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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-12591
CARDINAL HEALTH, INC.
(Exact name of Registrant as specified in its charter)
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OHIO 31-0958666
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5555 GLENDON COURT, DUBLIN, OHIO 43016
(Address of principal executive offices) (Zip Code)
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(614) 717-5000
Registrant's telephone number, including area code
Securities Registered Pursuant to Section 12(b) of the Act:
COMMON SHARES (WITHOUT PAR VALUE) NEW YORK STOCK EXCHANGE
(Title of Class) (Name of each exchange on which registered)
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of August 20, 1996, was approximately $4,346,376,000.
The number of Registrant's Common Shares outstanding as of August 20, 1996,
was as follows:
Common shares, without par value: 64,396,040
Class B common shares, without par value: 0
---------------
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1996 are incorporated by reference into Part I of this Annual
Report on Form 10-K.
Portions of the Registrant's Definitive Proxy Statement to be filed for its
1996 Annual Meeting of Shareholders are incorporated by reference into Part III
of this Annual Report on Form 10-K.
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TABLE OF CONTENTS
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ITEM PAGE
PART I
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1. Business................................................................................ 3
2. Properties.............................................................................. 6
3. Legal Proceedings....................................................................... 6
4. Submission of Matters to a Vote of Security Holders..................................... 6
Executive Officers of the Registrant.................................................... 7
PART II
5. Market for the Registrant's Common Shares and Related Stockholder Matters............... 8
6. Selected Financial Data................................................................. 9
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................................... 10
8. Financial Statements and Supplementary Data............................................. 12
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................................ 33
PART III
10. Directors and Executive Officers of the Registrant...................................... 33
11. Executive Compensation.................................................................. 33
12. Security Ownership of Certain Beneficial Owners and Management.......................... 33
13. Certain Relationships and Related Transactions.......................................... 33
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 34
Signatures.............................................................................. 38
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PART I
ITEM 1: BUSINESS
GENERAL
Cardinal Health, Inc., an Ohio corporation formed in 1979, is structured as
a holding company operating through separate operating subsidiaries. These
operating subsidiaries are sometimes collectively referred to as the "Cardinal
Health" companies. As used in this report, the "Registrant" and the "Company"
refer to Cardinal Health, Inc. and its subsidiaries, unless the context requires
otherwise.
The Company is a leading health care service provider which offers an array
of value-added pharmaceutical distribution services to a broad base of
customers. It is one of the country's largest wholesale distributors of
pharmaceutical and related health care products to independent and chain
drugstores, hospitals, alternate care centers and the pharmacy departments of
supermarkets and mass merchandisers located throughout the continental United
States. Through its Pyxis Corporation subsidiary ("Pyxis"), the Company develops
and manufactures unique point-of-use systems which automate the distribution,
management and control of medications and supplies in hospitals and alternate
care facilities. The Company is also the largest franchisor of independent
retail pharmacies in the United States through its Medicine Shoppe
International, Inc. subsidiary ("Medicine Shoppe"). In addition, through its
Allied Pharmacy Service division ("Allied"), the Company is one of the country's
largest providers of pharmacy management services to hospitals.
As a full-service wholesale distributor, the Company complements its
distribution activities by offering a broad range of value-added support
services to assist the Company's customers and suppliers in maintaining and
improving their market positions and to strengthen the Company's role in the
channel of distribution. These support services include computerized order entry
and order confirmation systems, customized invoicing, generic sourcing programs,
product movement and management reports, consultation on store operation and
merchandising, and customer training. The Company's proprietary software systems
feature customized databases specially designed to help its customers order more
efficiently, contain costs, and monitor their purchases which are covered by
group contract purchasing arrangements.
The Company operates several specialty health care businesses which offer
value-added services to the Company's customers and suppliers while providing
the Company with additional opportunities for growth and profitability. For
example, the Company operates a pharmaceutical repackaging program for both
independent and chain drugstore customers and serves as a distributor of
therapeutic plasma products and other specialty pharmaceuticals to hospitals,
clinics and other managed care facilities on a nationwide basis through the
utilization of telemarketing and direct mail programs. These specialty
distribution activities are part of the Company's overall strategy of developing
diversified products and services to enhance the profitability of its business
and that of its customers and suppliers.
ACQUISITIONS
In the last five years, the Company has completed the following business
combinations. In October 1991, the Company expanded its markets into the
mid-South by acquiring Chapman Drug Company, based in Knoxville, Tennessee, for
$16.8 million in cash. In May 1993, the Company purchased Solomons Company, a
Savannah, Georgia based pharmaceutical wholesaler servicing customers located
primarily in the southeastern region of the United States, in exchange for
approximately 1,062,000 Common Shares. In December 1993, a subsidiary of the
Company merged with PRN Services, Inc., a distributor of oncology and other
specialty products to clinics and physician groups across the United States. In
February 1994, the Company merged with Whitmire Distribution Corporation
("Whitmire"), a Folsom, California based pharmaceutical wholesaler (the
"Whitmire Merger"). The majority of Whitmire's sales were concentrated in the
western and central United States, complementing the Company's former
concentration of sales in the eastern United States and positioning the combined
company to service both customers and suppliers on a national basis. As a result
of the Whitmire Merger, the Company now maintains a network of distribution
centers enabling it to routinely serve the entire population of the continental
U.S. on a next-day basis.
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The Company has completed several additional business combinations since
the Whitmire Merger. On July 1, 1994, the Company purchased Humiston-Keeling,
Inc., a Calumet City, Illinois based pharmaceutical wholesaler serving customers
located primarily in the upper midwest region of the United States. On July 18,
1994, the Company merged with Behrens Inc., a Waco, Texas based pharmaceutical
wholesaler servicing customers located primarily in Texas and adjoining states.
On November 13, 1995, the Company merged with Medicine Shoppe, a St. Louis,
Missouri based franchisor of independent, apothecary-style retail pharmacies in
the United States and abroad. On May 7, 1996, the Company merged with Pyxis, a
San Diego, California based designer, manufacturer, marketer and servicer of
unique point-of-use systems which automate the distribution, management and
control of medications and supplies in hospitals and other health care
facilities. Pyxis had previously acquired Allied in August 1995, as well as the
Access automated medication management system which Pyxis acquired from
Lionville Systems, Inc. in January 1996.
On July 24, 1996, the Company announced that it had entered into a
definitive merger agreement with PCI Services, Inc. ("PCI"), a provider of
diversified packaging services to the pharmaceutical industry in the United
States and Europe. Under the terms of the transaction, PCI will become a wholly
owned subsidiary of the Company in a stock-for-stock merger. Subject to
adjustment upon certain events described in the merger agreement, the
shareholders of PCI will receive 0.336 Common Shares of the Company in exchange
for each common share of PCI. The Company will issue approximately 2.1 million
Common Shares in the acquisition of PCI. The transaction is expected to be
accounted for as a pooling-of-interests for financial reporting purposes and is
subject to certain conditions, including approval by PCI stockholders.
The Company continually evaluates possible candidates for acquisition and
intends to continue to seek opportunities to expand its health care operations
and services. For additional information concerning the acquisitions described
above, see Notes 2 and 17 of "Notes to Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CUSTOMERS AND SUPPLIERS
The Company regularly distributes pharmaceuticals, surgical and hospital
supplies, health and beauty care products, and related products and services to
hospitals, independent and chain drugstores, alternate care centers, and
pharmacy departments of supermarkets and mass merchandisers located throughout
the continental United States. In addition, the Company markets Pyxis' automated
dispensing systems to hospitals and alternate care centers in the U.S. and
Canada. Through Medicine Shoppe, the Company franchises retail pharmacies in the
U.S. and abroad. In fiscal 1996, the Company's largest customer, Kmart
Corporation ("Kmart"), accounted for approximately 12% of net revenues (by
dollar volume). The Company's business could be adversely affected if Kmart
were lost as a customer.
The Company obtains its products from many different suppliers, the largest
of which accounted for approximately 5.9% (by dollar volume) of its net revenues
in fiscal 1996. The Company's five largest suppliers accounted for approximately
22.5% (by dollar volume) of its net revenues during fiscal 1996, and the
Company's relationships with its suppliers are generally very good. The
Company's arrangements with its pharmaceutical suppliers typically may be
canceled by either the Company or the supplier upon 30 to 90 days prior notice,
although many of these arrangements are not governed by formal agreements. The
loss of certain suppliers could adversely affect the Company's business if
alternative sources of supply were unavailable.
While the Company's operations may show quarterly fluctuations, the Company
does not consider its business to be seasonal in nature on a consolidated basis.
COMPETITION
The Company's markets are highly competitive. As a pharmaceutical
wholesaler, the Company competes directly with other national and regional
wholesalers, direct selling manufacturers, mail-order houses, and specialty
distributors on the basis of price, breadth of product lines, marketing
programs, and support services. The Company's pharmaceutical wholesaling
operations have narrow profit margins and, accordingly, the Company's earnings
depend significantly on its ability to distribute a large volume and variety of
products efficiently and to provide quality
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support services. As a marketer of automated pharmaceutical dispensing systems,
the Company competes based upon its installed base of systems, its relationships
with customers, its customer service and support capabilities, its patents and
other intellectual property, and its ability to interface with customer
information systems. Potential competitors to the Pyxis system include both
existing domestic and foreign companies, as well as emerging companies that
supply products for specialized markets and other outside service providers.
Several smaller franchisors compete with Medicine Shoppe in the franchising of
pharmacies, where competition is based primarily upon price, benefits offered to
both the pharmacist and customer, access to third party programs, and the
reputation of the franchise. With its Allied subsidiary, the Company competes
with both national and regional hospital pharmacy management firms on the basis
of its established base of business, the effective use of automation equipment,
the development of clinical programs, and the quality of the services it
provides to its customers.
EMPLOYEES
At August 20, 1996, the Company had approximately 4,800 employees, of whom
approximately 350 are subject to collective bargaining agreements. The Company
considers its employee relations to be good.
INTELLECTUAL PROPERTY
The Company has applied to the United States Patent and Trademark Office
for registration of a number of trademarks, certain of which have been issued,
and also holds common law rights in various trademarks. The Company has also
applied for trademark registration for certain of its trademarks in certain
foreign jurisdictions. There can be no assurance that the Company will obtain
the registrations for which it has applied. The Company's principal trademarks
include CardinalCHOICE(TM), LEADER(R) DRUGSTORES, PYXIS(R), MEDSTATION(R),
SUPPLYSTATION(R), and THE MEDICINE SHOPPE(R).
The Company's Pyxis subsidiary holds certain United States patents relating
to certain aspects of its automated pharmaceutical dispensing systems and
intends to pursue additional patents as appropriate. The Company also owns
certain software, including software used for pharmaceutical purchasing and
inventory control, which is copyrighted and subject to the protection of
applicable copyright laws.
No assurances can be given that any intellectual property rights of the
Company will provide meaningful protection against competitive products or
otherwise be commercially valuable or that the Company will be successful in
obtaining additional patents or enforcing its proprietary rights against others.
REGULATORY MATTERS
The Company, as a distributor of prescription pharmaceuticals (including
certain controlled substances) and operator of pharmacy operations, is required
to register for permits and/or licenses with, and comply with certain operating
and security standards of, the United States Drug Enforcement Administration,
the Food and Drug Administration (the "FDA") and various state boards of
pharmacy or comparable agencies. In addition, the Company is subject to
requirements of the Controlled Substances Act and the Prescription Drug
Marketing Act of 1987, an amendment to the Food, Drug and Cosmetic Act (the
"FDCA") which requires each state to regulate the purchase and distribution of
prescription drugs under prescribed minimum standards. The Company is not
currently required to register or submit premarket notifications to the FDA for
its automated pharmaceutical dispensing systems. There can be no assurance,
however, that FDA policy in this regard will not change. The Company is also
subject to various Federal, state and local laws, regulations and
recommendations relating to safe working conditions, laboratory and
manufacturing practices, and the use and disposal of hazardous or potentially
hazardous substances. Through its Medicine Shoppe subsidiary, the Company is
subject to laws adopted by certain states which regulate franchise operations
and the franchisor-franchisee relationship, and similar legislation is proposed
in additional states. The most common provisions of such laws establish
restrictions on the ability of franchisors to terminate or to refuse to renew
franchise agreements. Federal Trade Commission rules also require franchisors
to make certain disclosures to prospective franchisees prior to the offer or
sale of franchises.
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ITEM 2: PROPERTIES
Due to the nature of the Company's business, its office, distribution,
assembly, and warehousing facilities are operated in widely dispersed locations
across the United States. At August 20, 1996, the Company had twenty-eight
principal pharmaceutical distribution facilities, four specialty distribution
facilities, and the Pyxis assembly operation located in an aggregate of
twenty-three states, seven of which are owned by the Company and the balance of
which are leased. The Company's principal executive offices are located in a
leased four-story building located at 5555 Glendon Court, Dublin, Ohio. The
Company considers its operating properties to be in satisfactory condition and
adequate to meet its present needs. However, the Company expects to make further
additions, improvements, and consolidations of its properties as the Company's
business continues to expand.
For certain financial information regarding the Company's facilities, see
Notes 5 and 9 of "Notes to Consolidated Financial Statements."
ITEM 3: LEGAL PROCEEDINGS
In November 1993, the Company and Whitmire, as well as other pharmaceutical
wholesalers, were each named as defendants in a series of purported class action
antitrust lawsuits which were later consolidated and transferred by the Judicial
Panel for Multi-District Litigation to the United States District Court for the
Northern District of Illinois (the "Brand Name Prescription Drug Litigation").
Subsequent to the consolidation, a new consolidated complaint was filed which
included allegations that the wholesaler defendants, including the Company and
Whitmire, conspired with manufacturers to inflate prices by using a chargeback
pricing system. In addition to the Federal court cases described above, the
Company and Whitmire have also been named as defendants in a series of state
court cases alleging similar claims under various state laws regarding the sale
of brand name prescription drugs. These lawsuits are described in "Item 1 -
Legal Proceedings" of Part II of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, which was filed with the Securities and
Exchange Commission and is incorporated herein by reference. On November 9,
1995, the Company, along with the other wholesaler defendants, filed a motion
for summary judgment in the Brand Name Prescription Drug Litigation. On April 4,
1996, summary judgment was granted in favor of the Company and the other
wholesaler defendants. The plaintiffs have appealed this decision. The Company
believes that the allegations against Cardinal and Whitmire in such litigation
are without merit, and it intends to contest such allegations vigorously. The
Company does not believe that the outcome of these lawsuits will have a material
adverse effect on the Company's financial condition or results of operations.
The Company also becomes involved from time to time in routine litigation
incidental to its business, none of which is expected to have any material
adverse effect on the Company's financial condition or results of operations.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of the Company's shareholders was held on
April 26, 1996.
(b) Not applicable.
(c) The following matter was voted on at the Special Meeting:
Approval and adoption of the Agreement and Plan of Merger dated as of
February 7, 1996, by and among the Company, Aztec Merger Corp. ("Aztec"), and
Pyxis providing for the merger of Aztec with and into Pyxis. The results of the
shareholder vote on this proposal were: 38,529,233 votes for; 70,204 votes
against; 56,744 votes abstained; and 0 broker non-votes.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows (information provided
as of August 20, 1996):
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NAME AGE POSITION
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Robert D. Walter 51 Chairman and Chief Executive Officer
Melburn G. Whitmire 56 Vice Chairman
John C. Kane 56 President and Chief Operating Officer
David A. Abrahamson 56 Executive Vice President; President -- Medicine Shoppe
David Bearman 50 Executive Vice President and Chief Financial Officer
George H. Bennett, Jr. 43 Executive Vice President, General Counsel and Secretary
James F. Millar 48 Executive Vice President; President -- Cardinal Distribution
Lisa M. Dolin 37 Senior Vice President -- Specialty Companies
Richard J. Miller 39 Vice President, Controller and Principal Accounting Officer
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Unless indicated to the contrary, the business experience summaries
provided below for the Company's executive officers describe positions held by
the named individuals during the last five years but may exclude other positions
held with subsidiaries of the Company.
ROBERT D. WALTER has been a Director, Chairman of the Board and Chief
Executive Officer of the Company since its formation in 1979 and has served as a
director and officer of certain of the Company's subsidiaries since their
formation or acquisition by the Company. Mr. Walter also serves as a director of
Banc One Corporation, Westinghouse Electric Corporation and Karrington Health,
Inc.
MELBURN G. WHITMIRE has been a Director of the Company since January 1994
and was elected Vice Chairman of the Company in February 1994. Prior to that,
Mr. Whitmire was Chairman of the Board, Chief Executive Officer and President of
Whitmire Distribution Corporation.
JOHN C. KANE has been a Director of the Company since August 1993 and has
been the Company's President and Chief Operating Officer since joining the
Company in February 1993. Prior to that, Mr. Kane was employed by Abbott
Laboratories (a pharmaceutical and health care manufacturer), where he served
most recently as President of the Ross Laboratories Division.
DAVID A. ABRAHAMSON has been an Executive Vice President of the Company
since August 1996 and President of Medicine Shoppe since May 1990.
DAVID BEARMAN has been an Executive Vice President of the Company since
February 1994 and, prior to that, served as a Region President from May 1991 to
February 1994 and as a Senior Vice President of the Company from October 1989.
Mr. Bearman has also served as the Company's Chief Financial Officer since
joining the Company in October 1989. Prior to joining the Company, Mr. Bearman
was employed by General Electric Company (a diversified manufacturing,
technology and services company).
GEORGE H. BENNETT, JR. has been Secretary of the Company since July 1994
and an Executive Vice President of the Company since February 1994. Prior to
that, Mr. Bennett was a Senior Vice President and Chief Administrative Officer
of the Company from May 1991. Mr. Bennett has also served as General Counsel of
the Company since joining the Company in January 1984.
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JAMES F. MILLAR has served as an Executive Vice President of the Company
since February 1994, and was named as President of the Company's Cardinal
Distribution pharmaceutical wholesaling business in June 1996. Prior to February
1994, Mr. Millar served in a series of increasingly senior regional operating
positions within the Company's pharmaceutical wholesaling business since he was
hired in 1987.
LISA M. DOLIN has been the Company's Senior Vice President -- Specialty
Companies since June 1996. She has served as President of the Company's National
PharmPak Services, Inc. subsidiary ("National PharmPak") since February 1995.
Prior to that, Ms. Dolin served as National PharmPak's Vice President and
General Manager beginning in October 1990.
RICHARD J. MILLER has been the Company's Principal Accounting Officer since
August 1996 and has served as Vice President, Controller since August 1995. Upon
joining the Company in July 1994, and until August 1995, he served as Vice
President, Auditing. Prior to that, Mr. Miller was a partner at Deloitte &
Touche LLP (an international accounting firm).
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER
MATTERS
The Company's common shares, without par value (the "Common Shares") are
quoted on the New York Stock Exchange under the symbol "CAH." Prior to listing
on the New York Stock Exchange, the Common Shares were quoted on the Nasdaq
National Market System under the symbol "CDIC."
The following table reflects the range of the reported high and low last
sale prices of the Common Shares as reported on the New York Stock Exchange
Composite Tape from September 7, 1994 through August 20, 1996 and on the Nasdaq
National Market System prior to September 7, 1994, and the per share dividends
declared thereon.
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HIGH LOW DIVIDENDS
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Fiscal 1995:
Quarter Ended
September 30, 1994 $42.13 $36.63 $0.03
December 31, 1994 48.25 41.13 0.03
March 31, 1995 50.88 44.25 0.03
June 30, 1995 47.50 42.25 0.03
Fiscal 1996:
Quarter Ended
September 30, 1995 $56.50 $43.75 $0.03
December 31, 1995 57.88 51.13 0.03
March 31, 1996 64.25 52.50 0.03
June 30, 1996 75.25 60.25 0.03
Fiscal 1997:
Through August 20, 1996 $72.50 $67.00 $0.03
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As of August 20, 1996, there were approximately 2,400 shareholders of
record of the Company's Common Shares.
The Company anticipates that it will continue to pay quarterly cash
dividends in the future. However, the payment and amount of future dividends
remain within the discretion of the Company's Board of Directors and will depend
upon the Company's future earnings, financial condition, capital requirements,
and other factors.
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ITEM 6: SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company was
prepared giving retroactive effect to the business combinations with Whitmire
Distribution Corporation ("Whitmire") on February 7, 1994, Medicine Shoppe
International, Inc. ("Medicine Shoppe") on November 13, 1995, and Pyxis
Corporation ("Pyxis") on May 7, 1996, all of which were accounted for as
pooling-of-interests transactions.
On March 1, 1994, the Company changed its fiscal year end from March 31 to
June 30. As a result, for the fiscal years ended March 31, 1993 and 1992, the
information presented is derived from consolidated financial statements which
combine data from Cardinal, Medicine Shoppe and Pyxis for the fiscal years ended
March 31, 1993 and 1992, with data from Whitmire for fiscal years ended July 3,
1993 and June 27, 1992, respectively. For the fiscal years ended June 30, 1996,
1995 and 1994, the information presented is derived from consolidated financial
statements which combine data from Cardinal, Whitmire, Medicine Shoppe and Pyxis
for the fiscal years ended June 30, 1996, 1995 and 1994. The selected
consolidated financial data below should be read in conjunction with the
Company's consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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CARDINAL HEALTH, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED
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JUNE 30, June 30, June 30, March 31, March 31,
1996 1995 1994 1993 1992
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Earnings Statement Data:
Net revenues $8,862,425 $8,022,108 $5,963,280 $4,734,636 $3,739,700
Earnings available for Common Shares before
cumulative effect of change in accounting
principle $ 111,864 $ 137,534 $ 79,825 $ 65,086 $ 38,560
Cumulative effect of change in accounting
principle (10,000)
--------------- --------------- --------------- --------------- ---------------
Net earnings available for Common Shares $ 111,864 $ 137,534 $ 79,825 $ 55,086 $ 38,560
=============== =============== =============== =============== ===============
Primary earnings per Common Share:
Before cumulative effect of change in
accounting principle $ 1.73 $ 2.14 $ 1.30 $ 1.19 $ 0.83
Cumulative effect of change in accounting
principle (0.18)
--------------- --------------- --------------- --------------- ---------------
Net $ 1.73 $ 2.14 $ 1.30 $ 1.01 $ 0.83
=============== =============== =============== =============== ===============
Fully diluted earnings per Common Share:
Before cumulative effect of change in
accounting principle $ 1.73 $ 2.14 $ 1.30 $ 1.16 $ 0.83
Cumulative effect of change in accounting
principle (0.17)
--------------- --------------- --------------- --------------- ---------------
Net $ 1.73 $ 2.14 $ 1.30 $ 0.99 $ 0.83
=============== =============== =============== =============== ===============
Balance Sheet Data:
Total assets $2,681,095 $2,160,961 $1,636,382 $1,265,861 $1,023,485
Long-term obligations 265,144 209,214 210,196 276,748 306,066
Redeemable preferred stock 20,400 19,560
Convertible preferred stock 109
Shareholders' equity 930,710 799,559 567,345 395,762 281,651
Cash dividends declared per Common Share $ 0.12 $ 0.12 $ 0.10 $ 0.07 $ 0.06
</TABLE>
Net earnings and cash dividends per Common Share have been adjusted to
reflect all stock dividends and stock splits. Amounts reflect business
combinations in fiscal 1996, 1995, 1994 and 1992. Fiscal 1996, 1994 and 1993
amounts reflect the impact of unusual items primarily related to mergers. See
Note 2 of "Notes to Consolidated Financial Statements" for a further discussion
of unusual items affecting fiscal 1996 and 1994.
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis has been prepared giving retroactive
effect to the pooling-of-interests business combinations with Medicine Shoppe
which was completed on November 13, 1995 and Pyxis which was completed on May 7,
1996 (see Note 2 of "Notes to Consolidated Financial Statements"). The
discussion and analysis presented below should be read in conjunction with the
consolidated financial statements and related notes appearing elsewhere in this
report.
