<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8549
FOXMEYER HEALTH CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 25-1425889
- ------------------------------------------------- --------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1220 Senlac Drive, Carrollton, Texas 75006
- ------------------------------------------------- --------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 214-446-4800
--------------------------
Indicate by check mark whether the registrant (1) had 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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
Number of shares of Common Stock outstanding as of November 10, 1995: 16,531,521
<PAGE> 2
PART 1. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------
Three months ended September 30,
----------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 1,320,536 $ 1,154,812
COSTS AND EXPENSES
Cost of goods sold (exclusive of depreciation shown separately below) 1,253,665 1,090,350
Selling, general and administrative expenses 52,353 47,021
Depreciation and amortization 5,943 5,316
- ------------------------------------------------------------------------------------------------------------------------
8,575 12,125
Other income (expense) 6,227 (797)
- ------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 14,802 11,328
FINANCING COSTS
Interest expense 8,184 5,608
Interest income 818 852
- ------------------------------------------------------------------------------------------------------------------------
Financing costs, net 7,366 4,756
NATIONAL STEEL CORPORATION
Net preferred income 917 1,364
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION,
EQUITY IN INCOME OF AFFILIATES AND MINORITY INTEREST 8,353 7,936
Income tax provision 236 903
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY IN
INCOME OF AFFILIATES AND MINORITY INTEREST 8,117 7,033
Equity in income of affiliates 433 1,031
Minority interest in results of operations of consolidated subsidiaries (429) (1,196)
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 8,121 6,868
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of applicable tax benefit of
$160 in 1994 - 198
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME 8,121 6,670
Preferred stock dividends 5,382 4,794
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 2,739 $ 1,876
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Income from continuing operations $ 0.16 $ 0.16
Loss from discontinued operations - (0.02)
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ 0.16 $ 0.14
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 17,202 12,950
========================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 3
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------
Six months ended September 30,
----------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 2,598,721 $ 2,332,733
COSTS AND EXPENSES
Cost of goods sold (exclusive of depreciation shown separately below) 2,468,127 2,204,053
Selling, general and administrative expenses 102,513 96,551
Depreciation and amortization 12,048 10,575
- ------------------------------------------------------------------------------------------------------------------------
16,033 21,554
Other income 13,373 1,724
- ------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 29,406 23,278
FINANCING COSTS
Interest expense 15,458 11,800
Interest income 2,079 2,529
- ------------------------------------------------------------------------------------------------------------------------
Financing costs, net 13,379 9,271
NATIONAL STEEL CORPORATION
Net preferred income 1,840 2,734
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION,
EQUITY IN INCOME (LOSS) OF AFFILIATES AND MINORITY INTEREST 17,867 16,741
Income tax provision 357 1,323
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY IN
INCOME (LOSS) OF AFFILIATES AND MINORITY INTEREST 17,510 15,418
Equity in income (loss) of affiliates (807) 462
Minority interest in results of operations of consolidated subsidiaries (1,064) (3,683)
- ------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 15,639 12,197
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of applicable tax benefit of
$953 in 1995 and $227 in 1994, respectively (1,317) (299)
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME 14,322 11,898
Preferred stock dividends 10,605 9,495
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 3,717 $ 2,403
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Income from continuing operations $ 0.30 $ 0.21
Loss from discontinued operations (0.08) (0.02)
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ 0.22 $ 0.19
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 16,959 12,973
========================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In thousands of dollars)
- ------------------------------------------------------------------------------------------------------------------------
September 30, March 31,
1995 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS
Cash and short-term investments $ 34,254 $ 35,232
Receivables - net 218,552 334,250
Inventories 892,092 820,818
Net assets of discontinued operations 20,528 -
Other current assets 60,874 38,394
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,226,300 1,228,694
INVESTMENT IN NATIONAL STEEL CORPORATION 31,919 30,163
INVESTMENTS IN AFFILIATES 51,353 4,912
PROPERTY, PLANT AND EQUIPMENT 213,236 256,393
Less: allowances for depreciation and amortization 72,657 85,716
- ------------------------------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 140,579 170,677
OTHER ASSETS
Goodwill - net 211,442 209,749
Intangible assets - net 11,121 22,966
Pre-bankruptcy receivable from Phar-Mor, Inc. - 5,963
Deferred tax asset, net of valuation allowance 45,776 52,408
Miscellaneous assets 47,605 51,464
- ------------------------------------------------------------------------------------------------------------------------
315,944 342,550
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,766,095 $ 1,776,996
========================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In thousands of dollars)
- ------------------------------------------------------------------------------------------------------------------------
September 30, March 31,
1995 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES
Accounts payable $ 668,135 $ 674,843
Accrued liabilities 51,803 64,655
Deferred income taxes 42,376 42,131
Long-term debt due within one year 18,393 2,540
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 780,707 784,169
LONG-TERM DEBT 467,633 422,751
RESERVES AND OTHER LIABILITIES 45,836 70,676
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 10,160 20,231
REDEEMABLE PREFERRED STOCK 183,534 175,019
STOCKHOLDERS' EQUITY
Common stock, $5.00 par value; authorized 50,000,000 shares;
24,167,277 shares issued 120,836 120,836
Capital in excess of par value 209,110 209,110
Minimum pension liability (75,428) (75,428)
Net unrealized holding gain on marketable securities 793 2,374
Retained earnings 158,838 184,949
- ------------------------------------------------------------------------------------------------------------------------
414,149 441,841
Less: common stock in treasury - 7,636,256 shares at
September 30, 1995 and 7,735,552 shares at March 31, 1995 135,924 137,691
- ------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 278,225 304,150
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,766,095 $ 1,776,996
========================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In thousands of dollars)
- ------------------------------------------------------------------------------------------------------------------------
Six months ended
September 30,
---------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,322 $ 11,898
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES:
Minority interest in results of operations of consolidated subsidiaries 1,064 3,683
Depreciation and amortization 12,048 10,575
Other non-cash (credits) or charges (9,251) 1,928
Net preferred income from National Steel Corporation (1,840) (2,734)
Gain on sale of investments (5,154) (3,071)
Deferred tax provision 311 1,496
Provision for losses on accounts receivable 1,309 1,729
Equity in loss of affiliates 807 -
Cash provided (used) by working capital items, net of acquisitions:
Receivables 39,433 (18,157)
Inventories (147,290) (60,690)
Other assets (3,068) (39)
Accounts payable and accrued liabilities 73,997 81,472
Other 1,203 (1,984)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (22,109) 26,106
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of Ben Franklin Retail Stores, Inc. (9,108) -
Purchase of property, plant and equipment (24,826) (17,405)
Proceeds from the sale of property, plant and equipment - 1,166
Acquisitions, net of cash acquired (4,609) (7,922)
Purchase of investments (77,760) (30,926)
Proceeds from the sale of investments 16,257 15,925
Cash used by discontinued operations (1,356) -
Other investing activities 1,438 (290)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (99,964) (39,452)
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities 671,080 490,281
Repayments under revolving credit facilities (568,080) (481,031)
Proceeds from issuance of long-term debt 21,696 7,300
Repurchase of common stock - (6,701)
Other debt repayments (1,833) (10,276)
Dividends paid to minority interests (1,032) (1,819)
Dividends paid on redeemable preferred stock (2,090) (2,310)
Other financing activities 1,354 2,686
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 121,095 (1,870)
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS (978) (15,216)
Cash and short-term investments, beginning of period 35,232 60,987
- ------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 34,254 $ 45,771
========================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 7
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of FoxMeyer Health
Corporation and its majority-owned subsidiaries (the "Corporation"). The
accompanying condensed consolidated balance sheet of the Corporation as of
September 30, 1995, the condensed consolidated income statements for the three
and six months ended September 30, 1995 and 1994 and the condensed consolidated
statements of cash flows for the six months ended September 30, 1995 and 1994
are unaudited. In the opinion of management, these statements have been
prepared on the same basis as the audited consolidated financial statements,
and include all adjustments necessary for the fair presentation of financial
position, results of operations and cash flows. Such adjustments are of a
normal recurring nature. The results of operations for the three and six
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the entire year. The condensed consolidated balance
sheet as of March 31, 1995 was derived from audited financial statements but
does not include all disclosures required by generally accepted accounting
principles. Additional information is contained in the Corporation's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended March 31, 1995, which should be read in conjunction with this
quarterly report.
NOTE 2 - NET INCOME PER SHARE OF COMMON STOCK
Net income per share is based on income after preferred stock dividend
requirements and the weighted average number of shares of common stock
outstanding during the period after giving effect to stock options considered
to be dilutive common stock equivalents. Fully diluted net income per share is
not presented as it is substantially the same as primary net income per share.
NOTE 3 - DISPOSITION OF BEN FRANKLIN RETAIL STORES, INC.
On July 12, 1995, the Board of Directors of the Corporation approved a plan to
distribute most of the Corporation's common stock holdings in Ben Franklin
Retail Stores, Inc. ("Ben Franklin") through a dividend of Ben Franklin common
stock to the holders of the Corporation's common stock. On September 29, 1995,
each stockholder of the Corporation received one share of Ben Franklin common
stock for every six shares of the Corporation's common stock. The charge to
stockholders' equity for the distribution of Ben Franklin common stock of $29.8
million was based on the book value of the shares at the time of distribution.
On September 29, 1995, as a result of the distribution, the Corporation's
ownership in Ben Franklin decreased from 67.7% to 17.4%. However, the
Corporation believes it still exercises significant influence over Ben Franklin
and, accordingly, will account for Ben Franklin on an equity basis. Prior year
results of operations of Ben Franklin have been reclassified to reflect the
current accounting treatment. The consolidated balance sheet at September 30,
1995 includes the Corporation's $10.2 million equity investment in Ben Franklin
in "Investments in affiliates." The market value of the common stock of Ben
Franklin owned by the Corporation was approximately $3.6 million at September
30, 1995. The consolidated balance sheet at March 31, 1995 has not been
restated to reflect the change to the equity method of accounting for Ben
Franklin.
6
<PAGE> 8
The following tables present the summarized financial information of Ben
Franklin on a 100% basis at September 30, 1995 and March 31, 1995 and for the
six months ended September 30, 1995 and 1994, respectively (in thousands of
dollars):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
September 30, 1995 March 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 197,706 $ 154,286
Noncurrent assets 66,743 65,187
Current liabilities 85,951 88,656
Noncurrent liabilities 119,518 71,431
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended September 30,
--------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 203,227 $ 167,368
Operating income 2,189 2,255
Net income (loss) (517) 828
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4 - DISCONTINUED OPERATIONS
On July 12, 1995, the Corporation adopted a plan to consolidate its managed
care and certain information services segments into a new organization,
CareStream Corporation ("CareStream"). As a result of this decision and the
related development of a formal plan to dispose of this segment of business, the
Corporation has accounted for CareStream as a discontinued operation since June
30, 1995. The loss from operations of CareStream for the three months ended
June 30, 1995 has been shown as a loss from discontinued operations. The
Corporation is deferring losses from operations of CareStream after June 30,
1995 to offset against the expected gain on the disposition of CareStream, which
gain is expected to exceed losses from operations through the date of disposal.
The Corporation's prior year income statements have been reclassified to reflect
the current accounting treatment of CareStream. The net assets of CareStream
consisting of those assets and liabilities which will be assumed by CareStream
and any deferred operating losses since June 30, 1995, are shown on the
consolidated balance sheet at September 30, 1995 as "Net assets of discontinued
operations".
NOTE 5 - INVESTMENTS
In September 1995, the Corporation purchased a majority interest in Hamilton
Morgan L.L.C., a Delaware limited liability company (formerly known as the Haft
Group/Phar-Mor L.L.C.) ("Hamilton Morgan"). The acquisition of Hamilton Morgan
has been accounted for using the purchase method of accounting resulting in
goodwill of approximately $8.1 million at September 30, 1995. Hamilton Morgan
subsequently acquired an approximate 31% common stock investment in Phar-Mor,
Inc. ("Phar-Mor"). The investment in Phar-Mor through Hamilton Morgan and the
common stock of Phar-Mor that the Corporation received in settlement of its
pre-bankruptcy claims against Phar-Mor are carried as "Investments in
affiliates" at approximately $35.9 million in the accompanying condensed
consolidated balance sheet and are equivalent, net of minority interest, to a
29.4% ownership interest in Phar-Mor. The Corporation will account for its
investment in Phar-Mor on an equity basis.
7
<PAGE> 9
The Corporation's investments in marketable equity securities, included in
"Other current assets," are classified either as "trading" or as "available for
sale". The carrying value and gross unrealized gains and losses of securities
available for sale are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
September 30, 1995 March 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carrying value $ 10,686 $ 18,219
Unrealized gains 825 2,509
Unrealized losses 32 196
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds of $13.5 million were received during the six months ended September
30, 1995 from the sale of marketable equity securities classified as available
for sale resulting in gross realized gains of $1.1 million and gross realized
losses of $0.6 million. The cost of securities sold was determined using the
average cost method.
At September 30, 1995, certain securities were reclassified from available for
sale to trading. As a result of this change in classification, approximately
$3.5 million was transferred from unrealized gains to realized gains and
included in "Other income" in the accompanying condensed financial statements.
NOTE 6 - DEBT
To fund the Corporation's purchase of a majority interest in Hamilton Morgan
(see Note 5), the Corporation entered into a $20 million credit agreement with
a bank (the "Credit Facility"). The Credit Facility matures September 6, 1998
and requires principal payments of $2.5 million each on September 6, 1996 and
1997. The Credit Facility bears interest either at the prime rate plus 0.5% or
a Euro-dollar rate (as defined) plus 2%. The Credit Facility is collateralized
by (i) a portion of the Corporation's shares of common stock of FoxMeyer
Corporation ("FoxMeyer"), a wholly-owned subsidiary of the Corporation, (ii)
the Corporation's interest in the Phar-Mor stock held by Hamilton Morgan and
(iii) other marketable securities. The Credit Facility also contains net worth
and other covenants.
In August and September 1995, FoxMeyer entered into amendments of the FoxMeyer
revolving credit facility which raised the amount available under the facility
to $295 million from $275 million and modified certain covenant calculations.
The amendments also allowed FoxMeyer to enter into a $60 million seasonal
credit facility (the "Seasonal Credit Facility"). The Seasonal Credit Facility
matures March 31, 1996, and bears interest at the higher of the prime rate or
an average rate for certificates of deposit plus 0.5%. The Seasonal Credit
Facility also contains certain covenants which are substantially the same as
those in the FoxMeyer revolving credit facility.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental cash flow information is provided for interest and
income taxes paid and for noncash transactions (in thousands of dollars):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Six months ended September 30,
----------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 15,013 $ 12,389
Income taxes paid 100 1,066
Noncash transactions:
Payment of dividends in kind on preferred stock 7,694 6,532
Payment of dividend in common stock of Ben Franklin 29,775 -
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 10
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Corporation has retained responsibility for certain potential environmental
liabilities attributable to former operating units and as a result is subject
to federal, state or local environmental laws, rules and regulations. The laws
generally impose joint and several liability on present and former owners and
operators, transporters and generators for remediation of contaminated
properties regardless of fault. The Corporation and its subsidiaries have
received various claims and demands from governmental agencies relating to
investigations and remedial actions to address environmental clean-up costs and
in some instances have been designated as a potentially responsible party by
the Environmental Protection Agency.
The Corporation's reserves for potential environmental assessments or
remediation activities, penalties or fines that may be imposed for
non-compliance with such laws or regulations have not changed materially since
March 31, 1995. The Corporation's estimates of these costs are based on
currently available facts, existing technologies, presently enacted laws and
regulations and the professional judgment of consultants and counsel.
The amounts of reserves for environmental liabilities are difficult to estimate
due to such factors as the unknown extent of remedial actions that may be
required and, in the case of sites not owned by the Corporation, the unknown
extent of the Corporation's probable liability in proportion to the probable
liability of other parties. Moreover, the Corporation may have environmental
liabilities that the Corporation cannot in its judgment estimate at this time
and losses attributable to remediation costs may arise at other sites. The
Corporation cannot now estimate the additional cost and expenses it may incur
for such environmental liabilities. While management of the Corporation does
not believe the liabilities associated with such other sites will have a
material adverse effect on its financial condition or results of operations, it
recognizes additional work may need to be performed to ascertain the ultimate
liability for such sites, and further information could ultimately change
management's current assessment.
During the six months ended September 30, 1995, the Corporation entered into
certain agreements with Ashland Oil, Inc. ("Ashland") settling previously
unresolved issues relating to the sale of The Permian Corporation ("TPC") to
Ashland in fiscal 1992. As a result of the settlement, the Corporation has
been released from all outstanding claims and from any additional claims in
connection with the sale of TPC to Ashland.
There are various other pending claims and lawsuits arising out of the normal
conduct of the Corporation. In the opinion of management, the ultimate outcome
of these claims and lawsuits will not have a material effect on the
consolidated financial condition or results of operations of the Corporation.
9
<PAGE> 11
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
FoxMeyer Health Corporation and its subsidiaries (the "Corporation") reported
net income from continuing operations of $8.1 million and $15.6 million for the
three and six months ended September 30, 1995, respectively. This
represents an increase of $1.2 million and $3.4 million over net income from
continuing operations for the same periods in the prior year. Net income per
share from continuing operations was $.16 per share and $.30 per share for the
three and six months ended September 30, 1995, respectively, as compared to
$.16 and $.21 per share for the same periods in the prior year.
SIGNIFICANT TRANSACTIONS OCCURRING SINCE MARCH 31, 1995 INCLUDE THE FOLLOWING:
On July 12, 1995, the Corporation adopted a plan to consolidate its managed care
and certain information services segments into a new organization, CareStream
Corporation ("CareStream"). As a result of this decision and the development of
a formal plan to dispose of this segment of business, the Corporation has shown
CareStream as a discontinued operation.
On July 12, 1995, the Corporation also approved a plan to distribute most of
its common stock holdings in Ben Franklin Retail Stores, Inc. ("Ben Franklin")
through a dividend of one share of Ben Franklin common stock for every 6 shares
of the Corporation's common stock which was paid on September 29, 1995. The
Corporation will continue to exert significant influence over Ben Franklin,
and, accordingly, will account for its remaining 17.4% ownership interest in
Ben Franklin on an equity basis.
In September 1995, the Corporation purchased a majority interest in Hamilton
Morgan L.L.C., a Delaware limited liability company ("Hamilton Morgan").
Hamilton Morgan subsequently acquired an approximate 31% common stock
investment in Phar-Mor, Inc. ("Phar-Mor"). As a result of the Corporation's
ownership of Hamilton Morgan and the common stock of Phar-Mor that the
Corporation received in settlement of its pre-bankruptcy claims, the
Corporation owns, net of minority interest, approximately 29.4% of Phar-Mor.
The Corporation will account for its investment in Phar-Mor on an equity basis.
With the actual distribution of Ben Franklin and the planned disposition of
CareStream, the Corporation now conducts its business principally through only
one operating unit, FoxMeyer Corporation ("FoxMeyer"). The results of
operations of Ben Franklin have been stated on an equity basis for the three
and six months ended September 30, 1995 and 1994. The results of CareStream
have been presented as a discontinued operation for the three and six months
ended September 30, 1995 and 1994.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1994
Net sales increased $165.7 million to $1,320.5 million for the three months
ended September 30, 1995, as compared to $1,154.8 million for the three months
ended September 30, 1994. Net sales increased significantly in the Hospital
and Alternate Care customer segments principally as a result of sales made to
the University Hospital Consortium ("UHC") which the Corporation only began
servicing in late fiscal 1995. Sales in the Independent customer segment also
showed improvement.
Gross profit increased $2.4 million to $66.9 million for the three months ended
September 30, 1995 as compared to the same period in the prior year. As a
percentage of sales, gross margin decreased from 5.6% to 5.1% of net sales for
the three months ended September 30, 1994 and 1995, respectively. Increased
sales to large volume, lower margin and lower cost-to-serve customers and
continuing price competition throughout the industry have contributed to this
decrease. The reduced availability of investment buying opportunities also
continues to exert pressure on gross margin. To offset these pressures, the
Corporation continues to emphasize and expand its offering of value-added
services such
10
<PAGE> 12
as private label, generic products and repackaging programs, all of which
provide significantly higher gross margin.
Management believes that the pressures currently being brought to bear on gross
margin, discussed above, will continue. The Corporation is aggressively
pursuing several long-term strategies to relieve this pressure and ultimately
strengthen its gross margins.
Operating expenses increased $6.0 million to $58.3 million for the three months
ended September 30, 1995 as compared to $52.3 million for the three months
ended September 30, 1994. However, as a percentage of net sales, operating
expenses decreased from 4.5% for the three months ended September 30, 1994 to
4.4% for the three months ended September 30, 1995. The percentage decrease is
principally the result of the Corporation's cost containment and cost reduction
programs. Additionally, the Corporation is realizing the benefits of the
further leveraging of its cost structure through additional sales to lower
cost-to-serve high volume accounts.
Other income increased $7.0 million to $6.2 million for the three months ended
September 30, 1995 as compared to a loss of $0.8 million for the three months
ended September 30, 1994. Factors contributing to the increase were: (i) the
recognition of gains on marketable equity securities, (ii) an agreement with
the purchaser of The Permian Corporation releasing the Corporation from any
further liability connected with the fiscal 1992 sale resulting in the release
of previously established reserves and (iii) increased real estate and other
investment activities. Offsetting these factors was the higher cost of the
accounts receivable financing program due to an additional $75 million of
receivables sold under the program in the current year.
NET FINANCING COSTS
Net financing costs increased $2.6 million to $7.4 million for the three months
ended September 30, 1995, as compared to $4.8 million for the three months
ended September 30, 1994. Interest income did not change significantly.
Average debt for the quarter increased by approximately $186.5 million over the
three months ended September 30, 1994. The additional borrowed funds were used
to finance the increase in net working capital required to support expanded
business and capital investments. On average, the Corporation's cost of debt
decreased 65 basis points as compared to the three months ended September 30,
1994 principally reflecting a decrease in the impact of the amortization of
deferred loan costs and fixed fees.
NATIONAL STEEL CORPORATION RESULTS
The net preferred income for National Steel Corporation was $0.9 million for
the three months ended September 30, 1995, compared to $1.4 million for the
prior period. An increase in the expense related to the Weirton pension
obligation for the quarter ended September 30, 1995 is the primary reason for
the $0.5 million decrease.
INCOME TAXES
The current year and prior year income tax provisions were based on estimates
of the full year effective tax rate. The low effective tax rate for both
periods was the result of the reduction in the deferred tax asset valuation
allowance.
EQUITY IN INCOME OF AFFILIATES
The equity in income of affiliates represents 67.7% of Ben Franklin's net
income and approximately 47% of FoxMeyer Canada's ("Canada") net loss for the
current and prior year periods. The decrease of $0.6 million in the
Corporation's equity in the results of operations of affiliates primarily
reflects (i) a decline in Ben Franklin's income that was the result of
increased operating expenses and interest expense related to the expansion of
its business from new franchisees and from additional company-owned stores and
(ii) a decline in Canada's income resulting from increased operating expenses
related to the expansion of Canada's business.
11
<PAGE> 13
MINORITY INTEREST IN RESULTS OF OPERATIONS OF CONSOLIDATED SUBSIDIARIES
The decrease in minority interest was primarily attributable to the elimination
of the minority interest in FoxMeyer resulting from the Corporation's October
1994 acquisition of the 19.5% common stock interest in FoxMeyer that it did not
already own.
DISCONTINUED OPERATIONS
The loss from discontinued operations reflects the results of CareStream in the
prior year. The Corporation is currently deferring losses from CareStream's
operations in the current quarter which will be offset by the expected gain on
the disposition of CareStream.
SIX MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1994
Net sales increased $266.0 million to $2,598.7 million for the six months ended
September 30, 1995, as compared to $2,332.7 million for the six months ended
September 30, 1994. Net sales increased significantly in the Hospital and
Alternate Care customer segments principally as a result of sales made to UHC
which the Corporation only began servicing in late fiscal 1995. Sales in the
Independent customer segment also showed significant improvement.
Gross profit increased $1.9 million to $130.6 million for the six months ended
September 30, 1995 as compared to the same period in the prior year. As a
percentage of sales, gross margin decreased from 5.5% to 5.0% of net sales for
the six months ended September 30, 1995 and 1994, respectively. Increased
sales to large volume, lower margin and lower cost-to-serve customers and
continuing price competition throughout the industry have contributed to this
decrease. The reduced availability of investment buying opportunities also
continues to exert pressure on gross margin. To offset these pressures, the
Corporation continues to emphasize and expand its offering of value-added
services such as private label, generic products and repackaging programs, all
of which provide significantly higher gross margin.
Operating expenses increased $7.5 million to $114.6 million for the six months
ended September 30, 1995 as compared to $107.1 million for the six months ended
September 30, 1994. However, as a percentage of net sales, operating expenses
decreased from 4.6% for the six months ended September 30, 1994 to 4.4% for the
six months ended September 30, 1995. The percentage decrease is principally
the result of the Corporation's cost containment and cost reduction programs.
Additionally, the Corporation is realizing the benefits of further leverage of
its cost structure through additional sales to lower cost-to-serve high volume
accounts.
Other income increased $11.7 million to $13.4 million for the six months ended
September 30, 1995 as compared to the six months ended September 30, 1994.
Factors contributing to the increase were: (i) the recognition of gains on
marketable equity securities and (ii) an agreement with the purchaser of The
Permian Corporation releasing the Corporation from liabilities connected with
the fiscal 1992 sale resulting in the release of previously established
reserves. Offsetting these factors was the higher cost of the accounts
receivable financing program primarily due to an additional $75 million of
receivables sold under the program in the current year. In addition, real
estate and other investment activities had less income than in the prior year
primarily because of significant non-recurring gains in the prior year from the
sale of real estate investments.
NET FINANCING COSTS
Net financing costs increased $4.1 million to $13.4 million for the six months
ended September 30, 1995, as compared to $9.3 million for the six months ended
September 30, 1994. Interest income decreased $0.4 million primarily as a
result of the early repayment of certain real estate notes receivable
investments in late fiscal 1995 and early fiscal 1996. Average debt for the
six months increased by approximately $146.3 million over the six months ended
September 30, 1994. The additional borrowed funds were used to finance the
increase in net working capital required to support expanded business and
capital investments. On average, the Corporation's cost of debt decreased 81
basis points as compared to the six months ended September 30, 1994 principally
reflecting a decrease in the impact of the amortization of deferred loan costs
and fixed fees.
12
<PAGE> 14
NATIONAL STEEL CORPORATION RESULTS
The net preferred income for National Steel Corporation was $1.8 million for
the six months ended September 30, 1995, compared to $2.7 million for the prior
period. An increase in the expense related to the Weirton pension obligation
for the six months ended September 30, 1995 is the primary reason for the $0.9
million decrease.
INCOME TAXES
The current year and prior year income tax provisions were based on estimates
of the full year effective tax rate. The low effective tax rate for both
periods was the result of the reduction in the deferred tax asset valuation
allowance.
EQUITY IN INCOME OF AFFILIATES
The equity in income of affiliates represents 67.7% of Ben Franklin's net
income and approximately 47% of Canada's net loss for the current and prior
year periods. The decrease of $1.3 million in the Corporation's equity in the
results of operations of affiliates primarily reflects a decline in Ben
Franklin's income that was the result of increased interest expense related to
the expansion of its business and a decline in Canada's income resulting from
increased operating expenses related to the expansion of Canada's business.
MINORITY INTEREST IN RESULTS OF OPERATIONS OF CONSOLIDATED SUBSIDIARIES
The decrease in minority interest was primarily attributable to the elimination
of the minority interest in FoxMeyer resulting from the Corporation's October
1994 acquisition of the 19.5% common stock interest in FoxMeyer that it did not
already own.
DISCONTINUED OPERATIONS
The loss from discontinued operations reflects the results of CareStream in the
prior year and for the three months ended June 30, 1995. The results of
operations for CareStream subsequent to June 30, 1995 have been deferred to
offset the expected gain from the ultimate disposition of CareStream.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operations (which includes working capital components) was
$22.1 million for the six months ended September 30, 1995. The change in
working capital components used $36.9 million of funds. An increase in
inventory and accounts receivable used $107.9 million of funds which was
partially offset by a $74.0 million increase in accounts payable and accrued
liabilities.
Cash used in investing activities was $100.0 million. Approximately $24.8
million of cash was used to purchase property and equipment during the period.
An additional $4.6 million was used to acquire other businesses. The
Corporation made investments in equity and debt securities in other companies
and in real estate which used approximately $61.5 million of cash, net of
proceeds from the sale of investments. The change to the equity method in
accounting for Ben Franklin resulted in the removal of Ben Franklin's cash of
$9.1 million from the consolidated balance sheet.
Cash provided by financing activities of $121.1 million resulted primarily from
additional net borrowings under the Corporation's various revolving credit
facilities of $103.0 million. The proceeds from the additional borrowings were
primarily used to fund the increase in inventory and the purchase of
property and equipment, acquisitions and other investments. In addition, the
Corporation borrowed $21.7 million to fund its investment in Hamilton Morgan and
its real estate investments.
Management assesses the Corporation's liquidity based on its major business
units: FoxMeyer and certain holding company, corporate office and other
miscellaneous activities (collectively, the "Holding Company") which includes
the Corporation's real estate partnership activities. While FoxMeyer is a
wholly-owned subsidiary of the Corporation, the
13
<PAGE> 15
FoxMeyer debt agreements limit the ability of FoxMeyer to transfer funds to the
Holding Company. The following is a discussion of the liquidity and capital
resources of each business.
FOXMEYER
As of September 30, 1995, FoxMeyer had borrowed $235.8 million under its
$295.0 million revolving credit facility (the "FoxMeyer Facility") at an
average interest rate of 6.6%. The average and maximum amounts borrowed
during the six months ended September 30, 1995 under the FoxMeyer Facility were
$191.4 million and $275.8 million, respectively. Restrictions imposed by the
FoxMeyer Facility require that on the last day of any quarter, FoxMeyer's total
indebtedness to capitalization ratio, as defined therein, cannot exceed 0.6 to
1.0. Under the requirements of this covenant, FoxMeyer was eligible to borrow
an additional $30.4 million at September 30, 1995.
In September 1995, FoxMeyer amended the FoxMeyer Facility to allow FoxMeyer to
enter into a $60 million seasonal credit facility (the "Seasonal Credit
Facility"). The Seasonal Credit Facility matures March 31, 1996. The Seasonal
Credit Facility bears interest at the higher of the prime rate or an average
rate for certificates of deposit plus 0.5% and also contains certain covenants
which are substantially the same as those in the FoxMeyer Facility.
FoxMeyer expects that cash flow from operations and continued maintenance of
its working capital facilities will provide adequate cash to fund seasonal
increases in inventories and receivables. FoxMeyer's accounts receivable
financing agreement expires in November 1995; however, FoxMeyer expects to be
able to renew or replace the agreement before its expiration date.
HOLDING COMPANY
The Holding Company has cash and short-term investments of approximately $9.5
million at September 30, 1995. In addition, the Holding Company had borrowed
the maximum amount of $15.0 million available under a revolving credit facility
(the "Holding Company Facility") and the maximum amount of $20.0 million under a
new credit agreement (the "Credit Agreement"), at an average interest rate of
7.8%. The average amount borrowed during the six months ended September 30,
1995 under both agreements was $17.5 million. At September 30, 1995, the
Holding Company had also borrowed the maximum amount available under a $30
million revolving agreement with FoxMeyer.
The Credit Agreement, which was used to partially fund the Corporation's
investment in Hamilton Morgan, matures September 6, 1998 and requires principal
payments of $2.5 million each on September 6, 1996 and 1997. The Credit
Agreement bears interest either at the prime rate plus 0.5% or a Euro-dollar
rate (as defined) plus 2%. The Credit Agreement is collaterized by a portion of
the Corporation's shares of common stock of FoxMeyer, the Corporation's interest
in the common stock of Phar-Mor held by Hamilton Morgan and other marketable
securities. The Credit Facility also contains net worth and other covenants.
The Holding Company's cash requirements include the funding of monthly
operating expenses, lease commitments, benefit obligations, dividend payments
on the Corporation's convertible redeemable preferred stock and mandatory
sinking fund payments thereon, and cash outlays attributable to environmental
liabilities of previously owned businesses, the amounts and timing of which are
uncertain. In addition, the Holding Company intends to make additional real
estate and other investments.
The Holding Company will rely on cash on hand and dividends received on shares
of FoxMeyer common stock to meet the cash funding obligations described above.
The amount of dividends that FoxMeyer can pay to the Holding Company are
limited by FoxMeyer's debt agreements. The Holding Company expects to be able
to renew or replace its revolving credit facility before its expiration date of
April 1, 1996. The Holding Company expects to fund a substantial portion of
any real estate investments through additional non-recourse debt which
management believes will be available at reasonable rates.
14
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10-A Sixth Amendment to Amended and Restated Loan Agreement and
Waiver, dated as of August 17, 1995, among FoxMeyer
Corporation, FoxMeyer Drug Company, Merchandise Coordinator
Services Corporation, Harris Wholesale Company, the Lenders
and Issuer referred to therein, CitiCorp USA, Inc., as
Administrative Agent for the Lenders, and NationsBank of
Texas, N.A. as Documentation Agent for the Lenders.
10-B Seventh Amendment to Amended and Restated Loan Agreement and
Waiver, dated as of September 30, 1995, among FoxMeyer
Corporation, FoxMeyer Drug Company, Merchandise Coordinator
Services Corporation, Harris Wholesale Company, the Lenders
and Issuer referred to therein, CitiCorp USA, Inc., as
Administrative Agent for the Lenders, and NationsBank of
Texas, N.A. as Documentation Agent for the Lenders.
10-C Loan Agreement dated as of October 24, 1995, among FoxMeyer
Corporation as borrower and FoxMeyer Drug Company,
Merchandise Coordinator Services Corporation, Harris
Wholesale Company as guarantors, the Lenders referred to
therein, CitiCorp USA, Inc., as Administrative Agent for the
Lenders, and NationsBank of Texas, N.A. as Documentation
Agent for the Lenders.
10-D Sixth Amendment to Loan Agreement dated as of September 6,
1995 by and among the registrant, the Banks identified
therein and Banque Paribas, as agent for the Banks.
10-E Credit Agreement dated as of September 6, 1995, between the
registrant and Credit Lyonnais New York Branch.
10-F Fourth Amendment dated as of September 30, 1995 to Trade
Receivables Purchase and Sale Agreement dated as of October
29, 1993 among FoxMeyer Corporation, Corporate Asset Funding
Company, Inc., Enterprise Funding Corporation, Citibank,
N.A., NationsBank of North Carolina, N.A., individually and
as Co-Agent, CitiCorp North America, Inc., individually and
as agent, and the Bank Listed therein.
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file any Current Reports on Form 8-K during
the three months ended September 30, 1995.
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements 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.
FOXMEYER HEALTH CORPORATION
By: /s/ Edward L. Massman
-----------------------------------
Edward L. Massman
Vice President and Controller
(Chief Accounting Officer)
Date: November 10, 1995
16
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10-A Sixth Amendment to Amended and Restated Loan Agreement and
Waiver, dated as of August 17, 1995, among FoxMeyer
Corporation, FoxMeyer Drug Company, Merchandise Coordinator
Services Corporation, Harris Wholesale Company, the Lenders
and Issuer referred to therein, CitiCorp USA, Inc., as
Administrative Agent for the Lenders, and NationsBank of
Texas, N.A. as Documentation Agent for the Lenders.
10-B Seventh Amendment to Amended and Restated Loan Agreement and
Waiver, dated as of September 30, 1995, among FoxMeyer
Corporation, FoxMeyer Drug Company, Merchandise Coordinator
Services Corporation, Harris Wholesale Company, the Lenders
and Issuer referred to therein, CitiCorp USA, Inc., as
Administrative Agent for the Lenders, and NationsBank of
Texas, N.A. as Documentation Agent for the Lenders.
10-C Loan Agreement dated as of October 24, 1995, among FoxMeyer
Corporation as borrower and FoxMeyer Drug Company,
Merchandise Coordinator Services Corporation, Harris
Wholesale Company as guarantors, the Lenders referred to
therein, CitiCorp USA, Inc., as Administrative Agent for the
Lenders, and NationsBank of Texas, N.A. as Documentation
Agent for the Lenders.
10-D Sixth Amendment to Loan Agreement dated as of September 6,
1995 by and among the registrant, the Banks identified
therein and Banque Paribas, as agent for the Banks.
10-E Credit Agreement dated as of September 6, 1995, between the
registrant and Credit Lyonnais New York Branch.
10-F Fourth Amendment dated as of September 30, 1995 to Trade
Receivables Purchase and Sale Agreement dated as of October
29, 1993 among FoxMeyer Corporation, Corporate Asset Funding
Company, Inc., Enterprise Funding Corporation, Citibank,
N.A., NationsBank of North Carolina, N.A., individually and
as Co-Agent, CitiCorp North America, Inc., individually and
as agent, and the Bank Listed therein.
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10-A
SIXTH AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"Sixth Amendment") is dated as of August 17, 1995, among (i) FOXMEYER
CORPORATION, a Delaware corporation ("Borrower"), (ii) FOXMEYER DRUG COMPANY, a
Kansas corporation, MERCHANDISE COORDINATOR SERVICES CORPORATION, a Delaware
corporation, and HARRIS WHOLESALE COMPANY, a Delaware corporation (the
"Operating Subsidiaries"), (iii) the LENDERS and ISSUER referred to therein,
and (iv) CITICORP USA, INC., a Delaware corporation, as Administrative Agent
("Administrative Agent"), and NATIONSBANK OF TEXAS, N.A., a bank organized
under the laws of the United States, as Documentation Agent ("Documentation
Agent").
WITNESSETH:
WHEREAS, FoxMeyer Corporation ("Old FoxMeyer"), Operating
Subsidiaries, Lenders and Issuer, and Administrative Agent and NationsBank of
Texas, N.A. and Banque Paribas, as Co-Agents, entered into an Amended and
Restated Loan Agreement dated as of April 29, 1993, as amended as of October
18, 1993, June 20, 1994 and August 26, 1994 (the "Amended and Restated Loan
Agreement"); on October 12, 1994, Old FoxMeyer was merged into Borrower and
Borrower succeeded to and assumed all of Old FoxMeyer's rights and obligations
under the Amended and Restated Loan Agreement; and Borrower, Operating
Subsidiaries, Lenders and Issuer, and Administrative Agent and Documentation
Agent entered into additional amendments dated as of November 22, 1994 and
April 26, 1995 (the Amended and Restated Loan Agreement, as so amended, being
herein referred to as the "Loan Agreement");
WHEREAS, Borrower has requested an increase in the aggregate
commitment under the Loan Agreement to $295,000,000 principal amount and other
amendments to the Loan Agreement;
WHEREAS, the Lenders, Issuer, Administrative Agent and Documentation
Agent have agreed to such increase, and other amendments, all upon the terms
and conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms are
used herein as defined in the Loan Agreement.
SECTION 2. AMENDMENT OF SECTION 1.2. Section 1.2 of the Loan
Agreement is hereby amended by deleting the definitions of "Aggregate
Commitment," "Guaranty Agreement" and "Pro Rata
1
<PAGE> 2
Share" and inserting the following definitions (in appropriate alphabetical
order):
Aggregate Commitment. Means $295,000,000, subject to
reduction as provided in Section 2.12 (which amount is the aggregate
of the maximum Commitments of all Lenders).
Sixth Amendment Date. Means the date on which the amendments
to this Agreement provided in the Sixth Amendment to Amended and
Restated Loan Agreement, dated as of August 16, 01995, become
effective in accordance with the terms and conditions thereof.
Guaranty Agreement. Means a guaranty agreement, substantially
in the form of Exhibit C hereto, as amended as contemplated by the
Fourth and Sixth Amendments hereto.
Pro Rata Share. Means, with respect to each Lender, as of the
date of any determination, such Lender's proportionate share of the
Aggregate Commitment (and the A Advances and Letters of Credit made
and issued, respectively, thereunder). As of the Sixth Amendment
Date, the Pro Rata Share of each Lender as to the Aggregate Commitment
(and the A Advances and Letters of Credit made and issued,
respectively, thereunder) is set forth on Schedule l hereto.
SECTION 3. AMENDMENT TO SCHEDULE I, NEW LENDERS AND OUTSTANDING
AMOUNTS.
(a) Schedule 1 to the Loan Agreement is hereby amended in its
entirety to read as set forth on Exhibit A attached hereto.
(b) Effective as of the Sixth Amendment Date, the $20,000,000
increase in the Aggregate Commitment under the Loan Agreement effected by this
Sixth Amendment will be assumed by The Bank of Nova Scotia and, as of such
date, such bank shall be a Lender under the Loan Agreement and shall have the
rights and obligations of a Lender thereunder.
(c) The Lenders made A Advances to Borrower under the Loan
Agreement and, as of the date of this Sixth Amendment, $175,000,000 aggregate
principal amount of A Advances is outstanding. Such A Advances constitute: (i)
a Eurodollar Loan made to the Borrower in the original principal amount of
$75,000,000 with an Interest Period of one month, expiring on September 13,
1995 (the "First Outstanding Eurodollar Loan"); (ii) a Eurodollar Loan made to
the Borrower in the original principal amount of $40,000,000 with an Interest
Period of one month, expiring on August 28, 1995 (the "Second Outstanding
Eurodollar Loan"); and (iii) a Eurodollar
2
<PAGE> 3
Loan made to the Borrower in the original principal amount of $60,000,000 with
an Interest Period of one month, expiring on September 5, 1995 (the "Third
Outstanding Eurodollar Loan") (collectively, the "Outstanding Eurodollar
Loans").
(d) On the Sixth Amendment Date, The Bank of Nova Scotia shall
make available pursuant to Section 2.4(d), and the Borrower hereby requests:
(i) an A Advance in the original principal amount of $5,454,545.45, which A
Advance shall be a Eurodollar Loan bearing interest at all times at the rate
applicable to the First Outstanding Eurodollar Loan, and shall have an Interest
Period of 27 days, expiring on September 13, 1995; (ii) an A Advance in the
original principal amount of $2,909,090.90, which A Advance shall be a
Eurodollar Loan, bearing interest at all times at the rate applicable to the
Second Outstanding Eurodollar Loan and shall have an Interest Period of 11
days, expiring on August 28, 1995; and (iii) an A Advance in the original
principal amount of $4,363,636.36, which A Advance shall be a Eurodollar Loan,
bearing interest at all times at the rate applicable to the Third Outstanding
Eurodollar Loan and shall have an Interest Period of 19 days, expiring on
September 5, 1995 (collectively, the "Nova Scotia Advances"). The Nova Scotia
Advances increase the aggregate principal amount of A Advances outstanding on
the Sixth Amendment Date to $187,727,272.71. Administrative Agent and each
Lender hereby waive the requirement in Section 2.4(a)(i) of the Loan Agreement
soley with respect to the amount of each of the Nova Scotia Advances. Each
Nova Scotia Advance shall be deemed to be a portion of the corresponding
Outstanding Eurodollar Loan for all purposes; provided, however, that interest
shall accrue on the portion of each Outstanding Eurodollar Loan represented by
a Nova Scotia Advance, and shall be payable to The Bank of Nova Scotia, based
upon the actual date of such advance. The Nova Scotia Advances shall represent
The Bank of Nova Scotia's Pro Rata Share of the aggregate principal amount of A
Advances outstanding on the Sixth Amendment Date, after giving effect to the
Sixth Amendment and the Nova Scotia Advances, such that the other Lenders' Pro
Rata Share of outstanding A Advances shall not be affected by the Nova Scotia
Advances and no other Lender shall be required to make funds available with
respect to the Nova Scotia Advances.
(e) Certain of the Lenders made B Advances to Borrower under the
Loan Agreement and, as of the date of this Sixth Amendment, $24,300,000
aggregate principal amount of B Advances is outstanding. All such B Advances
shall remain outstanding on the Sixth Amendment Date, subject to the terms
thereof. NationsBank and Paribas have issued Letters of Credit that are
outstanding under the Loan Agreement in an aggregate Stated Amount of
$8,908,496 and, as of the date of this Sixth Amendment, no amounts have been
drawn thereunder.
3
<PAGE> 4
(f) At all times before the Sixth Amendment Date, the Lenders
(other than The Bank of Nova Scotia) shall fund all A Advances and participate
in all Letters of Credit under the Loan Agreement, and be entitled to all
interest, fees and other amounts payable in respect thereof, as provided in the
Loan Agreement prior to the effectiveness of the amendments effected by this
Sixth Amendment. On the Sixth Amendment Date, before giving effect to the
amendments effected by the Sixth Amendment, the Borrower shall pay all fees and
other amounts (other than interest on the Outstanding Eurodollar Loan,
including the Nova Scotia Advance, which shall be paid at the end of the
Interest Payment Dates applicable thereto) accrued and unpaid under the Loan
Agreement as of such date. From and after the Sixth Amendment Date, the
Lenders shall fund all A Advances and participate in all Letters of Credit
under the Loan Agreement, and be entitled to all interest, fees and other
amounts payable in respect thereof, in accordance with their Pro Rata Shares of
the Aggregate Commitment (after giving effect to the amendments effected by
this Sixth Amendment).
SECTION 4. EFFECTIVENESS OF AMENDMENTS. The amendments effected by
this Sixth Amendment shall be effective upon satisfaction of the following, in
a manner acceptable to Administrative Agent, on or before August 31, 1995 (the
date of effectiveness herein called the "Amendment Date"):
(a) All of the Lenders, Issuer, Administrative Agent and
Documentation Agent and Borrower shall have executed and delivered
this Sixth Amendment.
(b) All of the Guarantors shall have executed and
delivered the Consent and Agreement attached to this Sixth Amendment,
and all of the Operating Subsidiaries shall have executed and
delivered amendments to their respective Intercompany Notes reflecting
the increase in the Aggregate Commitment.
(c) An A Note payable to the order of The Bank of Nova
Scotia in the maximum principal amount of $20,000,000 shall have been
duly executed by Borrower and delivered to Administrative Agent.
(d) An amendment to the Guaranty Agreement, substantially
in the form of Exhibit B hereto, shall have been duly executed by
Guarantors and delivered to Administrative Agent.
(e) Borrower and each Guarantor shall have delivered to
Administrative Agent certificates providing the certifications
contemplated by Section 4.1(c) and (d) of the Loan Agreement as of the
Amendment Date, including resolutions authorizing the execution,
delivery and
4
<PAGE> 5
performance of this Sixth Amendment and the other documents
contemplated hereby.
(f) (i) A legal opinion of Weil, Gotshal & Manges, and
other counsel reasonably acceptable to Administrative Agent as to
matters relating to Kansas law, as counsel for Borrower and
Consolidated Subsidiaries, substantially in the forms of Exhibit C
attached hereto shall have been duly executed by such counsel and
delivered to Administrative Agent, and (ii) a favorable legal opinion
of Gibson, Dunn & Crutcher, counsel to Administrative Agent shall have
been duly executed by such counsel and delivered to Administrative
Agent.
(g) Searches of the States of Texas and Kansas and such
other States as Administrative Agent may request, setting forth all
UCC filings, financing statements and other Lien filings against
Borrower or any Operating Subsidiary in such States, shall have been
delivered to Administrative Agent, which searches shall confirm that
the Assets of Borrower and Operating Subsidiaries are free and clear
of all Liens other than Permitted Liens, if any, in such States.
(h) A Solvency Certificate in the form of Exhibit D
hereto, appropriately completed, shall have been delivered to
Administrative Agent, which Solvency Certificate shall have been
executed by a Financial Officer of Borrower and each Operating
Subsidiary and shall reflect, to the satisfaction of Administrative
Agent, that (A) both before and after giving effect to the
transactions contemplated by this Sixth Amendment (and assuming
funding of the Loans in an amount equal to the maximum Aggregate
Commitment, as amended by this Sixth Amendment), each of Borrower and
each Operating Subsidiary is, both as a separate corporate entity and
on a consolidated basis with its Subsidiaries, Solvent and (B) there
has not occurred any material adverse change in the Net Worth of
Borrower or any Operating Subsidiary since the date of the balance
sheets of such corporations as of March 31, 1995.
(i) Before and after giving effect to this Sixth
Amendment, the representations and warranties provided in Article V of
the Loan Agreement shall be true and correct on the Amendment Date as
if made on such date (except to the extent that such representations
and warranties are expressly by their terms made only as of the date
of this Sixth Amendment or another date other than the Restatement
Date), and no Potential Default or Event of Default shall have
occurred or be continuing on the Amendment Date.
5
<PAGE> 6
(j) Administrative Agent shall have received such other
documents, instruments, certificates and opinions as it shall deem
necessary or appropriate in connection with this Sixth Amendment and
the transactions contemplated hereby.
(k) All proceedings taken in connection with the
transactions contemplated by this Sixth Amendment shall be reasonably
satisfactory to Administrative Agent, all Loan Papers shall be in form
and substance satisfactory to Administrative Agent and all legal
matters incident to this Sixth Amendment and the other Loan Papers and
the transactions contemplated by the Loan Papers shall be satisfactory
to counsel to Administrative Agent.
(l) A Closing Certificate in the form of Exhibit E
hereto, appropriately completed, shall have been executed by Borrower
and Operating Subsidiaries and certain of their officers, as indicated
therein, and delivered to Administrative Agent, which certificate
shall certify to the satisfaction of the conditions precedent set
forth in this Section 4.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants, and each Operating Subsidiary as to matters relating to such
Operating Subsidiary represents and warrants, that this Sixth Amendment has
been duly authorized, executed and delivered by Borrower and the Operating
Subsidiaries and constitutes the legal, valid, and binding obligation of
Borrower and the Operating Subsidiaries, enforceable in accordance with its
terms (subject as to enforcement of remedies to any applicable bankruptcy,
reorganization, moratorium, or similar laws or principles of equity affecting
the enforcement of creditors' rights generally). Borrower further represents
and warrants that, before and after giving effect to this Sixth Amendment, (a)
there exists no Potential Default or Event of Default on the date hereof, (b)
the representations and warranties set forth in Article V of the Loan Agreement
are true and correct on the date hereof (including the representations or
warranties that are expressly made only as of the Restatement Date), and (c)
Borrower and the Operating Subsidiaries have complied with all agreements and
conditions to be complied with by it under the Loan Agreement and other Loan
Papers by the date hereof.
SECTION 6. ENTIRE AGREEMENT; RATIFICATION. This Sixth Amendment
embodies the entire agreement of the parties and supersedes any prior
agreements or understandings with respect to the subject matter hereof. Except
as modified or supplemented hereby, the Loan Agreement and all other Loan
Papers shall continue in full force and effect.
6
<PAGE> 7
SECTION 7. GOVERNING LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
U.S. FEDERAL LAWS.
SECTION 8. COUNTERPARTS. This Sixth Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument. In making proof hereof, it shall not be necessary to
produce or account for any counterpart other than one signed by the party
against which enforcement is sought.
SECTION 9. NO ORAL AGREEMENTS. THIS SIXTH AMENDMENT, TOGETHER WITH
THE LOAN AGREEMENT AND THE OTHER LOAN PAPERS, CONSTITUTES A "LOAN AGREEMENT"
FOR THE PURPOSES OF SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE,
AND REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE PARTIES HERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN (A)
BORROWER OR ANY OPERATING SUBSIDIARY AND (B) ADMINISTRATIVE AGENT, ANY
CO-AGENT, ANY LENDER OR ISSUER.
7
<PAGE> 8
IN WITNESS WHEREOF, this Sixth Amendment to Amended and Restated Loan
Agreement is executed as of the date first set forth above.
FOXMEYER CORPORATION
By
-----------------------------------
Title:
FOXMEYER DRUG COMPANY
By
-----------------------------------
Title:
MERCHANDISE COORDINATOR SERVICES
CORPORATION
By
-----------------------------------
Title:
HARRIS WHOLESALE COMPANY
By
-----------------------------------
Title:
CITICORP USA, INC., individually and
as Administrative Agent
By
-----------------------------------
Title:
<PAGE> 9
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent and
Documentation Agent
By
-----------------------------------
Title:
BANQUE PARIBAS, individually and as
Co-Agent
By
-----------------------------------
Title:
By
-----------------------------------
Title:
CITIBANK, N.A., as Issuer (and not a
Lender)
By
-----------------------------------
Title:
FIRST BANK NATIONAL ASSOCIATION
By
-----------------------------------
Title:
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By
-----------------------------------
Title:
<PAGE> 10
BANK OF AMERICA ILLINOIS
By
-----------------------------------
Title:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By
-----------------------------------
Title:
CREDIT SUISSE
By
-----------------------------------
Title:
By
-----------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By
-----------------------------------
Title:
THE FUJI BANK, LTD.
By
-----------------------------------
Title:
THE BANK OF TOKYO, LTD., DALLAS AGENCY
By
-----------------------------------
Title:
<PAGE> 11
THE BANK OF NOVA SCOTIA
By
-----------------------------------
Title:
<PAGE> 12
CONSENT AND AGREEMENT
The undersigned, being all of the Guarantors (as defined in the Loan
Agreement), hereby consent and agree to the foregoing Sixth Amendment,
including the increase in the Aggregate Commitment effected thereby, and hereby
confirm their respective obligations under their respective Guaranty Agreements
(as defined in the Loan Agreement), which shall remain in full force and
effect.
FOXMEYER DRUG COMPANY, a Kansas
corporation
DRXCARE, INC.
HEALTH CARE PHARMACY PROVIDERS, INC.
HEALTH MART, INC.
FOXMEYER DRUG COMPANY, a Delaware
corporation
IV PARTNERS, INC.
FOXMEYER REALTY COMPANY
FOXMEYER SOFTWARE, INC.
HEALTHCARE TRANSPORTATION SYSTEM, INC.
MERCHANDISE COORDINATOR SERVICES
CORPORATION
CAROL STREAM HOLDINGS, INC.
HARRIS WHOLESALE COMPANY
HEALTHCARE CONNECT, INC.
OMNEX HEALTH, INC. (formerly HCPP
HOLDINGS, INC.)
US HEALTHDATA INTERCHANGE, INC.
SCRIP CARD ENTERPRISES, INC.
HEALTH SYSTEMS, INC.
By
-----------------------------------
Title:
<PAGE> 1
EXHIBIT 10-B
SEVENTH AMENDMENT TO AMENDED AND
RESTATED LOAN AGREEMENT AND WAIVER
THIS SEVENTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AND WAIVER
(this "Seventh Amendment") is dated as of September 30, 1995, among (i)
FOXMEYER CORPORATION, a Delaware corporation ("Borrower"), (ii) FOXMEYER DRUG
COMPANY, a Kansas corporation, MERCHANDISE COORDINATOR SERVICES CORPORATION, a
Delaware corporation, and HARRIS WHOLESALE COMPANY, a Delaware corporation (the
"Operating Subsidiaries"), (iii) the LENDERS and ISSUER referred to therein,
and (iv) CITICORP USA, INC., a Delaware corporation, as Administrative Agent
("Administrative Agent"), and NATIONSBANK OF TEXAS, N.A., a bank organized
under the laws of the United States, as Documentation Agent ("Documentation
Agent").
WITNESSETH:
WHEREAS, FoxMeyer Corporation ("Old FoxMeyer"), Operating Subsidiaries,
Lenders and Issuer, and Administrative Agent and NationsBank of Texas, N.A. and
Banque Paribas, as Co-Agents, entered into an Amended and Restated Loan
Agreement dated as of April 29, 1993, as amended as of October 18, 1993, June
20, 1994 and August 26, 1994 (the "Amended and Restated Loan Agreement"); on
October 12, 1994, Old FoxMeyer was merged into Borrower and Borrower succeeded
to and assumed all of Old FoxMeyer's rights and obligations under the Amended
and Restated Loan Agreement; and Borrower, Operating Subsidiaries, Lenders and
Issuer, and Administrative Agent and Documentation Agent entered into
additional amendments dated as of November 22, 1994, April 26, 1995 and August
17, 1995 (the Amended and Restated Loan Agreement, as so amended, being herein
referred to as the "Loan Agreement");
WHEREAS, Borrower has requested that the Lenders (a) agree to the
amendment of certain provisions of the Loan Agreement, among other things, to
revise certain financial covenants and to permit an overline credit facility
that may be provided by certain Lenders in the aggregate principal amount of up
to $60,000,000 and (b)(i) waive certain provisions of the Loan Agreement to
permit the distribution and sale by Borrower to its parent, FoxMeyer Health
Corporation ("Fox Health"), of certain of its subsidiaries engaged in its
CareStream operations (and certain assets related thereto) and (ii) release
such subsidiaries from their Guaranties of Borrower's obligations under the
Loan Agreement;
WHEREAS, the Lenders executing this Seventh Amendment, Issuer,
Administrative Agent and Documentation Agent are willing to agree to such
amendments and (provided all Lenders
1
<PAGE> 2
so agree) provide such waiver and agree to such release, all upon the terms and
conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms are
used herein as defined in the Loan Agreement.
SECTION 2. AMENDMENT OF LOAN AGREEMENT. Subject to Section 4 of this
Seventh Amendment:
(a) Section 1.2 of the Loan Agreement is hereby amended by deleting
the definitions of "Applicable Coverage Ratio", "Development Cost Debt Service
Coverage Ratio Adjustment Amount", "Development Cost Interest Coverage Ratio
Adjustment Amount", "Funded Debt", "Funded Debt Service", "Healthcare Connect
Subsidiaries" and "Permitted Indebtedness" and adding the following definitions
(in appropriate alphabetical order):
Applicable Coverage Ratio. Means, as of any date, the ratio of
(a)(i) EBIT, plus (ii) amortization and depreciation expense, plus (iii)
the Development Cost Interest Coverage Ratio Adjustment Amount, plus
(iv) the Phar-Mor Interest Coverage Ratio Adjustment Amount, plus (v)
the CareStream EBT Adjustment Amount, less (vi) the CareStream D&A
Adjustment Amount, of Borrower and the Consolidated Subsidiaries for the
12 month period ended on such date, to (b)(i) Interest Expense, less
(ii) the CareStream Interest Expense Adjustment Amount, plus (iii)
interest income then being currently received (to the extent such income
is netted against interest charges in the definition of "Interest
Expense"), for such 12 month period.
CareStream D&A Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first
accounted for as a discontinued operation of Borrower and the
Consolidated Subsidiaries in accordance with GAAP, the amounts in
respect of depreciation and amortization allocated to the CareStream
Operations in accordance with GAAP for the 12 month period ending on
such date of determination.
CareStream Debt Service Adjustment Amount. Means, for each date
of determination after the CareStream Operations shall first have been
accounted for as a discontinued operation of Borrower and the
Consolidated Subsidiaries in accordance with GAAP, the principal and
interest payments allocated to or or paid directly by the CareStream
Operations in accordance with
2
<PAGE> 3
GAAP for the 12 month period ending on such date of determination.
CareStream EBT Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first
accounted for as a discontinued operation of Borrower and the
Consolidated Subsidiaries in accordance with GAAP, an amount equal to
the loss of Borrower and the Consolidated Subsidiaries before provision
for income taxes allocated to the CareStream Operations in accordance
with GAAP for the 12 month period ending on such date of determination.
CareStream Holdings. Means the wholly owned Consolidated
Subsidiary to be formed for the purpose of acquiring all of the capital
stock of the Subsidiaries of Borrower (and related assets) engaged in
the CareStream Operations, which Subsidiary shall execute a Guaranty
Agreement pursuant to Section 3.3 not later than the date it acquires
such capital stock (and related assets).
CareStream Indemnity. Means the assumption and indemnity
agreement from NII to CareStream Holdings and Borrower, (a) assuming and
providing CareStream Holdings, and Borrower and its other Subsidiaries,
indemnification against all obligations and liabilities, and related
expenses, in respect of the CareStream Transactions (as defined in the
Seventh Amendment hereto) and the CareStream Operations, including
without limitation (i) all taxes payable on account of the dividend and
sale of appreciated assets included in the CareStream Transactions, any
future deconsolidation of the CareStream Operations from the affiliated
group (as defined in Section 1504 of the Code) that includes NII, (ii)
all deferred purchase price, earnout and other obligations under the
agreements under which the CareStream Operations were acquired and (iii)
all contingent obligations for financing provided for the CareStream
Operations, and (b) providing Borrower and its Subsidiaries with a right
of setoff in respect of such indemnification for amounts payable under
the Tax Sharing Agreement, all on terms contemplated by the Seventh
Amendment hereto and satisfactory to Administrative Agent (as amended,
supplemented or otherwise modified from time to time in accordance with
Section 6.2(w)).
