrower will not, nor will
it permit any of its Subsidiaries to, merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of the assets
(whether now owned or hereafter acquired) of the Borrower and its
Subsidiaries, taken as a whole, to, or acquire all or substantially all of
the assets of, any Person, except that (i) any Subsidiary of the Borrower may
merge or consolidate with or into, or transfer assets to, or acquire assets
of, any other Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower
may merge or consolidate with or into, or transfer assets to, the Borrower
and (iii) the Borrower may merge with or consolidate into, or acquire assets
of, and any Subsidiary of the Borrower may merge or consolidate with or into,
or acquire assets of, any other Person, PROVIDED in each case that,
immediately after giving effect to such proposed transaction, no Default
would exist and in the case of any such proposed transaction to which the
Borrower is a party, the Borrower is the surviving corporation.
SECTION 5.7. CHANGE IN NATURE OF BUSINESS. The Borrower will
not (i) make any material change in the nature of the business of the
Borrower and its Subsidiaries taken as a whole as carried on as of the date
hereof, or (ii) acquire, or permit any of its Subsidiaries to acquire,
businesses which result in any material change in the nature of the business
of the Borrower and its Subsidiaries taken as a whole as carried on as of the
date hereof; PROVIDED, HOWEVER, that the Borrower or any of its Subsidiaries
may engage in or acquire a business of a nature substantially related to the
nature of its business as carried on as of the date hereof, and PROVIDED,
FURTHER, in each case that, immediately after giving effect to such proposed
transaction, no Default would exist.
SECTION 5.8. TOTAL DEBT TO TOTAL CAPITAL RATIO. The Borrower
will not permit the ratio of (a) the sum of (x) Total Debt plus (y) the
Operating Lease Amount at any time to (b) the sum of (x) Total Capital at
such time plus (y) the Operating Lease Amount at such time to exceed 0.60 to
1.
SECTION 5.9. INDEBTEDNESS OF SUBSIDIARIES. The Borrower will
not permit the aggregate Indebtedness of all of its Subsidiaries (exclusive
of Indebtedness owing to the Borrower or a Wholly-Owned Subsidiary) to exceed
at any time to and including the first anniversary of the date of this
Agreement 35% of Total Capital. Thereafter, the Borrower will not permit the
aggregate Indebtedness of all of its Subsidiaries (exclusive of Indebtedness
owing to the Borrower or a Wholly-Owned Subsidiary) to exceed at any time (i)
25% of Total Capital, if the ratio of Total Debt to Total Capital is equal to
or less than 0.50 to 1 at such time; and (ii) 20% of Total Capital, if the
ratio of Total Debt to Total Capital is greater than 0.50 to 1 at such time.
SECTION 5.10. TRANSACTIONS WITH AFFILIATES. Except as
expressly permitted by this Agreement, the Borrower will not, nor will it
permit any of its Subsidiaries to, directly or indirectly enter into
transactions with any Affiliates unless the monetary or business
consideration arising therefrom would be substantially as advantageous to the
Borrower and its Subsidiaries as the monetary or business consideration which
would obtain in a comparable transaction with a Person not an Affiliate.
SECTION 5.11. USE OF PROCEEDS. The Borrower will use the
proceeds of the Loans hereunder solely for general corporate purposes (in
compliance with all applicable legal and regulatory requirements); PROVIDED
that neither Agent nor any Bank shall have any responsibility as to the use
of any of such proceeds. No part of the proceeds of any extension of credit
hereunder will be used to buy or carry any Margin Stock.
SECTION 5.12. ENVIRONMENTAL LAWS. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with the
requirements of all applicable Environmental Laws and all ordinances and
regulatory and administrative authorities with respect thereto, and shall not
permit or suffer any of its Subsidiaries to, generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process
Hazardous Materials other than in the ordinary course of business and in
compliance in all material respects with applicable Environmental Laws, and
shall not, and shall not permit or suffer any of its Subsidiaries to, cause
or permit, as a result of any intentional or unintentional act or omission on
the part of the Borrower or any Subsidiary thereof, the installation or
placement of Hazardous Materials in violation of or actionable under in any
material respect applicable Environmental Laws onto any of its Property or
suffer the presence of Hazardous Materials in violation of or actionable
under in any material respect applicable Environmental Laws on any of its
Property. The Borrower shall, and shall cause each of its Subsidiaries to,
promptly undertake and diligently pursue to completion any remedial clean-up
action required of the Borrower or any Subsidiary under applicable
Environmental Laws in the event of any release of Hazardous Materials.
SECTION 5.13. MOST FAVORED LENDER. The Borrower will not and
will not permit any Subsidiary to (a) enter into any indenture, agreement or
other instrument under which any Indebtedness for borrowed money in excess of
$15,000,000 for any such indenture, agreement or instrument (or series of
related agreements or instruments) of the Borrower or of any Subsidiary may
be issued (a "Restricted Agreement"), or (b) agree to any amendment, waiver,
consent, modification, refunding, refinancing or replacement of any
Restricted Agreement, in either case, with terms the effect of which is to
(i) include a Covenant which imposes a restriction, limitation or obligation
in favor of another lender not imposed in favor of the Banks by this
Agreement, or (ii) revise or alter any Covenant contained therein the effect
of which is to impose a restriction, limitation or obligation in favor of
another lender not imposed in favor of the Banks by this Agreement, unless
the Borrower or such Subsidiary, as the case may be, concurrently (x)
notifies the Banks and the Administrative Agent thereof and (y) incorporates
herein such additional, altered or revised Covenant. If the Administrative
Agent at the time so elects by notice to the Borrower and the Banks, the
incorporation of each such additional Covenant shall be deemed to occur
automatically without any further action or the execution of any additional
document by any of the parties to this Agreement. If the Administrative
Agent does not elect to effect such an automatic incorporation, the
Administrative Agent shall promptly tender to the Borrower for execution by
it an amendment (executed by the Administrative Agent) incorporating such
additional Covenant and shall promptly deliver a copy of such amendment to
the Banks.
ARTICLE 6
DEFAULTS
SECTION 6.1. EVENTS OF DEFAULT. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) The Borrower shall: (i) default in the payment of any
principal of any Loan when due (whether at stated maturity or at mandatory or
optional prepayment); or (ii) default in the payment of any interest on any
Loan, any fee or any other amount payable by it hereunder when due and such
default shall have continued unremedied for five days; or
(b) The Borrower or any of its Subsidiaries shall default beyond
any applicable grace period, or, in the case of any Derivatives Obligations
for which no grace period is otherwise provided, beyond five days, in the
payment when due of any principal of or interest on any Indebtedness (other
than the Indebtedness hereunder or under the Notes) aggregating $15,000,000
or more, or in the payment when due of amounts exceeding $15,000,000 in the
aggregate for the payment or collateralization of Derivatives Obligations; or
any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness or any event specified in any
instrument or agreement governing such Derivatives Obligations shall occur if
the effect of such event is (or, with the giving of notice or the passage of
time or both, would be) to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity or to have the interest rate thereon reset to a level so that
securities evidencing such Indebtedness trade at a level specified in
relation to the par value thereof or, in the case of an instrument or
agreement governing such Derivatives Obligations, to permit the payments
owing under such instrument or agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed
made herein (or in any modification or supplement hereto) by the Borrower, or
any certificate furnished to any Bank or the Administrative Agent pursuant to
the provisions hereof, shall prove to have been false or misleading as of the
time made or furnished in any material respect; or
(d) The Borrower shall default in the performance of any of its
obligations under any of Sections 5.1(f), 5.5 through 5.9 (inclusive), or
5.13 hereof; or the Borrower shall default in the performance of any of its
other obligations in this Agreement and such default shall continue
unremedied for a period of 30 days after notice thereof to the Borrower by
the Administrative Agent at the request of any Bank; or
(e) The Borrower or any of its Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as such
debts become due; or
(f) The Borrower or any of its Subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary case
under the Bankruptcy Code or (vi) take any corporate action for the purpose
of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of the Borrower or any of its Subsidiaries, in any
court of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Borrower or such Subsidiary or of all or any
substantial part of its Property, or (iii) similar relief in respect of the
Borrower or such Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or an order
for relief against the Borrower or such Subsidiary shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in
excess of $15,000,000 in the aggregate shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction against
the Borrower or any of its Subsidiaries and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 30 days from the date of entry thereof
and the Borrower or the relevant Subsidiary shall not, within said period of
30 days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(i) An event or condition specified in Section 5.1(e) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Borrower or any ERISA Affiliate shall incur or in the opinion
of the Required Banks shall be reasonably likely to incur a liability to a
Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing)
which would constitute, in the determination of the Required Banks, a
Material Adverse Effect; or
(j) Any Person or two or more Persons acting in concert shall
have acquired, in one transaction or in a series of related transactions,
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Borrower (or other securities convertible
into such securities) representing 40% or more of the combined voting power
of the Borrower's then outstanding securities entitled to vote in the
election of directors (other than securities having such power only by reason
of the happening of a contingency);
THEREUPON: (1) in the case of an Event of Default other than one referred to
in clause (f) or (g) of this Section 6.1 with respect to the Borrower, (A)
the Administrative Agent, upon request of the Banks having at least 51% of
the aggregate amount of the Commitments, shall, by notice to the Borrower,
terminate the Commitments and they shall thereupon terminate, and (B) the
Administrative Agent, upon request of Banks holding at least 51% of the
aggregate unpaid principal amount of the Loans, shall, by notice to the
Borrower, declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower
hereunder and under the Notes to be forthwith due and payable, whereupon such
amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower; and (2) in the case of the occurrence of an Event of
Default referred to in clause (f) or (g) of this Section 6.1 with respect to
the Borrower, the Commitments shall automatically be terminated and the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Borrower hereunder and under the Notes
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 6.2 NOTICE OF DEFAULT. The Administrative Agent shall
give notice to the Borrower under Section 6.1(d) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks
thereof.
ARTICLE 7
THE AGENTS
SECTION 7.1. APPOINTMENT AND AUTHORIZATION. Each Bank
irrevocably appoints and authorizes the Administrative Agent to take such
action as administrative agent on its behalf and to exercise such powers
under this Agreement and the Notes as are delegated to Administrative Agent
by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.2. AGENT AND AFFILIATES. Morgan Guaranty Trust
Company of New York and Citibank, N.A. shall each have the same rights and
powers under this Agreement as any other Bank and may exercise or refrain
from exercising the same as though it were not an Agent, and Morgan Guaranty
Trust Company of New York and Citibank, N.A. and their respective affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as
if it were not an Agent hereunder.
SECTION 7.3. ACTION BY AGENT. The obligations of each Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, no Agent shall not be required to take any
action with respect to any Default, except as expressly provided in Article
6.
SECTION 7.4. CONSULTATION WITH EXPERTS. Each Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
SECTION 7.5. LIABILITY OF AGENT. Neither Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees of the foregoing shall be liable for any action taken or not taken
by it in connection herewith (i) with the consent or at the request of the
Required Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither Agent nor any of the affiliates nor any of the
respective directors, officers, agents or employees of the foregoing shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article 3, except in the case of the Administrative
Agent receipt of items required to be delivered to such Agent; or (iv) the
validity, effectiveness or genuineness of this Agreement, the Notes or any
other instrument or writing furnished in connection herewith. Neither Agent
shall incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
SECTION 7.6. INDEMNIFICATION. Each Bank shall, ratably in
accordance with its Commitment, indemnify each Agent, its affiliates and the
respective directors, officers, agents and employees of the foregoing (to the
extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 7.7. CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon either Agent or any other Bank,
and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance upon
either Agent or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this Agreement.
SECTION 7.8. SUCCESSOR ADMINISTRATIVE AGENT. The
Administrative Agent may resign at any time by giving notice thereof to the
Banks and the Borrower. Upon any such resignation, the Required Banks shall
have the right to appoint a successor Administrative Agent reasonably
acceptable to the Borrower. If no successor Administrative Agent shall have
been so appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent gives
notice of resignation, then the retiring Administrative Agent may, on behalf
of the Banks, appoint a successor Administrative Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of
at least $50,000,000. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Administrative Agent the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent.
SECTION 7.9. AGENT'S FEES. The Borrower shall pay to each
Agent for its own account fees in the amounts and at the times previously
agreed upon between the Borrower and such Agent.
SECTION 7.10. DOCUMENTATION AGENT AND CO-AGENTS. Nothing in this
Agreement shall impose upon the Documentation Agent or any Co-Agent, in their
respective capacities as such, any duty or obligation whatsoever.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. BASIS FOR DETERMINING INTEREST RATE INADEQUATE
OR UNFAIR. If on or prior to the first day of any Interest Period for any CD
Loan, Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are not being offered to
the Reference Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having
50% or more of the aggregate principal amount of the affected Loans advise
the Administrative Agent that the Adjusted CD Rate or the London Interbank
Offered Rate, as the case may be, as determined by the Administrative Agent
will not adequately and fairly reflect the cost to such Banks of funding
their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest
Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, (i)
the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the
case may be, or to continue or convert outstanding Loans as or into CD Loans
or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each
outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be
converted into a Base Rate Loan on the last day of the then current Interest
Period applicable thereto. Unless the Borrower notifies the Administrative
Agent at least two Domestic Business Days before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been given that it
elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a
Committed Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day.
SECTION 8.2. ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to
make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify
the Administrative Agent, the Administrative Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank
to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar
Loans, shall be suspended. Before giving any notice to the Administrative
Agent pursuant to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan
of such Bank then outstanding shall be converted to a Base Rate Loan either
(a) on the last day of the then current Interest Period applicable to such
Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such
Loan to such day or (b) immediately if such Bank shall determine that it may
not lawfully continue to maintain and fund such Loan to such day.
SECTION 8.3. INCREASED COST AND REDUCED RETURN. (a) If on or
after (x) the date hereof, in the case of any Committed Loan or any
obligation to make Committed Loans or (y) the date of the related Money
Market Quote, in the case of any Money Market Loan, the adoption of any
applicable law, rule or regulation, or any change in any applicable law, rule
or regulation, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank (or
its Applicable Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System, but excluding (i) with respect to any CD Loan any
such requirement included in an applicable Domestic Reserve Percentage and
(ii) with respect to any Euro-Dollar Loan any such requirement with respect
to which such Bank is entitled to compensation during the relevant Interest
Period under Section 2.16), special deposit, insurance assessment (excluding,
with respect to any CD Loan, any such requirement reflected in an applicable
Assessment Rate) or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable Lending
Office) or on the United States market for certificates of deposit or the
London interbank market any other condition affecting its Fixed Rate Loans,
its Note or its obligation to make Fixed Rate Loans and the result of any of
the foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand
by such Bank (with a copy to the Administrative Agent), the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent) as a consequence
of such Bank's obligations hereunder to a level below that which such Bank
(or its Parent) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time to
time, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its Parent) for such
reduction.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation pursuant to
this Section but in any event within 45 days, after such Bank obtains actual
knowledge thereof; PROVIDED that (i) if any Bank fails to give such notice
within 45 days after it obtains actual knowledge of such an event, such Bank
shall, with respect to compensation payable pursuant to this Section 8.3 in
respect of any costs resulting from such event, only be entitled to payment
under this Section 8.3 for costs incurred from and after the date 45 days
prior to the date that such Bank does give such notice and (ii) each Bank
will designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not,
in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth in reasonable detail the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank shall use reasonable averaging and
attribution methods.
SECTION 8.4. TAXES. (a) For the purposes of this Section
8.4, the following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
the Borrower pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, EXCLUDING (i) in the case of each Bank and
the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the laws of which such Bank or such
Agent (as the case may be) is organized or in which its principal executive
office is located or, in the case of each Bank, in which its Applicable
Lending Office is located and (ii) in the case of each Bank, any United
States withholding tax imposed on such payments but only to the extent that
such Bank is subject to United States withholding tax at the time such Bank
first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any
Note or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
(b) Any and all payments by the Borrower to or for the account
of any Bank or the Administrative Agent hereunder or under any Note shall be
made without deduction for any Taxes or Other Taxes; PROVIDED that, if the
Borrower shall be required by law to deduct any Taxes or Other Taxes from any
such payments, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.4) such Bank or such Agent (as
the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 9.1, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and each Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
payable under this Section 8.4) paid by such Bank or such Agent (as the case
may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be
paid within 15 days after such Bank or the Agent (as the case may be) makes
demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Bank listed on the signature pages hereof
and on or prior to the date on which it becomes a Bank in the case of each
other Bank, and from time to time thereafter if requested in writing by the
Borrower (but only so long as such Bank remains lawfully able to do so),
shall provide the Borrower with Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Bank is entitled to benefits under an income
tax treaty to which the United States is a party which exempts the Bank from
United States withholding tax or reduces the rate of withholding tax on
payments of interest for the account of such Bank or certifying that the
income receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.4(d)
(unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which such form originally was required
to be provided), such Bank shall not be entitled to indemnification under
Section 8.4(b) or (c) with respect to Taxes imposed by the United States;
PROVIDED that if a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, becomes subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as such Bank shall reasonably request to assist such Bank to recover
such Taxes.
(f) If the Borrower is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 8.4, then such Bank will
change the jurisdiction of its Applicable Lending Office if, in the judgment
of such Bank, such change (i) will eliminate or reduce any such additional
payment which may thereafter accrue and (ii) is not otherwise disadvantageous
to such Bank.