RESULTS OF OPERATIONS
NET REVENUES. Net revenues in fiscal 1996 increased 10% compared with
fiscal 1995 primarily due to the internal revenue growth from pharmaceutical
wholesaling activities, including the addition of new customers, increased
sales to existing customers and price increases. The 35% increase in net
revenues in fiscal 1995 compared to fiscal 1994 was due to internal business
growth of 25%, primarily in pharmaceutical wholesaling activities, the
acquisition of Humiston-Keeling, Inc. in July 1994, and the merger transaction
with Behrens Inc. in July 1994 (see Note 2 of "Notes to Consolidated Financial
Statements"). The internal business growth in fiscal 1995 resulted primarily
from the addition of new customers (partially as a result of expanded sales
territories), increased sales to existing customers, and price increases.
GROSS MARGIN. As a percentage of net revenues, gross margin increased to
8.07% for fiscal 1996 from 7.79% in fiscal 1995. This increase is primarily due
to the gross margin generated from the acquisition of pharmacy management
operations in fiscal 1996 (see Notes 1 and 2 of "Notes to Consolidated Financial
Statements"). Pharmacy management operations generally provide a higher gross
margin than pharmaceutical wholesaling activities. The gross margin ratio in
fiscal 1995 decreased from 8.17% in fiscal 1994 primarily due to decreases in
pharmaceutical selling margin rates, reflecting a more competitive market and a
greater mix of high volume customers, offset by a slight increase in purchasing
gains associated with pharmaceutical price inflation.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of net revenues increased to 4.89% in
fiscal 1996 compared to 4.72% in fiscal 1995. The increase in the selling,
general and administrative expenses as a percentage of net revenues in fiscal
1996 is due to the inclusion of pharmacy management services in current year
operations (see "Gross Margin" above). This increase was partially offset by
economies associated with the Company's revenue growth from pharmaceutical
wholesaling activities, as well as productivity gains resulting in part from
warehouse consolidations and management information system enhancements. The
decrease in the selling, general and administrative expenses as a percentage of
net revenues in fiscal 1995 from 4.90% in fiscal 1994 is due to economies
associated with the Company's revenue growth as well as consolidating
distribution centers and administrative functions, and selectively automating
facilities.
UNUSUAL ITEMS. During fiscal 1996, the Company recorded costs totaling
$67.3 million ($47.8 million, net of tax) related primarily to the mergers with
Medicine Shoppe and Pyxis (see Note 2 of "Notes to Consolidated Financial
Statements"). These costs included approximately $22.4 million for investment
advisor, legal, accounting, internal personnel and other transaction fees
associated with the business combinations; $14.7 million related to costs to
exit and restructure certain activities, including operating lease terminations
and asset impairment charges; $7.8 million related to employee retention,
employee severance, and other personnel costs; and $2.9 million for other
activities related to integrating operations and implementing efficiencies of
the merged companies. Certain of these amounts are based upon estimates and
actual amounts paid may ultimately differ from these estimates. As of June 30,
1996, the Company had paid approximately $22.1 million related to these charges.
If additional costs are incurred, such items will be expensed in subsequent
periods.
In fiscal 1994, the Company recorded a charge to reflect Whitmire Merger
costs of approximately $35.9 million ($28.2 million net of tax). These costs
included approximately $7 million for investment banking, legal, accounting, and
other related transaction fees and costs associated with the combination; $13
million for corporate integration and distribution rationalization; $6 million
for integration of information systems; and $2 million for restructuring
Whitmire's revolving credit agreement. At June 30, 1996, the Company had
disbursed all amounts related to these liabilities, with the actual amounts paid
approximating the original amounts recorded.
10
<PAGE> 11
These items are considered unusual in nature in that the costs would
generally not have been incurred in the absence of the business combinations.
INTEREST EXPENSE. The increase in interest expense of $4.5 million in
fiscal 1996 compared to fiscal 1995 is due to the Company's issuance of $150
million, 6% Notes due 2006, in a public offering in January 1996. The increase
in interest expense of $1.1 million in fiscal 1995 compared to fiscal 1994 is
due to higher average short-term borrowings resulting from increased working
capital requirements associated with the Company's growth. The Company has
entered into various interest rate swap agreements (see Note 5 of "Notes to
Consolidated Financial Statements").
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
relative to pretax earnings was 44.6%, 41.1% and 44.8% for fiscal years 1996,
1995 and 1994, respectively. The fluctuation in the tax rate is primarily due to
certain nondeductible costs associated with the business combinations in fiscal
1996 and 1994 (see Note 7 of "Notes to Consolidated Financial Statements").
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $88.4 million to $854.1 million at June 30,
1996, from $765.7 million at June 30, 1995, and included increased investments
in merchandise inventories and trade receivables of $151.4 million and $42.7
million, respectively, and increased holdings of cash and equivalents and
marketable securities of $176.8 million. The increase was offset primarily by
an increase in accounts payable and the current portion of long-term debt of
$170.0 million and $102.8 million, respectively, and an increase in other
accrued liabilities of $29.8 million. The increases in inventories and accounts
payable are due to the Company's revenue growth, the procurement of
pharmaceutical inventory relative to an anticipated increase in business with a
large mass merchandising customer, and pharmaceutical price increases. The
increase in cash and equivalents, and marketable securities available-for-sale
reflect the timing of inventory purchases and payments noted above and a
partial use of proceeds from the Company's $150 million 6% Note offering (see
"Interest Expense," above). The increase in trade receivables was due primarily
to increased sales (see "Net Revenues", above). The increase in the current
portion of long-term debt is due to the Company's $100 million 8% Notes which
are due March 1997. Liabilities incurred in connection with the fiscal 1996
business combinations were the primary cause of the increase in the other
accrued liabilities.
Property and equipment, at cost increased by $69.7 million in fiscal 1996.
The property acquired included increased investment in management information
systems and customer support systems, as well as the construction and automation
of distribution facilities.
Goodwill and other intangibles increased by approximately $31.7 million to
$92.4 million due to purchase business combinations completed in the current
year, primarily related to the Company's point-of-use pharmacy systems and
pharmacy management services (see Note 2 of "Notes to Consolidated Financial
Statements").
Shareholders' equity increased to $930.7 million at June 30, 1996 from
$799.6 million at June 30, 1995 due primarily to net earnings of the Company of
approximately $111.9 million and proceeds and tax benefits from the exercise of
options under employee stock plans of $27.6 million, offset primarily by
dividends paid by the Company of approximately $7.6 million in fiscal 1996.
The Company has line-of-credit agreements with various bank sources
aggregating $345 million, of which $95 million is represented by committed
line-of-credit agreements and the balance is uncommitted. The Company had no
amounts outstanding under these lines at June 30, 1996.
The Company believes that it has adequate capital resources at its disposal
to meet currently anticipated capital expenditures, routine business growth and
expansion, and current and projected debt service requirements.
OTHER
PENDING BUSINESS COMBINATION. On July 24, 1996, the Company announced that
it had entered into a definitive merger agreement with PCI Services, Inc.
("PCI") pursuant to which PCI will become a wholly owned subsidiary of the
Company in a stock-for-stock merger expected to be accounted for as a
pooling-of-interests for financial reporting
11
<PAGE> 12
purposes. In connection with the merger, the Company estimates that it will
issue approximately 2.1 million Common Shares. Under the terms of the merger
agreement, shareholders of PCI will receive 0.336 Common Shares for each share
of PCI that they own at the time the transaction is consummated, subject to
adjustment under specified circumstances. In addition, pursuant to the terms of
the merger agreement, options for PCI common stock will be converted into
equivalent options for approximately 158,000 Common Shares, based upon the
exchange ratio. Upon consummation of the merger, the Company will record a
one-time charge to reflect transaction and other costs incurred as a result of
the merger. The merger is expected to be completed in the fall of 1996, subject
to satisfaction of certain conditions, including approval by shareholders of
PCI.
The Company's trend with regard to acquisitions in fiscal 1996, and
continuing with the pending PCI transaction described above, has been to expand
its role as a health care service provider. This trend has resulted in
diversification into health care services which (a) complement the Company's
core pharmaceutical distribution business; (b) provide opportunities for the
Company to develop synergies with, and thus strengthen, the acquired business;
and (c) generally generate higher gross margins as a percentage of net revenues
than pharmaceutical distribution. As the health care industry continues to
consolidate, the Company expects to continually evaluate acquisition candidates
in both pharmaceutical distribution as well as other opportunities that would
expand its role as a health care service provider; however, there can be no
assurance that it will be able to successfully pursue any such opportunity or
consummate any such transaction.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," which requires
adoption no later than the Company's fiscal 1997. The new standard defines a
fair value method of accounting for stock options and similar equity
instruments, under which compensation cost is measured at the grant date based
on the fair value of the award and is recognized over the service period, which
is usually the vesting period. Pursuant to the new standard, companies are
encouraged, but not required, to adopt the fair value method of accounting for
employee stock-based transactions. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose in
the financial statements pro forma net income and earnings per share as if the
new method of accounting had been applied. The accounting requirements of the
new method are effective for all employee awards granted after the beginning of
the fiscal year of adoption. The Company has not yet determined if it will elect
to change to the fair value method, nor has it determined the effect the new
standard will have on net income and earnings per share should it elect to make
such a change. Adoption of the new standard will have no effect on the Company's
cash flows.
In addition, in March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting
For the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires adoption no later than the Company's fiscal 1997. SFAS No.
121 requires impairment losses to be recorded on long-lived assets used in
operations when an indication of impairment is present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses accounting for long-lived assets
that are expected to be disposed of. The Company does not believe, based on
current circumstances, the adoption of SFAS No. 121 will have a material effect
on financial condition or results of operations.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Reports
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1996, 1995 and 1994
Consolidated Balance Sheets at June 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
12
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of Cardinal Health, Inc.:
We have audited the accompanying consolidated balance sheets of Cardinal Health,
Inc. and subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. The
consolidated financial statements and financial statement schedule give
retroactive effect to the pooling-of-interests business combination of Cardinal
Health, Inc. and Pyxis Corporation on May 7, 1996, as described in Note 2 to the
consolidated financial statements. We did not audit the financial statements of
Pyxis Corporation for any year, which statements reflect total assets
constituting 10.5% and 11.2%, respectively, of consolidated total assets at June
30, 1996 and 1995, and total revenues and net income constituting 2.5%, 2.0% and
2.1%, and 31.7%, 26.6% and 39.9%, respectively, for each of the three years in
the period ended June 30, 1996. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Pyxis Corporation, is based solely on the report of
such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Cardinal Health, Inc. and
subsidiaries at June 30, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1996
in conformity with generally accepted accounting principles. Also, in our
opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 13, 1996
13
<PAGE> 14
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Cardinal Health, Inc.
We have audited the consolidated balance sheets of Pyxis Corporation as of June
30, 1996 and 1995, and the related consolidated statements of income,
shareholder's equity, and cash flows for each of the three years in the period
ended June 30, 1996 (not included herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pyxis Corporation
at June 30, 1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended June 30,1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
August 2, 1996
14
<PAGE> 15
<TABLE>
<CAPTION>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED JUNE 30,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues $8,862,425 $8,022,108 $5,963,280
Cost of products sold 8,147,148 7,397,557 5,476,361
----------- ----------- ----------
Gross margin 715,277 624,551 486,919
Selling, general and administrative expenses 433,255 378,579 291,975
Unusual items (67,250) (35,880)
----------- ----------- ----------
Operating earnings 214,772 245,972 159,064
Other income (expense):
Interest expense (23,868) (19,403) (18,316)
Other, net-- primarily interest income 11,161 7,066 6,160
----------- ----------- ----------
Earnings before income taxes 202,065 233,635 146,908
Provision for income taxes 90,201 96,101 65,878
----------- ----------- ----------
Earnings before preferred dividends declared 111,864 137,534 81,030
Preferred dividends declared (1,205)
----------- ----------- ----------
Net earnings available for Common Shares $ 111,864 $ 137,534 $ 79,825
=========== =========== ===========
Earnings per Common Share:
Primary $ 1.73 $ 2.14 $ 1.30
Fully diluted $ 1.73 $ 2.14 $ 1.30
Weighted average number of Common Shares outstanding:
Primary 64,669 64,119 61,380
Fully diluted 64,743 64,170 61,399
The accompanying notes are an integral part of these statements.
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, JUNE 30,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 287,802 $ 64,589
Marketable securities available-for-sale 54,335 100,760
Trade receivables 564,881 522,230
Current portion of net investment in sales-type leases 37,953 30,119
Merchandise inventories 1,238,238 1,086,877
Prepaid expenses and other 56,568 47,107
----------- -----------
Total current assets 2,239,777 1,851,682
----------- -----------
Property and equipment, at cost:
Land, buildings and improvements 62,367 47,406
Machinery and equipment 162,525 119,122
Furniture and fixtures 40,692 29,398
----------- -----------
Total 265,584 195,926
Accumulated depreciation and amortization (112,122) (89,267)
----------- -----------
Property and equipment, net 153,462 106,659
Other assets:
Net investment in sales-type leases, less current portion 111,604 85,313
Goodwill and other intangibles 92,428 60,695
Other 83,824 56,612
----------- -----------
Total $2,681,095 $2,160,961
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ $ 3,000
Current portion of long-term obligations 106,007 3,162
Accounts payable 1,126,065 956,073
Other accrued liabilities 153,585 123,764
----------- -----------
Total current liabilities 1,385,657 1,085,999
----------- -----------
Long-term obligations, less current portion 265,144 209,214
Deferred income taxes and other liabilities 99,584 66,189
Shareholders' equity:
Common Shares, without par value 484,446 455,709
Retained earnings 455,690 351,441
Common Shares in treasury, at cost (5,426) (4,011)
Other (4,000) (3,580)
----------- -----------
Total shareholders' equity 930,710 799,559
----------- -----------
Total $2,681,095 $2,160,961
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
CARDINAL HEALTH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In Thousands)
COMMON SHARES
-------------------
SHARES RETAINED
ISSUED AMOUNT EARNINGS
------- --------- -----------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1993 44,925 $272,460 $147,006
Earnings before preferred dividends declared 81,030
Shares issued pursuant to the conversion of $75 million of convertible debentures 3,423 73,140
Employee stock plans activity and issuance of Common Shares for cash,
including tax benefits of $7,969 2,834 12,045
Treasury shares acquired and shares retired (92) (191) (2,232)
Cumulative effect of adjustment for unrealized loss on marketable
securities available-for-sale
Dividends paid (7,645)
5-for-4 stock split effected as a stock dividend and cash paid in lieu of fractional
shares 7,564 (16)
Equity of PRN Services, Inc. on merger date (see Note 2) 237 34 348
------- --------- ---------
BALANCE, JUNE 30, 1994 58,891 357,488 218,491
Net earnings 137,534
Employee stock plans activity and issuance of Common Shares for cash,
including tax benefits of $22,236 1,684 27,602
Treasury shares acquired and shares retired (186) (300) (4,805)
Change in unrealized loss on marketable securities available-for-sale, net of tax
Dividends paid (9,107)
Equity of Behrens Inc. on merger date (see Note 2) 944 451 9,328
Shares issued in connection with stock offering 1,867 70,468
------- --------- ---------
BALANCE, JUNE 30, 1995 63,200 455,709 351,441
Net earnings 111,864
Employee stock plans activity and issuance of Common Shares for cash,
including tax benefits of $11,168 982 28,737
Treasury shares acquired and restricted stock forfeitures
Change in unrealized loss on marketable securities available-for-sale, net of tax
Dividends paid (7,615)
======= ========= =========
BALANCE, JUNE 30, 1996 64,182 $484,446 $455,690
======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
TREASURY SHARES TOTAL
--------------- SHAREHOLDERS'
SHARES AMOUNT OTHER EQUITY
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1993 (173) $(3,083) $(3,066) $ 413,317
Earnings before preferred dividends declared 81,030
Shares issued pursuant to the conversion of $75 million of convertible debentures 73,140
Employee stock plans activity and issuance of Common Shares for cash,
including tax benefits of $7,969 (907) 11,138
Treasury shares acquired and shares retired (7) (307) (2,730)
Cumulative effect of adjustment for unrealized loss on marketable
securities available-for-sale (1,271) (1,271)
Dividends paid (7,645)
5-for-4 stock split effected as a stock dividend and cash paid in lieu of fractional
shares (16)
Equity of PRN Services, Inc. on merger date (see Note 2) 382
-------- ------- ---------- ---------
BALANCE, JUNE 30, 1994 (180) (3,390) (5,244) 567,345
Net earnings 137,534
Employee stock plans activity and issuance of Common Shares for cash,
including tax benefits of $22,236 839 28,441
Treasury shares acquired and shares retired (13) (621) (5,726)
Change in unrealized loss on marketable securities available-for-sale, net of tax 825 825
Dividends paid (9,107)
Equity of Behrens Inc. on merger date (see Note 2) 9,779
Shares issued in connection with stock offering 70,468
-------- ------- ---------- ---------
BALANCE, JUNE 30, 1995 (193) (4,011) (3,580) 799,559
Net earnings 111,864
Employee stock plans activity and issuance of Common Shares for cash,
including tax benefits of $11,168 (1,173) 27,564
Treasury shares acquired and restricted stock forfeitures (29) (1,415) 307 (1,108)
Change in unrealized loss on marketable securities available-for-sale, net of tax 446 446
Dividends paid (7,615)
======== ======= ========== =========
BALANCE, JUNE 30, 1996 (222) $(5,426) $ (4,000) $ 930,710
======== ======= ========== =========
The accompanying notes are an integral part of these statements.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
CARDINAL HEALTH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED JUNE 30,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings before preferred dividends declared $ 111,864 $ 137,534 $ 81,030
Adjustments to reconcile earnings before preferred dividends declared
to net cash from operating activities:
Depreciation and amortization 32,488 24,342 18,650
Provision for deferred income taxes 20,530 49,568 10,798
Provision for bad debts 9,450 12,479 12,172
Change in operating assets and liabilities, net of effects from
acquisitions:
Increase in trade receivables (47,355) (137,476) (89,217)
Increase in merchandise inventories (148,431) (159,036) (232,178)
Increase in net investment in sales-type leases (34,125) (40,584) (40,710)
Increase in accounts payable 164,601 154,137 170,682
Other operating items, net 13,200 (10,048) 13,355
---------- ---------- ----------
Net cash provided by (used in) operating activities 122,222 30,916 (55,418)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired (36,244) (19,345)
Proceeds from sale of property and equipment 796 91 1,079
Additions to property and equipment (73,094) (50,654) (14,195)
Purchase of marketable securities available-for-sale (163,719) (169,599) (652,347)
Proceeds from sale of marketable securities available-for-sale 218,019 143,501 682,300
---------- ---------- ----------
Net cash provided by (used in) investing activities (54,242) (96,006) 16,837
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowing activity (3,000) (22,500) 25,000
Reduction of long-term obligations (10,570) (5,424) (99,403)
Proceeds from long-term obligations, net of issuance costs 148,960 99,498
Proceeds from issuance of Common Shares 17,398 75,770 2,293
Tax benefit of stock options 11,168 22,236 7,969
Dividends on common and preferred shares and cash paid
in lieu of fractional shares (7,615) (9,107) (7,661)
Redemption of preferred stock (20,400)
Purchase of treasury shares (1,108) (5,726) (2,730)
---------- ---------- ----------
Net cash provided by financing activities 155,233 55,249 4,566
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 223,213 (9,841) (34,015)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 64,589 74,430 108,445
---------- ---------- ----------
CASH AND EQUIVALENTS AT END OF YEAR $ 287,802 $ 64,589 $ 74,430
========== ========== ==========
The accompanying notes are an integral part of these statements.
</TABLE>
18
<PAGE> 19
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Health, Inc. and subsidiaries (the "Company") is a health care
service provider which distributes a broad line of pharmaceuticals, surgical and
hospital supplies, therapeutic plasma and other specialty pharmaceutical
products, health and beauty care products, and other items typically sold by
hospitals, retail drug stores, and other health care providers. Through the
Company's subsidiary Pyxis Corporation ("Pyxis"), the Company manufactures,
leases, sells and services point-of-use pharmacy systems which automate the
distribution and management of medications and supplies in hospitals and other
health care facilities. Pharmacy management services are provided by the
Company's subsidiary Allied Pharmacy Service, Inc. ("Allied"). The Company is
also a franchisor of apothecary-style pharmacies through its subsidiary Medicine
Shoppe International, Inc. ("Medicine Shoppe"). See "Basis of Presentation" and
Note 2 below. The Company is currently operating in only one business segment,
primarily in the continental United States.
BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts
of all majority-owned subsidiaries and all significant intercompany accounts and
transactions have been eliminated. In addition, the consolidated financial
statements give retroactive effect to the pooling-of-interests business
combinations with Whitmire Distribution Corporation ("Whitmire") on February 7,
1994, Medicine Shoppe on November 13, 1995, and Pyxis on May 7, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual amounts may differ from these amounts.
CASH EQUIVALENTS
The Company considers all liquid investments purchased with a maturity of
three months or less to be cash equivalents. The carrying value of cash
equivalents approximates their fair value.
MARKETABLE SECURITIES AVAILABLE-FOR-SALE
The Company has classified its investment in municipal bonds and U.S.
Treasury obligations as available-for-sale. The fair value of the marketable
securities approximates the original costs determined on a specific
identification basis at June 30, 1996. Gross and net realized and unrealized
holding gains and losses were not material in any period presented in the
accompanying financial statements. The Company's marketable securities
available-for-sale mature on various dates in fiscal 1997.
RECEIVABLES
Trade receivables are primarily comprised of amounts owed to the Company
through its pharmaceutical wholesaling activities and are presented net of an
allowance for doubtful accounts of $32,414,000 and $31,529,000 at June 30, 1996
and 1995, respectively.
Medicine Shoppe provides financing to selected franchisees primarily for
development, acquisition and conversion costs, exclusive of origination fees.
Such financing arrangements generally require repayment in seven to ten years,
at interest rates which fluctuate with the prime rate. Most of these financings
are collateralized by property of the franchisees or by third-party guarantors.
Finance notes and accrued interest receivable were $36,438,000 and $32,340,000
at June 30, 1996 and 1995, respectively (the current portion was $5,827,000 and
$5,062,000, respectively), and are included in other assets. These amounts are
reported net of an allowance for doubtful accounts of $8,042,000 and $7,385,000
at June 30, 1996 and 1995, respectively.
19
<PAGE> 20
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MERCHANDISE INVENTORIES
Substantially all merchandise inventories (83% in 1996 and 91% in 1995) are
stated at lower of cost, using the last-in, first-out (LIFO) method, or market.
If the Company had used the first-in, first-out (FIFO) method of inventory
valuation, which approximates current replacement cost, inventories would have
been higher than reported at June 30, 1996, by $76,321,000 and at June 30, 1995,
by $79,365,000.
The Company continues to consolidate locations, automate selected
distribution facilities and invest in management information systems which
achieve efficiencies in inventory management processes. As a result of the
facility and related inventory consolidations and the operational efficiencies
achieved in fiscal 1996, the Company had partial inventory liquidations in
certain LIFO pools which reduced the LIFO provision by approximately $7 million.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
for financial reporting purposes are computed using the straight-line method
over the estimated useful lives of the assets which range from three to forty
years, including capital lease assets which are amortized over the terms of
their respective leases. Amortization of capital lease assets is included in
depreciation and amortization expense. Certain software costs related to
internally developed or purchased software are capitalized and amortized using
the straight-line method over the useful lives, not exceeding five years.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles primarily represent intangible assets
related to the excess of cost over net assets of subsidiaries acquired.
Intangible assets are being amortized using the straight-line method over lives
which range from ten to forty years. Accumulated amortization was $23,901,000
and $18,819,000 at June 30, 1996 and 1995, respectively. At each balance sheet
date, a determination is made by management to ascertain whether the intangible
assets have been impaired based on several criteria, including, but not limited
to, sales trends, undiscounted operating cash flows, and other operating
factors.