CareStream Interest Expense Adjustment Amount. Means, for each
date of determination after the CareStream Operations shall have been
first accounted for as a discontinued operation of Borrower and the
Consolidated Subsidiaries in accordance with GAAP, the Interest Expense
allocated to or paid directly by the CareStream Operations in accordance
with GAAP for the 12 month period ending on such date of determination.
3
<PAGE> 4
CareStream Net Income Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first
accounted for as a discontinued operation of Borrower and the
Consolidated Subsidiaries in accordance with GAAP, the loss (after
income taxes) of Borrower and the Consolidated Subsidiaries allocated to
the CareStream Operations in accordance with GAAP for the 12 month
period ending on such date of determination.
CareStream Note. Means the secured promissory note, in the
principal amount contemplated by the Seventh Amendment hereto, made by
NII payable to the order of CareStream Holdings evidencing the purchase
price for the CareStream Operations, on terms contemplated by the
Seventh Amendment hereto and satisfactory to Administrative Agent (as
amended, restated, replaced, substituted, supplemented or otherwise
modified from time to time in accordance with Section 6.2(w)).
CareStream Operations. Means the operations conducted by
Healthcare Connect, Inc. and its Subsidiaries, principally providing
healthcare administration and management services, together with (a) the
assets of Healthcare Connect, Inc. and its Subsidiaries, (b) the assets
purchased by Borrower and/or FoxMeyer Drug Company from the chapter 11
estate of Synercom Healthcare Systems, Inc. on or about February 8,
1995, and (c) the assets (consisting principally of hardward and
software) used as of the Waiver Effective Date (as defined in the
Seventh Amendment hereto) in the operation of the DataNet division of
Borrower and/or FoxMeyer Drug Company, but excluding all shares of
capital stock of FoxMeyer Canada.
CareStream Pledge Agreement. Means the pledge agreement from NII
to CareStream Holdings, pledging all of the capital stock and assets
included in the CareStream Operations distributed or sold to NII as
contemplated by the Seventh Amendment hereto, as security for the
CareStream Note and the CareStream Indemnity (which collateral shall be
released upon the payment in full of the CareStream Note), on the terms
contemplated by the Seventh Amendment hereto and satisfactory to
Administrative Agent (as amended, supplemented or otherwise modified
from time to time in accordance with Section 6.2(w)).
Development Cost Debt Service Coverage Ratio Adjustment Amount.
Means, as of any date of determination, the aggregate amount of any
reduction of Operating Cash Flow attributable to any write-off of
previously capitalized computer software development costs or any
write-off of the costs of, or loss on the
4
<PAGE> 5
disposition of, replaced computer software and related hardware, but
excluding any such reduction in respect of the CareStream Operations;
provided that the aggregate amount of the Development Cost Debt Service
Coverage Ratio Adjustment Amount utilized during any period of 12 months
shall not exceed $5,000,000 (prior to any adjustment for income taxes).
Development Cost Interest Coverage Ratio Adjustment Amount.
Means, as of any date of determination, the aggregate amount of any
reduction of EBIT attributable to any write-off of previously
capitalized computer software development costs or any write-off of the
costs of, or loss on the disposition of, replaced computer software and
related hardware, but excluding any such reduction in respect of the
CareStream Operations; provided that the aggregate amount of the
Development Cost Interest Coverage Ratio Adjustment Amount utilized
during any period of 12 months shall not exceed $5,000,000 (prior to any
adjustment for income taxes).
Funded Debt. Means, as of the date of any determination, the sum
of the following (without duplication): (a) all Indebtedness evidenced
by the Notes or the B Borrowing Account as of such date, (b) all
Indebtedness evidenced by the 7.09% Notes as of such date, (c) all
Indebtedness consisting of Subordinated Debt as of such date, (d) all
Indebtedness which would be classified as "funded debt" or "long-term
debt", including the current portions thereof, on a consolidated balance
sheet of Borrower and the Consolidated Subsidiaries prepared as of such
date in accordance with GAAP, (e) all Indebtedness of Borrower or any
Consolidated Subsidiary having a final maturity (or which is renewable
or extendible at the option of the obligor for a period ending) more
than one year after the date of creation thereof, notwithstanding that
payments in respect thereof are required to be made by the obligor less
than one year after the date of the creation thereof or that any amount
thereof is at the time included also in Current Liabilities of such
obligor, (f) all Indebtedness of Borrower or any Consolidated Subsidiary
outstanding under a revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof) over a period of more
than one year, notwithstanding that any such Indebtedness is created
within one year of the expiration of such agreement, (g) the present
value (discounted at the implicit rate, if known, or ten percent (10%)
per annum otherwise) of all obligations in respect of Capital Leases of
Borrower or any Consolidated Subsidiary and (h) Redeemable Capital Stock
of Borrower valued at the greater of its voluntary or involuntary
maximum fixed repurchase or redemption
5
<PAGE> 6
price plus accrued and unpaid dividends. For purposes hereof, the
"maximum fixed repurchase or redemption price" of any Redeemable Capital
Stock which does not have a fixed repurchase or redemption price shall
be calculated in accordance with the terms of such Redeemable Capital
Stock as if such Redeemable Capital Stock were purchased or redeemed on
any date on which Funded Debt shall be required to be determined, and if
such price is based upon, or measured by, the fair market value of such
Redeemable Capital Stock, such fair market value to be determined in
good faith by the Board of Directors of the issuer of such Redeemable
Capital Stock. Notwithstanding the foregoing, Funded Debt shall be
deemed not to include Indebtedness under the Overline Facility, which is
due and payable not later than March 31, 1996.
Funded Debt Service. Means, with respect to Borrower and the
Consolidated Subsidiaries, for any period, the sum of (a) the aggregate
of all principal and interest payments and repurchase or redemption
payments required or scheduled to be made during such period with
respect to Funded Debt, (b) interest payments required to be made during
such period with respect to Indebtedness under the Overline Facility and
(c) Preferred Dividends accruing or payable during such period.
Healthcare Connect Subsidiaries. Means Healthcare Connect, Inc.,
a Delaware corporation, and its wholly owned Subsidiaries, OmNex Health,
Inc. (formerly HCPP Holdings, Inc.), Health Care Pharmacy Providers,
Inc., NexCare, Inc., US HealthData Interchange, Inc. and Scrip Card
Enterprises, Inc., and any future wholly owned Subsidiaries of
Healthcare Connect, Inc., for such periods as such Persons are wholly
owned Subsidiaries of Borrower.
New CareStream. Means the wholly-owned Subsidiary of NII formed
for the purpose of holding the CareStream Operations acquired from
Borrower and CareStream Holdings.
Overline Facility. Means any agreement to be entered into among
Borrower, Operating Subsidiaries, the lenders named therein and Citicorp
USA, Inc., as Administrative Agent, providing a working capital facility
in the aggregate principal amount of up to $60,000,000, and all
Guaranties and other documents related thereto, as such agreement,
Guaranties and other documents may be amended, replaced, supplemented or
otherwise modified from time to time.
Permitted Indebtedness. Means (a) the Obligations, (b) the
existing Indebtedness, other than
6
<PAGE> 7
the 7.09% Notes and the 7.09% Note Guaranties, expressly identified on
Schedule 2 hereto (including renewals or extensions thereof, but
excluding increases thereof except as may otherwise be permitted), (c)
Guaranties of Indebtedness of customers of Borrower or an Operating
Subsidiary by Borrower or such Operating Subsidiary, provided such
Guaranties constitute Permitted Customer Advances, (d) agreements
entered into in the ordinary course of business by Borrower or an
Operating Subsidiary to repurchase at a discounted price Inventory sold
to customers of Borrower or such Operating Subsidiary, (e) obligations
evidenced by the Intercompany Notes, (f) accounts payable and other
accruals incurred by Borrower or any Consolidated Subsidiary and payable
or owing to another Person who is Borrower or any Consolidated
Subsidiary as a result of the cash management system of Borrower and its
Consolidated Subsidiaries, (g) obligations evidenced by any Interest
Rate Protection Agreement in respect of the Obligations or the 7.09%
Notes, (h) any Indebtedness which is expressly permitted pursuant to
clause (iv) of Section 6.2(l), (i) Indebtedness consisting of the 7.09%
Notes and the 7.09% Note Guaranties, (j) Indebtedness consisting of
Redeemable Capital Stock, provided such stock is Preferred Stock which
does not provide for mandatory repurchase or redemption prior to the
fifth (5th) anniversary of the date of issuance thereof, (k)
Subordinated Debt incurred in the aggregate principal amount not to
exceed $200,000,000, provided that at the time of any incurrence of such
Indebtedness and after giving effect thereto and considering facts and
circumstances then existing, no Potential Default or Event of Default
exists or will occur or may reasonably be expected to occur, (l) up to
$10,000,000 of Indebtedness consisting of (i) Capital Leases or (ii)
purchase money Indebtedness secured by Liens permitted by clause (h) of
the definition of "Permitted Liens" and (m) Indebtedness from time to
time outstanding under the Overline Facility.
(b) Section 2.8 of the Loan Agreement is hereby amended by
adding the following new subsection (i) thereto:
(i) Seventh Amendment Fee. Borrower shall pay to
Administrative Agent for the account of each Lender which
executes the Seventh Amendment hereto an amendment fee equal to
one tenth of one percent (0.10%) of such Lender's Commitment.
Such fee shall be paid (i) on the date the amendments provided in
the Seventh Amendment hereto become effective as to all Lenders
which have executed the Seventh Amendment as of such date and
(ii) on the earlier of the effective date of the waiver provided
in the Seventh Amendment hereto or five days after their
7
<PAGE> 8
respective executions thereof as to all Lenders which execute the
Seventh Amendment hereto after such amendments become effective.
(c) Section 3.3 of the Loan Agreement is hereby amended by
deleting the phrase "upon request by Administrative Agent" and inserting in
place thereof the word "thereafter".
(d) Section 6.1(f) of the Loan Agreement is hereby amended by
adding the following new sentence at the end thereof:
In furtherance of the foregoing, but not by way of limitation
thereof, Borrower and the Operating Subsidiaries shall permit Administrative
Agent to conduct during normal business hours after reasonable notice to
Borrower, from time to time at Borrower's expense, a review and examination of
the Inventory and Receivables, and related systems, of Borrower and the
Consolidated Subsidiaries, which review and examination may include a
verification of the amounts of Inventory and Receivables in the financial
statements of Borrower and the Consolidated Subsidiaries; provided, however,
that if the Administrative Agent shall conduct more than one such review and
examination in any calendar year, the Borrower shall only be required to
reimburse Administrative Agent for the expenses related to the first of such
reviews and Administrative Agent and Lenders shall be responsible for the
expenses relating to each subsequent review in such calendar year.
(e) Section 6.1(m) of the Loan Agreement is hereby amended by
inserting after the phrase "7.09% Note Guaranties" the phrase "and the
Indebtedness under the Overline Facility".
(f) Section 6.2(d) of the Loan Agreement is hereby amended by
deleting the proviso at the end of such section in its entirety.
(g) Section 6.2(f) of the Loan Agreement is hereby amended (i)
by inserting at the end of clause (i) thereof the phrase ", plus (E) the
CareStream EBT Adjustment Amount", (ii) by inserting after the phrase "the
Service Fee Adjustment Amount," in clause (ii) thereof the phrase "less the
CareStream Interest Expense Adjustment Amount," and (iii) by deleting the last
four ratios set forth in the table therein and inserting in place thereof the
following new ratios:
<TABLE>
<CAPTION>
Last Day of
Applicable Period Ratio
------------------------- ------------
<S> <C>
9/30/95 2.50 to 1.00
12/31/95 2.00 to 1.00
3/31/96 2.50 to 1.00
6/30/96 and thereafter 3.40 to 1.00
</TABLE>
8
<PAGE> 9
(h) Section 6.2(g) of the Loan Agreement is hereby amended (i)
by inserting at the end of clause (i) thereof the phrase ", plus (D) the
CareStream Net Income Adjustment Amount, less (E) the CareStream D&A Adjustment
Amount, less (F) the CareStream Interest Expense Adjustment Amount" and (ii) by
deleting the phrase "Funded Debt Service" in clause (ii) thereof and inserting
in place thereof the phrase "(A) Funded Debt Service, less (B) the CareStream
Debt Service Adjustment Amount".
(i) Section 6.2(i) of the Loan Agreement is hereby amended by:
(i) inserting after the phrase "Permitted Indebtedness
referred to in clause (d) of the definition thereof" each place
it appears the phrase "or, for the fiscal quarter ending December
31, 1995, Permitted Indebtedness referred to in clause (m) of the
definition thereof"; and
(ii) deleting the phrase "0.60 to 1.00" and inserting in
place thereof the following: "(i) 0.60 to 1.00 for all fiscal
quarters of Borrower other than the fiscal quarter ending
December 31, 1995 and (ii) 0.63 to 1.00 for the fiscal quarter
ending December 31, 1995."
(j) Section 6.2(n) of the Loan Agreement is hereby amended by
inserting after the phrase "Revolving Receivables Purchase Program," in the
second sentence thereof the phrase "and except as set forth in the Overline
Facility,".
(k) Section 6.2(w) of the Loan Agreement is hereby amended by
deleting the section heading in its entirety and inserting in place thereof the
new heading "NII Loan Documents; Other Documents" and adding at the end of such
section the following:
Borrower shall not allow to occur any of the following without
the prior written consent of Administrative Agent and Majority
Lenders: (A) modify the terms of payment of principal (whether
at maturity, on mandatory prepayment or otherwise) or interest in
respect of the CareStream Note, (B) release any collateral
securing the CareStream Note and the CareStream Indemnity, except
as permitted by the CareStream Pledge Agreement, or (C) modify or
release any assumption or indemnification obligations benefiting
Borrower and the Consolidated Subsidiaries under the CareStream
Indemnity.
9
<PAGE> 10
(l) Section 6.3(a) is hereby amended by deleting clause (ii)
thereof and inserting in place thereof the following:
(ii) the calculation of the Applicable Leverage Ratio for each
day of the preceding month and a borrowing base certificate as of the last day
of such preceding month substantially in the form of Exhibit N hereto, all in
reasonable detail and certified as to accuracy by a Financial Officer of
Borrower and the Operating Subsidiaries.
(m) Section 6.3(h) of the Loan Agreement is hereby amended by
inserting after the phrase "7.09% Note Purchase Agreements" the phrase ", the
Overline Facility".
(n) Section 6.3(o) of the Loan Agreement is hereby amended by:
(i) substituting a comma for the word "or" before the
"(iv)" and inserting after the phrase "any Subordinated Debt," in
the first clause thereof the phrase "(v) the Overline Facility or
(vi) the CareStream Note, the CareStream Pledge Agreement or the
CareStream Indemnity,"; and
(ii) inserting after the words "any of the NII Loan
Documents" the phrase ", the Revolving Receivables Purchase
Program, the Overline Facility, the CareStream Note, the
CareStream Pledge Agreement, the CareStream Indemnity".
(o) Section 7.1(d) of the Loan Agreement is hereby amended by
(i) inserting after the word "Notes" in the title thereto the phrase ",
Overline Facility" and (ii) inserting after the first semi-colon in such
Section the following phrase:
or any Event of Default (as defined in the Overline Facility)
shall occur; or any one or more Events of Default (as defined in
the CareStream Note, the CareStream Pledge Agreement or the
CareStream Indemnity) shall occur;
(p) Exhibit M to the Loan Agreement is hereby amended by
substituting in place thereof a new Exhibit M, to read as provided in Exhibit 1
to the Seventh Amendment hereto.
(q) Exhibit N is hereby added to the Loan Agreement to read as
provided in Exhibit 2 to the Seventh Amendment hereto.
10
<PAGE> 11
SECTION 3. REQUESTED CONSENT AND RELEASE.
(a) Borrower hereby requests that Lenders waive the provisions
of Sections 6.1(i), 6.1(l), 6.2(b), 6.2(j), 6.2(k), 6.2(l), 6.2(n) and 6.2(q)
of the Loan Agreement to permit the following transactions (the "CareStream
Transactions"):
(i) a dividend to Fox Health of $5,000,000 in value of
the capital stock of Health Care Pharmacy Providers, Inc.
("HCPP") and the contribution by Fox Health of such capital stock
to its wholly-owned Subsidiary formed for the purpose of holding
the CareStream Operations (as hereinafter defined) ("New
CareStream");
(ii) the creation of a wholly owned Subsidiary of
Borrower ("CareStream Holdings") to hold all of the capital stock
of HealthCare Connect, Inc. and its Subsidiaries, OmNex Health,
Inc., NexCare, Inc., Scrip Card Enterprises, Inc. and US
HealthData Interchange, Inc., including the balance of the
capital stock of HCPP but excluding all shares of capital stock
of FoxMeyer Canada, the assets purchased by Borrower and/or
Foxmeyer Drug Company from the chapter 11 estate of Synercom
Healthcare Systems, Inc. on or about February 8, 1995, and the
assets used as of the Waiver Effective Date (as defined below) in
the operation of the DataNet division of Borrower and/or FoxMeyer
Drug Company (collectively, the "CareStream Operations") and the
contribution of such capital stock and assets to CareStream
Holdings; and
(iii) the sale by CareStream Holdings of the CareStream
Operations to Fox Health for a consideration equal to (A) the
amount of Borrower's consolidated investment in the CareStream
Operations from March 31, 1993 to the date of such sale (which
investment aggregated $19,983,000 from March 31, 1993 through
March 31, 1995) less $5,000,000 (representing the amount of the
dividend described in paragraph (i) above), which amount shall be
evidenced by a promissory note (the "CareStream Note") of Fox
Health payable on the earlier of (1) the date of consummation of
any public or private offering of shares of capital stock of New
CareStream or any other transaction (whether sale of stock or
assets, merger or other business combination) in which funds are
received by Fox Health or any of its Subsidiaries (including
without limitation New CareStream) in respect of the sale or
other disposition of the CareStream Operations (or any interest
therein) or (2) one year from the date of the CareStream Note,
which note will be secured
11
<PAGE> 12
by a first priority pledge and security interest in the capital
stock and assets distributed or sold to Fox Health as part of the
CareStream Transactions and (B) the assumption and
indemnification (the "CareStream Indemnity") by Fox Health for
all obligations and liabilities, and related expenses, in respect
of the CareStream Transactions, including without limitation
obligations for Taxes (as defined in, and notwithstanding, the
Tax Sharing Agreement, including estimated Taxes), deferred or
contingent purchase price obligations and contingent obligations
for financing, and providing a right of setoff for amounts
payable under the Tax Sharing Agreement.
(b) In order to induce Lenders to provide such waiver,
Borrower hereby represents, warrants and covenants as follows:
(i) The CareStream Transactions are correctly described
in paragraph (a) above and the memoranda dated October 3, 1995
and October 13, 1995 (collectively, the "Transaction
Description"), from Borrower to Lenders. The Transaction
Description does not omit any statement of a material fact
necessary to make the statements contained therein or herein not
misleading.
(ii) The principal amount of the CareStream Note will be
not less than the actual amount of all loans, advances, capital
contributions and other investments made by Borrower and its
Consolidated Subsidiaries in the CareStream Operations after
March 31, 1993, less $5,000,000. After giving effect to the
CareStream Transactions, (A) the maximum aggregate amount of (1)
obligations of Borrower and the Consolidated Subsidiaries to pay
the deferred or contingent purchase prices for the CareStream
Operations and (2) all Guaranties and other contingent
obligations of Borrower and the Consolidated Subsidiaries for
financing of the CareStream Operations shall not exceed
$5,000,000, and shall be fully assumed and indemnified against by
Fox Health pursuant to the CareStream Indemnity, and (B) neither
Borrower or any Consolidated Subsidiary will have any other
liabilities or obligations to, or any agreement to provide
financial support for, the CareStream Operations.
(iii) The consummation of the CareStream Transactions
will not, and Borrower hereby agrees that the consummation of the
CareStream Transactions shall not, violate the terms of, or give
rise to a default under, the 7.09% Notes, the 7.09% Note
12
<PAGE> 13
Guaranties or the 7.09% Note Purchase Agreements, the agreements
and instruments evidencing the Revolving Receivables Purchase
Program or any other material agreement, any law, rule or
regulation, or any order, writ, judgment, injunction, decree,
determination or award, to which Borrower or any Consolidated
Subsidiary is a party or by which it or any of its material
Assets are bound or affected. None of the CareStream
Transactions will have a Material Adverse Effect.
(iv) After giving effect to the CareStream Transactions,
Borrower and each of the Operating Subsidiaries will be Solvent,
both as a separate corporate entity and on a consolidated basis
with its Subsidiaries.
(c) On the basis of the representations and warranties in this
Section 3 and in Section 5 of this Seventh Amendment, and subject to Section 4
of this Seventh Amendment, Lenders executing this Seventh Amendment hereby (i)
waive, in this specific instance, the provisions of the Loan Agreement set
forth in paragraph (a) above insofar as may be required to effect the
CareStream Transactions and (ii) agree to release and terminate on the Waiver
Effective Date (as hereinafter defined) the Guaranty Agreements of the
following Guarantors: Healthcare Connect, Inc., OmNex Health, Inc. (formerly
HCPP Holdings, Inc.), HCPP, NexCare, Inc., Scrip Card Enterprises, Inc. and US
HealthData Interchange, Inc.; provided that the waiver and release contemplated
by this Section 3 shall not become effective if a Potential Default or an Event
of Default shall have occurred and be continuing.
(d) Borrower acknowledges and agrees that the foregoing waiver
shall extend only to the requirements of the Loan Agreement to the limited
extent expressly provided herein and shall not extend to any other or
additional state of facts or circumstances or any other covenant, obligation,
representation or warranty of any party to the Loan Agreement or the other Loan
Papers.
SECTION 4. EFFECTIVENESS.
(a) This Seventh Amendment shall become binding on the parties
hereto when executed by the Required Lenders, Issuer, Administrative Agent,
Borrower and Operating Subsidiaries; provided it is so executed not later than
October 24, 1995. However, the amendments provided in Section 2 of this
Seventh Amendment shall not become effective until all of the applicable
conditions therefor provided in this Section 4 shall have been satisfied, and
the waiver and agreement to release provided in Section 3 of this Seventh
Amendment shall not become effective until all of the applicable conditions
therefor provided in this Section 4
13
<PAGE> 14
shall have been satisfied and all Lenders shall have executed this Seventh
Amendment. The amendments provided in Section 2 of this Seventh Amendment may
become and shall remain effective even if the waiver and agreement to release
provided in Section 3 of this Seventh Amendment does not become effective.
(b) The amendments provided in Section 2 of this Seventh
Amendment shall become effective upon satisfaction of the following, in a
manner acceptable to Administrative Agent, on or before October 24, 1995 (the
date of such effectiveness herein called the "Amendment Effective Date"):
(i) All of the Guarantors shall have executed and
delivered the Consent and Agreement attached to this Seventh
Amendment (the "Guarantor Consent and Agreement").
(ii) Borrower and each Guarantor shall have delivered to
Administrative Agent certificates providing the certifications
contemplated by Section 4.1(c) of the Loan Agreement as of the
Amendment Effective Date, including resolutions authorizing the
execution, delivery and performance of this Seventh Amendment and
the Guarantor Consent and Agreement.
(iii) Administrative Agent shall have received an opinion
of Weil, Gotshal & Manges, counsel to Borrower and the Operating
Subsidiaries, in form and substance satisfactory to
Administrative Agent, that this Seventh Amendment and the
Guarantor Consent and Agreement have been duly authorized,
executed and delivered by Borrower, the Operating Subsidiaries,
and the other Consolidated Subsidiaries, and that the Credit
Agreement, as amended by this Seventh Amendment, and the Guaranty
Agreements, as confirmed by the Guarantor Consent and Agreement,
constitute the legal, valid, and binding obligations of Borrower,
Operating Subsidiaries and the other Consolidated Subsidiaries,
enforceable in accordance with their respective terms (subject as
to enforcement of remedies to any applicable bankruptcy,
reorganization, moratorium, or similar laws or principles of
equity affecting enforcement of creditors' rights generally), and
as to such other matters as Administrative Agent deems
appropriate.
(iv) Before and after giving effect to this Seventh
Amendment, the representations and warranties provided in Article
V of the Loan Agreement, as supplemented by the addition of
NexCare, Inc. to Schedule 2 thereto as set forth on
14
<PAGE> 15
Exhibit 3 to this Seventh Amendment, shall be true and correct on
the Amendment Effective Date as if made on such date (except to
the extent that such representations and warranties are expressly
by their terms made only as of a date other than the Restatement
Date or the date of this Seventh Amendment), and no Potential
Default or Event of Default shall have occurred or be continuing
on the Amendment Effective Date.
(v) Borrower shall have paid all fees and expenses
payable by Borrower under the Loan Papers on or before the
Amendment Effective Date.
(vi) Administrative Agent shall have received such other
documents, instruments, certificates and opinions as it shall
deem necessary or appropriate in connection with the amendments
contemplated by Section 2 of this Seventh Amendment and the
transactions contemplated thereby.
(vii) Administrative Agent shall have received a
certificate from a Financial Officer of Borrower certifying the
satisfaction of the conditions precedent set forth in this
paragraph (b).
(c) The waiver provided in Section 3 of this Seventh Amendment
shall be effective, and Administrative Agent shall be authorized to release and
terminate the Guaranty Agreements of the Consolidated Subsidiaries named in
Section 3(c) of this Seventh Amendment, upon satisfaction of the following, in
a manner acceptable to Administrative Agent, on or before May 31, 1996 (the
date of effectiveness herein called the "Waiver Effective Date"):
(i) The Amendment Effective Date shall occur.
(ii) Borrower shall provide Administrative Agent with at
least five Business Days' notice of the proposed consummation of
the CareStream Transactions, which notice shall include copies of
the proposed CareStream Note, CareStream Pledge Agreement and
CareStream Indemnity (collectively, the "CareStream Transaction
Documents"), and the CareStream Transaction Documents shall be in
form and substance satisfactory to Administrative Agent. The
CareStream Transactions shall be consummated as contemplated by
this Seventh Amendment, and all proceedings taken in connection
with the CareStream Transactions shall be satisfactory to
Administrative Agent and its counsel.
(iii) Borrower and CareStream Holdings shall have
received the CareStream Note, the CareStream
15
<PAGE> 16
Pledge Agreement and the CareStream Indemnity, duly executed by
Fox Health, together with certificates representing all of the
capital stock required to be pledged pursuant thereto and related
stock powers duly endorsed in blank.
(iv) Administrative Agent shall have received evidence
that all Intercompany Notes of HCPP and the other Subsidiaries of
CareStream Holdings shall be repaid in full or contributed to
capital and included in the principal amount of the CareStream
Note.
(v) Administrative Agent shall have received an opinion
of Weil, Gotshal & Manges, counsel to Borrower and the Operating
Subsidiaries, in form and substance satisfactory to
Administrative Agent, (A) confirming the opinion provided under
paragraph (b)(iii) above as of the Waiver Effective Date, (B)
that the CareStream Transaction Documents have been duly
authorized, executed and delivered by Fox Health and New
CareStream and constitute the legal, valid and binding
obligations of Fox Health and New CareStream, enforceable in
accordance with their respective terms (subject as to enforcement
of remedies to any applicable bankruptcy, reorganization,
moratorium, or similar laws or principles of equity affecting
enforcement of creditors' rights generally), (C) that the
execution, delivery and performance of the CareStream Transaction
Documents do not violate the terms of, or give rise to a default
under, the 7.09% Notes, the 7.09% Note Guaranties or the 7.09%
Note Purchase Agreements, the agreements and instruments
evidencing the Revolving Receivables Purchase Program, any law,
rule or regulation, or any order, writ, judgment, injunction,
decree or determination or award, to which Borrower or any
Consolidated Subsidiary is a party or by which it or any of its
material Assets are bound or affected, (D) that the CareStream
Pledge Agreement creates a valid and enforceable pledge of and
security interest in the capital stock and assets intended to be
subject thereto, and (E) as to such other matters as
Administrative Agent deems appropriate.
(vi) Before and after giving effect to the CareStream
Transactions, the representations and warranties provided in
Article V of the Loan Agreement, as supplemented by the addition
of NexCare, Inc. to Schedule 2 thereto as set forth on Exhibit 3
to this Seventh Amendment, and in Section 2 of this Seventh
Amendment shall be true and correct on the Waiver Effective Date
as if made
16
<PAGE> 17
on such date (except to the extent that such representations and
warranties are expressly by their terms made only as of a date
other than the Restatement Date or the date of this Seventh
Amendment), and no Potential Default or Event of Default shall
have occurred or be continuing on the Waiver Effective Date.
(vii) Borrower shall have paid all fees and expenses
payable by Borrower under the Loan Papers on or before the Waiver
Effective Date.
(viii) Administrative Agent shall have received such other
documents, instruments, certificates and opinions as it shall
deem necessary or appropriate in connection with the waiver
contemplated by Section 3 of this Seventh Amendment and the
transactions contemplated thereby.
(ix) Administrative Agent shall have received a
certificate from a Financial Officer of Borrower certifying the
satisfaction of the conditions precedent set forth in this
paragraph (c).
SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants, and each Operating Subsidiary as to matters relating to such
Operating Subsidiary represents and warrants, that this Seventh Amendment and
the Guarantor Consent and Agreement have been duly authorized, executed and
delivered by Borrower, Operating Subsidiaries and the other Consolidated
Subsidiaries and constitute the legal, valid, and binding obligations of
Borrower, Operating Subsidiaries and the other Consolidated Subsidiaries,
enforceable in accordance with their respective terms (subject as to
enforcement of remedies to any applicable bankruptcy, reorganization,
moratorium, or similar laws or principles of equity affecting the enforcement
of creditors' rights generally). Borrower further represents and warrants
that, before and after giving effect to this Seventh Amendment, (a) there
exists no Potential Default or Event of Default on the date of this Seventh
Amendment, (b) the representations and warranties set forth in Article V of the
Loan Agreement, as supplemented by the addition of NexCare, Inc. to Schedule 2
thereto as set forth on Exhibit 3 to this Seventh Amendment, are true and
correct on the date of this Seventh Amendment (including the representations or
warranties that are otherwise expressly made as of the Restatement Date), and
(c) Borrower and Operating Subsidiaries have complied with all agreements and
conditions to be complied with by it under the Loan Agreement and other Loan
Papers by the date of this Seventh Amendment.
SECTION 6. ENTIRE AGREEMENT; RATIFICATION. This Seventh Amendment
embodies the entire agreement of the parties and supersedes any prior
agreements or understandings with respect
17
<PAGE> 18
to the subject matter hereof. Except as amended or waived hereby, the Loan
Agreement and all other Loan Papers shall continue in full force and effect.
SECTION 7. GOVERNING LAW. THIS SEVENTH AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
U.S. FEDERAL LAWS.
SECTION 8. COUNTERPARTS. This Seventh Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument. In making proof hereof, it shall not be necessary to
produce or account for any counterpart other than one signed by the party
against which enforcement is sought.
SECTION 9. NO ORAL AGREEMENTS. THIS SEVENTH AMENDMENT, TOGETHER WITH
THE LOAN AGREEMENT AND THE OTHER LOAN PAPERS, CONSTITUTES A "LOAN AGREEMENT"
FOR THE PURPOSES OF SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE,
AND REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE PARTIES HERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN (A)
BORROWER OR ANY OPERATING SUBSIDIARY AND (B) ADMINISTRATIVE AGENT,
DOCUMENTATION AGENT, ANY LENDER OR ISSUER.
18
<PAGE> 19
IN WITNESS WHEREOF, this Seventh Amendment to Amended and Restated Loan
Agreement is executed as of the date first set forth above.
FOXMEYER CORPORATION
By
-----------------------------------
Title:
FOXMEYER DRUG COMPANY
By
-----------------------------------
Title:
MERCHANDISE COORDINATOR SERVICES
CORPORATION
By
-----------------------------------
Title:
HARRIS WHOLESALE COMPANY
By
-----------------------------------
Title:
CITICORP USA, INC., individually and
as Administrative Agent
By
-----------------------------------
Title:
<PAGE> 20
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent and
Documentation Agent
By
-----------------------------------
Title:
BANQUE PARIBAS, individually and as
Co-Agent
By
-----------------------------------
Title:
By
-----------------------------------
Title:
CITIBANK, N.A., as Issuer (and not a
Lender)
By
-----------------------------------
Title:
FIRST BANK NATIONAL ASSOCIATION
By
-----------------------------------
Title:
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By
-----------------------------------
Title:
<PAGE> 21
BANK OF AMERICA ILLINOIS
By
-----------------------------------
Title:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By
-----------------------------------
Title:
CREDIT SUISSE
By
-----------------------------------
Title:
By
-----------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By
-----------------------------------
Title:
THE FUJI BANK, LTD.
By
-----------------------------------
Title:
THE BANK OF TOKYO, LTD., DALLAS AGENCY
By
-----------------------------------
Title:
<PAGE> 22
THE BANK OF NOVA SCOTIA
By
-----------------------------------
Title:
<PAGE> 23
CONSENT AND AGREEMENT
The undersigned, being all of the Guarantors (as defined in the Loan
Agreement), hereby consent and agree to the foregoing Seventh Amendment,
including the amendments contemplated thereby, the release of certain
Guarantors contemplated thereby and the distribution and sales of Assets
permitted thereby, and hereby confirm their respective obligations under their
respective Guaranty Agreements (as defined in the Loan Agreement), which shall
remain in full force and effect.
FOXMEYER DRUG COMPANY, a Kansas
corporation
DRXCARE, INC.
HEALTH CARE PHARMACY PROVIDERS, INC.
HEALTH MART, INC.
FOXMEYER DRUG COMPANY, a Delaware
corporation
IV PARTNERS, INC.
FOXMEYER REALTY COMPANY
FOXMEYER SOFTWARE, INC.
HEALTHCARE TRANSPORTATION SYSTEM, INC.
MERCHANDISE COORDINATOR SERVICES
CORPORATION
CAROL STREAM HOLDINGS, INC.
HARRIS WHOLESALE COMPANY
HEALTHCARE CONNECT, INC.
OMNEX HEALTH, INC. (formerly HCPP
HOLDINGS, INC.)
US HEALTHDATA INTERCHANGE, INC.
SCRIP CARD ENTERPRISES, INC.
HEALTH SYSTEMS, INC.
NEXCARE, INC.
By
-----------------------------------
Title:
<PAGE> 1
EXHIBIT 10-C
================================================================================
LOAN AGREEMENT
AMONG
FOXMEYER CORPORATION,
AS BORROWER
FOXMEYER DRUG COMPANY,
MERCHANDISE COORDINATOR SERVICES CORPORATION
AND
HARRIS WHOLESALE COMPANY,
AS GUARANTORS
THE LENDERS REFERRED TO THEREIN,
CITICORP USA, INC.,
AS ADMINISTRATIVE AGENT
AND
NATIONSBANK OF TEXAS, N.A.,
AS DOCUMENTATION AGENT
Dated as of October 24, 1995
$60,000,000 Overline Facility
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.3 Borrowing and Related Procedures . . . . . . . . . . . . . . . . . . . . . . 30
2.4 Principal Payment of Advances . . . . . . . . . . . . . . . . . . . . . . . . 32
2.5 Prepayments of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.6 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.8 Protection of Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.9 Manner and Application of Payment . . . . . . . . . . . . . . . . . . . . . . 35
2.10 Termination and Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.11 Taxes; Exemption from U.S. Withholding, Etc . . . . . . . . . . . . . . . . . 37
ARTICLE III GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.1 Guaranty Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.2 New Consolidated Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3 Requested Consent and Release . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.1 Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.2 All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.3 Representation and Warranty . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.4 Determinations Regarding Conditions Precedent . . . . . . . . . . . . . . . . 47
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 48
5.1 Organization, Standing, Qualification . . . . . . . . . . . . . . . . . . . . 48
5.2 Authorization, Enforceability, etc . . . . . . . . . . . . . . . . . . . . . 48
5.3 Financial Statements and Business Condition . . . . . . . . . . . . . . . . . 49
5.4 Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.5 Title to Parties; Prior Liens . . . . . . . . . . . . . . . . . . . . . . . . 50
5.6 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.7 Ownership of Borrower and Subsidiaries . . . . . . . . . . . . . . . . . . . 50
5.8 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.9 Business; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.10 Licenses, Permits, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.11 Litigation, Proceedings, etc . . . . . . . . . . . . . . . . . . . . . . . . 51
5.12 Plans and Fox Health Plans . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.13 Separate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.14 Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.15 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.17 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.19 Investment Company Act; Public Utility Holding Company Act . . . . . . . . . 56
5.20 Common Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.21 Burdensome Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.22 Intercompany Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.23 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.24 Amount of Phar-Mor Receivables . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
5.25 Fox Health Loan and Tender Offer . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.3 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.1 Nature Of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.2 Concurrent Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.3 Certain Rights of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE VIII THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.1 Appointment and Authorization; Administration; Duties . . . . . . . . . . . . 83
8.2 Advances and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.3 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.4 Distribution of Information . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.5 Notice to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.6 Liability of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . 86
8.7 Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . . . 87
8.8 Rights of Administrative Agent and Documentation Agent . . . . . . . . . . . 88
8.9 Independent Investigation and Credit Decision by Lenders . . . . . . . . . . 88
8.10 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
9.4 Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
9.5 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.7 Entirety and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
9.8 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.9 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.10 Lenders Not Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.11 No Oral Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.13 Construction of Indemnity and Reimbursement Obligations . . . . . . . . . . . 98
9.14 Jurisdiction, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.15 Changes in Accounting Principles . . . . . . . . . . . . . . . . . . . . . . 100
9.16 References to Schedule 2 . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.17 Article 15.10(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
</TABLE>
EXHIBITS
Exhibit A - Assignment and Acceptance
Exhibit B - Guaranty Agreement
Exhibit C - Loan Request Certificate
Exhibit D - Borrowing Base Certificate
Exhibit E - Note
Exhibit F - Corporate Certificate
Exhibit G - Legal Opinions of Counsel to Borrower and
Consolidated Subsidiaries
Exhibit H - Solvency Certificate
Exhibit I - Closing Certificate
Exhibit J - Compliance Certificate
SCHEDULES
Schedule 1 - Identities of Lenders; Pro Rata Shares of Lenders
Schedule 2 - Disclosure Schedule
Schedule 3 - Fox Health Plans
iv
<PAGE> 6
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of October 24, 1995, by
and among: FOXMEYER CORPORATION, a Delaware corporation; FOXMEYER DRUG
COMPANY, a Kansas corporation, MERCHANDISE COORDINATOR SERVICES CORPORATION, a
Delaware corporation, and HARRIS WHOLESALE COMPANY, a Delaware corporation; the
LENDERS LISTED ON THE SIGNATURE PAGES HEREOF; CITICORP USA, INC., a Delaware
corporation, as Administrative Agent for Lenders; and NATIONSBANK OF TEXAS,
N.A., a bank organized under the laws of the U.S., as Documentation Agent for
Lenders.
PRELIMINARY STATEMENT. FoxMeyer Corporation and certain of its
subsidiaries, FoxMeyer Drug Company, Merchandise Coordinator Services
Corporation and Harris Wholesale Company, have requested that Lenders make
short-term advances to Borrower for working capital purposes in an aggregate
principal amount of up to $60,000,000. Lenders are willing to make such
advances available, on a short-term basis, on the terms and conditions
hereinafter set forth.
In consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITION OF TERMS
1.1 ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP, and all financial data submitted pursuant to the Loan
Papers shall be prepared in accordance with GAAP unless otherwise specifically
provided herein, and the characterization of all expenditures as current or
capital shall be determined in accordance with GAAP.
1.2 TERMS DEFINED.
Certain terms used in the Loan Papers shall have the definitions
assigned to them in this Section 1.2 or in the contexts in which they appear.
Such definitions shall be equally applicable to both the singular and plural
forms of the terms defined, and words of any gender shall include each other
gender where appropriate.
Adjusted Net Income. Means, with respect to any period, net income
(after income taxes) of Borrower and the Consolidated Subsidiaries for such
period, but excluding (a) any gain or loss
<PAGE> 7
(net of income tax effect) arising from the sale of capital assets, (b) any
gain (net of income tax effect) arising from any write-up of assets, (c)
earnings or losses of any other Person, substantially all of the assets of
which have been acquired by Borrower or a Consolidated Subsidiary in any
manner, to the extent that such earnings or losses were realized by such other
Person prior to the date of such acquisition, (d) earnings of any Person (other
than a Consolidated Subsidiary) in which Borrower or a Consolidated Subsidiary
has an ownership interest, unless such earnings have actually been received by
Borrower or such Consolidated Subsidiary in the form of cash distributions, and
(e) any gain or loss (net of income tax effect) arising from the acquisition of
any Securities of Borrower or a Consolidated Subsidiary.
Administrative Agent. Means Citicorp, as agent for Lenders pursuant to
this Agreement, and its successors and assigns in such capacity.
Advance. Means an advance by a Lender to Borrower pursuant to Section
2.1.
Affiliate. Means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. For purposes of this definition "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used herein with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Securities or otherwise.
Aggregate Commitment. Means $60,000,000, subject to reduction as
provided in Section 2.10 (which amount is the aggregate of the maximum
Commitments of all Lenders).
Agreement. Means this Loan Agreement, as it may be amended, renewed,
extended, restated or supplemented from time to time.
Asset. Means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible or contingent or certain, and
includes, without limitation, Securities.
Assignment and Acceptance. Means an Assignment and Acceptance entered
(or to be entered) into by a Lender and an Eligible Assignee, and accepted (or
to be accepted) by the Administrative Agent, substantially in the form of
Exhibit A hereto.
Bankruptcy Code. Means Title 11 of the United States Code, as amended,
and all rules issued pursuant thereto.
2
<PAGE> 8
Base Financial Statements. Means the Financial Statements of Borrower
and its Consolidated Subsidiaries as of and for the fiscal year ended March 31,
1995 and the fiscal three months and six months ended June 30, 1995 and
September 30, 1995, respectively.
Base Rate. Means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at all
times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank in
New York, New York, from time to time, as Citibank's base rate; or
(b) one-half of one percent (.50%) per annum above the
latest three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving average
being determined weekly on each Monday (or, if any such date is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit dealers
of recognized standing selected by Citibank, in either case adjusted to
the nearest one-quarter of one percent (.25%) or, if there is no
nearest one-quarter of one percent (.25%), to the next higher
one-quarter of one percent (.25%).
Each change in the Base Rate shall become effective without prior notice to
Borrower automatically as of the opening of business on the date of such change
in the Base Rate.
Board of Governors. Means the Board of Governors of the Federal
Reserve System.
Borrower. Means FoxMeyer Corporation, a Delaware corporation.
Business Day. Means a day (other than Saturday or Sunday) on which
commercial banks are open for business in Dallas, Texas, and in New York, New
York.
Capital Expenditures. Means any expenditure by a Person for an Asset
which will be used in a year or years subsequent to the year in which such
expenditure is made and which Asset is properly classified, in relevant
financial statements of such Person and in accordance with GAAP, as equipment,
real property or improvements, fixed assets or a similar type of capitalized
asset.
3
<PAGE> 9
Capital Lease. Means, as of the date of any determination, any lease
of an Asset which is (or should be) capitalized on a balance sheet of the
lessee prepared as of such date in accordance with GAAP.
CareStream D&A Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first accounted
for as a discontinued operation of Borrower and the Consolidated Subsidiaries
in accordance with GAAP, the amounts in respect of depreciation and
amortization allocated to the CareStream Operations in accordance with GAAP for
the 12 month period ending on such date of determination.
CareStream Debt Service Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall first have been accounted
for as a discontinued operation of Borrower and the Consolidated Subsidiaries
in accordance with GAAP, the principal and interest payments allocated to or
paid directly by the CareStream Operations in accordance with GAAP for the 12
month period ending on such date of determination.
CareStream EBT Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first accounted
for as a discontinued operation of Borrower and the Consolidated Subsidiaries
in accordance with GAAP, an amount equal to the loss of Borrower and the
Consolidated Subsidiaries before provision for income taxes allocated to the
CareStream Operations in accordance with GAAP for the 12 month period ending on
such date of determination.
CareStream Holdings. Means the wholly owned Consolidated Subsidiary to
be formed for the purpose of acquiring all of the capital stock of the
Subsidiaries of Borrower (and related Assets) engaged in the CareStream
Operations, which Subsidiary shall execute a Guaranty Agreement pursuant to
Section 3.2 not later than the date it acquires such capital stock (and related
Assets).
CareStream Indemnity. Means the assumption and indemnity agreement
from Fox Health to CareStream Holdings and Borrower, (a) assuming and providing
CareStream Holdings, and Borrower and its other Subsidiaries, indemnification
against all obligations and liabilities, and related expenses, in respect of
the CareStream Transactions and the CareStream Operations, including without
limitation (i) all taxes payable on account of the dividend and sale of
appreciated Assets included in the CareStream Transactions, and any future
deconsolidation of the CareStream Operations from the affiliated group (as
defined in Section 1504 of the Code) that includes Fox Health, (ii) all
deferred purchase price, earnout and other obligations under the agreements
under which the CareStream Operations were acquired and (iii) all contingent
obligations for financing provided for the CareStream Operations, and (b)
providing Borrower and its Subsidiaries with a right of setoff in respect of
such
4
<PAGE> 10
indemnification for amounts payable under the Tax Sharing Agreement, all on
terms contemplated by Section 3.3 and satisfactory to Administrative Agent (as
amended, supplemented or otherwise modified from time to time in accordance
with Section 6.2(w)).
CareStream Interest Expense Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first accounted
for as a discontinued operation of Borrower and the Consolidated Subsidiaries
in accordance with GAAP, the Interest Expense allocated to or paid directly by
the CareStream Operations in accordance with GAAP for the 12 month period
ending on such date of determination.
CareStream Net Income Adjustment Amount. Means, for each date of
determination after the CareStream Operations shall have been first accounted
for as a discontinued operation of Borrower and the Consolidated Subsidiaries
in accordance with GAAP, the loss (after income taxes) of Borrower and the
Consolidated Subsidiaries allocated to the CareStream Operations in accordance
with GAAP for the 12 month period ending on such date of determination.
CareStream Note. Means the secured promissory note, in the principal
amount contemplated by Section 3.3, made by Fox Health payable to the order of
CareStream Holdings evidencing the purchase price for the CareStream
Operations, on terms contemplated by Section 3.3 and satisfactory to
Administrative Agent (as amended, restated, replaced, substituted, supplemented
or otherwise modified from time to time in accordance with Section 6.2(w)).
CareStream Operations. Means the operations conducted by Healthcare
Connect, Inc. and its Subsidiaries, principally providing healthcare
administration and management services, together with (a) the assets of
Healthcare Connect, Inc. and its Subsidiaries, (b) the assets purchased by
Borrower and/or FoxMeyer Drug Company from the Chapter 11 estate of Synercom
Healthcare Systems, Inc. on or about February 8, 1995, and (c) the assets
(consisting principally of hardware and software) used as of the Release
Effective Date in the operation of the DataNet division of Borrower and/or
FoxMeyer Drug Company, but excluding all shares of capital stock of FoxMeyer
Canada owned by Health Care Pharmacy Providers, Inc.
CareStream Pledge Agreement. Means the pledge agreement from Fox
Health to CareStream Holdings, pledging all of the capital stock and assets
included in the CareStream Operations distributed or sold to Fox Health as
contemplated by Section 3.3, as security for the CareStream Note and the
CareStream Indemnity (which collateral shall be released upon the payment in
full of the CareStream Note), on the terms contemplated by Section 3.3 and
satisfactory to Administrative Agent (as amended,
5
<PAGE> 11
supplemented or otherwise modified from time to time in accordance with Section
6.2(w)).
CareStream Transactions. Has the meaning set forth in Section 3.3(a).
CERCLA. Means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended, and
all regulations issued pursuant thereto.
Change of Control. Means an event or series of events by which (a) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) other than Fox Health is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of Securities representing more than 40% of the
combined voting power of the then outstanding voting Securities of Borrower and
(b) at any time during the term of this Agreement, a majority of the Board of
Directors of Borrower shall consist of Persons other than Continuing Directors
of Borrower. For purposes of this definition, "Continuing Director" means any
member of the Board of Directors on the date hereof and any other member of the
Board of Directors who shall be nominated or elected to succeed a Continuing
Director by at least two-thirds (2/3) of the Continuing Directors who are then
members of the Board of Directors.
Citibank. Means Citibank, N.A., New York.
Citicorp. Means Citicorp USA, Inc., a Delaware corporation and
subsidiary and Affiliate of Citibank.
Clean Air Act. Means the Clean Air Act (42 U.S.C. Section 7401 et
seq.) as amended, and all regulations issued pursuant thereto.
Clean Water Act. Means the Clean Water Act (33 U.S.C. Section 1251 et
seq.), as amended, and all regulations issued pursuant thereto.
Code. Means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and all regulations issued pursuant thereto.
Commitment. Means, with respect to each Lender, such Lender's
commitment to make Advances under the Facility in the maximum amount of its Pro
Rata Share of the Aggregate Commitment.
Consolidated Subsidiary. Means, as of any date, any Subsidiary of
Borrower included as of such date in the consolidated financial statements of
Borrower prepared in accordance with GAAP, and "Consolidated Subsidiaries"
means all of such Subsidiaries; provided that if FoxMeyer Canada shall at any
time be a Subsidiary of Borrower, FoxMeyer Canada shall be deemed not to be a
Consolidated Subsidiary so long as the
6
<PAGE> 12
following conditions are satisfied: (a) neither Borrower nor any of its
Consolidated Subsidiaries shall have any obligation or liability, contingent or
otherwise, for the Indebtedness or other obligations of FoxMeyer Canada other
than Borrower's obligations as co-lessee under the FMC Operating Leases; (b)
the aggregate amount of all expenditures for equity investments in, and all
loans or advances to, FoxMeyer Canada ("FMC Investments"), in addition to the
$5,181,102 expended as of March 31, 1995, shall not exceed $4,600,000; and (c)
no FMC Investment shall be made if a Potential Default or Event of Default then
exists or would exist. For the purposes of Sections 1.2, 6.2, and 6.3, the
assets, liabilities and results of operations of, and any equity in, FoxMeyer
Canada shall, to the extent not already excluded by the terms of such Sections,
be excluded from all financial definitions, calculations, determinations and
presentations, except as provided in the definition of "Net Worth" and except
as required by Exhibit J hereto.
Current Liabilities. Means, as of the date of any determination, the
sum of (a) the current liabilities which would be reflected on a consolidated
balance sheet of Borrower and its Consolidated Subsidiaries prepared as of such
date in accordance with GAAP plus (b) mandatory repurchase or redemption
payments scheduled in respect of Preferred Stock and Preferred Dividends within
the 12 month period immediately following such date.
Debtor Relief Laws. Means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
law for the relief of debtors from time to time in effect and generally
affecting the rights of creditors.
Default Rate. Means a rate per annum equal to the lesser of (a) the
Maximum Lawful Rate or (b) three percent (3%) plus the Base Rate.
Development Cost Debt Service Coverage Ratio Adjustment Amount. Means,
as of any date of determination, the aggregate amount of any reduction of
Operating Cash Flow attributable to any write-off of previously capitalized
computer software development costs or any write-off of the costs of, or loss
on the disposition of, replaced computer software and related hardware, but
excluding any such reduction in respect of the CareStream Operations; provided
that the aggregate amount of the Development Cost Debt Service Coverage Ratio
Adjustment Amount utilized during any period of 12 months shall not exceed
$5,000,000 (prior to any adjustment for income taxes).
Development Cost Interest Coverage Ratio Adjustment Amount. Means, as
of any date of determination, the aggregate amount of any reduction of EBIT
attributable to any write-off of previously capitalized computer software
development costs or any write-off of the costs of, or loss on the disposition
of, replaced computer software and related hardware, but excluding
7
<PAGE> 13
any such reduction in respect of the CareStream Operations; provided that the
aggregate amount of the Development Cost Interest Coverage Ratio Adjustment
Amount utilized during any period of 12 months shall not exceed $5,000,000
(prior to any adjustment for income taxes).
EBIT. Means, for any period, the sum of (a) the income (or deficit) of
Borrower and the Consolidated Subsidiaries before provision for income taxes
for such period (excluding, to the extent not already deducted, income
attributable to minority interests in Subsidiaries of Borrower for such period)
plus (b) Interest Expense for such period.
Eligible Assignee. Means (a) any Lender, (b) a commercial bank having
total assets in excess of $5,000,000,000, (c) an insurance company or a
financial institution having total assets in excess of $1,000,000,000, or (d) a
bank loan fund having total assets in excess of $250,000,000; provided, that,
unless Majority Lenders shall otherwise agree in writing, (i) any holder of any
capital stock of Borrower shall not be an Eligible Assignee and (ii) any
commercial bank referred to in clause (b) preceding that is organized under the
laws of a country other than the U.S. must, to be an Eligible Assignee, be
acting, for purposes of this Agreement, through a branch or agency of such bank
located in the U.S. For the purposes of the foregoing, the holdings of capital
stock by a trust department of any bank or other financial institution in the
ordinary course of its trust business shall not be ascribed to such bank or
other financial institution.
Environmental Laws. Means all applicable Federal, State and local
laws, rules, regulations, ordinances, orders and decrees relating to the
environment, the release of any materials into the environment, pollution
control, environmental contamination or otherwise governing the generation,
use, handling, collection, treatment, storage, transportation, recovery,
re-cycling, removal, discharge or disposal of Hazardous Materials (including,
without limitation, CERCLA, RCRA, the Clean Water Act, the Clean Air Act and
the Hazardous Materials Transportation Act).
ERISA. Means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and all regulations issued pursuant
thereto.
ERISA Affiliate. Means, with respect to any Person, any trade or
business (whether or not incorporated) that is a member of a controlled group
of which such Person is a member or that is under common control with such
Person within the meaning of Section 414(b) and (c) of the Code.
Event of Default. Has the meaning set forth in Section 7.1 of this
Agreement.
8
<PAGE> 14
Exhibit. Means, unless specifically indicated otherwise, exhibits
attached to this Agreement.
Existing Credit Facility. Means the Amended and Restated Loan
Agreement, dated as of April 29, 1993, as amended, among Borrower, the
Operating Subsidiaries, the lenders and issuer named therein and Citicorp USA,
Inc., as Administrative Agent, providing a credit facility in the aggregate
principal amount of up to $295,000,000, and all Guaranties and other documents
related thereto, as such agreement, Guaranties and other documents may be
amended, replaced, supplemented or otherwise modified from time to time.
FAS 109 Net Worth Adjustment Amount. Means the amount of the reduction
to equity resulting from the adoption by Borrower and the Consolidated
Subsidiaries of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," calculated in accordance with GAAP.
Facility. Means the credit facility in the maximum amount of the
Aggregate Commitment made available pursuant to Section 2.1.
Federal Funds Rate. Means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published or quoted on the
next succeeding Business Day by the Federal Reserve Bank of New York.
Fee Letter. Means the letter dated October __, 1995, from Citicorp to
Borrower, as agreed to and accepted by Borrower on October __, 1995, relating
to certain fees payable by Borrower.
Financial Officer. Means, with respect to any corporation, the chief
financial officer, treasurer, assistant treasurer/director of finance or
controller of such corporation.
Financial Statements. Includes, without limitation, balance sheets,
statements of operations, statements of stockholder's equity and statements of
cash flows prepared in comparative form with respect to the corresponding
period of the preceding fiscal year and prepared in accordance with GAAP and
including any notes comprising a part thereof.
FMC Operating Leases. Means the operating or capital leases between HP
Finance and Central Capital Corp., as lessors, and FoxMeyer Canada and
Borrower, as co-lessees, covering certain computer equipment, as in effect on
March 31, 1995.
Fox Health. Means FoxMeyer Health Corporation, a Delaware corporation,
formerly called National Intergroup, Inc.
9
<PAGE> 15
Fox Health Loan. Means one or more loans in the maximum aggregate
principal amount of $30,000,000 at any time outstanding under the Fox Health
Loan Agreement.
Fox Health Loan Agreement. Means the Amended and Restated Revolving
Loan Agreement, dated as of January 1, 1995, between Borrower and Fox Health,
as in effect on the date hereof, a copy of which has been delivered to
Administrative Agent prior to the date hereof, as amended as contemplated by
Section 4.1(p) hereof (as amended, supplemented or otherwise modified from time
to time in accordance with Section 6.2(w)).
Fox Health Loan Documents. Means the Fox Health Loan Agreement, the
Fox Health Note, all security agreements evidencing security interests securing
the Fox Health Note, and any and all other agreements, documents, instruments
and certificates governing the Fox Health Loan or any collateral or security
therefor.
Fox Health Management Agreement. Means the Amended and Restated
Management Agreement, dated as of January 1, 1992, between Borrower and Fox
Health, a copy of which has been delivered to Administrative Agent prior to the
date hereof, as the same may be amended after the date hereof; provided that no
such amendment increases any amount required to be paid thereunder by Borrower
to Fox Health.
Fox Health Member. Means any Person, other than a Group Member, which
is a member of a "controlled group" including, or under common control with,
Fox Health within the meaning of Section 414(b) and (c) of the Code.
Fox Health Note. Means the promissory note, dated January 1, 1995, in
the principal amount of $30,000,000 made by Fox Health payable to the order of
Borrower evidencing the Fox Health Loan (as amended, renewed, extended,
restated, replaced, substituted, supplemented or otherwise modified from time
to time in accordance with Section 6.2(w)).
Fox Health Plan. Means all "employee benefit plans" as defined in
Section 3(3) of ERISA with respect to which any Group Member has any direct,
indirect or contingent liability arising as a result of Borrower being a member
of a "controlled group" including, or under common control with, Fox Health
within the meaning of Sections 414(b) and (c) of the Code.
FoxMeyer Canada. Means FoxMeyer Canada, Inc., an Ontario corporation
(formerly called Evans Health Group Limited).
FoxMeyer Drug Company. Means FoxMeyer Drug Company, a Kansas
corporation.
10
<PAGE> 16
FoxMeyer Trading Company. Means Merchandise Coordinator Services
Corporation, a Delaware corporation (which generally is doing business as
FoxMeyer Trading Company).
Funded Debt. Means, as of the date of any determination, the sum of
the following (without duplication): (a) all Indebtedness evidenced by the
Notes as of such date, (b) all Indebtedness evidenced by the 7.09% Notes as of
such date, (c) all Indebtedness consisting of Subordinated Debt as of such
date, (d) all Indebtedness which would be classified as "funded debt" or
"long-term debt", including the current portions thereof, on a consolidated
balance sheet of Borrower and the Consolidated Subsidiaries prepared as of such
date in accordance with GAAP, (e) all Indebtedness of Borrower or any
Consolidated Subsidiary having a final maturity (or which is renewable or
extendible at the option of the obligor for a period ending) more than one year
after the date of creation thereof, notwithstanding that payments in respect
thereof are required to be made by the obligor less than one year after the
date of the creation thereof or that any amount thereof is at the time included
also in Current Liabilities of such obligor, (f) all Indebtedness of Borrower
or any Consolidated Subsidiary outstanding under a revolving credit or similar
agreement providing for borrowings (and renewals and extensions thereof) over a
period of more than one year, notwithstanding that any such Indebtedness is
created within one year of the expiration of such agreement, including without
limitation the Indebtedness outstanding under the Existing Credit Facility,
(g) the present value (discounted at the implicit rate, if known, or ten
percent (10%) per annum otherwise) of all obligations in respect of Capital
Leases of Borrower or any Consolidated Subsidiary and (h) Redeemable Capital
Stock of Borrower valued at the greater of its voluntary or involuntary maximum
fixed repurchase or redemption price plus accrued and unpaid dividends. For
purposes hereof, the "maximum fixed repurchase or redemption price" of any
Redeemable Capital Stock which does not have a fixed repurchase or redemption
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased or redeemed on
any date on which Funded Debt shall be required to be determined, and if such
price is based upon, or measured by, the fair market value of such Redeemable
Capital Stock, such fair market value to be determined in good faith by the
Board of Directors of the issuer of such Redeemable Capital Stock.
Notwithstanding the foregoing, Funded Debt shall be deemed not to include
Indebtedness under this Agreement.