SECTION 8.5. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED
RATE LOANS. If (i) the obligation of any Bank to make, or convert
outstanding Loans to, Euro-Dollar Loans has been suspended pursuant to
Section 8.2 or (ii) any Bank has demanded compensation under Section 8.3 or
8.4 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall,
by at least five Euro-Dollar Business Days' prior notice to such Bank through
the Administrative Agent, have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case
may be, shall instead be Base Rate Loans (on which interest and principal
shall be payable contemporaneously with the related Fixed Rate Loans of the
other Banks); and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case
may be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans
shall be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan
shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on
the first day of the next succeeding Interest Period applicable to the
related CD Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.6. SUBSTITUTION OF BANK. Provided that no Default
shall have occurred and be continuing, if (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any
Bank has demanded compensation under Section 8.3 or 8.4 the Borrower shall
have the right to designate an Assignee which is not an Affiliate to purchase
for cash, pursuant to an Assignment and Assumption Agreement substantially in
the form of Exhibit G hereto, the outstanding Loans and commitment of such
Bank and to assume all of such Bank's other rights and obligations hereunder
without recourse to or warranty by such Bank, for a purchase price equal to
the principal amount of all of such Bank's outstanding Loans plus any accrued
but unpaid interest thereon and the accrued but unpaid facility fees in
respect of any Bank's Commitment hereunder plus such amount, if any, as would
be payable pursuant to Section 2.14 if the outstanding Loans of such Bank
were prepaid in their entirety on the date of consummation of such
assignment, plus the compensation then due and payable pursuant to Sections
8.3 and 8.4.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, facsimile transmission or similar writing) and shall be given to
such party: (a) in the case of the Borrower or either Agent, at its address,
facsimile number or telex number set forth on the signature pages hereof, (b)
in the case of any Bank, at its address, facsimile number or telex number set
forth in its Administrative Questionnaire or (c) in the case of any party,
such other address, facsimile number or telex number as such party may
hereafter specify for the purpose by notice to the Administrative Agent and
the Borrower. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answerback is received,
(ii) if given by facsimile transmission, when transmitted to the facsimile
number specified in this Section and confirmation of receipt is received,
(iii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iv) if
given by any other means, when delivered at the address specified in this
Section; PROVIDED that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until received.
SECTION 9.2. NO WAIVERS. No failure or delay by either Agent
or any Bank in exercising any right, power or privilege hereunder or under
any Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.3. EXPENSES; INDEMNIFICATION. (a) The Borrower
shall pay (i) all out-of-pocket expenses of each Agent, including fees and
disbursements of special counsel for the Agents, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs and is continuing, all out-of-pocket
expenses incurred by each Agent and each Bank, including (without
duplication) the fees and disbursements of outside counsel and the allocated
cost of inside counsel, in connection with collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom.
The Borrower agrees to indemnify each Agent and each Bank,
their respective affiliates and the respective directors, officers, agents
and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel and settlement costs, which may
be incurred by such Indemnitee in connection with any investigative,
administrative or judicial proceeding (whether or not such Indemnitee shall
be designated a party thereto) brought or threatened relating to or arising
out of this Agreement or any actual or proposed use of proceeds of Loans
hereunder; PROVIDED that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 9.4. SHARING OF SET-OFFS. Each Bank agrees that if
it shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; PROVIDED that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment
of indebtedness of the Borrower other than its indebtedness hereunder. The
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation
as fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.5. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of either Agent are affected
thereby, by such Agent); PROVIDED that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the Commitment of
any Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of
or rate of interest on any Loan, or any fees hereunder (iii) postpone the
date fixed for any payment of principal of or interest on any Loan, or any
fees hereunder or for termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of
this Agreement; and PROVIDED FURTHER that, at the option of the
Administrative Agent, an additional, altered or revised Covenant shall be
incorporated herein pursuant to Section 5.13 either (i) automatically or (ii)
by an amendment signed solely by the Administrative Agent and the Borrower.
SECTION 9.6. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower
may not assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole
right and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; PROVIDED that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii) or (iii) of Section 9.5 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Section 2.16 and
Article 8 with respect to its participating interest. An assignment or other
transfer which is not permitted by subsection (c) or (d) below shall be given
effect for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or
other institutions (each an "Assignee") all, or a proportionate part
(equivalent to an initial Commitment of not less than $10,000,000, unless a
lower amount is agreed to by the Borrower and the Administrative Agent) of
all, of its rights and obligations under this Agreement and the Notes, and
such Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit G
hereto executed by such Assignee and such transferor Bank, with (and subject
to) the subscribed consent of the Borrower, which shall not be unreasonably
withheld, and the Administrative Agent; PROVIDED that if an Assignee is an
affiliate of such transferor Bank, no such consent shall be required; and
PROVIDED FURTHER that such assignment may, but need not, include rights of
the transferor Bank in respect of outstanding Money Market Loans. Upon
execution and delivery of such instrument and payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, such Assignee shall be a Bank party
to this Agreement and shall have all the rights and obligations of a Bank
with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this
subsection (c), the transferor Bank, the Administrative Agent and the
Borrower shall make appropriate arrangements so that, if required, a new Note
is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Administrative Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is
not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Borrower and the Administrative Agent
certification as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 8.4.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.3 or
8.4 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.7. COLLATERAL. Each of the Banks represents to
each of the Agents and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
SECTION 9.8. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
SECTION 9.9. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement constitutes the entire
agreement and understanding among the parties hereto and supersedes any and
all prior agreements and understandings, oral or written, relating to the
subject matter hereof. This Agreement shall become effective upon receipt by
the Administrative Agent of counterparts hereof signed by each of the parties
hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Administrative Agent in form
satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. CONFIDENTIALITY. The Agents and each Bank agree
to keep any information delivered or made available by the Borrower pursuant
to this Agreement confidential from anyone other than persons employed or
retained by it who are engaged in evaluating, approving, structuring or
administering the credit facility contemplated hereby; PROVIDED that nothing
herein shall prevent any Bank from disclosing such information (a) to any
other Bank or to an Agent, (b) to any other Person if reasonably incidental
to the administration of the credit facility contemplated hereby, (c) upon
the order of any court or administrative agency, (d) upon the request or
demand of any regulatory agency or authority, (e) which had been publicly
disclosed other than as a result of a disclosure by an Agent or Bank
prohibited by this Agreement, (f) in connection with any litigation to which
an Agent or Bank or its subsidiaries or Parent may be a party, (g) to the
extent necessary in connection with the exercise of any remedy hereunder, (h)
to such Bank's or the Agents' legal counsel and independent auditors and (i)
subject to provisions substantially similar to those contained in this
Section, to any actual or proposed Participant or Assignee.
SECTION 9.12. TERMINATION OF EXISTING CREDIT AGREEMENTS. On
the Effective Date, the commitments of the banks under the Existing Credit
Agreement shall automatically terminate. The Banks which are parties to the
Existing Credit Agreement, comprising the "Majority Banks" as defined
therein, hereby waive any requirement for notice of termination under the
Existing Credit Agreement and agree that such termination shall be effective
on the Effective Date without further action by any party to the Existing
Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
MALLINCKRODT GROUP INC.
By____________________________
Title:
Address: 7733 Forsyth Boulevard
Clayton, Missouri 63105
Facsimile: (314) 854-5380
Commitments
- -----------
$45,500,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By____________________________
Name:
Title:
$45,500,000 CITIBANK, N.A.
By____________________________
Name:
Title:
$33,000,000 BANK OF AMERICA ILLINOIS
By____________________________
Name:
Title:
$33,000,000 THE CHASE MANHATTAN BANK, N.A.
By____________________________
Name:
Title:
$33,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By____________________________
Name:
Title:
$24,000,000 ABN-AMRO BANK N.V., CHICAGO BRANCH
By____________________________
Name:
Title:
By____________________________
Name:
Title:
$24,000,000 BANCA COMMERCIALE ITALIANA
By____________________________
Name:
Title:
By____________________________
Name:
Title:
$24,000,000 BANK OF IRELAND
By____________________________
Name:
Title:
$24,000,000 THE BANK OF NOVA SCOTIA
By____________________________
Name:
Title:
$24,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By____________________________
Name:
Title:
$24,000,000 BANQUE PARIBAS
By____________________________
Name:
Title:
$24,000,000 THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By____________________________
Name:
Title:
$24,000,000 CIBC INC.
By____________________________
Name:
Title:
$24,000,000 DEUTSCHE AG
CHICAGO AND/OR CAYMAN ISLANDS
BRANCHES
By____________________________
Name:
Title:
By____________________________
Name:
Title:
$24,000,000 THE FUJI BANK, LIMITED
By____________________________
Name:
Title:
$24,000,000 MELLON BANK, N.A.
By____________________________
Name:
Title:
$24,000,000 SOCIETE GENERALE
By____________________________
Name:
Title:
$24,000,000 THE SUMITOMO BANK, LTD.
By____________________________
Name:
Title:
$24,000,000 UNION BANK OF SWITZERLAND
By____________________________
Name:
Title:
By____________________________
Name:
Title:
$24,000,000 YASUDA TRUST & BANKING CO., LTD.
CHICAGO BRANCH
By____________________________
Name:
Title:
_________________
Total Commitments
$550,000,000
=================
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
By____________________________
Title:
Address: 60 Wall Street
New York, New York 10260
Telex number: 177615 MGT UT
Facsimile number: (212) 648-5336
CITIBANK, N.A.,
as Documentation Agent
By____________________________
Title:
Address: 399 Park Avenue
New York, New York 10043
Telex number:
Facsimile number: (212) 826-2371
<PAGE>
PRICING SCHEDULE
Each of "CD Margin", "Euro-Dollar Margin" and "Facility Fee Rate"
means, for any day, the rates set forth below (in basis points per annum) in
the row opposite such term and in the column corresponding to the "Pricing
Level" that exists on such day:
Level I Level II Level III Level IV
- ---------------------------------------------------------------------
CD Margin 24.50 29.00 37.50 40.00
- ---------------------------------------------------------------------
Euro-Dollar
Margin 12.00 16.50 25.00 27.50
- ---------------------------------------------------------------------
Facility Fee
Rate 8.00 8.50 10.00 12.50
- ---------------------------------------------------------------------
Level V Level VI Level VII
- ---------------------------------------------------------------------
CD Margin 45.00 62.50 62.50
- ---------------------------------------------------------------------
Euro-Dollar
Margin 32.50 50.00 50.00
- ---------------------------------------------------------------------
Facility Fee
Rate 17.50 25.00 37.50
- ---------------------------------------------------------------------
For purposes of this Schedule, the following terms
have the following meanings, subject to the final paragraph
of this Schedule:
"Level I Pricing" applies at any date if, at such
date, the Borrower's long-term debt is rated A or higher by
S&P OR A2 or higher by Moody's (subject to the paragraph on
split ratings below).
"Level II Pricing" applies at any date if, at such
date, (i) the Borrower's long-term debt is rated A- or
higher by S&P OR A3 or higher by Moody's (subject to the
paragraph on split ratings below) and (ii) Level I Pricing
does not apply.
"Level III Pricing" applies at any date if, at
such date, (i) the Borrower's long-term debt is rated BBB+
or higher by S&P OR Baa1 or higher by Moody's (subject to
the paragraph on split ratings below) and (ii) neither Level
I Pricing nor Level II Pricing applies.
"Level IV Pricing" applies at any date if, at such
date, (i) the Borrower's long-term debt is rated BBB or
higher by S&P OR Baa2 or higher by Moody's and (ii) none of
Level I Pricing, Level II Pricing and Level III Pricing
applies.
"Level V Pricing" applies at any date if, at such
date, (i) the Borrower's long-term debt is rated BBB- or
higher by S&P AND Baa3 or higher by Moody's, and (ii) none
of Level I Pricing, Level II Pricing, Level III Pricing, and
Level IV Pricing applies.
"Level VI Pricing" applies at any date if, at such
date, (i) the Borrower's long-term debt is rated BB+ or
higher by S&P AND Ba1 or higher by Moody's, and (ii) none of
Level I Pricing, Level II Pricing, Level III Pricing, Level
IV Pricing, and Level V Pricing applies.
"Level VII Pricing" applies at any date if, at
such date, no other Pricing Level applies.
"Moody's" means Moody's Investors Service, Inc.
"Pricing Level" refers to the determination of
which of Level I, Level II, Level III, Level IV, Level V,
Level VI or Level VII applies at any date.
"S&P" means Standard & Poor's Rating Services, a
division of McGraw Hill, Inc.
The credit ratings to be utilized for purposes of
this Schedule are those assigned to the senior unsecured
long-term debt securities of the Borrower without third-
party credit enhancement, and any rating assigned to any
other debt security of the Borrower shall be disregarded.
The rating in effect at any date is that in effect at the
close of business on such date.
For purposes of determining eligibility for Level
I Pricing, Level II Pricing, Level III Pricing or Level IV
Pricing, so long as the Borrower qualifies for at least
Level V Pricing, split ratings will be dealt with as
follows: If the Borrower is split-rated and the ratings
differential is one level, the higher rating will apply. If
the Borrower is split-rated and the ratings differential is
two levels or more, the rating at the midpoint will apply.
If there is no midpoint rating, the higher of the two
intermediate ratings will apply.
<PAGE>
EXHIBIT A - Note
NOTE
New York, New York
________ __, ____
For value received, Mallinckrodt Group Inc., a New
York corporation (the "Borrower"), promises to pay to the
order of (the "Bank"), for the account of its Applicable
Lending Office, the unpaid principal amount of each Loan
made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided
for in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on
the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States
in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types
and maturities thereof and all repayments of the principal
thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding
may be endorsed by the Bank on the schedule attached hereto,
or on a continuation of such schedule attached to and made a
part hereof; PROVIDED that the failure of the Bank to make
any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Credit
Agreement.
This note is one of the Notes referred to in the
$550,000,000 Credit Agreement dated as of May 22, 1996 among
the Borrower, the banks party thereto from time to time, and
Morgan Guaranty Trust Company of New York, as Administrative
Agent and Citibank, N.A., as Documentation Agent (as the
same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof
and the acceleration of the maturity hereof.
MALLINCKRODT GROUP INC.
By____________________
Name:
Title:
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Type Amount of
of of Maturity Principal Notation
Date Loan Loan Date Repaid Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
<PAGE>
EXHIBIT B - Money Market Quote Request
Form of Money Market Quote Request
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York
From: Mallinckrodt Group Inc.
Re: $550,000,000 Credit Agreement (the "Credit
Agreement") dated as of May 22, 1996 among
Mallinckrodt Group Inc., the Banks party
thereto from time to time, and Morgan Guaranty
Trust Company of New York, as Administrative
Agent and Citibank, N.A., as Documentation
Agent.
We hereby give notice pursuant to Section 2.3 of the
Credit Agreement that we request Money Market Quotes for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount(1) Interest Period(2)
------------------- ------------------
$
___________________
(1) Amount must be $10,000,000 or a larger multiple of
$1,000,000.
(2) Not less than one month (LIBOR Auction) or not less
than 7 days (Absolute Rate Auction), subject to the
provisions of the definition of Interest Period.
<PAGE>
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the
London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them
in the Credit Agreement.
MALLINCKRODT GROUP INC.
By________________________
Name:
Title:
<PAGE>
EXHIBIT C - Invitation for Money Market Quotes
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Mallinckrodt
Group Inc. (the "Borrower")
Pursuant to Section 2.3 of the $550,000,000 Credit
Agreement dated as of May 22, 1996 among Mallinckrodt Group
Inc., the Banks party thereto from time to time, Citibank,
N.A., as Documentation Agent and the undersigned, as
Administrative Agent, we are pleased on behalf of the
Borrower to invite you to submit Money Market Quotes to the
Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
---------------- ---------------
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the
London Interbank Offered Rate.]
Please respond to this invitation by no later than
[2:00 P.M.] [9:30 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE>
EXHIBIT D - Money Market Quote
Form of Money Market Quote
--------------------------
To: Morgan Guaranty Trust Company of New York, as
Administrative Agent
Re: Money Market Quote to Mallinckrodt Group Inc. (the
"Borrower")
In response to your invitation on behalf of the
Borrower dated _____________, 19__, we hereby make the
following Money Market Quote on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the
following principal amounts, for the following
Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
--------- --------- ------------ --------------------
$
$
[Provided, that the aggregate principal amount of Money
Market Loans for which the above offers may be accepted
shall not exceed $____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not
(notes continued on following page)
<PAGE>
We understand and agree that the offer(s) set
forth above, subject to the satisfaction of the
applicable conditions set forth in the $550,000,000
Credit Agreement dated as of May 22, 1996 among
Mallinckrodt Group Inc., the Banks party thereto from
time to time, Citibank, N.A., as Documentation Agent and
yourselves, as Administrative Agent, irrevocably
obligates us to make the Money Market Loan(s) for which
any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
exceed principal amount requested. Specify aggregate
limitation if the sum of the individual offers exceeds the
amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
*** Not less than one month or not less than 7 days, as
specified in the related Invitation. No more than five bids
are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate
determined for the applicable Interest Period. Specify
percentage (to the nearest 1/10,000 of 1%) and specify
whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest
1/10,000th of 1%).
<PAGE>
EXHIBIT E - Opinion of Counsel for the Borrower
[Closing Date]
Each of the Banks and each of the Agents party
to the Credit Agreement
referred to below
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
Ladies and Gentlemen:
I am the General Counsel of Mallinckrodt Group Inc.,
a corporation organized under the laws of the State of New
York (the "BORROWER") and I am furnishing this opinion in
connection with the Credit Agreement dated as of May 22,
1996 (the "CREDIT AGREEMENT") among the Borrower, the banks
party thereto from time to time, Citibank, N.A., as
Documentation Agent and Morgan Guaranty Trust Company of New
York, as Administrative Agent, providing for, among other
things, the making of loans by the Banks in an aggregate
principal amount not exceeding $550,000,000. All
capitalized terms used but not defined herein have the
respective meanings given to such terms in the Credit
Agreement.
In rendering the opinions expressed below, I have
examined:
(i) the Credit Agreement;
(ii) the Notes (collectively with the Credit
Agreement, the "CREDIT DOCUMENTS"); and
(iii) such corporate records, agreements and
instruments of the Borrower and such other documents and
records as I have deemed necessary as a basis for the
opinions expressed below.
In my examination, I have assumed the genuineness of all
signatures (except those of officers of the Borrower), the
authenticity of all documents submitted to me as originals
and the conformity with authentic original documents of all
documents submitted to me as copies. When relevant facts
were not independently established, I have relied upon
representations made in or pursuant to the Credit Documents
and certificates of appropriate representatives of the
Borrower.
In rendering the opinions expressed below, I have
assumed, with respect to all of the documents referred to in
this opinion letter, that (except, to the extent set forth
in the opinions expressed below, as to the Borrower):
(i) such documents have been duly authorized by,
have been duly executed and delivered by, and
constitute legal, valid, binding and
enforceable obligations of, all of the parties
to such documents;
(ii) all signatories to such documents have been
duly authorized; and
(iii) all of the parties to such documents are duly
organized and validly existing and have the
power and authority (corporate or other) to
execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject
also to the comments and qualifications set forth below, and
having considered such questions of law as I have deemed
necessary as a basis for the opinions expressed below, I am
of the opinion that:
1. The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of
the State of New York.
2. The Borrower has all requisite corporate power
to execute and deliver, and to perform its obligations
under, each Credit Document and has all requisite
corporate power to borrow under the Credit Agreement.