REVENUE RECOGNITION
The Company records revenues when merchandise is shipped to its customers
and the Company has no further obligation to provide services related to such
merchandise. The Company also arranges for direct deliveries to be made to
customer warehouses which are excluded from net revenues and totaled
$2,179,000,000, $1,779,000,000 and $562,000,000 in fiscal 1996, 1995 and 1994,
respectively. The service fees related to direct deliveries are included in net
revenues and were not significant in any of the fiscal years presented.
Revenues are recognized from sales-type leases of point-of-use pharmacy
systems when the systems are installed, and/or the customer accepts the system,
and the lease becomes noncancellable. Unearned income on sales-type leases is
recognized using the interest method. Sales of point-of-use pharmacy systems are
recognized upon installation/delivery and customer acceptance. Revenues for
systems installed under operating lease arrangements are recognized over the
lease term as it becomes receivable according to the provisions of the lease.
The revenue from such operating leases is not significant.
The Company earns franchise and origination fees from its apothecary-style
pharmacy franchisees. Franchise fees represent monthly fees based upon
franchisees' sales and are recognized as revenues when they are earned.
Origination fees from signing new franchise agreements are recognized as
revenues when the new franchise store is opened. Master franchise origination
fees are recognized as revenues when all significant conditions relating to the
master franchise agreement have been satisfied by the Company.
Pharmacy management revenue is recognized according to the contracts
established. A fee is charged under such contracts through a monthly management
fee arrangement, a capitated fee arrangement or a portion of the hospital
charges to patients.
20
<PAGE> 21
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per Common Share are computed using the
treasury stock method and are based on the weighted average number of Common
Shares outstanding during each period and the dilutive effect of stock options
from the date of grant.
Excluding dividends paid by all entities with which the Company has merged,
the Company paid cash dividends per Common Share of $0.12, $0.12 and $0.09 for
the fiscal years ended June 30, 1996, 1995 and 1994, respectively.
STOCK SPLIT
The Company paid a 25% stock dividend on June 30, 1994, to effect a
five-for-four stock split of the Company's Common Shares. All share and per
share amounts included in the consolidated financial statements, except the
Consolidated Statements of Shareholders' Equity, have been adjusted to reflect
this stock split.
2. BUSINESS COMBINATIONS
Effective May 7, 1996, a wholly owned subsidiary of the Company was merged
with and into Pyxis (the "Pyxis Merger"). The Pyxis Merger was accounted for as
a pooling-of-interests business combination, and the Company issued
approximately 15,076,000 Common Shares to Pyxis shareholders. In addition,
Pyxis' outstanding stock options were converted into options to purchase
approximately 1,562,000 additional Common Shares.
The table below presents a reconciliation of net revenues and net earnings
available for Common Shares as reported in the accompanying consolidated
financial statements with those previously reported by the Company (in
thousands).
<TABLE>
<CAPTION>
Cardinal
Health Pyxis Combined
---------------- ---------------- ----------------
<S> <C> <C> <C>
Fiscal year ended June 30, 1994:
Net revenues $ 5,838,574 $ 124,706 $ 5,963,280
Net earnings available for Common Shares $ 47,990 $ 31,835 $ 79,825
Fiscal year ended June 30, 1995:
Net revenues $ 7,859,919 $ 162,189 $ 8,022,108
Net earnings available for Common Shares $ 101,000 $ 36,534 $ 137,534
Nine Months Ended March 31, 1996:
Net revenues $ 6,381,569 $ 160,376 $ 6,541,945
Net earnings available for Common Shares $ 79,003 $ 24,804 $ 103,807
</TABLE>
Adjustments affecting net income and shareholders' equity resulting from
the Pyxis Merger to adopt the same accounting practices were not material for
any periods presented herein. There were no material intercompany transactions.
On November 13, 1995, a wholly owned subsidiary of the Company was merged
with and into Medicine Shoppe. The Medicine Shoppe merger was accounted for as a
pooling-of-interests business combination. The Company issued approximately
6,426,000 Common Shares to Medicine Shoppe shareholders. In addition, Medicine
Shoppe's outstanding stock options were converted into options to purchase
approximately 121,000 Common Shares.
During fiscal 1996, the Company recorded costs totaling $67.3 million
($47.8 million, net of tax) related primarily to the mergers with Medicine
Shoppe and Pyxis. These costs included approximately $22.4 million for
investment advisor, legal, accounting, internal personnel and other transaction
fees associated with the business combinations; $14.7 million related to costs
to exit and restructure certain activities, including operating lease
terminations and asset impairment charges; $7.8 million related to employee
retention, employee severance, and other personnel costs; and $2.9 million for
other activities related to integrating operations and implementing efficiencies
of
21
<PAGE> 22
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the merged companies. Certain of these amounts are based upon estimates and
actual amounts paid may ultimately differ from these estimates. As of June 30,
1996, the Company had paid approximately $22.1 million related to these charges.
If additional costs are incurred, such items will be expensed in subsequent
periods.
During fiscal 1996, the Company completed two business combinations which
were accounted for under the purchase method of accounting. These business
combinations were primarily related to the Company's point-of-use pharmacy
systems and pharmacy management services. The aggregate purchase price, which
was paid primarily in cash, including fees and expenses, was $40.0 million.
Liabilities of the operations assumed were approximately $33.2 million,
consisting primarily of debt of $27.8 million. Had the purchases occurred at the
beginning of fiscal 1995, operating results for fiscal 1996 and 1995 on a pro
forma basis would not have been significantly different.
On July 18, 1994, the Company issued approximately 944,000 Common Shares in
a merger transaction for all of the common shares of Behrens Inc. ("Behrens"), a
pharmaceutical wholesaler based in Waco, Texas. The transaction was accounted
for as a pooling-of-interests business combination. The historical cost of
Behrens assets combined was approximately $25,396,000, and the total liabilities
assumed (including total debt of approximately $1,336,000) were approximately
$15,617,000. The impact of the Behrens merger, on both an historical and pro
forma basis, is not significant. Accordingly, prior periods have not been
restated for the Behrens merger.
On July 1, 1994, the Company acquired all of the outstanding stock of
Humiston-Keeling, Inc., a pharmaceutical wholesaler based in Calumet City,
Illinois, for cash of $33,334,000 and assumed total liabilities of $94,390,000
(including total debt of approximately $1,670,000) in a transaction accounted
for by the purchase method.
On January 27, 1994, shareholders of Cardinal and Whitmire approved and
adopted the Agreement and Plan of Reorganization dated October 11, 1993 (the
"Reorganization Agreement"), pursuant to which a wholly owned subsidiary of
Cardinal was merged with and into Whitmire effective February 7, 1994. In the
Whitmire Merger holders of outstanding Whitmire common stock received an
aggregate of approximately 6,802,000 Class A common shares and approximately
1,861,000 Class B common shares in exchange for all of the previously
outstanding common stock of Whitmire (all Class B common shares were converted
into Class A common shares in fiscal 1995). In addition, Whitmire's outstanding
stock options were converted into options to purchase an aggregate of
approximately 1,721,000 additional Common Shares pursuant to the terms of such
options and the Reorganization Agreement.
In fiscal 1994, the Company recorded a charge to reflect Whitmire Merger
costs of approximately $35.9 million ($28.2 million net of tax). These costs
included approximately $7 million for investment banking, legal, accounting, and
other related transaction fees and costs associated with the combination; $13
million for corporate integration and distribution rationalization; $6 million
for integration of information systems; and $2 million for restructuring
Whitmire's revolving credit agreement. At June 30, 1996, the Company had
disbursed all amounts related to these liabilities, with the actual amounts paid
approximating the original amounts recorded.
On December 17, 1993, the Company issued approximately 296,000 Common
Shares in a merger transaction for all of the capital stock of PRN Services,
Inc. ("PRN"), a distributor of pharmaceuticals and medical supplies to
oncologists and oncology clinics. The transaction was accounted for as a
pooling-of-interests business combination. The historical cost of PRN assets
combined was approximately $16,946,000, and the total liabilities assumed
(including total debt of approximately $5,847,000) were approximately
$16,564,000. The impact of the PRN merger, on both an historical and pro forma
basis, is not significant. Accordingly, prior periods have not been restated
for the PRN merger.
22
<PAGE> 23
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following supplemental information, which is presented for purposes of
facilitating meaningful comparisons to ongoing operations and to other
companies, summarizes the results of operations of the Company, adjusted on a
pro forma basis to reflect (a) the elimination of the effect of the merger costs
discussed above, and (b) the redemption of Whitmire's preferred stock pursuant
to the terms of the Reorganization Agreement. Solely for purposes of the summary
presented below, such redemption is assumed to have been funded from the
liquidation of investments in tax-exempt marketable securities.
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
June 30, June 30, June 30,
(In thousands, except per share amounts) 1996 1995 1994
--------------- -------------- --------------
<S> <C> <C> <C>
Operating earnings, excluding unusual items $ 282,022 $ 245,972 $ 194,944
Earnings available for Common Shares 159,697 137,534 108,938
Earnings per Common Share, excluding
unusual items:
Primary $ 2.47 $ 2.14 $ 1.77
Fully diluted $ 2.47 $ 2.14 $ 1.77
</TABLE>
Operating earnings and net earnings available for Common Shares
("Earnings") as reported in the Company's consolidated financial statements are
reconciled to the respective amounts in the preceding table as follows:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year
Ended June 30, 1996 Ended June 30, 1994
----------------------------- -----------------------------
Operating Operating
(In thousands) Earnings Earnings Earnings Earnings
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
As reported $ 214,772 $ 111,864 $ 159,064 $ 79,825
Supplemental adjustments:
Unusual items, primarily merger costs 67,250 47,833 35,880 28,180
Preferred stock redemptions 1,205
Interest adjustment on preferred stock (272)
------------- ------------- ------------- -------------
As supplementally adjusted $ 282,022 $ 159,697 $ 194,944 $ 108,938
============= ============= ============= =============
</TABLE>
3. LEASES
Sales-Type Leases
The Company's sales-type leases are for terms generally ranging up to five
years. Lease receivables are generally collateralized with the underlying
equipment. The components of the Company's net investment in sales-type leases
are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Future minimum lease payments receivable $ 176,963 $ 139,305
Unguaranteed residual values 1,457 1,302
Unearned income (25,637) (22,275)
Allowance for uncollectible minimum lease payments
receivable (3,226) (2,900)
-------------- ---------------
Net investment in sales-type leases $ 149,557 $ 115,432
Less: current portion 37,953 30,119
-------------- ---------------
Net investment in sales-type leases, less current
portion $ 111,604 $ 85,313
============== ===============
</TABLE>
23
<PAGE> 24
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments to be received pursuant to sales-type leases
are as follows at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 47,981
1998 44,918
1999 39,755
2000 28,566
2001 15,155
Thereafter 588
--------------
Total $ 176,963
==============
</TABLE>
Lease Related Financing Arrangements
Prior to the merger on May 7, 1996, Pyxis had financed its working capital
needs through the sale of certain lease receivables to a non-bank financing
company. In March 1994, Pyxis entered into a five-year financing and servicing
agreement with the financing company, whereby the financing company agreed to
purchase a minimum of $500 million of Pyxis' lease receivables under certain
conditions, provided that the total investment in the lease receivables at any
one time does not exceed $350 million. The aggregate lease receivables sold
under this arrangement totaled approximately $233 million and $154 million at
June 30, 1996 and 1995, respectively. As a result of the merger, the Company
intends to amend the agreement with the financing company and has made provision
for the estimated cost of exiting the arrangement.
4. NOTES PAYABLE, BANKS
The Company has entered into various uncommitted line-of-credit
arrangements which allow for borrowings up to $250,000,000 at June 30, 1996, at
various money market rates. No amounts were outstanding under such arrangements
at June 30, 1996, and $3,000,000, at a weighted average interest rate of 6.89%,
was outstanding at June 30, 1995. In addition, the Company has revolving credit
agreements, which have a maturity of less than one year, with seven banks. These
credit agreements are renewable on a quarterly basis and allow the Company to
borrow up to $95,000,000 (none of which was in use at June 30, 1996). The
Company is required to pay a commitment fee at the annual rate of .125% on the
average daily unused amounts of the total credit allowed under the revolving
credit agreements. The total available but unused lines of credit at June 30,
1996 were $345,000,000.
5. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Notes; 6.0% due 2006 $ 150,000 $
Notes; 6.5% due 2004 100,000 100,000
Notes; 8% due 1997 100,000 100,000
Primarily mortgage revenue bonds, notes and capital
leases; interest averaging 7.14% in 1996 and
8.78% in 1995, due in varying installments
through 2002 21,151 12,376
-------------- ---------------
Total $ 371,151 $ 212,376
Less: current portion 106,007 3,162
-------------- ---------------
Long-term obligations, less current portion $ 265,144 $ 209,214
============== ===============
</TABLE>
24
<PAGE> 25
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 23, 1996, the Company sold $150 million of 6% Notes due 2006
(the "6% Notes") in a public offering. The 6% Notes represent unsecured
obligations of the Company, are not redeemable prior to maturity and are not
subject to a sinking fund. Issuance costs of approximately $1.3 million incurred
in connection with the offering are being amortized on a straight-line basis
over the period the 6% Notes will be outstanding.
On February 23, 1994, the Company sold $100 million of 6.5% Notes due 2004
(the "6.5% Notes") in a public offering. The 6.5% Notes represent unsecured
obligations of the Company, are not redeemable prior to maturity and are not
subject to a sinking fund. Issuance costs of approximately $860,000 incurred in
connection with the offering are being amortized on a straight-line basis over
the period the 6.5% Notes will be outstanding.
The 8% Notes represent unsecured obligations of the Company, are not
redeemable prior to maturity and are not subject to a sinking fund.
The Company has entered into various interest rate swap agreements, which
serve to hedge the Company's aggregate interest cost on the 8% Notes, in
response to falling interest rates subsequent to the issuance of the 8% Notes in
1992. The net effect of the swap agreements is that the Company exchanged its
fixed rate position on the 8% Notes for a fixed rate of 5.1% for the period July
15, 1992, through March 1, 1993, a fixed rate of 6.5% for the period March 2,
1993, through March 1, 1994, and, thereafter, a fixed rate of 8.1% through March
1, 1997 (the maturity date of the 8% Notes). In May 1993, two of the offsetting
swap agreements were canceled at no gain or loss to the Company. The notional
principal in each of the four swap agreements outstanding at June 30, 1996 is
$100 million. Due to the offsetting nature of the swaps, the market value of
those in a net receivable position approximates the market value of those in a
net payable position. The risk of accounting loss, based on discounted cash
flows, in the event of nonperformance by counterparties with whom the Company is
in a net receivable position is approximately $777,000 as of June 30, 1996;
however, based on the credit quality of the counterparties, the Company believes
the likelihood of such a credit loss to be remote. The Company recognizes in
income the periodic net cash settlements under the matched swap agreements as
they accrue.
Certain long-term obligations are collateralized by property and equipment
of the Company with an aggregate book value of approximately $10,542,000 at June
30, 1996.
Maturities of long-term obligations for future fiscal years are as follows
(in thousands):
<TABLE>
<S> <C>
1997 $ 106,007
1998 4,933
1999 2,836
2000 1,897
2001 1,547
Thereafter 253,931
--------------
Total $ 371,151
==============
</TABLE>
6. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and equivalents, marketable securities, notes
payable -- banks and other accrued liabilities at June 30, 1996 and 1995,
approximate their fair value because of the short-term maturities of these
items.
The estimated fair value of the Company's long-term obligations was
$354,197,000 and $212,251,000 as compared to the carrying amounts of
$371,151,000 and $212,376,000 at June 30, 1996 and 1995, respectively. The fair
value of the Company's long-term obligations is estimated based on the quoted
market prices for the same or similar issues and the current interest rates
offered for debt of the same remaining maturities.
25
<PAGE> 26
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
June 30, June 30, June 30,
1996 1995 1994
--------------- -------------- ---------------
<S> <C> <C> <C>
Current:
Federal $ 62,030 $ 41,882 $ 49,707
State 7,641 4,651 5,373
--------------- -------------- ---------------
Total 69,671 46,533 55,080
Deferred 20,530 49,568 10,798
--------------- -------------- ---------------
Total provision $ 90,201 $ 96,101 $ 65,878
=============== ============== ===============
</TABLE>
A reconciliation of the provision based on the Federal statutory income tax
rate to the Company's income tax provision is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
June 30, June 30, June 30,
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Provision at Federal
statutory rate 35.0 % 35.0 % 35.0 %
State income taxes, net of
Federal benefit 4.8 4.7 4.6
Nondeductible expenses 4.4 4.6
Other 0.4 1.4 0.6
--------------- --------------- ---------------
Effective income tax rate 44.6 % 41.1 % 44.8 %
=============== =============== ===============
</TABLE>
Deferred income taxes arise from temporary differences between financial
reporting and tax reporting bases of assets and liabilities, and operating loss
and tax credit carryforwards for tax purposes. The components of the deferred
income tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
--------------- --------------
<S> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts $ 8,861 $ 14,305
Accrued liabilities 21,412 19,408
Property related 14,233 9,256
Net operating loss carryforwards 27,270 28,550
Other 20,442 15,587
--------------- --------------
Total deferred income tax assets 92,218 87,106
Valuation allowance for deferred income tax assets (2,373) (2,747)
--------------- --------------
Net deferred income tax assets 89,845 84,359
--------------- --------------
Deferred income tax liabilities:
Inventory basis differences (42,102) (46,471)
Revenues on lease contracts (122,417) (93,713)
Other (15,642) (16,744)
--------------- --------------
Total deferred income tax liabilities (180,161) (156,928)
--------------- --------------
Net deferred income tax liabilities $ (90,316) $ (72,569)
=============== ==============
</TABLE>
26
<PAGE> 27
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The above amounts are classified in the consolidated balance sheets as
follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Other accrued liabilities $ (453) $ (11,364)
Deferred income taxes and other liabilities (89,863) (61,205)
-------------- --------------
Net deferred income tax liabilities $ (90,316) $ (72,569)
============== ==============
</TABLE>
At June 30, 1996 and 1995, as a result of the Pyxis Merger, the Company had
Federal net operating loss carryforwards of $73 million. Also at June 30, 1996
and 1995, the Company had state net operating loss carryforwards of $50 million
and $56 million, respectively. A valuation allowance of $2.4 million and $2.7
million at June 30, 1996 and 1995, respectively, has been provided for the state
net operating loss carryforwards as utilization of such carryforwards within the
applicable statutory periods is uncertain. In addition, use of the Company's net
operating loss carryforwards will be limited due to the change in control of
Pyxis. The Federal net operating loss carryforwards begin expiring in 2001 and
the state net operating loss carryforwards began expiring in 1994.
8. EMPLOYEE RETIREMENT BENEFIT PLANS
Substantially all of the Company's non-union employees are enrolled in
Company-sponsored contributory profit sharing and retirement savings plans which
include features under Section 401(k) of the Internal Revenue Code, and provide
for Company matching and profit sharing contributions. The Company's
contributions to the plans are determined by the Board of Directors subject to
certain minimum requirements as specified in the plans.
Qualified union employees are covered by multiemployer defined benefit
pension plans under the provisions of collective bargaining agreements. Benefits
under these plans are generally based on the employee's years of service and
average compensation at retirement.
The total expense for employee retirement benefit plans was as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
June 30, June 30, June 30,
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
Defined contribution plans $ 7,233 $ 5,611 $ 4,053
Multiemployer plans 711 637 522
--------------- --------------- --------------
Total $ 7,944 $ 6,248 $ 4,575
=============== =============== ==============
</TABLE>
9. COMMITMENTS AND CONTINGENT LIABILITIES
The future minimum rental payments for operating leases having initial or
remaining noncancelable lease terms in excess of one year at June 30, 1996, are
as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 14,133
1998 12,151
1999 8,500
2000 4,233
2001 2,551
Thereafter 7,658
--------------
Total $ 49,226
==============
</TABLE>
27
<PAGE> 28
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense relating to operating leases was approximately $20,607,000,
$14,637,000 and $12,645,000 in fiscal 1996, 1995, and 1994, respectively.
Sublease rental income was not material for any period presented herein.
As of June 30, 1996, amounts outstanding on customer notes receivable sold
with full recourse to a commercial bank totaled approximately $13,923,000. The
Company also has outstanding guarantees of indebtedness and financial assistance
commitments which totaled approximately $2,822,000 at June 30, 1996.
The Company becomes involved from time-to-time in litigation arising out of
its normal business activities. In addition, in November 1993, Cardinal,
Whitmire, five other pharmaceutical wholesalers, and twenty-four pharmaceutical
manufacturers were named as defendants in a series of purported class action
antitrust lawsuits alleging violations of various antitrust laws associated with
the chargeback pricing system. The Company believes that the allegations set
forth against Cardinal and Whitmire in these lawsuits are without merit. In the
opinion of management, the Company's liability, if any, under any pending
litigation would not have a material adverse effect on the Company's financial
condition or results of operations.
10. REDEEMABLE PREFERRED STOCK
Prior to February 7, 1994, Whitmire had outstanding 360,000 shares of
redeemable preferred $.01 par value stock. Whitmire would have been required to
redeem, at $100.00 per share plus accrued but unpaid dividends, all shares of
its Senior and Series A Preferred Stock commencing in October 1994 through July
1996. Pursuant to the terms of the Reorganization Agreement between Cardinal and
Whitmire (see Note 2), all of the outstanding shares of Whitmire Senior and
Series A Preferred Stock were redeemed as of February 7, 1994, the date of the
Whitmire Merger.
11. SHAREHOLDERS' EQUITY
At June 30, 1996, the Company's authorized capital shares consisted of (a)
100,000,000 Class A common shares, without par value, of which 63,959,267 and
63,006,246 (as adjusted to reflect business combinations) were outstanding and
222,626 and 193,292 were held in treasury at cost at June 30, 1996 and 1995,
respectively; (b) 5,000,000 Class B common shares, without par value, of which
none were outstanding at either balance sheet date; and (c) 500,000 non-voting
preferred shares without par value, none of which have been issued. The Class A
common shares and Class B common shares are collectively referred to as Common
Shares.
On September 26, 1994, 8,050,000 of the Company's Common Shares were sold
pursuant to a public offering. Approximately 1,867,000 Common Shares were sold
by the Company, and approximately 6,183,000 Common Shares (the "Existing
Shares") were sold by certain shareholders of the Company. The Company did not
receive any of the proceeds from the sale of the Existing Shares.
12. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
The Company's trade receivables, finance notes and accrued interest
receivable, and lease receivables are exposed to a concentration of credit risk
with customers in the retail and health care sectors. However, the credit risk
is limited due to supporting collateral and the diversity of the customer base,
including its wide geographic dispersion. The Company performs ongoing credit
evaluations of its customers' financial conditions and maintains reserves for
credit losses. Such losses historically have been within the Company's
expectations.
During fiscal 1996, the Company's two largest customers individually
accounted for 12% of net revenues and 70% of direct deliveries, respectively.
During fiscal 1995, the Company's two largest customers individually accounted
for 11% of net revenues and 82% of direct deliveries, respectively. Trade
receivables due from these two customers aggregated approximately 25% of total
trade receivables at June 30, 1996 and 1995.
28
<PAGE> 29
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. STOCK OPTIONS AND RESTRICTED SHARES
The Company maintains stock incentive plans (the "Plans") for the benefit
of certain officers, directors and key employees. Options granted are generally
exercisable for periods up to ten years from the date of grant at a price which
equals fair market value at the date of grant. On November 14, 1995, the
Company's shareholders approved a new equity incentive plan (the "New Plan")
which authorized the issuance of up to an aggregate of 2,000,000 Common Shares
in the form of incentive stock options, nonqualified stock options, performance
shares and restricted shares. The Common Shares authorized for issuance under
the New Plan are in addition to 1,766,000 Common Shares which were issuable
pursuant to stock options outstanding immediately prior to the approval of the
New Plan and the 1,562,000 stock options which were issuable pursuant to the
Pyxis Merger.