Funded Debt Service. Means, with respect to Borrower and the
Consolidated Subsidiaries, for any period, the sum of (a) the aggregate of all
principal and interest payments and repurchase or redemption payments required
or scheduled to be made during such period with respect to Funded Debt, (b)
interest payments required to be made during such period with respect to
Indebtedness under this Agreement and (c) Preferred Dividends accruing or
payable during such period.
11
<PAGE> 17
GAAP. Means generally accepted accounting principles, applied on a
consistent basis with Borrower's most recent audited Financial Statements
existing as of the date hereof; and the requirement that such principles be
applied on a consistent basis means that the accounting principles in a current
period are comparable in all material respects to those applied in a preceding
period, with any exceptions thereto noted; provided that for the purpose of the
Push Down Accounting Adjustment, GAAP shall include the applicable requirements
of Regulation S-X of the Securities and Exchange Commission.
Governmental Requirements. Means any and all laws, ordinances, rules
and regulations of any Tribunal applicable to Borrower, any Consolidated
Subsidiary or any of their Assets.
Group Member. Means Borrower and each other Person which is a member
of a "controlled group" including, or under common control with, Borrower
within the meaning of Sections 414(b) and (c) of the Code, but excluding
Persons which would not be members of such "controlled group" if Fox Health did
not own at least eighty percent (80%) of the issued and outstanding shares of
common stock of Borrower.
Guarantor. Means FoxMeyer Drug Company (a Kansas corporation),
DRxCare, Inc., Health Care Pharmacy Providers, Inc., Health Mart, Inc.,
FoxMeyer Drug Company (a Delaware corporation), IV Partners, Inc., FoxMeyer
Realty Company, FoxMeyer Software, Inc., Healthcare Transportation System,
Inc., FoxMeyer Trading Company, Carol Stream Holdings, Inc., Harris Wholesale,
the Healthcare Connect Subsidiaries or any other Consolidated Subsidiary of
Borrower, and "Guarantors" means all of such entities.
Guaranty. Means, with respect to any Person, any contract, agreement
or understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without limitation,
agreements (a) to purchase such Indebtedness or any Asset constituting security
therefor, (b) to advance or supply funds for the purchase or payment of such
Indebtedness or to maintain net worth or working capital or other balance sheet
conditions, or otherwise to advance or make available funds for the purchase or
payment of such Indebtedness, (c) to purchase an Asset or service primarily for
the purpose of assuring the holder of such Indebtedness of the ability of the
primary obligor to make payment of the Indebtedness, or (d) otherwise to assure
the holder of the Indebtedness of the primary obligor against loss with respect
thereto; provided, however, that such term shall not include the endorsement by
Borrower or a Consolidated Subsidiary of negotiable instruments or documents
for deposit or collection in the ordinary course of business or the obligations
of Borrower or any Operating Subsidiary in respect of Receivables sold under
the Revolving Receivables Purchase Program.
12
<PAGE> 18
Guaranty Agreement. Means a guaranty agreement, substantially in the
form of Exhibit B hereto, as amended, supplemented or otherwise modified from
time to time.
Harris Wholesale. Means Harris Wholesale Company, a Delaware
corporation.
Hazardous Materials. Means (a) any "hazardous waste" as defined in
RCRA, (b) any "hazardous substance" as defined in CERCLA, (c) any "toxic
pollutants" as defined in the Clean Water Act, (d) any "hazardous air
pollutants" as defined in the Clean Air Act, (e) asbestos, (f) polychlorinated
biphenyls, (g) underground storage tanks, whether empty, filled or partially
filled with any substance, (h) any substance the presence of which on the
property in question is prohibited by the Environmental Laws, and (i) any other
substance which under the Environmental Laws requires special handling or
notification of or reporting to any Federal, State or local governmental entity
in its generation, use, collection, treatment, storage, transportation,
recovery, removal, discharge or disposal.
Healthcare Connect Subsidiaries. Means Healthcare Connect, Inc., a
Delaware corporation, and its wholly owned Subsidiaries, OmNex Health, Inc.
(formerly HCPP Holdings, Inc.), Health Care Pharmacy Providers, Inc., NexCare,
Inc., US HealthData Interchange, Inc. and Scrip Card Enterprises, Inc., and any
future wholly owned Subsidiaries of Healthcare Connect, Inc., for such periods
as such Persons are wholly owned Subsidiaries of Borrower.
Indebtedness. Means, with respect to any Person, (without duplication)
any and all (a) indebtedness of such Person for borrowed money; (b) obligations
of such Person for the deferred purchase price of property or services, which
purchase price (i) is due three months or more from the date of incurrence of
the obligation in respect thereof or (ii) customarily or actually is evidenced
by a note or similar instrument (including, without limitation, any such
indebtedness which is non-recourse to such Person personally but is secured by
Assets of such Person, the amount of such indebtedness being deemed the lesser
of the fair market value of such Assets or the indebtedness so secured); (c)
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments; (d) indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property); (e) obligations of such Person under any Capital Lease
(obligations of such Person under any operating lease being deemed not to be
Indebtedness); (f) obligations, contingent or otherwise, of such Person under
any acceptance, letter of credit or similar facility issued or accepted by
banks and other financial institutions; (g) obligations under any Interest Rate
Protection Agreement;
13
<PAGE> 19
(h) without duplication, Guaranties by such Person of Indebtedness of any other
Person of the type referred to in clauses (a) through (g) above; (i) without
duplication, all Indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on Assets (including,
without limitation, Receivables) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Indebtedness, the
amount of such Indebtedness being deemed the lesser of the fair market value of
such property or the Indebtedness so secured; and (j) all Redeemable Capital
Stock of such Person valued at the greater of its voluntary or involuntary
maximum fixed repurchase or redemption price plus accrued and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase or redemption price" of any
Redeemable Capital Stock which does not have a fixed repurchase or redemption
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased or redeemed on
any date on which Indebtedness shall be required to be determined, and if such
price is based upon, or measured by, the fair market value of such Redeemable
Capital Stock, such fair market value to be determined in good faith by the
Board of Directors of the issuer of such Redeemable Capital Stock. In
furtherance of the foregoing, but not in limitation thereof, the obligations of
Borrower or any Operating Subsidiary in respect of Receivables sold under the
Revolving Receivables Purchase Program shall be deemed not to constitute
"Indebtedness."
Intercompany Note. Means (a) that certain Amended and Restated
Subordinated Promissory Note dated March 31, 1993, made by FoxMeyer Drug
Company payable to the order of Borrower, (b) that certain Amended and Restated
Subordinated Promissory Note dated April 15, 1993, made by FoxMeyer Drug
Company payable to the order of Borrower, (c) that certain Amended and Restated
Subordinated Promissory Note dated March 31, 1993, made by FoxMeyer Trading
Company payable to the order of Borrower, (d) that certain Amended and Restated
Subordinated Promissory Note dated March 31, 1993, made by Harris Wholesale
payable to the order of FoxMeyer Drug Company, (e) that certain Amended and
Restated Subordinated Promissory Note dated April 15, 1993, made by FoxMeyer
Drug Company payable to, copies of which have been delivered to the
Administrative Agent on or before the date hereof, as the same may be amended
after the date hereof in accordance with Section 6.2(r), and (f) such other
subordinated promissory notes, having substantially similar terms as the
foregoing notes, as may hereafter be executed by Operating Subsidiaries to
evidence their Indebtedness to Borrower in accordance with Section 6.2(r), and
"Intercompany Notes" means all of such promissory notes.
Interest Expense. Means, for any period, the interest charges paid or
accrued (without duplication) during such period (including imputed interest on
Capital Lease obligations and
14
<PAGE> 20
amortization of debt discount, but excluding amortization of other debt
expense, and net of interest income being currently received in cash during
such period) on the Indebtedness of Borrower and the Consolidated Subsidiaries.
Interest Payment Date. Means December 31, 1995 and March 31, 1996.
Interest Rate Protection Agreement. Means any agreement evidencing an
arrangement designed to protect Borrower against fluctuations in interest
rates.
Inventory. Means all inventory, and includes all goods (wherever
located, whether in the possession of the owner of such inventory or a bailee
or other Person for sale, storage, transit, processing, use or otherwise, and
including finished goods and packing, packaging and shipping materials,
components, supplies, materials or consigned, returned or repossessed goods)
which are held for sale or lease or which are to be or have been furnished
under any contract of service or which are raw materials, work in process or
materials used or consumed in a business or are processed by or on behalf of
the owner of such inventory.
Inventory Amount. Means, as of the date of any determination, the
amount of the Inventory of Borrower or any Consolidated Subsidiary, net of all
related allowances and reserves, as determined in accordance with GAAP, but
shall exclude (to the extent otherwise included therein): (a) all raw
materials, (b) all work in process, (c) all Inventory as to which Borrower or
such Consolidated Subsidiary (as applicable) does not have the full and
unqualified right (except for the limitations on such right permitted by
Section 6.2(n)) to assign and grant a security interest therein as security for
the Obligations, and (d) all Inventory as to which Borrower or such
Consolidated Subsidiary does not have lawful and absolute title, subject only
to Permitted Liens.
IRS. Means the United States Internal Revenue Service.
Lender. Means any bank or other financial institution identified on
the signature pages of this Agreement and on Schedule 1 hereto or any Eligible
Assignee or Affiliate of a Lender which becomes a Lender in accordance with
Section 9.6, and "Lenders" means all of such banks, financial institutions,
Eligible Assignees and Affiliates which become Lenders in accordance with
Section 9.6.
Lien. Means any interest in any Asset securing any indebtedness,
obligation or liability owed to, or a claim by, a Person other than the owner
of such Asset, whether such interest is based on the common law or any statute
or contract, and includes, without limitation, any lien, mortgage, deed of
trust, collateral assignment, chattel mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention
15
<PAGE> 21
arrangement or a lease, consignment or bailment for security purposes.
Loan. Means any Advance. "Loans" means all of such Advances.
Loan Papers. Means, collectively, this Agreement, the Notes, the
Guaranty Agreements and any and all other agreements, documents, instruments
and certificates now or hereafter executed or delivered to Administrative Agent
or Lenders in connection with any of the foregoing (including, without
limitation, those agreements, documents, instruments and certificates, the
forms of which appear as Exhibits hereto), as such agreements, documents,
instruments and certificates may be amended, renewed, extended, restated,
replaced, substituted, supplemented or otherwise modified from time to time.
Loan Request Certificate. Means a Loan Request Certificate in the form
of Exhibit C hereto, appropriately completed, executed by Borrower and
delivered to Administrative Agent pursuant to Section 2.3(a) in connection with
Borrower's request for a Loan.
Majority Lenders. Means, as of the date of any determination, Lenders
that hold, in the aggregate, 51% or more of the sum of the aggregate principal
amount of the Advances then outstanding, or, if no Advances are then
outstanding, Lenders that hold, in the aggregate, 51% or more of the Aggregate
Commitment.
Margin Stock. Means margin stock, as such term is defined in
Regulation U.
Material Adverse Effect. Means any (a) material adverse effect
whatsoever upon the validity, performance or enforceability of any Loan Paper,
(b) material adverse effect upon the financial condition, business, Assets,
operations or prospects of Borrower and the Consolidated Subsidiaries taken as
a whole, or (c) material adverse effect upon the ability of Borrower or any
Operating Subsidiary to fulfill its payment obligations under the Loan Papers.
Maximum Lawful Rate. Means the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest from time
to time permitted under Federal or State laws now or hereafter applicable to
the Obligations in question, after taking into account, to the extent required
by applicable law, any and all relevant payments and charges deemed to be
interest (whether or not so characterized by the parties) and calculations.
Lenders hereby notify and disclose to Borrower that, for purposes of Tex. Rev.
Civ. Stat. Ann. art. 5069-1.04, as it may be amended from time to time, the
applicable rate ceiling shall be the "indicated rate" ceiling from time-to-time
in effect as limited by Art. 5069-1.04(b); provided, however,
16
<PAGE> 22
that, to the extent permitted by applicable law, Lenders shall have the right
to change the applicable rate ceiling from time to time in accordance with
applicable law.
Minority Equity Investment. Means any equity investment in any entity
that is engaged principally in a business related to that of Borrower and the
Consolidated Subsidiaries, provided that such investment, together with all
prior investments in such entity, does not constitute more than fifty percent
(50%) of the equity Securities of such entity.
Multiemployer Plan. Means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
Multiple Employer Plan. Means a Plan or Fox Health Plan to which the
Borrower or any ERISA Affiliate of the Borrower and one or more employer or
employers other than the Borrower or an ERISA Affiliate of the Borrower are
making or accruing an obligation to make contributions or, in the event that
any such plan has been terminated or the Borrower or an ERISA Affiliate has
withdrawn therefrom, to which the Borrower or any ERISA Affiliate of the
Borrower made or accrued an obligation to make contributions during any of the
preceding five years.
NationsBank. Means NationsBank of Texas, N.A., a national banking
association.
New CareStream. Means the wholly-owned Subsidiary of Fox Health formed
for the purpose of holding the CareStream Operations acquired from Borrower and
CareStream Holdings.
Net Worth. Means, as of the date of any determination, the remainder
of (a) the total stockholder's equity (including capital stock, additional
paid-in capital and retained earnings after deducting treasury stock) which
would appear on a consolidated balance sheet of Borrower and the Consolidated
Subsidiaries prepared as of such date in accordance with GAAP, minus (b) to the
extent not deducted therefrom, the aggregate amount of all Redeemable Capital
Stock, minus (c) the aggregate amount of gain from the sale of capital assets,
gain from any write-up of assets and any other non-operating or extraordinary
gain reflected in total stockholder's equity shown on such balance sheet;
provided, however, that:
(i) for purposes of the references to Net Worth in the
Solvency Certificate referred to in Section 4.1(h) and the minimum Net
Worth requirement of each Operating Subsidiary set forth in the second
sentence of Section 6.2(e), Net Worth shall be determined without
subtraction of the items described in clause (c) above and based upon
the financial condition of such Operating Subsidiary only; and
17
<PAGE> 23
(ii) for purposes of the ratio calculated pursuant to
Section 6.2(i), Net Worth shall be determined without subtraction of
the items described in clause (c) above.
Notwithstanding the foregoing, in determining Net Worth, the aggregate
amount of the equity investment in, and the principal amount of loans or
advances to, FoxMeyer Canada by Borrower and the Consolidated Subsidiaries
shall be accounted for in accordance with the equity method of accounting
(whether or not FoxMeyer Canada would, in accordance with GAAP, be required to
be accounted for on a consolidated basis), except that the amount so accounted
for shall not be increased (or decreased) by the amount of any income (or loss)
of FoxMeyer Canada after March 31, 1995. It is acknowledged that as of March
31, 1995, the amount so accounted for is $4,912,128, representing the remaining
portion of the equity investment in FoxMeyer Canada as of such date. In no
event shall the amount so accounted for in respect of FoxMeyer Canada exceed
$9,512,128.
Note. Has the meaning set forth in Section 2.1(b).
Obligations. Means (a) any and all present and future indebtedness,
obligations or liabilities, and any and all amendments, renewals, extensions,
restatements, supplements or changes in form thereof, or any part thereof, of
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary now or
hereafter owing to any one or more of Administrative Agent and Lenders under or
in connection with this Agreement and the other Loan Papers, including, without
limitation, all Loans, costs, fees, expenses and obligations of indemnity under
the Loan Papers, and (b) all interest accruing thereon and attorneys' fees
incurred in the enforcement or collection thereof in accordance with the Loan
Papers, regardless of whether any such indebtedness, obligations and
liabilities described in (a) and (b) above are direct, indirect, fixed,
contingent, joint, several or joint and several.
Operating Cash Flow. Means, with respect to Borrower and the
Consolidated Subsidiaries, for any period, the sum of (a) Adjusted Net Income
for such period, plus (b) all amounts in respect of depreciation and
amortization for such period, plus (c) Interest Expense for such period.
Operating Subsidiary. Means FoxMeyer Drug Company, FoxMeyer Trading
Company or Harris Wholesale, and "Operating Subsidiaries" means all of such
corporations.
PBGC. Means the Pension Benefit Guaranty Corporation.
Permitted Customer Advances. Means loans (exclusive of sales of
Inventory on credit which are not originally evidenced by a promissory note),
Guaranties of loans by financial institutions and pre-paid customer rebates
made by Borrower or
18
<PAGE> 24
any Operating Subsidiary in the ordinary course of its business to or for the
account of its customers who purchase or who are expected to purchase
substantial amounts of its Inventory with the proceeds thereof; provided,
however, that such loans, Guaranties and pre-paid rebates (a) may not at any
time exceed $50,000,000 in aggregate principal amount outstanding or guaranteed
(as to Borrower and Operating Subsidiaries collectively), (b) may not be
inconsistent with the current business practices of Borrower or the Operating
Subsidiaries, and (c) shall be subject to the following additional limitations
within the $50,000,000 aggregate limitation provided in clause (a) above: (i)
the aggregate amount of such loans and Guaranties outstanding (as to Borrower
and the Operating Subsidiaries collectively) to any one customer and all
Affiliates of such customer, other than Snyder's Drug Stores, Inc. ("Snyder
Drug") and its Affiliates, may not exceed $5,000,000; (ii) the aggregate amount
of such pre-paid rebates outstanding (as to Borrower and the Operating
Subsidiaries collectively) to any one customer and all Affiliates of such
customer, other than Snyder Drug and its Affiliates, may not exceed
$10,000,000; and (iii) the aggregate amounts of such loans, Guaranties and
pre-paid rebates outstanding (as to Borrower and the Operating Subsidiaries
collectively) to Snyder Drug and all of its Affiliates may not exceed
$5,000,000, $15,000,000 and $15,000,000, respectively; but (iv) in no event may
the Guaranties permitted hereby at any time exceed $15,000,000 in aggregate
principal amount guaranteed by Borrower and the Operating Subsidiaries
collectively to all their customers and their Affiliates. For the purposes of
the foregoing, the Phar-Mor Receivables shall be deemed not to constitute
pre-paid customer rebates.
Permitted Indebtedness. Means (a) the Obligations, (b) Indebtedness
outstanding from time to time under the Existing Credit Facility (including
renewals, extensions and increases thereof), (c) the existing Indebtedness,
other than the Indebtedness under the Existing Credit Facility, the 7.09%
Notes and the 7.09% Note Guaranties, expressly identified on Schedule 2 hereto
(including renewals or extensions thereof, but excluding increases thereof
except as may otherwise be permitted), (d) Guaranties of Indebtedness of
customers of Borrower or an Operating Subsidiary by Borrower or such Operating
Subsidiary, provided such Guaranties constitute Permitted Customer Advances,
(e) agreements entered into in the ordinary course of business by Borrower or
an Operating Subsidiary to repurchase at a discounted price Inventory sold to
customers of Borrower or such Operating Subsidiary, (f) obligations evidenced
by the Intercompany Notes, (g) accounts payable and other accruals incurred by
Borrower or any Consolidated Subsidiary and payable or owing to another Person
who is Borrower or any Consolidated Subsidiary as a result of the cash
management system of Borrower and its Consolidated Subsidiaries, (h)
obligations evidenced by any Interest Rate Protection Agreement in respect of
the Obligations or the 7.09% Notes, (i) any Indebtedness which is expressly
permitted pursuant
19
<PAGE> 25
to clause (iv) of Section 6.2(l), (j) Indebtedness consisting of the 7.09%
Notes and the 7.09% Note Guaranties, (k) Indebtedness consisting of Redeemable
Capital Stock, provided such stock is Preferred Stock which does not provide
for mandatory repurchase or redemption prior to the fifth (5th) anniversary of
the date of issuance thereof, (l) Subordinated Debt incurred in the aggregate
principal amount not to exceed $200,000,000, provided that at the time of any
incurrence of such Indebtedness and after giving effect thereto and considering
facts and circumstances then existing, no Potential Default or Event of Default
exists or will occur or may reasonably be expected to occur, and (m) up to
$10,000,000 of Indebtedness consisting of (i) Capital Leases or (ii) purchase
money Indebtedness secured by Liens permitted by clause (h) of the definition
of "Permitted Liens."
Permitted Investments. Means investments in (a) indebtedness,
evidenced by notes maturing not more than 180 days after the date of issue,
issued or guaranteed by the U.S. or any agency thereof, (b) time deposits and
certificates of deposit, maturing not more than 180 days after the date of
issue, issued by any financial institution (including, without limitation, a
Lender) which maintains a long-term debt rating of at least "BBB" (or its then
equivalent) according to Standards & Poor's Corporation or a Thompson Bankwatch
rating of at least "C" and which has combined capital and surplus and undivided
profits of not less than $l,000,000,000, or any other financial institution if
the amount on deposit is fully insured by The Federal Deposit Insurance
Corporation, (c) commercial paper, maturing not more than 180 days after the
date of issue, issued by a corporation (other than an Affiliate of Borrower)
with a rating of "P-1" (or its then equivalent) according to Moody's Investors
Service, Inc., "A-1" (or its then equivalent) according to Standard & Poor's
Corporation, "F-1" (or its then equivalent) according to Fitch's Investors
Service, Inc. or "D-1" (or its then equivalent) according to Duff & Phelps, or
a better rating, (d) master note arrangements or deposit arrangements with
entities which have ratings meeting the standard of (b) or (c) above, (e) money
market funds that invest only in debt securities (including, without
limitation, bankers' acceptances, bearer deposit notes, loan participations,
promissory notes and medium-term notes) which mature within 400 days after the
date of purchase and which have ratings meeting the standard of (b) or (c)
above or which, if unrated, are determined by the fund to be of comparable
quality to debt securities which have such ratings, and (f) repurchase
agreements in connection with obligations which are permitted for investment
under the categories set forth above.
Permitted Liens. Means, with respect to any Asset, (a) any Lien
created pursuant to Section 3.2 of the Existing Credit Facility; (b) pledges or
deposits made in the ordinary course of business to secure payment of worker's
compensation insurance (or to participate in any fund in connection with
worker's compensation insurance), unemployment insurance or
20
<PAGE> 26
social security programs; (c) Liens imposed by mandatory provisions of law and
arising in the ordinary course of business (such as materialmen's, mechanics',
landlord's and warehousemen's Liens and other like Liens) securing indebtedness
whose payment is not yet due; (d) Liens for taxes, assessments and governmental
charges or levies imposed upon a Person or upon such Person's income or profits
or property if the same are not yet due and payable; (e) the Liens referred to
in clauses (A), (B) and (C) immediately below if and only if (i) the amount,
applicability or validity thereof is currently (at the time in question) being
contested in good faith by appropriate action promptly and diligently conducted
and adequate cash reserves (to the extent required by GAAP) have been set aside
therefor, (ii) levy and execution thereon have been stayed and continue to be
stayed and (iii) they do not in the aggregate materially detract from the value
of the property of, or materially impair the use of such property in the
business of, Borrower, any Operating Subsidiary or Borrower and the
Consolidated Subsidiaries taken as a whole: (A) claims and Liens for taxes due
and payable, (B) claims and Liens upon, and defects of title to, personal
property or other legal process prior to adjudication of a dispute on the
merits and (C) adverse judgments on appeal; (f) Liens arising from good faith
deposits in connection with tenders, leases, real estate bids or contracts
(other than contracts involving the borrowing of money), pledges or deposits to
secure public or statutory obligations and deposits to secure (or in lieu of)
surety, or customs bonds and deposits to secure the payment of taxes,
assessments, customs duties or other similar charges; (g) encumbrances
consisting of zoning restrictions, restrictive covenants, encroachments,
protrusions, easements or other restrictions on or affecting the use of real
property or which would appear on a survey or title report covering such
property, provided that such items do not in the aggregate materially detract
from the value of any material property of the Person in question or materially
impair the use of such material property in such Person's business; (h) Liens
consisting of Capital Leases or solely securing purchase money Indebtedness, in
each case incurred in the ordinary course of business for the purchase of
computers, trucks and other equipment used in the ordinary course of business,
provided that each such Lien is limited to the equipment so financed; and (i)
Liens, if any, described on Schedule 2 hereto; provided, however, that none of
the aforesaid Permitted Liens (1) may attach or relate to any Intercompany Note
or any capital stock of any Consolidated Subsidiary or (2) arise under or be
required by ERISA.
Person. Means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
Phar-Mor Bankruptcy. Means that certain proceeding filed under Chapter
11 of the Bankruptcy Code made by Phar-Mor, Inc. on August 17, 1992.
21
<PAGE> 27
Phar-Mor Debt Service Coverage Ratio Adjustment Amount. Means, with
respect to the Phar-Mor Receivables and as of the date of any determination,
the aggregate amount of any reduction of Operating Cash Flow attributable to
any reserve or write-off, net of recoveries, for doubtful accounts and related
collection expenses directly resulting from the Phar-Mor Bankruptcy; provided,
however, that the aggregate amount of the Phar-Mor Debt Service Coverage Ratio
Adjustment Amount utilized during the term of this Agreement and the Existing
Credit Facility shall not exceed $70,000,000 (prior to any adjustment for
income taxes).
Phar-Mor Interest Coverage Ratio Adjustment Amount. Means, with
respect to the Phar-Mor Receivables and as of the date of any determination,
the aggregate amount of any reduction of EBIT attributable to any reserve or
write-off, net of recoveries, for doubtful accounts and related collection
expenses directly resulting from the Phar-Mor Bankruptcy; provided, however,
that the aggregate amount of the Phar-Mor Interest Coverage Ratio Adjustment
Amount utilized during the term of this Agreement and the Existing Credit
Facility shall not exceed $70,000,000 (prior to any adjustment for income
taxes).
Phar-Mor Net Worth Adjustment Amount. Means, with respect to the
Phar-Mor Receivables and as of the date of any determination, the aggregate
amount of any reduction in Net Worth directly resulting from the Phar-Mor
Bankruptcy; provided, however, that the amount of the pre-tax income write-off
for purposes of calculating the Phar-Mor Net Worth Adjustment Amount shall not
exceed $70,000,000.
Phar-Mor Receivables. Means the remainder of (a) the aggregate amount
of Receivables owed to FoxMeyer Drug Company by Phar-Mor, Inc. as of the end of
business on August 16, 1992, minus (b) as of the date of any determination, the
amounts of such Receivables attributable to any goods returned to FoxMeyer Drug
Company through reclamation; provided, however, that the amount referred to in
clause (a) immediately preceding shall not exceed $75,000,000 in aggregate net
amount (prior to any adjustment for income taxes).
Plan. Means all "employee benefit plans" as defined in Section 3(3) of
ERISA with respect to which Borrower or any Consolidated Subsidiary is a party
or bound or with respect to which it has any direct, indirect or contingent
liability, exclusive of any Fox Health Plan.
Potential Default. Means the occurrence of any event which, with
notice or lapse of time or both, would become an Event of Default (and, unless
otherwise expressly stated or the context in which such term is used otherwise
indicates, includes an Event of Default), and "potential default" means the
occurrence of any event which, with notice or lapse of time or both, would
become an event of default under the agreement, document or instrument in
question (and, unless otherwise
22
<PAGE> 28
expressly stated or the context in which such term is used otherwise indicates,
includes such an event of default).
Preferred Dividends. Means, for any period, dividends accrued,
accruing or payable during such period on Preferred Stock of Borrower other
than dividends payable solely in the same capital stock on which such dividends
are payable.
Preferred Stock. As applied to any Person, means capital stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of capital stock of any other class of such corporation.
Prescribed Forms. Means such duly executed form(s), statement(s) or
document(s), and in such number of copies, which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (a) an income
tax treaty between the U.S. and the country of residence of the Lender
providing the form(s), statement(s) or document(s), (b) the Code, or (c) any
applicable rule or regulation under the Code, permit Borrower to make payments
hereunder for the account of such Lender free of, or at a reduced rate of,
deduction or withholding of income or similar taxes.
Proposed Tax Adjustment. Means a written determination provided to Fox
Health, Borrower, or any member of an affiliated group (as defined in Section
1504 of the Code) or other comparable group for state, local or foreign income
or franchise tax purposes of which Borrower is or has been a member, by the IRS
or any other taxing authority in a notice referred to in Section 6212(a) of the
Code or any other notice of similar effect of an adjustment to the taxable
income or tax liability of any such entity or group, which adjustment, if
sustained, could result in a liability of Borrower or any Consolidated
Subsidiary.
Proposed Tax Liability. Means an amount of taxes, interest, additions
to tax and penalties for which Fox Health, Borrower or any Consolidated
Subsidiary could be held liable if one or more determinations set forth in a
Proposed Tax Adjustment is ultimately sustained, regardless of whether such
amount has been paid; provided, however, that a Proposed Tax Liability shall
not include any such liability if and to the extent that (i) it is paid in full
(determined with reference to the underlying Proposed Tax Adjustment) within
thirty (30) days after the date of the underlying Proposed Tax Adjustment, and
(ii) such payment is made neither directly nor indirectly from or out of the
assets or income of Borrower or any Consolidated Subsidiary (other than assets
or income of Borrower or any Consolidated Subsidiary paid to Fox Health as
permitted by this Agreement prior to or in anticipation of receipt by Fox
Health of the Proposed Tax Adjustment). Notwithstanding anything herein to the
contrary, the term "Proposed Tax Liability" shall not include any liability
23
<PAGE> 29
pertaining to any taxable period for which the return with respect to Borrower
did not also include the income, assets or other taxable items of Fox Health or
any Subsidiary of Fox Health (other than Borrower and any Consolidated
Subsidiary).
Proprietary Rights. Means all patents, copyrights, trademarks,
servicemarks, trade names, trade styles and applications and licenses relating
thereto and rights thereunder.
Pro Rata Share. Means, with respect to each Lender, as of the date of
any determination, such Lender's proportionate share of the Aggregate
Commitment. As of the date hereof, the Pro Rata Share of each Lender as to the
Aggregate Commitment is set forth on Schedule l hereto.
Push Down Accounting Adjustment. Means the decrease in stockholders
equity of Borrower and the Consolidated Subsidiaries resulting from the
application under GAAP of purchase accounting to the extent required as a
result of Borrower's becoming a wholly owned Subsidiary of Fox Health in
connection with Fox Health's repurchase of the common stock of Borrower, which
decrease shall not exceed $22,000,000.
RCRA. Means the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq.) as amended, and all regulations issued pursuant
thereto.
Receivables. Means all present and future accounts, accounts
receivable and other rights to payment for goods sold or leased or for services
rendered, whether now existing or hereafter arising, and whether or not such
accounts, accounts receivable or other rights have been earned by performance.
Receivables Amount. Means, as of the date of any determination, the
amount of the Receivables of Borrower or any Consolidated Subsidiary arising in
the ordinary course of Borrower's or such Consolidated Subsidiary's (as
applicable) business, net of all related allowances and reserves, as determined
in accordance with GAAP, but shall exclude (to the extent otherwise included
therein):
(a) all Receivables that are not valid and enforceable
obligations of the account debtor payable in U.S. dollars;
(b) all Receivables unpaid for more than 150 days after
the invoiced due date for such Receivables (other than Receivables as
to which a good faith dispute exists with the account debtors beyond
such 150 day period);
(c) all Receivables as to which Borrower or such
Consolidated Subsidiary (as applicable) does not have lawful and
absolute title, subject only to the Revolving Receivables Purchase
Program or Permitted Liens;
24
<PAGE> 30
(d) all Receivables as to which Borrower or such
Consolidated Subsidiary (as applicable) does not have the full and
unqualified right (except for the limitations on such right permitted
by Section 6.2(n)) to assign and grant a security interest therein as
security for the Obligations;
(e) the Phar-Mor Receivables; and all other Receivables
owed by account debtors which are not Solvent or which are seeking
relief, or are the subject of a case or proceeding, under any Debtor
Relief Laws, except for Receivables owed by Phar-Mor, Inc. (other than
the Phar-Mor Receivables) arising prior to the effectiveness of the
plan of reorganization in the Phar-Mor Bankruptcy so long as such
Receivables satisfy the requirements of Section 6.2(t); and
(f) all Receivables owing by officers or employees of
Borrower or any Consolidated Subsidiary, or owing by any other Person
in which any such entity has an equity interest if the amount owed by
such other Person are not incurred in the ordinary course of business
and all Receivables owing by an Affiliate of Borrower or any
Consolidated Subsidiary, to the extent such Receivables exceed
$1,000,000 in amount at any time outstanding;
provided that, as long as the time of termination of reinvestment by purchasers
under the Revolving Receivables Purchase Program shall not have occurred, the
amount of Receivables outstanding and purchased under the Revolving Receivables
Purchase Program shall be deemed to be included in the Receivables Amount.
Redeemable Capital Stock. Means any capital stock that, either by its
terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, is, or upon the happening of an event or passage of
time would be, required to be redeemed or is redeemable at the option of the
holder thereof at any time, or is convertible into or exchangeable for debt
Securities at any time at the option of the holder thereof.
Register. Has the meaning set forth in Section 9.6(e).
Regulation D. Means Regulation D of the Board of Governors from time
to time in effect and shall include any successor or other regulation relating
to reserve requirements applicable to member banks of the Federal Reserve
System (or its successor).
Regulation U. Means Regulation U of the Board of Governors from time
to time in effect and shall include any successor or other regulation hereafter
promulgated by the Board of Governors to replace Regulation U and having
substantially the same function.
Release Effective Date. Has the meaning set forth in Section 3.3(d).
25
<PAGE> 31
Reportable Event. Means any reportable event as defined in Section
4043 of Title IV of ERISA, and as modified by applicable regulations.
Required Lenders. Means, as of the date of any determination, Lenders
that hold, in the aggregate, 66-2/3% or more of the sum of the aggregate
principal amount of the Advances then outstanding, or, if no Advances are then
outstanding, Lenders that hold, in the aggregate, 66-2/3% or more of the
Aggregate Commitment.
Restricted Payments. Means, with respect to any entity (a) cash
dividends or distributions or any other dividends or distributions on, or in
respect of, any class of capital stock or equity interests of such entity,
except for dividends or distributions made solely in shares of stock or equity
interests of the same class, (b) any and all funds, cash or other payments made
in respect of the retirement, redemption, repurchase or other acquisition of
such stock or equity interests, unless such stock or equity interests shall be
redeemed or acquired through the exchange of such stock or equity interests
with stock or equity interests of the same class, (c) any loan or advance by
such entity to, or other investment by such entity in, the holder of any such
stock or equity interests, and (d) with respect to Borrower or any Operating
Subsidiary, any payment made by Borrower or such Operating Subsidiary to Fox
Health or any Affiliate of Fox Health pursuant to the Tax Sharing Agreement or
any other tax sharing agreement or other similar agreement relating to the
payment of any tax.
Revolving Receivables Purchase Program. Means a revolving trade
receivables purchase facility involving assignments of or security interests in
Receivables (and property of account debtors securing such Receivables) under
one or more agreements for limited recourse sales by Borrower and any and all
of the Operating Subsidiaries for cash of such Receivables (and property) or
interests therein, provided that (i) such agreements do not create any interest
in any Asset other than Receivables (and such property), (ii) the aggregate
principal amount paid by the purchasers of Receivables (and property of account
debtors securing such Receivables) or interests therein to be recovered from
Receivables (and such property) shall not exceed at any time outstanding
$200,000,000 and (iii) from and after the time of termination of reinvestment
by purchasers of Receivables or interests therein under such facility (whether
because of an event of termination, Borrower's election or otherwise), there
shall be no Lien on, or other restrictions on payment to Borrower or any of the
Operating Subsidiaries of the collections or other proceeds of, the interest of
Borrower or any of the Operating Subsidiaries in Receivables to the extent
Receivables or an interest therein has not been sold under such facility.
Schedule. Means, unless specifically indicated otherwise, schedules
attached to this Agreement.
26
<PAGE> 32
Section. Means, unless specifically indicated otherwise, sections and
subsections of this Agreement.
Securities. Means any and all securities of any type or character,
including, without limitation, (a) capital stock or other equity rights, bonds,
notes or other instruments convertible into capital stock or other equity
interests, and (b) options, warrants or other rights to acquire capital stock
or other equity interests.
Service Fee Adjustment Amount. Means, for any period, the service fee
income currently received in cash from customers of Borrower and the
Consolidated Subsidiaries (but only to the extent that such income can, in
accordance with GAAP, be included in interest income but has been included as
an offset to operating expense in the Financial Statements of Borrower and the
Consolidated Subsidiaries) during such period.
7.09% Note Guaranties. Means the guaranties, dated as of April 15,
1993, from certain Subsidiaries of Borrower to the purchasers of the 7.09%
Notes pursuant to the 7.09% Note Purchase Agreements.
7.09% Note Purchase Agreements. Means the note purchase agreements,
dated as of April 15, 1993, between Borrower and certain financial
institutions, relating to the 7.09% Notes.
7.09% Notes. Means Borrower's 7.09% Senior Notes due April 15, 2005,
having an aggregate principal amount of $198,000,000.
Share Repurchase Net Worth Adjustment. Means the sum of (a) the
aggregate purchase price paid by Borrower to repurchase its shares of common
stock pursuant to the Tender Offer plus (b) the expenses incurred by Borrower
directly in connection with the Tender Offer, which sum shall not exceed
$25,000,000.
Solvent. Means, with respect to any Person as of the date of any
determination, that on such date (a) the assets of such Person at a fair
valuation is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair
salable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business, (d) such
Person has not incurred, does not intend to incur, and does not believe that it
will incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities as they become due or mature, and (e) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's property would constitute unreasonably
small
27
<PAGE> 33
capital after giving due consideration to current and anticipated future
capital requirements and current and anticipated future business conduct and
the prevailing practice in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, such liabilities
shall be computed at the amount which, in light of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
Stated Rate. Has the meaning set forth in Section 2.6(d) of this
Agreement.
Subordinated Debt. Means unsecured Indebtedness of Borrower (a) in
respect of which Borrower is directly obligated and none of the Operating
Subsidiaries or other Consolidated Subsidiaries is directly, contingently or
otherwise obligated (including by way of a Guaranty), (b) which has a final
maturity and no scheduled redemptions or other payments prior to the expiration
of one year after the Termination Date and (c) which is subordinated in right
of payment to the prior payment of the Obligations of Borrower on terms, and
pursuant to documentation containing other terms (including interest, covenants
and events of default), in form and substance satisfactory to Administrative
Agent in its discretion.
Subsidiary. Means, with respect to any Person as of the date of any
determination, any corporation or other entity 50% or more of the voting shares
or other voting equity interests of which is owned, directly or indirectly, by
such Person, and "Subsidiaries" means all of such corporations or other
entities.
Tax Sharing Agreement. Means that certain Tax Sharing Agreement, dated
as of November 25, 1992, between Borrower and Fox Health, as in effect on the
date hereof, a copy of which has been delivered to the Administrative Agent
prior to the date hereof, as amended as contemplated by Section 4.1(p) hereof.
Tender Offer. Means the tender offer to purchase up to 3,300,000
shares of common stock of Borrower pursuant to which 1,650,000 of such shares
were purchased by each of Borrower and Fox Health on November 25, 1992.
Termination Date. Means March 31, 1996.
Termination Event. Means (i) with respect to any Plan or Fox Health
Plan, a Reportable Event; (ii) the withdrawal of the Borrower, or any ERISA
Affiliate of the Borrower, from a Multiple Employer Plan which is subject to
Title IV of ERISA during a plan year in which it was a "substantial employer",
as such term is defined in Section 4001(a)(2) of ERISA, the cessation of
operations at a facility in the circumstances described in Section 4062(e) of
ERISA, or the incurrence of liability by the Borrower, or any ERISA Affiliate
of the Borrower, under Section
28
<PAGE> 34
4064 of ERISA upon the termination of a Multiple Employer Plan; (iii) providing
notice of intent to terminate a Plan or Fox Health Plan in a "distress
termination" pursuant to Section 4041 of ERISA or the treatment of a plan
amendment as a distress termination under Section 4041 of ERISA; (iv) the
institution of proceedings to terminate a Plan or Fox Health Plan by the PBGC
under Section 4042 of ERISA; (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or Fox Health Plan; (vi) the
occurrence of an event described in Sections 4069, 4070, or 4212(c) of ERISA,
with respect to a Plan or Fox Health Plan; (vii) the failure by the Borrower or
any ERISA Affiliate of Borrower to make a payment to a Plan or Fox Health Plan
required under Section 302(f) of ERISA, or the adoption of an amendment to a
Plan or Fox Health Plan requiring the provision of security to such Plan or Fox
Health Plan pursuant to Section 307 of ERISA; or (viii) with respect to
Borrower or any ERISA Affiliate of Borrower, the incurrence of any Withdrawal
Liability, or with respect to any Plan or Fox Health Plan which is a
Multiemployer Plan, any termination of such Multiemployer Plan, or any such
Multiemployer Plan being insolvent or in reorganization status.
Tribunal. Means any Federal, State, municipal or other governmental
department, judicial body, commission, board, bureau, agency or instrumentality
of the U.S. or of any State, commonwealth, country, nation, territory,
possession, county, parish or municipality, whether now or hereafter
constituted or existing, and also means and includes any arbiter or mediator.
U.S. Means the United States of America.
Weirton Liabilities Agreement. Means the Amended and Restated Weirton
Liabilities Agreement, dated as of June 26, 1990, between Fox Health, NII
Capital Corporation, and National Steel Corporation, as amended by an
Amendment, dated as of July 31, 1991, by and among Fox Health, NII Capital
Corporation, and National Steel Corporation, a copy of which has been delivered
to the Administrative Agent prior to the date hereof.
Withdrawal Liability. Means "withdrawal liability" within the meaning
of Part I of Subtitle E of Title IV of ERISA.
Withholding Taxes. Has the meaning set forth in Section 2.11(a).
ARTICLE II
THE LOANS
2.1 ADVANCES.
(a) Commitments. Upon the terms and subject to the conditions set
forth in this Agreement, and upon request of
29
<PAGE> 35
Borrower as provided herein, each Lender agrees, severally and not jointly, to
make Advances to or for the account of Borrower from the date hereof to the
Termination Date; provided, however, that (i) the aggregate principal amount of
the Advances made by such Lender under this Section 2.1(a) and outstanding may
not at any time exceed such Lender's Commitment and (ii) the aggregate
principal amount of all the Advances made by all Lenders under this Section
2.1(a) and outstanding may not at any time exceed the Aggregate Commitment.
Each Advance shall be made as a part of a borrowing consisting of Advances made
by Lenders in accordance with their respective Pro Rata Shares; provided,
however, that the failure of any Lender to advance its Pro Rata Share of any
such Advance to the extent of its Pro Rata Share shall not in itself relieve
any other Lender of its obligation under this Section 2.1(a) (it being agreed,
however, that no Lender shall be responsible for the failure of any other
Lender to do so). Prior to the Termination Date, Borrower may borrow, repay
and reborrow under the Facility up to the full amount of the Aggregate
Commitment in accordance with the terms of this Agreement. Lenders shall not
be required to make any Advances under the Facility after the Termination Date.
(b) Notes. Each Lender's Advances outstanding under its
Commitment shall be evidenced by a promissory note, dated of even date
herewith, executed by Borrower and payable to the order of such Lender, in the
maximum original principal amount of such Lender's Commitment, substantially in
the form of Exhibit E hereto (as amended, renewed, extended, restated,
replaced, substituted, supplemented or otherwise modified from time to time,
individually, a "Note" and, collectively, the "Notes").
2.2 USE OF PROCEEDS.
All proceeds of the Loans shall be used solely for working capital
purposes of Borrower and its Consolidated Subsidiaries, provided that a
substantial majority of such proceeds shall be used for working capital
purposes of FoxMeyer Drug Company and Harris Wholesale. None of the proceeds
of the Loans may be used by Borrower or any Consolidated Subsidiary (i) for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any Margin Stock or of refinancing Indebtedness originally incurred for such
purpose, or (ii) for any purpose which constitutes a violation of, or is
inconsistent with, the regulations of the Board of Governors, including,
without limitation, Regulation G, U or X of the Board of Governors.
2.3 BORROWING AND RELATED PROCEDURES.
(a) Loan Request Certificate. Lenders shall make Advances to
Borrower in accordance with the terms hereof upon receipt by Administrative
Agent of a Loan Request Certificate appropriately completed (which may be by
telecopier or telefax confirmed immediately in writing) and specifying all
information
30
<PAGE> 36
called for in the Loan Request Certificate, including, without limitation, the
following information:
(i) the requested amount of such Advance, which amount
must be equal to $1,000,000, or an integral of $100,000 in excess
thereof; and
(ii) the requested date of such Advance, which date shall
be a Business Day.
Such Loan Request Certificate shall be delivered by Borrower to Administrative
Agent not later than 12:30 P.M., New York, New York time, on the requested date
of the Advance, and the Loan Request Certificate shall be effective and
irrevocable upon receipt thereof by Administrative Agent.
(b) Notice to Lenders. Upon receipt of a Loan Request
Certificate, Administrative Agent shall promptly notify each Lender of the
contents thereof and of such Lender's Pro Rata Share with respect to the
requested Advance.
(c) Funding of Advances. Not later than 3:00 P.M., New York, New
York time, on the funding date set forth in the Loan Request Certificate with
respect to any Advance, each Lender shall, subject to the satisfaction (or
effective waiver) of all applicable conditions precedent, make available its
Pro Rata Share of the requested Advance, in immediately available funds, to
Administrative Agent and, unless Administrative Agent determines that any
applicable condition precedent has not been satisfied, Administrative Agent
shall, not later than 4:00 P.M., New York, New York time on the same date, make
the funds so received from Lenders available to Borrower at such address or at
such other place in New York, New York, as Administrative Agent and such
recipient may mutually agree from time to time. Unless Administrative Agent
shall have received written notice from a Lender prior to the date of any
requested Advance that such Lender will not make available to Administrative
Agent such Lender's Pro Rata Share of such Advance, Administrative Agent may
assume that such Lender has timely made such share available to Administrative
Agent on the date of such requested Advance and Administrative Agent may (but
shall not be obligated to), in reliance upon such assumption, make available to
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have made its Pro Rata Share thereof available to
Administrative Agent, such Lender and Borrower severally agree to pay to
Administrative Agent, forthwith upon demand, and without premium or penalty,
such corresponding amount, together with interest thereon, for each day from
the date such amount is made available by Administrative Agent to Borrower
until the date such amount is repaid to Administrative Agent at (i) with
respect to Borrower, the interest rate applicable to the subject Loan and (ii)
with respect to such Lender, the Federal Funds Rate. If (and only if) such
Lender shall repay to Administrative Agent
31
<PAGE> 37
such corresponding amount, such amount shall constitute such Lender's share of
the Loan for purposes of this Agreement.
2.4 PRINCIPAL PAYMENT OF ADVANCES.
Subject to the terms of this Agreement, the unpaid principal amount of
the Advances shall be due and payable in full on the Termination Date.
2.5 PREPAYMENTS OF ADVANCES.
(a) Voluntary Prepayments. Subject to the terms of this
Agreement, Borrower may prepay the Advances in whole or in part at any time and
from time to time by notifying Administrative Agent of the particular Advances
to be prepaid, the amount of such prepayment and the prepayment date; provided,
however, that with respect to partial prepayments of the Advances, the
prepayment of principal must be in an amount equal to $1,000,000 or an integral
multiple of $100,000 in excess thereof. Unless Borrower expressly informs
Administrative Agent to the contrary prior to or concurrently with any
voluntary prepayment, such prepayment shall be applied first to accrued
interest and then to principal.
(b) Existing Credit Facility. Borrower shall prepay in full the
principal amount of the Loans on each date that Borrower pays or prepays any
principal of Indebtedness under the Existing Credit Facility other than the
payment of reimbursement obligations in respect of letters of credit issued
thereunder from the proceeds of Indebtedness thereunder.
(c) Notice. Administrative Agent shall, promptly after receiving
any prepayment pursuant to this Section 2.5, notify each Lender of the
principal amount of the Advances held by such Lender which is prepaid, the
prepayment date and, if applicable, the manner of application of the
prepayment.
2.6 INTEREST.
(a) Interest Payment Dates. Interest accrued on the unpaid
principal amount of the Loans outstanding from time to time shall be due and
payable on each Interest Payment Date and on the Termination Date.
(b) Interest Rate Prior to Default. The unpaid principal amounts
of all Loans shall bear interest at the lesser of (A) the Maximum Lawful Rate
or (B) an annual rate equal to the Base Rate.
(c) Default Rate. Notwithstanding any provision to the contrary
contained in this Section 2.6, upon the occurrence and thereafter during the
continuance of an Event of Default, the unpaid principal balance or amount of,
and, to the extent permitted by applicable law, accrued interest on, the
Obligations
32
<PAGE> 38
(including, without limitation, the Advances, costs, fees, expenses and
obligations of indemnity) shall bear interest, payable on demand, from the date
of the occurrence and during the continuation of such Event of Default until
the Obligations have been paid, at the Default Rate applicable thereto;
provided, however, that the Obligations other than Loans shall not (unless
otherwise expressly stated herein to the contrary) begin to bear interest until
the amounts thereof are past due and payable.
(d) Computation of Interest. Subject to Section 9.4, interest on
the Obligations shall be calculated on the basis of the actual number of days
elapsed and computed as if each year consisted of 365 or 366 days, as the case
may be. Such computations shall be made by including the first day but
excluding the last day of the period for which such interest is payable.
Notwithstanding any provision to the contrary contained herein, if at any time
or from time to time the rate of interest determined under Section 2.6(b) or
Section 2.6(c), as applicable, exclusive of limitations with reference to the
Maximum Lawful Rate (the "Stated Rate") would (but for limitations with
reference to the Maximum Lawful Rate) exceed the Maximum Lawful Rate, then any
subsequent reduction in the Stated Rate shall not reduce the rate of interest
payable below the Maximum Lawful Rate until the total amount of interest
accrued on the applicable Loan equals the amount of interest that would have
accrued thereon if the Stated Rate had at all times been in effect. Each
determination by Administrative Agent with respect to interest on the
Obligations shall be presumed correct.
2.7 FEES.
Borrower shall pay the following fees in connection with this Agreement:
(a) Structuring Fee. Borrower shall pay to Administrative Agent
for its own account a structuring fee in the amount and on the date set forth
in the Fee Letter.
(b) Upfront Fees. Borrower shall pay to Administration Agent, for
distribution to all Lenders (including Citicorp) in accordance with their
respective Pro Rata Shares of the Aggregate Commitment, on the date of
execution hereof, an upfront fee equal to fifteen hundredths of one percent
(0.15%) of the Aggregate Commitment.
(c) Commitment Fee. Borrower shall pay to Administrative Agent,
for distribution to all Lenders (including Citicorp) in accordance with their
respective Pro Rata Shares of the Aggregate Commitment, on (i) the last day of
each calendar quarter during the term of this Agreement (commencing with the
first of such dates to occur after the date hereof) and (ii) if such date falls
on other than the last day of a calendar quarter, the Termination Date, a
commitment fee on the average daily
33
<PAGE> 39
unused portion of the Aggregate Commitments at the rate of one-quarter of one
percent (0.25%) per annum.
(d) Computation of Fees. Subject to Section 9.4, the commitment
fee referred to in Section 2.7(c) shall be calculated on the basis of the
actual number of days elapsed and computed as if each year consisted of 360
days, except when the Maximum Lawful Rate is being charged on all or any
portion of the Obligations, at which time such fee shall be computed as if each
year consisted of 365 or 366 days, as the case may be. Each determination by
Administrative Agent with respect to fees shall be presumed correct in the
absence of manifest error.
(e) Charging Borrower's Account. In the event Borrower fails to
pay any fee to be paid pursuant to this Section 2.7 on the date the same is due
and payable, Lenders are hereby authorized (but shall not be required) to
advance or to cause to be advanced the amount of such fee upon any one or more
of the Advances to Borrower.
2.8 PROTECTION OF YIELD.
(a) Increased Costs. etc. Subject to Section 9.4, if at any time,
and from time to time, any Lender determines that the adoption, modification or
implementation (after the date hereof) of, or compliance (first required or
requested after the date hereof) with, any applicable law, rule or regulation
regarding taxation (exclusive of any law, rule or regulation imposing taxes on
the overall income or overall gross receipts of such Lender or its Affiliates
or imposing franchise taxes on such Lender or its Affiliates), required levels
of reserves, deposits, insurance or capital (including any allocation of
capital requirements or conditions), or similar requirements applicable to such
Lender or any of its Affiliates, or any interpretation or administration
thereof (after the date hereof) by any governmental authority, central bank or
comparable agency charged with the interpretation, administration or compliance
of or with any of such requirements, has or would have the effect of (i)
increasing such Lender's (or its Affiliate's) costs of making, funding or
maintaining the Loans, the Commitment, the Facility or any part thereof or (ii)
reducing the yield or rate of return of such Lender or its Affiliates on the
Loans, its Commitment, the Facility or any part thereof, to a level below that
which such Lender (or Affiliate) would have achieved but for the adoption,
modification or implementation of, or compliance with, any such requirements,
Borrower shall, within 15 days after request therefor by such Lender, pay to
such Lender such additional amounts as will compensate such Lender for such
increase in costs or reduction in yield or rate of return of such Lender (or
Affiliate). No failure by any Lender to immediately request payment of any
additional amounts payable under this Section 2.8(a) shall constitute a waiver
of such Lender's right to request payment of such amounts at any subsequent
time. Each Lender requesting that Borrower pay additional amounts pursuant
34
<PAGE> 40
to this Section 2.8(a) shall submit to Borrower and Administrative Agent a
certificate, executed by such Lender, as to such additional amounts, which
certificate shall be presumed correct. Such certificate shall set forth in
reasonable detail the nature of the occurrence giving rise to such claim for
additional amounts, the additional amounts to be paid to it hereunder, and the
method by which such amounts were determined. In determining such amounts,
such Lender may use any reasonable averaging and attribution methods. Any
portion of the additional amounts required to be paid under this Section 2.8(a)
remaining unpaid 15 days after the due date thereof shall bear interest at the
Default Rate. Notwithstanding the foregoing, Borrower shall be obligated to
pay such amounts only if and to the extent that the general circumstances which
have caused such additional amounts to be owing are applicable to Majority
Lenders (or their respective Affiliates).
(b) Reasonable Efforts. Borrower and Lenders shall use reasonable
efforts to avoid or to minimize amounts payable by Borrower pursuant to this
Section 2.8, and Borrower shall, as promptly as practical, notify
Administrative Agent, and each Lender shall, as promptly as practicable, notify
Borrower and Administrative Agent, of the existence of any event or
circumstance of which it is aware which will require the payment by Borrower of
any such amounts; provided, however, that the failure to give any such prompt
notification shall not result in any liability to such Lender and shall not
affect the rights of Lenders or the obligations of Borrower hereunder;
provided, further, however, that Borrower shall not be obligated to pay any
additional amount to any Lender pursuant to this Section 2.8 unless request is
made for payment of such additional amount within one year after such Lender
became aware that such additional amount was owing by Borrower. Such
reasonable efforts shall include, without limitation, the designation of a
different lending office if such designation would not, in the reasonable
judgment of the affected Lender, be disadvantageous to such Lender.
2.9 MANNER AND APPLICATION OF PAYMENT.
(a) Manner of Payment. All payments by Borrower shall be made,
without setoff, counterclaim or deduction of any kind except as may be
permitted by Section 2.11(a), to Administrative Agent (for the account of
Administrative Agent or Lenders, as appropriate) at Citibank, 399 Park Avenue,
New York, New York 10043, not later than 11:00 A.M., New York, New York time,
on the date due, and shall be payable in lawful currency of the U.S. in
immediately available funds. Administrative Agent will promptly (and if such
payment is received by Administrative Agent by 11:00 A.M., and otherwise if
feasible, on the same Business Day) distribute to each Lender its Pro Rata
Share (based upon the Loans to which such payment relates) of each such payment
received by Administrative Agent for the account of Lenders. Upon
Administrative Agent's acceptance of an Assignment and
35
<PAGE> 41
Acceptance and recording of the information contained therein in the Register
pursuant to Section 9.6, from and after the effective date of such Assignment
and Acceptance Administrative Agent shall make all payments under this
Agreement with respect to the interest assigned thereby to Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall, directly
between themselves, make all appropriate adjustments in such payments for
periods prior to such effective date. Whenever any payment with respect to
Loans or of any fees or expenses shall be due on a date which is not a Business
Day, the date for payment thereof shall be extended to the next succeeding
Business Day. If the date for any payment of principal is extended, interest
shall accrue and be payable by Borrower with respect to such extension.
(b) Application of Payments. Except as provided in Section 2.5,
all payments on the Loans and other Obligations shall be applied to payment of
the Loans and Obligations being paid in the following manner: (i) first,
against the interest accrued and unpaid on the Loans or Obligations as of the
date of such payments; (ii) second, against the principal of the Loans; and
(iii) third, against the remaining Obligations in any manner Administrative
Agent shall, in its discretion, determine.
2.10 TERMINATION AND REDUCTION.
(a) Automatic Termination and Reduction. The Aggregate Commitment
shall automatically terminate on the Termination Date.
(b) Voluntary Termination or Reduction. Upon at least three
Business Days' prior notice to Administrative Agent, Borrower may at any time
in whole permanently terminate, or from time to time in part permanently
reduce, the Aggregate Commitment; provided, however, that (i) each partial
reduction of the Aggregate Commitment shall be in an amount equal to $5,000,000
or an integral multiple of $1,000,000 in excess thereof and (ii) the Aggregate
Commitment may not be reduced (or terminated) pursuant to this Section 2.10(b)
to an amount that is less than the aggregate principal amount of the Loans then
outstanding. Once so terminated or reduced, the Aggregate Commitment may not
thereafter be increased by Borrower.
(c) Allocation of Reduction of Commitments. Each reduction in the
Aggregate Commitment shall be made ratably among Lenders in accordance with
their respective Pro Rata Shares of the Commitments.
2.11 TAXES; EXMPTION FROM U.S. WITHHOLDING, ETC.
(a) Withholding Taxes. With respect to payments to be made under
this Agreement and the Notes to any Lender organized under the laws of a
jurisdiction outside of the U.S., Borrower or Administrative Agent may withhold
from such payments which are
36
<PAGE> 42
subject to withholding taxes under Sections 1441(a) or 1442(a) of the Code (or
any successor provision) at the applicable statutory rate ("Withholding
Taxes"); provided, however, that Borrower and Administrative Agent shall not
withhold or shall withhold at a rate reduced by an applicable tax treaty if
such Lender timely provides Administrative Agent and Borrower with properly
executed Prescribed Forms indicating that such payments either are not subject
to Withholding Taxes or are subject to such taxes at a rate reduced by an
applicable tax treaty; provided, further, that any amounts required to be
withheld pursuant to Sections 1441(a) or 1442(a) of the Code or any successor
provision (as modified by any applicable tax treaty) shall not be treated as
Withholding Taxes (and shall be treated as Other Taxes) (i) to the extent such
amount exceeds the tax that would have been required to have been withheld
using the withholding rate applicable to the Lender at the later of the date
hereof or the time such person became a Lender (giving effect to any reduced
rate of withholding in effect at the later of the Reinstatement Date or the
time such Person became a Lender, if such Person supplies the Prescribed Forms
indicating entitlement to such rate) and (ii) if the Lender so notifies
Borrower within one year after such Lender became aware thereof.
(b) Other Taxes. Borrower agrees to and shall pay any and all
present or future stamp, documentary, excise, property and other taxes, charges
or similar levies now or hereafter imposed (excluding only taxes imposed on the
overall net income or overall gross receipts of Administrative Agent or a
Lender, franchise taxes imposed on Administrative Agent or a Lender, or any
Affiliate thereof, and Withholding Taxes), which arise from any payment made
under this Agreement or the other Loan Papers or from the execution, delivery
or registration of, or otherwise with respect to, this Agreement or the other
Loan Papers (hereinafter referred to as "Other Taxes"). Borrower shall
indemnify Administrative Agent and each Lender for the full amount of Other
Taxes (plus any taxes including, without limitation, any income or franchise
taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.11(b)) paid by Administrative Agent or such Lender (as the case may
be) and all liabilities (including penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto, whether or not such taxes
were correctly or legally asserted. Such indemnification shall be made by
Borrower within 15 days from the date Administrative Agent or such Lender (as
the case may be) makes request therefor and provides Borrower with a receipt
evidencing payment thereof.