3. The execution, delivery and performance by the
Borrower of the Credit Documents and the borrowings by
the Borrower under the Credit Agreement have been duly
authorized by all necessary corporate action on the part
of the Borrower.
4. Each Credit Document has been duly executed and
delivered by the Borrower.
5. Under Missouri conflict of laws principles, the
stated choice of New York Law to govern the Credit
Documents will be honored by the courts of the State of
Missouri and the Credit Documents will be construed in
accordance with, and will be treated as being governed
by, the law of the State of New York. However, if the
Credit Documents were stated to be governed by and
construed in accordance with the law of the State of
Missouri, or if a court were to apply the law of the
State of Missouri to the Credit Documents, each Credit
Document (assuming, in the case of the Notes, execution
and delivery thereof for value) would constitute the
legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its
terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors
generally and except as the enforceability of the Credit
Documents is subject to the application of general
principles of equity (regardless of whether considered in
a proceeding in equity or at law), including, without
limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable
remedy and (b) concepts of materiality, reasonableness,
good faith and fair dealing.
6. No authorization, approval or consent of, and
no filing or registration with, any governmental or
regulatory authority or agency is required on the part of
the Borrower for the execution, delivery or performance
by the Borrower of, or for the legality, validity or
enforceability of, the Credit Documents or for any
borrowing by the Borrower under the Credit Agreement.
7. The execution, delivery and performance by the
Borrower of the Credit Documents, and borrowings by the
Borrower under the Credit Agreement, do not and will not
(a) violate any provision of the charter or by-laws of
the Borrower, (b) violate any applicable law, rule or
regulation, (c) violate any order, writ, injunction or
decree of any court or governmental authority or agency
or any arbitral award applicable to the Borrower of which
I have knowledge (after due inquiry) or (d) result in a
breach of, constitute a default under, require any
consent under, or result in the acceleration or required
prepayment of any indebtedness pursuant to the terms of,
any agreement or instrument of which I have knowledge
(after due inquiry) to which the Borrower is a party or
by which the Borrower is bound or to which the Borrower
is subject.
8. Except as may be disclosed in regular periodic
reports filed with the Securities and Exchange Commission
prior to the date of the Credit Agreement (copies of
which reports have heretofore been furnished to the
Banks), I have no knowledge (after due inquiry) of any
legal or arbitral proceeding by or before any
governmental or regulatory authority or agency, now
pending or threatened against the Borrower or any of its
Subsidiaries or any of their respective Properties that,
if adversely determined, is reasonably likely to have a
Material Adverse Effect.
9. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or a company
"controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as
amended.
10. Neither the Borrower nor any of its
Subsidiaries is a "holding company", or an "affiliate" of
a "holding company" or a "subsidiary company" of a
"holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
The foregoing opinions are subject to the following
comments and qualifications:
A. The enforceability of Section 9.3 of the Credit
Agreement may be limited by laws rendering unenforceable
indemnification contrary to Federal or State securities
laws and the public policy underlying such laws.
B. The enforceability of provisions in the Credit
Documents to the effect that terms may not be waived or
modified except in writing may be limited under certain
circumstances.
C. I express no opinion as to (i) the effect of
the laws of any jurisdiction in which any Bank is located
(other than the State of Missouri) that limit the
interest, fees, or other charges such Bank may impose,
and (ii) the second sentence of Section 9.8 of the Credit
Agreement, insofar as such sentence relates to the
subject matter jurisdiction of the United States District
Court for the Southern District of New York to adjudicate
any controversy related to the Credit Documents.
The foregoing opinions are limited to matters
involving the Federal law of the United States of America,
the law of the State of Missouri and (with respect to my
opinions in paragraphs 1 through 4 above) the Business
Corporation Law of the State of New York, and I do not
express any opinion as to any other laws.
At the request of my client, this opinion letter is,
pursuant to Section 3.1(b) of the Credit Agreement, provided
to you by me in my capacity as General Counsel of the
Borrower and may not be relied upon by any Person for any
purpose other than in connection with the transactions
contemplated by the Credit Agreement without, in each
instance, my prior written consent.
Very truly yours,
<PAGE>
EXHIBIT F - Opinion of Special Counsel for the Agents
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
- ----------------------------------------------------------------------
[Closing Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
Dear Sirs:
We have participated in the preparation of the
$550,000,000 Credit Agreement (the "Credit Agreement") dated
as of May 22, 1996 among Mallinckrodt Group Inc., a New York
corporation (the "Borrower"), the banks party thereto from
time to time (the "Banks"), Citibank, N.A., as Documentation
Agent and Morgan Guaranty Trust Company of New York, as
Administrative Agent, and have acted as special counsel for
the Agents for the purpose of rendering this opinion
pursuant to Section 3.1(c) of the Credit Agreement. Terms
defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments and have conducted such other
investigations of fact and law as we have deemed necessary
or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the
opinion that:
1. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within
the Borrower's corporate powers and have been duly
authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and
binding agreement of the Borrower and each Note constitutes
a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms except as the same
may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York
and the foregoing opinion is limited to the laws of the
State of New York and the federal laws of the United States
of America. In giving the foregoing opinion, we express no
opinion as to the effect (if any) of any law of any
jurisdiction (except the State of New York) in which any
Bank is located which limits the rate of interest that such
Bank may charge or collect.
This opinion is rendered solely to you in connection
with the above matter. This opinion may not be relied upon
by you for any other purpose or relied upon by any other
person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT G - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among
[ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"),
MALLINCKRODT GROUP INC. (the "Borrower") and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent (the
"Agent").
WHEREAS, this Assignment and Assumption Agreement
(the "Agreement") relates to the $550,000,000 Credit
Agreement dated as of May 22, 1996 among the Borrower, the
Assignor and the other Banks party thereto from time to
time, as Banks, Citibank, N.A., as Documentation Agent and
Morgan Guaranty Trust Company of New York, as Administrative
Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans to the Borrower in
an aggregate principal amount at any time outstanding not to
exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the
Assignor under the Credit Agreement in the aggregate
principal amount of $__________ are outstanding at the date
hereof; and
WHEREAS, the Assignor proposes to assign to the
Assignee all of the rights of the Assignor under the Credit
Agreement in respect of a portion of its Commitment
thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its
outstanding Committed Loans, and the Assignee proposes to
accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing
and the mutual agreements contained herein, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not
otherwise defined herein shall have the respective meanings
set forth in the Credit Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby assigns
and sells to the Assignee all of the rights of the Assignor
under the Credit Agreement to the extent of the Assigned
Amount, and the Assignee hereby accepts such assignment from
the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the
Assigned Amount, including the purchase from the Assignor of
the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date
hereof. Upon the execution and delivery hereof by the
Assignor, the Assignee, [the Borrower and the Administrative
Agent] and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee
shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor
shall, as of the date hereof, be reduced by a like amount
and the Assignor released from its obligations under the
Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein
shall be without recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in
Federal funds in the amount heretofore mutually agreed
between them. It is understood that facility fees in
respect of the Assigned Amount accrued to the date hereof
are for the account of the Assignor and such fees accruing
from and including the date hereof are for the account of
the Assignee. Each of the Assignor and the Assignee hereby
agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such
other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
[SECTION 4. CONSENT OF THE BORROWER AND THE
ADMINISTRATIVE AGENT. This Agreement is conditioned upon
the consent of the Borrower and the Administrative Agent
pursuant to Section 9.6(c) of the Credit Agreement. The
execution of this Agreement by the Borrower and the
Administrative Agent is evidence of this consent. Pursuant
to Section 9.6(c), the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to
evidence the assignment and assumption provided for herein.]
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor
makes no representation or warranty in connection with, and
shall have no responsibility with respect to, the solvency,
financial condition, or statements of the Borrower, or the
validity and enforceability of the obligations of the
Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and
without reliance on the Assignor, any other Bank or either
Agent and based on such documents and information as it has
deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to
be responsible for making its own independent appraisal of
the business, affairs and financial condition of the
Borrower.
SECTION 6. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
[ASSIGNOR]
By_________________________
Name:
Title:
[ASSIGNEE]
By__________________________
Name:
Title:
MALLINCKRODT GROUP INC.
By__________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative
Agent
By__________________________
Name:
Title:
<PAGE>
Exhibit 10.19
EXECUTION COPY
$600,000,000
CREDIT AGREEMENT
dated as of
May 22, 1996
among
Fries & Fries, Inc.,
as Borrower
Mallinckrodt Group Inc.,
as Guarantor
The Banks Listed Herein
Morgan Guaranty Trust Company of New York,
as Administrative Agent
Citibank, N.A.,
as Documentation Agent
___________________
Bank of America Illinois, The Chase Manhattan Bank, N.A. and
The First National Bank of Chicago
Co-Agents
___________________
Citibank Securities, Inc. and J.P. Morgan Securities Inc.
Co-Syndication Agents
Citibank Securities, Inc.
Arranger
<PAGE>
TABLE OF CONTENTS*
*(The Table of Contents is not a part of this Agreement.)
Page
ARTICLE 1
DEFINITIONS
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms and Determinations . . . . . . . . . . . . . 15
1.3. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE CREDITS
2.1. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . 16
2.2. Notice of Committed Borrowing . . . . . . . . . . . . . . . . 16
2.3. Money Market Borrowings . . . . . . . . . . . . . . . . . . . 17
2.4. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . 21
2.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . 23
2.7. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . 23
2.8. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.9. Optional Termination or Reduction of Commitments. . . . . . . 27
2.10. Method of Electing Interest Rates . . . . . . . . . . . . . . 27
2.11. Scheduled Termination of Commitments. . . . . . . . . . . . . 29
2.12. Optional Prepayments. . . . . . . . . . . . . . . . . . . . . 29
2.13. General Provisions as to Payments . . . . . . . . . . . . . . 29
2.14. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . 30
2.15. Computation of Interest and Fees. . . . . . . . . . . . . . . 31
2.16. Regulation D Compensation . . . . . . . . . . . . . . . . . . 31
ARTICLE 3
CONDITIONS
3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2. Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence . . . . . . . . . . . . . . . . . . . . . 33
4.2. Financial Condition . . . . . . . . . . . . . . . . . . . . . 33
4.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4. No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.5. Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.6. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.7. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.9. Investment Company Act. . . . . . . . . . . . . . . . . . . . 36
4.10. Public Utility Holding Company Act. . . . . . . . . . . . . . 36
4.11. True and Complete Disclosure. . . . . . . . . . . . . . . . . 36
4.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5
COVENANTS
5.1. Financial Statements, Etc. . . . . . . . . . . . . . . . . . 37
5.2. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3. Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . 40
5.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 41
5.6. Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 43
5.7. Change in Nature of Business. . . . . . . . . . . . . . . . . 44
5.8. Total Debt to Total Capital Ratio . . . . . . . . . . . . . . 44
5.9. Indebtedness of Subsidiaries. . . . . . . . . . . . . . . . . 44
5.10. Transactions with Affiliates. . . . . . . . . . . . . . . . . 44
5.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 45
5.12. Environmental Laws. . . . . . . . . . . . . . . . . . . . . . 45
5.13. Most Favored Lender . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6
DEFAULTS
6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . 46
6.2. Notice of Default . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
THE AGENTS
7.1. Appointment and Authorization . . . . . . . . . . . . . . . . 49
7.2. Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . 50
7.4. Consultation with Experts . . . . . . . . . . . . . . . . . . 50
7.5. Liability of Agent. . . . . . . . . . . . . . . . . . . . . . 50
7.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 51
7.7. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . 51
7.8. Successor Administrative Agent. . . . . . . . . . . . . . . . 51
7.9. Agents' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 52
7.10. Documentation Agent and Co-Agents . . . . . . . . . . . . . . 52
ARTICLE 8
CHANGE IN CIRCUMSTANCES
8.1. Basis for Determining Interest Rate Inadequate or Unfair. . . 52
8.2. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.3. Increased Cost and Reduced Return . . . . . . . . . . . . . . 53
8.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.5. Base Rate Loans Substituted for Affected Fixed Rate Loans . . 57
8.6. Substitution of Bank. . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 9
GUARANTY
9.1. The Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . 58
9.2. Guaranty Unconditional. . . . . . . . . . . . . . . . . . . . 58
9.3. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. . . . . . . . . . . . . . . . . . . 59
9.4. Waiver by the Guarantor . . . . . . . . . . . . . . . . . . . 60
9.5. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.6. Stay of Acceleration. . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 10
MISCELLANEOUS
10.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.2. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.3. Expenses; Indemnification. . . . . . . . . . . . . . . . . . 61
10.4. Sharing of Set-Offs. . . . . . . . . . . . . . . . . . . . . 62
10.5. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 62
10.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . 63
10.7. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.8. Governing Law; Submission to Jurisdiction. . . . . . . . . . 65
10.9. Counterparts; Integration; Effectiveness . . . . . . . . . . 65
10.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 65
10.11. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 65
EXHIBIT A - Note
EXHIBIT B - Money Market Quote Request
EXHIBIT C - Invitation for Money Market Quotes
EXHIBIT D - Money Market Quote
EXHIBIT E - Opinion of Counsel for the Borrower
EXHIBIT F - Opinion of Special Counsel for
the Agents
EXHIBIT G - Assignment and Assumption Agreement
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of May 22, 1996 among FRIES & FRIES, INC., as
Borrower, MALLINCKRODT GROUP INC., as Guarantor, the BANKS party hereto from
time to time, CITIBANK, N.A., as Documentation Agent and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Adjusted CD Rate" has the meaning set forth in Section 2.7(b).
"Administrative Agent" means Morgan Guaranty Trust Company of New
York, in its capacity as administrative agent for the Banks hereunder, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
"Affiliate" means any Person that directly or indirectly controls, or
is under common control with, or is controlled by, the Guarantor and, if such
Person is an individual, any member of the immediate family (including parents,
spouse, children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used in this
definition, "CONTROL (including, with its correlative meanings, "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise), PROVIDED that, in any event, any Person that owns
directly or indirectly securities having 15% or more of the voting power for
the election of directors or other governing body of a corporation or 15% or
more of the partnership or other ownership interests of any other Person (other
than as a limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, (a) no individual
shall be an Affiliate solely by reason of his or her being a director, officer
or employee of the Guarantor or any of its Subsidiaries and (b) none of the
Subsidiaries of the Guarantor shall be Affiliates.
"Agent" means each of the Administrative Agent and the Documentation
Agent.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.7(b).
"Assignee" has the meaning set forth in Section 10.6(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.6(c), and their respective
successors.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means (i) a Committed Loan which bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or the provisions of Article 8 or (ii) an
overdue amount which was a Base Rate Loan immediately before it became overdue.
"Borrower" means Fries & Fries, Inc., a Delaware corporation, and its
successors.
"Borrowing" has the meaning set forth in Section 1.3.
"Capital Lease Obligations" means, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board), and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CD Base Rate" has the meaning set forth in Section 2.7(b).
"CD Loan" means (i) a Committed Loan which bears interest at a CD
Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or (ii) an overdue amount which was a CD Loan
immediately before it became overdue.
"CD Rate" means a rate of interest determined pursuant to Section
2.7(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means The Chase Manhattan Bank N.A., The First
National Bank of Chicago, Citibank N.A., and Morgan Guaranty Trust Company of
New York.
"Closing Date" means the date on or after the Effective Date on which
the Administrative Agent shall have received the documents specified in or
pursuant to Section 3.1.
"Co-Agents" means Bank of America Illinois, The Chase Manhattan Bank,
N.A., and The First National Bank of Chicago in their capacity as co-agents
hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" means, with respect to each Bank listed on the signature
pages hereof, the amount set forth opposite the name of such Bank on the
signature pages hereof, and with respect to any Bank which becomes a party to
this Agreement pursuant to Section 10.6, the amount of the Commitment thereby
assumed by such Bank, in each case as such amount may be reduced from time to
time pursuant to Sections 2.9 and 10.6 or increased pursuant to Section
10.6(c).
"Committed Loan" means a loan made by a Bank pursuant to Section 2.1;
PROVIDED that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Consolidated Net Worth" means, as at any date, the sum, for the
Guarantor and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of capital stock, PLUS
(b) the amount of capital in excess of par value, PLUS
(c) the amount of reinvested earnings (or in the case of a
reinvested earnings deficit, MINUS the amount of such deficit), MINUS
(d) the cost of treasury stock.
"Covenant" means, with respect to any agreement or instrument
representing or governing Indebtedness, any covenant (whether expressed as a
covenant or an event of default) contained therein.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Documentation Agent" means Citibank, N.A. in its capacity as
documentation agent for the Banks hereunder.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent; PROVIDED that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.7(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 10.9.
"Environmental Claim" means, with respect to any Person, (a) any
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into
the environment, of any Hazardous Material at any location, whether or not
owned by such Person, or (ii) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" means any and all present and future Federal,
state, local and foreign laws, rules or regulations, and any orders or decrees,
in each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Affiliate" means any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Guarantor is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Guarantor is a member.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means (i) a Committed Loan which bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.7(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
The Chase Manhattan Bank N.A., The First National Bank of Chicago, Citibank,
N.A., and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"Event of Default" has the meaning set forth in Section 6.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Administrative
Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.1) or any combination of the foregoing.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.2 hereof, are
to be used in making the calculations for purposes of determining compliance
with this Agreement.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time, (ii) all
Euro-Dollar Loans having the same Interest Period at such time or (iii) all CD
Loans having the same interest period at such time, provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Section 8.2 or 8.5, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it had
not been so converted or made.
"Guarantee" means a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
directly or indirectly to be or become contingently liable under or with
respect to, the Indebtedness of any Person, but excluding endorsements for
collection or deposit in the ordinary course of business. The terms
"GUARANTEE" and "GUARANTEED" used as a verb shall have a correlative meaning.
"Guarantor" means Mallinckrodt Group Inc., a New York corporation,
and its successors.
"Hazardous Material" means collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam insulation,
and transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law.
"Indebtedness" means, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within one year of the date the respective goods are
delivered; (c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been assumed
by such Person; (d) obligations of such Person under any contract for the
purchase of materials, supplies or other Property or the rendering of services
if such contract (or any related document) requires that payment for such
materials, supplies or other Property or services shall be made regardless of
whether or not delivery of such materials, supplies or other Property is ever
made or tendered or such services are ever rendered; (e) obligations of such
Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for account of such Person
(other than commercial documentary letters of credit); (f) Capital Lease
Obligations of such Person; and (g) Indebtedness of others Guaranteed by such
Person; provided, that Indebtedness of the Guarantor and its Subsidiaries shall
not include obligations of the Guarantor and its Subsidiaries in respect of
unfunded liabilities of the Guarantor in respect of postretirement health and
welfare benefits under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 106 ("Employers' Accounting for
Postretirement Benefits Other Than Pensions") not in excess of $96,000,000 in
the aggregate.