The following summarizes all stock option transactions for the Company
(excluding Whitmire, see below) under the Plans from June 30, 1993, through June
30, 1996, giving retroactive effect to conversions of options in connection with
merger transactions and stock splits (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Number Exercise Prices
of Options Per Share Total
------------- ---------------------- -------------
<S> <C> <C> <C> <C>
Balance Outstanding, June 30, 1993 2,134 $ 0.12 - $ 57.80 $ 26,806
Granted 1,534 24.20 - 91.93 74,258
Exercised (314) 0.12 - 63.64 (1,676)
Canceled (41) 0.12 - 84.09 (1,155)
------------- -------------
Balance Outstanding, June 30, 1994 3,313 0.12 - 91.93 98,233
Granted 830 36.23 - 64.26 40,671
Exercised (413) 0.12 - 60.26 (4,465)
Canceled (112) 0.12 - 91.93 (4,963)
------------- -------------
Balance Outstanding, June 30, 1995 3,618 0.12 - 91.93 129,476
Granted 958 28.90 - 72.38 51,008
Exercised (661) 0.12 - 68.87 (15,609)
Canceled (399) 6.15 - 91.93 (23,403)
------------- ----------
Balance Outstanding, June 30, 1996 3,516 $ 0.12 - $ 84.09 $ 141,472
============= =============
</TABLE>
At June 30, 1996, approximately 2,118,000 option shares under the Plans
were exercisable. In addition to the options outstanding and restricted shares
granted, approximately 1,472,000 shares are available to be issued pursuant to
the Plans.
In connection with the Whitmire Merger, outstanding Whitmire stock options
granted to current or former Whitmire officers or employees were automatically
converted into options ("Cardinal Exchange Options") to purchase an aggregate of
approximately 1,721,000 additional Common Shares pursuant to the terms of such
options and the Reorganization Agreement (see Note 2). Under the terms of their
original issuance and as reflected in the Reorganization Agreement, the exercise
price for substantially all of the Cardinal Exchange Options is remitted to
certain former investors of Whitmire. Cardinal Exchange Options to purchase
190,000, 1,250,000 and 271,000 Common Shares, with an average option price of
$2.06, $1.52 and $1.60, were exercised in fiscal 1996, 1995 and 1994,
respectively. At June 30, 1996, substantially all Cardinal Exchange Options had
been exercised.
The market value of restricted shares awarded by the Company is recorded in
the other component of shareholders' equity in the accompanying balance sheets.
The compensation awards are amortized to expense over the period in which
participants perform services, generally one to six years. As of June 30, 1996,
approximately 467,000 restricted shares have been issued, of which approximately
158,000 shares remain restricted and subject to forfeiture and approximately
26,000 shares have been forfeited.
29
<PAGE> 30
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following selected quarterly financial data (in thousands, except per
share amounts) for fiscal 1996 and 1995 has been restated to reflect the
pooling-of-interests business combinations (see Note 2):
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Fiscal 1996:
Net revenues $ 2,096,845 $ 2,188,619 $ 2,256,481 $ 2,320,480 $ 8,862,425
Gross margin 164,046 174,667 189,062 187,502 715,277
Selling, general and administrative
expenses 107,358 107,103 107,748 111,046 433,255
Operating earnings 56,688 50,012 81,314 26,758 214,772
Net earnings available for Common Shares 31,916 26,542 45,349 8,057 111,864
Net earnings per Common Share:
Primary $ 0.49 $ 0.41 $ 0.70 $ 0.12 $ 1.73
Fully diluted 0.49 0.41 0.70 0.12 1.73
- --------------------------------------------------------------------------------------------------------------------------
Fiscal 1995:
Net revenues $ 1,868,932 $ 2,039,393 $ 2,041,440 $ 2,072,343 $ 8,022,108
Gross margin 140,595 153,631 165,986 164,339 624,551
Selling, general and administrative
expenses 90,271 93,949 95,553 98,806 378,579
Operating earnings 50,324 59,682 70,433 65,533 245,972
Net earnings available for Common Shares 28,269 34,310 38,846 36,109 137,534
Net earnings per Common Share:
Primary $ 0.45 $ 0.53 $ 0.60 $ 0.56 $ 2.14
Fully diluted 0.45 0.53 0.60 0.56 2.14
</TABLE>
The following supplemental information for fiscal 1996 excludes the impact
of unusual items (in thousands, except per share amounts). See Note 2 for
additional information.
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Fiscal 1996:
Net revenues $ 2,096,845 $ 2,188,619 $ 2,256,481 $ 2,320,480 $ 8,862,425
Gross margin 164,046 174,667 189,062 187,502 715,277
Selling, general and administrative
expenses 107,358 107,103 107,748 111,046 433,255
Operating earnings, excluding unusual items 56,688 67,564 81,314 76,456 282,022
Net earnings available for Common Shares,
excluding unusual items 31,916 39,037 45,349 43,395 159,697
Net earnings per Common Share,
excluding unusual items:
Primary $ 0.49 $ 0.60 $ 0.70 $ 0.67 $ 2.47
Fully diluted 0.49 0.60 0.70 0.67 2.47
</TABLE>
Operating earnings and net earnings available for Common Shares
("Earnings") as reported in the Company's selected quarterly financial data for
fiscal 1996 are reconciled to the respective amounts in the preceding table as
follows (in thousands):
<TABLE>
<CAPTION>
Second Quarter Fourth Quarter
---------------------------- ----------------------------
Operating Operating
Earnings Earnings Earnings Earnings
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1996:
As reported $ 50,012 $ 26,542 $ 26,758 $ 8,057
Supplemental adjustments:
Unusual items, primarily
merger costs 17,552 12,495 49,698 35,338
-------------- ----------- -------------- -----------
As supplementally adjusted $ 67,564 $ 39,037 $ 76,456 $ 43,395
============== =========== ============== ===========
</TABLE>
The above selected quarterly financial data differs from amounts previously
reported by the Company due to the Pyxis Merger. Amounts reported by the Company
prior to the Pyxis Merger (completed May 7, 1996) are presented
30
<PAGE> 31
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
below and differ from the above selected quarterly financial data solely due to
the addition of Pyxis amounts pursuant to the pooling-of-interests accounting
method for business combinations (in thousands, except per share amounts).
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Fiscal 1996:
Net revenues $ 2,047,138 $ 2,131,627 $ 2,202,804
Gross margin 130,012 136,494 150,926
Selling, general and administrative
expenses 87,217 83,125 84,117
Operating earnings 42,795 36,995 66,809
Net earnings available for Common Shares 23,492 18,714 36,797
Net earnings per Common Share:
Primary $ 0.48 $ 0.38 $ 0.75
Fully diluted 0.48 0.38 0.75
-------------- ------------- ------------- ------------- --------------
Fiscal 1995:
Net revenues $ 1,832,128 $ 1,999,267 $ 2,001,250 $ 2,027,274 $ 7,859,919
Gross margin 114,082 123,627 137,992 133,509 509,210
Selling, general and administrative
expenses 77,358 78,824 81,660 83,671 321,513
Operating earnings 36,724 44,803 56,332 49,838 187,697
Net earnings available for Common Shares 19,710 24,942 29,986 26,362 101,000
Net earnings per Common Share:
Primary $ 0.42 $ 0.51 $ 0.61 $ 0.53 $ 2.07
Fully diluted 0.42 0.51 0.61 0.53 2.07
</TABLE>
15. SUPPLEMENTAL CASH FLOW INFORMATION
Income tax and interest payments for the fiscal years ended June 30, 1996,
1995 and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
June 30, June 30, June 30,
1996 1995 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
Interest paid $ 18,537 $ 20,259 $ 16,588
Income taxes paid $ 56,659 $ 20,692 $ 44,454
</TABLE>
See Note 2 for additional information regarding non cash investing and
financing activities.
16. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption no later than the Company's fiscal 1997.
The new standard defines a fair value method of accounting for stock options and
similar equity instruments, under which compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but not required,
to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in the financial
statements pro forma net income and earnings per share as if the new method of
accounting had been applied.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption. The
Company has not yet determined if it will elect to change to the fair value
method,
31
<PAGE> 32
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
nor has it determined the effect the new standard will have on net
income and earnings per share should it elect to make such a change. Adoption of
the new standard will have no effect on the Company's cash flows.
In addition, in March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting
For the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires adoption no later than the Company's fiscal 1997. SFAS No.
121 requires impairment losses to be recorded on long-lived assets used in
operations when an indication of impairment is present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses accounting for long-lived assets
that are expected to be disposed of. The Company does not believe, based on
current circumstances, the adoption of SFAS No. 121 will have a material effect
on financial condition or results of operations.
17. SUBSEQUENT EVENT
On July 24, 1996, the Company announced that it had entered into a
definitive merger agreement with PCI Services, Inc. ("PCI") pursuant to which
PCI will become a wholly owned subsidiary of the Company in a stock-for-stock
merger expected to be accounted for as a pooling-of-interests for financial
reporting purposes. In connection with the merger, the Company estimates that it
will issue approximately 2.1 million Common Shares. Under the terms of the
merger agreement, shareholders of PCI will receive 0.336 Common Shares for each
share of PCI that they own at the time the transaction is consummated, subject
to adjustment under specified circumstances. In addition, pursuant to the terms
of the merger agreement, options for PCI common stock will be converted into
equivalent options for approximately 157,920 Common Shares, based upon the
exchange ratio. Upon consummation of the merger, the Company will record a
one-time charge to reflect transaction and other costs incurred as a result of
the merger. The merger is expected to be completed in the fall of 1996, subject
to satisfaction of certain conditions, including approval by shareholders of
PCI.
32
<PAGE> 33
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G(3) to Form 10-K, the information
called for in this Item 10 relating to Directors is incorporated herein by
reference to the Company's Definitive Proxy Statement, to be filed with the
Securities and Exchange Commission (the "SEC"), pursuant to Regulation 14A of
the General Rules and Regulations under the Securities Exchange Act of 1934 (the
"Exchange Act"), relating to the Company's Annual Meeting of Shareholders (the
"Annual Meeting") under the caption "ELECTION OF DIRECTORS". Certain information
relating to Executive Officers of the Company appears at pages 7 and 8 of this
Form 10-K, which is hereby incorporated by reference.
ITEM 11: EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) to Form 10-K, the information
called for by this Item 11 is incorporated herein by reference to the Company's
Definitive Proxy Statement, to be filed with the SEC pursuant to Regulation 14A
of the General Rules and Regulations under the Exchange Act, relating to the
Company's Annual Meeting under the caption "EXECUTIVE COMPENSATION" (other than
information set forth under the caption "Compensation Committee Report").
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3) to Form 10-K, the information
called for by this Item 12 is incorporated herein by reference to the Company's
Definitive Proxy Statement, to be filed with the SEC pursuant to Regulation 14A
of the General Rules and Regulations under the Exchange Act, relating to the
Company's Annual Meeting under the caption "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT".
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) to Form 10-K, the information
called for by this Item 13 is incorporated herein by reference to the Company's
Definitive Proxy Statement, to be filed with the SEC pursuant to Regulation 14A
of the General Rules and Regulations under the Exchange Act, relating to the
Company's Annual Meeting under the caption "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" and "EXECUTIVE COMPENSATION--Compensation Committee Interlocks
and Insider Participation".
33
<PAGE> 34
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements are included in Item 8 of this report:
PAGE
----
Independent Auditors' Reports........................................13
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1996, 1995 and 1994...................................... 15
Consolidated Balance Sheets at June 30, 1996 and 1995............... 16
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1996, 1995 and 1994.......................... 17
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 30, 1996, 1995 and 1994...................................... 18
Notes to Consolidated Financial Statements.......................... 19
(a)(2) The following Supplemental Schedule is included in this report:
PAGE
----
Schedule II - Valuation and Qualifying Accounts..................... 39
All other schedules not listed above have been omitted as not applicable or
because the required information is included in the Consolidated Financial
Statements or in notes thereto.
(a)(3) Exhibits required by Item 601 of Regulation S-K:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- -------------------
2.01 Agreement and Plan of Merger dated as of August 26, 1995, among the
Registrant, Arch Merger Corp., and Medicine Shoppe International,
Inc. (1)
2.02 Agreement and Plan of Merger dated as of February 7, 1996, among the
Registrant, Aztec Merger Corp., and Pyxis Corporation. (2)
2.03 Agreement and Plan of Merger dated as of July 23, 1996 among the
Registrant, Panther Merger Corp., PCI Services, Inc. and MEDIQ
Incorporated. (3)
3.01 Amended and Restated Articles of Incorporation of the Registrant, as
amended. (4)
3.02 Restated Code of Regulations of the Registrant, as amended. (5)
4.01 Specimen Certificate for the Registrant's Class A Common Shares. (4)
4.02 Indenture between the Registrant and Bank One, Indianapolis, NA
relating to the Registrant's 8% Notes Due 1997. (6)
34
<PAGE> 35
4.03 Indenture between the Registrant and Bank One, Indianapolis, NA
relating to the Registrant's 6 1/2% Notes Due 2004 and 6% Notes Due
2006. (5)
Other long-term debt agreements of the Registrant are not filed pursuant to
Item 601(b)(4)(iii)(A) of Regulation S-K and the Registrant agrees to furnish
copies of such agreements to the SEC upon its request.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
10.01 Stock Incentive Plan of the Registrant, as amended. (12)*
10.02 Directors' Stock Option Plan of the Registrant, as amended and
restated. (12)
10.03 Equity Incentive Plan of the Registrant. (4)*
10.04 Amended and Restated 1991 Stock Plan of Pyxis Corporation. (13)*
10.05 1990 Stock Option Plan of Medicine Shoppe International, Inc. (14)*
10.06 Employee Incentive Stock Option Plan of Medicine Shoppe
International, Inc. (14)*
10.07 Executive Choice Plan of Medicine Shoppe International, Inc. (14)*
10.08 Employment Agreement dated October 11, 1993, among Whitmire, Melburn
G. Whitmire and the Registrant, as amended. (7)*
10.09 Employment Agreement dated August 26, 1995, among Medicine Shoppe,
David A. Abrahamson and the Registrant. *
10.10 Form of Indemnification Agreement between the Registrant and
individual directors. (8)
10.11 Form of Indemnification Agreement between the Registrant and
individual officers. (9)*
10.12 Form of Indemnification Agreement between Whitmire and directors and
officers of Whitmire. (12)*
10.13 Split Dollar Agreement dated April 16, 1993, among the Registrant,
Robert D. Walter, and Bank One Ohio Trust Company, NA, Trustee U/A
dated April 16, 1993 FBO Robert D. Walter. (12)*
10.14 Lease for portions of the Registrant's Columbus Investment Property
dated July 7, 1958, as amended. (10)
10.15 Cardinal Health, Inc. Incentive Deferred Compensation Plan, Amended
and Restated Effective November 13, 1995.
10.16 Shareholders Agreement dated July 13, 1984, as amended. (11)
10.17 Master Agreement and related documents, dated as of July 19, 1996
among the Registrant and/or its subsidiaries, SunTrust Banks, Inc.,
PNC Leasing Corp. and SunTrust Bank, Atlanta.
10.18 Vendor Program Agreement dated as of October 10, 1991 by and between
General Electric Capital Corporation and Pyxis Corporation, as
amended on December 13, 1991, January 15, 1993 and March 10, 1994.
11.01 Statement concerning computation of per share earnings.
35
<PAGE> 36
21.01 List of subsidiaries of the Registrant.
23.01 Consent of Deloitte & Touche LLP.
23.02 Consent of Ernst & Young LLP.
27.01 Financial Data Table
- ------------------
(1) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 (No. 0-12591) and
incorporated herein by reference.
(2) Included as an exhibit to the Registrant's Schedule 13D reporting
Registrant's beneficial ownership of shares of Pyxis Corporation (No.
5-43690) and incorporated herein by reference.
(3) Included as an exhibit to the Registrant's Schedule 13D reporting
Registrant's beneficial ownership of shares of PCI Services, Inc.
(No. 5-42666) and incorporated herein by reference.
(4) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1995 (No. 0-12591) and
incorporated herein by reference.
(5) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994 (No. 0-12591) and
incorporated herein by reference.
(6) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1992 (No. 0-12591) and
incorporated herein by reference.
(7) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1993 (No. 0-12591) and as an
exhibit to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995 (No. 0-12591) and incorporated herein
by reference.
(8) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 29, 1986 (No. 0-12591) and
incorporated herein by reference.
(9) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 28, 1987 (No. 0-12591) and
incorporated herein by reference.
(10) Included as an exhibit to the Registrant's Registration Statement on
Form S-1 (No. 2-84444) and incorporated herein by reference.
(11) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1993 (No. 0-12592) and
incorporated herein by reference.
(12) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 (No. 0-12591) and
incorporated herein by reference.
(13) Included as an exhibit to the Registrant's Post-Effective Amendment
No. 1 on Form S-8 to Form S-4 Registration Statement (No.
333-01927-01).
(14) Included as an exhibit to the Registrant's Post-Effective Amendment
No. 1 on Form S-8 to Form S-4 Registration Statement (No.
33-63283-01).
* Management contract or compensation plan or arrangement.
36
<PAGE> 37
(b) Reports on Form 8-K:
On April 23, 1996, the Company filed a Report on Form 8-K under Item 5 which
set forth the results for the fiscal quarter ended March 31, 1996 as contained
in the Company's press release dated April 22, 1996.
On May 8, 1996, the Company filed a Report on Form 8-K under Item 2 which
reported that it had completed its merger of a wholly owned subsidiary with and
into Pyxis Corporation ("Pyxis") on May 7, 1996. Pursuant to Item 7, the Form
8-K included the required audited financial statements of Pyxis and the required
combined unaudited pro forma financial information of the Company and Pyxis.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CARDINAL HEALTH, INC.
August 26, 1996 By: /s/ ROBERT D. WALTER
--------------------
Robert D. Walter, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------- -------------------------------------------- ---------------
<S> <C> <C>
/s/ ROBERT D. WALTER Chairman, Chief Executive Officer and August 26, 1996
- --------------------------------------- Director (principal executive officer)
Robert D. Walter
/s/ DAVID BEARMAN Executive Vice President and Chief Financial August 26, 1996
- --------------------------------------- Officer (principal financial officer)
David Bearman
/s/ RICHARD J. MILLER Vice President, Controller and Principal August 26, 1996
- --------------------------------------- Accounting Officer
Richard J. Miller
/s/ JOHN C. KANE President, Chief Operating Officer August 26, 1996
- --------------------------------------- and Director
John C. Kane
/s/ JOHN F. FINN Director August 26, 1996
- ---------------------------------------
John F. Finn
/s/ ROBERT L. GERBIG Director August 26, 1996
- ---------------------------------------
Robert L. Gerbig
/s/ JOHN F. HAVENS Director August 26, 1996
- ---------------------------------------
John F. Havens
/s/ REGINA E. HERZLINGER Director August 26, 1996
- ---------------------------------------
Regina E. Herzlinger
/s/ J. MICHAEL LOSH Director August 26, 1996
- ---------------------------------------
J. Michael Losh
/s/ GEORGE R. MANSER Director August 26, 1996
- ---------------------------------------
George R. Manser
/s/ JOHN B. McCOY Director August 26, 1996
- ---------------------------------------
John B. McCoy
/s/ JERRY E. ROBERTSON Director August 26, 1996
- ---------------------------------------
Jerry E. Robertson
/s/ L. JACK VAN FOSSEN Director August 26, 1996
- ---------------------------------------
L. Jack Van Fossen
/s/ MELBURN G. WHITMIRE Director August 26, 1996
- ---------------------------------------
Melburn G. Whitmire
</TABLE>
38
<PAGE> 39
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------ ---------- -------------------------- -------------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (1) DEDUCTIONS (2) OF PERIOD
- ------------------------------------------------ ---------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
Fiscal Year 1996:
Account receivable $ 31,529 $ 8,037 $ 1,435 $ (8,587) $ 32,414
Finance notes receivable 7,385 1,087 9 (439) 8,042
Net investment in sales-type leases 2,900 326 3,226
-------- -------- -------- -------- --------
$ 41,814 $ 9,450 $ 1,444 $ (9,026) $ 43,682
======== ======== ======== ======== ========
Fiscal Year 1995:
Account receivable $ 24,876 $ 11,602 $ 2,005 $ (6,954) $ 31,529
Finance notes receivable 7,275 724 (614) 7,385
Net investment in sales-type leases 2,747 153 2,900
-------- -------- -------- -------- --------
$ 34,898 $ 12,479 $ 2,005 $ (7,568) $ 41,814
======== ======== ======== ======== ========
Fiscal Year 1994:
Account receivable $ 18,457 $ 10,560 $ 956 $ (5,097) $ 24,876
Finance notes receivable 6,980 953 (658) 7,275
Net investment in sales-type leases 2,088 659 2,747
-------- -------- -------- -------- --------
$ 27,525 $ 12,172 $ 956 $ (5,755) $ 34,898
======== ======== ======== ======== ========
</TABLE>
1 During fiscal 1996, 1995 and 1994 recoveries of amounts provided for or
written off in prior years were $324,000, $177,000 and $308,000,
respectively, and increases from acquisitions of subsidiaries were
$1,120,000, $1,828,000 and $648,000, respectively.
2 Write-off of uncollectible accounts.
39
<PAGE> 1
Exhibit 10.09
EMPLOYMENT AGREEMENT
AGREEMENT by and among Medicine Shoppe International, Inc., a
Delaware corporation (the "Company"), David A. Abrahamson (the "Executive"), and
Cardinal Health, Inc. ("Cardinal"), dated as of the 26th day of August, 1995.
WHEREAS, the Company intends to enter into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which a subsidiary of
Cardinal will merge with and into the Company, with the Company as the surviving
corporation, and the Company will become a wholly owned subsidiary of Cardinal
(the "Transaction") (and references herein to the "Company" refer to the Company
both before and after the Transaction); and
WHEREAS, it is a condition to the execution of the Merger
Agreement that the Company enter into an employment agreement with the Executive
and a condition to the consummation of the Transaction that such agreement be in
full force and effect; and
WHEREAS, Cardinal desires to obtain for itself, through its
future ownership of the Company, the benefit of the Executive's services as set
forth in this Agreement; and
<PAGE> 2
WHEREAS, the Company and the Executive desire to set forth in
a written agreement the terms and conditions under which the Executive will
continue to be employed by the Company after the consummation of the
Transaction;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. Upon the consummation of the
Transaction, the Company shall employ the Executive, and the Executive hereby
accepts such employment, on the terms and conditions set forth in this
Agreement, for the period commencing on the Effective Time (as that term is
defined in the Merger Agreement) and ending on the fifth anniversary of the
Effective Time (the "Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall be employed by the Company as its President and Chief Executive
Officer with the responsibilities customarily assigned to such positions and
with such other responsibilities of an executive nature as may be determined
from time to time by the Company's Board of Directors (the "Board") or its
lawfully designated representative.
(b) During the Employment Period, the Executive shall devote
his full time and attention to the business and affairs of
-2-
<PAGE> 3
the Company, and shall use his best efforts to promote and establish the
business of the Company and to carry out faithfully and efficiently the
responsibilities assigned to him under this Agreement. It shall not be
considered a violation of the foregoing for the Executive to (i) serve on
corporate boards with the approval of Cardinal, (ii) serve on civic or
charitable boards or committees, (iii) deliver lectures or fulfill speaking
engagements and (iv) manage personal investments, so long as such activities do
not interfere with the performance of the Executive's responsibilities under
this Agreement.
(c) During the Employment Period, the Executive's services
shall be performed primarily at the Company's current office location or any
other location within 30 miles thereof specified by the Board from time to time.
Travel in connection with the business of the Company may be reasonably
requested by the Board or its lawfully designated representative from time to
time.
3. COMPENSATION. (a) BASE SALARY. During the Employment
Period, the Company shall pay the Executive an annual base salary (the "Annual
Base Salary") in an amount not less than $256,520, payable in accordance with
the Company's payroll practices for management personnel, as in effect from time
to time (but not less frequently than monthly). During the
-3-
<PAGE> 4
Employment Period, the Annual Base Salary shall be reviewed for possible
increase at least annually in accordance with Cardinal's normal payroll
practices for management personnel. Any increase in the Annual Base Salary shall
not limit, expand or reduce any other obligation of the Company under this
Agreement.