(c) Additional Amounts Payable by Borrower. If Borrower shall be
required by law to deduct any amount in respect of Other Taxes from or in
respect of any sum payable under this Agreement or under any Note to
Administrative Agent or any Lender, (i) the sum payable by Borrower shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under
37
<PAGE> 43
this Section 2.11) Administrative Agent or such Lender (as the case may be)
receives an amount equal to the amount it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(d) Tax Receipts; Refunds. Within 30 days after the date of any
payment of Other Taxes by or at the direction of Borrower, Borrower will
furnish to Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof. In the event that (i) Administrative Agent or any
Lender ever receives any refund, credit or deduction from any taxing authority
to which Administrative Agent or such Lender would not be entitled but for the
payment by Borrower of Other Taxes as required by this Section 2.11 (it being
understood that the decision as to whether or not to claim, and if claimed, as
to the amount of any such refund, credit or deduction shall be made by
Administrative Agent or such Lender in its sole discretion) and (ii)
Administrative Agent or such Lender (as the case may be) determines that such
refund, credit or deduction relates to such payment by Borrower of Other Taxes,
then Administrative Agent or such Lender (as the case may be) thereupon shall
repay to Borrower an amount with respect to such refund, credit or deduction
equal to (A) any net reduction in taxes actually obtained by Administrative
Agent or such Lender and determined by Administrative Agent or such Lender to
be attributable to such refund, credit or deduction less (B) all reasonable
expenses of Administrative Agent or such Lender attributable to such refund,
credit or deduction. Administrative Agent and Lenders shall not be obligated,
in connection with any term or provision of this Section 2.11, to allow
Borrower to obtain copies of or to review any tax returns or books or records
of Administrative Agent or any Lender.
(e) Change of Lending Office. Any Lender claiming any additional
amounts payable pursuant to this Section 2.11 for Other Taxes shall use its
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its lending office, if
the making of such a change would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter accrue and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender.
(f) Other Reasonable Efforts. In addition to any actions
contemplated by Sections 2.11(d) and 2.11(e), Administrative Agent and each
Lender agrees that (i) it will take all other reasonable actions by all usual
means to avoid or to minimize amounts payable by Borrower under this Section
2.11; provided, however, that Administrative Agent and Lenders shall not be
obligated by reason of this Section 2.11 to contest the payment of any
Withholding Taxes or Other Taxes or to disclose any information regarding its
tax affairs or tax computations or
38
<PAGE> 44
reorder its tax or other affairs or tax or other planning. Notwithstanding
anything to the contrary in this Section 2.11, in no event shall Borrower ever
be obligated to pay penalties assessed or interest on such penalties applicable
to past due Other Taxes if and to the extent that such penalties or interest on
such penalties are due to Administrative Agent's or such Lender's (as the case
may be) failure to comply with applicable laws.
ARTICLE III
GUARANTIES
3.1 GUARANTY AGREEMENTS.
To guaranty and otherwise ensure full and complete payment and
performance of the Obligations, each Operating Subsidiary shall, and Borrower
shall cause each Consolidated Subsidiary to, execute and deliver to
Administrative Agent, on behalf of Lenders, concurrently with the execution and
delivery of this Agreement, a Guaranty Agreement, guaranteeing full and
complete payment and performance of the Obligations.
3.2 NEW CONSOLIDATED SUBSIDIARIES.
Borrower shall, promptly after the occurrence of such creation or
acquisition, notify Administrative Agent of the creation or acquisition of any
Consolidated Subsidiary that is not identified as such on Schedule 2 hereto and
also shall, promptly thereafter, cause each such Consolidated Subsidiary to
execute and deliver to Administrative Agent, on behalf of Lenders to guaranty
and otherwise ensure payment and performance of the Obligations, a Guaranty
Agreement and such other related agreements, documents, instruments and
certificates as Administrative Agent may from time to time reasonably request,
all in form and substance satisfactory to Administrative Agent.
3.3 REQUESTED CONSENT AND RELEASE.
(a) Borrower hereby requests that Lenders waive the provisions of
Sections 6.1(i), 6.1(l), 6.2(b), 6.2(j), 6.2(k), 6.2(l), 6.2(n) and 6.2(q) to
permit the following transactions (the "CareStream Transactions"):
(i) a dividend to Fox Health of $5,000,000 in book value
of the capital stock of Health Care Pharmacy Providers, Inc. and the
contribution by Fox Health of such capital stock to New CareStream;
(ii) the creation of a wholly owned Subsidiary of Borrower
("CareStream Holdings") to hold all of the capital stock of HealthCare
Connect, Inc. and its Subsidiaries, OmNex Health, Inc., NexCare, Inc.,
Scrip Card Enterprises, Inc. and US HealthData Interchange,
39
<PAGE> 45
Inc., including the balance of the capital stock of Health Care
Pharmacy Providers, Inc. but excluding all shares of capital stock of
FoxMeyer Canada owned by Health Care Pharmacy Providers, Inc., the
assets purchased by Borrower and/or FoxMeyer Drug Company from the
Chapter 11 estate of Synercom Healthcare Systems, Inc. on or about
February 8, 1995, and the assets used as of the Release Effective Date
in the operation of the DataNet division of Borrower and/or FoxMeyer
Drug Company, and the contribution of such capital stock and assets to
CareStream Holdings; and
(iii) the sale by CareStream Holdings of the CareStream
Operations to Fox Health for a consideration equal to (A) the amount of
Borrower's consolidated investment in the CareStream Operations from
March 31, 1993 to the date of such sale (which investment aggregated
$19,983,000 from March 31, 1993 through March 31, 1995) less $5,000,000
(representing the amount of the dividend described in paragraph (i)
above), which amount shall be evidenced by the CareStream Note, which
shall be payable on the earlier of (1) the date of consummation of any
public or private offering of shares of capital stock of New CareStream
or any other transaction (whether sale of stock or assets, merger or
other business combination) in which funds are received by Fox Health
or any of its Subsidiaries (including without limitation New
CareStream) in respect of the sale or other disposition of the
CareStream Operations (or any interest therein) or (2) one year from
the date of the CareStream Note, which note shall be secured by a first
priority pledge and security interest in the capital stock and assets
distributed or sold to Fox Health as part of the CareStream
Transactions and (B) the CareStream Indemnity.
(b) In order to induce Lenders to provide such waiver, Borrower
hereby represents, warrants and covenants as follows:
(i) The CareStream Transactions are correctly described in
clause (a) above and the memoranda dated October 3, 1995 and October
13, 1995 (collectively, the "Transaction Description"), from Borrower.
The Transaction Description does not omit any statement of a material
fact necessary to make the statements contained therein or herein not
misleading.
(ii) The principal amount of the CareStream Note will be
not less than the actual amount of all loans, advances, capital
contributions and other investments made by Borrower and its
Consolidated Subsidiaries in the CareStream Operations after March 31,
1993, less $5,000,000. After giving effect to the CareStream
Transactions, (A) the maximum aggregate amount of
40
<PAGE> 46
(1) obligations of Borrower and the Consolidated Subsidiaries to pay
the deferred or contingent purchase prices for the CareStream
Operations and (2) all Guaranties and other contingent obligations of
Borrower and the Consolidated Subsidiaries for financing of the
CareStream Operations shall not exceed $5,000,000, and shall be fully
assumed and indemnified against by Fox Health pursuant to the
CareStream Indemnity, and (B) neither Borrower or any Consolidated
Subsidiary will have any other liabilities or obligations to, or any
agreement to provide financial support for, the CareStream Operations.
(iii) The consummation of the CareStream Transactions will
not, and Borrower hereby agrees that the consummation of the CareStream
Transactions shall not, violate the terms of, or give rise to a default
under, the 7.09% Notes, the 7.09% Note Guaranties or the 7.09% Note
Purchase Agreements, the agreements and instruments evidencing the
Revolving Receivables Purchase Program, the Existing Credit Facility
or any other material agreement, any law, rule or regulation, or any
order, writ, judgment, injunction, decree, determination or award, to
which Borrower or any Consolidated Subsidiary is a party or by which it
or any of its material Assets are bound or affected. None of the
CareStream Transactions will have a Material Adverse Effect.
(iv) After giving effect to the CareStream Transactions,
Borrower and each of the Operating Subsidiaries will be Solvent, both
as a separate corporate entity and on a consolidated basis with its
Subsidiaries.
(c) On the basis of the representations and warranties in this
Section 3.3 and subject to clause (d) below, Lenders agree (i) to waive the
provisions of this Agreement set forth in clause (a) above insofar as may be
required to effect the CareStream Transactions and (ii) to release and
terminate the Guaranty Agreements of the following Guarantors: Healthcare
Connect, Inc., OmNex Health, Inc., Health Care Pharmacy Providers, Inc.,
NexCare, Inc., Scrip Card Enterprises, Inc. and US HealthData Interchange,
Inc.; provided that the release contemplated by this clause (c) shall not
become effective if a Potential Default or an Event of Default shall have
occurred and be continuing.
(d) The waiver provided in clause (c) above shall be effective,
and Administrative Agent shall be authorized to release and terminate the
Guaranty Agreements of the Consolidated Subsidiaries named in clause (c) above,
upon satisfaction of the following, in a manner acceptable to Administrative
Agent, on or
41
<PAGE> 47
before May 31, 1996 (the date of effectiveness herein called the "Release
Effective Date"):
(i) Borrower shall provide Administrative Agent with at
least five Business Days' notice of the proposed consummation of the
CareStream Transactions, which notice shall include copies of the
proposed CareStream Note, CareStream Pledge Agreement and CareStream
Indemnity (collectively, the "CareStream Transaction Documents"), and
the CareStream Transaction Documents shall be in form and substance
satisfactory to Administrative Agent. The CareStream Transactions
shall be consummated as contemplated by this Section 3.3, and all
proceedings taken in connection with the CareStream Transactions shall
be satisfactory to Administrative Agent and its counsel.
(ii) Borrower and CareStream Holdings shall have received
the CareStream Note, the CareStream Pledge Agreement and the CareStream
Indemnity, duly executed by Fox Health, together with certificates
representing all of the capital stock required to be pledged pursuant
thereto and related stock powers duly endorsed in blank.
(iii) Administrative Agent shall have received evidence that
all Intercompany Notes of Health Care Pharmacy Providers, Inc. and the
other Subsidiaries of CareStream Holdings shall be repaid in full or
contributed to capital and included in the principal amount of the
CareStream Note.
(iv) Administrative Agent shall have received an opinion of
Weil, Gotshal & Manges, counsel to Borrower and the Operating
Subsidiaries, in form and substance satisfactory to Administrative
Agent, (A) that the CareStream Transaction Documents have been duly
authorized, executed and delivered by Fox Health and New CareStream and
constitute the legal, valid and binding obligations of Fox Health and
New CareStream, enforceable in accordance with their respective terms
(subject as to enforcement of remedies to any applicable bankruptcy,
reorganization, moratorium, or similar laws or principles of equity
affecting enforcement of creditors' rights generally), (B) that the
execution, delivery and performance of the CareStream Transaction
Documents do not violate the terms of, or give rise to a default under,
the 7.09% Notes, the 7.09% Note Guaranties or the 7.09% Note Purchase
Agreements, the agreements and instruments evidencing the Revolving
Receivables Purchase Program or the Existing Credit Facility, any law,
rule or regulation, or any order, writ, judgment, injunction, decree or
determination or award, to which Borrower or any Consolidated
Subsidiary is a party or by which it or any of its material Assets are
bound or affected,
42
<PAGE> 48
(C) that the CareStream Pledge Agreement creates a valid and
enforceable pledge of and security interest in the capital stock and
assets intended to be subject thereto, and (D) as to such other matters
as Administrative Agent deems appropriate.
(v) Before and after giving effect to the CareStream
Transactions, the representations and warranties provided in Article V
shall be true and correct on the Release Effective Date as if made on
such date (except to the extent that such representations and
warranties are expressly by their terms made only as of a date other
than the date hereof), and no Potential Default or Event of Default
shall have occurred or be continuing on the Release Effective Date.
(vi) Borrower shall have paid all fees and expenses payable
by Borrower under the Loan Papers on or before the Release Effective
Date.
(vii) Administrative Agent shall have received such other
documents, instruments, certificates and opinions as it shall deem
necessary or appropriate in connection with the waiver contemplated by
this clause (d) and the transactions contemplated thereby.
(viii) Administrative Agent shall have received a certificate
from a Financial Officer of Borrower certifying the satisfaction of the
conditions precedent set forth in this clause (d).
(e) Borrower acknowledges and agrees that the foregoing waiver
shall extend only to the requirements of this Agreement to the limited extent
expressly provided herein and shall not extend to any other or additional state
of facts or circumstances or any other covenant, obligation, representation or
warranty of any party to this Agreement or the other Loan Papers.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 INITIAL LOANS.
The obligations of Lenders to make the initial Loan shall be subject to
the prior satisfaction of each of the following conditions precedent:
(a) Notes. The Notes shall have been duly executed by Borrower
and delivered to Administrative Agent.
(b) Guaranty Agreements. The Guaranty Agreements shall have been
duly executed by each of the Operating
43
<PAGE> 49
Subsidiaries and the other Consolidated Subsidiaries and delivered to
Administrative Agent.
(c) Corporate Certificate. A Corporate Certificate in the form of
Exhibit F hereto, appropriately completed, shall have been duly executed by
each of Borrower, the Operating Subsidiaries and the other Consolidated
Subsidiaries and certain of its officers, as indicated therein, and delivered
to Administrative Agent, and the resolutions of the Board of Directors of such
corporation, the Certificate or Articles of Incorporation of such corporation
and the Bylaws of such corporation attached thereto shall be in form and
substance reasonably satisfactory to Administrative Agent.
(d) Good Standing and Authority. Certificates of the appropriate
governmental offices of each jurisdiction in which Borrower or any Operating
Subsidiary is incorporated and of each other jurisdiction in which Borrower or
any Operating Subsidiary transacts business and is required to qualify as a
foreign corporation and where the failure to so qualify could reasonably be
expected to cause a Material Adverse Effect, each dated no later than August 1,
1995, to the effect that Borrower or such Operating Subsidiary is in existence,
in good standing with respect to the payment of franchise and similar taxes and
duly qualified to transact business in such jurisdictions, shall have been
delivered to Administrative Agent.
(e) Opinions of Counsel. (i) A legal opinion of Weil, Gotshal &
Manges, and other counsel reasonably acceptable to Administrative Agent as to
matters relating to Kansas law, as counsel for Borrower and Consolidated
Subsidiaries, substantially in the forms of Exhibit G attached hereto shall
have been duly executed by such counsel and delivered to Administrative Agent,
and (ii) a favorable legal opinion of Gibson, Dunn & Crutcher, counsel to
Administrative Agent, in form and substance satisfactory to Administrative
Agent, shall have been duly executed by such counsel and delivered to
Administrative Agent.
(f) UCC and Lien Searches. Searches of Borrower's and each
Operating Subsidiary's State of incorporation, the States where Borrower's and
each Operating Subsidiary's chief executive office is located and all other
States that the Administrative Agent may request, setting forth all UCC
filings, financing statements and other Lien filings against Borrower or any
Operating Subsidiary, shall have been delivered to Administrative Agent, which
searches shall confirm that the Assets of Borrower and Operating Subsidiaries
are free and clear of all Liens other than Permitted Liens, if any.
(g) Cash Flow Projections and Financial Statements. Consolidated
cash flow projections of Borrower and its Consolidated Subsidiaries and
projected balance sheets and statements of operations of Borrower and its
Consolidated Subsidiaries for the two year period commencing with fiscal year
44
<PAGE> 50
1996, together with unaudited consolidating balance sheets and statements of
operations for FoxMeyer Drug Company, Harris Wholesale, and the other
Consolidated Subsidiaries as of September 30, 1995 and for the six months then
ended, shall have been delivered to the Administrative Agent, which
projections, balance sheets and statements shall be certified by a Financial
Officer of Borrower and, with respect to the balance sheets and statements of
each Operating Subsidiary, such Operating Subsidiary and shall reflect, to the
satisfaction of Administrative Agent, that, both before and after giving effect
to the transactions contemplated by this Agreement (and assuming funding of the
Loans in an amount equal to the maximum Aggregate Commitment), each of Borrower
and each Operating Subsidiary is, both as a separate corporate entity and on a
consolidated basis with its Subsidiaries, Solvent.
(h) Solvency Certificate. A Solvency Certificate in the form of
Exhibit H hereto, appropriately completed, shall have been delivered to
Administrative Agent, which Solvency Certificate shall have been executed by a
Financial Officer of Borrower and each Operating Subsidiary and shall reflect,
to the satisfaction of Administrative Agent, that (A) both before and after
giving effect to the transactions contemplated by this Agreement (and assuming
funding of the Loans in an amount equal to the maximum Aggregate Commitment),
each of Borrower and each Operating Subsidiary is, both as a separate corporate
entity and on a consolidated basis with its Subsidiaries, Solvent and (B) there
has not occurred any material adverse change in the Net Worth of Borrower or
any Operating Subsidiary since the date of the balance sheets of such
corporations as of March 31, 1995.
(i) Field Examination; Borrowing Base. Administrative Agent
shall have completed and be satisfied with the results of a review and
examination of the Inventory and Receivables, and related systems, of Borrower
and the Consolidated Subsidiaries, including without limitation a verification
of the amounts of Inventory and Receivables in the financial statements of
Borrower and the Consolidated Subsidiaries, and Administrative Agent shall have
received a certificate setting forth the calculation of the ratio set forth in
Section 6.2(d) as of September 30, 1995.
(j) Fees. All fees required to have been paid by Borrower
pursuant to Section 2.7 shall have been paid (to the extent then due).
(k) Insurance, etc. Borrower and each Consolidated Subsidiary
shall have obtained and shall maintain insurance and indemnification rights as
required pursuant to Section 6.1(c).
(l) No Material Adverse Effect. There shall not have occurred any
event or events and there shall not exist any circumstance or circumstances
which, individually or collectively, could reasonably be expected to cause a
Material Adverse Effect.
45
<PAGE> 51
(m) No Litigation, etc. There are no investigations, actions,
suits or proceedings pending or threatened in or before any Tribunal that could
reasonably be expected to cause a Material Adverse Effect.
(n) Intercompany Notes. Administrative Agent shall have received
a certified copy of each of the Intercompany Notes, which promissory notes
shall be in form and substance reasonably satisfactory to Administrative Agent.
(o) No Default. As of the date of the initial Loan, no Potential
Default or Event of Default shall exist.
(p) Amendments to Prior Agreements. Borrower shall cause the
amendment of the Fox Health Loan Agreement and each of the Intercompany Notes
to reflect the execution of this Agreement, including such references in
Sections 5.4(c), 6.2 and 8.5 of the Fox Health Loan Agreement.
(q) Proceedings Satisfactory. All proceedings taken in connection
with the transactions contemplated by the Loan Papers shall be reasonably
satisfactory to Administrative Agent, all Loan Papers shall be in form and
substance reasonably satisfactory to Administrative Agent and all legal matters
incident to this Agreement and the other Loan Papers and the transactions
contemplated by the Loan Papers shall be reasonably satisfactory to counsel to
Administrative Agent.
(r) Closing Certificate. A Closing Certificate in the form of
Exhibit I hereto, appropriately completed, shall have been executed by Borrower
and Operating Subsidiaries and certain of their officers, as indicated therein,
and delivered to Administrative Agent, which certificate shall certify to the
satisfaction of the conditions precedent set forth in this Section 4.1.
4.2 ALL LOANS.
The obligations of Lenders to make any Loans (including the initial
Loan) shall be subject to the prior satisfaction of each of the additional
following conditions precedent:
(a) No Default. As of the date of the making of such Loan and
after giving effect thereto, no Potential Default or Event of Default then
exists or would exist.
(b) Representations and Warranties. The representations and
warranties contained in the Loan Papers (including, without limitation, those
contained in Article V hereof and those relating to the information disclosed
on Schedule 2 hereto) shall be true and correct in all material respects on the
date of the making of such Loan with the same force and effect as though made
on and as of such date, except to
46
<PAGE> 52
the extent that such representations or warranties are expressly by their terms
made only as of another specific date.
(c) Covenants and Agreements. All covenants and agreements to
have been complied with and performed by Borrower or any Consolidated
Subsidiary on or prior to the making of such Loan shall have been fully
complied with and performed.
(d) Loan Request Certificate. With respect to any Advance, the
Loan Request Certificate relating thereto, appropriately completed and executed
by Borrower and in form and substance satisfactory to Administrative Agent,
shall have been delivered to Administrative Agent.
(e) Existing Credit Facility. As of the date of the making of
such Loan and after giving effect thereto, the aggregate amount of the Loans
(as defined in the Existing Credit Facility) then outstanding and the Letter
of Credit Outstandings (as defined in the Existing Credit Agreement) shall
equal $295,000,000 (or such lesser portion of the $295,000,000 aggregate
commitment under the Existing Credit Agreement as may be outstanding
consistent with the requirements thereof for borrowings in minimum
determinations).
(f) Additional Items. Such additional agreements, documents,
instruments and certificates as Administrative Agent, Lenders or counsel to
Administrative Agent may reasonably request to ensure or evidence compliance
with this Agreement shall have been delivered to Administrative Agent.
4.3 REPRESENTATION AND WARRANTY.
Each request for an Advance shall constitute a representation and
warranty by Borrower and Operating Subsidiaries to Administrative Agent and
Lenders that all conditions precedent in this Article IV applicable thereto
have been satisfied in full.
4.4 DETERMINATIONS REGARDING CONDITIONS PRECEDENT.
Except as may be expressly stated in this Article IV to the contrary,
all determinations of compliance with applicable conditions precedent shall be
made by Administrative Agent in good faith. If and to the extent that any
Lender shall, in accordance with this Article IV, have the right to make or be
involved in any such determination, such Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with each agreement,
document, instrument or certificate or other matter to be consented to,
approved or accepted or satisfactory to such Lender unless (a) an officer of
Administrative Agent responsible for the administration of this Agreement and
holding the position of Vice President or higher shall have received notice
from such Lender, prior to the relevant time and date,specifying its objection
thereto and (b) such objection shall not
47
<PAGE> 53
have been withdrawn by verbal or written notice to Administrative Agent. To
the extent that any condition precedent contained in Sections 4.1 or 4.2
involves a matter that is to be determined expressly based upon the
satisfaction of or acceptability to Administrative Agent, Majority Lenders,
Required Lenders or Lenders, such condition precedent shall, to such extent
(and only to such extent), be deemed satisfied if Administrative Agent and
Lenders make the requested Advance to which such condition precedent relates.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Administrative Agent and
Lenders, and each Operating Subsidiary, as to matters relating to such
Operating Subsidiary, hereby represents and warrants to Administrative Agent
and Lenders, as follows:
5.1 ORGANIZATION, STANDING, QUALIFICATION.
Each of Borrower and its Consolidated Subsidiaries (a) is a corporation
duly organized, validly existing and in good standing under the laws of its
State of incorporation, (b) has all requisite power, corporate or otherwise, to
conduct its business and to execute and deliver, and perform its obligations
under, the Loan Papers, and (c) is duly qualified to transact business as a
foreign corporation in each jurisdiction when the nature of its Assets or the
conduct of its business requires such qualification and where the failure to so
qualify could reasonably be expected to cause a Material Adverse Effect.
5.2 AUTHORIZATION, ENFORCEABILITY, ETC.
(a) The execution, delivery and performance by Borrower and
Consolidated Subsidiaries of the Loan Papers have been duly authorized by all
necessary corporate action and do not and will not (i) violate any provision of
any material agreement, law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect to which
Borrower or any Consolidated Subsidiary is a party or by which it or any of its
material Assets are bound or affected, (ii) result in, or require the creation
or imposition of, any Lien (other than a Permitted Lien) upon or with respect
to any Asset owned by Borrower or any Consolidated Subsidiary, or (iii) except
as may be disclosed on Schedule 2, result in a breach of, or constitute a
default by Borrower or any Consolidated Subsidiary under, any indenture, loan
or credit agreement or any other material contract, agreement, document or
instrument to which it is a party or by which it or any of its Assets are bound
or affected.
(b) No approval, authorization, order, license, permit, franchise
or consent of or registration, declaration, qualification or filing, and no
lapse of a waiting period or lack
48
<PAGE> 54
of objection, with or from any Tribunal or other Person is required in
connection with the execution, delivery and performance by Borrower or any
Consolidated Subsidiary of any Loan Papers to which it is a party or by which
it or any of its Assets are bound or affected, except for approvals,
authorizations, orders, licenses, permits, franchises, consents,
representations, declarations, qualifications and filings which have been duly
obtained, taken, given or made and are in full force and effect.
(c) This Agreement has been duly executed and delivered by
Borrower and Operating Subsidiaries, and constitutes legal, valid and binding
obligations of Borrower and Operating Subsidiaries, enforceable against
Borrower and Operating Subsidiaries in accordance with its terms, subject to
applicable Debtor Relief Laws. The other Loan Papers to which Borrower or any
Consolidated Subsidiary is a party, when duly executed and delivered by
Borrower or such Consolidated Subsidiary, will constitute legal, valid and
binding obligations of Borrower or such Consolidated Subsidiary, as the case
may be, enforceable against Borrower or such Consolidated Subsidiary in
accordance with their respective terms, subject to applicable Debtor Relief
Laws.
5.3 FINANCIAL STATEMENTS AND BUSINESS CONDITION.
Borrower's Financial Statements (including the Base Financial
Statements) were and, when delivered pursuant to Section 6.3, will be prepared
in accordance with GAAP and fairly present the consolidated and consolidating
financial conditions and results of operations of Borrower and its Consolidated
Subsidiaries as of, and for the fiscal year (or portion thereof, as the case
may be) ended or ending on, the date(s) thereof, subject to Year-End
adjustments (if applicable). There were and will be no material liabilities,
direct or indirect, fixed or contingent, of Borrower or any Consolidated
Subsidiary as of the dates of Borrower's Financial Statements (including the
Base Financial Statements) which are not or will not be reflected therein or in
the notes thereto or which otherwise have not been disclosed to Administrative
Agent and Lenders in Schedule 2. There has not occurred any material adverse
change in the financial condition of Borrower or any Consolidated Subsidiary
from the financial condition shown in the Base Financial Statements, and
neither Borrower nor any Consolidated Subsidiary has incurred any material
liability, direct or indirect, fixed or contingent except in the ordinary
course of its business as currently conducted. No event or events have
occurred, and no circumstance or circumstances exist, which, individually or
collectively, has or have a Material Adverse Effect.
5.4 FILING OF TAX RETURNS.
Each of Fox Health, Borrower and the Consolidated Subsidiaries has
properly and timely filed all material tax
49
<PAGE> 55
returns required to have been filed in accordance with applicable law. All
such returns are correct and complete in all material respects. All taxes
shown to be due and payable on such returns, including interest, penalties and
additions to tax, and all other taxes which are payable by any thereof, to the
extent the same have become due and payable, have been paid. Borrower and
Operating Subsidiaries are not aware of any Proposed Tax Liability of
$20,000,000 or more in the aggregate. All tax liabilities of each of Fox
Health, Borrower and the Consolidated Subsidiaries are adequately provided for
in accordance with GAAP. No income tax liability of Fox Health, Borrower or
any Consolidated Subsidiary has been asserted by the Internal Revenue Service
for taxes in excess of those already paid, except as is being contested by such
taxpayer in good faith consistent with the requirements therefor set forth in
Section 6.l(d). The Tax Sharing Agreement is a legal, valid and binding
obligation of Fox Health and Borrower, enforceable against Fox Health and
Borrower in accordance with its terms, subject to applicable Debtor Relief
Laws. Neither Fox Health nor Borrower is in breach or default of its
obligations under the Tax Sharing Agreement. The foregoing representations do
not apply to tax returns and taxes of Fox Health attributable to any period
commencing after the date hereof, if during such period neither Borrower nor
any Consolidated Subsidiary is a member of an affiliated group (as defined in
Section 1504 of the Code), or any similar group for state, local or other tax
purposes, in which Fox Health is a member. As of the date hereof, to the best
of Borrower's knowledge, there are no taxes to which Fox Health is subject and
for which Borrower or any Consolidated Subsidiary could be held liable under
applicable law other than by reason of Borrower's status as a member of such an
affiliated group or similar group.
5.5 TITLE TO PARTIES; PRIOR LIENS.
Each of Borrower and the Consolidated Subsidiaries has good and
indefeasible title to all material Assets purported to be owned by it (except
for minor defects in title and minor encumbrances not in any case materially
detracting from the value of the Assets affected thereby) and to all Inventory
and Receivables purported to be owned by it, except for Receivables sold
pursuant to the Revolving Receivables Purchase Program.
5.6 LEASES.
All material real property leases, if any, under which Borrower or
Consolidated Subsidiary is lessee or tenant are in full force and effect, and
there does not exist any default or potential default thereunder by which any
such lease could be terminated.
5.7 OWNERSHIP OF BORROWER AND SUBSIDIARIES.
As of the date hereof, the ownership (record and beneficial) of
Borrower (exclusive of the identities of
50
<PAGE> 56
Borrower's public stockholders) and the Consolidated Subsidiaries is accurately
set forth on Schedule 2 hereto.
5.8 SOLVENCY.
Each of Borrower and each Operating Subsidiary is, both as a separate
corporate entity and on a consolidated basis with its subsidiaries, and both
before and after giving effect to the transactions contemplated by this
Agreement, Solvent.
5.9 BUSINESS; COMPLIANCE.
Each of Borrower and the Consolidated Subsidiaries has performed and
complied with all material obligations required to be performed or complied
with by it, and is not in default (to the extent it could reasonably be
expected to be materially and adversely affected) under any license, permit,
order, authorization, grant, contract, agreement or regulation material to its
business to which it is a party or by which it or any of its Assets are bound
or affected. The businesses and operations of each of Borrower and the
Consolidated Subsidiaries have been and are being conducted in accordance with
all applicable laws, rules and regulations of all Tribunals except such laws,
rules and regulations where the failure to perform or comply could not
reasonably be expected to have a Material Adverse Effect.
5.10 LICENSES, PERMITS, ETC.
Borrower and each Consolidated Subsidiary possesses such valid
Proprietary Rights and consents, authorizations, exemptions and orders of
Tribunals or otherwise as are necessary or appropriate to carry on its business
as now being or currently proposed to be conducted.
5.11 LITIGATION, PROCEEDINGS, ETC.
Except as otherwise provided in Schedule 2, to Borrower's and each
Operating Subsidiary's knowledge, there are (a) no investigations, actions,
suits, proceedings, orders or injunctions pending or threatened against or
affecting Borrower or any Consolidated Subsidiary or its Assets, at law or in
equity, or before or by any Tribunal which (i) either has had or could
reasonably be expected to have a Material Adverse Effect or (ii) either has
related or could reasonably be expected to relate to the Loans, the
Commitments, the Facility or the other transactions contemplated by the Loan
Papers, and (b) no accidents, acts or actions have occurred which involve any
claim not fully covered by insurance which could reasonably be expected to have
a Material Adverse Effect. Neither Borrower nor any Consolidated Subsidiary is
in default with respect to any order, writ, injunction or decree of any
Tribunal, which default could reasonably be expected to cause a Material
Adverse Effect.
51
<PAGE> 57
5.12 PLANS AND FOX HEALTH PLANS.
(a) As of the date hereof, Schedule 2 identifies all Plans and
Schedule 3 identifies all Fox Health Plans (collectively in such regard, the
"ERISA Plan Schedules"). No act, omission, or other event occurring before
October 20, 1992 with respect to any Fox Health Plan, either alone or in
combination with other acts, omissions, or events occurring at any time,
creates or results in any liability to Borrower or any Consolidated Subsidiary
existing on or after the date hereof except as otherwise disclosed herein.
Except as provided in the immediately preceding sentence, no representation or
warranty in this Section 5.12 relating to an Fox Health Plan shall apply with
respect to any period of time prior to October 20, 1992.
(b) Each Plan and Fox Health Plan has been maintained at all times
in compliance, in all material respects, with its provisions and applicable
law, including, without limitation, compliance with the applicable provisions
of ERISA and the Code. All Plans and Fox Health Plans intended to be qualified
under Sections 401(a) and 501(a) of the Code are and always have been so
qualified (or can be corrected to be treated as so qualified by the IRS under
its Closing Agreement Program, Voluntary Compliance Resolution Program, or any
other similar program without any material liability to Borrower or any
Consolidated Subsidiary) and have either received IRS determination letters to
this effect or applications for such letters are currently pending or will be
filed within the time limits under Section 401(b) of the Code. Nothing has
occurred prior to or since the issuance of such letters (or filings of such
applications) to cause the loss of qualification or tax exemption under the
Code of any of such Plans or Fox Health Plans (except as may qualify for
correction and retroactive restoration or deemed restoration under the IRS
Closing Agreement Program, Voluntary Compliance Resolution Program, or any
other similar program without any material liability to Borrower or any
Consolidated Subsidiary).
(c) There has been no material prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) or other breach of
fiduciary duty with respect to any Plan or Fox Health Plan. Without limiting
the generality of any other provision hereof, except with respect to the Fox
Health Plans listed on Schedule 3, neither Borrower nor any Consolidated
Subsidiary is directly, indirectly or contingently liable with respect to any
"employee benefit plans" as defined in Section 3(3) of ERISA with respect to
which Fox Health or any Fox Health Member is a party or bound or with respect
to which Fox Health or any Fox Health Member shall have any direct or indirect
or contingent liability. Neither Borrower nor any Consolidated Subsidiary is
directly, indirectly, or contingently liable with respect to the Weirton
Liabilities Agreement. With respect to any Plan or Fox Health Plan, the
Borrower and its ERISA Affiliates (i) have not incurred and do not expect to
incur any material accumulated funding deficiency under Section 302 of
52
<PAGE> 58
ERISA (whether or not waived or the time periods extended), (ii) have not
incurred and do not expect to incur any material liability to the PBGC, and
(iii) have not yet had asserted and do not expect to have asserted against them
any material penalty, interest or excise tax under the Code or ERISA.
(d) With respect to each Plan and Fox Health Plan, in all material
respects, (i) all required contributions and payments have been made, (ii) all
benefits due thereunder have been paid, and (iii) each such plan is able to
fully pay benefits thereunder when due. No Termination Event has occurred or
is expected to occur with respect to any Plan or Fox Health Plan which, either
alone or in the aggregate, could result in any material liability to the
Borrower and all of its Consolidated Subsidiaries, taken as a whole.
(e) With respect to all Plans and Fox Health Plans in the
aggregate, the sum of the following does not exceed $5,000,000: (i) the amount
of any unfunded facility or plant shut down benefit or other "unpredictable
contingent event benefit," within the meaning of Section 412(l)(7)(B) of the
Code, and (ii) with respect to only those Plans and Fox Health Plans which have
benefit liabilities (as defined in Section 4001(a)(16) of ERISA, and as
determined on the basis of assumptions prescribed by the PBGC for purposes of
ERISA Section 4044) which exceed the fair market value of their assets, the
aggregate amount of unfunded benefit liabilities (within the meaning of Section
4001(a)(18) of ERISA) for all such Plans and Fox Health Plans. As of March 31,
1992, with respect to all Plans, if any, providing health benefits to any
former employee or dependent of such employee for periods subsequent to the
severance of such employee's employment (other than pursuant to Section 4980B
of the Code), the excess of the accumulated postretirement benefit obligation
(as determined under Financial Accounting Standard ("FAS") No. 106) over the
fair market value of any plan assets dedicated to such obligations (within the
meaning of FAS 106) does not exceed $3,500,000. Except as may be required
under the terms of any existing or future collective bargaining agreement, with
respect to any Plan providing health benefits to any former employee or
dependent of such employee for periods subsequent to the severance of such
employee's employment (other than pursuant to Section 4980B of the Code), no
benefit improvement or increase (including, without limitation, availability of
additional benefits, increased employer copayments or other subsidies,
increased maximums or annual or lifetime limits, coverage of additional
disabilities or other illnesses or injuries, decreased employee deductibles,
copayments, or out-of-pocket limits, or less restrictive eligibility
participation requirements) has occurred or been promised since March 31, 1992.
5.13 SEPARATE EXISTENCE.
Borrower, the Operating Subsidiaries and the other Consolidated
Subsidiaries have at all times (i) maintained their
53
<PAGE> 59
respective corporate existences separate and apart from Fox Health or any other
Affiliates of Fox Health; (ii) maintained or controlled physical possession of
all of their books and records (except, in the case of a Consolidated
Subsidiary, where its Assets and operations are immaterial); (iii) maintained
capitalization adequate for the conduct of their business (except, in the case
of a Consolidated Subsidiary, where its Assets and operations are immaterial);
(iv) accounted for, managed and identified separately all of their liabilities
and Assets apart from those of Fox Health and any other Affiliates of Fox
Health; (v) allocated overhead costs accordingly wherever offices are not
separate from those of Fox Health and any other Affiliate of Fox Health, and
Fox Health or such Affiliate bore its fair share of such expenses; and (vi)
kept their funds separate, and not commingled, with those of Fox Health or any
other Affiliate of Fox Health and used their funds only for their own purposes,
except for payments made under the Tax Sharing Agreement. The officers and
directors of Borrower, the Operating Subsidiaries and the other Consolidated
Subsidiaries have at all times conducted their business and affairs in
accordance with their independent judgment and have been responsible for all
matters (other than matters customarily delegated to others under powers of
attorney) for which a corporation's own officers and directors would
customarily be responsible. Neither Borrower, any Operating Subsidiaries nor
any other Consolidated Subsidiaries have held themselves out to the public or
to any of their creditors as being a unified entity with assets and liabilities
in common with any other Person. Neither Borrower, any Operating Subsidiary
nor any other Consolidated Subsidiary has exercised any control over, or had
the capacity to control the environmental activities of, Fox Health or any
current or former Affiliates of Fox Health (other than the Subsidiaries of the
Borrower) or occupied, leased or operated any real property of Fox Health or
any such current or former Affiliate of Fox Health.
5.14 FEDERAL RESERVE REGULATIONS.
Neither Borrower nor any of its Consolidated Subsidiaries is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(Lenders acknowledge, however, that Borrower has made the Fox Health Loan.)
Not more than 25 percent (25%) of the value of the Assets of Borrower and its
Consolidated Subsidiaries is represented by Margin Stock.
5.15 FISCAL YEAR.
The fiscal year of Borrower ends on March 31st.
5.16 ENVIRONMENTAL MATTERS.
(a) Each of Borrower and the Subsidiaries of the Borrower is in
compliance, in all material respects, with all
54
<PAGE> 60
Environmental Laws, including, but not limited to, all such laws and
regulations governing the generation, use, collection, treatment, storage,
transportation, recovery, removal, discharge or disposal of Hazardous
Materials.
(b) To Borrower's and each Operating Subsidiary's knowledge, there
are no presently outstanding complaints that Borrower or any Subsidiary is now
or at any time prior hereto was in violation of the Environmental Laws that
could reasonably be expected to have a Material Adverse Effect; there are no
administrative or judicial proceedings presently pending or any administrative
or judicial proceedings threatened by a Tribunal against Borrower or any
Subsidiary pursuant to the Environmental Laws that could reasonably be expected
to have a Material Adverse Effect; and there is no claim presently outstanding
against Borrower or any Subsidiary which was asserted pursuant to the
Environmental Laws that could reasonably be expected to have a Material Adverse
Effect.
(c) Except as may be disclosed on Schedule 2, there are no facts
or circumstances known to Borrower or any Consolidated Subsidiary that could
reasonably be expected to form the basis of any claim against Borrower or any
Subsidiary under any Environmental Laws that could reasonably be expected to
have a Material Adverse Effect, including, but not limited to, any claim
arising from past or present environmental practices asserted thereunder.
5.17 LABOR DISPUTES.
Except as may be set forth on Schedule 2, as of the date hereof (a)
there is no collective bargaining agreement or other labor contract covering
employees of Borrower or any Consolidated Subsidiary, (b) no such collective
bargaining agreement or other labor contract is scheduled to expire prior to
the Termination Date, and (c) to Borrower's and each Operating Subsidiary's
knowledge, no union or other labor organization is seeking to be organized, or
to be recognized as, a collective bargaining unit of employees of Borrower or
any Consolidated Subsidiary. Except as set forth on Schedule 2, there is no
pending or, to Borrower's and each Operating Subsidiary's knowledge, threatened
strike, work stoppage, unfair labor practice claim or other labor dispute
against or affecting Borrower or any Consolidated Subsidiary or their
respective employees which would be likely to have a Material Adverse Effect.
5.18 SUBSIDIARIES.
Except as identified on Schedule 2, as of the date hereof Borrower has
no Subsidiaries. As of the date hereof, all Operating Subsidiaries and all
Guarantors are wholly-owned Consolidated Subsidiaries other than FoxMeyer
Software, Inc. Except as may be expressly stated to the contrary on Schedule
2,
55
<PAGE> 61
as of the date hereof all Subsidiaries of Borrower are Consolidated
Subsidiaries.
5.19 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Neither Borrower nor any Consolidated Subsidiary is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended, or (b) a "holding company" as defined in, or subject
to regulation under, the Public Utility Holding Company Act of 1935, as
amended.
5.20 COMMON ENTERPRISE.
Borrower and each Consolidated Subsidiary are members of an affiliated
corporate group and are engaged in a common enterprise, and the expertise and
efforts of Borrower and each Consolidated Subsidiary support and benefit the
other members of such affiliated group. Borrower and each Consolidated
Subsidiary expect to derive substantial benefit (and Borrower and each
Consolidated Subsidiary may reasonably be expected to derive substantial
benefit), directly and indirectly, from the Loans and the other transactions
contemplated by this Agreement, both in their separate capacities and as a
member of an affiliated and integrated corporate group. Each Operating
Subsidiary will receive reasonably equivalent value in exchange for the
guaranty being provided by it pursuant to Section 3.1 as security for the
payment and performance of the Obligations. Borrower provides cash management
and related services to its Consolidated Subsidiaries.
5.21 BURDENSOME CONTRACTS.
Neither Borrower nor any Consolidated Subsidiary is a party to, or
bound by, any agreement, contract or Plan which is materially burdensome
(taking into consideration any benefits provided thereby) and which has, or is
expected to have, a Material Adverse Effect.
5.22 INTERCOMPANY NOTES.
The Intercompany Notes evidence Indebtedness advanced by the payees
thereof to the makers thereof (a) to finance or refinance acquisitions
previously made by such makers, (b) to capitalize such makers or (c) resulting,
in part, from the cash management system maintained by Borrower and
Consolidated Subsidiaries.
5.23 FULL DISCLOSURE.
No information, exhibit or written report furnished by or on behalf of
Borrower or any Consolidated Subsidiary to Administrative Agent or any Lender
in connection with this Agreement or the transactions contemplated hereby
contains any
56
<PAGE> 62
material misstatement of fact or omits the statement of a material fact
necessary to make the statements contained herein or therein not misleading.
5.24 AMOUNT OF PHAR-MOR RECEIVABLES.
As of the end of business on August 16, 1992, the net amount of
Phar-Mor Receivables did not exceed $75,000,000 (prior to any adjustment for
income taxes).
5.25 FOX HEALTH LOAN AND TENDER OFFER.
All proceeds of the Fox Health Loan have been used by Fox Health solely
(a) for the purchase by Fox Health of up to 1,650,000 shares of the common
stock of Borrower pursuant to the Tender Offer, (b) for a portion of the fees
and expenses incurred by Fox Health in connection with the Tender Offer, and
(c) for working capital or general corporate purposes of Fox Health in an
aggregate amount not in excess of $7,675,000. None of the proceeds of the Fox
Health Loan have been or will be used by Fox Health to purchase any shares of
capital stock of Fox Health. Borrower has complied, in all respects, with all
laws, rules and regulations relating to the Tender Offer and with all
applicable requirements (if any) of Regulation G of the Board of Governors in
connection with the Fox Health Loan.
ARTICLE VI
COVENANTS
6.1 AFFIRMATIVE COVENANTS.
So long as any portion of the Obligations remains unpaid or any Lender
is committed to make any Advance hereunder:
(a) Payment and Performance of Obligations. Borrower shall pay
all principal, interest, fees and other charges with respect to the Obligations
when and as the same become due and payable in accordance with the Loan Papers;
and Borrower and each Operating Subsidiary shall strictly observe and perform,
or cause to be observed and performed, all covenants, agreements, terms,
conditions and limitations contained in the Loan Papers applicable to it or,
with respect to Borrower, any Consolidated Subsidiary and shall do all things
necessary to prevent the occurrence of any default thereunder.
(b) Maintenance of Existence; Qualification and Assets. Borrower
and each Operating Subsidiary shall at all times maintain, and, with respect to
Borrower, cause each Consolidated Subsidiary to maintain, (i) its legal
existence (except as otherwise required or permitted by Section 6.2(m) with
respect to Consolidated Subsidiaries other than Operating Subsidiaries), (ii)
its qualification to transact business and good standing in all jurisdictions
where the nature of its Assets
57
<PAGE> 63
or the conduct of its business requires such qualification and where the
failure to so qualify could reasonably be expected to cause a Material Adverse
Effect, and (iii) its material Assets (and exclusive of obsolete Assets) in
proper repair, working order and condition, ordinary wear and tear excepted.
(c) Maintenance of Insurance and Indemnification Rights. Borrower
and each Operating Subsidiary shall at all times maintain, and, with respect to
Borrower, cause each Consolidated Subsidiary to maintain, insurance covering
such risks and in such amounts as is customarily maintained by businesses
similarly situated, including, without limitation, insurance covering the
following in such amounts as Administrative Agent may reasonably determine to
be appropriate: (i) workmen's compensation insurance (subject, to the extent
applicable to Section 6.1(j), provided appropriate stop loss or excess coverage
insurance is maintained); (ii) employer's liability insurance; (iii)
comprehensive general public liability and property damage insurance; (iv)
insurance against loss or damage by fire, lightning, hail, tornado, explosion
and other similar risk; and (v) comprehensive automobile liability insurance.
Borrower and each Operating Subsidiary shall at all times maintain, and, with
respect to Borrower, cause each Consolidated Subsidiary to maintain, valid and
enforceable indemnification rights pursuant to such agreements and in such
amounts as is customarily maintained by businesses similarly situated,
including, without limitation, indemnification rights against drug
manufacturers relating to liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary in any
way relating to or arising out of the use of drugs or pharmaceuticals
manufactured by such manufacturers and sold by Borrower, any Operating
Subsidiary or any other Consolidated Subsidiary.
(d) Payment of Taxes and Claims. Borrower and each Operating
Subsidiary shall pay and, with respect to Borrower, shall cause each
Consolidated Subsidiary to pay, in all material respects, any taxes imposed
upon it or any of its Assets or with respect to any of its franchises,
businesses, income or profits before any penalty or interest accrues thereon
and all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law have or might become a vendor's Lien or landlords', mechanics', laborers',
materialmen's, operator's, statutory or other similar Lien affecting any of its
Assets; provided, however, that neither Borrower nor any Consolidated
Subsidiary shall be required to pay any such taxes or claims if and to the
extent that (i) the amount, applicability or validity thereof is currently (at
the time in question) being contested in good faith by appropriate action
promptly initiated and diligently conducted, and (ii) such Person shall have
set aside
58
<PAGE> 64
on its books reserves (to the extent required by GAAP) that are adequate for
the payment of such taxes or claims; and provided, further, however, that all
such taxes and claims shall in any event be paid forthwith upon the
commencement of any proceedings to foreclose any Lien which may have attached
as security therefor. Borrower shall promptly notify Administrative Agent of
any taxes or claims contested by Fox Health, Borrower or any Consolidated
Subsidiary and the circumstances relating thereto, in detail reasonably
satisfactory to Administrative Agent; provided, however, that this sentence
shall apply to taxes contested by Fox Health only to the extent that the same
(including any applicable interest, penalties or additions to tax) are in
excess of $5,000,000 and only during such time as Fox Health and Borrower are
members of an "affiliated group" as such term is defined in Section 1504(a) of
the Code or if such taxes arose during such period of time. Borrower shall
cause Fox Health to pay, before any penalty or interest accrues thereon, all
taxes of whatever form (including, without limitation, all "Taxes" as such term
is defined in the Tax Sharing Agreement) imposed upon Fox Health by any
applicable law, rule or regulation to the extent that Borrower could become
liable for the payment of such taxes; provided, however, that Borrower shall
not be required to cause Fox Health to pay any such taxes if and to the extent
that (A) the amount, applicability or validity thereof is currently (at the
time in question) being contested in good faith by appropriate action promptly
initiated and diligently conducted and (B) Fox Health shall have set aside on
its books reasonable reserves (to the extent required by GAAP) that are
adequate for the payment of such taxes; and provided, further, however, that
all such taxes shall in any event be paid by Fox Health forthwith upon the
commencement of any proceedings to foreclose any Lien which may have attached
as security therefor. Notwithstanding anything to the contrary contained in
the immediately preceding sentence, the failure of Fox Health to pay taxes when
due shall not constitute a violation of this Section 6.1(d) unless the amount
of such taxes (including any applicable interest, penalties or additions to
tax) not paid when due exceeds in the aggregate $5,000,000.
(e) Compliance with Laws and Documents. Borrower and each
Operating Subsidiary shall comply, and, with respect to Borrower, shall cause
each Subsidiary of Borrower to comply, in all material respects, with the
provisions of any and all applicable laws, rules, regulations, orders,
Governmental Requirements and agreements material to its businesses and
operations, including, without limitation, Environmental Laws, and shall
maintain or cause to be maintained its ability to fully perform its obligations
thereunder. With respect to each Plan or Fox Health Plan which is subject to
the minimum funding standards of ERISA, Borrower shall ensure that the Person
responsible therefor at all times makes (and Borrower shall cause such Person
to make) prompt payments of both contributions required to be made to meet such
minimum funding standards (without regard to any waivers thereof or extensions
of time therefor) and
59
<PAGE> 65
contributions required under (i) the terms of such Plan or Fox Health Plan,
(ii) any contractual obligations (including, without limitation, collective
bargaining agreements) relating to such Plan or Fox Health Plan, and (iii) any
law pertaining thereto. In addition, for each Multiemployer Plan with respect
to which Borrower or any ERISA Affiliate of Borrower has any Withdrawal
Liability, Borrower shall ensure that the Group Member or Fox Health Member
responsible therefor at all times makes (and Borrower shall cause such Person
to make) prompt payment thereof.
(f) Inspections. Borrower and each Operating Subsidiary shall, at
any reasonable time and from time to time during business hours after
Administrative Agent shall have given Borrower at least one Business Day's
prior notice, permit, and, with respect to Borrower, shall cause each
Subsidiary of Borrower to permit, any agents or representatives of
Administrative Agent or any Lender to inspect any of Borrower's, each Operating
Subsidiary's and each other Subsidiary's Assets and to examine and make copies
of and abstracts from its records and books of account and to discuss its
affairs, finances and accounts with any of its officers, employees or, subject
to reasonable notice, independent public accountants (and by this provision
Borrower and Operating Subsidiaries authorize said accountants to discuss with
Administrative Agent and Lenders and their agents and representatives, the
affairs, finances and accounts of Borrower, Operating Subsidiaries and the
other Subsidiaries of Borrower). In furtherance of the foregoing, but not by
way of limitation thereof, Borrower and the Operating Subsidiaries shall permit
Administrative Agent to conduct during normal business hours after reasonable
notice to Borrower, from time to time at Borrower's expense, a review and
examination of the Inventory and Receivables, and related systems, of Borrower
and the Consolidated Subsidiaries, which review and examination may include a
verification of the amounts of Inventory and Receivables in the financial
statement of Borrower and the Consolidated Subsidiaries; provided, however,
that if the Administrative Agent shall conduct more than one such review and
examination in any calendar year, the Borrower shall only be required to
reimburse Administrative Agent for the expenses related to the first of such
reviews and Administrative Agent and Lenders shall be responsible for the
expenses relating to each subsequent review in such calendar year.
(g) Records. Borrower and each Operating Subsidiary shall keep,
and, with respect to Borrower, shall cause each Consolidated Subsidiary to
keep, adequate books and records reflecting all financial transactions of such
Person, in which complete entries shall be made in accordance with GAAP.
(h) Expenses. Borrower shall promptly pay, from time to time
upon request made by Administrative Agent, any and all reasonable costs, fees
and expenses paid or incurred by Administrative Agent incident to this
Agreement or any other Loan Paper or any amendment thereto or the filing or
recordation, if
60
<PAGE> 66
appropriate, thereof (including, without limitation, the reasonable fees and
expenses of Administrative Agent and counsel to Administrative Agent incurred
in connection with the negotiation, preparation, execution and administration
of the Loan Papers and any amendment thereto and the filing or recordation, if
appropriate, of any Loan Papers). In addition, Borrower shall promptly pay,
from time to time upon request made by Administrative Agent or any Lender after
the occurrence of an Event of Default, any and all reasonable costs, fees and
expenses incurred by Administrative Agent or any Lender incident to (A) the
collection and enforcement of the Loans, the Obligations and the Loan Papers,
(B) the exercise of any right or remedy under or with respect to the Loans, the
Obligations and the Loan Papers and (C) the defense or prosecution of any
action, suit or proceeding under or with respect to the Loans, the Obligations
and the Loan Papers. Without limiting the obligations of Borrower under the
preceding sentence, each Lender shall use reasonable efforts to mitigate the
costs, fees and expenses for which Borrower is liable under the preceding
sentence, by engaging the services of one common counsel on behalf of all
Lenders in each applicable jurisdiction, but only if and to the extent that,
and for such period of time as, such Lender reasonably determines that the use
of such common counsel is consistent with its best interests under the
applicable circumstances.
(i) Maintenance of Assets. Borrower and each Operating Subsidiary
shall maintain, and, with respect to Borrower, shall cause each Consolidated
Subsidiary to maintain, all Proprietary Rights and other Assets material to the
conduct of its business as heretofore or to be conducted by it.
(j) Workers' Compensation. If and to the extent that Borrower or
any Consolidated Subsidiary is or becomes a non-subscriber under any applicable
State workers' compensation statute, Borrower and each Operating Subsidiary
shall, and, with respect to Borrower, shall cause each such Consolidated
Subsidiary to, consistently take all reasonable precautions as may be necessary
or appropriate to minimize the risk of loss to Borrower and such Consolidated
Subsidiary associated with, or arising from, claims that would otherwise be
covered by such State workers' compensation statute if Borrower or such
Consolidated Subsidiary had continued to subscribe under such statute.
(k) Further Assurances. Borrower and each Operating Subsidiary
shall execute and deliver, or shall cause to be executed and delivered, any and
all other and further agreements, documents, instruments and certificates as,
in the judgment of Administrative Agent, may be necessary or appropriate to
more effectively evidence or secure the Obligations and the performance of the
terms and provisions of the Loan Papers.
61
<PAGE> 67
(l) Ownership of Consolidated Subsidiaries. Borrower shall ensure
that each Operating Subsidiary remains a wholly-owned Consolidated Subsidiary,
and Borrower shall ensure that each other currently existing Consolidated
Subsidiary (other than FoxMeyer Software, Inc.) remains a wholly-owned
Consolidated Subsidiary except as may result from sales, mergers or
dissolutions expressly permitted in Sections 6.2(m) or 6.2(n).
(m) Rank of Obligations. Borrower and each Operating Subsidiary
shall, and shall cause each Consolidated Subsidiary to, do all acts necessary
to ensure that their respective Obligations under this Agreement and the other
Loan Papers rank, and at all times shall rank at least pari passu in right of
payment with all other (if any) senior, unsubordinated Indebtedness of
Borrower, Operating Subsidiaries and Consolidated Subsidiaries, respectively,
including without limitation the 7.09% Notes, the 7.09% Note Guaranties and the
Indebtedness under the Existing Credit Facility.
6.2 NEGATIVE COVENANTS.
So long as any portion of the Obligations remains unpaid or any Lender
is committed to make any Advance hereunder:
(a) Limitation on Indebtedness. Neither Borrower nor any
Operating Subsidiary shall, and Borrower shall not permit any Consolidated
Subsidiary to, create, incur, assume, have outstanding, act as surety with
respect to, guarantee or otherwise be or become directly or indirectly
absolutely or contingently, liable or obligated with respect to any
Indebtedness, except Permitted Indebtedness. Nothing contained in this Section
6.2(a) is intended to, or shall, prohibit the obligations of Borrower or any
Operating Subsidiary in respect of Receivables sold under the Revolving
Receivables Purchase Program.
(b) Ownership and Creation of Subsidiaries. Neither Borrower nor
any Operating Subsidiary shall permit any change in the ownership of any
Consolidated Subsidiary except as permitted pursuant to Sections 6.2(m) or (n).
Neither Borrower nor any Operating Subsidiary shall create any Consolidated
Subsidiary after the date hereof, except for the sole purpose of effecting a
merger, consolidation or acquisition permitted by Sections 6.2(k), 6.2(l)(vii),
6.2(m) and 6.2(n).
(c) No Amendment. Neither Borrower nor any Operating Subsidiary
shall cause or permit any amendment or modification of the Certificate or
Articles of Incorporation or Bylaws of Borrower or any Consolidated Subsidiary
that could reasonably be expected to affect adversely the rights or interests
of Administrative Agent or Lenders under the Loan Papers or authorize the
issuance of Redeemable Capital Stock or Preferred Stock; provided that Borrower
may authorize the issuance of Preferred Stock (which may or may not be
Redeemable Capital
62
<PAGE> 68
Stock) which does not provide for mandatory repurchase or redemption prior to
the fifth (5th) anniversary of the date of issuance thereof.
(d) Working Capital Borrowing Base. Borrower shall not permit, as
of the last day of any calendar month (commencing with September 1995), (i) the
product of 1.85 times the sum of (A) all consolidated Indebtedness of Borrower
and the Consolidated Subsidiaries (other than obligations under any Interest
Rate Protection Agreements and Permitted Indebtedness referred to in clause (e)
of the definition thereof) as of such day plus (B) the aggregate amount paid by
purchasers of Receivables (and property of account debtors securing such
Receivables) or interests therein under the Revolving Receivables Purchase
Program to be recovered from Receivables (and such property) outstanding as of
such day, to exceed (ii) the sum of the Receivables Amount and the Inventory
Amount as of such day.
(e) Minimum Net Worth. Borrower shall not permit Net Worth, as of
June 30, 1995, to be less than $417,510,000. Borrower shall not permit Net
Worth, as of the last day of each fiscal quarter ending after June 30, 1995
(the "fiscal quarter"), to be less than an amount equal to the sum of (i) the
minimum Net Worth required pursuant to this Section 6.2(e) as of June 30, 1995,
or if later, the last day of the immediately preceding fiscal quarter, plus
(ii) subject to the qualification below, 75% of the positive amount (if any) of
net income (after taxes) of Borrower and its Consolidated Subsidiaries during
the subject fiscal quarter, plus (iii) 100% of the proceeds to Borrower of
issuances of its capital stock (other than Redeemable Capital Stock) during the
subject fiscal quarter, minus (iv) any increase during such fiscal quarter in
the Phar-Mor Net Worth Adjustment Amount and minus (v) the amount of Push Down
Accounting Adjustment made (or plus the amount thereof reversed) during such
fiscal quarter. For purposes of calculating the amounts referred to in clause
(ii) above, net income shall be determined by excluding the reduction, if any,
to net income attributable to either any reserves or write-offs for doubtful
accounts or related collection expenses with respect to the Phar-Mor
Receivables or any reduction to net income (including without limitation any
reduction for expenses, other than interest expense associated with related
borrowing) incurred in connection with the Tender Offer. Borrower and FoxMeyer
Drug Company shall not permit the Net Worth of any Operating Subsidiary at any
time to be equal to or less than zero.
(f) Interest Coverage Ratio. Borrower shall not, on the last day
of any fiscal quarter of Borrower (commencing with September 30, 1995), permit
the ratio of (i)(A) EBIT plus (B) the Phar-Mor Interest Coverage Ratio
Adjustment Amount plus (C) the Development Cost Interest Coverage Ratio
Adjustment Amount, less (D) the Service Fee Adjustment Amount, plus (E) the
CareStream EBT Adjustment Amount to (ii)(A) Interest Expense, plus (B)
Preferred Dividends, less (C) the Service Fee Adjustment
63
<PAGE> 69
Amount, less (D) the CareStream Interest Expense Adjustment Amount, in each
case for the 12 month period ending on such day to be less than the ratio set
forth below for the applicable period:
<TABLE>
<CAPTION>
Last Day of
Applicable Period Ratio
----------------- ------------
<S> <C>
9/30/95 2.50 to 1.00
12/31/95 2.00 to 1.00
3/31/96 2.50 to 1.00
</TABLE>
(g) Debt Service Coverage Ratio. Borrower shall not, on the last
day of any fiscal quarter of Borrower (commencing with September 30, 1995),
permit the ratio of (i)(A) Operating Cash Flow, plus (B) the Phar-Mor Debt
Service Coverage Ratio Adjustment Amount, plus (C) the Development Cost Debt
Service Coverage Ratio Adjustment Amount, plus (D) the CareStream Net Income
Adjustment Amount, less (E) the CareStream D&A Adjustment Amount, less (F) the
CareStream Interest Expense Adjustment Amount to (ii)(A) Funded Debt Service,
less (B) the CareStream Debt Service Adjustment Amount for the 12 month period
ending on such day to be less than 2.00 to 1.00.