"Indemnitee" has the meaning set forth in Section 10.3(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Loan,
the period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in the applicable Notice
of Interest Rate Election and ending one, two, three or six months thereafter,
as the Borrower may elect in the applicable notice; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Maturity Date shall end on the Maturity Date (determined, for purposes of
Section 2.14, at the commencement of such Interest Period);
(2) with respect to each CD Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice;
PROVIDED that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Maturity Date shall end on the Maturity Date (determined, for purposes of
Section 2.14, at the commencement of such Interest Period);
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date of borrowing specified in the applicable Notice of Borrowing and ending
such whole number of months thereafter (but not less than 1 month) as the
Borrower may elect in accordance with Section 2.3; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date; and
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such number of days thereafter (but not less than 7 days) as the
Borrower may elect in accordance with Section 2.3; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.3.
"Lien" means, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loan" means a Domestic Loan, a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans, Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.7(c).
"Margin Stock" means "margin stock" within the meaning of Regulations
U and X.
"Material Adverse Effect" means a material adverse effect on (a) the
financial condition, operations or business taken as a whole of the Guarantor
and its Subsidiaries, (b) the ability of the Borrower or the Guarantor to
perform its respective obligations hereunder and under the Notes, (c) the
validity or enforceability of this Agreement or of the Notes or (d) the rights
and remedies of the Banks and the Agents hereunder and under the Notes.
"Maturity Date" means the first anniversary of the Termination Date
or, if such day is not a Euro-Dollar Business Day, the next succeeding
Euro-Dollar Business Day PROVIDED that if, at any time before the Termination
Date, the Borrower acquires, outside the ordinary course of business, assets
from any Person for an aggregate purchase price in excess of $10,000,000, the
Maturity Date shall mean the Termination Date, and PROVIDED FURTHER that, if
the Borrower shall for any reason cease to constitute a Wholly-Owned Subsidiary
of the Guarantor, the Maturity Date shall be one Domestic Business Day after
the date of such occurrence.
"Money Market Absolute Rate" has the meaning set forth in Section
2.3(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Administrative Agent; PROVIDED that any Bank may from time to
time by notice to the Borrower and the Administrative Agent designate separate
Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand,
and its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.1).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.3(d)(ii)(C).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.3.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Guarantor
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.2) or a Notice of Money Market Borrowing (as defined in
Section 2.3(f)).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.10.
"Operating Lease Amount" means, at any time, an amount equal to seven
times the amount by which (i) the minimum rental commitments under
non-cancelable operating leases of the Guarantor and its Subsidiaries for the
fiscal year of the Guarantor and its Subsidiaries following the most recent
fiscal year for which audited financial statements are available at such time,
as reflected in the notes to such financial statements, exceed (ii)
$50,000,000.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 10.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means an employee benefit or other plan established or
maintained by the Guarantor or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Quarterly Date" means the last day of March, June, September and
December in each year, the first of which shall be the first such day after the
date of this Agreement; PROVIDED that if any such day is not a Euro-Dollar
Business Day, then such Quarterly Date shall be the next succeeding Euro-Dollar
Business Day (unless such Euro-Dollar Business Day falls in a subsequent
calendar month, in which event such Quarterly Date shall be the next preceding
Euro-Dollar Business Day).
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Regulations U and X" mean, respectively, Regulations U and X of the
Board of Governors of the Federal Reserve System, as in effect from time to
time.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to and excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation, limited
liability company, partnership or other entity of which at least a majority of
the securities or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions of such corporation, partnership or other
entity (irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such corporation,
partnership or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned
or controlled by such Person or one or more Subsidiaries of such Person or by
such Person and one or more Subsidiaries of such Person; unless otherwise
specified, "Subsidiary" means a Subsidiary of the Guarantor.
"Termination Date" means May 21, 1997, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day; PROVIDED
that if the Borrower shall for any reason cease to constitute a Wholly-Owned
Subsidiary of the Guarantor, the Termination Date shall be one Domestic
Business Day after the date of such occurrence.
"Total Capital" means, at any time, Consolidated Net Worth plus Total
Debt.
"Total Debt" means, at any time, the aggregate outstanding principal
amount of all Indebtedness of the Guarantor and its Subsidiaries at such time
(determined on a consolidated basis without duplication in accordance with
GAAP).
"Wholly-Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the
Guarantor.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Guarantor's independent public accountants) with the most recent audited
consolidated financial statements of the Guarantor and its Consolidated
Subsidiaries delivered to the Banks; PROVIDED that, if the Guarantor notifies
the Administrative Agent that the Guarantor wishes to amend any covenant in
Article 5 to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the
Administrative Agent notifies the Guarantor that the Required Banks wish to
amend Article 5 for such purpose), then the Guarantor's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Guarantor
and the Required Banks.
SECTION 1.3. TYPES OF BORROWINGS. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to the
Borrower pursuant to Article 2 on the same date, all of which Loans are of the
same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period. Borrowings are classified for purposes
of this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "Fixed Rate Borrowing" is a Euro-Dollar Borrowing, a CD
Borrowing or a Money Market Borrowing (excluding any such Borrowing of Money
Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.1),
and a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or
by reference to the provisions of Article 2 under which participation therein
is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.1
in which all Banks participate in proportion to their Commitments, while a
"Money Market Borrowing" is a Borrowing under Section 2.3 in which the Bank
participants are determined on the basis of their bids in accordance
therewith).
ARTICLE 2
THE CREDITS
SECTION 2.1. COMMITMENTS TO LEND. During the Revolving Credit
Period, each Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower pursuant to this Section from
time to time in amounts such that the aggregate principal amount of Committed
Loans by such Bank at any one time outstanding shall not exceed the amount of
its Commitment. Each Borrowing under this Section shall be in an aggregate
principal amount of $10,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.2(c)) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, prepay Loans to the extent permitted by
Section 2.12 and reborrow at any time during the Revolving Credit Period under
this Section.
SECTION 2.2. NOTICE OF COMMITTED BORROWING. The Borrower
shall give the Administrative Agent notice (a "Notice of Committed Borrowing")
not later than 10:30 A.M. (New York City time) on (x) the date of each Base
Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing
and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
(A) specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate; and
(iv) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period; and
(B) certifying that each of the conditions precedent to such Borrowing has been
satisfied.
SECTION 2.3. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION.
In addition to Committed Borrowings pursuant to Section 2.1, the Borrower may,
as set forth in this Section, request the Banks during the Revolving Credit
Period to make offers to make Money Market Loans to the Borrower. The Banks
may, but shall have no obligation to, make such offers and the Borrower may,
but shall have no obligation to, accept any such offers in the manner set forth
in this Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto so as to be received not
later than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein, in the case of a
LIBOR Auction or (y) the Domestic Business Day next preceding the date of
Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more
than one Interest Period in a single Money Market Quote Request. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days (or
such other number of days as the Borrower and the Administrative Agent may
agree) of any other Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a
Money Market Quote Request, the Administrative Agent shall send to the Banks by
telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request relates
in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each
Bank may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Administrative Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 10.1 not later
than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day
prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y)
9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is
to be effective); PROVIDED that Money Market Quotes submitted by the
Administrative Agent (or any affiliate of the Administrative Agent) in the
capacity of a Bank may be submitted, and may only be submitted, if the
Administrative Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than (x) one hour prior to the
deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes
prior to the deadline for the other Banks, in the case of an Absolute Rate
Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be
irrevocable except with the written consent of the Administrative Agent given
on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount (w) may be
greater than or less than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were requested, (z)
may be subject to an aggregate limitation as to the principal amount of
Money Market Loans for which offers being made by such quoting Bank may be
accepted,
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the "Money Market
Margin") offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate
of interest per annum (specified to the nearest 1/10,000th of 1%) (the
"Money Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(e) NOTICE TO BORROWER. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is submitted
solely correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Borrower shall notify
the Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the principal amount of each Money Market Borrowing must
be $10,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be; and
(iv) the Borrower may not accept any offer that is described
in subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two
or more Banks with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect of which such
offers are accepted shall be allocated by the Administrative Agent among such
Banks as nearly as possible (in multiples of $1,000,000, as the Administrative
Agent may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determinations by the Administrative Agent of the amounts of
Money Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.4. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon receipt of
a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank
of the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank participating therein shall make available its share
of such Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 10.1.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Banks available to the Borrower at the
Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from
a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsection (b) of this Section and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Administrative Agent, such Bank and the
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section 2.7 and (ii) in the
case of such Bank, the Federal Funds Rate. If such Bank shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.5. NOTES. (a) The Loans of each Bank shall be evidenced
by a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the administrative
Agent, request that its Loans of a particular type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such Loans.
Each such Note shall be in substantially the form of Exhibit hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.1(a), the
Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; PROVIDED that the failure of any Bank to make
any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.6. MATURITY OF LOANS. (a) Each Committed Loan shall
mature, and the principal amount thereof shall be due and payable on the
Maturity Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.7. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day. Such interest shall be payable quarterly in arrears on
each Quarterly Date and, with respect to the principal amount of any Base Rate
Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate
Loan is so converted. Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base
Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of 0.365% plus the Adjusted CD Rate
applicable to such Interest Period; PROVIDED that if any CD Loan or any portion
thereof shall, as a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such portion shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the rate applicable
to Base Rate Loans for such day, PROVIDED that until the end of the Interest
Period applicable to such CD Loan, any such overdue principal shall bear
interest at the higher of the foregoing rate and the sum of 2.365% plus the
Adjusted CD Rate applicable to such Loan at the date such payment was due.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of 0.24% plus the London
Interbank Offered Rate applicable to such Interest Period. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of three months after
the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for
such day, PROVIDED that until the end of the Interest Period applicable to such
Euro-Dollar Loan, any such overdue principal shall bear interest at the higher
of the foregoing rate and the sum of 2.24% plus the London Interbank Offered
Rate applicable to such Loan at the date such payment was due.
(e) Subject to Section 8.1, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.7(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.3. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.3. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof. Any
overdue principal of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the Base Rate for such day.
(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(g) Each Reference Bank agrees to use its best efforts furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.1
shall apply.
SECTION 2.8 FEES. (a) FACILITY FEE. The Borrower shall pay to the
Administrative Agent for the account of Banks ratably a facility fee at the
rate of 0.06% per annum. Such facility fee shall accrue (i) from and including
the Effective Date to but excluding the date of termination of the Commitments
in their entirety, on the daily aggregate amount of the Commitments (whether
used or unused) and (ii) from and including such date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans.
(b) PAYMENTS. Accrued fees under this Section shall be payable
quarterly in arrears on each Quarterly Date until the date of termination of
the Commitments in their entirety (and, if later, the date the Loans shall be
repaid in their entirety).
SECTION 2.9. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Administrative Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $10,000,000 or any
larger multiple of $1,000,000, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amounts of the Loans.
SECTION 2.10. METHOD OF ELECTING INTEREST RATES. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in
each case to the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period, subject
to Section 2.14 in the case of any such conversion or continuation effective
on any day other than the last day of the then current Interest Period
applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or CD Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest Period,
subject to Section 2.14 in the case of any such conversion or continuation
effective on any day other than the last day of the then current Interest
Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Administrative Agent not later than 10:30 A.M.
(New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective (unless
the relevant Loans are to be converted to Domestic Loans of the other type or
are CD Rate Loans to be continued as CD Rate Loans for an additional Interest
Period, in which case such notice shall be delivered to the Administrative
Agent not later than 10:30 A.M. (New York City time) on the second Domestic
Business Day before such conversion or continuation is to be effective). A
Notice of Interest Rate Election may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Group of Loans;
PROVIDED that (i) such portion is allocated ratably among the Loans comprising
such Group and (ii) the portion to which such Notice applies, and the remaining
portion to which it does not apply, are each $10,000,000 or any larger multiple
of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans being converted are to be Fixed Rate
Loans, the duration of the next succeeding Interest Period applicable
thereto; and
(iv) if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of such
additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate
Election shall comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans
on the last day of the then current Interest Period applicable thereto.
(d) An election by the Borrower to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section 2.10 shall
not constitute a "Borrowing" subject to the provisions of Section 3.2.
SECTION 2.11. SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on the
Maturity Date.
SECTION 2.12 OPTIONAL PREPAYMENTS. (a) Subject in the case of any
Fixed Rate Loans to Section 2.14, the Borrower may, upon at least one Domestic
Business Day's notice to the Administrative Agent, prepay the Group of Base
Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.1), upon at least three Domestic Business Days' notice to
the Administrative Agent, prepay any Group of CD Loans, or upon at least three
Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Group
of Euro-Dollar Loans, in each case in whole at any time, or from time to time
in part in amounts aggregating $10,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment
shall be applied to prepay ratably the Loans of the several Banks included in
such Group or Borrowing.
(b) Except as provided in subsection (a) above the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share (if any) of such prepayment and such
notice shall not thereafter be revocable by the Borrower.
SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to Section 10.1. The
Administrative Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Administrative Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Domestic
Loans or of fees shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans or the Money Market LIBOR Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the Money Market Absolute
Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
that the Borrower shall not have so made such payment, each Bank shall repay to
the Administrative Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate.
SECTION 2.14. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than
the last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.7(d), or if the Borrower fails to
borrow or prepay any Fixed Rate Loans after notice has been given to any Bank
in accordance with Section 2.4(a) or 2.12(c), the Borrower shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or conversion or failure to borrow or prepay,
provided that such Bank shall have delivered to the Borrower a certificate as
to the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.15. COMPUTATION OF INTEREST AND FEES. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid or the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.16. REGULATION D COMPENSATION. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of such Bank to
United States residents), and as a result the cost to such Bank (or its
Applicable Lending Office) of making or maintaining its Euro-Dollar Loans is
increased, then such Bank may require the Borrower to pay, contemporaneously
with each payment of interest on the Euro-Dollar Loans, additional interest on
the related Euro-Dollar Loan of such Bank at a rate per annum determined by
such Bank up to but not exceeding the excess of (i) (A) the applicable London
Interbank Offered Rate divided by (B) one MINUS the Euro-Dollar Reserve
Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank
wishing to require payment of such additional interest (x) shall so notify the
Borrower and the Administrative Agent, in which case such additional interest
on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the
place indicated in such notice with respect to each Interest Period commencing
at least three Euro-Dollar Business Days after the giving of such notice and
(y) shall furnish to the Borrower at least five Euro-Dollar Business Days prior
to each date on which interest is payable on the Euro-Dollar Loans an officer's
certificate setting forth in reasonable detail the amount to which such Bank is
then entitled under this Section 2.16 (which shall be consistent with such
Bank's good faith estimate of the level at which the related reserves are
maintained by it).
ARTICLE 3
CONDITIONS
SECTION 3.1. CLOSING. The closing hereunder shall occur upon
receipt by the Administrative Agent of the following documents, each dated the
Closing Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or
before the Closing Date complying with the provisions of Section 2.5;
(b) an opinion of the General Counsel of the Guarantor,
substantially in the form of Exhibit E hereto;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agents, substantially in the form of Exhibit F hereto; and
(d) all documents the Administrative Agent may reasonably request
relating to the existence of the Borrower and the Guarantor, the corporate
authority for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the
Banks of the Closing Date, and such notice shall be conclusive and binding on
all parties hereto.
SECTION 3.2. BORROWINGS. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) the fact that the Closing Date shall have occurred on or prior
to May 24, 1996;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.2 or 2.3, as the case may be;
(c) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate amount
of the Commitments;
(d) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the
Guarantor and the Borrower contained in this Agreement (except those contained
in Section 4.2(c), in Section 4.3(i) and in the last sentence of Section 4.12
hereof) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower and the Guarantor on the date of such Borrowing as to
the facts specified in clauses (c), (d) and (e) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Guarantor and the Borrower represent and warrant that:
SECTION 4.1. CORPORATE EXISTENCE. Each of the Guarantor and its
Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
have a Material Adverse Effect. The Borrower is a Wholly-Owned
Subsidiary of the Guarantor.
SECTION 4.2. FINANCIAL CONDITION. (a) The Guarantor has heretofore
furnished to each of the Banks the consolidated balance sheet of the Guarantor
and its Subsidiaries as at June 30, 1995 and the related consolidated
statements of earnings, cash flows and changes in shareholders' equity of the
Guarantor and its Subsidiaries for the fiscal year ended on said date, with the
opinion thereon of Ernst & Young LLP. All such financial statements fairly
present, in all material aspects, the consolidated financial condition of the
Guarantor and its Subsidiaries, as at said date, and the consolidated results
of their operations for the fiscal year ended on said date, all in accordance
with GAAP.
(b) The Guarantor has heretofore furnished to each of the Banks the
unaudited consolidated balance sheet of the Guarantor and its Subsidiaries as
at December 31, 1995 and the related unaudited consolidated statements of
earnings, cash flows and changes in shareholders' equity of the Guarantor and
its Subsidiaries for the six month period ended on said date. All such
financial statements fairly present, in all material aspects, the consolidated
financial condition of the Guarantor and its Subsidiaries, as at said date, and
the consolidated results of their operations for the six month period ended on
said date, all in accordance with GAAP.
(c) Since December 31, 1995, there has been no material adverse
change, and nothing has occurred that is reasonably likely to result in any
material adverse change, in the consolidated financial condition, operations or
business taken as a whole of the Guarantor and its Subsidiaries from that set
forth in the financial statements referred to in clause (b) above as at the
date referred to therein.
SECTION 4.3. LITIGATION. Except as may be disclosed in regular
periodic reports filed with the Securities and Exchange Commission prior to the
date of this Agreement (copies of which reports have heretofore been furnished
to the Banks), there are no legal or arbitral proceedings, or any proceedings
by or before any governmental or regulatory authority or agency, now pending
or (to the knowledge of the Guarantor) threatened against the Guarantor or any
of its Subsidiaries (i) which, if adversely determined, is reasonably likely to
have a Material Adverse Effect or (ii) which in any manner draws into question
the validity of this Agreement or the Notes.
SECTION 4.4. NO BREACH. None of the execution and delivery
of this Agreement and the Notes, the consummation of the transactions herein
contemplated or compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent under, the charter or
by-laws of the Borrower or the Guarantor, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or governmental authority
or agency, or any agreement or instrument to which the Guarantor or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any
such agreement or instrument.