(b) ANNUAL BONUS. In addition to the Annual Base Salary,
during the Employment Period the Executive shall be eligible to receive annual
bonuses (each, regardless of whether for a 12-month period or a different
period, an "Annual Bonus") pursuant to this Section 3(b). For the period ending
September 30, 1996, the Annual Bonus shall be determined in accordance with
Exhibit A hereto. Thereafter during the Employment Period, the Annual Bonus
shall be determined pursuant to Cardinal's standard Management Incentive Plan as
in effect from time to time, or any successor thereto (the "MIP"), with an MIP
potential equal to 60 percent of the Annual Base Salary; PROVIDED, that the
first Annual Bonus for which the Executive shall be eligible under the MIP shall
be for the period October 1, 1996 through June 30, 1997, and for that period he
shall receive an Annual Bonus equal to 75 percent of the amount he would
otherwise have received, had he participated in the MIP for a full period of
twelve months. Notwithstanding the foregoing, if the President of Cardinal and
the Executive mutually agree that it would be preferable to do so, (i) the terms
of the Annual Bonus for the period ending
-4-
<PAGE> 5
September 30, 1996 may be amended, including without limitation by shortening
the performance period and/or determining the amount thereof in a manner
differing from that set forth on Exhibit A hereto, and/or (ii) the Executive's
transition to the MIP may occur sooner than October 1, 1996.
(c) OTHER BENEFITS. During the Employment Period, the
Executive shall be entitled to participate in the group health, life, disability
insurance, retirement savings and other employee benefit plans (collectively,
"Group Plans") generally offered to the Company's employees in accordance with
the standard terms and conditions of such plans as in effect from time to time,
which plans shall be substantially equivalent in the aggregate to either (A) the
Company's Group Plans as in effect on the date of this Agreement or (B) the
Group Plans maintained from time to time by Cardinal and in which the management
personnel of Cardinal generally participate. In addition, the Executive shall be
eligible to participate in Cardinal's Stock Incentive Plan or any successor
thereto (the "Cardinal Stock Plan"), although except as provided in Section 8(d)
hereof, the actual awards and benefits, if any, to be granted to the Executive
thereunder shall be in the sole discretion of the Compensation and Personnel
Committee of Cardinal's Board of Directors. The Employee shall at all times
comply with Cardinal's policies on option exercises and the selling and buying
of Cardinal stock.
-5-
<PAGE> 6
(d) EXPENSES. The Company shall reimburse the Executive for
all reasonable business expenses incurred by the Executive in the performance of
his services hereunder for the Company, which expenses shall be substantiated to
the reasonable satisfaction of the Company, in a manner similar to that
applicable to other management personnel of the Company, and the Executive shall
provide all necessary records to reflect the reasonable business expenses
incurred.
(e) VACATION. During the Employment Period, the Executive
shall be entitled to annual paid vacations as provided in the Company's vacation
policy as in effect prior to the Effective Time, as it may be revised thereafter
from time to time.
(f) CLUB MEMBERSHIP. During the Employment Period, the Company
shall pay the cost of the Executive's membership in the St. Louis Club.
(g) The Executive shall be entitled to receive any bonus
earned for the fiscal year of the Company ending September 30, 1995 pursuant to
the terms of the Employment Agreement dated as of October 1, 1994, between the
Company and the Executive (the "Prior Agreement"), and the provisions of the
Prior Agreement
-6-
<PAGE> 7
relating to such bonus shall remain in effect following the Effective Time to
the extent such bonus has not previously been paid to the Executive.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means the illness or disability of the Executive
which prevents or hampers the performance of his obligations hereunder, and
which continues for a consecutive period of one hundred and twenty (120) days or
longer or an aggregate period of one hundred and eighty (180) days or longer, in
either instance during the Employment Period. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective upon receipt of such notice by the
Executive (the "Disability Effective Date").
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" shall mean (A) fraud, misappropriation, embezzlement or material
misconduct on the part of the Executive, (B) the Executive's (x) failure to
-7-
<PAGE> 8
substantially perform his duties for the Company when and to the extent
requested by the Board or its lawfully designated representative to do so and
(y) failure to correct same within five (5) business days after notice from the
Board or its lawfully designated representative requesting the Executive to do
so, or (C) the Executive's breach of any material provision of this Agreement.
(ii) A termination of the Executive's employment by the
Company without Cause shall be effected by giving the Executive written notice
of the termination.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of duties
inconsistent in any material respect with Section 2(a) of this
Agreement, other than any such action that is remedied by the
Company within five (5) business days after receipt of notice
thereof from the Executive;
(B) any failure by the Company to comply with any
provision of Section 3 of this Agreement other than any such
failure that is remedied by the Company within five (5)
business days after receipt of notice thereof from the
Executive; or
(C) any requirement by the Company that the Executive's
services be rendered primarily at a location or locations not
complying with the provisions of Section 2(c) of this
Agreement, other than any such requirement that is remedied by
the Company within five (5) business
-8-
<PAGE> 9
days after receipt of notice thereof from the Executive.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the tenth business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date (which date
shall in no event be later than 30 days after the notice is given); PROVIDED,
that such a termination of employment shall not become effective if the Company
shall have substantially corrected the circumstance giving rise to the Notice of
Termination within such 30-day period.
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company written
notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the
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<PAGE> 10
Disability Effective Date, the date on which the termination of the Executive's
employment by the Company for Cause or by the Executive for Good Reason is
effective, the date on which the Company gives the Executive notice of a
termination of employment without Cause, or the date on which the Executive
gives the Company notice of a termination of employment without Good Reason, as
the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH,
DISABILITY, CAUSE; WITHOUT GOOD REASON. If, during the Employment Period, the
Executive's employment is terminated because of death, Disability, for Cause, or
by the Executive without Good Reason, then except as provided in Section 8, the
Executive shall not be entitled to any compensation provided for under this
Agreement, other than Annual Base Salary through the Termination Date, benefits
under any long-term disability insurance coverage in the case of termination
because of Disability, and (without limiting the provisions of Section 6 hereof)
vested benefits, if any, required to be paid or provided by law.
(b) WITHOUT CAUSE; GOOD REASON. If, during the Employment
Period, the Executive's employment is terminated by the Company without Cause or
by the Executive for Good
-10-
<PAGE> 11
Reason, the Executive shall not be entitled to any compensation provided for
under this Agreement except as set forth in the following sentence. The Company
(i) shall continue to pay the Executive his Annual Base Salary, at the rate then
in effect, for and with respect to the unexpired portion of the Employment
Period (in the same manner as specified in Section 3(a) hereof) and (ii) shall
continue the group health benefits provided for in Section 3(c) during the
unexpired portion of the Employment Period (in the same manner as specified
therein); PROVIDED, that (x) if any such benefits cannot be provided to
nonemployees under the terms of the applicable plans or applicable law, the
Company shall provide the Executive with substitute benefits that are comparable
and equal in value to such benefits, and (y) during any period when the
Executive is eligible to receive any such benefits under another
employer-provided plan, the benefits provided by the Company under this
paragraph may be made secondary to those provided under such other plan.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company, Cardinal or any of the
Affiliated Companies for which the Executive may qualify,
-11-
<PAGE> 12
nor, subject to Section 10(f), shall anything in this Agreement limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company, Cardinal or any of the Affiliated Companies. Vested
benefits and other amounts that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of, or any contract or agreement
with, the Company, Cardinal or any of the Affiliated Companies on or after the
Date of Termination shall be payable in accordance with such plan, policy,
practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
7. MITIGATION. Following any termination of the Executive's
employment that gives rise to a right to payments and benefits described in
Section 5(b) above, the Executive shall use reasonable efforts to obtain other
employment or self-employment, of a nature comparable to the employment provided
for in this Agreement, and if the Executive does engage in any other employment
or self-employment, the payments of Annual Base Salary that the Company is
obligated to make pursuant to Section 5(b) above shall be reduced (but not below
zero) by the amount of the Executive's remuneration from such other employment
or self-
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<PAGE> 13
employment, as and when earned or vested (regardless of when paid or received).
8. CONFIDENTIAL INFORMATION; NO-RAID; NONCOMPETITION;
INVENTIONS. (a) The Executive shall hold in a fiduciary capacity for the benefit
of the Company, Cardinal and the Affiliated Companies all secret or confidential
information, knowledge or data relating to the Company, Cardinal or any of the
Affiliated Companies and their respective businesses (including, without
limitation, any proprietary and not publicly available information concerning
any processes, methods, trade secrets, research, secret data, costs or names of
users or purchasers of their respective products or services, business methods,
operating procedures or programs or methods of promotion and sale) that the
Executive obtains during the Executive's employment by the Company, Cardinal or
any of the Affiliated Companies and that is not public knowledge (other than as
a result of the Executive's violation of this of Section 8(a)) ("Confidential
Information"). For the purposes of this Section 8(a), information shall not be
deemed to be publicly available merely because it is embraced by general
disclosures or because individual features or combinations thereof are publicly
available. The Executive shall not communicate, divulge or disseminate
Confidential Information
-13-
<PAGE> 14
at any time during or after the Executive's employment with the Company,
Cardinal or any of the Affiliated Companies, except with the prior written
consent of the Company, Cardinal or such Affiliated Company, as applicable, or
as otherwise required by law or legal process. All records, files, memoranda,
reports, customer lists, drawings, plans, documents and the like that the
Executive uses, prepares or comes into contact with during the course of his
employment shall remain the sole property of the Company, Cardinal and/or one or
more of the Affiliated Companies, as applicable, and shall be turned over to the
Company, Cardinal or such Affiliated Company, as applicable, upon termination of
the Executive's employment.
(b) The Executive agrees that he will not, at any time during
or after the Executive's employment with the Company, Cardinal or any of the
Affiliated Companies, without the prior written consent of the Company, Cardinal
or such Affiliated Company, as applicable, directly or indirectly employ, or
solicit the employment of (whether as an employee, officer, director, agent,
consultant or independent contractor), any person who was or is at any time
during the previous twelve (12) months an employee, representative, officer or
director of the Company, Cardinal or any of the Affiliated Companies (except for
such
-14-
<PAGE> 15
employment by the Company, Cardinal or any of the Affiliated Companies).
(c) During the Noncompetition Period (as defined below), the
Executive shall not, without the prior written consent of the Board, engage in
or become associated with a Competitive Activity. For purposes of this Section
8(c): (i) the "Noncompetition Period" means the Initial Noncompetition Period
(as defined in clause (ii) of this sentence) plus the applicable Additional
Noncompetition Period (as defined in clause (iii) of this sentence); (ii) the
"Initial Noncompetition Period" means the period during which the Executive is
employed by the Company, Cardinal, or any of the Affiliated Companies; (iii)
the Additional Noncompetition Period means (A) in the case of a termination of
the Executive's employment by the Company for Cause, the period beginning on
the last day of the Initial Noncompetition Period and ending on the third
anniversary thereof, (B) in the case of a termination of the Executive's
employment by the Executive without Good Reason, the period beginning on the
last day of the Initial Noncompetition Period and ending on the fifth
anniversary thereof, (C) in the case of a termination of the Executive's
employment by the Company without Cause or by the Executive for Good Reason,
the period beginning on the last day of the Initial Noncompetition Period and
ending on the later of the first anniversary thereof or the first anniversary
of the first date on which the Executive no longer is receiving any
compensation or benefits pursuant to Section 5 (b) hereof, plus any subsequent
period during which the Executive receives any compensation or benefits
pursuant to Section 5 (b) hereof, and
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<PAGE> 16
(D) in the case of any other termination of the Executive's employment, the
period beginning on the last day of the Initial Noncompetition Period and ending
on the later of the first anniversary thereof or the sixth anniversary of the
Effective Time; (iv) a "Competitive Activity" means any business or other
endeavor, in the United States or Canada or any other country, of a kind then
being conducted by the Company, Cardinal or any of the Affiliated Companies in
such country; and (v) the Executive shall be considered to have become
"associated with a Competitive Activity" if he becomes directly or indirectly
involved as an owner, principal, employee, officer, director, independent
contractor, representative, stockholder, financial backer, agent, partner,
advisor, lender, or in any other individual or representative capacity with any
individual, partnership, corporation or other organization that is engaged in a
Competitive Activity. Notwithstanding the foregoing, the Executive may make and
retain investments during the Employment Period in not more than five percent of
the equity of any entity engaged in a Competitive Activity, if such equity is
listed
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<PAGE> 17
on a national securities exchange or regularly traded in an over-the-counter
market. Should this provision be unenforceable in any jurisdiction because it is
deemed too broad, as to time, area, subject matter, or otherwise, this provision
shall be deemed modified to the extent necessary to be enforceable in such
jurisdiction. The parties acknowledge that after the end of the Initial
Noncompetition Period, nothing contained in this Section 8(c) shall prevent the
Executive from owning or operating a pharmacy or similar type of business, or in
any way working for a business engaged primarily in franchising (other than
franchising of pharmacies or other businesses in which the Company, Cardinal or
any of the Affiliated Companies is engaged), so long as such activity is not in
competition with the Company, Cardinal or any of the Affiliated Companies.
(d) In consideration for the Executive's agreeing to be bound
by the provisions of Section 8(c), he shall be granted, as of the Effective
Time, (i) options (the "Options") to purchase 10,000 shares of common stock of
Cardinal (the "Cardinal Stock"), and (ii) 5,000 shares of restricted Cardinal
Stock (the "Restricted Stock"), in each case pursuant to the Cardinal Stock
Plan. The Options shall have a per-share exercise price equal to the last sale
price of a share of the Cardinal Stock on the New York Stock
-17-
<PAGE> 18
Exchange on the day during which the Effective Time occurs or, if no such sales
take place on such day, on the most recent prior day on which such sales take
place. In addition, the Options shall have a term of ten years from the
Effective Time, shall vest and become exercisable on the third anniversary of
the Effective Time, and shall otherwise be subject to the standard terms and
conditions applicable to option grants under the Cardinal Stock Plan. The
Restricted Stock shall vest and become exercisable on the third anniversary of
the Effective Time, and shall otherwise be subject to the standard terms and
conditions applicable to restricted stock grants under the Cardinal Stock Plan.
(e) All plans, discoveries and improvements, whether
patentable or unpatentable, made or devised by the Executive, whether by himself
or jointly with others, from the date of the Executive's initial employment by
the Company and continuing until the end of the Employment Period and any
subsequent period when the Executive is employed by the Company, Cardinal or any
of the Affiliated Companies, relating or pertaining in any way to his employment
with or the business of the Company, Cardinal or any of the Affiliated
Companies, shall be promptly disclosed in writing to the Board and are hereby
transferred to and shall redound to the benefit of the Company, and shall
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<PAGE> 19
become and remain its sole and exclusive property. The Executive agrees to
execute any assignments to the Company or its nominee, of his entire right,
title and interest in and to any such discoveries and improvements and to
execute any other instruments and documents requisite or desirable in applying
for and obtaining patents or copyrights, at the expense of the Company, with
respect thereto in the United States and in all foreign countries, that may be
required by the Company. The Executive further agrees, during and after the
Employment Period, to cooperate to the extent and in the manner required by the
Company, in the prosecution or defense of any patent or copyright claims or any
litigation, or other proceeding involving any trade secrets, processes,
discoveries or improvements covered by this Agreement, but all necessary
expenses thereof shall be paid by the Company.
(f) The Executive acknowledges and agrees that the Company's
remedy at law for any breach of the Executive's obligations under this Section 8
would be inadequate and agrees and consents that temporary and permanent
injunctive relief may be granted in any proceeding which may be brought to
enforce any provision of such Section without the necessity of proof of actual
damage. With respect to any provision of this Section 8 finally determined by a
court of competent jurisdiction to be
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<PAGE> 20
unenforceable, the Executive and the Company hereby agree that such court shall
have jurisdiction to reform this Agreement or any provision hereof so that it is
enforceable to the maximum extent permitted by law, and the parties agree to
abide by such court's determination.
9. SUCCESSORS. (a) This Agreement is personal to the
Executive, and he may not assign any interest herein in any manner whatsoever.
Any purported assignment by the Executive shall be void.
(b) In addition to assignments by operation of law, the
Company shall have the right to assign this Agreement to any person, firm or
corporation, controlling, controlled by or under common control with the Company
(including without limitation Cardinal or any of the Affiliated Companies), or
acquiring substantially all of its assets, but such assignment shall not release
the Company from its obligations under this Agreement.
10. MISCELLANEOUS. (a) The provisions of Sections 5, 6, 7, 8,
9 and 10 of this Agreement shall survive any expiration or termination of this
Agreement.
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<PAGE> 21
(b) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(c) All notices, requests, consents and other communications
required or provided under this Agreement shall be in writing and shall be
deemed sufficient if delivered by facsimile, overnight courier, or certified or
registered mail, return receipt requested, postage prepaid, and shall be
effective upon delivery as follows:
IF TO THE EXECUTIVE:
--------------------
David A. Abrahamson
200 S. Brentwood Boulevard
Apartment 21A
St. Louis, Missouri 63105
Facsimile:
IF TO THE COMPANY:
------------------
Medicine Shoppe International, Inc.
101 S. Hanley Road, Suite 1600
St. Louis, Missouri 63105
Attention: Assistant Secretary
Facsimile:
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<PAGE> 22
(with a copy to Cardinal)
IF TO CARDINAL:
---------------
Cardinal Health, Inc.
655 Metro Place South, Suite 925
Dublin, Ohio 43017
Attention: General Counsel
Facsimile: (614) 761-8919
Either party may change the address and/or facsimile number to which notices are
to be sent to that party by giving written notice of such change of address to
the other party in the same manner above provided for giving notice.
(d) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective, but only to the extent of such prohibition or unenforceability,
without invalidating the other provisions hereof or without affecting the
validity or unforceability of such provision in any other jurisdiction.
(e) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign
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<PAGE> 23
taxes that are required to be withheld by applicable laws or regulations.
(f) As of the Effective Time, except as specifically provided
in Section 3(g) hereof, this Agreement shall constitute the entire agreement
between the parties relative to the subject matter contained herein, superceding
all prior agreements, including without limitation the Prior Agreement. No
promises, covenants or representations of any character or nature other than
those expressly stated herein have been made to induce either party to enter
into this Agreement. This Agreement shall not be modified, waived or discharged
except in writing duly signed by each of the parties or their authorized
assignees.
(g) The Executive's or the Company's failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement except to the extent any
other party hereto is materially prejudiced by such failure.
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<PAGE> 24
(h) The term "Affiliated Companies" means all companies
controlled by, controlling or under common control with Cardinal, other than the
Company.
11. GUARANTEE. Cardinal hereby irrevocably, absolutely and
unconditionally guarantees the payment by the Company of all compensation that
the Company is obligated to pay to the Executive under Sections 3, 5 and 8 of
this Agreement.
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<PAGE> 25
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and each of the Company and Cardinal has caused this Agreement
to be executed in its name on its behalf, all as of the day and year first above
written.
By /s/ David A. Abrahamson
--------------------------------
David A. Abrahamson
MEDICINE SHOPPE INTERNATIONAL,
INC.
By /s/ Donald P. Gallop
--------------------------------
Chr. of Executive Comm.
CARDINAL HEALTH, INC.
By /s/ George H. Bennett, Jr.
--------------------------------
Exec. V. P.
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<PAGE> 26
EXHIBIT A
ANNUAL BONUS
------------
The Annual Bonus for the fiscal year ending September 30, 1996
shall be determined as follows:
<TABLE>
<CAPTION>
Percentage Increase of Percentage of Target
"Earnings From Operations" Bonus to be paid
Over Fiscal Year Ending based on Actual Aggregate
September 30, 1995 Earnings Performance Amount of Bonus
------------------ -------------------- -----------------
<S> <C> <C>
Below 9% 0 -0-
9% 60% $ 77,076
10% 70% $ 89,922
11% 80% $102,768
12% 90% $115,614
13% 95% $122,037
14% 100% $128,460
15% 110% $141,306
16% 120% $154,152
17% 135% $173,421
For each additional 1% +15% for each $ 19,269
additional
percentage point
</TABLE>
The determination of the "Earnings From Operations" shall be
based upon the Company's unaudited financial statements for the period ending
September 30, 1996, prepared in accordance with generally accepted accounting
principles, consistently applied, but excluding such unusual or nonrecurring
items as may be determined by
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<PAGE> 27
the Board, which determination shall be conclusive upon the parties hereto.
Any Annual Bonus due hereunder shall be paid by the Company on
or before January 28, 1997.
-2-
<PAGE> 1
Exhibit 10.15
CARDINAL HEALTH, INC.
INCENTIVE DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED EFFECTIVE
November 13, 1995
<PAGE> 2
CARDINAL HEALTH, INC.
INCENTIVE DEFERRED COMPENSATION PLAN
(THE "PLAN")
I
PURPOSE
-------
Cardinal Health, Inc. and its affiliates (collectively, the "Company")
is willing to provide supplemental retirement benefits out of its general assets
to certain key employees as an incentive for those individuals to continue their
relationship with the Company and to provide the benefits such individuals could
otherwise earn under the Cardinal Health, Inc. Profit Sharing and Retirement
Savings Plan (the "Qualified Plan") if certain federal law restrictions did not
apply. Only a select group of the Company's management or highly compensated
employees will be eligible to participate in this program. The Company's goal is
to retain and reward its key employees by helping them to accumulate benefits
for a comfortable retirement.
II
ELIGIBILITY
-----------
Selection of the Company employees eligible to participate in the Plan
is within the sole discretion of the Chairman of Cardinal Health, Inc. Only high
income or key management employees are eligible for selection by the Chairman.
If you fall into one of these groups and are chosen by the Chairman to
participate in the Plan, you will sign an Incentive Deferred Compensation
Agreement which details the requirements you must satisfy to be eligible to
receive this supplemental retirement benefit from the Company. The Chairman will
review and determine his selections each year. Thus, selection in one year does
not automatically confer a right to participate in succeeding years.
III
INCENTIVE DEFERRED COMPENSATION ACCUMULATIONS
---------------------------------------------
The benefits provided to participants under their Incentive Deferred
Compensation Agreements are paid from the Company's general assets. The program
is, therefore, considered to be an "unfunded" arrangement as amounts are not set
aside or held by the Company in a trust, escrow, or similar account or fiduciary
relationship on your behalf. Each participant's rights to benefits under the
Plan are equivalent to the rights of any unsecured general creditor of the
Company. However, the Company may open accounts with one or more investment
companies selected by the Chairman, in his discretion, including from among
those used as investment options under the Qualified Plan, and may invest funds
subject to this Plan in these mutual funds. Each participant may be permitted to
direct how the portion of the Company's
-1-
<PAGE> 3
funds allocable to him or her is invested from among the available options, if
such investment accounts are established. The Company currently expects any such
options to be similar to those available under the Qualified Plan, but is not
obligated to make these or any other particular investment options available.
All investments shall at all times continue to be a part of the Company's
general assets for all purposes.
To measure the amount of the Company's obligations to a participant in
this program, the Company will maintain a bookkeeping record or account of each
participant's "Accumulations". There are three basic components of each
participant's Accumulations:
First, the Company may credit to your Accumulations each
calendar year during which you are selected to participate in the Plan
an amount equal to 3% of your compensation from the Company in excess
of the compensation limit applicable to the Qualified Plan under the
Internal Revenue Code (currently $150,000 per year) but not more than
$250,000. For this purpose, your compensation includes salary,
commission and bonus payments made for the year, but does not include
other cash or noncash compensation, expense reimbursements or other
benefits provided by the Company, other than your own salary deferrals
into this Plan or the Qualified Plan. In addition, the Company may make
an additional profit sharing contribution to the Plan for a year, in
the Company's discretion, to be credited to your Accumulations. One of
the purposes of these contributions is to make up the portion of
automatic and special profit sharing contributions to the Qualified
Plan that you are losing due to the capping of pay eligible for
consideration under the Qualified Plan under Internal Revenue Code
rules. All contributions under this provision to your Accumulations, as
adjusted for earnings or losses (described below), are referred to as
your "PROFIT SHARING VALUE."