(h) Capital Expenditures. Neither Borrower nor any Operating
Subsidiary shall, and Borrower shall not permit any Consolidated Subsidiary to,
cause or permit the aggregate amount of all Capital Expenditures made by
Borrower and the Consolidated Subsidiaries, during any fiscal year ending after
the date hereof, to exceed $45,000,000.
(i) Total Indebtedness and Purchase Program Outstandings to
Capitalization Ratio. Borrower shall not, on the last day of any fiscal
quarter of Borrower (commencing with September 30, 1995), permit the ratio of
(i) the sum of (A) all consolidated Indebtedness of Borrower and the
Consolidated Subsidiaries (other than obligations under any Interest Rate
Protection Agreements and Permitted Indebtedness referred to in clause (e) of
the definition thereof or, for the fiscal quarter ending December 31, 1995, the
Indebtedness under this Agreement) as of such date plus (B) the aggregate
amount paid by purchasers of Receivables (and property of account debtors
securing such Receivables) or interests therein under the Revolving Receivables
Purchase
64
<PAGE> 70
Program to be recovered from Receivables (and such property) outstanding as of
such date to (ii) the sum of (A) all consolidated Indebtedness of Borrower and
the Consolidated Subsidiaries (other than obligations under any Interest Rate
Protection Agreements and Permitted Indebtedness referred to in clause (e) of
the definition thereof or, for the fiscal quarter ending December 31, 1995, the
Indebtedness under this Agreement) plus (B) the aggregate amount paid by
purchasers of Receivables (and property of account debtors securing such
Receivables) or interests therein under the Revolving Receivables Purchase
Program to be recovered from Receivables (and such property) outstanding as of
such date plus (C) consolidated Net Worth of Borrower and the Consolidated
Subsidiaries as of such date plus (D) the amount of the Push Down Accounting
Adjustment as of such date to be more than (i) 0.63 to 1.00 for the fiscal
quarter ending December 31, 1995 and (ii) 0.60 to 1.00 for the fiscal quarters
ended September 30, 1995 and ending March 31, 1996.
(j) Restricted Payments, etc. Neither Borrower nor any Operating
Subsidiary shall, and Borrower shall not permit any Consolidated Subsidiary to,
make any Restricted Payments, except Restricted Payments payable (i) to
Borrower or (ii) to any Operating Subsidiary by a Subsidiary of such Operating
Subsidiary; provided, however, that Borrower, and its Consolidated Subsidiaries
with respect to clause (B) below, may (A) make and maintain the Fox Health
Loan, (B) make payments in compliance with the Tax Sharing Agreement, (C)
repurchase or redeem Redeemable Capital Stock on (but not earlier than) the
fifth (5th) anniversary of the date of issuance thereof, (D) repurchase
employee stock options or common stock held by employees in accordance with the
requirements of any applicable employee stock option or purchase plans or as
otherwise may be required to ensure that Fox Health and Borrower may file
consolidated income tax returns and (E) pay dividends in the ordinary course of
its business and consistent with prudent business practices, in all events
(i.e., as to each of clauses (A), (B), (C), (D) and (E) preceding) if (but only
if), at the time of any such loan, payment, repurchase, redemption or dividend
and after giving effect thereto and considering facts and circumstances then
existing, the conditions set forth in clauses (a), (b) and (c) of Section
6.2(j) of the Existing Credit Facility as in effect on the date hereof have
been satisfied and, in the cases of clauses (A), (C), (D) and (E) preceeding,
no Potential Default or Event of Default exists or will occur or may reasonably
be expected to occur. Notwithstanding the foregoing, however (i.e., whether or
not the conditions set forth in clauses (a), (b) and (c) of Section 6.2(j) of
the Existing Credit Facility as in effect on the date hereof are satisfied and
whether or not a Potential Default or Event of Default exists or will occur),
Borrower, any Consolidated Subsidiary or any other member of the FoxMeyer Group
(as applicable) may pay to Fox Health so much of the FoxMeyer Group Tentative
Tax Liability or the FoxMeyer Group Interim Tax Liability (as the case may be)
as does not exceed the aggregate amount of the tax liability to which such
payment relates that is both payable to the applicable taxing authority by the
Consolidated Group and is actually paid to the applicable taxing authority in a
reasonably prompt fashion. Subject to the rights of Borrower under the Tax
Sharing Agreement, the portion of the FoxMeyer Group Tentative Tax Liability or
the FoxMeyer Group Interim Tax Liability (as the case may be) which remains
unpaid as a result of the application of clause (a), (b) or (c) of Section
6.2(j) of the Existing Credit Facility as in effect on the date hereof shall
be retained by and remain the property of the FoxMeyer Group and shall be paid
to Fox Health pursuant to the Tax Sharing Agreement only at
65
<PAGE> 71
such time, if any, and to the extent that, each of the conditions set forth in
clause (a), (b) and (c) of Section 6.2(j) of the Existing Credit Facility as
in effect on the date hereof would be satisfied immediately following such
payment. For purposes of this Section 6.2(j), the terms "FoxMeyer Group",
"FoxMeyer Group Tentative Tax Liability", "FoxMeyer Group Interim Tax
Liability" and "Consolidated Group" shall have the meanings given to such terms
in the Tax Sharing Agreement.
(k) Acquisitions. Except as may result from the mergers
permitted pursuant to Section 6.2(m), neither Borrower nor any Operating
Subsidiary shall, and Borrower shall not permit any Consolidated Subsidiary to,
acquire all or substantially all of the Assets of any other Person or of a
division or other business unit thereof or Securities representing more than
fifty percent (50%) of the Securities of any class of any other Person;
provided, however, that (i) any Operating Subsidiary may purchase Inventory in
bulk and purchase or lease the warehouses where such Inventory is located upon
terms that are fair and reasonable to such purchaser, (ii) Borrower or any
Operating Subsidiary may acquire all or substantially all of the Assets of any
other Consolidated Subsidiary other than FoxMeyer Drug Company, (iii) Borrower,
any Operating Subsidiary or any Healthcare Connect Subsidiary may acquire all
or substantially all of the Assets of any other Person or of a division or
other business units thereof (a "Business") or Securities representing more
than fifty percent (50%) of the equity Securities of any Person, provided that
(A) such Business or Person becomes a Consolidated Subsidiary or such Person is
FoxMeyer Canada, (B) such Business or Person is Solvent before giving effect to
such acquisition, (C) neither Borrower nor any Consolidated Subsidiary becomes,
and (except in the case of FoxMeyer Canada) neither such Person is nor the
Assets or operations of such Person are, or could reasonably be expected to be
subject to any material loss contingency required by GAAP to be disclosed in
the financial statements of such Person and (D) the aggregate purchase price
for all such acquisitions of Businesses or equity Securities (other than
Securities of FoxMeyer Canada) pursuant to this clause (iii) during any fiscal
year of Borrower may not exceed $25,000,000 (exclusive, in the case of the
acquisition of a Business or all of the equity Securities of any other Person,
of amounts properly allocable to working capital in accordance with GAAP), and
provided further that this clause (iii) shall not permit the acquisition of any
Securities of (A) Fox Health, (B) Centaur Partners IV, (C) any Affiliate of any
of the foregoing (other than Borrower, a Consolidated Subsidiary or FoxMeyer
Canada) or (D) FoxMeyer Canada if such acquisition would cause the limit
provided in clause (b) of the proviso in the definition of Consolidated
Subsidiary to be exceeded, and (iv) Borrower may acquire Receivables from any
Consolidated Subsidiary for sale under the terms of the Revolving Receivables
Purchase Program. For the purposes of clause (iii) above, payments made
pursuant to an earn-out or similar contingent payment arrangement shall be
deemed included in the purchase price for an acquisition for the
66
<PAGE> 72
fiscal year as to which such payments have accrued and are payable.
(l) Loans, Advances and Investments. Neither Borrower nor any
Operating Subsidiary shall, and Borrower shall not permit any Consolidated
Subsidiary to, directly or indirectly make any loan, advance, extension of
credit or capital contribution to, make any investment in, or purchase or
commit to purchase any Securities or evidences of financial obligations of, or
interests in, any Person except (i) Permitted Investments, (ii) acquisition of
equity Securities permitted by Section 6.2(k)(iii), (iii) trade and customer
accounts receivable which are for goods furnished or services rendered in the
ordinary course of business and are payable in accordance with customary trade
terms, (iv) (A) existing loans, advances and capital contributions to and from
Subsidiaries, (B) loans, advances and capital contributions to Borrower or any
Operating Subsidiary consistent with prudent business practices, (C) capital
contributions to any Operating Subsidiary to the extent necessary to ensure
that such Operating Subsidiary remains Solvent, (D) loans, advances and capital
contributions to Consolidated Subsidiaries other than Operating Subsidiaries
consistent with prudent business practices and not to exceed $15,000,000 in
aggregate amount (as to all such Consolidated Subsidiaries collectively) at any
time outstanding, provided that in calculating the outstanding amount of such
loans, advances and capital contributions, there shall not be counted (1)
amounts loaned, advanced or contributed to a Consolidated Subsidiary from
amounts received by Borrower or any Operating Subsidiary from any other
Consolidated Subsidiary (excluding an Operating Subsidiary), (2) amounts of
loans, advances or contributions permitted by clauses (iv)(A) through (C) above
or (E) below or (3) amounts of loans, advances or contributions to a
Consolidated Subsidiary to fund Minority Equity Investments permitted by clause
(vii) below, and (E) amounts loaned, advanced or contributed to Healthcare
Connect Subsidiaries to fund acquisitions pursuant to Section 6.2(k)(iii) in
the aggregate amount (as to all Healthcare Connect Subsidiaries collectively)
not to exceed $25,000,000 during any fiscal year of Borrower, (v) advances to
employees in the ordinary course of business not exceeding $1,000,000 in the
aggregate at any time outstanding, (vi) Permitted Customer Advances, (vii) (A)
expenditures for Minority Equity Investments other than in FoxMeyer Canada not
to exceed $25,000,000 in the aggregate at any time outstanding and (B)
expenditures for equity investments in, or loans or advances to, FoxMeyer
Canada of $5,181,102 as of March 31, 1995 and up to an additional amount that
would not cause the limit provided in clause (b) of the proviso in the
definition of Consolidated Subsidiary to be exceeded, (viii) the making and
maintenance of the Fox Health Loan, subject to Section 6.2(j); provided,
however, that neither Borrower nor any Operating Subsidiary shall, and Borrower
shall not permit any Consolidated Subsidiary to, make any loan, advance,
extension of credit or capital contribution to, make any investment in, or
purchase or commit to purchase any Securities
67
<PAGE> 73
or evidences of financial obligations of, or interests in, (A) Fox Health
(other than the making and maintenance of the Fox Health Loan, subject to
Section 6.2(j)), (B) Centaur Partners IV, (C) any director, executive officer
or partner of Fox Health, Centaur Partners IV or Borrower, or (D) any Affiliate
of any of the foregoing (other than Borrower or a Consolidated Subsidiary to
the extent permitted in any of clauses (i) through (v) of this Section 6.2(l));
provided, further, however, that accounting adjustments and operating expense
reimbursements (including, without limitation, expenses for taxes and insurance
and attorneys' fees and expenses) may be made between Borrower and Fox Health
in the ordinary course of Borrower's business and, subject to Section 6.2(j),
payments required to be made under the Tax Sharing Agreement may be made
between Borrower and Fox Health. For the purposes of clause (vii) above, the
amount of any Minority Equity Investment in Phar-Mor, Inc. received in
satisfaction of the Phar-Mor Receivables pursuant to the plan of reorganization
in the Phar-Mor Bankruptcy shall, to the extent of such satisfaction, be deemed
to be zero, but any payment of cash or other consideration (whether in respect
of the exercise or subscription price for options, subscription rights or other
securities or otherwise) shall reduce, to the extent of such payment, the
amount available under such clause (vii).
(m) Mergers and Dissolutions. Neither Borrower nor any Operating
Subsidiary shall, and Borrower shall not permit any Consolidated Subsidiary to
(i) merge or consolidate with any Person or (ii) be dissolved or liquidated;
provided, however, that Healthcare Connect Subsidiaries may be merged into
other Healthcare Connect Subsidiaries, other Consolidated Subsidiaries other
than Operating Subsidiaries may be dissolved or may be merged with and into
Borrower or other Consolidated Subsidiaries and Harris Wholesale may be merged
with and into FoxMeyer Drug Company so long as, with respect to any such merger
as to which Borrower or any Operating Subsidiary is a party, (1) Borrower or
such Operating Subsidiary, as the case may be, and FoxMeyer Drug Company in the
case of a merger of Harris Wholesale with and into FoxMeyer Drug Company, shall
be the entity surviving such merger and (2) the Consolidated Subsidiary to be
merged is Solvent at the time of such merger or such merger will not cause the
surviving entity to cease to be Solvent[; and provided also that Health Care
Pharmacy Providers, Inc. may form a wholly owned Subsidiary for the purpose of
holding its existing systems technology (and no other material assets) and
merge such Subsidiary into FoxMeyer Canada, if (A) immediately after the
merger, Borrower and Health Care Pharmacy Providers, Inc. shall own at least
40% of the outstanding share capital of the amalgamated company resulting from
the merger and (B) as of the date of the merger and after giving effect
thereto, no Potential Default or Event of Default exists or would exist]. The
word "consolidate" in clause (i) of the immediately preceding sentence shall
not be construed to refer to a consolidation for tax reporting purposes.
68
<PAGE> 74
(n) No Sales of Certain Assets; Negative Pledge; No Negative
Pledge in Favor of Other Lenders. Neither Borrower nor any Operating
Subsidiary shall, and Borrower shall not permit any Consolidated Subsidiary to,
directly or indirectly, (i) sell, transfer, assign, encumber or otherwise
dispose of, or create, or allow to be created or to otherwise exist, any Lien
upon, any of the Inventory, Receivables, Intercompany Notes or capital stock of
any Operating Subsidiary except for (A) Permitted Liens described in clause (e)
of the definition of such term, (B) sales of Inventory made in the ordinary
course of business, (C) transfers of Assets between Borrower and the
Consolidated Subsidiaries to the extent the same would be permitted to be
transferred by merger in accordance with Section 6.2(m), and (D) sales of
Receivables pursuant to the Revolving Receivables Purchase Program and
transfers of Receivables from the Consolidated Subsidiaries to Borrower for
such sale or other disposition, or (ii) sell, transfer, assign, encumber or
otherwise dispose of, or create, or allow to be created or to otherwise exist,
any Lien upon, any of its Assets other than described in clause (i) above
except for Permitted Liens, sales of such other Assets for full and fair
consideration made in the ordinary course of business or otherwise consistent
with prudent business practices and, subject to the consent of Administrative
Agent, which consent shall not be unreasonably withheld, sales of capital stock
of Consolidated Subsidiaries (other than Operating Subsidiaries or the
Healthcare Connect Subsidiaries or the Subsidiaries of the Healthcare Connect
Subsidiaries) for full and fair consideration; provided, however, that neither
Borrower nor any Operating Subsidiary shall sell, transfer, assign, encumber or
otherwise dispose of any capital stock of any Operating Subsidiary, provided
also, that Borrower shall cause the Fox Health Loan to be secured at all times
by collateral equal or greater in value, on the date of delivery of such
collateral, to the then outstanding balance of the Fox Health Loan. Except as
set forth in this Section 6.2(n) or the other Loan Papers in favor of
Administrative Agent and Lenders, in the 7.09% Note Purchase Agreements, under
the terms of the Revolving Receivables Purchase Program or under the Existing
Credit Facility, neither Borrower nor any Operating Subsidiary shall, and
Borrower shall not permit any Consolidated Subsidiary to, (1) covenant or
agree, with any other lender(s) or other Person(s), not to create, or not to
allow to be created or otherwise exist, any Lien upon any Asset of Borrower or
any Consolidated Subsidiary, or (2) covenant or agree, with any other lender(s)
or other Person(s), to any other arrangement that is functionally equivalent or
similar to a negative pledge (provided, however, that such a negative pledge or
the functional equivalent thereof may be created or otherwise exist in favor of
other lender(s) or other Person(s) with respect to Assets of Borrower or any
Consolidated Subsidiary other than Inventory and Receivables to the same extent
that Permitted Liens, other than Permitted Liens in favor of Administrative
Agent and Lenders, are permitted to be created or otherwise exist (pursuant to
this Agreement) in favor of such other lender(s) or other Person(s) with
respect to the same Assets). Without the
69
<PAGE> 75
prior written consent of Required Lenders, which consent shall not be
unreasonably withheld except in the case of any issuance prohibited by Section
6.2(c) or any issuance by any Healthcare Connect Subsidiary or its
Subsidiaries, neither Borrower nor any Operating Subsidiary shall cause, permit
or consent to the issuance of any Securities of any Consolidated Subsidiary to
any Person other than Borrower or a Consolidated Subsidiary; provided that
equity Securities of any Person whose equity Securities are acquired pursuant
to Section 6.2(k)(iii) may be issued by such Person at the time of or as
consideration for such acquisition if after the issuance thereof Borrower, the
Operating Subsidiaries or the Healthcare Connect Subsidiaries own more than
fifty percent (50%) of the equity Securities of such Person. Notwithstanding
the foregoing, (x) any factoring or sale of Receivables in bulk and (y) any
sale involving a net disposition (after taking into account any contemporaneous
purchases) of 25% or more of the consolidated property, plant and equipment of
Borrower and its Consolidated Subsidiaries shall each be deemed not to be a
sale in the ordinary course of business and, except for sales of Receivables
pursuant to the Revolving Receivables Purchase Program, shall be prohibited by
this Section 6.2(n).
(o) Fiscal Year. Borrower shall not change its fiscal year from
that in effect on the date hereof.
(p) Plans. Neither Borrower nor any Operating Subsidiary shall,
and Borrower shall not permit any Subsidiary, Fox Health, or any Fox Health
Member to, take any action (or, if applicable, fail to take any action) that
will cause any representation or warranty contained in Section 5.l2, if made on
and again as of any date on or after the date hereof, to not be true.
(q) Transactions with Affiliates. Neither Borrower nor any
Operating Subsidiary shall, and Borrower shall not permit any Subsidiary to,
enter into any transactions with any Affiliate except in the ordinary course
and pursuant to the reasonable requirements of such Person's business and upon
fair and reasonable terms no less favorable to such Person than would result in
a comparable arms' length transaction with a Person who is not an Affiliate;
provided, however, that Borrower may make and maintain the Fox Health
Loan(subject to Section 6.2(j)) and maintain the Tax Sharing Agreement and the
Fox Health Management Agreement. Except as permitted pursuant to Sections
6.2(j), 6.2(k), 6.2(l) or 6.2(m), neither Borrower nor any Operating Subsidiary
shall, directly or indirectly, make any payments to any Affiliate or Affiliates
exceeding $250,000 in aggregate amount (as to Borrower and Operating
Subsidiaries collectively) during any fiscal year.
(r) Intercompany Notes, etc. Borrower and Operating Subsidiaries
shall not amend or modify any Intercompany Note in any manner that could
adversely affect the rights or interests of Administrative Agent or Lenders
under the Loan Papers. Without
70
<PAGE> 76
limiting the generality of the foregoing, the Intercompany Notes shall at all
times remain expressly subordinate to the payment of the Obligations pursuant
to the subordination terms and provisions currently contained therein. Any and
all Indebtedness (if any, whether now in existence or hereafter incurred) of
any Operating Subsidiary to Borrower of the same type as or a similar type to
(in terms of function or purpose) the Indebtedness evidenced by the
Intercompany Notes shall be evidenced by a promissory note(s) containing terms
and provisions similar to the terms and provisions contained in the
Intercompany Notes and shall at all times remain expressly subordinate to the
payment of the Obligations pursuant to subordination terms and provisions
essentially identical to those currently contained in the Intercompany Notes.
Neither Borrower nor any Operating Subsidiary shall sell, transfer, assign,
encumber or otherwise dispose of, or create, or allow to be created or to
otherwise exist, any Lien upon, any Intercompany Note or any other Indebtedness
(if any, whether now in existence or hereafter incurred) of any Operating
Subsidiary to Borrower of the same type as or a similar type to (in terms of
function or purpose) the Indebtedness evidenced by the Intercompany Notes.
(s) Exceptions to Covenants. Neither Borrower nor any Operating
Subsidiary shall take or fail to take, and Borrower shall ensure that no
Consolidated Subsidiary takes or fails to take, any action which is permitted
by any of the covenants contained in this Agreement if such action or omission
would result in the breach of any other covenant contained in this Agreement or
another Loan Paper.
(t) Sales of Goods to Phar-Mor. Borrower shall not, and Borrower
shall not permit any Consolidated Subsidiary to, sell goods to Phar-Mor, Inc.
during the pendency of any bankruptcy or insolvency proceedings involving
Phar-Mor, Inc. unless either (a) payment in full is received prior to or
concurrently with the delivery of such goods, (b) at the time of delivery of
such goods the Final Order, dated October 23, 1992, of the Court in the
Phar-Mor Bankruptcy, among other things, granting Liens and providing priority
administrative expense status to Borrower and its Subsidiaries in respect of
the sales of such goods is in effect (or an equivalent order of the Court in
the Phar-Mor Bankruptcy shall be in effect granting the same Liens and
providing the same priority status) and such Liens and status secure and assure
the payment of the full purchase price of such goods, (c) Borrower or its
Subsidiary, as the case may be, is legally obligated to deliver (and has no
then effective right not to deliver) such goods to Phar-Mor, Inc. pursuant to
the terms and conditions described in Schedule 2 or (d) Borrower has received
the prior written consent thereto of Administrative Agent and Documentation
Agent.
(u) Customer Receivables. Neither Borrower nor any Operating
Subsidiary shall permit, and Borrower shall not permit any Consolidated
Subsidiary to, have outstanding and unpaid at
71
<PAGE> 77
any time to any one customer and all Affiliates of such customer Receivables in
an aggregate amount exceeding ten percent (10%) of the sum of (i) the Net Worth
of Borrower and its Consolidated Subsidiaries as of the end of the fiscal
quarter of Borrower then most recently ended and (ii) the amount of the Push
Down Accounting Adjustment as of such quarter end; provided that such
Receivables may be increased to fifteen percent (15%) of such Net Worth and
Push Down Accounting Adjustment if Administrative Agent and the Documentation
Agent, in their sole discretion for such times and on such conditions as they
may require, consent to such increase in writing and so confirm to Lenders in
the particular case of any customer. For the purpose of the foregoing, the
Phar-Mor Receivables shall be deemed not to be Receivables subject to the
limitations imposed by this Section 6.2(u).
(v) Tax Sharing Agreement. Borrower shall not make any payment to
Fox Health with respect to any tax liability of Borrower unless such payment
(including the amount thereof) is required under and is in compliance with the
Tax Sharing Agreement. Borrower shall not amend, renew, extend or otherwise
modify the Tax Sharing Agreement without the prior written consent of
Administrative Agent and Majority Lenders.
(w) Fox Health Loan Documents; Other Documents. Borrower shall
not allow to occur any of the following without the prior written consent of
Administrative Agent and Majority Lenders: (i) a reduction in the interest
rate applicable to the Fox Health Loan except as may be expressly required or
permitted pursuant to the Fox Health Loan Documents as in effect on the date
hereof, (ii) a delay in a date for the payment of accrued interest with respect
to the Fox Health Loan, (iii) an extension of the final maturity date of the
Fox Health Loan as provided in Section 1.4(a) of the Fox Health Loan Agreement
to a date later than December 31, 1999, or (iv) an increase in the maximum
aggregate principal amount of loans at any time outstanding under the Fox
Health Loan Agreement in excess of $30,000,000. Borrower shall not allow to
occur any amendment or other modification of Sections 5.2, 5.3, 5.4, 5.5 or 6.2
of the Fox Health Loan Agreement without the prior written consent of the
Administrative Agent. Borrower shall not allow to occur any of the following
without the prior written consent of Administrative Agent and Majority Lenders:
(A) modify the terms of payment of principal (whether at maturity, on mandatory
prepayment or otherwise) or interest in respect of the CareStream Note, (B)
release any collateral securing the CareStream Note and the CareStream
Indemnity, except as permitted by the CareStream Pledge Agreement, or (C)
modify or release any assumption or indemnification obligations benefiting
Borrower and the Consolidated Subsidiaries under the CareStream Indemnity.
(x) Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries. Neither Borrower nor any Operating Subsidiary shall,
and Borrower shall not permit any Consolidated Subsidiary to, permit, create or
otherwise cause or
72
<PAGE> 78
suffer to exist or become effective any restriction of any kind on the ability
of any Operating Subsidiary or Consolidated Subsidiary to (i) pay dividends or
make any other distribution on its capital stock to Borrower or any other
Subsidiary of Borrower, (ii) pay any Indebtedness owed to Borrower or any other
Subsidiary of Borrower, (iii) make any loan, advance, extension of credit or
capital contribution to, or make any investment in, or purchase or commit to
purchase any Securities or evidences of financial obligations of, or interests
in Borrower or any other Subsidiary of Borrower or (iv) transfer any of its
property or Assets to Borrower or any other Subsidiary of Borrower, except for
any restriction pursuant to the Loan Papers.
(y) Maintenance of Separate Existence. Neither Borrower nor any
Operating Subsidiary shall, and Borrower shall not permit any Consolidated
Subsidiary to, (i) fail to do all things necessary to maintain their corporate
existence separate and apart from Fox Health and any other Affiliate of Fox
Health, including, without limitation, holding regular meetings of their
stockholders and boards of directors and maintaining appropriate corporate
books and records (including current minute books); (ii) suffer any limitation
by Fox Health or any other Affiliate of Fox Health on the authority of their
own directors and officers to conduct their business and affairs in accordance
with their independent business judgment, or authorize or suffer any Person
other than their own officers and directors to act on their behalf with respect
to matters (other than matters customarily delegated to others under powers of
attorney) for which a corporation's own officers and directors would
customarily be responsible; (iii) fail to (A) maintain or cause to be
maintained under their control physical possession of all their books and
records (unless, in the case of a Consolidated Subsidiary, its Assets and
operations are immaterial), (B) maintain capitalization adequate for the
conduct of their business (unless, in the case of a Consolidated Subsidiary,
its Assets and operations are immaterial), (C) account for and manage all of
their liabilities separately from those of Fox Health and any other Affiliate
of Fox Health, including, without limitation, payment by them of all payroll
and other administrative expenses and taxes from their own assets, (D)
segregate and identify separately all of their Assets from those of Fox Health
and any other Affiliate of Fox Health, or (E) maintain offices through which
their business is conducted separate from those of Fox Health and any other
Affiliate of Fox Health unless there shall be a fair and appropriate allocation
of overhead costs among them, and each such entity shall bear its fair share of
such expenses; (iv) commingle their funds with those of Fox Health and any
other Affiliate of Fox Health, or use their funds for other than the uses of
Borrower, the Operating Subsidiaries and the other Consolidated Subsidiaries
except for payments made under the Tax Sharing Agreement; or (v) hold
themselves out to the public or to any of their creditors as being a unified
entity with assets and liabilities in common with any other Person, it being
understood that their financial statements will be
73
<PAGE> 79
consolidated with those of Fox Health. Borrower shall use its best efforts to
assure that at all times it shall have at least three independent directors who
are not, and who have not been within the preceding 12 month period, an
officer, director, employee or holder of 5% or more of the outstanding voting
securities of Fox Health or any Affiliate of Fox Health (other than an
independent director of Ben Franklin Retail Stores, Inc.).
(z) Amendments to or Waivers of Subordinated Debt; Payment of
Subordinated Debt. Borrower shall not: (i) amend, supplement or otherwise
modify the subordination or other provisions of any indenture, agreement,
instrument or other document evidencing Subordinated Debt that requires the
approval of Administrative Agent in connection with the incurrence of such
Indebtedness pursuant to the definition of "Subordinated Debt", (ii) waive or
otherwise relinquish any of its rights or causes of action arising under any
indenture, agreement, instrument or other document governing or evidencing
Subordinated Debt; or (iii) prepay, redeem, defease (whether actually or in
substance) or purchase in any manner (or deposit or set aside funds for the
purpose of any of the foregoing), make any payment in respect of principal of
or premium on, or make any payment in respect of interest (other than regularly
scheduled payments of principal or interest required in accordance with the
terms governing or evidencing the respective Indebtedness) on, or permit any of
the Operating Subsidiaries or other Consolidated Subsidiaries to prepay,
redeem, defease or purchase in any manner, make any payment in respect of
principal of, or make any payment in respect of interest (other than regularly
scheduled payments of principal or interest required in accordance with the
terms of the instruments governing or evidencing the respective Indebtedness)
on, any Subordinated Debt, whether in connection with a change in control, sale
of assets, or otherwise.
6.3 REPORTING REQUIREMENTS.
So long as any portion of the Obligations remains unpaid or any Lender
is committed to make any Advance hereunder, Borrower shall furnish to
Administrative Agent and each Lender the following:
(a) Monthly and Other Certificates. As soon as available and in
any event on or before the third Business Day prior to the end of each calendar
month commencing with the first calendar month after the date hereof, a
Certificate substantially in the form of Exhibit D hereto, setting forth the
calculation of the ratio set forth in Section 6.2(d) as of the last day of the
preceding month, in reasonable detail and certified as to accuracy by a
Financial Officer of Borrower.
(b) Quarterly Financial Reports. As soon as available and in any
event within 50 days after the end of each fiscal quarter (other than the last
fiscal quarter of each fiscal year)
74
<PAGE> 80
commencing with the fiscal quarter ended September 30, 1995, a consolidated
statement of operations, statement of stockholder's equity and statement of
cash flows of Borrower and its Consolidated Subsidiaries, in each case for the
period from the beginning of the current fiscal year to the end of such fiscal
quarter, and a consolidated balance sheet of Borrower and its Consolidated
Subsidiaries, in each case as at the end of such fiscal quarter, setting forth
(i) in each case (other than the balance sheet) in comparative form the figures
for the corresponding fiscal quarter and the corresponding portion of
Borrower's preceding fiscal year and (ii) in the case of the balance sheet in
comparative form the figures as at the preceding fiscal year end, all in
reasonable detail and certified as to fairness of presentation, GAAP and
consistency by a Financial Officer of Borrower, subject to changes resulting
from year-end adjustments.
(c) Compliance Certificates. Concurrently with the financial
reports required pursuant to Section 6.3(b), a Compliance Certificate
substantially in the form of Exhibit J hereto, appropriately completed.
(d) Notice of Default under this Agreement. Promptly upon
becoming aware of the occurrence thereof, notification of any Potential Default
or Event of Default, specifying in connection with such notification all
actions taken or proposed to be taken in order to remedy such circumstance.
(e) Notice of Defaults under other Documents. Within three
Business Days after Borrower or any Operating Subsidiary becomes aware of the
occurrence thereof, notification of Borrower's or any Consolidated Subsidiary's
default or potential default under any material agreement, document, instrument
or certificate to which such Person is a party or by which such Person or its
Assets is bound or affected.
(f) Proxies and Reports. Promptly and as soon as available, one
copy of each (i) financial statement, report, notice or proxy statement sent by
Fox Health or Borrower to its stockholders generally, (ii) regular, periodic or
special report, registration statement or prospectus filed by Fox Health or
Borrower with any securities exchange or the Securities and Exchange
Commission or any successor agency, (iii) press release or other statement made
available generally by Fox Health or Borrower to the public generally
concerning material developments in Fox Health's or Borrower's businesses, (iv)
order issued by any Tribunal materially affecting Borrower or any Consolidated
Subsidiary or its material Assets and (v) material report, notice or financial
statement required to be prepared by or on behalf of Borrower, any Consolidated
Subsidiary or any Plan, including without limitation those required by the
7.09% Note Purchase Agreements, the Existing Credit Facility or any indenture,
agreement, instrument or other document governing or evidencing Subordinated
Debt.
75
<PAGE> 81
(g) Notice of Legal Proceedings. Promptly upon becoming aware of
the existence thereof, notification of the institution of any investigation,
action, suit, proceeding, order, injunction or dispute with any Person or
Tribunal and involving Borrower or any Consolidated Subsidiary or any of its
Assets (including, without limitation, any of the Inventory or Receivables)
which could reasonably be expected to have a Material Adverse Effect.
(h) ERISA. Promptly after such failure or minimum funding waiver
or extension of time application, written notification of any failure of any
Group Member, Fox Health or any Fox Health Member to make a required
installment or any other required payment under Sections 302 or 515 of ERISA on
or before the due date for such installment or payment, or upon any application
for a waiver of a required payment or contribution or an extension of time for
the same; and promptly after becoming aware of the occurrence of any event or
condition which has the result that any representation or warranty contained in
Section 5.12, if made on and again as of any date on or after the date of this
Agreement, ceases to be true, a written notification specifying the nature of
such event or condition; provided, further, that, where such event or condition
would be reasonably expected to have a Material Adverse Effect, such
notification shall include a description of what action Borrower, any Group
Member, Fox Health or any Fox Health Member is taking or proposes to take with
respect thereto and, when known, any action taken by the IRS, PBGC, Plan, Fox
Health Plan, or the Department of Labor with respect thereto.
(i) Burdensome Contracts; Certain Contracts with Account Debtors.
Within 30 days after any agreement or contract of any type described in Section
5.21 comes into existence, notification of the existence of such agreement or
contract and such other information relating thereto as Administrative Agent
may reasonably request.
(j) Reports and Information. Such information (not otherwise
required to be furnished under the Loan Papers) respecting Borrower's or any
Consolidated Subsidiary's businesses, affairs, books, material Assets, or
liabilities, and such opinions, agreements, documents, instruments,
certificates and outside audits in addition to those mentioned in this
Agreement, as Administrative Agent (or any Lender through Administrative Agent)
may reasonably request from time to time, including, without limitation,
information regarding the subject matter of the information disclosed on
Schedule 2 hereto.
(k) Certain Defaults and Other Events. Promptly after the
occurrence thereof, notification of the occurrence of any default by Borrower,
Fox Health or any of their respective Affiliates with respect to or under (i)
the 7.09% Notes or the 7.09% Note Purchase Agreements, (ii) the Tax Sharing
Agreement, (iii) the Fox Health Loan or the Fox Health Loan Documents,
76
<PAGE> 82
(iv) any Subordinated Debt, (v) the Existing Credit Facility or (vi) the
CareStream Note, the CareStream Pledge Agreement or the CareStream Indemnity,
the actions that Borrower intends to take with respect to such default and any
other information with respect thereto as Administrative Agent may reasonably
request from time to time; and promptly after the occurrence thereof,
notification of any amendment, waiver or other modification of the provisions
of the 7.09% Note Purchase Agreements, the 7.09% Notes or the 7.09% Note
Guaranties, the Tax Sharing Agreement, any of the Fox Health Loan Documents,
the Revolving Receivables Purchase Program, the Overline Facility, the
CareStream Note, the CareStream Pledge Agreement, the CareStream Indemnity or
any indenture, agreement, instrument or other document governing or evidencing
any Subordinated Debt, together with copies thereof.
ARTICLE VII
EVENTS OF DEFAULT
7.1 NATURE OF EVENTS.
An "Event of Default" shall exist if any one or more of the following
shall occur:
(a) Payments. Borrower shall fail to make any payment of
principal, interest, fees, costs, expenses or other amounts with respect to the
Obligations on or before the date such payment is due and, except with respect
to principal or interest for which there shall be no notice requirement or cure
period, such failure shall continue for a period of ten days following
Borrower's receipt of notice thereof from Administrative Agent;
(b) Covenant Defaults. Borrower, any Operating Subsidiary or any
other Consolidated Subsidiary shall fail to observe or perform any covenant or
agreement contained in Sections 6.1(b), 6.1(c), 6.1(d), 6.1(e) (except the
covenant contained in the first sentence thereof), 6.1(g), 6.1(l) or 6.1(m),
Section 6.2 or Sections 6.3(d), 6.3(e) or 6.3(k)(i) or (iv); or Borrower, any
Operating Subsidiary or any other Consolidated Subsidiary shall fail to observe
or perform any other covenant or agreement contained in the Loan Papers (other
than covenants and agreements pertaining to payment obligations of Borrower
which shall be governed by Section 7.1(a)) and such failure shall continue for
a period of 30 days following Borrower's receipt of notice thereof from
Administrative Agent; any such failure shall constitute an Event of Default
whether or not Borrower, any Operating Subsidiary or any Consolidated
Subsidiary shall have the power or authority to prevent such failure (e.g., an
Event of Default may result from matters relating to Fox Health or an Fox
Health Member under Sections 6.1(d), 6.1(e) and 6.2(p) whether or not Borrower
or any Operating Subsidiary or Consolidated Subsidiary has the power or
authority to affect such matters);
77
<PAGE> 83
(c) Representations or Warranties. Any representation, warranty
or other statement made or deemed made by or on behalf of Borrower, any
Operating Subsidiary or any other Consolidated Subsidiary and contained in the
Loan Papers or in any agreement, document, instrument or certificate furnished
in compliance or connection with the Loan Papers is false, misleading or
incorrect in any material respect as of the date made or deemed made;
(d) 7.09% Notes, Existing Credit Facility and Subordinated Debt.
Any Event of Default (as defined in the 7.09% Note Purchase Agreements) shall
occur; or any Event of Default (as defined in the Existing Credit Facility)
shall occur; or any one or more Events of Default (as defined in the CareStream
Note, the CareStream Pledge Agreement or the CareStream Indemnity) shall occur;
or any Event of Default (as defined in any indenture, agreement, instrument or
other document governing or evidencing any Subordinated Debt) shall occur;
(e) Other Debt. Any event or condition occurs with respect to
Indebtedness aggregating in excess of $5,000,000 (at any time outstanding) of
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary, the
effect of which is (i) to cause or to permit any holder of such Indebtedness to
cause the same, or a material portion thereof, to become due prior to its
stated maturity or prior to its regularly scheduled date(s) of payment and such
right of acceleration is not waived by the holder (whether or not such
acceleration occurs), (ii) that all or any portion of any Indebtedness is
declared to be due and payable, or required to be prepaid (other than by
regularly scheduled payment) prior to the scheduled maturity thereof, or (iii)
that all or any portion of any such Indebtedness is not paid, renewed or
rearranged when due;
(f) Involuntary Proceedings. A case is commenced or petition or
complaint is filed against Borrower, any Operating Subsidiary or any other
Consolidated Subsidiary (except any such other Consolidated Subsidiary which
has total Assets of not in excess of $5,000,000) under any Debtor Relief Law
and such case, petition or complaint remains in effect for more than 30 days; a
receiver, liquidator or trustee of Borrower, any Operating Subsidiary or any
such other Consolidated Subsidiary, or of any material Asset of Borrower, any
Operating Subsidiary or any such other Consolidated Subsidiary, is appointed by
court order and such order remains in effect for more than 45 days; or any
material Asset of Borrower, any Operating Subsidiary or any such other
Consolidated Subsidiary is sequestered by court order and such order remains in
effect for more than 45 days;
(g) Voluntary Proceedings. Borrower, any Operating Subsidiary or
any other Consolidated Subsidiary (except any such other Consolidated
Subsidiary which has total Assets of not in excess of $5,000,000) voluntarily
seeks, consents to, or acquiesces in the benefit of any provision of any Debtor
Relief
78
<PAGE> 84
Law; consents to the filing of any petition against it under any such law;
makes an assignment for the benefit of its creditors; admits in writing its
inability to pay its debts generally as they become due; or consents to the
appointment of a receiver, trustee, liquidator or conservator for it or any
part of its Assets;
(h) Undischarged Judgments. Any judgment(s), decree(s) or
order(s) for the payment of money aggregating in excess of $5,000,000 (at any
time outstanding) shall be rendered against Borrower, any Operating Subsidiary
or any other Consolidated Subsidiary and such judgment(s), decree(s) or
order(s) shall not be satisfied and shall be in effect for any period of 30
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;
(i) Attachment. The failure to have discharged, within a period
of 30 days after the commencement thereof, any attachment, sequestration or
similar proceeding against any material portion of the Assets of Borrower or
any Operating Subsidiary;
(j) Termination Event. The occurrence of one or more Termination
Events, provided that the aggregate liability which is incurred by Borrower or
any Consolidated Subsidiary as a result of such event or events, individually
or collectively, shall exceed $5,000,000;
(k) Change of Control. The occurrence of any Change of Control;
provided, however, that the occurrence of a Change of Control which has been
consented to by Majority Lenders shall not constitute an Event of Default; and
provided further that, if no Subordinated Debt is then outstanding, Lenders
shall not unreasonably withhold such consent based upon such considerations
(including, without limitation, considerations regarding character and
reputation of management and conflicts of interest) as they shall reasonably
deem relevant;
(l) Guaranty Agreements. Any of the Guaranty Agreements executed
by the Operating Subsidiaries shall be held by a court of competent
jurisdiction to be invalid or unenforceable in any respect, or Borrower or any
Operating Subsidiary takes any action for the purpose of repudiating or
rescinding any Guaranty Agreement or the obligations of any Operating
Subsidiary thereunder, or Borrower or any Operating Subsidiary declares the
obligations of any Operating Subsidiary under its Guaranty Agreement are
unenforceable; or
(m) Material Adverse Effect. The occurrence of any event or
events or the existence of any circumstance or circumstances which,
individually or collectively, has or have a Material Adverse Effect.
79
<PAGE> 85
7.2 CONCURRENT ACCELERATION.
In the event of the occurrence of an Event of Default specified in
Sections 7.1(f) or 7.1(g), the aggregate unpaid amount of the Obligations shall
immediately, and concurrently with the occurrence of such Event of Default,
become due and payable in full without any action or notification of any kind
required by Administrative Agent or any Lender, including, without limitation,
presentment, demand, protest or notice of protest, dishonor, notice of
intention to acceleration and notice of acceleration, all of which are
expressly hereby waived by Borrower.
7.3 CERTAIN RIGHTS OF LENDERS.
(a) Remedies Upon Default. Should an Event of Default occur,
Administrative Agent may, at its discretion, and, at the request of Required
Lenders, Administrative Agent shall, take any one or more of the following
actions:
(i) Acceleration. Without demand or notice of any nature
whatsoever, declare the unpaid balance of the Obligations, or any part
thereof, immediately due and payable, whereupon the same shall be due
and payable (unless accelerated automatically pursuant to Section 7.2);
(ii) Termination. Terminate the Aggregate Commitment in
its entirety or as to any portion thereof, to the extent Administrative
Agent or Required Lenders shall deem appropriate;
(iii) Judgment. Reduce any claim to judgment;
(iv) Setoff. Exercise the rights of setoff or banker's
Lien against the interests of Borrower or any Consolidated Subsidiary
in and to every account and other Assets of Borrower or any
Consolidated Subsidiary which are in the possession of Administrative
Agent or any Lender, or any Affiliate of any thereof, to the extent of
the full amount of the Obligations; and
(v) Exercise of Rights. Exercise any and all other
rights or remedies afforded by any applicable laws as Administrative
Agent or Required Lenders shall deem appropriate, or by the Loan
Papers, at law, in equity, or otherwise, including, but not limited to,
the right to bring suit or other proceeding before any Tribunal, either
for specific performance of any covenant or condition contained in the
Loan Papers or in aid of the exercise of any right or remedy granted to
Administrative Agent or any Lender in the Loan Papers.
80
<PAGE> 86
(b) Performance by Administrative Agent. Should any covenant,
duty or agreement of Borrower or any Operating Subsidiary fail to be performed
in accordance with the terms of the Loan Papers, Administrative Agent may, at
its discretion, perform or attempt to perform, such covenant, duty or agreement
on behalf of Borrower or such Operating Subsidiary. In such event, Borrower
shall, at the request of Administrative Agent, promptly pay to Administrative
Agent any amount expended by Administrative Agent in such performance or
attempted performance, together with interest accrued thereon at the Default
Rate until Administrative Agent is reimbursed therefor. Notwithstanding the
foregoing, it is expressly understood that Administrative Agent does not assume
and shall never have, except by its express written consent, any liability or
responsibility for the performance of any covenant, duty or agreement of
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary under
the Loan Papers.
(c) Duties and Rights. Administrative Agent and Lenders may
execute any of their duties or exercise any of their rights or remedies by or
in the name of Administrative Agent or any Lender and by or through any of
their officers, directors, employees, attorneys, agents or other
representatives.
(d) Lenders Not in Control. Borrower and Operating Subsidiaries
acknowledge that none of the covenants or other provisions contained in this
Agreement shall give Administrative Agent or any Lender the right or power to
exercise control over the affairs or management of Borrower, any Operating
Subsidiary or any other Subsidiary of Borrower.
(e) Waivers. The acceptance by Administrative Agent or any Lender
at any time and from time to time of partial payment of the Obligations shall
not be deemed to be a waiver of any Event of Default or Potential Default then
existing. No waiver by Administrative Agent or any Lender of any Event of
Default or Potential Default shall be deemed to be a waiver of any other or
subsequent Event of Default or Potential Default. No delay or omission by
Administrative Agent or any Lender in exercising any right or remedy shall
impair such right or remedy or be construed as a waiver thereof or an
acquiescence therein, and no single or partial exercise of any such right or
remedy shall preclude other or further exercise thereof, or the exercise of any
other right or remedy under the Loan Papers or otherwise. Except as otherwise
provided in this Agreement or by applicable law, Borrower, each Operating
Subsidiary and each surety, endorser, guarantor and other party liable for the
payment or performance of all or any portion of the Obligations severally waive
presentment and demand for payment, protest, and notice of protest, notice of
intention to accelerate, acceleration and nonpayment, and agree that their
liability shall not be affected by any renewal or extension in the time of
payment of any Obligation, or by any release or change in any security for the
81
<PAGE> 87
payment or performance of the Obligations, regardless of the number of such
renewals, extensions, releases or changes.
(f) Cumulative Rights. All rights and remedies available to
Administrative Agent or any Lender under the Loan Papers shall be cumulative of
and in addition to all other rights and remedies granted to Administrative
Agent or any Lender at law or in equity, whether or not the Obligations are due
and payable and whether or not Administrative Agent or any Lender shall have
instituted any suit for collection or other action in connection with the Loan
Papers.
(g) Expenditures by Lenders. Any sums expended by or on behalf
of Administrative Agent or any Lender pursuant to the exercise of any right or
remedy shall, to the extent the same are required to be paid or reimbursed by
Borrower pursuant to Section 6.1(h), become part of the Obligations of Borrower
and shall bear interest at the Default Rate, from the date of such expenditure
until the date repaid.
(h) Indemnification of Administrative Agent and Lenders. Borrower
and each Operating Subsidiary hereby jointly and severally indemnifies
Administrative Agent, Documentation Agent, each Lender and Administrative
Agent's, Documentation Agent's and each Lender's directors, officers,
employees, attorneys and agents (Administrative Agent, Documentation Agent,
each Lender and each such other Person is hereinafter called an "Indemnitee")
and holds them and each of them harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements (collectively "Claims") of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of the Loan
Papers or any of the transactions contemplated therein (including, without
limitation, any Claims relating to or arising out of the execution or delivery
of this Agreement or any other Loan Paper, the performance of the terms and
provisions hereof and thereof and the obligations thereunder, and the use of
the proceeds of the Loans) or the Environmental Laws, no matter how such Claims
arise or result, and including, without limitation, those Claims that may arise
or result from any Indemnitee's negligence or inadvertence; provided, however,
that no Indemnitee shall have the right to be indemnified hereunder (i) to the
extent that such Claims directly relate to or arise out of any breach by such
Indemnitee of its obligations under the Loan Papers, (ii) to the extent that
such Claims directly relate to or arise out of the relationship between (A) an
assignor Lender and an assignee Lender under this Agreement or (B) a Lender and
a participant of such Lender under this Agreement, or (iii) to the extent that
the Claims as to which such Indemnitee is seeking indemnification are
determined by a court of competent jurisdiction by final and nonappealable
order or judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee. Such indemnification shall not give Borrower or
any
82
<PAGE> 88
Operating Subsidiary any right to participate in the selection of counsel for
any Indemnitee or the conduct or settlement of any dispute or proceeding for
which indemnification may be claimed.
(i) Right of Setoff. If an Event of Default shall have occurred
and be continuing, and either (i) such Event of Default shall consist of a
failure of Borrower to make any payment of principal or interest with respect
to any Loan, (ii) Administrative Agent shall have declared the Loans
immediately due and payable or (iii) Required Lenders shall have requested
Administrative Agent to declare the Loans immediately due and payable, then
each Lender and each of its Affiliates are hereby authorized at any time and
from time to time, to the fullest extent permitted by applicable law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender or any of its Affiliates to or for the credit or account of
Borrower or any Guarantor against any or all of the Obligations now or
hereafter existing and held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan Paper
and whether or not such Obligations shall be matured or unmatured.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
8.1 APPOINTMENT AND AUTHORIZATION; ADMINISTRATION; DUTIES.
(a) Administrative Agent. The general administration of the Loan
Papers and any other documents contemplated by this Agreement shall be by
Administrative Agent or its designees. Administrative Agent shall not be
required to exercise any right or remedy with respect to any Event of Default
except as may be expressly directed by Required Lenders. In the event Required
Lenders direct Administrative Agent to exercise any right or remedy available
hereunder, Administrative Agent agrees to commence taking action with respect
to such right or remedy within a reasonable period of time and to diligently
pursue such action or to submit its resignation pursuant to Section 8.10.
Except as otherwise provided herein or otherwise agreed to by Administrative
Agent and Lenders in writing, each Lender hereby irrevocably authorizes
Administrative Agent, at Administrative Agent's discretion, to take or refrain
from taking such actions as Administrative Agent on such Lender's behalf and to
exercise or refrain from exercising such powers, rights and remedies under the
Loan Papers and any other documents contemplated by this Agreement as are
delegated by the terms hereof or thereof, as appropriate, together with all
powers, rights and remedies reasonably incidental thereto. Notwithstanding the
foregoing or any term or provision of this Agreement, Administrative Agent
shall have no duties or responsibilities except as expressly set forth in this
Agreement or the other Loan Papers. Unless
83
<PAGE> 89
otherwise expressly stated in this Agreement or in the other Loan Papers to the
contrary, all references in this Agreement and the other Loan Papers to
Administrative Agent shall be deemed to be references to Administrative Agent
in its capacity as agent for and on behalf of Lenders pursuant to this
Agreement and the other Loan Papers.
(b) Powers. Each Lender irrevocably appoints and authorizes
Administrative Agent to exercise such powers, rights and remedies under this
Agreement and the other Loan Papers or otherwise as are delegated to
Administrative Agent by the terms hereof or thereof, together with all such
powers, rights and remedies as are reasonably incidental thereto, provided,
however, that, as between and among Lenders, Administrative Agent will not
prosecute, settle or compromise any claim against Borrower or any Consolidated
Subsidiary or release or institute enforcement proceedings against any guaranty
securing the Obligations, except with the consent of Required Lenders. Any
action for enforcement of the interests of Lenders under the Loan Papers shall
be taken either as Administrative Agent for Lenders or directly in the
respective names of Lenders, as counsel to Administrative Agent may at the time
advise. Subject to Section 9.7, Lenders consent and agree that any action
taken by Administrative Agent with the consent or at the direction of Required
Lenders as provided herein shall be taken for and on behalf of all Lenders,
including those who may not have so consented or directed; provided that any
Lender may direct Administrative Agent not to act for or on its behalf in any
such proceeding if such Lender executes in favor of Administrative Agent a
release of its rights to share in the benefits of any such action. Lenders,
Borrower and Operating Subsidiaries agree that Administrative Agent is not a
fiduciary for Lenders, Borrower, any Operating Subsidiary or any other Person
but simply is acting in the capacity described herein to alleviate
administrative burdens for all parties hereto and that Administrative Agent has
no duties or responsibilities to Lenders, Borrower, any Operating Subsidiary or
any other Person except those (if any) expressly set forth herein.
8.2 ADVANCES AND PAYMENTS.
On the date of each Advance, Administrative Agent shall be authorized,
but not obligated, to advance, for the account of each Lender making such
Advance, the amount of the Advance to be made by it in accordance with Article
II if and to the extent that such Lender does not make such amount timely
available to Administrative Agent for advance to Borrower pursuant to this
Agreement. Each Lender agrees to immediately reimburse Administrative Agent in
immediately available funds for any amount so advanced on its behalf by
Administrative Agent. If any such reimbursement is not made in immediately
available funds on the same day on which Administrative Agent shall have made
any such amount available on behalf of any Lender, such Lender shall pay
interest to Administrative Agent at the Federal Funds Rate until such
reimbursement is made. All amounts to be paid to
84
<PAGE> 90
Lenders by Administrative Agent shall be credited to Lenders, forthwith after
collection by Administrative Agent, in immediately available funds, in such
manner as Lenders and Administrative Agent shall from time to time agree.
8.3 SHARING OF PAYMENTS.
Each Lender agrees that if it or any of its Affiliates shall obtain any
payment (whether voluntarily, involuntarily through the exercise of a right of
banker's Lien, setoff or counterclaim, including, without limitation, a secured
claim under the Bankruptcy Code or other security interest arising with respect
to or in lieu of such secured claim and received by such Lender under any
Debtor Relief Law, or otherwise) in respect of any Obligation owing to such
Lender as a result of which the unpaid portion of its Advances is
proportionately less than the unpaid portion of the Advances of other Lenders
(based upon the respective Pro Rata Shares of the Aggregate Commitment) (a) it
shall promptly purchase at par (and shall be deemed to have thereupon
purchased) from such other Lenders a participation in such Advances of such
other Lenders, so that the aggregate unpaid principal amount of such Advances
of each Lender shall be in the same proportion to the aggregate unpaid
principal amount of all Advances then outstanding as the principal of such
Advances of such Lender prior to the obtaining of such payment was to the
principal amount of all such Advances outstanding prior to the obtaining of
such payment, (b) it shall pay interest calculated at the Federal Funds Rate to
such other Lenders on the amount purchased from the date it received such
payment until the date of the purchase of such participation, and (c) such
other adjustments shall be made from time to time as shall be equitable to
ensure that Lenders share such payment pro rata based upon their respective Pro
Rata Shares of the Aggregate Commitment. Notwithstanding anything to the
contrary contained herein, if a Lender shall obtain payment in respect of
Advances under any circumstances contemplated herein while any Advances shall
remain outstanding, such Lender shall promptly turn over such payment to
Administrative Agent for distribution, as appropriate, to Lenders on account of
the Advances as provided herein. Borrower expressly consents to the foregoing
arrangements and agrees that any Lender or Lenders holding (or deemed to be
holding) a participation in any of the Loans or other Obligations may exercise
any and all rights of payment (including, without limitation, rights of
banker's lien, setoff or counterclaim) with respect to such participation as
fully as if such Lender were the direct creditor of Borrower in the amount of
such participation.
8.4 DISTRIBUTION OF INFORMATION.
Administrative Agent shall forward to all Lenders copies of all
financial statements and reports of a material nature furnished to it hereunder
by Borrower other than those which are by the terms hereof to be distributed by
Borrower directly to Lenders, provided, however, that any failure by
Administrative
85
<PAGE> 91
Agent to do so shall not result in any liability to Administrative Agent.
8.5 NOTICE TO LENDERS.
Except as otherwise provided in this Agreement or except with respect
to communications or notices to be provided directly to Lenders by Borrower or
any Consolidated Subsidiary pursuant to this Agreement or the other Loan
Papers, upon receipt by Administrative Agent from Borrower of any communication
calling for an action on the part of Lenders, or upon notice to Administrative
Agent of any Event of Default, Administrative Agent shall, in a prompt fashion,
give to Lenders notice of the nature of such communication or Event of Default,
as the case may be; provided, however, that any failure by Administrative Agent
to give any such notice shall not result in any liability to Administrative
Agent except if such failure constitutes gross negligence or willful
misconduct.
8.6 LIABILITY OF ADMINISTRATIVE AGENT.
(a) Other Agents. Administrative Agent, when acting on behalf of
Lenders, may execute any of its responsibilities or duties under this Agreement
by or through its, or any Lender's, officers, directors, employees, attorneys
or agents. All such officers, directors, employees, attorneys and agents, when
exercising the rights or performing the duties of Administrative Agent, shall
be deemed to be included in the term Administrative Agent. Neither
Administrative Agent nor its officers, directors, employees, attorneys or
agents shall be liable to Lenders or any of them for any action taken or
omitted to be taken in good faith, or be responsible to Lenders or to any of
them for the consequences of any oversight or error of judgment, or for any
loss, unless the same shall happen through its gross negligence or willful
misconduct. Administrative Agent and its officers, directors, employees,
attorneys and agents shall in no event be liable to Lenders or to any of them
for any action taken or omitted to be taken by it pursuant to instructions
received by it from Required Lenders or, to the extent contemplated hereby, any
of Lenders or in reliance upon the advice of counsel selected by it. Without
limiting the foregoing, neither Administrative Agent nor any of its officers,
directors, employees, attorneys or agents shall be responsible to any of
Lenders for the due execution, validity, genuineness, effectiveness,
sufficiency or enforceability of, or for any statement, warranty or
representation in, or for the perfection of any Lien contemplated by, this
Agreement or any other Loan Paper, or shall be required to ascertain or to make
any inquiry concerning the performance or observance by Borrower, any Operating
Subsidiary or any other Consolidated Subsidiary of any of the terms,
conditions, covenants or agreements of this Agreement or any other Loan Paper.
86
<PAGE> 92
(b) No Responsibility for Failure of Performance. Neither
Administrative Agent nor any of its officers, directors, employees, attorneys
or agents (when acting in its or their capacities as or on behalf of
Administrative Agent hereunder) shall have any responsibility to Borrower, any
Operating Subsidiary or any other Consolidated Subsidiary on account of the
failure or delay in performance or breach by any of Borrower, any Operating
Subsidiary, any other Consolidated Subsidiary or Lenders of any of their
respective obligations under this Agreement or any other Loan Paper.
(c) Communications. Administrative Agent, as agent hereunder,
shall be entitled to rely on any communication, instrument or document
reasonably believed by it to be genuine or correct and to have been signed or
sent by a Person or Persons believed by it to the proper Person or Persons, and
it shall be entitled to rely on advice of legal counsel, independent public
accountants and other professional advisers and experts selected by it.
8.7 REIMBURSEMENT AND INDEMNIFICATION.
Each Lender agrees (a) if and to the extent not promptly reimbursed by
Borrower, to reimburse Administrative Agent, in accordance with such Lender's
Pro Rata Share of the Advances to which the same relate (except as provided
below in this Section 8.7), on demand, for reasonable fees, costs and expenses
incurred for the benefit of Lenders under the Loan Papers, including, without
limitation, reasonable counsel fees and compensation of agents and employees
paid for services rendered on behalf of Lenders, and any other reasonable
expense incurred in connection with the preparation, execution, administration,
monitoring or enforcement thereof, (b) if and to the extent not promptly
indemnified by Borrower, to indemnify and hold harmless Administrative Agent
and any of its officers, directors, employees, attorneys or agents, in
accordance with such Lender's Pro Rata Share of the Advances to which the same
relate (except as provided below in this Section 8.7), on demand, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against it
or any of them in any way relating to or arising out of this Agreement or any
other Loan Paper or any action taken or omitted by it or any of them under this
Agreement or any other Loan Paper (except such as shall result from their gross
negligence or willful misconduct), and (c) that Administrative Agent may offset
distributions of principal, interest and fees due to a Lender by the amount of
unreimbursed amounts due and owing in accordance with the provisions of this
Section 8.7 if such Lender has not reimbursed or indemnified Administrative
Agent upon a written request by Administrative Agent for reimbursement or
indemnification. If and to the extent that Administrative Agent, in its
discretion, determines that any amount to be reimbursed or indemnified
87
<PAGE> 93
pursuant to this Section 8.7 does not relate to any particular Loan or Letter
of Credit, such reimbursement or indemnification, as the case may be, shall be
made in accordance with such Lender's Pro Rata Share of the Aggregate
Commitment.