SECTION 4.5. ACTION. Each of the Guarantor and the Borrower has all
necessary corporate power, authority and legal right to execute, deliver and
perform its obligations under this Agreement and the Notes; the execution,
delivery and performance by each of the Guarantor and the Borrower of this
Agreement and the Notes have been duly authorized by all necessary corporate
action on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and delivered
by each of the Guarantor and the Borrower and constitutes, and each of the
Notes (in the case of the Borrower) when executed and delivered for value will
constitute, its legal, valid and binding obligation, enforceable against each
of the Guarantor and the Borrower (as applicable) in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 4.6. APPROVALS. No authorizations, approvals or consents
of, and no filings or registrations with, any governmental or regulatory
authority or agency, or any securities exchange, are necessary for the
execution, delivery or performance by the Guarantor and the Borrower of this
Agreement or (in the case of the Borrower) the Notes or for the legality,
validity or enforceability hereof.
SECTION 4.7. ERISA. Each Plan, and, to the knowledge of the
Guarantor, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with,
the applicable provisions of ERISA, the Code and any other Federal or State
law, and no event or condition has occurred and is continuing as to which the
Guarantor would be under an obligation to furnish a report to the Banks under
Section 5.1(e) hereof.
SECTION 4.8. TAXES. The Guarantor and its Subsidiaries are members
of an affiliated group of corporations filing consolidated returns for Federal
income tax purposes, of which the Guarantor is the "common parent" (within the
meaning of Section 1504 of the Code) of such group. The Guarantor and its
Subsidiaries have filed all Federal income tax returns and all other material
tax returns that are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by the
Guarantor or any of its Subsidiaries. The charges, accruals and reserves on
the books of the Guarantor and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Guarantor, adequate. The
Guarantor has not given or been requested to give a waiver of the statute of
limitations relating to the payment of Federal, state, local and foreign taxes
or other impositions, the payment of which is reasonably likely to have a
Material Adverse Effect.
SECTION 4.9. INVESTMENT COMPANY ACT. Neither the Guarantor nor any
of its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Guarantor nor any of its Subsidiaries is a "holding company", or an "affiliate"
of a "holding company," or a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
SECTION 4.11. TRUE AND COMPLETE DISCLOSURE. The information,
reports, financial statements, exhibits and schedules furnished in writing by
or on behalf of the Guarantor or the Borrower to the Administrative Agent or
any Bank in connection with the negotiation, preparation or delivery of this
Agreement or included herein or delivered pursuant hereto, when taken as a
whole do not contain any untrue statement of material fact or omit to state any
material fact necessary to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Guarantor and its
Subsidiaries to Administrative Agent or any Bank in connection with this
Agreement and the transactions contemplated hereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to the Guarantor or the Borrower that could
have a Material Adverse Effect that has not been disclosed herein or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Banks for use in connection with the transactions
contemplated hereby.
SECTION 4.12. ENVIRONMENTAL MATTERS. In the ordinary course of its
business, the Guarantor conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Guarantor
and its Subsidiaries, in accordance with customary industry practice. On the
basis of this review, the Guarantor has reasonably concluded that the costs of
compliance with Environmental Laws are unlikely to have a Material Adverse
Effect.
ARTICLE 5
COVENANTS
The Guarantor and the Borrower agree that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 5.1. FINANCIAL STATEMENTS, ETC. The Guarantor will deliver
to each of the Banks:
(a) as soon as available and in any event within 60 days after
the end of each of the first three quarterly fiscal periods of each fiscal year
of the Guarantor, consolidated statements of earnings, cash flows and changes
in shareholders' equity of the Guarantor and its Subsidiaries for such period
and for the period from the beginning of the respective fiscal year to the end
of such period, and the related consolidated balance sheet of the Guarantor and
its Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the corresponding
period in the preceding fiscal year, accompanied by a certificate of a senior
financial officer of the Guarantor, which certificate shall state that said
consolidated financial statements fairly present, in all material respects, the
consolidated financial condition and results of operations of the Guarantor and
its Subsidiaries, in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to normal
year-end audit adjustments);
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Guarantor, consolidated statements of earnings,
cash flows and changes in shareholders' equity of the Guarantor and its
Subsidiaries for such fiscal year and the related consolidated balance sheet of
the Guarantor and its Subsidiaries as at the end of such fiscal year, setting
forth in each case in comparative form the corresponding consolidated figures
for the preceding fiscal year, and accompanied by an opinion thereon of
independent certified public accountants of recognized national standing, which
opinion shall state that said consolidated financial statements fairly present,
in all material respects, the consolidated financial condition and results of
operations of the Guarantor and its Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted accounting principles;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Guarantor shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Guarantor generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within ten days after the
Guarantor knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a senior financial officer of the Guarantor
setting forth details respecting such event or condition and the action, if
any, that the Guarantor or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or given
to PBGC by the Guarantor or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section 412 of
the Code or Section 302 of ERISA, including, without limitation, the failure to
make on or before its due date a required installment under Section 412(m) of
the Code or Section 302(e) of ERISA, shall be a reportable event regardless of
the issuance of any waivers in accordance with Section 412(d) of the Code); and
any request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the Guarantor or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Plan, or the receipt by the Guarantor or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken by PBGC with respect
to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Guarantor or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the Guarantor
or any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Guarantor or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Guarantor or an ERISA Affiliate fails to timely provide security to the Plan in
accordance with the provisions of said Sections;
(f) promptly after the Guarantor or Borrower knows or has reason to
believe that any Default has occurred, a notice of such Default describing the
same in reasonable detail and, together with such notice or as soon thereafter
as possible, a description of the action that the Guarantor or the Borrower has
taken or proposes to take with respect thereto; and
(g) from time to time such other information regarding the financial
condition, operations, business or prospects of the Guarantor or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and
any reports or other information required to be filed under ERISA) as any Bank
or the Agent may reasonably request.
The Guarantor will furnish to each Bank, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Guarantor (i) to the effect
that no Default has occurred and is continuing (or, if any Default has occurred
and is continuing, describing the same in reasonable detail and describing the
action that the Guarantor has taken or proposes to take with respect thereto)
and (ii) setting forth in reasonable detail the computations necessary to
determine whether the Guarantor is in compliance with Sections 5.8 and 5.9
hereof as of the end of the respective quarterly fiscal period or fiscal year.
SECTION 5.2. LITIGATION. The Guarantor will promptly give to each
Bank notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Guarantor or any of its Subsidiaries, except proceedings which, if adversely
determined, would not have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Guarantor will give to each Bank notice of the
assertion of any Environmental Claim by any Person against, or with respect to
the activities of, the Guarantor or any of its Subsidiaries and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation which, if adversely determined, would not have a Material
Adverse Effect.
SECTION 5.3. EXISTENCE, ETC. The Guarantor will, and will cause each
of its Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (PROVIDED that nothing
in this Section 5.3 shall prohibit any transaction expressly permitted under
Sections 5.6 and 5.7 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of which
is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business
in good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP; and
(f) subject to Section 10.11 hereof, permit representatives of any
Bank, during normal business hours, to examine, copy and make extracts from
its books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Bank.
SECTION 5.4 INSURANCE. The Guarantor will, and will cause each of
its Subsidiaries to, keep insured by financially sound and reputable insurers
all Property of a character usually insured by corporations engaged in the same
or similar business similarly situated against loss or damage of the kinds and
in the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations.
SECTION 5.5 LIMITATION ON LIENS. The Guarantor will not, nor will
it permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its Property, whether now owned or hereafter acquired,
except:
(a) Liens in existence on the date hereof securing Indebtedness
outstanding on the date hereof in an aggregate principal amount not exceeding
$50,000,000;
(b) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good faith
and by appropriate proceedings if, unless the amount thereof is not material
with respect to it or its financial condition, adequate reserves with respect
thereto are maintained on the books of the Guarantor or the affected
subsidiaries, as the case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings;
(d) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Property or minor imperfections in title thereto which, in the aggregate,
are not material in amount, and which do not in any case materially detract
from the value of the Property subject thereto or interfere with the ordinary
conduct of the business of the Guarantor or any of its Subsidiaries;
(g) Liens on Property of any corporation which becomes a Subsidiary
of the Guarantor after the date of this Agreement; PROVIDED that such Liens are
in existence at the time such corporation becomes a Subsidiary of the
Guarantor, were not created in anticipation thereof and do not at any time
secure any Indebtedness other than Indebtedness which was secured by such Liens
at the time such corporation became a Subsidiary;
(h) Liens upon real and/or tangible personal Property acquired
after the date hereof (by purchase, construction or otherwise) by the Guarantor
or any of its Subsidiaries, each of which Liens either (A) existed on such
Property before the time of its acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
the cost of construction) of such Property; PROVIDED that no such Lien shall
extend to or cover any Property of the Guarantor or such Subsidiary other than
the Property so acquired and improvements thereon;
(i) Liens incidental to the conduct of its business or the ownership
of its Property which were not incurred in connection with the borrowing of
money, the obtaining of credit or Derivatives Obligations, and which do not in
the aggregate materially detract from the value of its Property or materially
impair the use thereof in the operation of its business;
(j) Liens arising from judgments, decrees or attachments not in
excess of $25,000,000 in the aggregate and in circumstances not constituting an
Event of Default under Section 6.1(h) hereof;
(k) leases or subleases granted to others otherwise permitted by
this Agreement;
(l) UCC financing statements and other similar filings regarding
leases and other Liens otherwise permitted by this Agreement;
(m) rights to receive income in connection with consignment
arrangements or licensing agreements in the ordinary course of the Guarantor's
or such Subsidiary's business, as the case may be;
(n) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $50,000,000; and
(o) any extension, renewal or replacement of the foregoing,
PROVIDED, however, that the Liens permitted hereunder shall not be spread to
cover any additional Indebtedness or Property (other than a substitution of
like Property).
Notwithstanding the foregoing, nothing in this Section 5.5 shall
restrict the ability of the Guarantor or any of its Subsidiaries to sell or
assign its accounts receivable.
SECTION 5.6. MERGERS, ETC. Neither the Guarantor nor the Borrower
will, nor will either permit any of their respective Subsidiaries to, (a) merge
or consolidate with or into any Person, (b) convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of the assets (whether now owned or
hereafter acquired) of the Guarantor and its Subsidiaries or of the Borrower
and its Subsidiaries, in each case taken as a whole, to any Person, or (c)
acquire all or substantially all of the assets of, any Person, except that (i)
any Subsidiary of the Guarantor may merge or consolidate with or into, or
transfer assets to, or acquire assets of, any other Subsidiary of the
Guarantor, (ii) any Subsidiary of the Guarantor may merge or consolidate with
or into, or transfer assets to, the Guarantor and (iii) the Guarantor may merge
with or consolidate into, or acquire assets of, and any Subsidiary of the
Guarantor may merge or consolidate with or into, or acquire assets of, any
other Person, PROVIDED in each case that, immediately after giving effect to
such proposed transaction, no Default would exist and in the case of any such
proposed transaction to which either the Guarantor or the Borrower is a party,
it is the surviving corporation.
SECTION 5.7. CHANGE IN NATURE OF BUSINESS. The Guarantor will not
(i) make any material change in the nature of the business of the Guarantor and
its Subsidiaries taken as a whole as carried on as of the date hereof, or (ii)
acquire, or permit any of its Subsidiaries to acquire, businesses which result
in any material change in the nature of the business of the Guarantor and its
Subsidiaries taken as a whole as carried on as of the date hereof; PROVIDED,
HOWEVER, that the Guarantor or any of its Subsidiaries may engage in or acquire
a business of a nature substantially related to the nature of its business as
carried on as of the date hereof, and PROVIDED, FURTHER, in each case that,
immediately after giving effect to such proposed transaction, no Default would
exist.
SECTION 5.8. TOTAL DEBT TO TOTAL CAPITAL RATIO. The Guarantor will
not permit the ratio of (a) the sum of (x) Total Debt plus (y) the Operating
Lease Amount at any time to (b) the sum of (x) Total Capital at such time plus
(y) the Operating Lease Amount at such time to exceed 0.60 to 1.
SECTION 5.9. INDEBTEDNESS OF SUBSIDIARIES. The Guarantor will not
permit the aggregate Indebtedness of all of its Subsidiaries (exclusive of
Indebtedness owing to the Guarantor or a Wholly-Owned Subsidiary) to exceed at
any time to and including the first anniversary of the date of this Agreement
35% of Total Capital. Thereafter, the Guarantor will not permit the aggregate
Indebtedness of all of its Subsidiaries (exclusive of Indebtedness owing to the
Guarantor or a Wholly-Owned Subsidiary) to exceed at any time (i) 25% of Total
Capital, if the ratio of Total Debt to Total Capital is equal to or less than
0.50 to 1 at such time; and (ii) 20% of Total Capital, if the ratio of Total
Debt to Total Capital is greater than 0.50 to 1 at such time.
SECTION 5.10 TRANSACTIONS WITH AFFILIATES. Except as expressly
permitted by this Agreement, the Guarantor will not, nor will it permit any of
its Subsidiaries to, directly or indirectly enter into transactions with any
Affiliates unless the monetary or business consideration arising therefrom
would be substantially as advantageous to the Guarantor and its Subsidiaries as
the monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
SECTION 5.11. USE OF PROCEEDS. The Borrower will use the proceeds
of the Loans hereunder solely for general corporate purposes (in compliance
with all applicable legal and regulatory requirements); provided that neither
any Agent nor any Bank shall have any responsibility as to the use of any of
such proceeds. No part of the proceeds of any extension of credit hereunder
will be used to buy or carry any Margin Stock.
SECTION 5.12. ENVIRONMENTAL LAWS. The Guarantor will, and will
cause each of its Subsidiaries to, comply in all material respects with the
requirements of all applicable Environmental Laws and all ordinances and
regulatory and administrative authorities with respect thereto, and shall not
permit or suffer any of its Subsidiaries to, generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process
Hazardous Materials other than in the ordinary course of business and in
compliance in all material respects with applicable Environmental Laws, and
shall not, and shall not permit or suffer any of its Subsidiaries to, cause or
permit, as a result of any intentional or unintentional act or omission on the
part of the Guarantor or any Subsidiary thereof, the installation or placement
of Hazardous Materials in violation of or actionable under in any material
respect applicable Environmental Laws onto any of its Property or suffer the
presence of Hazardous Materials in violation of or actionable under in any
material respect applicable Environmental Laws on any of its Property. The
Guarantor shall, and shall cause each of its Subsidiaries to, promptly
undertake and diligently pursue to completion any remedial clean-up action
required of the Guarantor or any Subsidiary under applicable Environmental
Laws in the event of any release of Hazardous Materials.
SECTION 5.13. MOST FAVORED LENDER. The Guarantor will not and will
not permit any Subsidiary to (a) enter into any indenture, agreement or other
instrument under which any Indebtedness for borrowed money in excess of
$15,000,000 for any such indenture, agreement or instrument (or series of
related agreements or instruments) of the Guarantor or of any Subsidiary may
be issued (a "Restricted Agreement"), or (b) agree to any amendment, waiver,
consent, modification, refunding, refinancing or replacement of any Restricted
Agreement, in either case, with terms the effect of which is to (i) include a
Covenant which imposes a restriction, limitation or obligation in favor of
another lender not imposed in favor of the Banks by this Agreement, or (ii)
revise or alter any Covenant contained therein the effect of which is to
impose a restriction, limitation or obligation in favor of another lender not
imposed in favor of the Banks by this Agreement, unless the Guarantor or such
Subsidiary, as the case may be, concurrently (x) notifies the Banks and the
Administrative Agent thereof and (y) incorporates herein such additional,
altered or revised Covenant. If the Administrative Agent at the time so elects
by notice to the Guarantor and the Banks, the incorporation of each such
additional Covenant shall be deemed to occur automatically without any further
action or the execution of any additional document by any of the parties to
this Agreement. If the Administrative Agent does not elect to effect such an
automatic incorporation, the Administrative Agent shall promptly tender to the
Guarantor and the Borrower for execution by them an amendment (executed by the
Administrative Agent) incorporating such additional Covenant, and shall
promptly deliver a copy of such amendment to the Banks.