Second, to encourage each participant to invest in his or her
own future, you may also elect to defer your compensation from the
Company. There are two types of deferral elections that you may make
under the Plan. You may elect (within 30 days of when you first become
eligible to participate in the Plan for your initial year of
participation or, for subsequent years, not later than the December 31
prior to each such year) to defer payment of a portion of your
compensation to be earned during the balance of the current or next
calendar year, as applicable, as a credit to your Accumulations. Under
special circumstances, the Chairman may also determine, in his
discretion, that you may be periodically eligible to make a special
election after the beginning of the year to defer any compensation for
the remainder of the year which is not yet payable to you. Both types
of voluntary deferrals, adjusted for earnings or losses as described
below, are known as the "DEFERRAL VALUE." The minimum amount you may
defer under either type of election is 1% of your compensation. The
Company may, in its discretion, establish and change from time to time
a maximum limitation on your deferral contributions. Also, who is
eligible to participate in the deferral portion of the Plan is
determined on a year to year basis
-2-
<PAGE> 4
by the Company. If you were a participant one year but are not
eligible in a succeeding year, you will still be a participant, but
will be treated as "inactive."
Third, the Company will also match your deferral at the same
rate it is generally matching 401(k) deferrals under the Qualified Plan
for the period in question. Generally, however, only deferrals with
respect to the first $250,000 of your compensation will be eligible for
a matching contribution. Any "caps" on the match under the Qualified
Plan will also apply to this Plan, with the match under this Plan being
offset by the match to the Qualified Plan to the extent duplicative.
For example, if the Qualified Plan match for the year is 75 cents on
the dollar, up to the first 3% of salary deferrals, and you are
eligible to defer 5% of the first $150,000 of pay to the Qualified Plan
(under the special discrimination-testing rules of that plan), then
only the first 3% of deferrals from the portion of your salary above
$150,000 but less than $250,000 will be matched under this Plan. In
addition to this formula match, the Company may make additional
matching contributions for a year, in its sole discretion. All amounts
credited to your Accumulations on a matching basis, adjusted for
earnings or losses as described below, are referred to as your
"MATCHING VALUE."
EARNINGS (OR LOSSES): At least once each calendar year while you have a
credit balance in your Accumulations, the Company will credit your Accumulations
with earnings (or losses), if any, for the period since the last such crediting
and determine the value of your Accumulations at that time. The earnings (or
losses) may either be credited on the basis of the earnings (or losses)
allocable to your directed portion of the Company investments, if any, or on the
basis of a hypothetical earnings rate, as determined by the Company in its sole
discretion. The Company also reserves the right to adjust the earnings (or
losses) credited to your Accumulations and to determine the value of your
Accumulations as of any date by adjusting such earnings (or losses) or such fair
market value for the Company's tax and other costs of providing this Plan.
These earnings will compensate for the postponement of the receipt of
the Accumulations and give you the benefit of tax-deferred growth of the
accumulating amounts. Under current federal income tax rules, the amounts
credited to your Accumulations, including earnings, will not be taxable income
to you in the year they are credited to your account. You, or your beneficiaries
in the event of your death, will generally be taxable on these amounts and the
credited earnings only if and when benefits are actually paid to you. Thus, this
program provides the opportunity to defer income and the payment of income
taxes.
-3-
<PAGE> 5
IV
BENEFITS
--------
A. Vesting
-------
If you participate in the deferral portion of the Plan, your
Deferral Value will always be 100% "vested". This means you will always
be entitled to receive benefits from this portion of your
Accumulations.
The portion of your Accumulations derived from the Profit
Sharing Value and the Matching Value will not be fully vested until you
complete 5 years of service for the Company. A "year of service" for
this purpose means a period of 12 consecutive calendar months during
which you were employed by the Company and worked at least 1,000 hours.
Years of service are calculated from the date you were first hired as
an employee by the Company, and anniversaries of that date. The
schedule for vesting is as follows:
<TABLE>
<CAPTION>
Vested
Years of Service Percentage
---------------- ----------
<S> <C>
Less than 2 None
2 but less than 3 25%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
</TABLE>
In addition, you also become 100% vested in your Accumulations
upon your death or if you become permanently disabled prior to
retirement or other termination of service with the Company, or upon a
"Change in Control," regardless of your years of service. "Change in
Control" means: (i) the purchase or other acquisition by any person,
entity or group of persons (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable
successor provisions), directly or indirectly, which results in
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Act) of such person, entity or group of persons equalling 30
percent or more of either the outstanding common shares of Cardinal
Health, Inc. ("Cardinal") or the combined voting power of the
then-outstanding securities of Cardinal entitled to vote in the
election of directors of Cardinal, or (ii) the approval by the
shareholders of Cardinal of a reorganization, merger, or consolidation,
with respect to which in each case persons who were shareholders of
Cardinal immediately prior to such reorganization, merger or
consolidation do not (solely because of their common shares of Cardinal
owned immediately prior to such reorganization, merger, or
consolidation) immediately thereafter, own more than 50 percent of the
combined voting power entitled to vote in the election of directors of
the then-outstanding securities of the reorganized,
-4-
<PAGE> 6
merged or consolidated company, or (iii) a liquidation or dissolution
of Cardinal, or (iv) the sale of all or substantially all of Cardinal's
assets.
B. Forfeiture of Benefits
----------------------
If your employment with the Company terminates for any reason
other than death, disability, or a Change in Control prior to the time
you have completed 5 years of service, you will forfeit some or all
(based on the above schedule) rights to receive benefits under the
Plan, except that you will still be entitled to receive benefits based
on your Deferral Value.
C. Payment of Benefits.
-------------------
1. RETIREMENT BENEFITS. You will be eligible to receive
retirement benefits under the plan upon your retirement after attaining
age 65 with five years of service. Retirement benefits will generally
be paid as a monthly benefit payable for 60 months. The amount of your
benefit will equal the amount necessary to amortize your total
Accumulations over the 60 month period. The amount payable each month
will either be based on an approximately equal amortization of
principal plus actual earnings (or less actual losses) or an
amortization based on an assumed interest rate declared by the Company
from time to time during the period of distribution. You must give the
Company at least 30 days advance written notice of your intention to
retire and receive retirement benefits. Actual benefit payments will
begin on the first day of the second month following your satisfaction
of all requirements for payment.
2. DISABILITY BENEFITS. If you become totally disabled before
satisfying the requirements for retirement benefits, you will be
eligible to receive payment of the amounts credited to your
Accumulations as a monthly benefit commencing after six months of total
disability and payable for 60 months. The amount of the benefit will be
determined in the same manner as retirement benefits. For this purpose,
"total disability" means a physical or mental condition which totally
and presumably permanently prevents you from engaging in any
substantially gainful activity. It is up to the Company to determine
whether you qualify as being totally disabled and the Company may
require you to submit to periodic medical examinations to confirm that
you are, and continue to be, totally disabled. If your disability ends,
your disability benefit payments will stop. However, you could continue
to qualify for benefits under another provision of the Plan.
3. DEATH BENEFITS. In the event of your death while receiving
benefit payments under the Plan, the Company will pay the beneficiary
or beneficiaries designated by you any remaining payments due under the
terms of your Incentive Deferred Compensation Agreement, using the same
method of distribution in effect to you at the date of your death. In
the event of death prior to beginning to receive benefits under the
Incentive Deferred Compensation Agreement, the Company will pay any
vested benefits to your beneficiary or beneficiaries, beginning as soon
as practicable after your
-5-
<PAGE> 7
death. In this case, benefits will generally be paid as a monthly
benefit payable for 60 months computed in the same manner as retirement
benefits. The Company will provide you with the form for designating
your beneficiary or beneficiaries. If you fail to make a beneficiary
designation, or if your designated beneficiary predeceases you or
cannot be located, any death benefits will be paid to your estate.
4. OTHER TERMINATION OF SERVICE. If your service with the
Company terminates for any reason other than retirement, death, or
total disability, then the vested portion of your Accumulations will be
paid to you as a monthly benefit payable for 60 months computed in the
same manner as retirement benefits, beginning as soon as
administratively practicable after your employment terminates.
5. PAYMENT ALTERNATIVES. At the Company's election, or upon
your request, benefits may be paid in a lump sum or over a shorter or
longer period of time than the 60 months generally called for, as
described above. However, no request by you or your beneficiaries for a
different payment method will be binding on the Company, and any
accelerated or deferred payment of benefits shall be made only in the
sole discretion of the Company. In addition, the Company may alter the
payment method in effect from time to time in its discretion, for
example, in order to avoid the loss of a deduction under Code
sec.162(m). If the payment method is altered, the amount you or your
beneficiaries will receive will be computed under one of the
alternative methods for determining payment amounts provided for under
the normal form of distribution for your Accumulations, determined by
the Company in its discretion.
6. CHANGE IN CONTROL. If a Change in Control occurs, and your
employment with the Company (or its successor) terminates within two
years after the Change in Control occurred, then you shall be entitled
to receive your Accumulations in a single lump sum within 30 days of
your termination of employment, notwithstanding any other provision of
this Plan or your Incentive Deferred Compensation Agreement. Also,
following a Change in Control, the Company's discretion to alter the
payment methodology (described in sec.5, above) is limited to
accelerating your benefits; the Company cannot, after a Change in
Control, defer the commencement of payments or extend the period of
distribution beyond the normal periods described in the preceding
sections (1-4).
V
MISCELLANEOUS PROVISIONS
------------------------
A. No Right to Company Assets.
--------------------------
As explained previously, this Incentive Deferred Compensation
Plan is an unfunded arrangement and the agreement you will enter into
with the Company does not create a trust or any kind of a fiduciary
relationship between the Company and you, your designated beneficiaries
or any other person. To the extent you, your designated
-6-
<PAGE> 8
beneficiaries, or any other person acquires a right to receive payments
from the Company under the Incentive Deferred Compensation Agreement,
that right is no greater than the right of any unsecured general
creditor of the Company.
B. Modification or Revocation.
--------------------------
Your Incentive Deferred Compensation Agreement will continue
in effect until revoked, terminated, or all benefits are paid, even
during any period of time when you are an "inactive" participant
because you are not designated by the Company as eligible to accumulate
additional benefits. However, the Incentive Deferred Compensation
Agreement and this Plan may be amended or revoked at any time, in whole
or in part, by the Company in its sole discretion. Unless you agree
otherwise, you will still be entitled to the vested benefit, if any,
that you have earned through the date of any amendment or revocation.
Such benefits will be payable at the times and in the amounts provided
for in the Incentive Deferred Compensation Agreement, or the Company
may elect to accelerate distribution and pay all amounts due
immediately.
C. Rights Preserved.
----------------
Nothing in the Incentive Deferred Compensation Agreement or
this Plan gives any employee the right to continued employment by the
Company. The relationship between you and the Company shall continue to
be "at will" and may be terminated at any time by the Company or you,
with or without cause, except as may be specifically set forth in any
separate written employment agreement between you and the Company.
D. Controlling Documents.
---------------------
This is merely a summary of the key provisions of the
Incentive Deferred Compensation Agreement currently in use by the
Company. In the event of any conflict between the provisions of this
Plan and the Incentive Deferred Compensation Agreement, the agreement
shall in all cases control.
The Company has executed this amended and restated Plan in Dublin, Ohio
on the date set forth below.
Cardinal Health, Inc.
By: /s/ George H. Bennett, Jr.
Its: Exec. V.P.
Date: November 13, 1995
-7-
<PAGE> 1
Exhibit 10.17
================================================================================
================================================================================
MASTER AGREEMENT
Dated as of July 16, 1996
among
CARDINAL MISSISSIPPI, INC. and
CERTAIN OTHER SUBSIDIARIES
NOW OR HEREAFTER PARTIES HERETO,
as Lessees,
CARDINAL HEALTH, INC., as Guarantor,
SUNTRUST BANKS, INC., as Lessor,
PNC LEASING CORP., as Lender,
and
SUNTRUST BANK, ATLANTA, as Agent
----------------------------------------------
[Warehouses]
================================================================================
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS; INTERPRETATION........................................................ 2
SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
NATURE OF TRANSACTION.............................................................. 2
SECTION 2.1 Agreement to Acquire, Construct,
Fund
and Lease.......................................................................... 2
SECTION 2.2 Fundings of Purchase Price,
Development Costs and Construction Costs........................................... 3
SECTION 2.3 Funded Amounts and Interest and
Yield Thereon; Commitment Fee...................................................... 5
SECTION 2.4 Lessee Owner for Tax Purposes...................................................... 6
SECTION 2.5 Amounts Due Under Lease............................................................ 7
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS.................................................... 7
SECTION 3.1 Conditions to the Obligations of the
Funding Parties on each Closing Date............................................... 7
SECTION 3.2 Additional Conditions for the
Initial Closing Date............................................................... 12
SECTION 3.3 Conditions to the Obligations of
Lessees............................................................................ 14
SECTION 3.4 Conditions to the Obligations of the
Funding Parties on each Funding Date............................................... 14
SECTION 3.5 Completion Date Conditions......................................................... 15
SECTION 3.6 Addition of Lessees................................................................ 17
SECTION 4 REPRESENTATIONS.................................................................... 18
SECTION 4.1 Representations of Lessee.......................................................... 18
SECTION 4.2 Representations of the Lessor...................................................... 21
SECTION 4.3 Representations of each Lender..................................................... 22
SECTION 5 COVENANTS OF THE LESSEES........................................................... 22
SECTION 5.1 Qualification to do Business....................................................... 22
SECTION 5.2 Further Assurances................................................................. 23
SECTION 5.3 Information........................................................................ 23
SECTION 5.4 Additional Required Appraisals..................................................... 23
SECTION 5.5 IDB Documentation.................................................................. 23
SECTION 6 TRANSFERS BY LESSOR AND LENDER..................................................... 23
SECTION 6.1 Lessor Transfers................................................................... 23
SECTION 6.2 Lender Transfers................................................................... 23
SECTION 7 INDEMNIFICATION.................................................................... 24
SECTION 7.1 General Indemnification............................................................ 24
SECTION 7.2 Environmental Indemnity............................................................ 26
SECTION 7.3 Proceedings in Respect of Claims................................................... 28
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 7.4 General Tax Indemnity.............................................................. 30
SECTION 7.5 Increased Costs, etc............................................................... 37
SECTION 7.6 End of Term Indemnity.............................................................. 40
SECTION 8 MISCELLANEOUS...................................................................... 41
SECTION 8.1 Survival of Agreements............................................................. 41
SECTION 8.2 Notices............................................................................ 41
SECTION 8.3 Counterparts....................................................................... 42
SECTION 8.4 Amendments......................................................................... 42
SECTION 8.5 Headings, etc...................................................................... 43
SECTION 8.6 Parties in Interest................................................................ 43
SECTION 8.7 GOVERNING LAW...................................................................... 43
SECTION 8.8 Expenses........................................................................... 43
SECTION 8.9 Severability....................................................................... 44
SECTION 8.10 Liabilities of the Funding Parties................................................. 44
SECTION 8.11 Submission to Jurisdiction; Waivers................................................ 44
SECTION 8.12 Liabilities of the Agent........................................................... 45
</TABLE>
-ii-
<PAGE> 4
APPENDIX A Definitions and Interpretation
SCHEDULES
SCHEDULE 2.2 Commitments
SCHEDULE 8.2 Notice Information
EXHIBITS
EXHIBIT A Form of Funding Request
EXHIBIT B [Reserved]
EXHIBIT C Form of Security Agreement and Assignment
EXHIBIT D-1 Form of Mortgage
EXHIBIT D-2 Form of Deed of Trust
EXHIBIT E Form of Lease
EXHIBIT F Form of Environmental Audit Reliance Letter
EXHIBIT G Forms of Opinions of Counsel
EXHIBIT H Form of Lessee Certification of Construction
Completion
EXHIBIT I Form of Joinder Agreement
EXHIBIT J Form of Assignment and Assumption Agreement
EXHIBIT K Form of Assignment of Lease and Rents
-iii-
<PAGE> 5
MASTER AGREEMENT
THIS MASTER AGREEMENT, dated as of July 16, 1996 (as it may be amended
or modified from time to time in accordance with the provisions hereof, this
"MASTER AGREEMENT"), is among CARDINAL MISSISSIPPI, INC. a Mississippi
corporation ("CARDINAL MISSISSIPPI"); (Cardinal Mississippi, together with the
other Subsidiaries that hereafter become parties hereto, are collectively
referred to as the "LESSEES" and individually as a LESSEE"), CARDINAL HEALTH,
INC., an Ohio corporation ("CARDINAL"), as Guarantor, SUNTRUST BANKS, INC., a
Georgia corporation, as Lessor (the "LESSOR"); PNC LEASING CORP., a Pennsylvania
corporation ("PNC"); PNC and such other financial institutions that may
hereafter become parties to the Loan Agreement are collectively referred to as
"LENDERS" and individually as a "LENDER"), and SUNTRUST BANK, ATLANTA, a Georgia
banking corporation, as Agent (the "AGENT").
PRELIMINARY STATEMENT
In accordance with the terms and provisions of this Master Agreement,
the Leases, the Lease Participation Agreement, the Loan Agreement and the other
Operative Documents, (i) the Lessor contemplates acquiring Land and Leased
Property from time to time, and leasing such Land or Leased Property, as the
case may be, to the respective Lessees, (ii) unless the Building has been
completed at the time of the acquisition of the Leased Property, the respective
Lessees wish to construct Buildings on such Land for the Lessor and, when
completed, to lease such Buildings from Lessor as part of the Leased Property
under the related Lease, (iii) the Lessees wish to obtain, and the Lessor is
willing to provide, funding for the acquisition of the Land or Leased Property,
as the case may be, and, if applicable, the construction of Buildings, (iv) the
Lessor wishes to sell, and the Lease Participant wishes to purchase, a
participation interest in the Lessor's rights under the Leases, (v) the Lessor
wishes to obtain, and Lenders are willing to provide, from time to time,
financing of a portion of the funding of the acquisition of the Land or Leased
Property, as the case may be, and, if applicable, the construction of the
Buildings, and (vi) the Guarantor is willing to provide its Guaranty to the
Lease Participant, the Lenders and the Lessor.
In consideration of the mutual agreements contained in this Master
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 6
SECTION 1
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in APPENDIX A hereto
for all purposes hereof; and the rules of interpretation set forth in APPENDIX A
hereto shall apply to this Master Agreement.
SECTION 2
ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
NATURE OF TRANSACTION
SECTION 2.1 AGREEMENT TO ACQUIRE, CONSTRUCT, FUND AND LEASE.
(a) LAND. Subject to the terms and conditions of this Master
Agreement, with respect to each parcel of Land that is not an IDB Property
acquired by an Authority pursuant to the following sentence, on the related
Closing Date (i) the Lessor agrees to acquire such interest in the related Land
from the applicable Seller as is transferred, sold, assigned and conveyed to the
Lessor pursuant to the applicable Purchase Agreement, (ii) the Lessor hereby
agrees to lease such Land to the related Lessee pursuant to a Lease, and (iii)
the related Lessee hereby agrees to lease such Land from the Lessor pursuant to
such Lease. With respect to each IDB Property, (i) the applicable Authority may
acquire such interest in the related Land from the applicable Seller as is
transferred, sold, assigned and conveyed to the Authority pursuant to the
applicable Purchase Agreement, (ii) the applicable Authority will lease such
Land to the Lessor pursuant to the related IDB Lease, and (iii) the related
Lessee hereby agrees to sublease such Land from the Lessor pursuant to the
related IDB Lease (it being understood that any reference in the Operative
Documents to the lease by a Lessee of an IDB Property shall be deemed to refer
to the sublease thereof pursuant to the related Lease).
(b) BUILDING. With respect to each parcel of Land that does
not have a completed Building at the time of acquisition by the Lessor, subject
to the terms and conditions of this Master Agreement, from and after the Closing
Date relating to such Land (i) the Construction Agent, and the related Lessee,
as Co-Construction Agent, agree, pursuant to the terms of the Construction
Agency Agreement, to construct and install the Building on such Land for the
Lessor prior to the Scheduled Construction Termination Date, (ii) the Lenders
and the Lessor agree to fund all or a portion of the costs of such construction
and installment (and interest and yield thereon), (iii) the Lessor shall lease
such Building as part of such Leased Property
2
<PAGE> 7
to such related Lessee pursuant to the related Lease, and (iv) the related
Lessee shall lease such Building from the Lessor pursuant to the related Lease.
SECTION 2.2 FUNDINGS OF PURCHASE PRICE, DEVELOPMENT COSTS AND
CONSTRUCTION COSTS.
(a) INITIAL FUNDING AND PAYMENT OF PURCHASE PRICE FOR LAND AND
DEVELOPMENT COSTS ON CLOSING DATE. Subject to the terms and conditions of this
Master Agreement, on the Closing Date for any Land or Leased Property, each
Lender shall make available to the Lessor its initial Loan with respect to such
Land in an amount equal to the product of such Lender's Commitment Percentage
times the purchase price for the Land or Leased Property and the development,
transaction and closing costs incurred by the Lessee through such Closing Date,
which funds the Lessor shall use, together with Lessor funds in an amount equal
to the product of the Lessor's Commitment Percentage times the purchase price
for the related Land or Leased Property and the development, transaction and
closing costs incurred by such Lessee through such Closing Date, to purchase the
Land or Leased Property from the applicable Seller pursuant to the applicable
Purchase Agreement and to pay to the related Lessee the amount of such
development, transaction and closing costs, and the Lessor shall lease such Land
to the related Lessee pursuant to the related Lease.
(b) SUBSEQUENT FUNDINGS AND PAYMENTS OF CONSTRUCTION COSTS
DURING CONSTRUCTION TERM. Subject to the terms and conditions of this Master
Agreement, on each Funding Date following the Closing Date for each Construction
Land Interest until the related Construction Term Expiration Date, (i) each
Lender shall make available to the Lessor a Loan in an amount equal to the
product of such Lender's Commitment Percentage times the amount of Funding
requested by the related Lessee for such Funding Date, which funds the Lessor
hereby directs such Lender to pay over to the related Lessee as set forth in
PARAGRAPH (D), and (ii) the Lessor shall pay over to the related Lessee its own
funds (which shall constitute a part of and an increase in the Lessor's Invested
Amount with respect to such Leased Property) in an amount equal to the product
of the Lessor's Commitment Percentage times the amount of Funding requested by
the related Lessee for such Funding Date.
(c) AGGREGATE LIMITS ON FUNDED AMOUNTS. The aggregate amount
that the Funding Parties shall be committed to provide as Funded Amounts under
this Master Agreement, the Loan Agreement and the Lease Participation Agreement
shall not exceed (x) with respect to each Leased Property the lesser of (i) the
costs of purchase and construction of such Leased Property and the related
closing and financing costs, and (ii) the estimated Fair Market
3
<PAGE> 8
Sales Value of such Leased Property on the related Completion Date as set forth
in the related Appraisal, or (y) $60,000,000 in the aggregate for all Leased
Properties. The aggregate amount that any Funding Party shall be committed to
fund under this Master Agreement, the Lease Participation Agreement and the Loan
Agreement shall not exceed the lesser of (i) such Funding Party's Commitment and
(ii) such Funding Party's Commitment Percentage of the aggregate Fundings
requested under this Master Agreement.
(d) NOTICE, TIME AND PLACE OF FUNDINGS. With respect to each
Funding, the related Lessee or Cardinal shall give the Lessor and the Agent an
irrevocable prior written notice not later than 12:00 noon, Atlanta, Georgia,
three Business Days prior to the proposed Closing Date or other Funding Date, as
the case may be, pursuant, in each case, to a Funding Request in the form of
EXHIBIT A (a "FUNDING REQUEST"), specifying the Closing Date or subsequent
Funding Date, as the case may be, and the amount of Funding requested. All
documents and instruments required to be delivered on such Closing Date pursuant
to this Master Agreement shall be delivered at the offices of Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois 60603, or at such other
location as may be determined by the Lessor, Cardinal and the Agent. Each
Funding shall occur on a Closing Date or a Payment Date and shall be in an
amount equal to $250,000 or an integral multiple of $25,000 in excess thereof.