8.8 RIGHTS OF ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT.
It is understood and agreed that Citicorp and NationsBank shall have
the same powers, rights, remedies and obligations hereunder (including the
right to give such instructions) as the other Lenders and may exercise such
powers, rights and remedies, as well as its powers, rights and remedies under
other agreements, documents, instruments and certificates to which it is or may
be party, and engage in other transactions with Borrower, any Operating
Subsidiary, any other Consolidated Subsidiary, or any other Affiliate of
Borrower, as though it were not the Administrative Agent or Documentation
Agent, as the case may be, under this Agreement.
8.9 INDEPENDENT INVESTIGATION AND CREDIT DECISION BY LENDERS.
Each Lender acknowledges and agrees that it has decided to enter into
this Agreement and to make Loans hereunder based on its own analysis of (a) the
transactions contemplated hereby, (b) the creditworthiness of Borrower and
Consolidated Subsidiaries, (c) this Agreement and the other Loan Papers and (d)
the business, legal and other issues relating thereto, and further acknowledges
and agrees that neither Administrative Agent nor Documentation Agent shall bear
any responsibility therefor. Each Lender acknowledges and agrees that it will,
independently and without reliance upon Administrative Agent, Documentation
Agent or any other Lender, continue to make its own credit decisions and other
decisions regarding the taking or not taking of any action under this Agreement
or the other Loan Papers.
8.10 SUCCESSOR ADMINISTRATIVE AGENT.
Administrative Agent may resign at any time by giving at least five
Business Days' prior notice thereof to Lenders and Borrower. Within 30 days
after the retiring Administrative Agent's giving of notice of resignation,
Majority Lenders shall have the right to appoint a successor Administrative
Agent from among Lenders and, if such right is exercised, such Lender appointed
by Majority Lenders as such shall thereupon become successor Administrative
Agent (unless such Lender shall decline to accept such appointment). If no
successor Administrative Agent shall have been so appointed by Majority Lenders
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation, the retiring
Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent which shall either be a Lender or a commercial bank
reasonably acceptable to Borrower
88
<PAGE> 94
constituting an Eligible Assignee and having capital and surplus of at least
$750,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the powers, rights,
remedies, privileges, responsibilities and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its responsibilities, duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of this Article VIII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES.
Unless otherwise expressly provided in this Agreement, all notices or
other communications required or permitted to be given under this Agreement
shall be in writing and may be personally served, telecopied, telefaxed,
telexed or sent by courier or first class prepaid mail (airmail if to an
address in a foreign country from the party writing) and shall be deemed to
have been given and received when delivered in person or by courier service,
upon transmission of a telecopy, telefax or telex or otherwise upon actual
receipt. For purposes of this Agreement, the addresses of the parties to this
Agreement (until 15 days' prior notice of a change thereof is delivered as
provided in this Section 9.1) shall be as set forth below each party's name on
the signature pages hereof.
9.2 SURVIVAL.
All representations, warranties, covenants and agreements made by
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary herein
or in the other Loan Papers shall be considered to have been relied upon by
Administrative Agent and Lenders and shall survive the delivery of the Loan
Papers, the making of Loans and the creation and extension of the Obligations,
regardless of any investigation made by or on behalf of Administrative Agent or
any Lender. All covenants and agreements made by Borrower, any Operating
Subsidiary or any other Consolidated Subsidiary herein or in the other Loan
Papers regarding the payment of principal, interest, fees, taxes, costs or
expenses, and all covenants and agreements made (a) by Borrower, any Operating
Subsidiary or any other Consolidated Subsidiary or (b) by Lenders herein, (i)
to or in favor of any one or more of Administrative Agent and Lenders or (ii)
to or in favor of Administrative Agent, respectively, regarding any
indemnification or reimbursement or disclaimer of liability (including, without
limitation, the provisions of Sections 2.8,
89
<PAGE> 95
2.11, 7.3(h), 7.3(i) and 8.7), shall survive the termination of this Agreement
and the other Loan Papers.
9.3 GOVERNING LAW.
THIS AGREEMENT AND THE OTHER LOAN PAPERS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE U.S.
FEDERAL LAWS.
9.4 LIMITATION ON INTEREST.
Notwithstanding anything to the contrary contained in this Agreement or
the other Loan Papers, none of the terms and provisions of this Agreement or
the other Loan Papers shall ever be construed to create a contract or
obligation to pay interest at a rate in excess of the Maximum Lawful Rate; and
neither Administrative Agent, Documentation Agent nor any Lender shall ever
charge, receive, take, collect, reserve or apply, as interest on the
Obligations, any amount in excess of the Maximum Lawful Rate. In furtherance
of the foregoing, the parties hereto agree that any interest, charge, fee,
expense or other obligation provided for in this Agreement or in the other Loan
Papers which constitutes interest under applicable law shall be limited to an
amount equal to the lesser of (a) the amount of such interest, charge, fee,
expense or other obligation that would be payable in the absence of this
Section 9.4, or (b) an amount, which when added to all other interest payable
under this Agreement or the other Loan Papers, equals the Maximum Lawful Rate.
If, notwithstanding the foregoing, Administrative Agent or any Lender ever
contracts for, charges, receives, takes, collects, reserves or applies as
interest any amount in excess of the Maximum Lawful Rate, such amount which
would be deemed excessive interest shall be deemed a partial payment or
prepayment of principal of the Obligations and treated hereunder as such; and
if the Obligations, or applicable portions thereof, are paid in full, any
remaining excess shall promptly be paid to Borrower (or to such other Person
who may be entitled thereto by law). In determining whether the interest paid
or payable, under any specific contingency, exceeds the Maximum Lawful Rate,
Borrower, Operating Subsidiaries, Administrative Agent and Lenders shall, to
the maximum extent permitted under applicable law, (i) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate and spread, as appropriate to reflect variation in the
Maximum Lawful Rate, the total amount of interest throughout the entire
contemplated term of the Obligations, or applicable portions thereof, so that
the interest rate does not exceed the Maximum Lawful Rate at any time during
the term of the Obligations; provided that, if the unpaid principal balance is
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence
thereof exceeds the Maximum Lawful Rate, Administrative Agent or Lenders, as
appropriate, shall
90
<PAGE> 96
refund to Borrower (or to such other Person who may be entitled thereto by law)
the amount of such excess and, in such event, Administrative Agent and Lenders
shall not be subject to any penalties provided by any laws for contracting for,
charging, receiving, taking, collecting, reserving or applying interest in
excess of the Maximum Lawful Rate.
9.5 INVALID PROVISIONS.
If any provision of this Agreement or any of the other Loan Papers is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term thereof, such provision shall be fully severable,
this Agreement and the Loan Papers shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof
or thereof, and the remaining provisions hereof or thereof shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement or the other Loan Papers (as the case
may be) a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
9.6 SUCCESSORS AND ASSIGNS.
(a) Interested Parties; Prohibition Regarding Assignment by Borrower.
This Agreement and the other Loan Papers shall be binding upon and inure to the
benefit of Borrower, Operating Subsidiaries, Lenders, Administrative Agent and
Documentation Agent and their respective successors and assigns; provided,
however, that neither Borrower nor any Operating Subsidiary may assign,
transfer or delegate any of its rights, duties or obligations under this
Agreement or the other Loan Papers without the prior written consent of
Administrative Agent and Lenders. Lenders may assign, sell and transfer their
interests, rights and obligations under this Agreement and the other Loan
Papers only in accordance with this Section 9.6.
(b) Assignment by Lenders. Any Lender may assign to one or more
Eligible Assignees all or any portion of its interests, rights and obligations
under this Agreement and the other Loan Papers; provided, however, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
all of the assigning Lender's interests, rights and obligations under this
Agreement, (ii) the amount of each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) shall not be
less than the lesser of (A) the entire amount of such Lender's Advances or (B)
the principal amount of $5,000,000 or an integral multiple of $1,000,000 in
excess thereof. In addition, if any Lender shall not consent to any amendment
or waiver requested by Borrower hereunder, at any time following 45 days
thereafter,
91
<PAGE> 97
Borrower may require such Lender to assign all its rights and obligations to
another financial institution chosen by Borrower and acceptable to
Administrative Agent, for a purchase price equal to the sum of all amounts
owing to such Lender under the Loan Papers, calculated as if the Advances of
such Lender were being repaid). The parties to each such assignment shall
execute and deliver to Administrative Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance, together with the Notes subject
to such assignment, and a processing and recordation fee of $2,500 payable to
Administrative Agent; provided, however, that such fee shall not apply in the
circumstances contemplated by the immediately preceding sentence. Upon such
execution, delivery, acceptance and recording, from and after the "Effective
Date" specified in the Assignment and Acceptance, which "Effective Date",
unless Administrative Agent agrees otherwise, shall not be earlier than five
Business Days after the date of acceptance and recording by Administrative
Agent on behalf of Borrower (provided, however, that, as between the assigning
Lender and the assignee thereunder only, the effective date shall be the
effective date of execution and delivery as between such Persons as specified
in the Assignment and Acceptance), (A) the assignee thereunder shall be a
Lender under this Agreement and, to the extent provided in such Assignment and
Acceptance, have the interests, rights and obligations of a Lender hereunder
and (B) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of the assigning Lender's interests, rights and obligations
under this Agreement, such assigning Lender shall cease to be a Lender under
this Agreement). Each Lender shall, in a reasonably prompt fashion after it
has engaged in any material discussions with an Eligible Assignee that
apparently will lead to an assignment referred to in this Section 9.6(b),
notify Borrower of the identity of such Eligible Assignee unless such Eligible
Assignee has expressly requested that its identity remain confidential;
provided, however, that the failure to give any such notification shall not
result in any liability to such Lender and shall not affect the rights of
Lenders or the obligations of Borrower hereunder.
(c) Assignment to Affiliates. Notwithstanding the other
provisions of this Section 9.6, each Lender may at any time make an assignment,
sale or transfer of all or any portion of its interests, rights and obligations
under this Agreement and the other Loan Papers, and may make an assignment,
sale or transfer of any participation therein, to any Affiliate of such Lender
whether or not such Affiliate is an Eligible Assignee. Except as stated in
this Section 9.6(c), any such assignment shall be made pursuant to, and upon
the execution and delivery to Administrative Agent for its acceptance and
recording of, an Assignment and Acceptance and pursuant to the terms and
provisions of Sections 9.6(b) and 9.6(d) (including payment to
92
<PAGE> 98
Administrative Agent of a processing and recordation fee of $2,500).
(d) Effect of Assignment and Acceptance. By executing and
delivering an Assignment and Acceptance, the assigning Lender thereunder and
the Eligible Assignee (or an Affiliate of the assigning Lender if the
assignment is made pursuant to Section 9.6(c)) thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assignee is an Eligible Assignee (or an Affiliate of the assigning
Lender if the assignment is made pursuant to Section 9.6(c)); (ii) other than
as provided in the Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
representations, warranties or other statements made in or in connection with
this Agreement or any other Loan Paper or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Paper; (iii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower or any Consolidated Subsidiary or the performance or observance by
Borrower or any Consolidated Subsidiary of any of its obligations under this
Agreement or any other Loan Paper; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
Financial Statements delivered pursuant to Sections 6.3(b) (or if none of such
Financial Statements shall have been delivered, then copies of the Base
Financial Statements) and such other agreements, documents, instruments,
certificates and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (v)
such assignee will independently and without reliance upon Administrative
Agent, such assigning Lender or any other Lender and based on such agreements,
documents, instruments, certificates and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Papers; (vi) such
assignee appoints and authorizes Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other Loan Papers as are delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; (vii)
such assignee agrees that it will perform in accordance with their terms all
the obligations which by the terms of this Agreement and the other Loan Papers
are required to be performed by it as a Lender; and (viii) such assignee makes
loans in the ordinary course of its business.
(e) Register. Administrative Agent shall maintain at its offices
in New York, New York a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
and the Commitments of, and principal amount of the Advances owing to each
Lender pursuant to the terms hereof from time to time (the "Register").
93
<PAGE> 99
The entries in the Register shall be conclusive in the absence of manifest
error and Borrower, Consolidated Subsidiaries, Administrative Agent and Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Borrower, Consolidated
Subsidiaries and Lenders at any reasonable time and from time to time upon
reasonable prior notice.
(f) Acceptance and Recording. Upon its receipt of an Assignment
and Acceptance executed by an assigning Lender and an Eligible Assignee (or the
Affiliate of an assigning Lender if the assignment is made pursuant to Section
9.6(c)) and the required processing and recordation fee, Administrative Agent
shall, if such Assignment and Acceptance is duly completed and is in the
required form, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to Lenders and Borrower. Within five Business Days after its receipt
of any such notice from Administrative Agent, Borrower, at its own expense,
shall execute and deliver to Administrative Agent, in exchange for the
surrendered Note or Notes, a new Note or Notes payable to the order of such
assignee in the appropriate principal amount(s) evidencing such assignee's
assigned Loans and Commitments, and, if the assignor Lender has retained a
portion of its Loans and Commitments, a new Note or Notes payable to the order
of such assignor in the appropriate principal amount(s) evidencing such
assignor's Loans and Commitments retained by it. Such new Note(s) shall be
dated the date of the surrendered Note(s) which they replace and shall
otherwise be in substantially the form of the surrendered Notes, as
appropriate.
(g) Participations. Each Lender may, without the consent of
Borrower, any Consolidated Subsidiary or Administrative Agent, sell
participations to one or more Lenders in all or a portion of its interests,
rights and obligations under this Agreement (including all or a portion of its
Loans or Commitment) held by it; provided, however, that (i) such Lender shall
remain a Lender for all purposes of this Agreement and the transferee of such
participation shall not constitute a Lender under this Agreement, (ii) such
Lender's obligations under this Agreement shall remain unchanged, (iii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) the participating banks or other entities
shall be entitled to the benefit of the provisions contained in Sections 2.8
and 2.11 to the same extent as if they were Lenders, except that no such
participant shall be entitled to receive any greater benefit pursuant to
Section 2.8 than its assignor Lender would have been entitled to receive with
respect to the rights participated, and (v) Borrower, Consolidated
Subsidiaries, Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's
interests, rights and obligations under this Agreement, and such Lender shall
retain the sole right
94
<PAGE> 100
to enforce the obligations of Borrower, Operating Subsidiaries and other
Consolidated Subsidiaries relating to the Loans and to approve any amendment,
modification or waiver of any provision of this Agreement, provided that such
participation agreement may provide that such Lender will not agree to any
amendment, modification or waiver of this Agreement or the other Loan Papers,
without the consent of such participant, that would (A) reduce the principal or
the rate of interest payable by Borrower on any Loan or reduce any fees payable
to it by Borrower, (B) postpone any date fixed for the payment of principal of
or interest on the Loans or any fees payable to it by Borrower, (C) increase
any Commitment of any Lender or subject any Lender to any obligation to make
Loans, (D) release any Guaranty guaranteeing any of the Obligations, or (E)
amend Section 9.7 or any other provision of this Agreement requiring the
consent or other action of all Lenders.
(h) Disclosure. Any Lender may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 9.6, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower, any Operating Subsidiary or
any other Subsidiary of Borrower, the Loan Papers furnished to such Lender by
or on behalf of the Borrower, any Operating Subsidiary or any other Subsidiary
of Borrower; provided, however, that, prior to any such disclosure, each such
assignee or participant or proposed assignee or participant shall execute an
agreement whereby such assignee or participant shall agree (subject to
customary exceptions) to preserve the confidentiality of any non-public
information received from such Lender on the same terms and conditions as
contained in Section 9.13.
(i) Substitution of Lenders. If (i) any Lender has demanded
compensation under Section 2.8(a) in an aggregate amount exceeding $15,000
during any calendar year, (ii) any Lender has claimed any additional amounts
payable under Section 2.11(c) for Other Taxes not applicable to Citicorp in an
aggregate amount exceeding $15,000 during any calendar year, (iii) any Lender
is or becomes insolvent or a receiver, conservator or similar authority is
appointed for any Lender, then Administrative Agent or Borrower shall have the
right, but not the obligation, upon notice to such Lender and Borrower or
Administrative Agent, as applicable, to designate, with the consent of such
assignee, an assignee for any such Lender, which assignee shall be an Eligible
Assignee mutually satisfactory to Administrative Agent and Borrower, to
purchase such Lender's Loans and Commitments and assume such Lender's
obligations; provided, however, that Borrower shall not have the right to
designate any assignee for Citicorp. Within ten Business Days after any such
notice to such Lender and Borrower or Administrative Agent, as applicable, such
Lender shall be obligated to sell its Loans and Commitment, and such assignee
shall be obligated to purchase such Loans and assume such Lender's obligations,
pursuant to an Assignment and Acceptance. The purchase price therefor shall be
an amount equal
95
<PAGE> 101
to the sum of (A) the outstanding principal amount of the Loans payable to such
Lender, plus (B) all accrued and unpaid interest on such Loans, plus (C) all
accrued and unpaid fees and other amounts due to such Lender pursuant to this
Agreement.
(j) Assignment to Federal Reserve Bank. Notwithstanding anything
to the contrary contained in this Section 9.6, any Lender may at any time or
from time to time assign as collateral all or any portion of its rights under
this Agreement with respect to its Loans, Commitment and Note to a Federal
Reserve Bank. No such assignment shall release the assigning Lender from its
obligations under this Agreement.
9.7 ENTIRETY AND AMENDMENTS.
Except as provided in Section 2.6 regarding fees, this Agreement and
the other Loan Papers embody the entire agreement between or among the parties
hereto relating to the subject matter hereof, supersede all prior commitment
letters, term sheets, discussions, agreements and understandings, if any,
relating to the subject matter hereof, and, except as provided below, neither
this Agreement nor any provision hereof or of any of the Loan Papers may be
waived, amended or modified except by an agreement in writing executed jointly
by Borrower, Operating Subsidiaries and Required Lenders, and the same may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof, provided however, that, without the prior written
consent of all Lenders, no such agreement shall (a) change or amend the
principal amount of, or extend the maturity of or any date for the payment of
any principal of or interest on, any Advance, or waive or excuse any such
payment or any part thereof, or change or amend the rate of interest on any
Loan (other than any such change in the rate of interest resulting from a
change in the Base Rate in accordance with the definition of such term), (b)
change or amend the Commitment or obligations of any Lender, the provisions of
this Section 9.7 or the definitions of "Majority Lenders" or "Required
Lenders", (c) release any Guaranty guaranteeing any of the Obligations other
than the release of any Guaranty of any Consolidated Subsidiary which has total
Assets of not in excess of $5,000,000 (which other release shall only require
the consent of the Majority Lenders), (d) change any fee payable to
Administrative Agent or any Lender other than the agency fees referred to in
the Fee Letter, or (e) increase the amount of the Aggregate Commitment;
provided, further, that no such agreement shall change or amend or otherwise
affect the powers, rights, remedies or duties of Administrative Agent or
Documentation Agent hereunder without the prior written consent of
Administrative Agent or Documentation Agent, respectively. Each Lender and
each holder of a Note shall be bound by any waiver, amendment or modification
authorized by this Section 9.7 regardless of whether its Note shall have been
marked to make reference thereto, and any consent by any Lender or holder of a
Note pursuant to this
96
<PAGE> 102
Section 9.7 shall bind any Person subsequently acquiring a Note from it,
whether or not such Note shall have been so marked.
9.8 COUNTERPARTS; EFFECTIVENESS.
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
9.9 NO DUTY.
All attorneys, accountants, appraisers, consultants and other
professional Persons retained by Administrative Agent or any Lender shall have
the right to act exclusively in the interests of Administrative Agent or such
Lender, respectively, and shall have no duty of disclosure, duty of loyalty,
duty of care or other duty or obligation of any type or nature whatsoever to
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary or its
stockholders or any other Person.
9.10 LENDERS NOT FIDUCIARIES.
The relationship between (a) Borrower and Operating Subsidiaries and
(b) Administrative Agent, Documentation Agent and Lenders, is solely that of
debtor and creditor, and neither Administrative Agent, Documentation Agent nor
any Lender has or shall have any fiduciary or other special relationship with
Borrower, any Operating Subsidiary or any other Consolidated Subsidiary, and no
term or provision of any of the Loan Papers shall be construed so as to deem
such relationship to be other than that of debtor and creditor.
9.11 NO ORAL AGREEMENTS.
THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN PAPERS AS WRITTEN,
CONSTITUTE A "LOAN AGREEMENT" FOR THE PURPOSES OF SECTION 26.02(a) OF THE TEXAS
BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENTS BETWEEN AND
AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN (A) BORROWER OR ANY OPERATING SUBSIDIARY AND
(B) ADMINISTRATIVE AGENT, DOCUMENTATION AGENT OR ANY LENDER.
9.12 CONFIDENTIALITY.
Administrative Agent, Documentation Agent and each Lender agree (on
behalf of itself and each of its Affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with customary procedures for handling, destroying and returning
confidential information of the nature involved and in accordance with safe and
sound banking practices, any non-public information supplied
97
<PAGE> 103
to it by Borrower or any Operating Subsidiary pursuant to this Agreement,
provided that Administrative Agent, Documentation Agent and each Lender may
disclose (and shall not be required to keep confidential) such non-public
information (a) to the extent authorized by Borrower or any Operating
Subsidiary, (b) to the extent required by law, rule, regulation or judicial
process of any Tribunal, (c) to its counsel or agents, (d) to bank examiners,
regulators, auditors or accountants, (e) to Administrative Agent, Documentation
Agent or any other Lender, (f) in connection with any action, suit or
proceeding to which it or any one or more of Lenders is a party, (g) to any
assignee or participant (or prospective assignee or participant) or Affiliate
of a Lender so long as such assignee or participant (or prospective assignee or
participant) or Affiliate agrees to preserve the confidentiality of any
non-public information to the extent required of Lenders pursuant to this
Section 9.12, (h) which has become public knowledge through no violation of
this Agreement, (i) to the extent such information becomes available through a
Person other than Borrower or an Operating Subsidiary without knowledge by
Administrative Agent, Documentation Agent or such Lender (as the case may be)
of any requirements of confidentiality, (j) to the extent such information was
already known by, or in the possession of, Administrative Agent, Documentation
Agent or such Lender, as the case may be, without restriction on disclosure
thereof at the time such information was supplied by Borrower or any Operating
Subsidiary, or (k) to the extent such information is also furnished to
Administrative Agent, Documentation Agent or any Lender by a third party not
having any similar duty of confidentiality to Borrower. Except as otherwise
provided in the immediately preceding sentence, all such non-public information
supplied to Administrative Agent, Documentation Agent or any Lender shall not
be copied or distributed to any Person other than Administrative Agent,
Documentation Agent and Lenders without the prior written consent of Borrower.
The obligations of confidentiality under this Section 9.12 shall supersede and
replace the obligations of Administrative Agent, Documentation Agent and each
Lender under any confidentiality letter or other confidentiality agreement in
respect of this financing initially signed and delivered to Borrower prior to
the date hereof.
9.13 CONSTRUCTION OF INDEMNITY AND REIMBURSEMENT OBLIGATIONS.
IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT ALL COVENANTS
AND AGREEMENTS MADE BY (A) BORROWER OR ANY OPERATING SUBSIDIARY OR (B) LENDERS
HEREIN (I) TO OR IN FAVOR OF ADMINISTRATIVE AGENT AND LENDERS OR (II) TO OR IN
FAVOR OF ADMINISTRATIVE AGENT, RESPECTIVELY, REGARDING ANY INDEMNIFICATION OR
REIMBURSEMENT OR DISCLAIMER OF LIABILITY, TO THE EXTENT THAT SUCH COVENANTS AND
AGREEMENTS PROVIDE (EXPRESSLY OR BY CLEAR IMPLICATION) THAT THE BENEFICIARY OF
SUCH PROVISIONS SHALL BE RESPONSIBLE ONLY FOR ITS OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OR THE LIKE, ARE INTENDED TO AND SHALL INDEMNIFY,
98
<PAGE> 104
REIMBURSE AND PROTECT SUCH BENEFICIARY PURSUANT TO THE TERMS THEREOF
NOTWITHSTANDING SUCH BENEFICIARY'S OWN NEGLIGENCE (AS OPPOSED TO GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT), WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE
OR CONCURRING CAUSE OF ANY AMOUNT TO BE INDEMNIFIED, REIMBURSED OR PROTECTED
AGAINST.
9.14 JURISDICTION, ETC.
(a) Jurisdiction. Borrower and each Operating Subsidiary hereby
irrevocably and unconditionally submits, for itself and its property, to the
non-exclusive jurisdiction of any Texas State court or Federal court sitting in
Dallas, Texas, and any appellate court thereof, in any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Papers, or for recognition or enforcement of any order or judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such suit, action or proceeding may be heard and
determined in such court located in Texas, or to the extent permitted by law,
in such Federal court in Dallas County, Texas. Each of the parties hereto
agrees that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall affect
any right that Administrative Agent or any Lender may otherwise have to bring
any suit, action or proceeding relating to this Agreement or the other Loan
Papers against Borrower or any Operating Subsidiary or its property in the
courts of any jurisdiction.
(b) Venue. Borrower and each Operating Subsidiary hereby
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or the other Loan Papers in any Texas State court or Federal
court sitting in Dallas, Texas. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR
PROCEEDING BROUGHT BEFORE THE COURTS REFERRED TO IN THIS SECTION 9.14 ON THE
BASIS OF FORUM NON CONVENIENS.
(c) Service of Process. Each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in Section
9.1. Nothing in this Agreement shall affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
(d) NO JURY TRIAL. IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR THE LOAN
PAPERS OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT
MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, BORROWER
HEREBY
99
<PAGE> 105
AGREES, TO THE EXTENT PERMITTED BY LAW, THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
9.15 CHANGES IN ACCOUNTING PRINCIPLES.
If any changes in the accounting principles from those in effect on the
date hereof are hereafter adopted which result in a change in the method of
calculation of any of the financial covenants, standards or terms in this
Agreement, the parties hereto agree to enter into negotiations in order to
amend such provisions so as to equitably reflect such changes with the desired
result that the criteria for evaluating the financial condition of Borrower and
its Consolidated Subsidiaries shall be the same after such changes as if such
changes had not been made.
9.16 REFERENCES TO SCHEDULE 2.
Any reference in this Agreement to Schedule 2 shall be deemed to be a
reference only to that portion of Schedule 2 which specifically relates to the
Section of this Agreement in which such reference is made.
9.17 ARTICLE 15.10(B).
The parties hereto agree that, except for Section 15.16(b) thereof, the
provisions of Article 5069-15.01 et seq. of The Revised Civil Statutes of
Texas, 1925, as amended (regulating certain revolving credit loans and
revolving triparty accounts) shall not apply to the Loans or the Loan Papers.
100
<PAGE> 106
IN WITNESS WHEREOF, Borrower, Operating Subsidiaries, Administrative
Agent, Documentation Agent and Lenders have caused this Agreement to be
executed and delivered by their duly authorized officers effective as of the
date first above written.
BORROWER:
FOXMEYER CORPORATION
By: _______________________________
Name: Michael C. Kearney
Title: Vice President and
Treasurer
Address and Telecopy No. for Notice
Purposes:
1220 Senlac Drive
Carrollton, Texas 75006
Telecopy No.: (214) 446-4898
OPERATING SUBSIDIARIES:
FOXMEYER DRUG COMPANY
By: _______________________________
Name: Michael C. Kearney
Title: Vice President and
Treasurer
Address and Telecopy No. for Notice
Purposes:
1220 Senlac Drive
Carrollton, Texas 75006
Telecopy No.: (214) 446-4898
MERCHANDISE COORDINATOR SERVICES
CORPORATION:
By: _______________________________
Name: Michael C. Kearney
Title: Vice President and Treasurer
101
<PAGE> 107
Address and Telecopy No. for Notice
Purposes:
1220 Senlac Drive
Carrollton, Texas 75006
Telecopy No.: (214) 446-4898
HARRIS WHOLESALE COMPANY:
By:______________________________
Name:____________________________
Title:___________________________
Address and Telecopy No. for Notice
Purposes:
1220 Senlac Drive
Carrollton, Texas 75006
Telecopy No.: (214) 446-4898
ADMINISTRATIVE AGENT:
CITICORP USA, INC., as
Administrative Agent for Lenders
By:______________________________
Name:____________________________
Title:___________________________
Address and Telecopy No. for Notice
Purposes:
1 Court Square
7th Floor
Long Island City, New York 11020
Attn: Kathy Martin
Telecopy No.: (718) 248-4844
with a copy to:
400 Perimeter Center Terrace
Suite 600
Atlanta, GA 30346
Attn: Kirk P. Lakeman
Telecopy No.: (404) 668-8137
102
<PAGE> 108
DOCUMENTATION AGENT:
NATIONSBANK OF TEXAS, N.A.
as Documentation Agent for Lenders
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
901 Main Street
67th Floor
P.O. Box 831000
Dallas, Texas 75202
(Street Address)
75283-1000
(Post Office Box Address)
Telecopy No.: (214) 508-0980
LENDERS:
CITICORP USA, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
400 Perimeter Center Terrace
Suite 600
Atlanta, GA 30346
Attn: Kirk P. Lakeman
Telecopy No.: (404) 668-8137
with a copy to:
1 Court Square
7th Floor
Long Island City, New York 11020
Attn: Kathy Martin
Telecopy No.: (718) 248-4844
103
<PAGE> 109
NATIONSBANK OF TEXAS, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
901 Main Street
67th Floor
P.O. Box 8310001
Dallas, Texas 75202
(Street Address)
75283-1000
(Post Office Box Address)
Telecopy No.: (214) 508-0980
BANK OF AMERICA ILLINOIS
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
333 Clay Street, Suite 4550
Houston, Texas 77002
Telecopy No.: (713) 651-4841
with a copy to:
2200 Ross Avenue
Suite 3000, LB 140
Dallas, Texas 75201-2831
Telecopy No.: (214) 969-0998
104
<PAGE> 110
BANQUE PARIBAS
By:________________________________
Name:______________________________
Title:_____________________________
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No.: (713) 659-4811
with a copy to:
2121 San Jacinto, Suite 930
Dallas, Texas 75201
Telecopy No.: (214) 969-0260
FIRST BANK NATIONAL ASSOCIATION
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Telecopy No.: (612) 973-0825
105
<PAGE> 111
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
1445 Ross Avenue, Suite 300
Dallas, Texas 75202
Telecopy No.: (214) 740-1543
CREDIT SUISSE
By:________________________________
Name:______________________________
Title:_____________________________
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
633 West Fifth Street
64th Floor
Los Angeles, CA 90071
Attention: Rita Asa
Telecopy No.: (213) 955-8245
with a copy to:
1100 Louisiana, Suite 4750
Houston, Texas 77002
Telecopy No.: (713) 751-0702
106
<PAGE> 112
THE FUJI BANK, LTD.
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
1 Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Telecopy No.: (713) 759-0048
THE BANK OF TOKYO, LTD., DALLAS
AGENCY
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
2001 Ross Avenue, #3150
Dallas, Texas 75201
Telecopy No.: (214) 954-1007
THE BANK OF NOVA SCOTIA
By:________________________________
Name:______________________________
Title:_____________________________
Address and Telecopy No. for Notice
Purposes:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Telecopy No.: (404) 888-8998
107
<PAGE> 113
Telecopy No.: (214) 508-0980
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:_______________________________
Name:_____________________________
Title:____________________________
Address and Telecopy No. for Notice
Purposes:
800 Market Street
St. Louis, Missouri 63101
Telecopy No.: (314) 466-6499
108
<PAGE> 1
EXHIBIT 10-D
SIXTH AMENDMENT TO LOAN AGREEMENT
This SIXTH AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into as of September 6, 1995, by and among FOXMEYER HEALTH CORPORATION
(f/k/a National Intergroup, Inc.) ("Borrower"), a Delaware corporation, the
Banks identified on the signature pages hereof ("Banks") and BANQUE PARIBAS, a
bank organized under the laws of the Republic of France, as Agent for Banks
("Agent").
RECITALS:
a. Pursuant to that certain Loan Agreement dated as of
January 13, 1994, by and among Borrower, Banks and Agent, as
amended by that certain (i) First Amendment to Loan Agreement
dated as of January 13, 1994, (ii) Second Amendment to Loan
Agreement dated as of September 6, 1994, (iii) Third Amendment
Agreement dated as of October 12, 1994, (iv) Fourth Amendment
to Loan Agreement dated as of December 19, 1994 and (v) Fifth
Amendment to Loan Agreement dated as of March 22, 1995 (as the
same may be further amended, renewed, extended, restated or
otherwise modified from time to time, the "Agreement"), Banks
agreed to provide to Borrower a revolving credit and letter of
credit facility in the maximum aggregate principal amount of
$15,000,000.
b. The indebtedness of Borrower to the Banks pursuant to
the Agreement is evidenced by (i) a Promissory Note dated
February 22, 1994, in the maximum original principal amount of
$10,000,000 made by Borrower and payable to the order of
Banque Paribas, and (ii) a Promissory Note dated February 22,
1994, in the maximum original principal amount of $5,000,000
made by Borrower and payable to the order of Credit Lyonnais
New York Branch (as amended, renewed, extended, restated,
replaced or supplemented from time to time, whether by one or
more other promissory notes or otherwise and whether payable
to the Banks identified above or their successors or assigns,
the "Notes").
c. Effective as of October 12, 1994, Borrower changed
its name from "National Intergroup, Inc." to "FoxMeyer Health
Corporation."
d. The Obligations (as such term is defined in the
Agreement) are secured by security interests evidenced and
created by that certain Amended and
<PAGE> 2
Restated Pledge and Security Agreement dated as of October 12,
1994, by and between Borrower and Agent (the "Original
Security Agreement") as amended by that certain First
Amendment to Amended and Restated Pledge and Security
Agreement dated as of March 22, 1995 (as the same may be
further amended, renewed, extended, restated or otherwise
modified from time to time, the "Security Agreement")
presently covering, in part, 150 shares of common stock of
FoxMeyer Corporation ("FoxMeyer"), which shares of common
stock of FoxMeyer, as a result of a reduction from 28,200,000
to 1,000 in the number of shares of common stock that FoxMeyer
is authorized to issue, were issued on or about March 17,
1995, in replacement of the 4,000,000 shares of FoxMeyer owned
by Borrower and pledged to Agent pursuant to the Original
Security Agreement.
e. Borrower desires to engage in certain other
transactions and, in connection therewith, Borrower, Agent and
Banks now desire to further amend the Agreement as herein set
forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
i. Terms Defined. Unless otherwise defined in
this Amendment, each capitalized term used in this
Amendment has the meaning given to such term in the
Agreement (as amended by this Amendment).
ii. Amendments to Section 1.2 of the Agreement.
(a) Effective as of the date hereof, the following
new term and the definition thereof are hereby added
toSection 1.2 of the Agreement, which term shall
appear in alphabetical order:
"'Credit Lyonnais Loan' means the loan in the original
principal amount of $20,000,000 made by Credit Lyonnais New York
Branch to Borrower in accordance with the Credit Lyonnais Loan
Agreement."
(b) Effective as of the date hereof, the following new term and
the definition thereof are hereby added to Section 1.2 of the Agreement, which
term shall appear in alphabetical order:
2
<PAGE> 3
"'Credit Lyonnais Loan Agreement' means that certain Credit
Agreement dated as of September 6, 1995, by and between Borrower and
Credit Lyonnais New York Branch."
(c) Effective as of the date hereof, clause (h) of the definition
of the term "Permitted Liens" in Section 1.2 of the Agreement is hereby amended
and restated to read in its entirety as follows:
"(h) Liens affecting up to 160 shares of FoxMeyer Stock, other
than the Collateral, securing the FoxMeyer/NII Loan Facility, and
Liens affecting up to 17 shares of FoxMeyer Stock, other than the
Collateral;".
(d) Effective as of the date hereof, clause (i) of the definition
of the term "Permitted Liens" in Section 1.2 of the Agreement is hereby amended
and restated to read in its entirety as follows:
"(i) Liens affecting (A) Borrower's interest in the PMLLC and
(B) the lesser of (i) up to 300 shares of FoxMeyer Stock, other than
the Collateral, or (ii) the number of issued and outstanding shares of
FoxMeyer Stock which are not and are not required to be pledged as
Collateral in accordance with Section 3.1(a), in each case (i.e., as
to each ofclauses (A) and (B) preceding) securing the Credit Lyonnais
Loan, provided, however, that the number of such shares of FoxMeyer
Stock so pledged as security for the Credit Lyonnais Loan shall be the
minimum number of such shares as determined in accordance with
Sections 2.4 and 4.1(a) of the Credit Lyonnais Loan Agreement;".
(e) Effective as of the date hereof, clause (l) of the definition
of the term "Permitted Liens" in Section 1.2 of the Agreement is hereby amended
and restated to read in its entirety as follows:
"(l) Liens affecting Margin Stock, other than the Collateral,
owned by Borrower securing the Credit Lyonnais Loan or other
Indebtedness permitted in accordance withSection 6.2(a);".
(f) Effective as of the date hereof, the following new term and
the definition thereof are hereby added to Section 1.2 of the Agreement, which
term shall appear in alphabetical order:
3
<PAGE> 4
"'PMLLC' means Hamilton Morgan L.L.C. (f/k/a Robert Haft
Group/Phar-Mor L.L.C.), a Delaware limited liability company."
(g) Effective as of the date hereof, the following new term and
the definition thereof are hereby added to Section 1.2 of the Agreement, which
term shall appear in alphabetical order:
"'PMLLC Agreement' means the Amended and Restated Limited
Liability Company Agreement of Robert Haft Group/Phar-Mor L.L.C. dated
May 5, 1995, by and among Robert M. Haft, Mary Z. Haft and Borrower."
iii. Amendment to Section 6.2(a) of the Agreement.
Effective as of the date hereof, Section 6.2(a) of
the Credit Agreement is hereby amended and restated
to read in its entirety as follows:
"(a) Limitation on Indebtedness. Any Indebtedness for
borrowed money incurred by Borrower, other than Indebtedness arising
under this Agreement, shall either be (i) unsecured or (ii) secured
only by Permitted Liens referred to in clauses (a), (g), (h), (i),
(j), (k) or (l) of the definition of such term. The aggregate of all
Funded Debt, exclusive of (A) the Indebtedness evidenced by the Notes,
(B) the Indebtedness of Borrower pursuant to the FoxMeyer/NII Loan
Facility not to exceed $30,000,000, (C) the Indebtedness of Borrower
pursuant to the Riverside Loan, (D) the Weirton Liabilities, (E) the
Indebtedness of Borrower incurred in connection with investments by
any Real Estate Partnership to the extent that such Indebtedness is
wholly nonrecourse to Borrower and (F) the Indebtedness of Borrower
pursuant to the Credit Lyonnais Loan Agreement not to exceed
$20,000,000, shall not exceed $20,000,000 at any time outstanding."
iv. Amendment to Section 6.2(c) of the Agreement.
Effective as of the date hereof, subclause (B) of
clause (iii) of Section 6.2(c) of the Agreement is
hereby amended and restated to read in its entirety
as follows:
"(B) the aggregate amount of such purchases (1) during the
term of this Agreement does not exceed $41,000,000 and (2) after
September 6, 1995, does not relate to more than 562,700 shares of
common stock of Borrower,".
4
<PAGE> 5
v. Amendment to Section 6.2(d). Effective as of
the date hereof, Section 6.2(d) of the Agreement is
hereby amended and restated to read in its entirety
as follows:
"(d) Acquisitions. Neither Borrower, any Subsidiary of
Borrower (other than FoxMeyer and Ben Franklin) nor any group of which
Borrower or such Subsidiary is a member shall become the beneficial
owner of Securities representing five percent or more of the combined
voting power of the then-outstanding voting securities of an issuing
entity, other than currently existing Subsidiaries of Borrower, that
has a class of Securities registered with the SEC pursuant to Section
12 of the Exchange Act; provided, however, that (i) in accordance with
that certain waiver letter dated March 7, 1994, executed by Banks (the
March 7, 1994 Waiver Letter'), Borrower may acquire voting Securities
of SysteMed, Inc. subject to continued satisfaction of the conditions
specified in the March 7, 1994 Waiver Letter, (ii) in accordance with
that certain waiver letter dated June 10, 1994, executed by Banks (the
June 10, 1994 Waiver Letter'), Borrower may acquire the 'Convertible
Debenture' and the 'UNSI Conversion Shares' subject to continued
satisfaction of the conditions specified in the June 10, 1994 Waiver
Letter, (iii) in accordance with the PMLLC Agreement and the
Subscription Agreement executed by Borrower during May 1995 and
accepted by PMLLC, Borrower may acquire a 69.80% limited liability
company interest in PMLLC for $29,000,000 in cash, (iv) in accordance
with that certain Stock Purchase Agreement dated April 21, 1995, by
and among PMLLC and certain secured creditors of Phar-Mor, Inc.
("PM"), PMLLC may acquire 3,750,000 shares of common stock of PM for
$30,000,000 in cash, which number of such shares constitutes
approximately 31% of the common capital stock of PM, and (v)
substantially in accordance with the terms set forth in that certain
letter dated July 19, 1995, from Borrower to Agent, Borrower may, in
consideration of its making a $500,000 short-term, convertible secured
bridge loan to CST Entertainment, Inc. ('CST'), acquire warrants to
purchase 750,000 shares of common stock of CST, which number of such
shares, when combined with the potential number of shares into which
the bridge loan may convert, may represent up to approximately 6.25%
of the total number of shares of capital stock of CST issued and
outstanding. For purposes of thisSection 6.2(d), the term 'group'
shall mean as defined in Rule 13d-5 promulgated under the Exchange Act
and the term 'beneficial owner' shall mean as defined in Rule 13d-3
promulgated under the Exchange Act."
5
<PAGE> 6
vi. Amendments relating to Distribution of Ben
Franklin Shares. In connection with the anticipated
distribution to the holders of Borrower's common
stock of approximately 50% of the total number of
shares of common stock of Ben Franklin issued and
outstanding, effective as of the date hereof:
(a) the reference to "December 31, 1994" contained in clause (vii)
of Section 6.2(c) is hereby amended to mean "December 31, 1995";
(b) clause (ii) of Section 6.2(g) is hereby amended and restated
to read in its entirety as follows:
"(ii) sell, transfer, assign, encumber or otherwise dispose
of, or create or allow to be created or to otherwise exist, any Lien
upon, any of its other Assets (i.e., Assets other than Collateral or
capital stock of FoxMeyer) except for Permitted Liens, sales of such
other assets for full and fair consideration made in the ordinary
course of business or otherwise consistent with prudent business
practices, sales of capital stock of Consolidated Subsidiaries other
than FoxMeyer for full and fair consideration and distribution of
shares of common stock of Ben Franklin by Borrower to the shareholders
of Borrower in accordance with clause (vii) of Section 6.2(c)";
(c) at such time as Borrower no longer owns 50% or more of the
issued and outstanding shares of capital stock of Ben Franklin, the definition
of the term "Major Subsidiaries" in Section 1.2 is amended to delete reference
therein to "Ben Franklin"; and
(d) at such time as Borrower no longer owns 50% or more of the
issued and outstanding shares of capital stock of Ben Franklin, Sections 6.3(e)
and 6.3(g) are amended to delete references therein to "Ben Franklin".
vii. Amendment to Section 8.1 of the Agreement.
Effective as of the date hereof, a new Section 8.1(o)
is hereby added to the Agreement as an additional
Event of Default, which Section 8.1(o) shall read in
its entirety as follows:
"(o) Credit Lyonnais Default. The occurrence of a Default
as such term is defined in the Credit Lyonnais Loan Agreement."
6
<PAGE> 7
viii. Effect of this Amendment. The Loan Documents
(including, without limitation, the Agreement as
amended by this Amendment) shall remain in full force
and effect except that any reference in any Loan
Documents to the Agreement shall be deemed to refer
the Agreement as amended by this Amendment.
ix. Conditions Precedent. The effectiveness of
this Amendment is subject to the satisfaction of the
following conditions precedent:
(a) Agent shall have received all of the following, each dated
(unless otherwise indicated) the date of this Amendment, in form and substance
satisfactory to Agent:
(i) Borrower Resolutions. Resolutions of the
Board of Directors of Borrower certified by its Secretary or an
Assistant Secretary which authorize the execution, delivery and
performance by Borrower of this Amendment and the other Loan Documents
to which Borrower is or is to be a party hereunder;
(ii) Opinion of Counsel. A favorable opinion of
legal counsel to Borrower as to (A) the authorization, execution and
delivery of this Amendment and (B) such other matters as Agent may
reasonably request, in form and substance satisfactory to Agent;
(iii) Additional Information. Agent shall have
received such additional documents, instruments and information as
Agent or its legal counsel, Jenkens & Gilchrist, a Professional
Corporation, may request; and
(iv) Amendment Fee. An amendment fee in the amount
of $50,000.
(b) The representations and warranties contained herein and in all
other Loan Documents, as amended hereby, shall be true and correct as of the
date hereof as if made on the date hereof;
(c) No Event of Default shall have occurred and be continuing and
no event or condition shall have occurred that with the giving of notice or
lapse of time or both would be an Event of Default; and
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all other agreements,
documents, instruments executed and/or
7
<PAGE> 8
delivered pursuant hereto and all legal matters incident thereto, shall be
satisfactory to Agent and its legal counsel, Jenkens & Gilchrist, a
Professional Corporation.
x. Representations and Warranties. Borrower
hereby represents and warrants to Agent and Banks
that, as of the date of and after giving effect to
this Amendment, (a) all representations and
warranties set forth in the Agreement are true and
correct as if made again on and as of such date
(except to the extent that such representations and
warranties were expressly, in the Agreement, made
only in reference to a specific date), (b) no Default
or Event of Default has occurred and is continuing,
and (c) the Agreement, the Notes, the Security
Documents and the other Loan Documents (as amended by
this Amendment) are and remain legal, valid, binding
and enforceable obligations of Borrower.
xi. Phar-Mor Write-Down. Reference is made to
the definition of "EBITDA" in Section 1.2 of the
Agreement and, more specifically, to clause (a) of
such definition which reads as follows: "(a) income
(or deficit) before provision for income taxes for
such period (excluding (i) extraordinary gains and
losses and (ii) to the extent not already deducted,
income attributable to minority interests in
subsidiaries for such period) . . .". Borrower and
Banks hereby agree that, for purposes of calculating
EBITDA for the fiscal year ended March 31, 1995, the
$28,767,000 charge to income as a result of a
write-down of FoxMeyer's pre-bankruptcy Phar-Mor
receivable and associated costs to administer the
claim shall be deemed an extraordinary loss and shall
therefore be excluded for purposes of calculating
EBITDA under the Agreement during such period.
xii. GOVERNING LAW. THIS AMENDMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE U.S. FEDERAL LAWS.
xiii. Counterparts. This Amendment may be executed
in any number of counterparts, all of which when
taken together shall constitute one agreement, and
any of the parties hereto may execute this Amendment
by signing any such counterpart.
8
<PAGE> 9
xiv. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER
WITH THE AGREEMENT AND THE OTHER LOAN DOCUMENTS AS
WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN AND
AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN (A) BORROWER AND
(B) AGENT OR ANY BANK.
xv. Agreement Remains in Effect; No Waiver.
Except as expressly provided herein, all terms and
provisions of the Loan Documents shall remain
unchanged and in full force and effect and are hereby
ratified and confirmed. No waiver by Agent or any
Bank of any Default or Event of Default shall be
deemed to be a waiver of any other Default or Event
of Default. No delay or omission by Agent or any
Bank in exercising any power, right or remedy shall
impair such power, right or remedy or be construed as
a waiver thereof or an acquiescence therein, and no
single or partial exercise of any such power, right
or remedy shall preclude other or further exercise
thereof or the exercise of any other power, right or
remedy under the Agreement, the Loan Documents or
otherwise.
xvi. Payment of Costs, Fees and Expenses.
Borrower shall promptly pay any and all costs, fees
and expenses paid or incurred by Agent incident to
this Amendment (including, without limitation, the
fees and expenses of counsel to Agent). Concurrently
herewith, Borrower shall pay to Agent, for the pro
rata benefit of Banks, an amendment fee of $50,000.
9
<PAGE> 10
IN WITNESS WHEREOF, Borrower, Agent and Banks have caused this
Amendment to be executed and delivered by their duly authorized officers
effective as of the date first above written.
BORROWER:
FOXMEYER HEALTH CORPORATION,
(f/k/a National Intergroup, Inc.)
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AGENT:
BANQUE PARIBAS, as Agent for Banks
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
10
<PAGE> 11
BANKS:
BANQUE PARIBAS
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
11
<PAGE> 1
EXHIBIT 10-E
[LOGO] [LOGO]
CONFORMED CREDIT AGREEMENT *
between
FOXMEYER HEALTH CORPORATION,
as Borrower
and
CREDIT LYONNAIS NEW YORK BRANCH,
as Lender
$20,000,000
SEPTEMBER 6, 1995
PREPARED BY HAYNES AND BOONE, L.L.P.
* CONFORMED TO SHOW SIGNATURES.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1 DEFINITION AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Other References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2 TERM LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Collateral Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Collateral-Base Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3 PAYMENT TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Interest Rate Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Calculation of Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Interest Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Manner and Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Inadequacy of LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12 Reserve Requirements and Change in Circumstances . . . . . . . . . . . . . . . . . . . . . 16
3.13 Change In Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Maximum-Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4 SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Partial Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Authorization and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 No Conflicts or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.14 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.15 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.16 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.18 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 7 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Financials, Reports, and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Notice of Default or Potential Default . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7.3 Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Compliance with Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Compliance with Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Operations of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.8 Authorizations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.9 Inspection of Properties, Books, and Records; Access . . . . . . . . . . . . . . . . . . . 25
7.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.13 Maintenance of Existence, Assets, and Business . . . . . . . . . . . . . . . . . . . . . . 25
7.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.16 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Liquidation, Consolidations, Mergers, and Dispositions of Substantial Assets . . . . . . . 27
8.5 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.7 Payroll Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.8 Certain Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.9 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.10 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.11 Name, Fiscal Year, and Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.13 Strict Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.14 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9 FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 10 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Remedies Upon Default or Potential Default . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Performance by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Borrower's Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Not in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 Course of Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.7 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.8 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9 Diminution in Value of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.1 Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.2 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.3 Form and Number of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.4 Exceptions to Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.7 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.8 Forum, Consent to Service and Jurisdiction, and Jury Trial . . . . . . . . . . . . . . . . 33
11.9 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.10 Amendments, Consents, Conflicts, and Waivers . . . . . . . . . . . . . . . . . . . . . . . 33
11.11 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.12 Parties and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
(ii)
<PAGE> 4
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C> <C>
Schedule 5 - Closing Conditions
Schedule 6.1 - Companies
Schedule 6.11 - Litigation and Judgments
Schedule 8.1 - Permitted Indebtedness
Schedule 8.2 - Permitted Liens
Schedule 8.3 - Permitted Investments
Schedule 8.6 - Permitted Distributions
Exhibit A - Promissory Note
Exhibit B-1 - Security Agreement (Borrower)
Exhibit B-2 - Security Agreement (Hamilton Morgan)
Exhibit B-3 - Consent of Members
Exhibit C-1 - Advance Request
Exhibit C-2 - Rollover Notice
Exhibit C-3 - Weekly Collateral-Base Certificate
Exhibit C-4 - Quarterly Collateral-Base Certificate
Exhibit C-5 - Compliance Certificate
Exhibit D-1 - Opinion of Borrower's General Counsel
Exhibit D-2 - Opinion of Borrower's Bankruptcy Counsel
Exhibit D-3 - Opinion of Hamilton Morgan's Counsel
</TABLE>
(iii)
<PAGE> 5
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of September 6, 1995, between
FOXMEYER HEALTH CORPORATION, a Delaware corporation ("BORROWER"), and CREDIT
LYONNAIS NEW YORK BRANCH, a duly licensed branch under the New York Banking Law
of a foreign banking corporation organized under the Laws of the Republic of
France ("LENDER").
Borrower has requested that Lender provide to Borrower a $20,000,000
term loan to be used by Borrower to partially finance its $26,000,000 purchase
of a 69.8% interest in Hamilton Morgan, which is being formed to acquire
approximately 31% of Phar-Mor's common stock upon the Plan of Reorganization's
confirmation. Lender has agreed to provide that term loan upon the terms and
subject to the conditions of the Loan Documents.
ACCORDINGLY, for adequate and sufficient consideration, Borrower and
Lender agree as follows:
SECTION 1 DEFINITION AND TERMS.
1.1 Definitions. As used in the Loan Documents:
ADVANCE means the disbursement by Lender to Borrower of an amount
loaned under this agreement.
ADVANCE DATE means (a) for the initial Advance, the Closing Date, and
(b) for any reborrowing under SECTION 2.1, the date the Advance is made.
ADVANCE REQUEST means a request under SECTION 2.2 substantially in the
form of EXHIBIT C-1.
AFFILIATE of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with that Person. For purposes of this definition, "control," "controlled by,"
and "under common control with" mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise).
BANQUE PARIBAS FACILITY means the Loan Agreement dated as of January
13, 1994, between Borrower (formerly known as National Intergroup, Inc.), as
Borrower, certain financial institutions as Banks, and Banque Paribas as Agent.
BASE RATE means, on any day, an annual interest rate equal to the sum
of (a) 0.50% plus (b) the greater of either (i) the variable interest rate
established from time to time by Lender as its reference interest rate for
short-term-commercial loans in dollars to domestic borrowers (which interest
rate may not be the lowest rate charged by Lender on similar loans) or (ii)
Lender's overnight cost of funds as determined solely by Lender.
BASE-RATE LOAN means that portion of the Loan that bears interest by
reference to the Base Rate.
BUSINESS DAY means a day other than a Saturday, Sunday, or other day
on which commercial banks in New York City are authorized or required by Law to
close.
CAPITAL LEASE means any capital lease or sublease that is required by
GAAP to be capitalized on a balance sheet.
CERCLA means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C.A. Section 9601 et seq.
<PAGE> 6
CERCLIS means the Comprehensive Environmental Response, Compensation,
and Liability Information System.
CLOSING DATE means the date agreed to by Borrower and Lender on or
within three Business Days after which the initial Advance of the Loan is to be
made, which date (a) must be a Business Day, (b) may not be before all
conditions precedent in the Loan Documents for the initial Advance of the Loan
have been satisfied or waived in writing, and (c) may not be later than
September 29, 1995.
COLLATERAL is defined in SECTION 4.
COLLATERAL BASE means, at any time, the Collateral Value of the
FoxMeyer Stock and Publicly-Traded Stock that is (a) subject to Lender Liens,
(b) subject to no other Liens except Permitted Liens, and (c) subject to no
restrictions on transfer except under general corporate and securities Laws
and, solely in respect of Phar-Mor stock, the LLC Agreement and Proxy.
COLLATERAL-BASE CERTIFICATE means a certificate that is completed and
executed by a Responsible Officer and delivered to Lender in substantially the
form of EXHIBIT C-3 or EXHIBIT C-4, as applicable.
COLLATERAL-BASE DEFICIENCY means -- at any time and if positive -- the
amount by which (a) 525% of the unpaid principal balance of the Loan exceeds
the total Collateral Base, (b) 400% of the unpaid principal balance of the Loan
exceeds the Collateral Base applicable solely to FoxMeyer Stock, or (c) 125% of
the unpaid principal balance of the Loan exceeds the Collateral Base applicable
to Publicly-Traded Stock.
COLLATERAL DOCUMENTS means the Security Agreements and all applicable
financing statements necessary or appropriate to perfect the Lender Liens.
COLLATERAL VALUE means:
(a) For the FoxMeyer Stock and as of the last day of each
fiscal quarter of FoxMeyer Corporation, the product of (i) 500% of
FoxMeyer Corporation's consolidated EBITDA for the four-fiscal
quarters ending on that last day times (ii) a fraction with (A) the
number of shares of FoxMeyer Stock subject to a Lender Lien as the
numerator and (B) the total number of shares of issued and outstanding
FoxMeyer Stock as the denominator.
(b) For Publicly-Traded Stock and at any time, either (i)
the closing-sale price on the immediately preceding Business Day as
appearing on any regularly-published reporting or quotation service,
or (ii) if not so reported, the value agreed upon by Borrower and
Lender in good faith after taking into account marketability,
applicable restrictions, and other relevant factors, or (iii) absent
that agreement, as determined by Lender in its sole discretion.
COMPANIES means, at any time, Borrower and its Subsidiaries.
COMPLIANCE CERTIFICATE means a certificate that is completed and
executed by a Responsible Officer and delivered to Lender in substantially in
the form of EXHIBIT C-5.
CONTROLLED GROUP means (a) the controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code or (b) the group of trades
or businesses under common control as defined in Section 414(c) of the Internal
Revenue Code, of which Borrower is a part or may become a part.
CONVERSION DATE is defined in SECTION 3.3(C).
2
<PAGE> 7
CURRENT FINANCIALS means either (a) Borrower's consolidated and
consolidating Financials for the year ended March 31, 1995, together with
Borrower's consolidated Financials for the three months ended on June 30, 1995,
or (b) at any time after annual Financials are first delivered under SECTION
7.1, Borrower's consolidated- and consolidating-annual Financials
then-most-recently delivered to Lender under SECTION 7.1(A), together with
Borrower's consolidated-quarterly Financials then-most recently delivered to
Lender under SECTION 7.1(B).
DEBTOR LAWS means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization
or similar Laws from time to time in effect affecting the rights of creditors
generally.
DEFAULT is defined in SECTION 10.
DEFAULT RATE means, on any day, an annual interest rate equal to the
lesser of either (a) the sum of 3.0% plus the Base Rate or (b) the Maximum
Rate.
DISCLOSURE STATEMENT means the Disclosure Statement in Support of
Debtors' Third Amended Joint Plan of Reorganization dated May 25, 1995, and
filed in connection with the Plan of Reorganization, as it is amended and in
effect on the date of this agreement notwithstanding SECTION 1.3(J).
DISTRIBUTION means, with respect to any shares of any capital stock or
other equity securities issued by a Person (a) the retirement, redemption,
purchase, or other acquisition for value of those securities, (b) the
declaration or payment of any dividend on or with respect to those securities,
(c) any loan or advance by that Person to, or other investment by that Person
in, the holder of any of those securities, and (d) any other payment by that
Person with respect to those securities.
EBITDA means -- for any Person, for any period, and without
duplication -- the sum of (a) Income Before Taxes, plus (b) Interest Expense
for such period, plus (c) depreciation and amortization for such period. For
purposes of this definition, the $28,767,000 charge to income as a result of a
write down of FoxMeyer Corporation's pre-bankruptcy Phar- Mor receivable and
associated costs to administer the claim in bankruptcy are deemed an
extraordinary loss and, therefore, excluded in calculating Borrower's
consolidated EBITDA.
EMPLOYEE PLAN means any plan, including both single employer and
multi-employer plans, established or maintained for employees of Borrower or
any member of the Controlled Group to which SECTION 4021(A) of ERISA applies.
ENVIRONMENTAL COMPLAINT means any complaint, order, citation, or
notice issued to Borrower with regard to any alleged violation of requirements
of Environmental Laws relating to air emissions, water discharges, Release, or
disposal of any Hazardous Material, noise emissions, or any other
environmental, health, or safety matter affecting Borrower.
ENVIRONMENTAL LAWS means (a) CERCLA, (b) the Resource Conservation and
Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of
1984, 42 U.S.C.A. Section 6901 et seq., (c) the Clean Air Act, 42 U.S.C.A.
Section 7401 et seq., as amended by the Clean Air Act Amendments of 1990, (d)
the Clean Water Act of 1977, 33 U.S.C.A. Section 1251 et seq., (e) the Toxic
Substances Control Act, 15 U.S.C.A. Section 2601 et seq., (f) the Hazardous
Materials Transportation Act, 42 U.S.C.A. Section 1801 et seq., and (g) all
other federal, state, and local Laws relating to pollution, health, and safety,
or protection of the environment, including, without limitation, air pollution,
water pollution, noise control, or the use, handling, discharge, disposal,
transportation, Release, or recovery of on-site or off-site Hazardous
Materials.
ENVIRONMENTAL LIABILITY means any claim, demand, obligation, cause of
action, order, violation, damage (including without limitation, to any Person,
property or natural resources), injury, judgment, penalty or fine, cost
3
<PAGE> 8
of enforcement, cost of remedial action, clean-up, restoration, or any other
cost or expense whatsoever (including reasonable attorneys' fees and
disbursements) resulting from the actual or alleged violation of any
Environmental Law, the imposition of any Environmental Lien, or otherwise
arising under any Environmental Law or resulting from any common Law cause of
action asserted by any Person.