ARTICLE 6
DEFAULTS
SECTION 6.1. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) The Borrower and the Guarantor shall: default in the payment of
any principal of any Loan when due (whether at stated maturity or at mandatory
or optional prepayment); or default in the payment of any interest on any
Loan, any fee or any other amount payable by it hereunder when due and such
default shall have continued unremedied for five days; or
(b) The Guarantor shall default beyond any applicable grace period,
or, in the case of any Derivatives Obligations for which no grace period is
otherwise provided, beyond five days, in the payment when due of any principal
of or interest on any Indebtedness (other than the Indebtedness hereunder or
under the Notes) aggregating $15,000,000 or more, or in the payment when due of
amounts exceeding $15,000,000 in the aggregate for the payment or
collateralization of Derivatives Obligations; or any event specified in any
note, agreement, indenture or other document evidencing or relating to any such
Indebtedness or any event specified in any instrument or agreement governing
such Derivatives Obligations shall occur if the effect of such event is (or,
with the giving of notice or the passage of time or both, would be) to cause,
or to permit the holder or holders of such Indebtedness (or a trustee or agent
on behalf of such holder or holders) to cause, such Indebtedness to become due,
or to be prepaid in full (whether by redemption, purchase, offer to purchase or
otherwise), prior to its stated maturity or to have the interest rate thereon
reset to a level so that securities evidencing such Indebtedness trade at a
level specified in relation to the par value thereof or, in the case of an
instrument or agreement governing such Derivatives Obligations, to permit the
payments owing under such instrument or agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed
made herein (or in any modification or supplement hereto) by the Guarantor or
the Borrower, or any certificate furnished to any Bank or the Administrative
Agent pursuant to the provisions hereof, shall prove to have been false or
misleading as of the time made or furnished in any material respect; or
(d) The Guarantor shall default in the performance of its
obligations under Sections 5.1(f), 5.5 through 5.9 (inclusive), or 5.13 hereof;
or either of the Borrower or the Guarantor shall default in the performance of
any of its other obligations in this Agreement and such default shall continue
unremedied for a period of 30 days after notice thereof to the Borrower by the
Administrative Agent at the request of any Bank; or
(e) The Guarantor or any of its Subsidiaries shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Guarantor or any of its Subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a substantial
part of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or readjustment of debts, (v) fail to controvert in
a timely and appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of the Guarantor or any of its Subsidiaries, in any
court of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Guarantor or such Subsidiary or of all or any
substantial part of its Property, or (iii) similar relief in respect of the
Guarantor or such Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more days; or an order for relief
against the Guarantor or such Subsidiary shall be entered in an involuntary
case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in
excess of $15,000,000 in the aggregate shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Guarantor or any of its Subsidiaries and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within 30 days from the date of entry thereof and the
Guarantor or the relevant Subsidiary shall not, within said period of 30 days,
or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) An event or condition specified in Section 5.1(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a result
of such event or condition, together with all other such events or conditions,
the Guarantor or any ERISA Affiliate shall incur or in the opinion of the
Required Banks shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) which would
constitute, in the determination of the Required Banks, a Material Adverse
Effect; or
(j) Any Person or two or more Persons acting in concert shall have
acquired, in one transaction or in a series of related transactions, beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or indirectly,
of securities of the Guarantor (or other securities convertible into such
securities) representing 40% or more of the combined voting power of the
Guarantor then outstanding securities entitled to vote in the election of
directors (other than securities having such power only by reason of the
happening of a contingency); or
(k) at any time any obligation of the Guarantor under Article 9
shall for any reason cease to be in full force and effect, or the Guarantor
shall so assert in writing;
THEREUPON: (1) in the case of an Event of Default other than one referred to
in clause (f) or (g) of this Section 6.1 with respect to the Guarantor or the
Borrower, (A) the Administrative Agent, upon request of the Banks having at
least 51% of the aggregate amount of the Commitments, shall, by notice to the
Borrower, terminate the Commitments and they shall thereupon terminate, and (B)
the Administrative Agent, upon request of Banks holding at least 51% of the
aggregate unpaid principal amount of the Loans, shall, by notice to the
Borrower, declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower hereunder
and under the Notes to be forthwith due and payable, whereupon such amounts
shall be immediately due and payable without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Borrower; and (2) in the case of the occurrence of an Event of Default referred
to in clause (f) or (g) of this Section 6.1 with respect to the Guarantor or
the Borrower, the Commitments shall automatically be terminated and the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Borrower hereunder and under the Notes
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
6.2. NOTICE OF DEFAULT. The Administrative Agent shall give notice
to the Borrower under Section 6.1(d) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENTS
SECTION 7.1. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers under this
Agreement and the Notes as are delegated to Administrative Agent by the terms
hereof or thereof, together with all such powers as are reasonably incidental
thereto.
SECTION 7.2. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of
New York and Citibank, N.A. shall each have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from exercising
the same as though it were not an Agent, and Morgan Guaranty Trust Company of
New York and Citibank, N.A. and their respective affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Guarantor or any Subsidiary or affiliate of the Guarantor as if it were not an
Agent hereunder.
SECTION 7.3. ACTION BY AGENT. The obligations of each Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, no Agent shall be required to take any action with
respect to any Default, except as expressly provided in Article 6.
SECTION 7.4. CONSULTATION WITH EXPERTS. Each Agent may consult with
legal counsel (who may be counsel for the Guarantor or the Borrower),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.5 LIABILITY OF AGENT. Neither Agent nor any of its
affiliates nor any of the respective directors, officers, agents or employees
of the foregoing shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful misconduct.
Neither Agent nor any of its affiliates nor any of the respective directors,
officers, agents or employees of the foregoing shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Guarantor or the Borrower; (iii) the satisfaction of any
condition specified in Article 3, except in the case of the Administrative
Agent receipt of items required to be delivered to such Agent; or (iv) the
validity, effectiveness or genuineness of this Agreement, the Notes or any
other instrument or writing furnished in connection herewith. Neither Agent
shall incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
SECTION 7.6. INDEMNIFICATION. Each Bank shall, ratably in
accordance with its Commitment, indemnify each Agent, its affiliates and the
respective directors, officers, agents and employees of the foregoing (to the
extent not reimbursed by the Borrower or the Guarantor) against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.7. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon either Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the either
Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking any action under this Agreement.
SECTION 7.8. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may resign at any time by giving notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall have the right
to appoint a successor Administrative Agent reasonably acceptable to the
Borrower. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Administrative Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of its appointment as Administrative
Agent, as, hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was
Administrative Agent.
SECTION 7.9. AGENTS FEES. The Borrower shall pay to each Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and such Agent.
SECTION 7.10. DOCUMENTATION AGENT AND CO-AGENTS. Nothing in this
Agreement shall impose upon the Documentation Agent or any Co-Agent, in their
respective capacities as such, any duty or obligation whatsoever.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any CD
Loan, Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50%
or more of the aggregate principal amount of the affected Loans advise the
Administrative Agent that the Adjusted CD Rate or the London Interbank Offered
Rate, as the case may be, as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their CD Loans
or Euro-Dollar Loans, as the case may be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may
be, or to continue or convert outstanding Loans as or into CD Loans or
Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each
outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted
into a Base Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Administrative Agent at
least two Domestic Business Days before the date of any Fixed Rate Borrowing
for which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing,
such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such
Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from and
including the first day to but excluding the last day of the Interest Period
applicable thereto at the Base Rate for such day.
SECTION 8.2. ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative
Agent, the Administrative Agent shall forthwith give notice thereof to the
other Banks and the Borrower, whereupon until such Bank notifies the Borrower
and the Administrative Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be
suspended. Before giving any notice to the Administrative Agent pursuant to
this Section, such Bank shall designate a different Euro-Dollar Lending Office
if such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
SECTION 8.3. INCREASED COST AND REDUCED RETURN. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to
make Committed Loans or (y) the date of the related Money Market Quote, in the
case of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify
or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System,
but excluding (i) with respect to any CD Loan any such requirement included in
an applicable Domestic Reserve Percentage and (ii) with respect to any
Euro-Dollar Loan any such requirement with respect to which such Bank is
entitled to compensation during the relevant Interest Period under Section
2.16), special deposit, insurance assessment (excluding, with respect to any CD
Loan, any such requirement reflected in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable Lending Office) or shall impose
on any Bank (or its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate
Loans and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan, or to reduce the amount of any sum received or receivable by such Bank
(or its Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be material, then, within
15 days after demand by such Bank (with a copy to the Administrative Agent),
the Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation pursuant to this
Section but in any event within 45 days, after such Bank obtains actual
knowledge thereof; PROVIDED that (i) if any Bank fails to give such notice
within 45 days after it obtains actual knowledge of such an event, such Bank
shall, with respect to compensation payable pursuant to this Section 8.3 in
respect of any costs resulting from such event, only be entitled to payment
under this Section 8.3 for costs incurred from and after the date 45 days prior
to the date that such Bank does give such notice and (ii) each Bank will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth in reasonable detail the additional amount or amounts to be paid it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, such Bank shall use reasonable averaging and attribution methods.
SECTION 8.4. TAXES. (a) For the purposes of this Section 8.4, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower or the Guarantor pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, EXCLUDING (i) in the case of each Bank and
Agent, taxes imposed on its income, and franchise or similar taxes imposed on
it, by a jurisdiction under the laws of which such Bank or such Agent (as the
case may be) is organized or in which its principal executive office is located
or, in the case of each Bank, in which its Applicable Lending Office is located
and (ii) in the case of each Bank, any United States withholding tax imposed on
such payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note.
(b) Any and all payments by the Borrower and the Guarantor to or for
the account of any Bank or the Administrative Agent hereunder or under any Note
shall be made without deduction for any Taxes or Other Taxes; provided that, if
the Borrower or the Guarantor (as the case may be) shall be required by law to
deduct any Taxes or Other Taxes from any such payments, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
8.4) such Bank or such Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower or Guarantor (as applicable) shall make such deductions, (iii) the
Borrower or Guarantor (as applicable) shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower or Guarantor (as applicable) shall furnish to the
Administrative Agent, at its address referred to in Section 10.1, the original
or a certified copy of a receipt evidencing payment thereof.
(c) Each of the Borrower and the Guarantor agrees to indemnify each
Bank and each Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 8.4) paid by such Bank or
such Agent (as the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be paid within 15 days after such Bank or such Agent (as
the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service Form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Bank is entitled to benefits under an income tax treaty to which the
United States is a party which exempts the Bank from United States withholding
tax or reduces the rate of withholding tax on payments of interest for the
account of such Bank or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States.
(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.4(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.4(b) or (c) with respect to Taxes imposed by the United States; provided that
if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.4, then such Bank will
change the jurisdiction of its Applicable Lending Office if, in the judgment of
such Bank, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank.
SECTION 8.5. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Bank to make, or convert outstanding Loans
to, Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any
Bank has demanded compensation under Section 8.3 or 8.4 with respect to its CD
Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Administrative Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may
be, shall instead be Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks); and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.6. SUBSTITUTION OF BANK. Provided that no Default shall
have occurred and be continuing, if (i) the obligation of any Bank to make
Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any Bank
has demanded compensation under Section 8.3 or 8.4 the Borrower shall have the
right to designate an Assignee which is not the Guarantor or an Affiliate to
purchase for cash, pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit G hereto, the outstanding Loans and
Commitment of such Bank and to assume all of such Bank's other rights and
obligations hereunder without recourse to or warranty by such Bank, for a
purchase price equal to the principal amount of all of such Bank's outstanding
Loans plus any accrued but unpaid interest thereon and the accrued but unpaid
facility fees in respect of such Bank's Commitment hereunder plus such amount,
if any, as would be payable pursuant to Section 2.14 if the outstanding Loans
of such Bank were prepaid in their entirety on the date of consummation of such
assignment, plus the compensation then due and payable pursuant to Sections 8.3
and 8.4.
ARTICLE 9
GUARANTY
SECTION 9.1. THE GUARANTY. The Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to this Agreement, and the full and punctual payment
of all other amounts payable by the Borrower under this Agreement. Upon
failure by the Borrower to pay punctually any such amount, the Guarantor shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in this Agreement.
SECTION 9.2. GUARANTY UNCONDITIONAL. The obligations of the
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower under this Agreement or any
Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this Agreement
or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Borrower under this
Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership of
the Borrower, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower or its assets or any resulting release or
discharge of any obligation of the Borrower contained in this Agreement or
any Note;
(v) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, either Agent, any Bank
or any other Person, whether in connection herewith or any unrelated
transactions, PROVIDED that nothing herein shall prevent the assertion of
any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Borrower for any reason of this Agreement or any Note, or any provision of
applicable law or regulation purporting to prohibit the payment by the
Borrower of the principal of or interest on any Note or any other amount
payable by the Borrower under this Agreement; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, either Agent, any Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of or defense to the
Guarantor's obligations or the Borrower's obligations, as the case may be,
hereunder.
SECTION 9.3. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Borrower under this Agreement shall have been paid in full. If at any time any
payment of the principal of or interest on any Note or any other amount payable
by the Borrower under this Agreement is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, the Guarantor's obligations hereunder with respect to such
payment shall be reinstated as though such payment had been due but not made at
such time.
SECTION 9.4. WAIVER BY THE GUARANTOR. The Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Borrower or any other Person.
SECTION 9.5. SUBROGATION. Upon making any payment with respect to
the Borrower hereunder, the Guarantor shall be subrogated to the rights of the
payee against the Borrower with respect to such payment; PROVIDED that the
Guarantor shall not enforce any payment by way of subrogation until all amounts
of principal of and interest on the Notes and all other amounts payable by the
Borrower under this Agreement have been paid in full.
SECTION 9.6. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Borrower under this Agreement or the Notes
is stayed upon the insolvency, bankruptcy or reorganization of the Borrower,
all such amounts otherwise subject to acceleration under the terms of this
Agreement shall nonetheless be payable by the Guarantor hereunder forthwith on
demand by the Administrative Agent made at the request of the requisite
proportion of the Banks specified in Article 6 of this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (a) in the case of the Borrower, the Guarantor, or either Agent, at its
address, facsimile number or telex number set forth on the signature pages
hereof, (b) in the case of any Bank, at its address, facsimile number or telex
number set forth in its Administrative Questionnaire or (c) in the case of any
party, such other address, facsimile number or telex number as such party may
hereafter specify for the purpose by notice to the Administrative Agent, the
Guarantor and the Borrower. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the appropriate answerback is
received, (ii) if given by facsimile transmission, when transmitted to the
facsimile number specified in this Section and confirmation of receipt is
received, (iii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iv) if given by any other means, when delivered at the address
specified in this Section; PROVIDED that notices to the Administrative Agent
under Article 2 or Article 8 shall not be effective until received.
SECTION 10.2. NO WAIVERS. No failure or delay by either Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.3 EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay
(i) all out-of-pocket expenses of each Agent, including fees and disbursements
of special counsel for the Agents, in connection with the preparation and
administration of this Agreement, any waiver or consent hereunder or any
amendment hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs and is continuing, all out-of-pocket expenses incurred
by each Agent and each Bank, including (without duplication) the fees and
disbursements of outside counsel and the allocated cost of inside counsel, in
connection with collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower and the Guarantor jointly and severally agree to
indemnify each Agent and each Bank, their respective affiliates and the
respective directors, officers, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including,
without limitation, the reasonable fees and disbursements of counsel and
settlement costs, which may be incurred by such Indemnitee in connection with
any investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or proposed use of proceeds
of Loans hereunder; PROVIDED that no Indemnitee shall have the right to be
indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 10.4. SHARING OF SET-OFFS. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participation in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; PROVIDED that nothing in this Section shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of the
Borrower or the Guarantor other than its indebtedness hereunder. Each of the
Borrower and the Guarantor agrees, to the fullest extent it may effectively do
so under applicable law, that any holder of a participation in a Note, whether
or not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower or the Guarantor (as the case may be) in the amount of such
participation.
SECTION 10.5. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower, the Guarantor and the
Required Banks (and, if the rights or duties of either Agent are affected
thereby, by such Agent); PROVIDED that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the Commitment of any
Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan, or any fees hereunder (iii) postpone the date
fixed for any payment of principal of or interest on any Loan, or any fees
hereunder or for termination of any Commitment (iv) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Notes, or
the number of Banks, which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement or
(v) release the Guarantor from any of its obligations under, or modify in any
material respect the provisions of, Article 9; and PROVIDED FURTHER that, at
the option of the Administrative Agent, an additional, altered or revised
Covenant shall be incorporated herein pursuant to Section 5.13 either (i)
automatically or (ii) by an amendment signed solely by the Administrative
Agent, the Guarantor and the Borrower.
SECTION 10.6. SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; PROVIDED that such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii) or (iii) of Section 10.5
without the consent of the Participant. Each of the Borrower and the Guarantor
agrees that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Section 2.16 and Article 8 with
respect to its participating interest. An assignment or other transfer which
is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to
an initial Commitment of not less than $10,000,000, unless a lower amount is
agreed to by the Borrower and the Administrative Agent) of all, of its rights
and obligations under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an Assignment and Assumption
Agreement in substantially the form of Exhibit G hereto executed by such
Assignee and such transferor Bank, with (and subject to) the subscribed consent
of the Borrower, which shall not be unreasonably withheld, and the
Administrative Agent; PROVIDED that if an Assignee is an affiliate of such
transferor Bank, no such consent shall be required; and PROVIDED FURTHER that
such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Administrative Agent
and the Borrower shall make appropriate arrangements so that, if required, a
new Note is issued to the Assignee. In connection with any such assignment,
the transferor Bank shall pay to the Administrative Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Administrative Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.4.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.3 or
8.4 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 10.7. COLLATERAL. Each of the Banks represents to each of
the Agents and each of the other Banks that it in good faith is not relying
upon any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 10.8. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower and the Guarantor hereby
submit to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. The Borrower and
the Guarantor irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 10.9. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the
Administrative Agent of counterparts hereof signed by each of the parties
hereto (or, in the case of any party as to which an executed counterpart shall
not have been received, receipt by the Administrative Agent in form
satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 10.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
GUARANTOR, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 10.11 CONFIDENTIALITY. The Agents and each Bank agree to
keep any information delivered or made available by the Borrower or the
Guarantor pursuant to this Agreement confidential from anyone other than
persons employed or retained by it who are engaged in evaluating, approving,
structuring or administering the credit facility contemplated hereby; PROVIDED
that nothing herein shall prevent any Bank from disclosing such information (a)
to any other Bank or to an Agent, (b) to any other Person if reasonably
incidental to the administration of the credit facility contemplated hereby,
(c)upon the order of any court or administrative agency, (d) upon the request
or demand of any regulatory agency or authority, (e) which had been publicly
disclosed other than as a result of a disclosure by an Agent or Bank
prohibited by this Agreement, (f) in connection with any litigation to which an
Agent or Bank or its subsidiaries or Parent may be a party, (g) to the extent
necessary in connection with the exercise of any remedy hereunder, (h) to such
Bank's or the Agents' legal counsel and independent auditors and (i) subject
to provisions substantially similar to those contained in this Section, to any
actual or proposed Participant or Assignee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
FRIES & FRIES, INC.,
as Borrower
By__________________________
Name:
Title:
Address:
Facsimile: (708) 949-3756
MALLINCKRODT GROUP INC.,
as Guarantor
By__________________________
Name:
Title:
Address:
Facsimile:
<PAGE>
Commitments
$49,500,000 CITIBANK, N.A.
By__________________________
Name:
Title:
$49,500,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By__________________________
Name:
Title:
$37,000,000 BANK OF AMERICA ILLINOIS
By__________________________
Name:
Title:
$37,000,000 THE CHASE MANHATTAN BANK, N.A.
By__________________________
Name:
Title:
$37,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By__________________________
Name:
Title:
$26,000,000 ABN-AMRO BANK N.V., CHICAGO BRANCH
By__________________________
Name:
Title:
By__________________________
Name:
Title:
$26,000,000 BANCA COMMERCIALE ITALIANA
By__________________________
Name:
Title:
By__________________________
Name:
Title:
$26,000,000 BANK OF IRELAND
By__________________________
Name:
Title:
$26,000,000 THE BANK OF NOVA SCOTIA
By__________________________
Name:
Title:
$26,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.
CHICAGO BRANCH
By__________________________
Name:
Title:
$26,000,000 BANQUE PARIBAS
By__________________________
Name:
Title:
$26,000,000 THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By__________________________
Name:
Title:
$26,000,000 CIBC INC.