All remittances made by any Lender and the Lessor for any Funding shall be made
in immediately available funds by wire transfer to or, as is directed by, the
related Lessee or Cardinal, with receipt by the related Lessee not later than
1:00 p.m., Atlanta, Georgia time, on the applicable Funding Date, upon
satisfaction or waiver of the conditions precedent to such Funding set forth in
SECTION 3; such funds shall (1) in the case of the initial Funding on a Closing
Date, be used to pay the purchase price to the applicable Seller for the related
Land or Leased Property, as the case may be, and pay the related Lessee
development, transaction and closing costs related to such Land or Leased
Property, as the case may be, and (2) in the case of each subsequent Funding in
respect of a Construction Land Interest be used to pay to Cardinal or the
related Lessee as the Construction Agent or Co-Construction Agent, as the case
may be, for payment or reimbursement of Construction costs.
(e) LESSEE'S DEEMED REPRESENTATION FOR EACH FUNDING. Each
Funding Request by a Lessee shall be deemed a reaffirmation of such Lessee's
indemnity obligations in favor of the Indemnitees under the Operative Documents
and a representation by such Lessee to the Lessor, the Agent, the Lease
Participant and the Lenders that on the proposed Closing Date or Funding Date,
as the case may be, (i) the amount of Funding requested represents amounts owing
in respect of the purchase price of the related Land or Leased Property, as the
case may be, and development,
4
<PAGE> 9
transaction and closing costs in respect of the Leased Property (in the case of
the initial Funding on a Closing Date) or amounts that such Lessee reasonably
believes will be due in the 90 days following such Funding from such Lessee or
Cardinal to third parties in respect of the Construction, or amounts paid by
such Lessee or Cardinal to third parties in respect of the Construction for
which such Lessee or Cardinal has not previously been reimbursed by a Funding
(in the case of any Funding), (ii) no Event of Default or Potential Event of
Default exists, and (iii) the representations of such Lessee set forth in
SECTION 4.1 are true and correct in all material respects as though made on and
as of such Funding Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date.
(f) Notwithstanding anything to the contrary set forth herein
or in the other Operative Documents, each Lender's and the Lessor's commitments
shall be several, and not joint. In no event shall any Funding Party be
obligated to fund an amount in excess of such Funding Party's Commitment
Percentage of any Funding, or to fund amounts in the aggregate in excess of such
Funding Party's Commitment.
SECTION 2.3 FUNDED AMOUNTS AND INTEREST AND YIELD THEREON;
COMMITMENT FEE.
(a) The Lessor's Invested Amount for any Leased Property
outstanding from time to time shall accrue yield ("YIELD") at a rate equal to
the sum of (i) the LIBOR Rate, plus (ii) .44475% per annum, computed using the
actual number of days elapsed and a 360 day year. If all or a portion of the
principal amount of or yield on the Lessor's Invested Amounts shall not be paid
when due (whether at the stated maturity, by acceleration or otherwise), such
overdue amount shall, without limiting the rights of the Lessor under the
Leases, accrue yield at the Overdue Rate, in each case from the date of
nonpayment until paid in full (as well after as before judgment). Any change in
the Yield rate on the Lessor's Invested Amounts resulting from a change in the
Alternative Rate shall become effective as of the opening of business on the day
on which such Alternative Rate changes as provided in the definition thereof.
(b) Each Lender's Funded Amount for any Leased Property
outstanding from time to time shall accrue interest as provided in the Loan
Agreement.
(c) During the Construction Term, if requested by the related
Lessee in a writing delivered to the Sun Trust Lessor and the Agent not less
than three Business Days prior to the related
5
<PAGE> 10
Payment Date, in lieu of paying accrued interest, on such Payment Date, each
Lender's Funded Amount in respect of a Construction Land Interest shall
automatically be increased by the amount of interest accrued on the related
Loans pursuant to the Loan Agreement during the quarter ending immediately prior
to such Payment Date (except to the extent that at any time such increase would
cause such Lender's Funded Amount to exceed such Lender's Commitment, in which
event the related Lessee shall pay such excess amount to such Lender).
Similarly, during the Construction Term, if the related Lessee has delivered
such notice as set forth in the preceding sentence, in lieu of paying accrued
Yield, on such Payment Date, the Lessor's Invested Amount in respect of such
Construction Land Interest shall automatically be increased by the amount of
Yield accrued on the Lessor's Invested Amount in respect of such Land during the
quarter ending immediately prior to such Payment Date (except to the extent that
at any time such increase would cause the Lessor's Invested Amount to exceed the
Lessor's Commitment, in which event the related Lessee shall pay such excess
amount to the Lessor). Such increases in Funded Amounts shall occur without any
disbursement of funds by the Funding Parties. If the related Lessee has not
delivered the notice to increase the Loans and the Lessor's Invested Amount as
described in the foregoing sentences, such Lessee shall pay the amount of
accrued interest on the Loans and accrued Yield related to the Leased Properties
leased by such Lessee on each Payment Date in cash.
(d) Cardinal hereby agrees to pay to each of the Lessor and
each Lender a commitment fee (the "COMMITMENT FEE") equal for each day from the
date hereof until the Funding Termination Date in an amount equal to (x) 0.125%
TIMES (y) the difference, if any, between such Person's Commitment and such
Person's outstanding Funded Amount on such day TIMES (z) 1/360. Such Commitment
Fee shall be paid, in arrears, on the last Business Day of each March, June,
September and December for the calendar quarter then ended, and on the Funding
Termination Date for the period for which such Commitment Fee has not
theretofore been paid.
SECTION 2.4 LESSEE OWNER FOR TAX PURPOSES. With respect to each Leased
Property, it is the intent of the Lessee and the Funding Parties that for
federal, state and local tax purposes (A) the related Lessee owns such Leased
Property and will be entitled to all tax benefits ordinarily available to an
owner of property similar to such Leased Property, (B) the related Lease will be
treated as a financing arrangement, and (C) the Lessor will be treated as a
lender making loans to the related Lessee. Nevertheless, each Lessee
acknowledges and agrees that no Funding Party or any other Person has made any
representations or warranties concerning the tax, financial, accounting or legal
characteristics or treatment of the Operative Documents and that
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each Lessee has obtained and relied solely upon the advice of its own tax,
accounting and legal advisors concerning the Operative Documents and the
accounting, tax, financial and legal consequences of the transactions
contemplated therein.
SECTION 2.5 AMOUNTS DUE UNDER LEASE. With respect to each Leased
Property, anything else herein or elsewhere to the contrary notwithstanding, it
is the intention of each Lessee and the Funding Parties that: (i) the amount and
timing of Basic Rent due and payable from time to time from such Lessee under
the related Lease shall be equal to the aggregate payments due and payable with
respect to interest on, and principal of, the Loans in respect of such Leased
Property and Yield on, and principal of, the Lessor's Invested Amounts in
respect of such Leased Property on each Payment Date; (ii) if such Lessee elects
the Purchase Option or becomes obligated to purchase such Leased Property under
the related Lease, the Funded Amounts in respect of such Leased Property, all
interest and Yield thereon and all other obligations of such Lessee owing to the
Funding Parties in respect of such Leased Property shall be paid in full by such
Lessee, (iii) if such Lessee properly elects the Remarketing Option or the
Surrender Option, the principal amount of, and accrued interest on, the A Loans
and the A Percentage of the Lessor's Invested Amounts in respect of such Leased
Property will be paid out of the Recourse Deficiency Amount, and such Lessee
shall only be required to pay to the Lenders in respect of the principal amount
of the B Loans in respect of such Leased Property and to the Lessor in respect
of the B Percentage of the Lessor's Invested Amounts in respect of such Leased
Property the proceeds of the sale of such Leased Property; and (iv) upon an
Event of Default resulting in an acceleration of such Lessee's obligation to
purchase such Leased Property under the related Lease, the amounts then due and
payable by such Lessee under such Lease shall include all amounts necessary to
pay in full the Loans in respect of such Leased Property, and accrued interest
thereon, the Lessor's Invested Amounts in respect of the Leased Property and
accrued Yield thereon and all other obligations of such Lessee owing to the
Funding Parties in respect of such Leased Property.
SECTION 3
CONDITIONS PRECEDENT; DOCUMENTS
SECTION 3.1 CONDITIONS TO THE OBLIGATIONS OF THE FUNDING PARTIES ON
EACH CLOSING DATE. The obligations of the Lessor and each Lender to carry out
their respective obligations under SECTION 2 of this Master Agreement to be
performed on the Closing Date with respect to any Leased Property shall be
subject to the fulfillment to the satisfaction of, or waiver by, each such party
hereto (acting directly or through its counsel) on or prior to
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such Closing Date of the following conditions precedent, PROVIDED that the
obligations of any Funding Party shall not be subject to any conditions
contained in this SECTION 3.1 which are required to be performed by such Funding
Party:
(a) DOCUMENTS. The following documents shall have been
executed and delivered by the respective parties thereto:
(i) DEED AND PURCHASE AGREEMENT; SUPPLEMENT TO
CONSTRUCTION AGENCY AGREEMENT. The related original Deed duly
executed by the applicable Seller and in recordable form, and
copies of the related Purchase Agreement, duly executed by
such Seller and the related Lessee, shall each have been
delivered to the Agent, with copies thereof to each other
Funding Party. A supplement to the Construction Agency
Agreement, substantially in the form of Exhibit A thereto,
duly executed by the related Lessee, the Lessor and Cardinal
shall have been delivered to the Agent.
(ii) LEASE; LEASE SUPPLEMENT. The original of the
related Lease or Lease Supplement, as the case may be, duly
executed by the related Lessee and the Lessor and in
recordable form, shall have been delivered to the Agent.
(iii) MORTGAGE AND ASSIGNMENT OF LEASE AND RENTS.
Counterparts of the Mortgage in the form of EXHIBIT D-1 (or
D-2 if such Mortgage is in the form of a deed of trust)
attached hereto, duly executed by the Lessor and in recordable
form, shall have been delivered to the Agent (which Mortgage
shall secure debt in an amount equal to 125% of the projected
cost of acquisition and construction of such Leased Property);
and the Assignment of Lease and Rents in the form of EXHIBIT K
hereto in recordable form, duly executed by the Lessor, shall
have been delivered to the Agent.
(iv) SECURITY AGREEMENT AND ASSIGNMENT. Counterparts
of the Security Agreement and Assignment (substantially in the
form of EXHIBIT C), duly executed by the related Lessee, with
an acknowledgement and consent thereto satisfactory to the
Lessor and the Agent duly executed by the related General
Contractor and the related Architect, as applicable, and
complete copies of the related Construction Contract and the
related Architect's Agreement certified by such Lessee, shall
have been delivered to the Lessor and the Agent (it being
understood and agreed that if no related Construction Contract
or Architect's Agreement exists on such Closing Date the
related Lessee shall deliver
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such Security Agreement and Assignment and consents
concurrently with such Lessee's entering into such contracts).
(v) SURVEY. The related Lessee shall have delivered,
or shall have caused to be delivered, to the Lessor and the
Agent, at such Lessee's expense, an accurate survey certified
to the Lessor and the Agent in a form satisfactory to the
Lessor and the Agent and showing no state of facts
unsatisfactory to the Lessor or the Agent and prepared within
ninety (90) days of the Closing Date by a Person reasonably
satisfactory to the Lessor and the Agent. Such survey shall
(1) be acceptable to the Title Insurance Company, (2) show no
encroachments on such Land by structures owned by others, and
no encroachments from any part of such Leased Property onto
any land owned by others, and (3) disclose no state of facts
reasonably objectionable to the Lessor, the Agent or the Title
Insurance Company, and be acceptable to each such Person.
(vi) TITLE AND TITLE INSURANCE. On such Closing Date,
the Lessor shall receive from a title insurance company
acceptable to the Lessor and the Agent an ALTA Owner's Policy
of Title Insurance issued by such title insurance company and
the Agent shall receive from such title insurance company an
ALTA Mortgagee's Policy of Title Insurance issued by such
title insurance company, in each case, in the amount of the
projected cost of acquisition and, construction of such Leased
Property, reasonably acceptable in form and substance to the
Lessor and the Agent, respectively (collectively, the "TITLE
POLICY"). The Title Policy shall be dated as of the Closing
Date, and, to the extent permitted under Applicable Law, shall
include a pending disbursements clause reasonably satisfactory
to the Lessor and the Agent and, coverage over the creditors'
rights exclusion and the general exceptions to such policy and
shall contain such affirmative endorsements as to mechanic's
liens, easements and rights-of-way, encroachments, the
non-violation of covenants and restrictions, survey matters
and other matters as the Lessor or the Agent shall reasonably
request.
(vii) APPRAISAL. Each Funding Party shall have
received a report of the Appraiser (an "APPRAISAL"), paid for
by the related Lessee or Cardinal, which shall meet the
requirements of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, shall be satisfactory to such
Funding Party and shall state in a manner satisfactory to such
Funding Party the estimated
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"as vacant" value of such Land and the Building to be
constructed thereon. Such Appraisal must show that the "as
vacant" value described above is at least 48% of the total
cost of the Leased Property, including the trade fixtures,
equipment and personal property to be included therein. Upon
request by the related Lessee, the Funding Parties agree to
waive delivery on such Closing Date of an Appraisal, provided
that no subsequent Funding shall occur until such Appraisal
has been delivered.
(viii) ENVIRONMENTAL AUDIT AND RELATED RELIANCE
LETTER. The Lessor and the Agent shall have received an
Environmental Audit for such Leased Property showing that no
Hazardous Materials are present and otherwise satisfactory to
the Lessor and the Agent; and the firm that prepared the
Environmental Audit for such Leased Property shall have
delivered to the Lessor and the Agent a letter (substantially
in the form of EXHIBIT F) stating that the Lessor, the Agent,
the Lease Participant and the Lenders may rely upon such
firm's Environmental Audit of such Land, IT BEING UNDERSTOOD
that the Lessor's and the Agent's acceptance of any such
Environmental Audit shall not release or impair any Lessee's
or the Guarantor's obligations under the Operative Documents
with respect to any environmental liabilities relating to such
Leased Property.
(ix) EVIDENCE OF INSURANCE. The Lessor and the Agent
shall have received from the related Lessee certificates of
insurance evidencing compliance with the provisions of Article
VIII of the related Lease (including the naming of the Lessor,
the Agent, the Lease Participant and the Lenders as additional
insured or loss payee with respect to such insurance), in form
and substance satisfactory to the Lessor and the Agent.
(x) OFFICER'S CERTIFICATE. Each of the Agent and the
Lessor shall have received an Officer's Certificate of (1) the
related Lessee stating that, to the best of such officer's
knowledge, (A) each and every representation and warranty of
such Lessee contained in the Operative Documents is true and
correct in all material respects on and as of such Closing
Date as though made on and as of such Closing Date, except to
the extent such representations or warranties relate solely to
an earlier date, in which case such representations and
warranties were true and correct in all material respects on
and as of such earlier date; (B) no Event of Default,
Potential Event of Default or Construction Force Majeure Event
has occurred and is
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continuing; (C) each Operative Document to which such Lessee
is a party is in full force and effect with respect to it; and
(D) no event that could have a Material Adverse Effect has
occurred since December 31, 1995; and (2) Cardinal stating
that, to the best of such officer's knowledge, (A) each and
every representation and warranty of Cardinal contained in the
Operative Documents is true and correct in all material
respects on and as of such Closing Date as though made on and
as of such Closing Date, except to the extent such
representations or warranties relate solely to an earlier
date, in which case such representations and warranties were
true and correct in all material respects on and as of such
earlier date; (B) no Event of Default, Potential Event of
Default or Construction Force Majeure Event has occurred and
is continuing; (C) each Operative Document to which Cardinal
is a party is in full force and effect with respect to it; and
(D) no event that could have a Material Adverse Effect has
occurred since December 31, 1995.
(xi) UCC FINANCING STATEMENT; RECORDING FEES;
TRANSFER TAXES. Each Funding Party shall have received
satisfactory evidence of (i) the execution and delivery to
Agent of a UCC-1 and UCC-2 financing statement to be filed
with the Secretary of State of the applicable State (or other
appropriate filing office) and the county where the related
Land is located respectively, and such other Uniform
Commercial Code financing statements as any Funding Party
deems necessary or desirable in order to protect such Funding
Party's interests and (ii) the payment of all recording and
filing fees and taxes with respect to any recordings or
filings made of the related Deed, the related Lease, the
related Lease Supplement, if any, the related Mortgage and the
related Assignment of Lease and Rents.
(xii) OPINIONS. The opinion of local counsel for the
related Lessee qualified in the jurisdiction in which such
Leased Property is located, substantially in the form set
forth in EXHIBIT G-2, and containing such other matters as the
parties to whom they are addressed shall reasonably request,
shall have been delivered and addressed to each of the Lessor,
the Agent, the Lease Participant and the Lenders, and to the
extent requested by the Agent, opinions supplemental to those
delivered under SECTION 3.2(VII) and satisfactory to the Agent
shall have been delivered and addressed to each of the Lessor,
the Agent, the Lease Participant and the Lenders.
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(xiii) IDB PROPERTY. If such Leased Property is an
IDB Property or is otherwise subject to industrial development
or revenue bonds, the IDB Documentation shall have been
executed by the parties thereto, and shall be in form and
substance reasonably acceptable to the Agent, the Lessor and
the Lenders.
(b) LITIGATION. No action or proceeding shall have been
instituted or threatened nor shall any governmental action, suit, proceeding or
investigation be instituted or threatened before any Governmental Authority, nor
shall any order, judgment or decree have been issued or proposed to be issued by
any Governmental Authority, to set aside, restrain, enjoin or prevent the
performance of this Master Agreement or any transaction contemplated hereby or
by any other Operative Document or which is reasonably likely to materially
adversely affect the Leased Property or any transaction contemplated by the
Operative Documents or which could reasonably be expected to result in a
Material Adverse Effect.
(c) LEGALITY. In the opinion of such Funding Party or its
counsel, the transactions contemplated by the Operative Documents shall not
violate any Applicable Law, and no change shall have occurred or been proposed
in Applicable Law that would make it illegal for such Funding Party to
participate in any of the transactions contemplated by the Operative Documents.
(d) NO EVENTS. (i) No Event of Default, Potential Event of
Default, Event of Loss or Event of Taking shall have occurred and be continuing,
(ii) no action shall be pending or threatened by a Governmental Authority to
initiate a Condemnation or an Event of Taking, and (iii) there shall not have
occurred any event that could reasonably be expected to have a Material Adverse
Effect since December 31, 1995.
(e) REPRESENTATIONS. Each representation and warranty of the
parties hereto or to any other Operative Document contained herein or in any
other Operative Document shall be true and correct in all material respects as
though made on and as of the Closing Date.
(f) CUTOFF DATE. The Initial Closing Date shall occur on or
prior to July 16, 1996. No Closing Date shall occur after the Funding
Termination Date.
(g) TRANSACTION EXPENSES. The related Lessee shall have paid
the Transaction Costs then accrued and invoiced which such Lessee has agreed to
pay pursuant to SECTION 8.8.
SECTION 3.2 ADDITIONAL CONDITIONS FOR THE INITIAL CLOSING DATE. The
obligations of the Lessor and each Lender to carry out
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their respective obligations under SECTION 2 of this Master Agreement to be
performed on the Initial Closing Date shall be subject to the satisfaction of,
or waiver by, each such party hereto (acting directly or through its counsel) on
or prior to the Initial Closing Date of the following conditions precedent in
addition to those set forth in SECTION 3.1, PROVIDED that the obligations of any
Funding Party shall not be subject to any conditions contained in this SECTION
3.2 which are required to be performed by such Funding Party:
(i) GUARANTY. Counterparts of the Guaranty, duly
executed by the Guarantor, shall have been delivered to each
Funding Party.
(ii) LOAN AGREEMENT. Counterparts of the Loan
Agreement, duly executed by the Lessor, the Agent and each
Lender shall have been delivered to each of the Lessor and the
Agent. An A Note and a B Note, duly executed by the Lessor,
shall have been delivered to each Lender.
(iii) LEASE PARTICIPATION AGREEMENT. Counterparts of
the Lease Participation Agreement, duly executed by the Lessor
and the Lease Participant, shall have been delivered to each
of the parties thereto.
(iv) MASTER AGREEMENT. Counterparts of this
Master Agreement, duly executed by the parties hereto,
shall have been delivered to each of the parties
hereto.
(v) CONSTRUCTION AGENCY AGREEMENT. Counterparts of
the Construction Agency Agreement, duly executed by the
parties thereto shall have been delivered to each of the
parties hereto.
(vi) LESSEE'S AND GUARANTOR'S RESOLUTIONS AND
INCUMBENCY CERTIFICATE, ETC. Each of the Agent and the Lessor
shall have received (x) a certificate of the Secretary or an
Assistant Secretary of each of Cardinal Mississippi and the
Guarantor, respectively, attaching and certifying as to (i)
the Board of Directors' resolution duly authorizing the
execution, delivery and performance by it of each Operative
Document to which it is or will be a party, (ii) the
incumbency and signatures of persons authorized to execute and
deliver such documents on its behalf, (iii) its certificate of
incorporation, certified as of a recent date by the Secretary
of State of the state of its incorporation and (iv) its
by-laws, and (y) good standing certificates for Cardinal
Mississippi and good standing
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certificates for the Guarantor from the appropriate offices of
the States of such Person's incorporation and principal place
of business.
(vii) OPINIONS OF COUNSEL. The opinion of Baker &
Hostetler, dated the initial Closing Date, substantially in
the form set forth in EXHIBIT G-1, and containing such other
matters as the parties to whom it is addressed shall
reasonably request, shall have been delivered and addressed to
each of the Lessor, the Agent, the Lease Participant and the
Lenders.
(viii) LESSOR'S INCUMBENCY CERTIFICATE. The Agent
shall have received a certificate of secretary of the Lessor
attaching and certifying as to the incumbency and signatures
of persons authorized to execute and deliver such documents on
its behalf.
SECTION 3.3 CONDITIONS TO THE OBLIGATIONS OF LESSEES. The obligations
of each Lessee to lease from the Lessor are subject to the fulfillment on the
related Closing Date to the satisfaction of, or waiver by, the related Lessee,
of the following conditions precedent:
(a) GENERAL CONDITIONS. The conditions set forth in SECTIONS
3.1 AND 3.2 that require fulfillment by the Lessor or the Lenders shall have
been satisfied.
(b) LEGALITY. In the opinion of such Lessee or its counsel,
the transactions contemplated by the Operative Documents shall not violate any
Applicable Law, and no change shall have occurred or been proposed in Applicable
Law that would make it illegal for such Lessee to participate in any of the
transactions contemplated by the Operative Documents.
SECTION 3.4 CONDITIONS TO THE OBLIGATIONS OF THE FUNDING PARTIES ON
EACH FUNDING DATE. The obligations of the Lessor and each Lender to carry out
their respective obligations under SECTION 2 of this Master Agreement to be
performed on each Funding Date shall be subject to the fulfillment to the
satisfaction of, or waiver by, each such party hereto (acting directly or
through their respective counsel) or prior to each such Funding Date of the
following conditions precedent, PROVIDED that the obligations of any Funding
Party shall not be subject to any conditions contained in this SECTION 3.4 which
are required to be performed by such Funding Party:
(a) FUNDING REQUEST. The Lessor and the Agent shall have
received from the related Lessee the Funding Request therefor pursuant to
SECTION 2.2(D).
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(b) CONDITION FULFILLED. As of such Funding Date, the
condition set forth in SECTION 3.1(D) shall have been satisfied.
(c) REPRESENTATIONS. As of such Funding Date, both before and
after giving effect to the Funding requested by the related Lessee on such date,
the representations and warranties that such Lessee is deemed to make pursuant
to SECTION 2.2(E) shall be true and correct in all material respects on and as
of such Funding Date as though made on and as of such Funding Date, except to
the extent such representations or warranties relate solely to an earlier date,
in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date.