ENVIRONMENTAL LIEN means a Lien in favor of any Governmental Authority
or other Person (a) under any Environmental Law or (b) for any liability or
damages arising from or costs incurred by any Governmental Authority or other
Person in response to a Release or threatened Release of any Hazardous
Material.
ERISA means the Employee Retirement Income Security Act of 1974.
EURODOLLAR-BUSINESS DAY means a Business Day on which dealings in
dollars are conducted in the London interbank market.
EURODOLLAR LOAN means that portion of the Loan that bears interest by
reference to LIBOR for a particular Interest Period.
EXCHANGE ACT means the Securities Exchange Act of 1934.
FINANCIALS means balance sheets, statements of operations, statements
of stockholders' equity, and statements of cash flows prepared (a) according to
GAAP (subject to year-end audit adjustments with respect to interim
Financials), (b) except as stated in SECTION 1.4, in comparative form to prior
year-end figures or corresponding periods of the preceding fiscal year or other
relevant period, as applicable, and (c) where appropriate or required by the
Loan Documents, prepared on a consolidated and consolidating basis.
FOXMEYER CORPORATION FACILITY means the Amended and Restated Loan
Agreement dated April 29, 1993, between FoxMeyer Corporation, as Borrower,
FoxMeyer Drug Company, Merchandise Coordinator Services Corporation, and Harris
Wholesale Company, as Guarantors, the Lender and Issuer party to it, Citicorp
USA, Inc. as Administrative Agent, and NationsBank of Texas, N.A., as
Documentation Agent.
FOXMEYER STOCK means shares of common stock of FoxMeyer Corporation.
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable from time to time.
GOVERNMENTAL AUTHORITY means any foreign governmental authority, the
United States of America, any state of the United States of America, and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau, or court having jurisdiction over
any Company or Lender or any of their respective businesses, operations,
assets, or properties.
GUARANTY of any Person means any contract, agreement, or understanding
(other than endorsements for collection or deposit in the ordinary course of
business) of that Person by which that Person guarantees, or in effect
guarantees, any Indebtedness of any other individual or entity (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, agreements to (a) purchase that Indebtedness or any property
constituting security for it, (b) advance or supply funds for the purchase or
payment of that Indebtedness or maintain net worth or working capital or other
balance sheet conditions, or otherwise to advance or make available funds for
the purchase or payment of that Indebtedness, (c) purchase property,
securities, or service primarily for the purpose of assuring the holder of that
Indebtedness of the ability of the primary obligor to make payment of that
Indebtedness, or (d) otherwise assure the holder of that Indebtedness of the
primary obligor against loss.
4
<PAGE> 9
HAMILTON MORGAN means Hamilton Morgan L.L.C., a Delaware limited
liability company formerly known as the Robert Haft Group/Phar-Mor L.L.C., a
Delaware limited liability company formed by the LLC Agreement, and owned 69.8%
by Borrower and 30.2% by Robert M. Haft and Mary Z. Haft, as tenants by the
entirety, for the purpose of acquiring approximately 31% of the common stock of
Phar-Mor under the Plan of Reorganization.
HAMILTON MORGAN/FOXMEYER REGISTRATION AGREEMENT means the Phar-Mor,
Inc., Registration Rights Agreement to be dated and executed on or about the
effective date of the Plan of Reorganization by Phar-Mor, Hamilton Morgan, and
FoxMeyer Drug Company.
HAZARDOUS MATERIAL means any substance, material, or waste that is or
becomes regulated, under any federal, state, or local environmental Law
(including, but not limited to Environmental Laws) as hazardous to public
health or safety or to the environment, including, but not limited to (a) any
substance or material designated as a "hazardous substance" under Section 311
of the Clean Water Act, 33 U.S.C.A. Section 1251 et seq. (33 U.S.C. Section
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C.
Section 1317), (b) any substance or material defined as "hazardous waste" under
Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq. (42 U.S.C. Section 6903), and (c) any substance or material
defined as a "hazardous substance" under Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9001
et seq. (42 U.S.C. Section 9601).
INCOME BEFORE TAXES means income (or deficit) before provision for
income taxes (excluding (i) extraordinary gains and losses and (ii) to the
extent not already deducted, income attributable to minority interests in
subsidiaries for such period).
INDEBTEDNESS of any Person means all of its indebtedness, obligations,
and liabilities, including without limitation (a) all indebtedness for borrowed
money or for the deferred purchase price of property or services or that is
evidenced by a bond, debenture, note, or other instrument, (b) all obligations
in respect of any Guaranty, (c) all obligations in respect of any Capital
Lease, (d) all obligations in respect of letters of credit, acceptances, or
similar obligations issued or created for its account, (e) every obligation
secured -- or for which the holder of the obligation is contingently or
otherwise entitled to be secured -- by any Lien on that Person's property
whether that Person is personally liable or assumes that obligation, and (f)
all liabilities for unfunded vested benefits under any Employee Plan.
INTEREST EXPENSE means -- for any Person, for any period, and without
duplication -- all interest on Indebtedness, whether paid in cash or accrued as
a liability and payable in cash during any subsequent period (including,
without limitation, the interest component of Capital Leases), as determined by
GAAP, and premium or penalty for repayment, redemption, or repurchase of
Indebtedness.
INTEREST OPTION is defined in SECTION 3.3.
INTEREST-PAYMENT DATE means (a) for each Base-Rate Loan, the
Termination Date and the last day of each March, June, September, and December,
commencing on the first of such days to occur after the Closing Date, and (b)
for each Eurodollar Loan the Termination Date and (i) the last day of each
March, June, September, and December occurring during its Interest Period if
longer than three months, and (ii) the last day of its Interest Period.
INTEREST PERIOD means, for each Eurodollar Loan, a period of one, two,
three, or six months (or any other period as may be offered to Borrower by
Lender) selected by Borrower in the applicable Advance Request or Rollover
Notice so long as:
5
<PAGE> 10
(a) Each Interest Period commences (i) for an initial
Advance (including any re-borrowing under SECTION 2.1), on the Advance
Date and (ii) otherwise, on the last day of the preceding Interest
Period.
(b) If any Interest Period would otherwise end on a day
that is not a Eurodollar-Business Day, then that Interest Period shall
be extended to the next succeeding Eurodollar-Business Day unless it
is in the next calendar month, in which event that Interest Period
shall end on the immediately preceding Eurodollar-Business Day.
(c) If Borrower fails to timely select a new Interest
Period for a Eurodollar Loan before the last day of its existing
Interest Period, then Borrower is deemed to have selected the Base
Rate for that portion of the Loan, which automatically becomes a
Base-Rate Loan on that last day.
(d) Any Interest Period that begins on the last
Eurodollar-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 that Interest Period) shall end on the last Eurodollar-Business
Day of a calendar month.
(e) No Interest Period may end after the
Stated-Termination Date.
INTERNAL REVENUE CODE means the United States Internal Revenue Code of
1986.
INVESTMENTS means -- for any Person -- any loan, advance, extension of
credit, or capital contribution by that Person to, any investment by that
Person in, or purchase by that Person or commitment by that Person to purchase
any stock or other securities or evidences of Debt of, or interests in, any
other individual or entity.
LAWS means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions, and
interpretations of any Governmental Authority.
LENDER is defined in the preamble to this agreement.
LENDER LIEN means any present or future first-priority Lien securing
the Obligation and assigned, conveyed, and granted to or created in favor of
Lender under this agreement, under any Law, or otherwise.
LIBOR means -- for any Eurodollar Loan and its Interest Period -- an
annual interest rate (rounded upward, if necessary, to the nearest 0.01%) equal
to the sum of (a) 2.0% plus (b) the quotient obtained by dividing:
(i) either (A) the rates as displayed on Telerate page
3750 (or such other pages as may replace that page on that service),
at 11:00 a.m. (London time) on the second Business Day before the
commencement of that Interest Period, as the rate at which banks
referred to on such page(s) offered to make dollar deposits for a
period similar to that Interest Period, or (B) if those rates are not
being so quoted, then the arithmetic mean (rounded upwards, if
necessary, to the next higher 1/16 of 1%, expressed as a decimal) of
the rates quoted by the principal London office of Lender to prime
banks in the London interbank eurodollar market at or about 11:00 a.m.
(London time) on the second Business Day before the commencement of
that Interest Period for dollar deposits for a period similar to that
Interest Period; by
(ii) one minus the Reserve Requirement (expressed as a
decimal) applicable to that Interest Period.
6
<PAGE> 11
LIEN means any lien, mortgage, security interest, assignment, tax
lien, pledge, charge, encumbrance, conditional sale or title retention
arrangement, or any other interest in property designed to secure the repayment
of Indebtedness, whether arising by agreement, under any Law, or otherwise.
LITIGATION means any action or proceeding by or before any Governmental
Authority.
LLC AGREEMENT means the Amended and Restated Limited Liability Company
Agreement dated as of May 5, 1995, entered into between Borrower, Robert M.
Haft, and certain of their Affiliates for the formation of Hamilton Morgan, as
it is amended and in effect on the date of this agreement notwithstanding
SECTION 1.3(J).
LOAN means the term loan by Lender to Borrower under SECTION 2.
LOAN DOCUMENTS means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this agreement,
(b) the Note, the Collateral Documents, and all other agreements, documents,
and instruments in favor of Lender ever delivered under this agreement or
otherwise delivered in connection with all or any part of the Obligation, and
(c) all renewals, extensions, and restatements of, and amendments and
supplements to, any of the foregoing.
MATERIAL-ADVERSE EFFECT means any (a) material adverse effect
whatsoever upon the validity, performance, or enforceability of any Loan
Document, (b) material impairment of the ability of Borrower to fulfill its
payment or other material obligations under the Loan Documents, (c) material
and adverse effect on the financial condition of Borrower as represented to
Lender in the Current Financials most recently delivered before the date of
this agreement, or (d) Default or Potential Default.
MAXIMUM RATE means, on any day, the highest, non-usurious interest
rate (if any) permitted by Law.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Internal Revenue Code to
which Borrower or any member of the Controlled Group is making, or has made, or
is accruing, or has accrued, an obligation to make contributions.
NET INCOME of any Person means that Person's profit or loss after
deducting its related income Tax expense.
NET WORTH means -- for any Person, at any time, and without
duplication -- the sum of (a) total stockholders' equity (including, without
limitation, capital stock, additional paid-in capital, and retained earnings
after deducting treasury stock), minus (b) the total of all capital stock that
is redeemable on or before the Stated-Termination Date, minus (c) all capital
stock that is convertible, at the option of the holder, into debt securities or
other Indebtedness of that Person on or before the Stated-Termination Date.
NOTE is defined in SECTION 3.1.
OBLIGATION means all present and future (a) indebtedness, obligations,
and liabilities of Borrower to Lender arising under or evidenced by any Loan
Document, (b) interest accruing on, and attorneys' fees incurred in the
enforcement or collection of, any of the foregoing, (c) costs incurred by
Lender to obtain, preserve, perfect and enforce the Liens contemplated to
secure payment of any of the foregoing and to maintain, preserve, and collect
the property in which Lender has been granted a Lien to secure such payment,
and (d) renewals, extensions (but Lender has no obligation whatsoever to extend
the Termination Date), modifications, and refinancings of any of the foregoing.
OTHER TAXES is defined in SECTION 3.10(B).
7
<PAGE> 12
PBGC means the Pension Benefit Guaranty Corporation.
PERMITTED DISTRIBUTIONS means the Distributions described on SCHEDULE
8.6.
PERMITTED INDEBTEDNESS means the Indebtedness described on SCHEDULE
8.1.
PERMITTED INVESTMENTS means the Investments described on SCHEDULE 8.3.
PERMITTED LIENS means the Liens described on SCHEDULE 8.2.
PERSON means an individual, a corporation, a joint venture, a general
or limited partnership, a trust, an unincorporated organization, or a
government or any agency or political subdivision thereof.
PHAR-MOR means Phar-Mor, Inc., a Pennsylvania corporation, that will
become a Delaware corporation promptly after the effectiveness of the Plan of
Reorganization.
PLAN OF REORGANIZATION means the Debtors' Third Amended Joint Plan of
Reorganization filed by Phar-Mor and related entities on May 25, 1995, Case
Nos. 92-41599 through 92-41614, with the United States Bankruptcy Court for the
Northern District of Ohio, as it is amended and in effect on the date of this
agreement notwithstanding SECTION 1.3(J).
POTENTIAL DEFAULT means any event's occurrence or any circumstance's
existence that would -- upon any required notice, time lapse, or both -- become
a Default.
PROCESS AGENT means either (a) CT Corporation, whose address is 350
St. Paul Street, Dallas, Texas 75201, or (b) FoxMeyer Health Corporation, c/o
Mr. Abbey J. Butler, 207 Dune Road, Box 137, Westhampton Beach, New York 11978.
PROXY means the Joint Irrevocable Proxy dated as of May 5, 1995,
entered into between Borrower, Robert M. Haft, and certain of their Affiliates
in respect of Phar-Mor stock, as it is amended and in effect on the date of
this agreement notwithstanding SECTION 1.3(J).
PUBLICLY-TRADED STOCK means (a) common stock of Phar-Mor after the
effectiveness of the Plan of Reorganization and (b) other publicly-traded stock
acceptable to Lender in its sole discretion.
REGULATION D means Regulation D of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 204.
REGULATION U means Regulation U promulgated by the Board of Governors
of the Federal Reserve System, 12 C.F.R. Part 221.
RELEASE means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of any Hazardous Material or any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste, or any constituent
of any such substance or waste, including, but not limited to these terms as
defined in Environmental Laws, through or in the air, soil, surface water,
groundwater, or any property.
RESPONSIBLE OFFICER means Borrower's Chairman, Chief Executive
Officer, President, Treasurer, Assistant Treasurer, or Chief Financial Officer.
REPRESENTATIVES means representatives, officers, directors, employees,
accountants, attorneys, and agents.
8
<PAGE> 13
RESERVE REQUIREMENT means, for any Eurodollar Loan and for the
relevant Interest Period, the total reserve requirements (including all basic,
supplemental, emergency, special, marginal, and other reserves required by
applicable Law) applicable to a member bank of the Federal Reserve System for
eurocurrency fundings or liabilities as of the first day of that Interest
Period.
ROLLOVER NOTICE is defined in SECTION 3.3(B).
RULE 144 means Rule 144 of the General Regulations as promulgated by
the Securities and Exchange Commission under the Securities Act and, as
applicable, its various sections and subsections.
SEC REPORTS means Borrower's reports on Forms 10-K and 10Q as filed
with the Securities and Exchange Commission and delivered to Lender.
SECURITIES ACT means the Securities Act of 1933.
SECURITY AGREEMENT means (a) for Borrower, a Security Agreement in
substantially the form of EXHIBIT B-1, and (b) for Hamilton Morgan, a Security
Agreement in substantially the form of EXHIBIT B-2.
STATED-TERMINATION DATE means September 6, 1998.
SUBSIDIARY means -- for any Person -- any entity of which more than
50% (in number of votes with power to elect a majority of the board of
directors or similar governing body other than such power arising only upon the
occurrence of a contingency) of the stock (or equivalent interests) is owned of
record or beneficially, directly or indirectly, by that Person.
TAX-SHARING AGREEMENT means the Tax Sharing Agreement dated as of
November 25, 1992, between Borrower and FoxMeyer Corporation and consented and
agreed to by their Subsidiaries, as (subject to SECTION 8.8) renewed, extended,
amended, or replaced.
TAXES is defined in SECTION 3.10(A).
TERMINATION DATE means the earlier of either (a) the
Stated-Termination Date or (b) the effective date that Lender's commitment to
lend under this agreement is fully canceled or terminated.
1.2 Time References. Unless otherwise specified, in the Loan
Documents (a) time references (e.g., 10:00 a.m.) are to time in New York City,
(b) in calculating a period from one date to another, the word "from" means
"from and including" and the word "to" or "until" means "to but excluding," and
(c) references to a "day" or "days," unless specified otherwise, are to
calendar days.
1.3 Other References. Unless otherwise specified, in the Loan
Documents (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c)
monetary references are to currency of the United States of America, (d)
section, paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy
transmissions, (f) references to "including" mean including without limiting
the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to
specific items as being limited to the same type or character of those specific
items is not applicable in the Loan Documents, (h) references to any Person
include that Person's heirs, personal representatives, successors, trustees,
receivers, and permitted assigns, (i) references to any Law include every
amendment or supplement to it, rule and regulation adopted under it, and
successor or replacement for it, and (j)
9
<PAGE> 14
references to any Loan Document or other document include every renewal and
extension of it, amendment and supplement to it, and replacement or
substitution for it.
1.4 Accounting Principles. Unless otherwise specified, in the
Loan Documents (a) GAAP determines all accounting and financial terms and
compliance with financial covenants, (b) GAAP in effect on the date of this
agreement determines compliance with financial covenants, and (c) otherwise,
all accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period.
SECTION 2 TERM LOAN.
2.1 Commitment. Subject to the provisions of the Loan Documents,
Lender agrees to extend to Borrower a term loan in a single, initial Advance of
$20,000,000 on the Closing Date and, to the extent that Borrower has made one
or more mandatory prepayments under SECTION 3.7(A), in one or more subsequent
Advances so long as:
(a) The unpaid principal balance of the Loan may never
exceed $20,000,000.
(b) The unpaid principal balance of those subsequent
Advances may not exceed a total of (i) $3,500,000 if the unpaid
principal balance of the Loan is more than $10,000,000 before those
Advances are made, or (ii) $2,000,000 if the unpaid principal balance
of the Loan is $10,000,000 or less before those Advances are made.
(c) Only one Advance may be made in respect of any
particular prepayment under SECTION 3.7(A), and that Advance may only
be made on a Business Day that is before the earlier of either (i) 120
days after the date on which that prepayment was made or (ii) the
Termination Date.
(d) Immediately after giving effect to each Advance, a
Collateral-Base Deficiency may not exist.
(e) Borrower has not given notice to Lender irrevocably
waiving the right to reborrow under this agreement, which Borrower may
do at any time.
Except as specifically provided for those subsequent Advances, no portion of
the Loan may be reborrowed once paid or prepaid.
2.2 Procedure. Borrower may only request an Advance by delivering
to Lender an Advance Request for it that specifies the Advance Date, the one or
more Interest Options for the Advance, and the Interest Periods, if applicable.
Each Advance Request is binding and irrevocable when delivered and must be
received by Lender by no later than 12:00 noon on the earlier of either the
Business Day before the Advance Date or, if LIBOR is applicable to any portion
of the Advance, the third Business Day before the Advance Date.
2.3 Collateral Base. Borrower shall determine the Collateral Base
in accordance with this agreement and verify it to Lender as of each Advance
Date and otherwise in accordance with SECTION 7.1. Lender may review and
adjust any determination of the Collateral Base as so verified by Borrower if,
in its good faith based upon information otherwise available to it, Lender
deems that determination not to be in accordance with this agreement.
2.4 Collateral-Base Deficiency. If a Collateral-Base Deficiency
ever exists, then, within three Business Days after demand by Lender, Borrower
shall wholly eliminate that Collateral-Base Deficiency by (a) prepaying
principal of the Loan, (b) pledging additional FoxMeyer Stock or
Publicly-Traded Stock, as the case
10
<PAGE> 15
may be, to Lender in accordance with SECTION 4 if that would eliminate the
particular Collateral-Base Deficiency, or (c) any combination of the foregoing.
Lender may become aware of a Collateral-Base Deficiency and elect in its sole
discretion to not make (or to defer making) demand upon Borrower under this
section. That election by Lender is not a waiver of any Collateral-Base
Deficiency then or subsequently existing and is revocable in Lender's sole
discretion at any time.
SECTION 3 PAYMENT TERMS.
3.1 Promissory Note. The Loan and interest on it shall be
evidenced by a promissory note (the "NOTE") dated the Closing Date, executed by
Borrower, payable to Lender's order, in the stated principal amount of
$20,000,000, and otherwise substantially in the form of EXHIBIT A.
Notwithstanding the stated principal amount of the Note, the amount of
principal actually owing on the Note at any time is the sum of the Loan minus
all payments or prepayments of principal actually received by Lender. Lender
is authorized but not required to endorse on a schedule attached to the Note
appropriate notations evidencing the date and the amount of each Advance and
each payment or prepayment by Borrower.
3.2 Interest Rates.
(a) Base-Rate Loans. The unpaid principal of the
Base-Rate Loan shall bear interest from the Closing Date until due and
payable at an annual rate from day to day equal to the lesser of
either the Base Rate or the Maximum Rate.
(b) Eurodollar Loans. The unpaid principal of each
Eurodollar Loan shall bear interest for the applicable Interest Period
at an annual rate equal to the lesser of either LIBOR for the
applicable Interest Period or the Maximum Rate from day to day.
(c) Past-Due Interest. Past-due principal and interest
on the Loan shall bear interest, to the extent lawful, at the Default
Rate.
3.3 Interest Rate Options. Subject to the following provisions,
Borrower has the option of having all or any portion of the Loan bear interest
at LIBOR or the Base Rate (each, an "INTEREST OPTION"). Each Eurodollar Loan
must be at least $500,000 and an integral multiple of $100,000.
(a) Advance Date. Borrower shall notify Lender of each
Interest Option applicable to each Advance as of its Advance Date.
(b) At Expiration of Interest Periods. Before the
termination of each Interest Period for each Eurodollar Loan, Borrower
shall give written notice (a "ROLLOVER NOTICE"), in substantially the
form of EXHIBIT C-2, to Lender of the Interest Option for that portion
of the Loan upon the expiration of that Interest Period. That
Rollover Notice must be given to Lender at least (i) one Business Day,
in the case of a Base Rate selection, or (ii) three
Eurodollar-Business Days, in the case of a LIBOR selection, before the
termination of that Interest Period. If Borrower specifies LIBOR, the
Rollover Notice must also specify the length of the succeeding
Interest Period selected by Borrower. Each Rollover Notice is
irrevocable and effective upon notification to Lender. If the
required Rollover Notice is not timely received by Lender before the
expiration of the then relevant Interest Period in effect when such
notice was required to be given, Borrower is deemed to have selected
the rate set forth in SECTION 3.2(A) to be applicable to that portion
of the Loan upon expiration of that Interest Period and to have given
Lender notice of that selection.
11
<PAGE> 16
(c) Conversion From Base Rate. With respect to a
Base-Rate Loan, Borrower may, on any Eurodollar-Business Day (a
"CONVERSION DATE"), convert that Base-Rate Loan to a Eurodollar Loan
by giving Lender a Rollover Notice of that election at least three
Eurodollar-Business Days before that Conversion Date.
(d) Options Upon Default. Notwithstanding anything in
this SECTION 3.3 to the contrary, no Base-Rate Loan may be converted
to a Eurodollar Loan and no Eurodollar Loan may be continued as such
when a Default or Potential Default exists. While a Default or
Potential Default exists, each Eurodollar Loan shall be automatically
converted to a Base-Rate Loan on the last day of its Interest Period.
3.4 Calculation of Interest Rates. Interest on the unpaid
principal balance of each Eurodollar Loan shall be calculated on the basis of
the actual number of days elapsed in a year consisting of 360 days. Interest
on the unpaid principal balance of each Base-Rate Loan shall be calculated on
the basis of the actual days elapsed in a year consisting of 365 or, if
applicable, 366 days.
3.5 Interest Payments. Interest on the Note is due and payable on
each Interest-Payment Date.
3.6 Principal Payments. Principal payments of $2,500,000 each are
due and payable on each of September 6, 1996, and September 6, 1997. The
unpaid principal balance of the Note is due and payable on the Termination
Date.
3.7 Prepayments.
(a) At any time when any Phar-Mor Stock or any interest
of Borrower in Hamilton Morgan, as the case may be, is Collateral,
Borrower shall make a mandatory prepayment of the unpaid principal of
the Loan on the same day as the day of each sale of any Phar-Mor
capital stock pledged to Lender under the Loan Documents or any
interest of Borrower in Hamilton Morgan, which prepayment shall equal
the full-gross cash proceeds derived from that sale. Borrower may
request certain partial releases of Lender Liens under SECTION 4.2(C)
upon such payment.
(b) Borrower shall make a mandatory prepayment of the
unpaid principal of the Loan as provided in SECTION 2.4.
(c) Borrower may also make voluntary prepayments of all
or part of the unpaid principal of the Loan at any time and from time
to time by first giving Lender at least three-Business Days'
irrevocable and binding notice so long as the notice specifies the
amount to be prepaid and each partial prepayment must be at least
$500,000 or an integral multiple of $100,000.
All partial prepayments shall be applied to the principal installments on the
Note in inverse order of maturity. All prepayments may be made without premium
or penalty but with all amounts owed under SECTION 3.14(B) as a result of the
prepayment.
3.8 Manner and Application of Payments. All payments and
prepayments of principal of, and interest on, the Note to Lender must be made
by Borrower before 2:00 p.m. in federal or other immediately available funds at
Credit Lyonnais New York Branch for the account of Lender. Any payment or
prepayment received by Lender after 2:00 p.m. shall be deemed to have been
received by Lender on the next-succeeding-Business Day. Unless otherwise
specified in the Loan Documents, all payments and prepayments of the Obligation
shall be applied in the following order:
12
<PAGE> 17
(a) all unpaid costs and fees due under the Loan
Documents as the date of the payment or prepayment;
(b) accrued and unpaid interest on the Obligation that is
due and payable as of the date of the payment or prepayment;
(c) Base-Rate Loans;
(d) Eurodollar Loans as either (i) selected by Borrower
or (ii) if Borrower fails to make that selection or if a Default or
Potential Default exists, as selected by Lender; and
(e) to the unpaid balance of the Obligation in the order
and manner selected by Lender.
3.9 Lending Office. Lender may (a) designate its principal office
or a foreign branch, subsidiary, or Affiliate of Lender as its lending office
(and the office to whose accounts payments are to be credited) for any
Eurodollar Loan, (b) designate its principal office or a domestic branch,
subsidiary, or Affiliate as its lending office (and the office to whose account
payments are to be credited) for any Base-Rate Loan, and (c) change its lending
offices. Lender shall continue to hold the Note evidencing the Loan for the
benefit and account of each such foreign branch, subsidiary, or Affiliate.
Lender may fund all or any of the Loan in any manner that it deems appropriate,
but, for the purposes of this agreement, Lender is, regardless of Lender's
actual means of funding, deemed to have funded that portion of the Loan in
accordance with the Interest Option from time to time selected in accordance
with this agreement.
3.10 Taxes.
(a) All payments and prepayments must be made free and
clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities, excluding taxes imposed upon its income, and franchise
taxes imposed upon Lender, by the jurisdiction under the Laws of which
Lender is organized or is or should be qualified to do business or any
political subdivision and taxes imposed upon its income, and franchise
taxes imposed upon it by the jurisdiction of Lender's lending office
or any political subdivision thereof ("TAXES"). If Borrower is
required by Law to deduct any Taxes from or in respect of any sum
payable under the Loan Documents, then (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this SECTION 3.10) Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower
shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxing authority or other authority in
accordance with applicable Law.
(b) Borrower shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges, or
similar levies that arise from any payment made under the Loan
Documents or from the execution, delivery, or registration of, or
otherwise with respect to, the Loan Documents ("OTHER TAXES").
(c) BORROWER SHALL INDEMNIFY LENDER FOR THE FULL AMOUNT
OF TAXES AND OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES AND
OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS
SECTION 3.10) PAID BY LENDER OR ANY LIABILITY (INCLUDING PENALTIES AND
INTEREST, UNLESS SUCH PENALTIES OR SUCH INTEREST WERE CAUSED BY
LENDER'S GROSS NEGLIGENCE OR WILFUL MISCONDUCT) ARISING FROM OR WITH
RESPECT TO THAT PAYMENT, WHETHER OR NOT THOSE TAXES OR OTHER TAXES
WERE CORRECTLY OR LEGALLY ASSERTED. THIS INDEMNIFICATION SHALL BE
MADE WITHIN 30 DAYS FROM THE DATE LENDER MAKES WRITTEN DEMAND TO
BORROWER.
13
<PAGE> 18
(d) Within 30 days after the date of the payment of Taxes
or Other Taxes, Borrower shall furnish to Lender the original or a
certified copy of a receipt evidencing payment.
(e) Lender shall use good faith efforts to carry out its
obligations under this agreement in such a way as to reduce the amount
of Taxes or Other Taxes attributable to the Loan and other payments,
including the use of a different lending office, as long as such
actions would not adversely affect Lender, as determined by the Lender
in Lender's sole discretion.
(f) Lender shall endeavor as far as is reasonably
practical, but without binding commitment, to ensure that, if any
additional amount paid by Borrower under SECTION 3.10(A), (B), or (C),
in Lender's sole opinion (which shall not be open to question) is
recovered in whole or in part by Lender (whether through credit,
offset, deduction, or otherwise), then Lender shall reimburse Borrower
to the extent of the amount so recovered.
(g) As of the date of this agreement, Lender is entitled
to receive any payment or prepayment made without the withholding of
any Tax and agrees to provide to Borrower, within 30 days of the date
of this agreement, a copy of the appropriate Internal Revenue Service
form certifying its exemption from that Tax. Upon request, Lender
shall furnish such other certificates, statements, or other documents
as reasonably necessary to evidence its exemption from Tax, if
available.
(h) If any payment is due by Borrower to Lender under
SECTION 3.10(C) and if (within 30 days after Lender demands that
payment) Borrower requests that Lender contest the assessment of the
applicable Tax or Other Tax, then Lender shall take reasonably
necessary action to contest that assessment. If any Law requires the
payment of Taxes or Other Taxes before contesting the validity,
correctness, or legality of them or if any Taxes or Other Taxes have
been paid before Lender's receipt of notice from Borrower of its
desire to contest the applicable assessment, then Borrower shall make
the required reimbursement payment to Lender within the time specified
in SECTION 3.10(C). If payment of the assessment is not a condition
precedent to contesting the applicable Taxes or Other Taxes, then any
amount payable to Lender under SECTION 3.10(C) shall be made by at
least either (i) the date specified in the final determination
rendered by the appropriate Governmental Authority or (ii) if the
decision is appealed, the date specified in the final decision of the
appellate court. Lender may request that Borrower advance to Lender
the anticipated costs of any contest (including, with out limitation,
reasonable attorneys' fees) as a condition precedent to Lender being
obligated to carry out its duties to contest under this SECTION
3.10(I).
(i) As promptly as practicable after Lender becomes aware
of any circumstance or event that will cause additional amounts to
become owing by Borrower under this SECTION 3.10, then Lender shall
notify Borrower of the nature of that circumstance or event. Lender's
failure, however, to give that or any other notice to Borrower does
not impair Lender's right to receive, or Borrower's obligations to
pay, any additional amounts under this SECTION 3.10 so long as the
demand for payment of any additional amount under this SECTION 3.10 is
made within one year after Lender becomes aware that the additional
amount is owing by Borrower.
(j) Without prejudice to the survival of any other
agreement of Borrower, the agreements and obligations of Borrower
contained in this SECTION 3.10 shall, subject to CLAUSE (I) above,
survive the payment in full of the Obligation, release of all Lender
Liens, and termination or expiration of all Loan Documents.
3.11 Inadequacy of LIBOR. If (and on each occasion that) on the
second-Business Day before the commencement of any Interest Period for a
Eurodollar Loan Lender determines that dollar deposits in the amount of the
applicable Eurodollar Loan are not generally available in the London interbank
eurodollar market, or that
14
<PAGE> 19
reasonable means do not exist for ascertaining LIBOR, or that the rate at which
dollar deposits are being offered will not adequately and fairly reflect the
cost to Lender of making or maintaining that Eurodollar Loan for that Interest
Period, then (a) Lender may so notify Borrower and (b) until Lender notifies
Borrower that the circumstances giving rise to the first notice no longer
exist, any Advance Request is deemed to be for a Base-Rate Loan and each
Eurodollar Loan must convert to a Base-Rate Loan at the end of its Interest
Period. Each foregoing determination by Lender is conclusive, absent manifest
error.
3.12 Reserve Requirements and Change in Circumstances.
(a) Notwithstanding any other provision, if after the
Closing Date, the introduction of any new Law or any change in
existing Law (whether or not having the force of Law) imposes,
modifies, or deems applicable any reserve, special deposit, or similar
requirement against assets of, deposits with or for the account of, or
credit or credit commitments extended by, Lender, or imposes on the
Lender or the London interbank market any other condition affecting
this agreement or the Loan that is, in each case not otherwise
included in the calculation of LIBOR, and the result is to increase
the cost to Lender of making or maintaining the Loan or to reduce any
amount received or receivable by Lender or under any Loan Document
(whether of principal, interest, or otherwise) by a material amount,
then Borrower shall pay to Lender the additional costs incurred or
reduction suffered. Borrower shall make that payment to Lender within
30 days after Lender gives to Borrower a certificate stating the
change that has occurred or the reserve requirements or other
conditions which have been imposed, the amount of the additional costs
or reduction and the way in which that amount has been calculated.
Lender must have used good-faith and reasonable efforts to specify a
new lending office with a view to mitigating the consequences of any
occurrence under this section that would not result in any additional
costs, expenses, or risks to Lender that are not reimbursed by
Borrower or be in any other respect prejudicial to Lender. A
certificate delivered by Lender to Borrower under this section is
conclusive, absent manifest error.
(b) If after the Closing Date, Lender determines that the
applicability of any Law or guideline adopted pursuant to or arising
out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the
adoption after the Closing Date of any other Law or guideline
regarding capital adequacy, or any change in any of the foregoing or
any change in the interpretation or administration of any of the
foregoing by any Governmental Authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or
compliance by Lender or Lender's holding company with any request or
directive regarding capital adequacy (whether or not having the force
of Law) of any such Governmental Authority, central bank, or
comparable agency, has or would have the effect of reducing the rate
of return on Lender's capital or on the capital of Lender's holding
company as a consequence of the Loan Documents or the Loan to a level
below that which Lender or Lender's holding company could have
achieved but for that adoption, change, or compliance (taking into
consideration Lender's policies and the policies of Lender's holding
company with respect to capital adequacy) by a material amount, then,
from time to time, Borrower shall pay to Lender the additional amount
or amounts as will compensate Lender or Lender's holding company for
that reduction. That payment by Borrower to Lender shall be made
within 30 days after the date on which Lender gives to Borrower a
certificate setting forth those amount or amounts, together with a
description of the manner in which they were calculated. A
certificate delivered by Lender to Borrower under this section is
conclusive, absent manifest error.
(c) Lender's failure to demand compensation for any
increased costs or reduction in amounts received or receivable or
reduction in return on capital with respect to any Interest Period is
not a waiver of Lender's rights to demand compensation for any
increased costs or reduction in amounts received or receivable or
reduction in return on capital in that Interest Period or in any other
Interest
15
<PAGE> 20
Period. The protection of this SECTION 3.12 is available to Lender
regardless of any possible contention of the invalidity or
inapplicability of the Law or guideline or other change or condition
that occurred or is imposed and survives for the repayment of the
Obligation, release of Lender Liens, and termination or expiration of
the Loan Documents.
(d) Lender's cost of making or maintaining the Loan may
fluctuate as a result of the applicability of reserve requirements
imposed by the Board of Govenors of the Federal Reserve System at the
ratios provided for in Regulation D on the date of this agreement.
Borrower shall pay to Lender from time to time such amounts as shall
be necessary to compensate Lender for the portion of the cost of
making or maintaining the Loan resulting from any such reserve
requirements provided for in Regulation D as in effect now or in the
future, it being understood that the rates of interest applicable to
the Loan have been determined on the assumption that no such reserve
requirements exist or will exist and that such rates do not reflect
costs imposed on Lender in connection with such reserve requirements.
(e) As promptly as practicable after Lender becomes aware
of any circumstance or event that will cause additional amounts to
become owing by Borrower under this SECTION 3.12, then Lender shall
notify Borrower of the nature of that circumstance or event. Lender's
failure, however, to give that or any other notice to Borrower does
not impair Lender's Right to receive, or Borrower's obligations to
pay, any additional amounts under this SECTION 3.12 so long as the
demand for payment of any additional amount under this SECTION 3.12 is
made within one year after Lender becomes aware that the additional
amount is owing by Borrower.
(f) Without prejudice to the survival of any other
agreement of Borrower, the agreements and obligations of Borrower
contained in this SECTION 3.12 shall, subject to CLAUSE (E) above,
survive the payment in full of the Obligation, release of all Lender
Liens, and termination or expiration of all Loan Documents.
3.13 Change In Legality.
(a) Notwithstanding any contrary provision, if any change
in any Law or any new Law makes it unlawful for Lender to make or
maintain any Eurodollar Loan at LIBOR or to give effect to its
obligations with respect to any Eurodollar Loan at LIBOR, then, by
written notice to Borrower, Lender may (i) declare that LIBOR is no
longer available and (ii) require that the entire Loan be priced at
the Base Rate, in which event the Loan shall be automatically
converted to a Base-Rate Loan as of the effective date of that notice
as provided in CLAUSE (B) below and all payments and prepayments of
principal that would otherwise have been applied to repay any
converted Eurodollar Loan shall instead be applied to repay the
Base-Rate Loan resulting from that conversion.
(b) For purposes of CLAUSE (A) above, a notice to
Borrower by Lender is in respect of each Eurodollar Loan on the
earliest of either (i) the last day of its Interest Period, (ii) the
date of Borrower's receipt of the notice, or (iii) the date required
by Law.
(c) Lender shall use good-faith and reasonable efforts to
specify a new lending office for the Loan, with a view to effecting
compliance with the Law referred to in CLAUSE (A) above that would not
result in any additional costs, expenses, or risks to Lender that are
not reimbursed by Borrower or be in any other respect prejudicial to
Lender.
3.14 INDEMNITY. BORROWER SHALL INDEMNIFY LENDER AGAINST ANY
REASONABLE LOSS OR EXPENSE WHICH LENDER MAY SUSTAIN OR INCUR AS A CONSEQUENCE
OF (a) ANY FAILURE BY BORROWER TO FULFILL ON THE DATE OF ANY ADVANCE THE
APPLICABLE CONDITIONS IN SECTION 5, (b) ANY PAYMENT OR PREPAYMENT OF THE LOAN
REQUIRED BY ANY OTHER PROVISION OF THIS AGREEMENT OR OTHERWISE
16
<PAGE> 21
MADE ON A DATE OTHER THAN AN INTEREST-PAYMENT DATE, (c) ANY DEFAULT IN PAYMENT
OR PREPAYMENT OF ALL OR ANY PART OF THE PRINCIPAL AMOUNT OR INTEREST ACCRUED ON
THE LOAN, AS AND WHEN DUE AND PAYABLE, OR (d) THE OCCURRENCE OF ANY DEFAULT OR
POTENTIAL DEFAULT, IN EACH CASE INCLUDING, BUT NOT LIMITED TO, ANY LOSS OR
REASONABLE EXPENSE SUSTAINED OR INCURRED OR TO BE SUSTAINED OR INCURRED IN
LIQUIDATING OR REDEPLOYING DEPOSITS FROM THIRD PARTIES ACQUIRED TO EFFECT OR
MAINTAIN THE LOAN. SUCH LOSS OR REASONABLE EXPENSE SHALL INCLUDE, WITHOUT
LIMITATION, AN AMOUNT EQUAL TO THE EXCESS, IF ANY, AS REASONABLY DETERMINED BY
LENDER OF (i) ITS COST OF OBTAINING THE FUNDS FOR THE LOAN BEING PAID, PREPAID,
OR NOT BORROWED (BASED ON THE APPLICABLE LIBOR) FOR THE PERIOD FROM THE DATE OF
SUCH PAYMENT, PREPAYMENT, OR FAILURE TO BORROW OR REFINANCE TO THE LAST DAY OF
THE INTEREST PERIOD FOR APPLICABLE EURODOLLAR LOAN (OR, IN THE CASE OF A
FAILURE TO BORROW OR REFINANCE, THE INTEREST PERIOD FOR THE LOAN WHICH WOULD
HAVE COMMENCED ON THE DATE OF SUCH FAILURE) OVER (ii) THE AMOUNT OF INTEREST
THAT WOULD BE REALIZED BY LENDER IN REDEPLOYING THE FUNDS SO PAID, PREPAID, OR
NOT BORROWED OR REFINANCED FOR SUCH PERIOD OR INTEREST PERIOD, AS THE CASE MAY
BE. LENDER'S CERTIFICATE SETTING FORTH ANY AMOUNT OR AMOUNTS THAT LENDER IS
ENTITLED TO RECEIVE UNDER THIS SECTION SHALL BE DELIVERED TO BORROWER AND IS
CONCLUSIVE, ABSENT MANIFEST ERROR.
3.15 Fees. Borrower shall pay the following fees to Lender that,
in each case, are not compensation for the use, detention, or forbearance of
money, are in addition to, and not in lieu of, interest and expenses otherwise
described in this agreement, are non-refundable, bear interest (to the fullest
extent permitted by Law and if not paid when due) at the Default Rate, and are
calculated on the bases of a year of 365 or 366 days, as the case may be:
(a) Arrangement Fee. An arrangement fee as provided in
the separate letter agreement between Borrower and Lender required to
be delivered by SCHEDULE 5.
(b) Commitment Fee. A commitment fee equal to 0.50% of
amounts available to be re-borrowed under SECTION 2.1 payable
quarterly as it accrues on the last day of each March, June,
September, and December and on the Termination Date.
3.16 Maximum-Interest Rate. Regardless of any provision in any
Loan Document, Lender is never entitled to receive, collect, or apply as
interest on the Obligation any amount in excess of interest calculated at the
Maximum Rate. If Lender ever receives, collects, or applies as interest any
such excess, then (a) the amount which would be excessive interest is deemed to
be a partial prepayment of principal and treated as such, and (b) if the
principal of the Obligation is fully paid, any remaining excess shall be paid
to Borrower.
SECTION 4 SECURITY.
4.1 Collateral. Borrower shall cause the full payment and
performance of the Obligation to be secured by Lender Liens on all of the
following items and types of property (together with all cash and noncash
proceeds and other related items and types of property described in the
Security Agreements, the "COLLATERAL"):
(a) FoxMeyer Stock that (i) has a Collateral Value of at
least $80,000,000 and is pledged to Lender as of the Closing Date and
(ii) is subsequently pledged to Lender under SECTION 2.4, if any.
(b) Shares of Phar-Mor common stock purchased by Hamilton
Morgan with a stated value (in accordance with the Plan of
Reorganization) on the Closing Date of at least $20,940,000.
17
<PAGE> 22
(c) Publicly-Traded Stock -- in addition to the Phar-Mor
stock pledged under CLAUSE (B) above -- that (i) has a Collateral
Value of at least $10,000,000 and is pledged to Lender as of the
Closing Date and (ii) is subsequently pledged to Lender under SECTION
2.4, if any.
(d) All right, title, and interest of Borrower in
Hamilton Morgan.
Each pledge of securities under the Loan Documents must be in compliance with
Regulation U, must be upon forms substantially in the form of the appropriate
Security Agreement, and all applicable provisions of the Loan Documents,
including, without limitation, SECTIONS 7.10 and 7.12.
4.2 Partial Release. At Borrower's expense, Lender shall release
its Lender Liens (and return any certificated securities the subject of any
such release to the pledgor of them) on the following Collateral under the
following circumstances if no Default, Potential Default, or Material-Adverse
Effect exists or would occur upon the release and if the release would not
cause a violation with Regulation U:
(a) Borrower may pledge additional Publicly-Traded Stock
in substitution for, and request and obtain the release of the Lender
Liens on, other Publicly-Traded Stock so long as -- immediately
following any such substitution and release -- the Collateral Base
applicable to Publicly-Traded Stock is not less than either (i) the
Collateral Base immediately before such substitution and release if
before March 31, 1996, or (ii) 150% of the unpaid principal balance of
the Loan on or after March 31, 1996.
(b) From time to time upon Borrower's request after March
31, 1996, at Borrower's expense, and to the extent that the Collateral
Base applicable to Publicly-Traded Stock exceeds 150% of the unpaid
principal balance of the Loan (i.e., an "EXCESS), then Lender shall
release its Lender Liens on Publicly-Traded Stock to the extent of
that excess without impairing its Lender Liens on all other
Publicly-Traded Stock.
(c) Upon a prepayment under SECTION 3.7(A), if a
Collateral-Base Deficiency will not exist immediately after the
release, Lender shall release its Lender Liens on the Phar-Mor Stock
or Borrower's interest in Hamilton Morgan, as the case may be, the
subject of that sale.
(d) Upon the release, sale, credit bid at foreclosure, or
other disposition of all of the Phar-Mor Stock that is Collateral,
Lender shall release its Lender Liens on Borrower's interest in
Hamilton Morgan.
(e) Upon the sale by Borrower of all of its interest in
Hamilton Morgan and a release of the Lender Liens in Borrower's
interest in Hamilton Morgan, Lender shall release its Lender Liens in
all of the Phar-Mor Stock that is then Collateral.
These are partial releases only in that they do not affect the Lender Liens on
any Collateral not specifically released.
SECTION 5 CONDITIONS PRECEDENT. Lender is not obligated to fund any Advance
unless Lender has received all of the items described on SCHEDULE 5 on or
before the Closing Date or such other deadline as may be specified on SCHEDULE
5. In addition, Lender is not obligated to fund (as opposed to continue or
convert) any initial or subsequent Advance unless on the applicable Advance
Date and after giving effect to the requested Advance: (a) Lender timely
receives an Advance Request; (b) all of the representations and warranties in
the Loan Documents are true and correct in all material respects (unless they
speak to a specific date or are based on facts which have changed by
transactions contemplated or expressly permitted by this agreement); (c) no
Material-Adverse Effect, Default, or Potential Default exists; (d) none of the
matters disclosed in any amendments to SCHEDULE 6.11 or similar matters
described in any SEC Report delivered to Lender after the Closing Date are
18
<PAGE> 23
objected to by Lender in its sole discretion; (e) no Collateral-Base Deficiency
exists; (f) no limitation in SECTION 2.1 is exceeded; and (g) the Advance would
not result in the violation of Regulation U. Each Advance Request constitutes
Borrower's representation and warranty that the conditions in CLAUSES (B)
through (F) above are satisfied. Upon Lender's reasonable request, Borrower
shall deliver to Lender evidence substantiating any of the matters in the Loan
Documents that are necessary to enable Borrower to qualify for any Advance.
Each condition precedent in this agreement (including, without limitation, each
on SCHEDULE 5) is material to the transactions contemplated by this agreement,
and time is of the essence with respect to each condition precedent.
SECTION 6 REPRESENTATIONS AND WARRANTIES. To induce Lender to make the Loan,
Borrower represents and warrants to Lender that:
6.1 Organization. Borrower is a corporation, duly organized and
existing in good standing under Delaware Laws, is duly qualified and is in good
standing in all other states in which it is doing business, and has the
corporate power and authority to own its properties and assets and to transact
the business in which it is engaged and is or will be qualified in those states
where it proposes to transact business in the future. SCHEDULE 6.1 describes
each of Borrower's Subsidiaries by name, domicile, and ownership.
6.2 Authorization and Power. Borrower has the corporate power and
requisite authority to execute, deliver, and perform the Loan Documents to be
executed by it. Borrower has taken all corporate action necessary to authorize
the execution, delivery, and performance of the Loan Documents by it.
Borrower is and will continue to be duly authorized to perform and execute the
Loan Documents.
6.3 No Conflicts or Consents. Neither the execution and delivery
of, nor the consummation of any of the transactions contemplated in, nor
compliance with the terms and provisions of, the Loan Documents will contravene
or materially conflict with Borrower's corporate charter or bylaws or any
provision of Law to which Borrower is subject, or any judgment, license, order,
or permit applicable to Borrower, or any indenture, loan agreement, mortgage,
deed of trust, or other agreement or instrument to which Borrower is a party or
by which Borrower may be bound or subject. No consent, approval, authorization,
or order of any Governmental Authority or third party is required in connection
with the execution and delivery by Borrower of, or the consummation of the
transactions contemplated by, the Loan Documents.
6.4 Enforceable Obligations. The Loan Documents to which Borrower
is intended to be a party have been duly executed and delivered by Borrower and
are the legal and binding obligations of Borrower, enforceable in accordance
with their respective terms, except as limited by Debtor Laws and general
principles of equity.
6.5 Liens. All of the properties and assets of Borrower are free
and clear of all Liens except Permitted Liens.
6.6 Indebtedness. Borrower has no Indebtedness except Permitted
Indebtedness.
6.7 Financial Condition. Borrower has delivered to Lender copies
of Borrower's Current Financials that (a) are true and correct in all material
respects, (b) fairly represent the consolidated and, where appropriate,
consolidating financial condition and results of operations of the Companies as
of the dates of the Current Financials and for the periods covered by them, and
(c) have been prepared in accordance with GAAP applied on a basis consistent
with that of prior periods. There are no obligations, liabilities, or
Indebtedness (including contingent and indirect liabilities and obligations) of
Borrower which are (separately or in the aggregate) material which are required
by GAAP to be reflected in financial statements and which are not so reflected
in the Current Financials. No changes having a Material-Adverse Effect have
occurred since the date of the Current Financials. On the date of this
agreement and on each Advance Date, Borrower is, after giving effect to the
Advance, solvent.
19
<PAGE> 24
6.8 No Default. No Default or a Potential Default exists.
6.9 Material Agreements. Borrower is in compliance in all
material respects with the terms and conditions of each of the material
contracts, leases, loan agreements, indentures, mortgages, security agreements
and other material agreements and obligations to which it is a party or by
which any of its properties is bound, non-compliance with which could
reasonably likely have a Material-Adverse Effect.
6.10 Use of Proceeds; Margin Stock. Borrower shall use the
proceeds of the initial Advance of the Loan on the Closing Date solely as
described in the recitals to this agreement and the proceeds of all other
Advances only for working capital and general corporate purposes. Neither
Borrower nor any Person acting on behalf of Borrower has taken or will take any
action which might cause any of the Loan Documents to violate Regulation U or
any other regulations of the Board of Governors of the Federal Reserve System
or to violate Section 8 of the Securities Exchange Act of 1934.
6.11 No Litigation. Except as disclosed Borrower's SEC Reports as
of the Closing Date or on SCHEDULE 6.11 -- as supplemented from time to time,
subject to SECTION 5(D), by subsequent SEC Reports and any amendment to that
schedule that is dated, executed, and delivered by Borrower to Lender to
reflect changes in that schedule -- and matters covered (subject to reasonable
and customary deductible and retention) by insurance or indemnification
agreements (a) Borrower is not subject to, or aware of the threat of, any
Litigation that is reasonably likely to be determined adversely to Borrower
and, if so adversely determined, could reasonably likely have a
Material-Adverse Effect, and (b) no outstanding and unpaid judgments against
Borrower exist that could reasonably likely have a Material-Adverse Effect.
6.12 Taxes. All tax returns required to be filed by Borrower in
any jurisdiction have been filed and all taxes, assessments, fees, and other
governmental charges upon Borrower or upon any of its properties, income, or
franchises have been paid prior to the time that such taxes could give rise to
a Lien, except for those taxes being contested in good faith by Borrower
through appropriate proceedings after the establishment of appropriate reserves
in accordance with GAAP.
6.13 Compliance with Law. To the best of Borrower's knowledge
after reasonable inquiry, Borrower is in substantial compliance in all material
respects with all Laws, including, without limitation, Environmental Laws,
which are applicable to Borrower or its other properties and assets. Borrower
has obtained all federal, state, and local permits required to enable it to
conduct its business in the manner in which it is presently conducted.
6.14 Employee Plans. Except where not a Material-Adverse Effect
(a) no Employee Plan has incurred an "accumulated funding deficiency" (as
defined in Section 302 of ERISA or Section 412 of the Internal Revenue Code),
(b) Borrower has not incurred liability -- except for liabilities for premiums
that have been paid or that are not past due -- under ERISA to the PBGC in
connection with any Employee Plan, (c) Borrower has not withdrawn in whole or
in part from participation in a Multiemployer Plan, (d) Borrower has not
engaged in any "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code), (e) no "reportable event" (as
defined in Section 4043 of ERISA) has occurred, excluding events for which the
notice requirement is waived under applicable PBGC regulations, (f) neither
Borrower nor any of its Affiliates has any liability under or is subject to any
Lien under ERISA or the Internal Revenue Code to or on account of any employee
benefit plan, program, scheme, or arrangement established or maintained by
Borrower or any of its Affiliates or to which any of them contributes or had an
obligation to contribute, (g) each Employee Plan complies in all material
respects, both in form and operation, with ERISA and the Internal Revenue Code,
and (h) no Multiemployer Plan is in reorganization within the meaning of
Section 418 of the Internal Revenue Code.
6.15 Leases. Borrower enjoys peaceful and undisturbed possession
under all leases necessary for the operation of its properties and assets. All
material leases in which Borrower is lessee are in full force and effect.
20
<PAGE> 25
6.16 Labor Matters. Except where not a Material-Adverse Effect (a)
no actual or threatened strikes, labor disputes, slow downs, walkouts, work
stoppages, or other concerted interruptions of operations that involve any
employees employed at any time in connection with the business activities or
operations at any real property exist, (b) hours worked by and payment made to
the employees of Borrower have not been in violation of the Fair Labor
Standards Act or any other applicable Laws pertaining to labor matters, (c) all
payments due from Borrower for employee health and welfare insurance,
including, without limitation, workers compensation insurance, have been paid
or accrued as a liability on its books, and (d) Borrower's business activities
and operations are in compliance with OSHA and other applicable health and
safety Laws.
6.17 Intellectual Property. Except where not a Material-Adverse
Effect (a) Borrower owns or has the right to use all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications and trade names necessary to continue to conduct its businesses as
presently conducted by it and proposed to be conducted by it immediately after
the date of this agreement, (b) Borrower is conducting its business without
infringement or claim of infringement of any license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual
property right of others, and (c) no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property of Borrower exists.
6.18 Hazardous Substances. Except as disclosed in Borrower's SEC
Reports as of the Closing Date, Borrower (a) has not received any notice or
other communication or otherwise learned of any Environmental Liability which
would individually or in the aggregate have a Material-Adverse Effect arising
in connection with (i) any non-compliance with or violation of the requirements
of any Environmental Law, or any permit issued under any Environmental Law, or
(ii) the Release of any Hazardous Material into the environment, (b) has no
actual liability or pending action in connection with the Release of any
Hazardous Material into the environment which would individually or in the
aggregate have a Material-Adverse Effect, or (c) has not received notice of
any investigation by any Governmental Authority evaluating whether any remedial
action is needed to respond to a Release or threatened Release of any Hazardous
Material into the environment for which Borrower is or may be liable or which
involve any of Borrower's properties, nor has Borrower filed any notice under
any Environmental Law (i) reporting a Release of any Hazardous Material which
Release has not been in compliance with all Environmental Laws or (ii)
reporting a violation of any applicable Environmental Law the violation of
which will or reasonably could be expected to result in a Material-Adverse
Effect.
6.19 Full Disclosure. There is no material fact that Borrower
has not disclosed to Lender that could reasonably likely have a
Material-Adverse Effect or a material and adverse effect on the properties,
business, or condition (financial or otherwise) of Borrower. Neither the
Current Financials, the Disclosure Statement, nor any certificate or statement
delivered by Borrower to Lender in connection with negotiations of the Loan
Documents contains any untrue statement of a material fact or omits to state
any material fact necessary to keep the statements contained in the Loan
Documents from being misleading.
SECTION 7 AFFIRMATIVE COVENANTS. For so long as Lender is committed to lend
under this agreement and until the Obligation has been fully paid and
performed, Borrower covenants and agrees with Lender as follows unless it first
obtains Lender's written consent to the contrary:
7.1 Financials, Reports, and Documents. Borrower shall deliver to
Lender each of the following:
(a) Annual Financials. As soon as available and in any
event within 120 days after the close of each fiscal year of Borrower,
Financials showing the consolidated and consolidating financial
condition and results of operations of the Companies as of, and for
the year ended on, that last day, in each case setting forth in
comparative form the figures for the preceding fiscal year, all in
reasonable detail, and accompanied by (i) an opinion of independent
public accountants of recognized national
21
<PAGE> 26
standing selected by Borrower, to the effect that the consolidated
portion of those Financials have been prepared in accordance with GAAP
consistently maintained and applied (except as noted in it) and that
the examination of such accounts in connection with those Financials
has been made in accordance with generally accepted auditing standards
and, accordingly, includes such tests of the accounting records and
such other auditing procedures as were considered necessary in the
circumstances, (ii) a certificate of a Responsible Officer of Borrower
that all payments made by any Company under the Tax-Sharing Agreement
during that fiscal year were made in accordance with its terms, and
(iii) a Compliance Certificate.
(b) Quarterly Financials. As soon as available, and in
any event within 50 days after the end of each fiscal quarter (except
the last) of each fiscal year of Borrower, Financials showing the
consolidated financial condition and results of operations of the
Companies as of, and for the year ended on that last day, in each case
setting forth in comparative form the figures for the corresponding
period of the preceding fiscal year, all in reasonable detail, and
accompanied by (i) a Compliance Certificate and (ii) a description of
the formation of or investment in any Subsidiary not otherwise
described on SCHEDULE 6.1.
(c) Projections. As soon as available and in any event
within 50 days after the last day of each fiscal quarter (i) cash-flow
projections reflecting in form and reasonable detail acceptable to
Lender Borrower's cash sources and uses for the five-quarterly period
commencing with the quarter ending on that last day, and (ii) a
written report specifying the amount and type of each payment made
during the quarter ended on that last day by any of the Companies
under the Tax-Sharing Agreement.
(d) Weekly Collateral-Base Certificate. Each Friday (or
Thursday if Friday is not a Business Day), a Collateral-Base
Certificate substantially in the form of EXHIBIT C-3.
(e) Quarterly Collateral-Base Certificate. As soon as
available, and in any event within 50 days after the last day of each
fiscal quarter, a Collateral-Base Certificate substantially in the
form of EXHIBIT C-4.
(f) Other Reports. All reports regularly provided to the
lenders under the Banque Paribas Facility or the FoxMeyer Corporation
Facility, concurrently with the delivery of those reports to those
lenders, and copies of all regulatory filings, concurrently with the
filing of those reports.
(g) Schedule 5. All items required to be delivered after
the Closing Date by, and within the deadlines specified on, SCHEDULE
5.
(h) Other Information. Such other information concerning
the business, properties, or financial condition of Borrower as Lender
reasonably requests.
7.2 Notice of Default or Potential Default. Borrower shall
furnish to Lender, promptly upon becoming aware of the existence of any
condition or event which constitutes a Default or Potential Default, written
notice specifying the nature and period of existence thereof and the action
which Borrower is taking or proposes to take to cure such Default or Potential
Default.
7.3 Other Notices. Borrower shall promptly (but in any event not
more than 30 days after the occurrence), notify Lender of the occurrence of any
of the following events: (a) Any change in its financial condition or its
business which could reasonably likely have a Material-Adverse Effect; (b) any
default in any material agreement of the type referred to in SECTION 6.9 to
which Borrower is a party (which notice shall be accompanied by a copy of such
agreement, as modified), (c) any claim, demand, action, event, or report
indicating any potential or actual liability arising in connection with (i) the
non-compliance with or violation of the
22
<PAGE> 27
requirements of any Environmental Law which individually or in the aggregate
could reasonably likely have a Material- Adverse Effect, (ii) the Release of
any Hazardous Material into the environment which individually or in the
aggregate could reasonably likely have a Material-Adverse Effect, or (iii) the
existence of any Environmental Lien on any properties or assets of Borrower,
(d) any remedial action taken by Borrower in response to any Environmental
Complaint or Environmental Liability which individually or in the aggregate
could reasonably likely have a Material-Adverse Effect, (e) the listing of any
of Borrower's properties on CERCLIS or any state counterpart, and (f) any
change in any material fact or circumstance represented or warranted by
Hamilton Morgan in its Security Agreement and any claim, action, or proceeding
challenging the Lender Lien on or affecting title to any of the Phar-Mor Stock
that is Collateral (and, at Lender's request, Borrower shall appear in and
defend any such action or proceeding at Borrower's expense).
7.4 Compliance with Loan Documents. Borrower shall promptly
comply with any and all covenants and provisions of the Loan Documents executed
by it.
7.5 Compliance with Law. Borrower shall comply with all
applicable Laws, including, without limitation Environmental Laws, applicable
to it or any of its property, business operations, or transactions, a breach of
which could reasonably likely have a Material-Adverse Effect.