By__________________________
Name:
Title:
$26,000,000 DEUTSCHE AG
CHICAGO AND/OR CAYMAN ISLANDS BRANCHES
By__________________________
Name:
Title:
By__________________________
Name:
Title:
$26,000,000 THE FUJI BANK, LIMITED
By__________________________
Name:
Title:
$26,000,000 MELLON BANK, N.A.
By__________________________
Name:
Title:
$26,000,000 SOCIETE GENERALE
By__________________________
Name:
Title:
$26,000,000 THE SUMITOMO BANK, LTD.
By__________________________
Name:
Title:
$26,000,000 UNION BANK OF SWITZERLAND
By__________________________
Name:
Title:
By__________________________
Name:
Title:
$26,000,000 YASUDA TRUST & BANKING CO., LTD.
CHICAGO BRANCH
By__________________________
Name:
Title:
_________________
Total Commitments
$600,000,000
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By__________________________
Name:
Title:
60 Wall Street
New York, New York 10260
Telex number: 177615 MGT UT
Facsimile number:(212) 648-5336
CITIBANK, N.A.,
as Documentation Agent
By__________________________
Name:
Title:
399 Park Avenue
New York, New York 10043
Facsimile number: (212) 826-2371
<PAGE>
EXHIBIT A - Note
NOTE
New York, New York
____________,_____
For value received, Fries & Fries, Inc. (the "Borrower"), promises to pay
to the order of (the "Bank"), for the account of its Applicable Lending Office,
the unpaid principal amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the maturity date
provided for in the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; PROVIDED that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in the $600,000,000 Credit
Agreement dated as of May 22, 1996 among the Borrower, Mallinckrodt Group Inc.,
as Guarantor, the banks party thereto from time to time, Morgan Guaranty Trust
Company of New York, as Administrative Agent and Citibank, N.A., as
Documentation Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment hereof and the acceleration of the maturity hereof.
FRIES & FRIES, INC.
By____________________
Name:
Title:
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Type Amount of
of of Maturity Principal Notation
Date Loan Loan Date Repaid Made By
---- ------ ---- -------- --------- --------
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
<PAGE>
EXHIBIT B - Money Market Quote Request
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
From: Fries & Fries, Inc.
Re: $600,000,000 Credit Agreement (the "Credit Agreement")
dated as of May 22, 1996 among Fries & Fries, Inc., as
Borrower, Mallinckrodt Group Inc., as Guarantor, the
Banks party thereto from time to time, Morgan Guaranty
Trust Company of New York, as Administrative Agent and
Citibank, N.A., as Documentation Agent
We hereby give notice pursuant to Section 2.3 of the Credit Agreement that
we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount(1) Interest Period (2)
- ------------------- -------------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
FRIES & FRIES, INC.
By________________________
Name:
Title:
(1) Amount must be $10,000,000 or a larger multiple of $1,000,000.
(2) Not less than one month (LIBOR Auction) or not less than 7 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
<PAGE>
EXHIBIT C - Invitation for Money Market Quotes
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Fries & Fries, Inc. (the
"Borrower")
Pursuant to Section 2.3 of the $600,000,000 Credit Agreement dated as of
May 22, 1996 among Fries & Fries, Inc., as Borrower, Mallinckrodt Group Inc.,
as Guarantor, the Banks party thereto from time to time, Citibank, N.A., as
Documentation Agent and the undersigned, as Administrative Agent, we are
pleased on behalf of the Borrower to invite you to submit Money Market Quotes
to the Borrower for the following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.]
(New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE>
EXHIBIT D - Money Market Quote
Form of Money Market Quote
To: Morgan Guaranty Trust Company of New York, as Administrative
Agent
Re: Money Market Quote to Fries & Fries, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- ---------- ------------ --------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not
(notes continued on following page)
<PAGE>
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the $600,000,000 Credit
Agreement dated as of May 22, 1996 among Fries & Fries, Inc., Mallinckrodt
Group Inc., as Guarantor, the Banks party thereto from time to time, Citibank,
N.A., as Documentation Agent, and yourselves, as Administrative Agent,
irrevocably obligates us to make the Money Market Loan(s) for which any
offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:___________ By:__________________________
Authorized Officer
__________
exceed principal amount requested. Specify aggregate limitation if the sum of
the individual offers exceeds the amount the Bank is willing to lend. Bids
must be made for $5,000,000 or a larger multiple of $1,000,000.
*** Not less than one month or not less than 7 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
<PAGE>
EXHIBIT E - Opinion of Counsel for the Borrower
[Closing Date]
Each of the Banks and each of the Agents party
to the Credit Agreement
referred to below
Morgan Guaranty Trust Company
of New York
as Administrative Agent for said Banks
60 Wall Street
New York, NY 10260
Ladies and Gentlemen:
I am the General Counsel of Mallinckrodt Group Inc., a corporation
organized under the laws of the State of New York (the "GUARANTOR") and am
furnishing this opinion in connection with the Credit Agreement dated as of May
22, 1996 (the "CREDIT AGREEMENT") among Fries & Fries, Inc., the Borrower, the
Guarantor, the banks party thereto from time to time, Citibank, N.A. as
Documentation Agent, and Morgan Guaranty Trust Company of New York, as
Administrative Agent, providing for, among other things, the making of loans by
the Banks in an aggregate principal amount not exceeding $600,000,000. All
capitalized terms used but not defined herein have the respective meanings
given to such terms in the Credit Agreement.
In rendering the opinions expressed below, I have examined:
(i) the Credit Agreement;
(ii) the Notes (collectively with the Credit Agreement, the
"CREDIT DOCUMENTS"); and
(iii) such corporate records, agreements and instruments of the Borrower
and the Guarantor and such other documents and records as I have
deemed necessary as a basis for the opinions expressed below.
In my examination, I have assumed the genuineness of all signatures (except
those of officers of the Borrower and the Guarantor), the authenticity of all
documents submitted to me as originals and the conformity with authentic
original documents of all documents submitted to me as copies. When relevant
facts were not independently established, I have relied upon representations
made in or pursuant to the Credit Documents and certificates of appropriate
representatives of the Borrower and the Guarantor.
In rendering the opinions expressed below, I have assumed, with respect to
all of the documents referred to in this opinion letter, that (except, to the
extent set forth in the opinions expressed below, as to the Borrower and the
Guarantor):
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid, binding and
enforceable obligations of, all of the parties to such documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and validly
existing and have the power and authority (corporate or other) to
execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject also to the comments
and qualifications set forth below, and having considered such questions of law
as I have deemed necessary as a basis for the opinions expressed below, I am of
the opinion that:
1. The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
York, and the Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
2. The Borrower has all requisite corporate power to execute
and deliver, and to perform its obligations under, each Credit
Document and has all requisite corporate power to borrow under the
Credit Agreement. The Guarantor has all requisite corporate power to
execute and deliver, and to perform its obligations under, the Credit
Agreement.
3. The execution, delivery and performance by the Borrower
of the Credit Documents and the borrowings by the Borrower under the
Credit Agreement have been duly authorized by all necessary corporate
action on the part of the Borrower. The execution, delivery and
performance by the Guarantor of the Credit Agreement have been duly
authorized by all necessary corporate action on the part of the
Guarantor.
4. Each Credit Document has been duly executed and delivered
by the Borrower. The Credit Agreement has been duly executed and
delivered by the Guarantor.
5. Under Missouri conflict of laws principles, the stated
choice of New York Law to govern the Credit Documents will be honored
by the courts of the State of Missouri and the Credit Documents will
be construed in accordance with, and will be treated as being
governed by, the law of the State of New York. However, if the
Credit Documents were stated to be governed by and construed in
accordance with the law of the State of Missouri, or if a court were
to apply the law of the State of Missouri to the Credit Documents,
(i) each Credit Document (assuming, in the case of the Notes,
execution and delivery thereof for value) would constitute the legal,
valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, and (ii) the Credit Agreement
would constitute the legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its
terms, except, in each case, as the foregoing may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally and
except as the enforceability of the Credit Documents is subject to
the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law), including,
without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
6. No authorization, approval or consent of, and no filing
or registration with, any governmental or regulatory authority or
agency is required on the part of either the Borrower or the
Guarantor for (i) the execution, delivery or performance by the
Borrower of, or for the legality, validity or enforceability of, the
Credit Documents or for any borrowing by the Borrower under the
Credit Agreement or (ii) the execution, delivery or performance by
the Guarantor of, or for the legality, validity or enforceability of,
the Credit Agreement.
7. The execution, delivery and performance by each of the
Borrower and the Guarantor of the Credit Agreement and, in the case
of the Borrower, the Notes, and borrowings by the Borrower under the
Credit Agreement, do not and will not (a) violate any provision of
the charter or by-laws of the Borrower or Guarantor, (b) violate any
applicable law, rule or regulation, (c) violate any order, writ,
injunction or decree of any court or governmental authority or agency
or any arbitral award applicable to the Borrower or the Guarantor of
which I have knowledge (after due inquiry) or (d) result in a breach
of, constitute a default under, require any consent under, or result
in the acceleration or required prepayment of any indebtedness
pursuant to the terms of, any agreement or instrument of which I have
knowledge (after due inquiry) to which the Borrower or Guarantor is a
party or by which the Borrower or Guarantor is bound or to which the
Borrower or Guarantor is subject.
8. Except as may be disclosed in regular periodic reports
filed with the Securities and Exchange Commission prior to the date
of the Credit Agreement (copies of which reports have heretofore been
furnished to the Banks), I have no knowledge (after due inquiry) of
any legal or arbitral proceeding by or before any governmental or
regulatory authority or agency, now pending or threatened against the
Guarantor or any of its Subsidiaries or any of their respective
Properties that, if adversely determined, is reasonably likely to
have a Material Adverse Effect.
9. Neither the Guarantor, the Borrower nor any of the
Guarantor's other Subsidiaries is an "investment company", or a
company "controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
10. Neither the Guarantor, the Borrower nor any of the
Guarantor's other Subsidiaries is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a
"holding company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
The foregoing opinions are subject to the following comments and
qualifications:
A. The enforceability of Section 10.3 of the Credit Agreement
may be limited by laws rendering unenforceable indemnification
contrary to Federal or State securities laws and the public policy
underlying such laws.
B. The enforceability of provisions in the Credit Documents
to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
C. I express no opinion as to (i) the effect of the laws of
any jurisdiction in which any Bank is located (other than the State
of Missouri) that limit the interest, fees, or other charges such
Bank may impose, and (ii) the second sentence of Section 10.8 of the
Credit Agreement, insofar as such sentence relates to the subject
matter jurisdiction of the United States District Court for the
Southern District of New York to adjudicate any controversy related
to the Credit Documents.
The foregoing opinions are limited to matters involving the Federal law of
the United States of America, the law of the State of Missouri and (with
respect to my opinions in paragraphs 1 through 4 above) the Business
Corporation Law of the State of New York and the General Corporation Law of the
State of Delaware, and I do not express any opinion as to any other laws.
At the request of my client, this opinion letter is, pursuant to Section
3.1(b) of the Credit Agreement, provided to you by me in my capacity as General
Counsel of the Guarantor and may not be relied upon by any Person for any
purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, my prior written consent.
Very truly yours,
<PAGE>
EXHIBIT F - Opinion of Special Counsel for the Agents
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
--------------------------------------
[Closing Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
Ladies and Gentlemen:
We have participated in the preparation of the $600,000,000 Credit
Agreement (the "Credit Agreement") dated as of May 22, 1996 among Fries &
Fries, Inc., as Borrower, (the Borrower"), Mallinckrodt Group Inc., as
Guarantor (the "Guarantor"), the banks party thereto from time to time (the
"Banks"), Citibank, N.A., as Documentation Agent, and Morgan Guaranty Trust
Company of New York, as Administrative Agent, and have acted as special counsel
for the Agents for the purpose of rendering this opinion pursuant to Section
3.1(c) of the Credit Agreement. Terms defined in the Credit Agreement are used
herein as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower and the
Guarantor of the Credit Agreement and by the Borrower of the Notes are within
the Guarantor's or the Borrower's, as applicable, corporate powers and have
been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of each
of the Borrower and the Guarantor and each Note constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT G - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), Fries & Fries, Inc. (the
"Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "Agent").
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the $600,000,000 Credit Agreement dated as of
May 22, 1996 among the Borrower, Mallinckrodt Group Inc., as Guarantor,
the Assignor and the other Banks party thereto from time to time, as
Banks, Citibank, N.A., as Documentation Agent, and Morgan Guaranty Trust
Company of New York, as Administrative Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor
has a Commitment to make Loans to the Borrower in an aggregate principal
amount at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount of
$__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a
portion of its Commitment thereunder in an amount equal to $__________
(the "Assigned Amount"), together with a corresponding portion of its
outstanding Committed Loans, and the Assignee proposes to accept
assignment of such rights and assume the corresponding obligations from
the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the
Credit Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells
to the Assignee all of the rights of the Assignor under the Credit
Agreement to the extent of the Assigned Amount, and the Assignee hereby
accepts such assignment from the Assignor and assumes all of the
obligations of the Assignor under the Credit Agreement to the extent of
the Assigned Amount, including the purchase from the Assignor of the
corresponding portion of the principal amount of the Committed Loans
made by the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee, [the Borrower and the
Administrative Agent] and the payment of the amounts specified in
Section 3 required to be paid on the date hereof (i) the Assignee shall,
as of the date hereof, succeed to the rights and be obligated to perform
the obligations of a Bank under the Credit Agreement with a Commitment
in an amount equal to the Assigned Amount, and (ii) the Commitment of
the Assignor shall, as of the date hereof, be reduced by a like amount
and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse
to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the
Assignor on the date hereof in Federal funds in the amount heretofore
mutually agreed between them. It is understood that facility fees in
respect of the Assigned Amount accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor
and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the extent
of such other party's interest therein and shall promptly pay the same
to such other party.
[SECTION 4. CONSENT OF THE BORROWER AND THE ADMINISTRATIVE
AGENT. This Agreement is conditioned upon the consent of the Borrower
and the Administrative Agent pursuant to Section 10.6(c) of the Credit
Agreement. The execution of this Agreement by the Borrower and the
Agent is evidence of this consent. Pursuant to Section 10.6(c), the
Borrower agrees to execute and deliver a Note payable to the order of
the Assignee to evidence the assignment and assumption provided for
herein.]
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of the Credit Agreement or any
Note. The Assignee acknowledges that it has, independently and without
reliance on the Assignor, any other Bank or either Agent and based on
such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of
the business, affairs and financial condition of the Borrower.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the
date first above written.
[ASSIGNOR]
By_________________________
Name:
Title:
[ASSIGNEE]
By__________________________
Name:
Title:
FRIES & FRIES, INC.
By__________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By__________________________
Name:
Title:
<PAGE>
Exhibit 10.23
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the ___ day of _________, 1996
(the "Effective Date") by and between Mallinckrodt Group Inc., a New York
corporation (the "Company"), and _____________ ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as a key employee of the
Company and his services and knowledge are valuable to the Company in
connection with the management of one or more of the Company's principal
operating facilities, divisions, departments or subsidiaries; and
WHEREAS, the Company considers the establishment and maintenance of
a sound and vital management to be essential to protecting and enhancing the
best interests of the Company and its shareholders; and
WHEREAS, the Board as of the date hereof has determined that it is
in the best interests of the Company and its stockholders to secure its
executives' continued services and to ensure its executives' continued and
undivided dedication and objectivity in the event of any threat or occurrence
of, or negotiation or other action that could lead to, or create the
possibility of, a Change in Control (as defined in Section 1(b)) of the
Company, the Board has authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Cause" means (i) the willful and continued failure of
Executive substantially to perform his duties with the Company (other than any
failure due to physical or mental incapacity) after a demand for substantial
performance is delivered to him by the Board which specifically identifies the
manner in which the Board believes he has not substantially performed his
duties or (ii) willful misconduct materially and demonstrably injurious to the
Company. No act or failure to act by Executive shall be considered "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. The unwillingness of Executive to accept any condition or event which
would constitute Good Reason under Section 1(f) may not be considered by the
Board to be a failure to perform or misconduct by Executive. Notwithstanding
the foregoing, Executive shall not be deemed to have been terminated for Cause
for purposes of this Agreement unless and until there shall have been delivered
to him a copy of a resolution, duly adopted by a vote of three-quarters (3/4)
of the entire Board at a meeting of the Board called and held (after reasonable
notice to Executive and an opportunity for Executive and his counsel to be
heard before the Board) for the purpose of considering whether Executive has
been guilty of such a willful failure to perform or such willful misconduct as
justifies termination for cause hereunder, finding that in the good faith
opinion of the Board Executive has been guilty thereof and specifying the
particulars thereof. The Company must notify Executive of an event
constituting Cause within ninety (90) days following the Board's knowledge of
its existence or such event shall not constitute Cause under this Agreement.
(b) "Change in Control" means the occurrence of any one of the
following events:
(i) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); PROVIDED, HOWEVER, that the event described in this
paragraph (i) shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (A) by the Company or any Subsidiary
of the Company, (B) by any employee benefit plan sponsored or maintained
by the Company or any Subsidiary of the Company, (C) by any underwriter
temporarily holding securities pursuant to an offering of such securities,
(D) pursuant to a Non-Control Transaction (as defined in paragraph (iii)),
(E) pursuant to any acquisition by Executive or any group of persons
including Executive; or (F) except as provided in (iii) below, in which
Company Voting Securities are acquired from the Company, if a majority of
the Board approves a resolution providing expressly that the acquisition
pursuant to this clause (F) does not constitute a Change in Control under
this paragraph (i);
(ii) individuals who, on April 19, 1996, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to
April 19, 1996, whose election, or nomination for election, by the
Company's stockholders was approved by a vote of at least a majority of
the directors comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be, for purposes of this paragraph (ii), considered as though such
person were a member of the Incumbent Board; PROVIDED, HOWEVER, that no
individual initially elected or nominated as a director of the Company as
a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be
deemed to be a member of the Incumbent Board;
(iii) the consummation of a merger, consolidation, share exchange
or similar form of corporate reorganization of the Company or any such
type of transaction requiring the approval of the Company's stockholders
(whether for such transaction or the issuance of securities in the
transaction or otherwise), or the consummation of the direct or indirect
sale or other disposition of all or substantially all of the assets, of
the Company (a "Business Combination"), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of the
publicly traded corporation resulting from such Business Combination
(including, without limitation, any corporation which directly or
indirectly has beneficial ownership of 100% of the Company Voting
Securities or all or substantially all of the Company's assets) eligible
to elect directors of such corporation is represented by shares that were
Company Voting Securities immediately prior to such Business Combination
(either by remaining outstanding or being converted), and such voting
power is in substantially the same proportion as the voting power of such
Company Voting Securities immediately prior to the Business Combination,
(B) no person (other than any publicly traded holding company resulting
from such Business Combination, any employee benefit plan sponsored or
maintained by the Company (or the corporation resulting from such Business
Combination), or any person which beneficially owned, immediately prior to
such Business Combination, directly or indirectly, 20% or more of the
Company Voting Securities (a "Company 20% Stockholder")) becomes the
beneficial owner, directly or indirectly, of 20% or more of the total
voting power of the outstanding voting securities eligible to elect
directors of the corporation resulting from such Business Combination and
no Company 20% Stockholder increases its percentage of such total voting
power, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the approval of the Board of
the execution of the initial agreement providing for such Business
Combination (a "Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 20% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; PROVIDED, THAT if a Change in Control of the
Company would occur as a result of such an acquisition by the Company (if not
for the operation of this sentence), and after the Company's acquisition such
person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control of the Company
shall occur. Notwithstanding anything in this Agreement to the contrary, if
Executive's employment is terminated prior to a Change in Control, and
Executive reasonably demonstrates that such termination was at the request of a
third party who has indicated an intention or taken steps reasonably calculated
to effect a Change in Control (a "Third Party") and who effectuates a Change in
Control, then for all purposes of this Agreement, the date of a Change in
Control shall mean the date immediately prior to the date of such termination
of employment.