7.6 Compliance with Material Agreements. Borrower shall comply in
all material respects with all material agreements (of the type referred to in
SECTION 6.9), indentures, mortgages, or documents binding on it or affecting
its properties or business.
7.7 Operations of Properties. Borrower shall act prudently and in
accordance with customary industry standards in managing or operating its
assets, properties, business, and investments. Borrower shall keep in good
working order and condition, ordinary wear and tear excepted, and all of its
assets and properties which are material to the conduct of its business.
7.8 Authorizations and Approvals. Borrower shall promptly obtain,
from time to time at its own expense, all such governmental licenses,
authorizations, consents, permits, and approvals as may be required to enable
it to comply with its obligations under the Loan Documents.
7.9 Inspection of Properties, Books, and Records; Access.
Borrower shall give any representative of Lender access upon reasonable notice
(which notice, in any event, shall be deemed reasonable if Borrower is given at
least one Business Day prior notice) during all normal business hours to, and
permit such representative to, examine, copy, or make excerpts from, any and
all books, records, and documents in the possession of Borrower and relating to
its affairs, and to inspect, subject to Borrower's safety procedures, any of
the properties and offices of Borrower. Borrower shall maintain complete and
accurate books and records of its transactions in accordance with good
accounting practices.
7.10 Further Assurances. Borrower shall make, execute, or endorse,
and acknowledge and deliver or file or cause the same to be done, all such
assignments, pledges, mortgages, collateral chattel mortgages, financing
statements, or other assurances, and take any and all such other action, as
Lender may, from time to time, deem reasonably necessary or proper in
connection with any of the Loan Documents, the obligations of Borrower
hereunder or thereunder, or for better assuring and confirming to Lender all or
any part of the Collateral.
7.11 Use of Credit. Borrower shall use the proceeds of the Loan
only for the purposes represented in this agreement.
7.12 Expenses. Within ten Business Days after demand accompanied
by an invoice describing the costs, fees, and expenses in reasonable detail,
Borrower shall pay (a) all costs, fees, and expenses paid or incurred
23
<PAGE> 28
by Lender incident to any Loan Document (including, without limitation, the
reasonable fees and expenses of Lender's counsel in connection with the
negotiation, preparation, delivery, and execution of the Loan Documents and any
related amendment, waiver, or consent), and (b) all reasonable costs and
expenses incurred by Lender in connection with the enforcement of the
obligations of Borrower or any other obligor under the Loan Documents or the
exercise of any rights under the Loan Documents (including, without limitation,
reasonable allocated costs of in-house counsel, other reasonable attorneys'
fees, and court costs), all of which are part of the Obligation, bearing
interest, (if not paid within ten Business Days after demand accompanied by an
invoice describing the costs, fees, and expenses in reasonable detail) at the
Default Rate until paid.
7.13 Maintenance of Existence, Assets, and Business. Borrower
shall (a) maintain its corporate existence and good standing in its state of
incorporation, and (b) except where not a Material-Adverse Effect (i) maintain
its authority to transact business and good standing in all other states, (ii)
maintain all licenses, permits, and franchises necessary for its business, and
(iii) keep all of its material assets that are useful in and necessary to its
business in good working order and condition (ordinary wear and tear excepted)
and make all necessary repairs and replacements.
7.14 Insurance. Borrower shall, at its cost and expense, maintain
with financially sound, responsible, and reputable insurance companies or
associations -- or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdictions in which it
operates -- insurance concerning its properties and businesses against
casualties and contingencies and of types and in amounts (and with co-insurance
and deductibles) as is customary in the case of similar businesses.
7.15 Environmental Matters. Borrower shall (a) operate and manage
its businesses and otherwise conduct its affairs in compliance with all
Environmental Laws and except to the extent noncompliance does not constitute a
Material- Adverse Effect, (b) promptly deliver to Lender a copy of any notice
received from any tribunal alleging that Borrower is not in compliance with any
Environmental Law if the allegation constitutes a Material-Adverse Effect, and
(c) promptly deliver to Agent a copy of any notice received from any Tribunal
alleging that Borrower has any potential Environmental Liability if the
allegation constitutes a Material-Adverse Effect.
7.16 INDEMNITY.
(a) AS USED IN THIS SECTION (i) "INDEMNITEE" MEANS
LENDER, EACH PRESENT AND FUTURE AFFILIATE OF LENDER, EACH PRESENT AND
FUTURE REPRESENTATIVE OF LENDER OR ANY OF THOSE AFFILIATES, AND EACH
PRESENT AND FUTURE SUCCESSOR AND ASSIGN OF LENDER OR ANY OF THOSE
AFFILIATES OR REPRESENTATIVES; AND (ii) "INDEMNIFIED LIABILITIE" MEANS
ALL PRESENT AND FUTURE, KNOWN AND UNKNOWN, FIXED AND CONTINGENT,
ADMINISTRATIVE, INVESTIGATIVE, JUDICIAL, AND OTHER CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION, INVESTIGATIONS, SUITS, PROCEEDINGS, AMOUNTS
PAID IN SETTLEMENT, DAMAGES, JUDGMENTS, PENALTIES, COURT COSTS,
LIABILITIES, AND OBLIGATIONS -- AND ALL PRESENT AND FUTURE COSTS,
EXPENSES, AND DISBURSEMENTS (INCLUDING, WITHOUT LIMITATION, ALL
REASONABLE ATTORNEYS' FEES AND EXPENSES WHETHER OR NOT SUIT OR OTHER
PROCEEDING EXISTS OR ANY INDEMNITEE IS PARTY TO ANY SUIT OR OTHER
PROCEEDING) IN ANY WAY RELATED TO ANY OF THE FOREGOING -- THAT MAY AT
ANY TIME BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY
INDEMNITEE AND IN ANY WAY RELATING TO OR ARISING OUT OF ANY (A) LOAN
DOCUMENT, TRANSACTION CONTEMPLATED BY ANY LOAN DOCUMENT, OR
COLLATERAL, (B) ENVIRONMENTAL LIABILITY IN ANY WAY RELATED TO ANY
COMPANY, PREDECESSOR OF ANY COMPANY, COLLATERAL, OR ACT, OMISSION,
STATUS, OWNERSHIP, OR OTHER RELATIONSHIP, CONDITION, OR CIRCUMSTANCE
CONTEMPLATED BY, CREATED UNDER, OR ARISING PURSUANT TO OR IN
CONNECTION WITH ANY LOAN DOCUMENT, (C) AT ANY TIME WHILE BORROWER OWNS
ANY INTEREST IN HAMILTON MORGAN AND HAMILTON MORGAN OWNS ANY PHAR-MOR
STOCK, ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
24
<PAGE> 29
STATEMENT OF ANY MATERIAL FACT CONTAINED IN ANY REGISTRATION STATEMENT
UNDER WHICH ANY PHAR-MOR STOCK IS REGISTERED UNDER THE SECURITIES ACT
OR OTHER SECURITIES LAWS, ANY PRELIMINARY PROSPECTUS OR FINAL
PROSPECTUS CONTAINED THEREIN, OR ANY AMENDMENT OR SUPPLEMENT THERETO
OR ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT
REQUIRED TO BE STATED OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT
MISLEADING, REGARDLESS OF ANY INVESTIGATION MADE BY OR ON BEHALF OF
ANY INDEMNITEE, OR (D) INDEMNITEE'S SOLE OR CONCURRENT ORDINARY
NEGLIGENCE.
(b) BORROWER SHALL INDEMNIFY EACH INDEMNITEE FROM AND
AGAINST, PROTECT AND DEFEND EACH INDEMNITEE FROM AND AGAINST, HOLD
EACH INDEMNITEE HARMLESS FROM AND AGAINST, AND ON DEMAND PAY OR
REIMBURSE EACH INDEMNITEE FOR, ALL INDEMNIFIED LIABILITIES.
(c) THE FOREGOING PROVISIONS (i) ARE NOT LIMITED IN
AMOUNT EVEN IF THAT AMOUNT EXCEEDS THE OBLIGATION,(ii) INCLUDE,
WITHOUT LIMITATION, REASONABLE FEES AND EXPENSES OF ATTORNEYS AND
OTHER COSTS AND EXPENSES OF LITIGATION OR PREPARING FOR LITIGATION AND
DAMAGES OR INJURY TO PERSONS, PROPERTY, OR NATURAL RESOURCES ARISING
UNDER ANY STATUTORY OR COMMON LAW, PUNITIVE DAMAGES, FINES, AND OTHER
PENALTIES, AND (iii) ARE NOT AFFECTED BY THE SOURCE OR ORIGIN OF ANY
HAZARDOUS SUBSTANCE, AND(iv) ARE NOT AFFECTED BY ANY INDEMNITEE'S
INVESTIGATION, ACTUAL OR CONSTRUCTIVE KNOWLEDGE, COURSE OF DEALING, OR
WAIVER.
(d) HOWEVER, NO INDEMNITEE IS ENTITLED TO BE INDEMNIFIED
UNDER THE LOAN DOCUMENTS FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR
WILFUL MISCONDUCT.
(e) THE PROVISIONS OF AND INDEMNIFICATION AND OTHER
UNDERTAKINGS UNDER THIS SECTION SURVIVE THE FORECLOSURE OF ANY LENDER
LIEN OR ANY TRANSFER IN LIEU OF THAT FORECLOSURE, THE SALE OR OTHER
TRANSFER OF ANY COLLATERAL OR REAL PROPERTY TO ANY PERSON, THE
SATISFACTION OF THE OBLIGATION, THE TERMINATION OF THE LOAN DOCUMENTS,
AND THE RELEASE OF ANY OR ALL LENDER LIENS.
SECTION 8 NEGATIVE COVENANTS. For so long as Lender is committed to lend
under this agreement and until the Obligation has been fully paid and
performed, Borrower covenants and agrees with Lender as follows unless it first
obtains Lender's written consent to the contrary:
8.1 Indebtedness. Borrower may not create, incur, permit or suffer
to exist any Indebtedness except Permitted Indebtedness.
8.2 Liens. Borrower may not create, incur, permit or suffer to
exist (a) any Lien on any of its assets except Permitted Liens or (b) enter
into or permit to exist any arrangement or agreement that directly or
indirectly prohibits Borrower from creating or incurring any Lien on any of its
assets except the Loan Documents and the Banque Paribas Facility.
8.3 Investments. Borrower may not make any Investments except
Permitted Investments.
8.4 Liquidation, Consolidations, Mergers, and Dispositions of
Substantial Assets. Borrower may not dissolve or liquidate, or consolidate
with or merge into another Person, or sell, transfer, lease, or otherwise
dispose of all or any substantial part of its property or assets or business.
8.5 Environmental Matters. Except in compliance with relevant
Environmental Laws, Borrower may not (a) cause or permit any Hazardous Material
to be generated, placed, held, located or disposed of on, under
25
<PAGE> 30
or at any property now owned or hereafter owned, leased or otherwise controlled
directly or indirectly by Borrower or (b) permit any such property ever to be
used as a dumpsite or storage site (whether permanent or temporary) for any
Hazardous Material, if such actions individually or in the aggregate could
likely have a Material-Adverse Effect.
8.6 Distributions. Borrower may not:
(a) Declare, make, or pay any Distribution except any
Permitted Distributions at any time when neither a Default nor
Potential Default exists or would occur as a result of the
Distribution; or
(b) Permit FoxMeyer Corporation to enter into or permit
to exist any arrangement or agreement that directly or indirectly
limits or restricts, in any way (including, but not limited to,
modifications in amount or time), the declaration, making, or paying
of any Distribution to Borrower except as (i) presently limited or
restricted by the express provisions of any credit agreements
identified on Schedule 2 to the Banque Paribas Facility, (ii) may be
limited or restricted by the express provisions of future agreements
that are no more restrictive regarding such matters than the
provisions of agreements governing such presently existing credit
agreements identified on Schedule 2 to the Banque Paribas Facility,
and (iii) may be limited or restricted by the corporate Laws of the
jurisdiction in which FoxMeyer Corporation is incorporated.
8.7 Payroll Taxes. Borrower may not use any proceeds of any
Advance to pay the wages of employees unless a timely payment to or deposit
with the United States of America of all amounts of Taxes or Other Taxes
required to be deducted and withheld with respect to such wages is also made.
8.8 Certain Amendments. Borrower may not amend, modify, terminate,
or forfeit (or suffer to exist any amendment, modification, termination, or
forfeiture of) any of the following in any material respect: (a) Its corporate
charter or bylaws; (b) the Tax-Sharing Agreement except amendments or
modifications necessary to comply with changes of applicable tax Laws; (c) the
Plan of Reorganization; (d) the Hamilton Morgan/FoxMeyer Registration
Agreement; or (e) the LLC Agreement except -- in the case of CLAUSES (A)
through (E) above -- any change that is not reasonably likely to adversely
affect in any respect Lender's rights or any Lender Liens in respect of the
Phar-Mor Stock or Borrower's interests in Hamilton Morgan constituting
Collateral or any other changes consented to by Lender (which consent may not
be unreasonably withheld). Borrower may not permit the borrowing limitations
of Paragraph 6(f)(i) of the LLC Agreement to be increased.
8.9 Employee Plans. Except where not a Material-Adverse Effect,
Borrower may not permit any of the events or circumstances described in SECTION
6.14 to exist or occur.
8.10 Government Regulations. Borrower may not conduct its business
in a way that it becomes regulated under the Investment Company Act of 1940, as
amended, or the Public Utility Holding Company Act of 1935, as amended.
8.11 Name, Fiscal Year, and Accounting Method. Borrower may not
change its name, fiscal year or method of accounting except as required by
GAAP.
8.12 Assignment. Borrower may not assign or transfer any of its
rights, duties, or obligations under any Loan Document.
8.13 Strict Compliance. Borrower may not indirectly do anything
that it may not directly do under any covenant in any Loan Document.
26
<PAGE> 31
8.14 Transactions with Affiliates. Borrower may not enter into any
material transaction with any of its Affiliates except (a) transactions
otherwise specifically contemplated or permitted by the Loan Documents and (b)
transactions in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than it could obtain or could become
entitled to in an arm's-length transaction with a Person that was not its
Affiliate.
SECTION 9 FINANCIAL COVENANTS. For so long as Lender is committed to lend
under this agreement and until the Obligation has been fully paid and
performed, Borrower covenants and agrees with Lender that, without first
obtaining Lender's written consent to the contrary, it may not directly or
indirectly permit:
9.1 Net Worth. The Companies' consolidated Net Worth (measured at
the end of each fiscal quarter beginning with the fiscal quarter-ended
September 30, 1995) to be less than the sum of (a) $250,000,000 for the fiscal
quarter-ended June 30, 1995, and subsequently the Minimum Net Worth as
depicted on the most-recent-prior-Quarterly Compliance Certificate, minus (b)
any noncash charges occurring after the date of this agreement attributable to
adjustments in the employee pension benefit plan sponsored and maintained by
National Steel Corporation that provides pension benefits for retired employees
and certain active employees of that corporation transferred to its Weirton
Steel division in connection with the sale of that division, plus (c) 50% of
the sum of (A) the Companies' consolidated positive Net Income minus (B)
Distributions paid on preferred stock from and after the date of this
agreement, plus (d) 100% of the net (i.e., gross less usual and customary
underwriting, placement, and other related costs and expenses) proceeds of the
issuance of any equity securities by Borrower after the date of this agreement.
No calculation in accordance with CLAUSE (C) above as of any quarter end may
result in a lower minimum-Net-Worth requirement under this section than existed
for any prior quarter end.
9.2 Capitalization. The market value of Borrower's capital stock
to ever be less than $325,000,000. For purposes of this section, "market
value" means, for any day, either (i) the closing sales price on the
immediately-preceding-Business Day as reported in any regularly-published and
widely-circulated reporting or quotation service or (ii) if not so reported,
the value agreed upon by Borrower and Lender after good-faith negotiations, or
(iii) if Borrower and Lender cannot so agree within a reasonable time, the
value determined in good faith by Lender. The value determined under CLAUSES
(II) and (III) above shall take into consideration marketability, transfer
restrictions, and all other relevant factors.
SECTION 10 EVENTS OF DEFAULT.
10.1 Default. As used in this agreement, the term "DEFAULT" means
the occurrence or existence of any one or more of the following:
(a) Borrower fails or refuses to pay when due any
interest on the Note or any fee, expense, or other payment required by
the Loan Documents, and that failure or refusal continues for three
Business Days after the due date.
(b) Borrower fails or refuses to pay when due any
principal of the Loan.
(c) Any representation or warranty made in any Loan
Document or any certificate or statement furnished or made to Lender
or in connection with the Loan Document proves to be untrue or
inaccurate in any material respect at the time made.
(d) Borrower fails or refuses to perform, observe, or
comply with SECTIONS 8 or 9.
27
<PAGE> 32
(e) Borrower fails or refuses to perform, observe, or
comply with any other agreement, covenant, or provision -- other than
those described in CLAUSES (A) though (D) above -- binding on it in
any Loan Document, and that failure or refusal continues for ten days
after the earlier of either (i) notice of it from Lender to Borrower
or (ii) Lender is or should have been notified of it by Borrower under
SECTION 7.2.
(f) A Default occurs under the Security Agreement
executed and delivered by Hamilton Morgan.
(g) Default occurs in the payment of any material
Indebtedness of Borrower (other than the Obligation) or default shall
occur in respect of any note, indenture, loan agreement or credit
agreement relating to any such Indebtedness and such default shall
continue for more than the specified period of grace, if any; or, any
such Indebtedness shall become due before its stated maturity by
acceleration of the maturity or shall become due by its terms and
shall not be promptly paid or extended.
(h) Any final judgment(s) for the payment of money in
excess of $10,000,000 shall be rendered against Borrower and such
judgment or judgments is not satisfied or discharged at least ten days
before the date on which any of its assets could be lawfully sold to
satisfy such judgment.
(i) The occurrence of an "Event of Default" under the
Banque Paribas Facility or the FoxMeyer Corporation Facility.
(j) Any of the Loan Documents shall cease to be legal,
valid and binding agreements enforceable against the Person executing
the same in accordance with the respective terms or shall in any way
be terminated or become or be declared ineffective or inoperative or
shall in any way whatsoever cease to give or provide the respective
liens, security interests, rights, titles, interests, remedies, powers
or privileges intended to be created thereby.
(k) Borrower (i) applies for or consents to the
appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself or of all or a substantial part of such Person's
assets, (ii) files a voluntary petition in bankruptcy, admits in
writing that such Person is unable to pay its debts as they become due
or generally does not pay its debts as they become due, (iii) makes a
general assignment for the benefit of creditors, (iv) files a petition
or answer seeking reorganization of an arrangement with creditors or
to take advantage of any bankruptcy or insolvency laws, (v) files an
answer admitting the material allegations of, or consents to, or
defaults in answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or (vi) takes corporate
action for the purpose of effecting any of the foregoing.
(l) An involuntary petition or complaint is filed against
Borrower seeking bankruptcy or reorganization of such Person or the
appointment of a receiver, custodian, trustee, intervenor or
liquidator of such Person, or all or substantially all of such
Person's assets, and such petition or complaint shall not have been
dismissed within 60 days of the filing thereof; or an order, order for
relief, judgment or decree is entered by any court of competent
jurisdiction or other competent authority approving a petition or
complaint seeking reorganization of such Person or appointing a
receiver, custodian, trustee, intervenor or liquidator of such Person,
or of all or substantially all of such Person's assets.
(m) Any change occurs in the condition (financial or
otherwise) of Borrower which, in the reasonable opinion of Lender, has
a Material-Adverse Effect.
(n) A Collateral-Base Deficiency occurs and is not cured
within three Business Days after demand by Lender under SECTION 2.4.
28
<PAGE> 33
10.2 Remedies Upon Default or Potential Default. If a Default or
Potential Default occurs and is continuing, then Lender may exercise any one or
more of the following rights and remedies, and any other remedies provided in
any of the Loan Documents, as Lender, in its sole discretion, deems necessary
or appropriate: (a) Declare the principal of, and all interest then accrued on,
the Note and any other liabilities hereunder to be forthwith due and payable,
whereupon the same shall forthwith become due and payable without presentment,
demand, protest, notice of default, notice of acceleration or of intention to
accelerate or other notice of any kind, all of which Borrower hereby expressly
waives, anything contained herein or in the Note to the contrary
notwithstanding; (b) reduce any claim to judgment; or (c) without notice of
default or demand, pursue and enforce any of Lender's rights and remedies under
the Loan Documents, or otherwise provided under or pursuant to any applicable
Law or agreement; provided, however, that if any Default or Potential Default
specified in SECTIONS 10.1(J) and (K) shall occur, the principal of, and all
interest on, the Note and other liabilities shall become immediately due and
payable concurrently with such Default, without any further action by Lender
and without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any kind, all of
which Borrower expressly waives.
10.3 Performance by Lender. Should Borrower fail to perform any
covenant, duty or agreement contained in any of the Loan Documents after
written demand is made by Lender, Lender may perform or attempt to perform such
covenant, duty or agreement on behalf of Borrower. In any such event, Borrower
shall, at the request of Lender, promptly pay any amount expended by Lender in
such performance or attempted performance to Lender at Credit Lyonnais New York
Branch for the account of Lender, together with interest thereon at the Default
Rate from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly understood that Lender does not assume any liability
or responsibility for the performance of any duties of Borrower under the Loan
Documents or under any of the Loan Documents or other control over the
management and affairs of Borrower.
10.4 Borrower's Waivers. To the extent permitted by Law, Borrower
waives presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration, and notice of protest and nonpayment, and
agrees that its liability with respect to all or any part of the Obligation is
not affected by any renewal or extension in the time of payment of all or any
part of the Obligation, by any indulgence, or by any release or change in any
security for the payment of all or any part of the Obligation.
10.5 Not in Control. Nothing in any Loan Documents gives or may be
deemed to give to Lender the right to exercise control over any Company's
assets, affairs, or management or to preclude or interfere with any Company's
compliance with any Law or require any act or omission by any Company that may
be harmful to Persons or property. Any "Material-Adverse Effect" or other
materiality or substantiality qualifier of any representation, warranty,
covenant, agreement, or other provision of any Loan Document is included for
credit documentation purposes only and does not imply or be deemed to mean that
Lender acquiesces in any non-compliance by any Company with any Law, document,
or otherwise or does not expect the Companies to promptly, diligently, and
continuously carry out all appropriate removal, remediation, compliance,
closure, or other activities required or appropriate in accordance with all
Environmental Laws. Lender's power is limited to the rights provided in the
Loan Documents. All of those rights exist solely -- and may be exercised in
manner calculated by Lender in its good faith business judgment -- to preserve
and protect the Collateral and to assure payment and performance of the
Obligation.
10.6 Course of Dealing. The acceptance by Lender of any partial
payment on the Obligation is not a waiver of any Default then existing. No
waiver by Lender of any Default is a waiver of any other then-existing or
subsequent Default. No delay or omission by Lender in exercising any right
under the Loan Documents impairs that right or is a waiver thereof or any
acquiescence therein, nor will any single or partial exercise of any right
preclude other or further exercise thereof or the exercise of any other right
under the Loan Documents or otherwise.
29
<PAGE> 34
10.7 Cumulative Rights. All rights available to Lender under the
Loan Documents are cumulative of and in addition to all other rights granted to
Lender at law or in equity, whether or not the Obligation are due and payable
and whether or not Lender has instituted any suit for collection, foreclosure,
or other action in connection with the Loan Documents.
10.8 Certain Proceedings. Borrower shall promptly execute and
deliver, or cause the execution and delivery of, all applications,
certificates, instruments, registration statements, and all other documents and
papers Lender reasonably request in connection with the obtaining of any
consent, approval, registration (other than securities Law registrations),
qualification, permit, license, or authorization of any Governmental Authority
or other Person necessary or appropriate for the effective exercise of any
rights under the Loan Documents. Because Borrower agrees that Lender's
remedies at Law for failure of Borrower to comply with the provisions of this
section would be inadequate and that failure would not be adequately
compensable in damages, Borrower agrees that the covenants of this section may
be specifically enforced.
10.9 Diminution in Value of Collateral. Lender has no liability or
responsibility whatsoever for any diminution in or loss of value of any
collateral now or in the future securing payment or performance of any of the
Obligation (other than diminution in or loss of value caused by its own gross
negligence or willful misconduct).
SECTION 11 MISCELLANEOUS.
11.1 Non-Business Days. Unless otherwise specifically provided,
any payment or action that is due under any Loan Document on a day that is not
a Business Day or a Eurodollar Business Day, as is applicable, may be delayed
until the next-succeeding Business Day or Eurodollar Business Day, as the case
may be, but interest continues to accrue on any applicable payment until
payment is in fact made.
11.2 Communications. Unless otherwise specifically provided,
whenever any Loan Document requires or permits any consent, approval, notice,
request, or demand from one party to another, that communication must be in
writing (which may be by telex or telecopy) to be effective and is deemed to
have been given (a) if by telex, when transmitted to the appropriate telex
number and the appropriate answer back is received, (b) if by telecopy, when
transmitted to the appropriate telecopy number (but, without affecting the date
when the telecopy is so deemed delivered, it must be confirmed by telephone
promptly after being sent), (c) if by mail, on the third Business Day after it
is enclosed in an envelope and properly addressed, stamped, sealed, and
deposited in the appropriate official postal service, or (d) if by any other
means, when actually delivered. Until changed by notice under this agreement,
the address, telex number, telephone number, and telecopy number for each of
Borrower and Agent are stated beside their respective signatures to this
agreement.
11.3 Form and Number of Documents. The form, substance, and number
of counterparts of each writing to be furnished under this agreement must be
satisfactory to Lender and its counsel.
11.4 Exceptions to Covenants. Borrower may not take or fail to
take any action that is permitted as an exception to any of the covenants
contained in any Loan Document if that action or omission would result in the
breach of any other covenant contained in any Loan Document.
11.5 Survival. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents survive all
closings under the Loan Documents and, except as otherwise specified, are not
affected by any investigation made by any party.
11.6 Governing Law. Unless otherwise stated in any Loan Document,
the Laws of the State of New York and of the United States of America govern
the rights and duties of the parties to the Loan Documents and the validity,
construction, enforcement, and interpretation of the Loan Documents.
30
<PAGE> 35
11.7 Invalid Provisions. Any provision in any Loan Document held
to be illegal, invalid, or unenforceable is fully severable; the appropriate
Loan Document shall be construed and enforced as if that provision had never
been included; and the remaining provisions shall remain in full force and
effect and shall not be affected by the severed provision. Borrower and Lender
agree to negotiate (between themselves and with any other party to that Loan
Document), in good faith, the terms of a replacement provision as similar to
the severed provision as may be possible and be legal, valid, and enforceable.
11.8 Forum, Consent to Service and Jurisdiction, and Jury Trial.
Any Litigation against Borrower with respect to any Loan Document or any
judgment entered by any court in respect of any Loan Document may be brought in
New York courts or in the United States courts located in the Borough of
Manhattan in New York City as Lender in its sole discretion may elect.
Borrower hereby submits to the non-exclusive jurisdiction of those courts for
the purpose of any Litigation. Borrower hereby agrees that service of all
writs, process, and summonses in any Litigation brought in New York may be
brought upon Process Agent, and Borrower irrevocably appoints Process Agent as
Borrower's true and lawful attorney-in-fact in Borrower's name, place, and
stead to accept that service of all of those writs, process, and summonses.
Borrower irrevocably consents to the service of process in any Litigation in
those courts by the mailing it by registered or certified mail, postage
prepaid, to Borrower's address for purposes of notices under this agreement.
Borrower hereby irrevocably waives any objections which it may now or in the
future have to the laying of venue of any Litigation arising out of or relating
to any Loan Document brought in any court located in the Borough of Manhattan,
New York City, and further irrevocably waives any claim that any such
Litigation brought in that court has been brought in an inconvenient forum.
BORROWER WAIVES, TO THE FULLEST EXTENT LAWFUL TO DO SO, ITS RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY LOAN
DOCUMENT.
11.9 Entirety. The Loan Documents embody the entire agreement
between the parties and supersede all prior agreements and understandings, if
any, relating to the subject matter of the Loan Documents.
11.10 Amendments, Consents, Conflicts, and Waivers. Unless
otherwise specifically provided (a) the provisions of this agreement may be
amended, modified, or waived, only by an instrument in writing executed by
Borrower and Lender and supplemented only by documents delivered or to be
delivered in accordance with the express terms of this agreement, (b) any
conflict or ambiguity between the terms and provisions of this agreement and
terms and provisions in any other Loan Document is controlled by the terms and
provisions of this agreement, (c) no course of dealing or any failure or delay
by Lender in exercising any right or remedy operates as a waiver of that right
or remedy, and (d) a waiver must be in writing and signed by Lender to be
effective and will be effective only in the specific instance and for the
specific purpose for which it is given.
11.11 Multiple Counterparts. Any Loan Document may be executed in a
number of identical counterparts (including, at Lender's discretion,
counterparts or signature pages executed and transmitted by telecopy) with the
same effect as if all signatories had signed the same document. All
counterparts must be construed together to constitute one and the same
instrument.
11.12 Parties and Participations. Each Loan Document to which
Borrower and Lender are party binds and inures to them and their respective
successors and permitted assigns. Borrower may not assign or transfer any
rights or obligations under any Loan Document without first obtaining Lender's
consent, and any purported assignment or transfer without Lender's consent is
void. Lender may assign or transfer any of its rights and obligations under
the Loan Documents, including, without limitation, participations sold to any
other financial institution. Any participation may not affect the rights and
obligations of Lender vis-a-vis Borrower, and Borrower is never obligated to
Lender for any cost or expense in excess of amounts that would be due by
Borrower to Lender if Lender had never granted any participation.
REMAINDER OF PAGE INTENTIONALLY BLANK.
31
<PAGE> 36
SIGNATURE PAGE FOLLOWS.
32
<PAGE> 37
EXECUTED as of the date first stated in this agreement.
<TABLE>
<S> <C>
FoxMeyer Health Corporation FOXMEYER HEALTH CORPORATION, as Borrower
1220 Senlac Drive
Carrollton, TX 75006
Telephone (214) 446-4570 By /s/ Michael C. Kearney
Telecopy (214) 446-4580 ---------------------------------------
Attention: Michael C. Kearney, Michael C. Kearney, Vice President and
Vice President and Treasurer Treasurer
Credit Lyonnais CREDIT LYONNAIS NEW YORK BRANCH, as Lender
Dallas Agency
Lincoln Plaza
500 N. Akard, Suite 3210
Dallas, TX 75201 By /s/ Robert Ivosevich
---------------------------------------
Telephone (214) 954-3500 Robert Ivosevich, Senior Vice President
Telecopy (214) 954-3312
Telex 6829274 CRLYDAL
Attention: Timothy M. O'Connor,
Assistant Vice President
</TABLE>
Signature Page
<PAGE> 1
EXHIBIT 10-F
FOURTH AMENDMENT
Dated as of September 30, 1995
THIS FOURTH AMENDMENT (this "Fourth Amendment") is entered
into among FOXMEYER CORPORATION (formerly FoxMeyer Acquisition Corp., the
successor in interest by merger to FoxMeyer Corporation), a Delaware
corporation (the "Seller"), CORPORATE ASSET FUNDING COMPANY, INC., a Delaware
corporation ("CAFCO"), ENTERPRISE FUNDING CORPORATION, a Delaware corporation
("Enterprise" and, together with CAFCO, the "Investors" and individually an
"Investor"), CITIBANK, N.A., a national banking association ("Citibank"),
NATIONSBANK, N.A., a national banking association, individually ("NationsBank")
and as co-agent (the "Co-Agent"), CITICORP NORTH AMERICA, INC., individually
("CNAI") and as agent the ("Agent"), and the other financial institutions
listed on the signature pages hereof under the heading "A Syndicate Banks" (the
"A Syndicate Banks") or "B Syndicate Banks", respectively (the "B Syndicate
Banks" and, together with Citibank, NationsBank and the A Syndicate Banks, the
"Banks").
PRELIMINARY STATEMENTS. (1) The Seller, the Investors, the
Agent and the Co-Agent are party to that certain Trade Receivables Purchase and
Sale Agreement dated as of October 29, 1993, as amended by the Amendment dated
as of October 27, 1994, the Second Amendment dated as of November 22, 1994 and
the Third Amendment dated as of April 26, 1995 (said Agreement as so amended
being the "Investor Agreement"). The Seller, the Banks, the CNAI, the Agent
and the Co-Agent are party to that certain Trade Receivables Purchase and Sale
Agreement dated as of October 29, 1993, as amended by the Amendment dated as of
October 27, 1994, the Second Amendment dated as of November 22, 1994 and the
Third Amendment dated as of April 26, 1995 (said Agreement as so amended being
the "Parallel Purchase Commitment" and, together with the Investor Agreement,
the "Agreements"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the respective Agreements.
(2) The Seller, the Investors, Citibank, NationsBank, the
other Banks, CNAI, the Agent and the Co-Agent, on the terms and conditions
stated below, have agreed to amend certain financial covenants contained in the
Agreements.
SECTION 1. Amendments to the Investor Agreement. The
Investor Agreement is, effective as of the date hereof and subject to the
satisfaction of the condition precedent set forth in Section 3 hereof, hereby
amended as follows:
<PAGE> 2
2
(a) The definitions of the terms "Applicable Coverage Ratio",
"Credit Agreement", "Development Cost Debt Service Coverage Ratio Adjustment
Amount", "Development Cost Interest Coverage Ratio Adjustment Amount", "Funded
Debt" and "Funded Debt Service", contained in Section 1.01 thereof, are amended
in their entirety to read as follows, respectively:
"Applicable Coverage Ratio" means, as of any date,
the ratio of (a)(i) EBIT, plus (ii) amortization and depreciation
expense, plus (iii) the Development Cost Interest Coverage Ratio
Adjustment Amount, plus (iv) the Phar-Mor Interest Coverage Ratio
Adjustment Amount, plus (v) the CareStream EBT Adjustment Amount,less
(vi) CareStream D&A Adjustment Amount, of the Seller and its
Consolidated Subsidiaries for the 12 month period ended on such date,
to (b)(i) Interest Expense, less (ii) the CareStream Interest Expense
Adjustment Amount, plus (iii) interest income then being currently
received (to the extent such income is netted against interest charges
in the definition of "Interest Expense"), for such 12 month period.
"Credit Agreement" means the Amended and Restated
Loan Agreement dated as of April 29, 1993, as amended by the First
Amendment to Amended and Restated Loan Agreement dated as of October
18, 1993, the Second Amendment to Amended and Restated Loan Agreement
dated as of June 20, 1994, the Third Amendment to Amended and Restated
Loan Agreement dated as of August 26, 1994, the Fourth Amendment to
Amended and Restated Loan Agreement dated as of November 22, 1994, the
Fifth Amendment to Amended and Restated Loan Agreement dated as of
April 26, 1995, the Sixth Amendment to Amended and Restated Loan
Agreement dated as of August 17, 1995, and the Seventh Amendment to
Amended and Restated Loan Agreement dated as of September 30, 1995,
among the Seller as Borrower, each Selling Subsidiary as Guarantors,
the Lenders and Issuer referred to therein, and Citicorp USA, Inc. as
Administrative Agent and NationsBank of Texas, N.A. and Banque Paribas
as Co-Agents, as further amended, supplemented or otherwise modified
from time to time."
"Development Cost Debt Service Coverage Ratio
Adjustment Amount" means, as of any date of determination, the
aggregate amount of any reduction of Operating Cash Flow attributable
to any write-off of previously capitalized computer software
development costs or any write-off of the costs of, or loss on the
disposition of, replaced computer software and related hardware, but
excluding any such reduction in respect of the CareStream Operations;
provided that the aggregate amount of the Development Cost Debt
Service Coverage Ratio Adjustment Amount utilized during any period of
12 months shall not exceed $5,000,000 (prior to any adjustment for
income taxes).
<PAGE> 3
3
"Development Cost Interest Coverage Ratio Adjustment
Amount" means, as of any date of determination, the aggregate amount
of any reduction of EBIT attributable to any write-off of previously
capitalized computer software development costs or any write-off of
the costs of, or loss on the disposition of, replaced computer
software and related hardware, but excluding any such reduction in
respect of the CareStream Operations;provided that the aggregate
amount of the Development Cost Interest Coverage Ratio Adjustment
Amount utilized during any period of 12 months shall not exceed
$5,000,000 (prior to any adjustment for income taxes).
"Funded Debt" means, as of the date of any
determination, the sum of the following (without duplication): (a)
all Debt evidenced by the Notes (as defined in the Credit Agreement)
for the B Borrowing Account (as defined in the Credit Agreement) as of
such date, (b) all Debt evidenced by the 7.09% Notes (as defined in
the Credit Agreement) as of such date, (c) all Debt consisting of
Subordinated Debt (as defined in the Credit Agreement) as of such
date, (d) all Debt which would be classified as "funded debt" or
"long-term debt", including the current portions thereof, on a
consolidated balance sheet of the Seller and its Consolidated
Subsidiaries prepared as of such date in accordance with GAAP, (e) all
Debt of the Seller or any Consolidated Subsidiary having a final
maturity (or which is renewable or extendible at the option of the
obligor for a period ending) more than one year after the date of
creation thereof, notwithstanding that payments in respect thereof are
required to be made by the obligor less than one year after the date
of the creation thereof or that any amount thereof is at the time
included also in Current Liabilities (as defined in the Credit
Agreement) of such obligor, (f) all Debt of the Seller or any
Consolidated Subsidiary outstanding under a revolving credit or
similar agreement providing for borrowings (and renewals and
extensions thereof) over a period of more than one year,
notwithstanding that any such Debt is created within one year of the
expiration of such agreement, (g) the present value (discounted at the
implicit rate, if known, or ten percent (10%) per annum otherwise) of
all obligations in respect of Capital Leases of the Seller or any
Consolidated Subsidiary and (h) Redeemable Capital Stock of the Seller
valued at the greater of its voluntary or involuntary maximum fixed
repurchase or redemption price plus accrued and unpaid dividends. For
purposes hereof, the "maximum fixed repurchase or redemption price" of
any Redeemable Capital Stock which does not have a fixed repurchase or
redemption price shall be calculated in accordance with the terms of
such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased or redeemed on any date on which Funded Debt shall be
required to be determined, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock,
such fair market value to be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
Notwithstanding the foregoing, Funded Debt shall be deemed not to
<PAGE> 4
4
include Indebtedness under the Overline Facility, which is due and
payable not later than March 31, 1996.
"Funded Debt Service" means, with respect to the
Seller and its Consolidated Subsidiaries, for any period, the sum of
(a) the aggregate of all principal and interest payments and
repurchase or redemption payments required or scheduled to be made
during such period with respect to Funded Debt, (b) interest payments
required to be made during such period with respect to Debt under the
Overline Facility and (c) Preferred Dividends accruing or payable
during such period.
(b) Section 1.01 of the Investor Agreement is amended by
adding thereto the following new definitions, to be added in the applicable
alphabetical order:
"CareStream D&A Adjustment Amount" means, for each
date of determination after the CareStream Operations shall have been
first accounted for as a discontinued operation of the Seller in
accordance with GAAP, the amounts in respect of depreciation and
amortization allocated to the CareStream Operations in accordance with
GAAP for the 12 month period ending on such date of determination.
"CareStream Debt Service Adjustment Amount" means,
for each date of determination after the CareStream Operations shall
first have been accounted for as a discontinued operation of the
Seller in accordance with GAAP, the principal and interest payments
allocated to or paid directly by the CareStream Operations in
accordance with GAAP for the 12 month period ending on such date of
determination.
"Carestream EBT Adjustment Amount" means, for each
date of determination after the CareStream Operations shall have been
first accounted for as a discontinued operation of the Seller in
accordance with GAAP, an amount equal to the loss of the Seller before
provision for income taxes allocated to the CareStream Operations in
accordance with GAAP for the 12 month period ending on such date of
determination.
"Carestream Interest Expense Adjustment Amount"
means, for each date of determination after the CareStream Operations
shall have been first accounted for as a discontinued operation of the
Seller in accordance with GAAP, the Interest Expense allocated to or
paid directly by the CareStream Operations in accordance with GAAP for
the 12 month period ending on such date of determination.
"Carestream Net Income Adjustment Amount" means, for
each date of determination after the CareStream Operations shall have
been first accounted for as a discontinued operation of the Seller in
accordance with GAAP, the loss (after income
<PAGE> 5
5
taxes) of the Seller allocated to the CareStream Operations in
accordance with GAAP for the 12 month period ending on such date of
determination.
"Carestream Operations" means, the operations
conducted by Healthcare Connect, Inc. and its Subsidiaries,
principally providing healthcare administration and management
services, together with (a) the assets of Healthcare Connect, Inc. and
its Subsidiaries, (b) the assets purchased by the Seller and/or
FoxMeyer Drug Company from the chapter 11 estate of Synercom
Healthcare Systems, Inc. on or about February 8, 1995 and (c) the
assets (consisting principally of hardware and software) used in the
operation of the DataNet division of the Seller and/or FoxMeyer Drug
Company, but excluding all shares of capital stock of FoxMeyer Canada.
"Overline Facility" means any agreement to be entered
into among the Seller, Operating Subsidiaries, the lenders named
therein and Citicorp USA, Inc., as Administrative Agent, providing a
working capital facility in the aggregate principal amount of up to
$60,000,000, and all Guaranties and other documents related thereto,
as such agreement, Guaranties and other documents may be amended,
replaced, supplemented or otherwise modified from time to time.
(c) Paragraph (iii) of Section 5.03(h) (concerning Interest
Coverage Ratio) of the Investor Agreement is amended by (i) inserting at the
end of clause (A) thereof the phrase "plus (5) the CareStream EBT Adjustment
Amount", (ii) inserting after the phrase "the Service Fee Adjustment Amount,"
in clause (B) thereof the phrase "less (4) the CareStream Interest Expense
Adjustment Amount," and (iii) deleting the ratios set opposite September 30,
1995, December 31, 1995 and March 31, 1996, respectively, and substituting for
such ratios those ratios set opposite such dates below:
<TABLE>
<CAPTION>
Last Day of
Applicable Period Ratio
----------------- -----
<S> <C>
September 30, 1995 2.50 to 1.00
December 31, 1995 2.00 to 1.00
March 31, 1996 2.50 to 1.00
</TABLE>
(d) Paragraph (iv) of Section 5.03(h) (concerning Debt
Service Coverage Ratio) of the Investor Agreement is amended by (i) inserting
at the end of clause (A) thereof the phrase "plus (4) the CareStream Net Income
Adjustment Amount less (5) the CareStream D&A Adjustment Amount less (6) the
CareStream Interest Expense Adjustment Amount" and (ii) deleting the phrase
"Funded Debt Service" in clause (B) thereof and inserting in place thereof the
phrase "(1) Funded Debt Service less (2) the CareStream Debt Service Adjustment
Amount".
<PAGE> 6
6
(e) Paragraph (v) of Section 5.03(h) (concerning Total Debt
and Purchase Program Outstanding to Capitalization Ratio) of the Investor
Agreement is amended by (i) inserting at the end of (and within) the
parenthetical clause contained in clause (A)(1) thereof the phrase "or, for the
fiscal quarter ending December 31, 1995, Debt from time to time outstanding
under the Overline Facility" and (ii) adding to the end of said paragraph (v)
the following "on each such date other than the last day of the fiscal quarter
ending December 31, 1995, and on such last day 0.63 to 1.00."
SECTION 2. Amendments to the Parallel Purchase Commitment.
The Parallel Purchase Commitment is, effective as of the date hereof and
subject to the satisfaction of the condition precedent set forth in Section 3
hereof, hereby amended as follows:
(a) The definitions of the terms "Applicable
Coverage Ratio", "Credit Agreement", "Development Cost Debt Service Coverage
Ratio Adjustment Amount", "Development Cost Interest Coverage Ratio Adjustment
Amount", "Funded Debt" and "Funded Debt Service", contained in Section 1.01
thereof, are amended in their entirety to read as follows, respectively:
"Applicable Coverage Ratio" means, as of any date,
the ratio of (a)(i) EBIT, plus (ii) amortization and depreciation
expense, plus (iii) the Development Cost Interest Coverage Ratio
Adjustment Amount, plus (iv) the Phar-Mor Interest Coverage Ratio
Adjustment Amount, plus (v) the CareStream EBT Adjustment Amount,less
(vi) CareStream D&A Adjustment Amount, of the Seller and its
Consolidated Subsidiaries for the 12 month period ended on such date,
to (b)(i) Interest Expense, less (ii) the CareStream Interest Expense
Adjustment Amount, plus (iii) interest income then being currently
received (to the extent such income is netted against interest charges
in the definition of "Interest Expense"), for such 12 month period.
"Credit Agreement" means the Amended and Restated
Loan Agreement dated as of April 29, 1993, as amended by the First
Amendment to Amended and Restated Loan Agreement dated as of October
18, 1993, the Second Amendment to Amended and Restated Loan Agreement
dated as of June 20, 1994, the Third Amendment to Amended and Restated
Loan Agreement dated as of August 26, 1994, the Fourth Amendment to
Amended and Restated Loan Agreement dated as of November 22, 1994, the
Fifth Amendment to Amended and Restated Loan Agreement dated as of
April 26, 1995, the Sixth Amendment to Amended and Restated Loan
Agreement dated as of August 17, 1995, and the Seventh Amendment to
Amended and Restated Loan Agreement dated as of September 30, 1995,
among the Seller as Borrower, each Selling Subsidiary as Guarantors,
the Lenders and Issuer referred to therein, and Citicorp USA, Inc. as
Administrative Agent and NationsBank of Texas,
<PAGE> 7
7
N.A. and Banque Paribas as Co-Agents, as further amended, supplemented
or otherwise modified from time to time."
"Development Cost Debt Service Coverage Ratio
Adjustment Amount" means, as of any date of determination, the
aggregate amount of any reduction of Operating Cash Flow attributable
to any write-off of previously capitalized computer software
development costs or any write-off of the costs of, or loss on the
disposition of, replaced computer software and related hardware, but
excluding any such reduction in respect of the CareStream Operations;
provided that the aggregate amount of the Development Cost Debt
Service Coverage Ratio Adjustment Amount utilized during any period of
12 months shall not exceed $5,000,000 (prior to any adjustment for
income taxes).
"Development Cost Interest Coverage Ratio Adjustment
Amount" means, as of any date of determination, the aggregate amount
of any reduction of EBIT attributable to any write-off of previously
capitalized computer software development costs or any write-off of
the costs of, or loss on the disposition of, replaced computer
software and related hardware, but excluding any such reduction in
respect of the CareStream Operations;provided that the aggregate
amount of the Development Cost Interest Coverage Ratio Adjustment
Amount utilized during any period of 12 months shall not exceed
$5,000,000 (prior to any adjustment for income taxes).
"Funded Debt" means, as of the date of any
determination, the sum of the following (without duplication): (a)
all Debt evidenced by the Notes (as defined in the Credit Agreement)
for the B Borrowing Account (as defined in the Credit Agreement) as of
such date, (b) all Debt evidenced by the 7.09% Notes (as defined in
the Credit Agreement) as of such date, (c) all Debt consisting of
Subordinated Debt (as defined in the Credit Agreement) as of such
date, (d) all Debt which would be classified as "funded debt" or
"long-term debt", including the current portions thereof, on a
consolidated balance sheet of the Seller and its Consolidated
Subsidiaries prepared as of such date in accordance with GAAP, (e) all
Debt of the Seller or any Consolidated Subsidiary having a final
maturity (or which is renewable or extendible at the option of the
obligor for a period ending) more than one year after the date of
creation thereof, notwithstanding that payments in respect thereof are
required to be made by the obligor less than one year after the date
of the creation thereof or that any amount thereof is at the time
included also in Current Liabilities (as defined in the Credit
Agreement) of such obligor, (f) all Debt of the Seller or any
Consolidated Subsidiary outstanding under a revolving credit or
similar agreement providing for borrowings (and renewals and
extensions thereof) over a period of more than one year,
notwithstanding that any such Debt is created within one year of the
expiration of such agreement, (g) the present value (discounted at the
implicit rate, if known, or
<PAGE> 8
8
ten percent (10%) per annum otherwise) of all obligations in respect
of Capital Leases of the Seller or any Consolidated Subsidiary and (h)
Redeemable Capital Stock of the Seller valued at the greater of its
voluntary or involuntary maximum fixed repurchase or redemption price
plus accrued and unpaid dividends. For purposes hereof, the "maximum
fixed repurchase or redemption price" of any Redeemable Capital Stock
which does not have a fixed repurchase or redemption price shall be
calculated in accordance with the terms of such Redeemable Capital
Stock as if such Redeemable Capital Stock were purchased or redeemed
on any date on which Funded Debt shall be required to be determined,
and if such price is based upon, or measured by, the fair market value
of such Redeemable Capital Stock, such fair market value to be
determined in good faith by the Board of Directors of the issuer of
such Redeemable Capital Stock. Notwithstanding the foregoing, Funded
Debt shall be deemed not to include Indebtedness under the Overline
Facility, which is due and payable not later than March 31, 1996.
"Funded Debt Service" means, with respect to the
Seller and its Consolidated Subsidiaries, for any period, the sum of
(a) the aggregate of all principal and interest payments and
repurchase or redemption payments required or scheduled to be made
during such period with respect to Funded Debt, (b) interest payments
required to be made during such period with respect to Debt under the
Overline Facility and (c) Preferred Dividends accruing or payable
during such period.
(b) Section 1.01 of the Investor Agreement is amended by
adding thereto the following new definitions, to be added in the applicable
alphabetical order:
"CareStream D&A Adjustment Amount" means, for each
date of determination after the CareStream Operations shall have been
first accounted for as a discontinued operation of the Seller in
accordance with GAAP, the amounts in respect of depreciation and
amortization allocated to the CareStream Operations in accordance with
GAAP for the 12 month period ending on such date of determination.
"CareStream Debt Service Adjustment Amount" means,
for each date of determination after the CareStream Operations shall
first have been accounted for as a discontinued operation of the
Seller in accordance with GAAP, the principal and interest payments
allocated to or paid directly by the CareStream Operations in
accordance with GAAP for the 12 month period ending on such date of
determination.
"Carestream EBT Adjustment Amount" means, for each
date of determination after the CareStream Operations shall have been
first accounted for as a discontinued operation of the Seller in
accordance with GAAP, an amount equal to the loss of the Seller before
provision for income taxes allocated to the CareStream
<PAGE> 9
9
Operations in accordance with GAAP for the 12 month period ending on
such date of determination.
"Carestream Interest Expense Adjustment Amount"
means, for each date of determination after the CareStream Operations
shall have been first accounted for as a discontinued operation of the
Seller in accordance with GAAP, the Interest Expense allocated to or
paid directly by the CareStream Operations in accordance with GAAP for
the 12 month period ending on such date of determination.
"Carestream Net Income Adjustment Amount" means, for
each date of determination after the CareStream Operations shall have
been first accounted for as a discontinued operation of the Seller in
accordance with GAAP, the loss (after income taxes) of the Seller
allocated to the CareStream Operations in accordance with GAAP for the
12 month period ending on such date of determination.
"Carestream Operations" means, the operations
conducted by Healthcare Connect, Inc. and its Subsidiaries,
principally providing healthcare administration and management
services, together with (a) the assets of Healthcare Connect, Inc. and
its Subsidiaries, (b) the assets purchased by the Seller and/or
FoxMeyer Drug Company from the chapter 11 estate of Synercom
Healthcare Systems, Inc. on or about February 8, 1995 and (c) the
assets (consisting principally of hardware and software) used in the
operation of the DataNet division of the Seller and/or FoxMeyer Drug
Company, but excluding all shares of capital stock of FoxMeyer Canada.
"Overline Facility" means any agreement to be entered
into among the Seller, Operating Subsidiaries, the lenders named
therein and Citicorp USA, Inc., as Administrative Agent, providing a
working capital facility in the aggregate principal amount of up to
$60,000,000, and all Guaranties and other documents related thereto,
as such agreement, Guaranties and other documents may be amended,
replaced, supplemented or otherwise modified from time to time.
(c) Paragraph (iii) of Section 5.03(h) (concerning Interest
Coverage Ratio) of the Investor Agreement is amended by (i) inserting at the
end of clause (A) thereof the phrase "plus (5) the CareStream EBT Adjustment
Amount", (ii) inserting after the phrase "the Service Fee Adjustment Amount,"
in clause (B) thereof the phrase "less (4) the CareStream Interest Expense
Adjustment Amount," and (iii) deleting the ratios set opposite September 30,
1995, December 31, 1995 and March 31, 1996, respectively, and substituting for
such ratios those ratios set opposite such dates below:
<PAGE> 10
10
<TABLE>
<CAPTION>
Last Day of
Applicable Period Ratio
----------------- -----
<S> <C>
September 30, 1995 2.50 to 1.00
December 31, 1995 2.00 to 1.00
March 31, 1996 2.50 to 1.00
</TABLE>
(d) Paragraph (iv) of Section 5.03(h) (concerning Debt
Service Coverage Ratio) of the Investor Agreement is amended by (i) inserting
at the end of clause (A) thereof the phrase "plus (4) the CareStream Net Income
Adjustment Amount less (5) the CareStream D&A Adjustment Amount less (6) the
CareStream Interest Expense Adjustment Amount" and (ii) deleting the phrase
"Funded Debt Service" in clause (B) thereof and inserting in place thereof the
phrase "(1) Funded Debt Service less (2) the CareStream Debt Service Adjustment
Amount".
(e) Paragraph (v) of Section 5.03(h) (concerning Total Debt
and Purchase Program Outstanding to Capitalization Ratio) of the Investor
Agreement is amended by (i) inserting at the end of (and within) the
parenthetical clause contained in clause (A)(1) thereof the phrase "or, for the
fiscal quarter ending December 31, 1995, Debt from time to time outstanding
under the Overline Facility" and (ii) adding to the end of said paragraph (v)
the following "on each such date other than the last day of the fiscal quarter
ending December 31, 1995, and on such last day 0.63 to 1.00."
SECTION 3. Condition Precedent. Sections 1 and 2 of this
Fourth Amendment shall become effective as of the date hereof when, and only
when, the Agent shall have received counterparts of this Fourth Amendment
executed by the Majority Banks under and as defined in the Parallel Purchase
Commitment (or, as to any Banks, advice satisfactory to the Agent that such
Banks have duly executed such amendment), the Seller, each Investor, CNAI, the
Co-Agent and the Agent.
SECTION 4. Reference to and Effect on the Agreements (a)
Upon the effectiveness of Sections 1 and 2 hereof, on and after the date of
this Fourth Amendment, each reference in either Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import, and each reference to
either Agreement in the other Agreement, the Fee Letter, the Asset Purchase
Agreement, any Selling Subsidiary Letter, any letter agreement with any Bank or
any other document delivered in connection with either Agreement, shall mean
and be a reference to such Agreement as amended and modified hereby.
(b) Except as specifically amended and modified above, the
Agreements, the Certificates, the Fee Letter, the Asset Purchase Agreement, the
Selling Subsidiary Letters, the respective letter agreements between the Agent
or the Co-Agent, as applicable, and the respective Banks and the other
documents delivered in connection with the Agreements are and shall continue to
be in full force and effect and are hereby ratified and confirmed.
<PAGE> 11
11
SECTION 5. Cost and Expenses. The Seller agrees to pay on
demand all costs and expenses of each of the Agent and the Co-Agent,
respectively, in connection with the preparation, execution and delivery of
this Fourth Amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent and the Co-Agent, respectively, with respect
thereto and with respect to advising the Agent or the Co-Agent as to its rights
and responsibilities hereunder and thereunder. The Seller further agrees to
pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Fourth
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 5.
SECTION 6. Execution in Counterparts. This Fourth Amendment
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a
signature page to this Fourth Amendment and the consent referred to below by
telefacsimile shall be effective as delivery of a manually executed counterpart
of this Fourth Amendment and such consent.
SECTION 7. Governing Law. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FOXMEYER CORPORATION
By:
-----------------------------------
Title:
<PAGE> 12
12
CORPORATE ASSET FUNDING
COMPANY, INC.
By: CITICORP NORTH AMERICA, INC.,
its Attorney-in-fact
By:
-------------------------------
Vice President
ENTERPRISE FUNDING CORPORATION
By:
-----------------------------------
Title:
CITIBANK, N.A.
By:
-----------------------------------
Vice President
NATIONSBANK, N.A.,
individually and as Co-Agent
By:
-----------------------------------
Title:
CITICORP NORTH AMERICA, INC.,
individually and as Agent
By:
-----------------------------------
Vice President
<PAGE> 13
13
A SYNDICATE BANKS
-----------------
BANK OF AMERICA ILLINOIS
(formerly Continental Bank, N.A.)
By:
--------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------
Title:
FIRST BANK NATIONAL ASSOCIATION
By:
--------------------------------
Title:
B SYNDICATE BANKS
-----------------
THE FUJI BANK, LTD. - HOUSTON
AGENCY
By:
--------------------------------
Title:
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:
--------------------------------
Title:
THE BANK OF TOKYO, LTD.,
acting through its Dallas Agency
By:
--------------------------------
Title:
<PAGE> 1
EXHIBIT 11
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(In thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended For the six months ended
September 30, September 30,
-------------------------- -------------------------
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations $ 8,121 $ 6,868 $ 15,639 $ 12,197
Deduct dividends on preferred shares 5,382 4,794 10,605 9,495
--------- --------- ---------- ---------
Income from continuing operations applicable to stockholders $ 2,739 $ 2,074 $ 5,034 $ 2,702
========= ========= ========== =========
LOSS FROM DISCONTINUED OPERATIONS
Loss from discontinued operations $ - $ (198) $ (1,317) $ (299)
========= ========= ========== =========
SHARES
Weighted average number of common shares outstanding 17,202 12,950 16,959 12,973
========= ========= ========== =========
Income from continuing operations $ 0.16 $ 0.16 $ 0.30 $ 0.21
Loss from discontinued operations - (0.02) (0.08) (0.02)
--------- --------- ---------- ---------
Net income $ 0.16 $ 0.14 $ 0.22 $ 0.19
========= ========= ========== =========
ASSUMING FULL DILUTION
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations $ 8,121 $ 6,868 $ 15,639 $ 12,197
Dividends on non-convertible preferred shares 4,337 3,639 8,515 7,185
Dividends on convertible preferred shares (conversion of preferred
shares would be anti-dilutive) 1,045 1,155 2,090 2,310
--------- --------- ---------- ---------
Income from continuing operations applicable to common stockholders $ 2,739 $ 2,074 $ 5,034 $ 2,702
========= ========= ========== =========
LOSS FROM DISCONTINUED OPERATIONS
Loss from discontinued operations $ - $ (198) $ (1,317) $ (299)
========= ========= ========== =========
SHARES
Weighted average number of common shares outstanding 17,202 12,950 16,959 12,973
Conversion of preferred stock (anti-dilutive) - - - -
Additional dilutive effect of outstanding options (as determined
by the treasury stock method) 38 1 268 4
Assuming conversion of National Steel Corporation 4 5/8%
convertible debentures - - - 20
--------- --------- ---------- ---------
Weighted average number of common shares outstanding as adjusted 17,240 12,951 17,227 12,997
========= ========= ========== =========
Income from continuing operations $ 0.16 $ 0.16 $ 0.30 $ 0.21
Loss from discontinued operations - (0.02) (0.08) (0.03)
--------- --------- ---------- ---------
Net income** $ 0.16 $ 0.14 $ 0.22 $ 0.18
========= ========= ========== =========
</TABLE>
** This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 34,254
<SECURITIES> 41,838
<RECEIVABLES> 224,165
<ALLOWANCES> 5,613
<INVENTORY> 892,092
<CURRENT-ASSETS> 1,226,300
<PP&E> 213,236
<DEPRECIATION> 72,657
<TOTAL-ASSETS> 1,766,095
<CURRENT-LIABILITIES> 780,707
<BONDS> 467,633
<COMMON> 120,836
183,534
0
<OTHER-SE> 157,389
<TOTAL-LIABILITY-AND-EQUITY> 278,225
<SALES> 2,598,721
<TOTAL-REVENUES> 2,598,721
<CGS> 2,468,127
<TOTAL-COSTS> 2,468,127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,309
<INTEREST-EXPENSE> 15,458
<INCOME-PRETAX> 17,867
<INCOME-TAX> 357
<INCOME-CONTINUING> 15,639
<DISCONTINUED> (1,317)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,322
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