(c) "Company" means Mallinckrodt Group Inc., a New York
corporation.
(d) "Date of Termination" means (1) the effective date on which
Executive's employment by the Company terminates as specified in a Notice of
Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date
of death of Executive. Notwithstanding the previous sentence, (i) if the
Executive's employment is terminated for Disability (as defined in Section
1(e)), then such Date of Termination shall be no earlier than thirty (30) days
following the date on which a Notice of Termination is received, and (ii) if
the Executive's employment is terminated by the Company other than for Cause,
then such Date of Termination shall be no earlier than thirty (30) days
following the date on which a Notice of Termination is received. In the event
Executive's employment is terminated in connection with a request by a Third
Party (as described in Sections 1(b) and 1(f)) and Executive becomes entitled
upon the effectuation of a Change in Control by the Third Party to severance
payments and/or benefits under Sections 4(a) and/or 4(b), the date the Change
in Control is effectuated by the Third Party shall be treated as Executive's
Date of Termination for purposes of determining the timing of payments and
benefits under Sections 4(a) and 4(b).
(e) "Disability" means physical or mental incapacity qualifying
Executive for long-term disability under the Company's long-term disability
plan.
(f) "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
(1) (i) the assignment to Executive of any duties or
responsibilities (including reporting responsibilities) inconsistent in any
material and adverse respect with Executive's duties and responsibilities with
the Company immediately prior to such Change in Control (including any material
and adverse diminution of such duties or responsibilities); PROVIDED, HOWEVER,
that Good Reason shall not be deemed to occur upon a change in duties or
responsibilities that is solely and directly a result of the Company no longer
being a publicly traded entity, and does not involve any other event set forth
in this paragraph (f), (ii) a material and adverse change in Executive's titles
or offices with the Company as in effect immediately prior to such Change in
Control or (iii) any attempted removal or involuntary termination of Executive
by the Company otherwise than as expressly permitted by this Agreement pursuant
to a Nonqualifying Termination (or any purported termination of employment
which is not effected by a Notice of Termination, which termination shall not
be effective);
(2) a reduction by the Company in Executive's rate of annual base
salary or target annual bonus opportunity as in effect immediately prior to
such Change in Control or as the same may be increased from time to time
thereafter;
(3) any requirement of the Company that Executive (i)
notwithstanding Executive's objection, be based anywhere more than fifty (50)
miles from the location where Executive's employment is located at the time of
the Change in Control or (ii) travel on Company business to an extent
substantially greater than the travel obligations of Executive immediately
prior to such Change in Control;
(4) the failure of the Company to (i) continue in effect any
employee benefit plan or compensation plan in which Executive is participating
immediately prior to such Change in Control (including the taking of any action
by the Company which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any such plan), unless Executive
is permitted to participate in other plans providing Executive with
substantially comparable benefits, (ii) provide Executive and Executive's
dependents with welfare benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for Executive immediately prior to such Change in Control or provide
substantially comparable benefits at a substantially comparable cost to
Executive, (iii) provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for Executive immediately prior to such Change in Control,
or provide substantially comparable fringe benefits, or (iv) provide Executive
with paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for Executive immediately prior to such Change in Control (including crediting
Executive with all service credited to Executive for such purpose prior to the
Change in Control), unless the failure to provide such paid vacation is a
result of a policy uniformly applied by the entity acquiring the Company to its
employees; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 9(b).
Notwithstanding the foregoing, an isolated and inadvertent action
taken in good faith and which is remedied by the Company within ten (10) days
after receipt of notice thereof given by Executive shall not constitute Good
Reason. Any event or condition described in this Section 1(f)(1) through (4)
which occurs prior to a Change in Control, but which Executive reasonably
demonstrates was at the request of a Third Party who effectuates a Change in
Control, shall constitute Good Reason following a Change in Control for
purposes of this Agreement notwithstanding that it occurred prior to the Change
in Control. Executive must notify the Company of an event constituting Good
Reason within ninety (90) days following his knowledge of its existence or such
event shall not constitute Good Reason under this Agreement.
(g) "Nonqualifying Termination" means a termination of Executive's
employment (1) by the Company for Cause, (2) by Executive for any reason other
than Good Reason, (3) as a result of Executive's death, (4) by the Company due
to Executive's Disability, unless within thirty (30) days after Notice of
Termination is provided to Executive pursuant to Section 10 following such
absence Executive shall have returned to performance of Executive's duties on a
full-time basis, or (5) as a result of Executive's Retirement.
(h) "Notice of Termination" means notice of the Date of
Termination as described in Section 10(b).
(i) "Retirement" means termination of employment by either
Executive or the Company (other than for Cause) on or after Executive's normal
retirement date under the terms of the Retirement Plan (other than if any such
Retirement also constitutes Good Reason).
(j) "Retirement Plan" means The Mallinckrodt Retirement Plan or
any successor or substitute plan or plans of the Company.
(k) "Subsidiary" means any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities of such
corporation or other entity entitled to vote generally in the election of
directors.
(l) "Termination Period" means the period of time beginning with a
Change in Control and ending on the earliest to occur of (1) Executive's death
and (2) three (3) years following such Change in Control.
2. TERM OF AGREEMENT. This Agreement shall commence on the
Effective Date and shall continue in effect until the first to occur of (i)
Executive's termination of employment prior to a Change in Control (except as
otherwise provided herein), (ii) a Nonqualifying Termination during the
Termination Period or (iii) the completion of the Termination Period; PROVIDED,
HOWEVER, that benefits and payments otherwise owed to Executive under this
Agreement following a termination of employment during the Termination Period
may continue beyond the completion of the Termination Period.
3. OBLIGATIONS OF EXECUTIVE. Executive agrees that if a Change in
Control shall occur, he will not voluntarily leave the employ of the Company
(other than as a result of Disability or upon Retirement) without Good Reason
until ninety (90) days following such Change in Control.
4. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If during the Termination Period the employment of Executive
shall terminate, other than by reason of a Nonqualifying Termination, then the
Company shall pay to Executive (or Executive's beneficiary or estate) within
five (5) days following the Date of Termination, as compensation for services
rendered to the Company:
(1) a lump-sum cash amount equal to the sum of Executive's unpaid
base salary from the Company and its affiliated companies through the Date of
Termination (without taking into account any reduction of base salary
constituting Good Reason) plus any bonus payments which have become payable, to
the extent not theretofore paid;
(2) to the extent not paid under the terms of such annual
incentive compensation plan, a lump-sum cash amount equal to the target award
for Executive under the Company's annual incentive compensation plan for the
fiscal year in which his Date of Termination occurs, reduced pro rata for that
portion of the fiscal year not completed as of the end of the month in which
such Date of Termination occurs; and
(3) a lump-sum cash amount equal to [two and one-half (2 1/2)]
[two (2)] times the sum of (A) Executive's annual rate of base salary from the
Company and its affiliated companies in effect immediately prior to the Date of
Termination (not taking into account any reductions which would constitute Good
Reason) plus (B) Executive's target bonus for the fiscal year of the Company in
which the Change in Control occurs; PROVIDED, that any amount paid pursuant to
this Section 4(a)(3) shall offset any other amount of severance relating to
salary or bonus continuation to be received by Executive upon termination of
employment of Executive under any other severance plan, policy, employment
agreement or arrangement of the Company.
(b) If during the Termination Period the employment of Executive
shall terminate, other than by reason of a Nonqualifying Termination, then for
a period of [thirty (30)] [twenty-four (24)] months following the Date of
Termination, the Company shall provide Executive (and Executive's dependents,
if applicable) with the same level of medical, dental, accident, disability and
life insurance benefits upon substantially the same terms and conditions
(including cost of coverage) as existed immediately prior to Executive's Date
of Termination (or, if more favorable to Executive, as such benefits and terms
and conditions existed immediately prior to the Change in Control); PROVIDED,
THAT, if Executive cannot continue to participate in the Company plans
providing such benefits, the Company shall otherwise provide such benefits on
the same after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, if Executive becomes reemployed with another
employer and is eligible to receive welfare benefits from such employer, the
welfare benefits described herein shall be secondary to such benefits during
the period of Executive's eligibility, but only to the extent that the Company
reimburses Executive for any increased cost and provides any additional
benefits necessary to give Executive the benefits promised hereunder.
(c) If during the Termination Period the employment of Executive
shall terminate, other than by reason of a Nonqualifying Termination, Executive
shall be credited with [two and one-half (2 1/2)] [two (2)] additional years of
credited service for purposes of calculating benefits under the Company's
Supplemental Executive Retirement Plan.
(d) If during the Termination Period the employment of Executive
shall terminate by reason of a Nonqualifying Termination, then the Company
shall pay to Executive within five (5) days following the Date of Termination a
lump sum cash amount equal to the sum of Executive's unpaid base salary from
the Company through the Date of Termination plus any bonus payments which have
become payable, to the extent not theretofore paid.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company or its affiliated companies to or for the benefit of Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 5) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code, or any interest or penalties
are incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by Executive of all taxes (including any interest or penalties imposed
with respect to such taxes) including, without limitation, any income and
employment taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. For
purposes of determining the amount of the Gross-up Payment, Executive shall be
deemed to pay federal income taxes at the highest marginal rates of federal
income taxation for the calendar year in which the Gross-up Payment is to be
made and applicable state and local income taxes at the highest marginal rate
of taxation for the calendar year in which the Gross-up Payment is to be made,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately
prior to the Change in Control (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within
fifteen (15) business days of the receipt of notice from the Company or
Executive that there has been a Payment, or such earlier time as is requested
by the Company (collectively, the "Determination"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. The Gross-up Payment under this Section 5 should be made
within thirty (30) days of any Payment. If the Accounting Firm determines that
no Excise Tax is payable by Executive, it shall furnish Executive with a
written opinion that failure to report the Excise Tax on Executive's applicable
federal income tax return would not result in the imposition of a negligence or
similar penalty. The Determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-up Payments will be made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that Executive
thereafter is required to make payment of any additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. In the event the amount of the Gross-up
Payment exceeds the amount necessary to reimburse Executive for his Excise Tax,
the Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by Executive to or for
the benefit of the Company. Executive shall cooperate, to the extent his
expenses are reimbursed by the Company, with any reasonable requests by the
Company in connection with any contests or disputes with the Internal Revenue
Service in connection with the Excise Tax.
6. WITHHOLDING TAXES. The Company may withhold from all payments
due to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse Executive, on
a current basis, for all reasonable legal fees and expenses, if any, incurred
by Executive in connection with such contest or dispute regardless of the
result thereof. Executive agrees that in the event it is determined in an
arbitration proceeding that Executive's basis for a contest or dispute was
frivolous and not advanced in good faith, Executive shall be obligated to
return to the Company any such reimbursed legal fees and expenses within
sixty (60) days following the determination.
8. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed
to entitle Executive to continued employment with the Company or its
Subsidiaries.
9. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the surviving or resulting corporation or the
person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any Business
Combination, it will cause any successor or transferee unconditionally to
assume, by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the
Company to obtain such assumption prior to the effectiveness of any Business
Combination that does not constitute a Non-Control Transaction shall be a
breach of this Agreement and shall constitute Good Reason hereunder and shall
entitle Executive to compensation and other benefits from the Company in the
same amount and on the same terms as Executive would be entitled hereunder if
Executive's employment were terminated following a Change in Control other than
by reason of a Nonqualifying Termination. For purposes of implementing the
foregoing, the date on which any such Business Combination becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive shall die
while any amounts would be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Executive to receive such amounts or, if no person is
so appointed, to Executive's estate.
10. NOTICE.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage
prepaid, addressed as follows:
If to Executive:
If to the Company:
Mallinckrodt Group Inc.
7733 Forsyth Boulevard
St. Louis, MO 63105
Attention: Corporate Secretary
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.
(b) A written notice (a "Notice of Termination") of Executive's
Date of Termination by the Company or Executive, as the case may be, to the
other, shall (i) indicate the specific termination provision in this Agreement
relied upon, (ii) to the extent applicable, set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) specify the
Date of Termination. The failure by Executive or the Company to set forth in
such notice any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of Executive or the Company hereunder
or preclude Executive or the Company from asserting such fact or circumstance
in enforcing Executive's or the Company's rights hereunder.
11. FULL SETTLEMENT. The Company's obligation to make any
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Executive or others. In no event shall Executive be obligated to seek
other employment or take other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and, except
as provided in Section 4(b), such amounts shall not be reduced whether or not
Executive obtains other employment.
12. EMPLOYMENT. Employment for purposes of this Agreement means
employment with the Company or any Subsidiary.
13. GOVERNING LAW; VALIDITY. The validity, interpretation, and
enforcement of this Agreement shall be governed by the law of the State of New
York. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which other provisions shall remain in full force and effect.
14. ARBITRATION. Any dispute or controversy under this Agreement
shall be settled exclusively by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitration award in any court having jurisdiction. The Company shall bear
all costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 14.
15. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement of the parties in respect of the subject matter hereof and
specifically supersedes and overrides the Employment Agreement, dated
_______________, and the letter agreement with respect to Gross-up Payments,
dated _______________. No provision of this Agreement may be amended, waived
or discharged except by the mutual written agreement of the parties.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY
BE ENFORCED BY THE PARTIES.
MALLINCKRODT GROUP INC.
Date: __________ By:____________________
Name:
Title:
[EXECUTIVE]
DATE: __________ _______________________
<PAGE>
Exhibit 10.24
MALLINCKRODT GROUP INC.
EXECUTIVE LIFE INSURANCE PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this __________ day of ____________________, 1996
between Mallinckrodt Group Inc., a Missouri corporation, (hereinafter the
"Company"), and __________________________ a key employee of the Company
(hereinafter the "Participant").
WHEREAS the Board of Directors of the Company has approved the Executive Life
Insurance Plan for selected key management employees for the purpose of
attracting and retaining outstanding individuals as management employees of the
Company; and
WHEREAS such Executive Life Insurance Plan provides that the Participant
becomes eligible to participate upon designation by the Company;
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the
Company and the Participant agree as follows:
1. PARTICIPATION - This agreement is made to evidence the Participant's
participation in the Executive Life Insurance Plan for selected key
management employees (hereinafter the "Plan"), and to establish the
amount of the Participant's Survivor Benefit under the Plan.
2. SURVIVOR BENEFIT - The Participant's Survivor Benefit, as defined in the
Plan, is four times final base salary. Because the benefit is subject
to income tax when paid to the beneficiary, the benefit amount will be
increased to include all income taxes payable as a result of this Plan.
3. NON-QUALIFIED PLAN - The Participant's right to a benefit from the Plan
is "non-qualified" and the Plan is unfunded in a technical and legal
sense. The Participant's sole claim to payments is as a general
creditor of the Company. Any informal funding the Company chooses to
utilize in meeting its obligations, including life insurance policies
insuring the Participant's life, is and will continue to be general,
unrestricted assets of the Company.
4. ADOPTION OF THE PLAN - The Plan (and all its provisions), as it now
exists and as it may be amended hereafter, is incorporated herein and
made a part of this Agreement.
5. DEFINITIONS - When used herein, the terms which are defined in the Plan
shall have the meanings given them in the Plan, unless a different
meaning is clearly required by the context.
6. ENTIRE AGREEMENT - This agreement contains the entire agreement and
understanding by and between the Company and the Participant, and no
representations, premises, agreements, or understandings, written or
oral, not contained herein shall be of any force or effect.
7. GOVERNING LAW - This Agreement will be effective when accepted by the
Company at its office in Missouri, and will constitute a Missouri
contract.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals as of the day and year first above written.
___________________________
Participant
Approved and accepted by Mallinckrodt Group Inc. in Missouri on ____________,
1996.
By: ___________________________
<PAGE>
<TABLE>
Exhibit 11.1
<CAPTION>
EARNINGS PER SHARE
PRIMARY COMPUTATION
Years Ended June 30, 1996, 1995 and 1994
($ in millions except share and per share amounts)
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Basis for computation of earnings per
common and common equivalent shares:
Earnings from continuing operations $191.2 $163.9 $ 87.9
Deduct dividends on 4 Percent
cumulative preferred stock (.4) (.4) (.4)
------- ------- -------
Earnings from continuing operations
available for common shareholders 190.8 163.5 87.5
Discontinued operations 20.7 16.4 15.9
------- ------- -------
Available for common shareholders $211.5 $179.9 $103.4
======= ======= =======
Number of common and common equivalent
shares:
Weighted average shares outstanding 75,183,729 76,687,154 76,809,532
Shares issuable upon exercise of
stock options, net of shares
assumed to be repurchased 1,159,663 770,960 797,884
---------- ---------- ----------
76,343,392 77,458,114 77,607,416
========== ========== ==========
Earnings per common and common
equivalent share:
Continuing operations $2.50 $2.11 $1.13
Discontinued operations .27 .21 .20
------ ------ ------
Net earnings $2.77 $2.32 $1.33
====== ====== ======
</TABLE>