(d) NO BONDED STOP NOTICE OR FILED MECHANICS LIEN. As of each
Funding Date, and as to any Funded Amount requested for any Leased Property on
each such Funding Date, (i) neither the Lessor, the Agent, the Lease Participant
nor any Lender has received (with respect to such Leased Property) a bonded
notice to withhold Loan funds which has not been discharged by the related
Lessee, and (ii) no mechanic's liens or materialman's liens have been filed
against such Leased Property that have not been discharged by the related
Lessee, bonded over in a manner reasonably satisfactory to the Agent or insured
by the Title Insurance Company.
SECTION 3.5 COMPLETION DATE CONDITIONS. The occurrence of the
Completion Date with respect to any Leased Property shall be subject to the
fulfillment to the satisfaction of, or waiver by, each party hereto (acting
directly or through its counsel) of the following conditions precedent:
(a) TITLE POLICY ENDORSEMENTS; ARCHITECT'S CERTIFICATE. The
related Lessee shall have furnished to each Funding Party (1) the following
endorsements to the related Title Policy (each of which shall be subject to no
exceptions other than those reasonably acceptable to the Agent): a date-down
endorsement (redating and confirming the coverage provided under the Title
Policy and each endorsement thereto) and a "Form 9" endorsement, in each case,
effective as of a date not earlier than the date of completion of the
Construction, and (2) a certificate of the Architect dated at or about the
Completion Date, in form and substance reasonably satisfactory to the Agent, the
Lessor and the Lenders, and stating that (i) the Building has been completed
substantially in accordance with the Plans and Specifications, and the Leased
Property is ready for occupancy, (ii) the Plans and Specifications comply in all
material respects with all Applicable Laws in effect at such time, and (iii) to
the best of the Architect's knowledge, the Leased Property, as so completed,
complies in all material respects with all Applicable Laws in effect at such
time. The related Lessee shall also
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deliver to the Agent true and complete copies of: (A) an "as built" or "record"
set of the Plans and Specifications, (B) a plat of survey of the Leased Property
"as built" to a standard reasonably acceptable to the Agent showing all
easements, paving, driveways, fences and exterior improvements, and (C) copies
of a certificate or certificates of occupancy for the Leased Property or other
legally equivalent permission to occupy the Leased Property.
(b) CONSTRUCTION COMPLETION. The Construction shall have been
completed substantially in accordance with the Plans and Specifications, the
related Deed and all Applicable Laws, and the Leased Property shall be ready for
occupancy and operation. All fixtures, equipment and other property contemplated
under the Plans and Specifications to be incorporated into or installed in the
Leased Property shall have been substantially incorporated or installed, free
and clear of all Liens except for Permitted Liens.
(c) LESSEE CERTIFICATION. The related Lessee shall have
furnished the Lessor, the Agent, the Lease Participant and each Lender with both
(1) a certification of such Lessee (substantially in the form of EXHIBIT H)
that:
(i) all amounts owing to third parties for the
Construction have been paid in full (other than contingent obligations
for which such Lessee has made adequate reserves), and no litigation or
proceedings are pending, or to the best of such Lessee's knowledge, are
threatened, against the Leased Property or such Lessee which could
reasonably be expected to have a Materially Adverse Effect;
(ii) all consents, licenses and permits and other
governmental authorizations or approvals required for the Construction
and operation of the Leased Property have been obtained and are in full
force and effect;
(iii) the Leased Property has available all services
of public facilities and other utilities necessary for use and
operation of the Leased Property for its intended purposes including,
without limitation, adequate water, gas and electrical supply, storm
and sanitary sewerage facilities, telephone, other required public
utilities and means of access between the Building and public highways
for pedestrians and motor vehicles;
(iv) all material agreements, easements and other
rights, public or private, which are necessary to permit the lawful use
and operation of the Leased Property as such Lessee intends to use the
Leased Property under the related Lease and which are necessary to
permit the lawful intended
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use and operation of all then intended utilities, driveways, roads and
other means of egress and ingress to and from the same have been
obtained and are in full force and effect and such Lessee has no
knowledge of any pending modification or cancellation of any of the
same; and the use of the Leased Property does not depend on any
variance, special exception or other municipal approval, permit or
consent that has not been obtained and is in full force and effect for
its continuing legal use;
(v) all of the requirements and conditions set
forth in SECTION 3.5(B) hereof have been completed and
fulfilled; and
(vi) the Leased Property is in compliance in all
material respects with all applicable zoning laws and
regulations; and
(2) copies of all final lien waivers regarding the Construction, together with
sworn statements from contractors, subcontractors and material suppliers.
(d) COMPLETION DATE APPRAISAL. Within 90 days after the
issuance of the certificate of occupancy for the Building, the Lessor and the
Agent shall have received a report of the Appraiser (the "COMPLETION DATE
APPRAISAL"), which shall confirm the Appraisal delivered on the Closing Date.
The cost of such appraisal shall be paid by the related Lessee.
SECTION 3.6 ADDITION OF LESSEES. After the date hereof, additional
Subsidiaries of Cardinal may become Lessees hereunder and under the other
Operative Documents upon satisfaction of the following conditions precedent:
(a) such Subsidiary and the Guarantor shall have executed and
delivered to the Agent and the Lessor a Joinder Agreement,
substantially in the form of EXHIBIT I;
(b) such Subsidiary shall have delivered to each of the Agent
and the Lessor (x) a certificate of the Secretary or an Assistant
Secretary of such Subsidiary, attaching and certifying as to (i) the
Board of Directors' resolution duly authorizing the execution, delivery
and performance by it of each Operative Document to which it is or will
be a party, (ii) the incumbency and signatures of persons authorized to
execute and deliver such documents on its behalf, (iii) its certificate
of incorporation, certified as of a recent date by the Secretary of
State of its incorporation and (iv) its by-laws, and (y) good standing
certificates from the appropriate offices of the States of such
Subsidiary's incorporation and principal place of business;
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(c) such Subsidiary shall have delivered an opinion of Baker &
Hostetler, addressed to each of the Lessor, the Agent, the Lease
Participant and the Lenders, substantially in the form set forth in
EXHIBIT G-1; and
(d) the Agent, the Lessor, the Lease Participant and the
Lenders shall have received such other documents, certificates and
information as any of them shall have reasonably requested.
SECTION 4
REPRESENTATIONS
SECTION 4.1 REPRESENTATIONS OF LESSEE. Effective as of the date of
execution hereof (or of the related Joinder Agreement, as applicable), as of
each Closing Date and as of each Funding Date, each Lessee represents and
warrants to each of the other parties hereto as follows:
(a) ORGANIZATION; CORPORATE POWERS. Such Lessee (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (ii) is duly qualified as a foreign
corporation and in good standing (A) in each jurisdiction where a Leased
Property is located and (B) under the laws of each jurisdiction where such
qualification is required and where the failure to be duly qualified and in good
standing would have a Material Adverse Effect and (iii) has all requisite
corporate power and authority to own, operate and encumber its property and
assets and to conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Operative Documents.
(b) AUTHORITY. (i) Such Lessee has the requisite corporate
power and authority to execute, deliver and perform the Operative Documents
executed by it, or to be executed by it.
(ii) The execution, delivery and performance (or recording or
filing, as the case may be) of the Operative Documents, and the consummation of
the transactions contemplated thereby, have been duly approved by the Board of
Directors of such Lessee and no other corporate proceedings on the part of such
Lessee are necessary to consummate the transactions so contemplated.
(c) The Operative Documents executed by such Lessee, have been
duly executed and delivered (or recorded or filed, as the case may be) by such
Lessee, and constitute its legal, valid and binding obligation, enforceable
against it in accordance with their respective terms, except as enforcement may
be limited by
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bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
limiting creditors' rights generally or by equitable principles generally.
(d) NO CONFLICT. The execution, delivery and performance by
such Lessee of each Operative Document to which it is a party and each of the
transactions contemplated thereby do not and will not (i) violate any Applicable
Law or Contractual Obligation of any Person the consequences of which violation,
singly or in the aggregate, would have a Material Adverse Effect, (ii) result in
or require the creation or imposition of any Lien whatsoever on such Leased
Property or upon any of the properties or assets of such Lessee or any of its
Subsidiaries (other than Permitted Liens), or (iii) require any approval of
stockholders which has not been obtained.
(e) GOVERNMENTAL CONSENTS. Except as have been made, obtained
or given, and are in full force and effect, no filing or registration with,
consent or approval of, or notice to, with or by any Governmental Authority, is
required to authorize, or is required in connection with, the execution,
delivery and performance by such Lessee of the Operative Documents, the use of
the proceeds of the Fundings made to effect the purchase of the Land and the
Construction, or the legality, validity, binding effect or enforceability of any
Operative Document.
(f) GOVERNMENTAL REGULATION. Neither such Lessee nor any
Subsidiary of such Lessee is an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
(g) REQUIREMENTS OF LAW. Such Lessee and each Subsidiary of
such Lessee and each Person acting on behalf of any of them is in compliance
with all Requirements of Law applicable to them and their respective businesses,
in each case where the failure to so comply would have a Material Adverse
Effect, either individually or together with other such cases.
(h) RIGHTS IN RESPECT OF THE LEASED PROPERTY. Such Lessee is
not a party to any contract or agreement to sell any interest in such Leased
Property or any part thereof, other than pursuant to this Master Agreement and
the related Lease.
(i) HAZARDOUS MATERIALS. (i) To the best knowledge of such
Lessee, on the Closing Date for each Leased Property, there are no Hazardous
Materials present at, upon, under or within such Leased Property or released or
transported to or from such Leased Property (except in full compliance with all
Applicable Law).
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(ii) On the related Closing Date, no Governmental
Actions have been taken or are in process or have been threatened, which could
reasonably be expected to subject such Leased Property, any Lender, the Lease
Participant or the Lessor with respect to such Leased Property to any Claims or
Liens under any Environmental Law which would have a materially adverse effect
on such Lessee, the Lessor, the Lender, the Lease Participant or such Leased
Property.
(iii) Such Lessee has, or will obtain on or
before the date required by Applicable Law, all Environmental Permits necessary
to operate such Leased Property in accordance with Environmental Laws and is
complying with and has at all times complied with all such Environmental
Permits, except to the extent the failure to so comply would not have a Material
Adverse Effect.
(iv) No notice, notification, demand, request for
information, citations, summons, complaint or order has been issued or filed to
or with respect to such Lessee, no penalty has been assessed on such Lessee and
no investigation or review is pending or, to its best knowledge, threatened by
any Governmental Authority or other Person in each case relating to the Leased
Property with respect to any alleged violation or liability of such Lessee under
any Environmental Law. No material notice, notification, demand, request for
information, citations, summons, complaint or order has been issued or filed to
or with respect to any other Person, no material penalty has been assessed on
any other Person and no investigation or review is pending or, to its best
knowledge, threatened by any Governmental Authority or other Person relating to
such Leased Property with respect to any alleged material violation or liability
under any Environmental Law by any other Person.
(v) Such Leased Property and each portion thereof
are presently in compliance in all material respects with all Environmental
Laws, and there are no present or, to such Lessee's best knowledge, past facts,
circumstances, activities, events, conditions or occurrences regarding such
Leased Property (including without limitation the release or presence of
Hazardous Materials) that could reasonably be anticipated to (A) form the basis
of a material Claim against such Leased Property, any Funding Party or such
Lessee, (B) cause such Leased Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental Law, (C)
require the filing or recording of any notice or restriction relating to the
presence of Hazardous Materials in the real estate records in the county or
other appropriate municipality in which such Leased Property is located, or (D)
prevent or interfere with the continued operation and maintenance of such Leased
Property as contemplated by the Operative Documents.
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(j) LEASED PROPERTY. The present condition and use of such
Leased Property conforms in all material respects with all conditions or
requirements of all existing permits and approvals issued with respect to such
Leased Property, and the present use of such Leased Property and such Lessee's
future intended use of such Leased Property under the related Lease does not, in
any material respect, violate any Applicable Law. No material notices,
complaints of orders or violation or non-compliance have been issued or, to such
Lessee's best knowledge, threatened or contemplated by any Governmental
Authority with respect to such Leased Property or any present or intended future
use thereof. All agreements, easements and other rights, public or private,
which are necessary to permit the lawful use and operation of such Leased
Property as such Lessee intends to use such Leased Property under the related
Lease and which are necessary to permit the lawful intended use and operation of
all presently intended utilities, driveways, roads and other means of egress and
ingress to and from the same have been, or to such Lessee's best knowledge will
be, obtained and are in full force and effect, and such Lessee has no knowledge
of any pending modification or cancellation of any of the same.
SECTION 4.2 REPRESENTATIONS OF THE LESSOR. Effective as of the date of
execution hereof, as of each Closing Date and as of each Funding Date, the
Lessor represents and warrants to the Agent, the Lease Participant, the Lenders
and the related Lessees as follows:
(a) SECURITIES ACT. The interest being acquired or to be
acquired by the Lessor in such Leased Property is being acquired for its own
account, without any view to the distribution thereof or any interest therein,
PROVIDED that the Lessor shall be entitled to assign, convey or transfer its
interest in accordance with SECTION 6.1 and the Lease Participation Agreement.
(b) EMPLOYEE BENEFIT PLANS. The Lessor is not and will not be
making its investment hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as
defined in Section 4975(e)(1)) of the Code.
(c) GOVERNMENTAL CONSENTS. Except as have been made, obtained
or given, and are in full force and effect, no filing or registration with,
consent or approval of, notice to, with or by any Governmental Authority, is
required to authorize, or is required in connection with, the execution,
delivery and performance by the Lessor of the Operative Documents, or the
legality, validity, binding effect or enforceability, in each case, as against
the Lessor, of any Operative Documents;
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PROVIDED, HOWEVER, that the Lessor makes no representation or warranty with
respect to any such filing, registration, consent, approval or notice with
respect to any matter specific to a Leased Property, including, without
limitation, the acquisition, ownership, construction, leasing, operation or
maintenance thereof or any IDB Documentation related thereto.
SECTION 4.3 REPRESENTATIONS OF EACH LENDER. Effective as of the date of
execution hereof, as of each Closing Date and as of each Funding Date, each
Lender represents and warrants to the Lessor and to the related Lessee as
follows:
(a) SECURITIES ACT. The interest being acquired or to be
acquired by such Lender in the Funded Amounts is being acquired for its own
account, without any view to the distribution thereof or any interest therein,
PROVIDED that such Lender shall be entitled to assign, convey or transfer its
interest in accordance with SECTION 6.2. Such Lender is an accredited investor
as that term is defined in Rule 501(a) under the Securities Act.
(b) EMPLOYEE BENEFIT PLANS. Such Lender is not and will not be
making its investment hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as
defined in Section 4975(e)(1)) of the Code.
(c) GOVERNMENTAL CONSENTS. Except as have been made, obtained
or given, and are in full force and effect, no filing or registration with,
consent or approval of, notice to, with or by any Governmental Authority, is
required to authorize, or is required in connection with, the execution,
delivery and performance by such Lender of the Operative Documents, or the
legality, validity, binding effect or enforceability, in each case, as against
such Lender, of any Operative Documents; PROVIDED, HOWEVER, that such Lender
makes no representation or warranty with respect to any such filing,
registration, consent, approval or notice with respect to any matter specific to
a Leased Property, including, without limitation, the acquisition, ownership,
construction, leasing, operation or maintenance thereof or any IDB Documentation
related thereto.
SECTION 5
COVENANTS OF THE LESSEES
SECTION 5.1 QUALIFICATION TO DO BUSINESS. Each Lessee shall remain
qualified to do business in the state where its Leased Property is located.
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SECTION 5.2 FURTHER ASSURANCES. Upon the written request of the Lessor
or the Agent, each Lessee, at its own cost and expense, will cause all financing
statements (including precautionary financing statements), fixture filings and
other similar documents, to be recorded or filed at such places and times in
such manner, as may be necessary to preserve, protect and perfect the interest
of the Lessor, the Agent, the Lease Participant and the Lenders in the related
Leased Property as contemplated by the Operative Documents.
SECTION 5.3 INFORMATION. Each Lessee will furnish to the Agent such
information relating to the business, affairs and financial condition of such
Lessee and its Subsidiaries as the Agent (when requested so to do by the Lease
Participant or any Lender) may from time to time reasonably request.
SECTION 5.4 ADDITIONAL REQUIRED APPRAISALS. If, as a result of any
change in Applicable Law after the date hereof, an appraisal of all or any of
the Leased Property is required during the Lease Term under Applicable Law with
respect to any Funding Party's interest therein, such Funding Party's Funded
Amount with respect thereto or the Operative Documents, then the related Lessee
shall pay the cost of such appraisal.
SECTION 5.5 IDB DOCUMENTATION. Each Lessee shall timely perform its
obligations under all IDB Documentation related to the Leased Property leased by
such Lessee.
SECTION 6
TRANSFERS BY LESSOR AND LENDERS
SECTION 6.1 LESSOR TRANSFERS. The Lessor shall not assign, convey or
otherwise transfer all or any portion of its right, title or interest in, to or
under any Leased Property (except pursuant to the Lease Participation Agreement
(provided that the Lessor shall not consent to any assignment by the Lease
Participant thereunder without the prior written consent of Cardinal, which
consent shall not be unreasonably withheld) and ARTICLE V of the Leases) or any
of the Operative Documents without the prior written consent of the Lenders and
Cardinal, which consent shall not be unreasonably withheld, PROVIDED that the
Lessor may make any such assignment, conveyance or transfer (and may permit the
Lease Participant to assign its rights and obligations under the Lease
Participation Agreement) to any other Funding Party or any Affiliate of any
Funding Party, without such consent. Any proposed transferee of the Lessor shall
make the representation set forth in SECTION 4.2(B) to the other parties hereto.
SECTION 6.2 LENDER TRANSFERS. No Lender may grant participations in its
Commitment or sell Loans or participations
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in its Loan and Commitment to any Person (other than an Affiliate) without the
prior written consent of Guarantor, which consent shall not be unreasonably
withheld. Any approved participation buyer shall not receive voting or waiver
rights except with respect to postponing maturities, decreasing interest rates,
releasing all or substantially all of the collateral or increasing principal
amounts. Assignments will be permitted only with the prior written consent of
the Guarantor and the Agent, which consent shall not be unreasonably withheld,
obtained at least 14 days prior to any proposed assignment, and the payment of a
processing fee of $2,500 to the Agent. Assignments shall be evidenced by an
assignment and assumption agreement in substantially the form set forth as
EXHIBIT J.
SECTION 7
INDEMNIFICATION
SECTION 7.1 GENERAL INDEMNIFICATION. Each Lessee and the Guarantor
jointly and severally agree, whether or not any of the transactions contemplated
hereby shall be consummated, to assume liability for, and to indemnify, protect,
defend, save and hold harmless each Indemnitee, on an After-Tax Basis, from and
against, any and all Claims that may be imposed on, incurred by or asserted, or
threatened to be asserted, against such Indemnitee (whether because of action or
omission by such Indemnitee or otherwise), whether or not such Indemnitee shall
also be indemnified as to any such Claim by any other Person and whether or not
such Claim arises or accrues prior to any Closing Date or after the Lease
Termination Date, in any way relating to or arising out of:
(a) any of the Operative Documents or any of the
transactions contemplated thereby, and any amendment,
modification or waiver in respect thereof; or
(b) any Land, any Building or any part thereof or interest
therein;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification,
addition, substitution, storage, transfer of title, redelivery, use,
financing, refinancing, disposition, operation, condition, sale
(including, without limitation, any sale pursuant to any Lease), return
or other disposition of all or any part of any interest in any Leased
Property or the imposition of any Lien (or incurring of any liability
to refund or pay over any amount as a result of any Lien) thereon,
including,
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without limitation: (1) Claims or penalties arising from any violation
or alleged violation of law or in tort (strict liability or otherwise),
(2) latent or other defects, whether or not discoverable, (3) any Claim
based upon a violation or alleged violation of the terms of any
restriction, easement, condition or covenant or other matter affecting
title to any Leased Property or any part thereof, (4) the making of any
Alterations in violation of any standards imposed by any insurance
policies required to be maintained by the Lessees pursuant to the
Leases which are in effect at any time with respect to any Leased
Property or any part thereof, (5) any Claim for patent, trademark or
copyright infringement, (6) Claims arising from any public improvements
with respect to any Leased Property resulting in any charge or special
assessments being levied against any Leased Property or any Claim for
utility "tap-in" fees, and (7) Claims for personal injury or real or
personal property damage occurring, or allegedly occurring, on any
Land, Building or Leased Property;
(d) the offer, issuance, sale or delivery of the Notes by any
Lessee or the Guarantor;
(e) the breach or alleged breach by any Lessee or Cardinal of
any representation or warranty made by it or deemed made by it in any
Operative Document or any certificate required to be delivered by any
Operative Document;
(f) the retaining or employment of any broker, finder or
financial advisor by any Lessee or Cardinal to act on its behalf in
connection with this Master Agreement, or the incurring of any fees or
commissions to which any Lessor, the Agent, the Lease Participant or
any Lender might be subjected by virtue of their entering into the
transactions contemplated by this Master Agreement;
(g) the existence of any Lien on or with respect to any Leased
Property, the Construction, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein, including any Liens which arise out
of the possession, use, occupancy, construction, repair or rebuilding
of any Leased Property or by reason of labor or materials furnished or
claimed to have been furnished to any Lessee, or any of its contractors
or agents or by reason of the financing of any personalty or equipment
purchased or leased by any Lessee or Alterations constructed by any
Lessee, except in all cases the liens listed as items (a) and (b) in
the definition of Permitted Liens;
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(h) the transactions contemplated hereby or by any other
Operative Document, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA and any prohibited transaction described
in Section 4975(c) of the Code;
(i) any act or omission by any Lessee or Cardinal under any
Purchase Agreement or any other Operative Document, and any breach of
any requirement, condition, restriction or limitation in any Deed; or
(j) any of the IDB Documentation or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof;
PROVIDED, HOWEVER, neither any Lessee nor the Guarantor shall be required to
indemnify any Indemnitee under this SECTION 7.1 for any of the following: (1)
any Claim to the extent that such Claim results from the willful misconduct or
gross negligence of such Indemnitee, (2) any Claim resulting from Lessor Liens
which the Lessor Indemnitee Group is responsible for discharging under the
Operative Documents, (3) without limiting the provisions of SECTION 7.2, any
Claim related to any Leased Property to the extent attributable to acts or
events occurring after the expiration of the Lease Term and the return of the
Leased Property to the Lessor so long as the Lessor, the Agent and the Funding
Parties are not exercising remedies against a Lessee or the Guarantor in respect
of the Operative Documents, (4) any Claim resulting from the breach by Lessor of
any representation or warranty made by it or deemed made by it in any Operative
Document and (5) any Claim resulting from the breach of any Lender of any
representation or warranty made by any of them or deemed made by any of them in
any Operative Document. It is expressly understood and agreed that the indemnity
provided for herein shall survive the expiration or termination of, and shall be
separate and independent from any other remedy under this Master Agreement, any
Lease or any other Operative Document.
SECTION 7.2 ENVIRONMENTAL INDEMNITY. In addition to and without
limitation of SECTION 7.1, each Lessee and the Guarantor jointly and severally
agree to indemnify, hold harmless and defend each Indemnitee from and against
any and all claims (including without limitation third party claims for personal
injury or real or personal property damage), losses (including but not limited
to any loss of value of any Leased Property), damages, liabilities, fines,
penalties, charges, suits, settlements, demands, administrative and judicial
proceedings (including informal proceedings) and orders, judgments, remedial
action, requirements, enforcement actions of any kind, and all reasonable costs
and expenses incurred in connection therewith (including, but not limited to,
reasonable attorneys' and/or
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paralegals' fees and expenses), including, but not limited to, all costs
incurred in connection with any investigation or monitoring of site conditions
or any clean-up, remedial, removal or restoration work by any federal, state or
local government agency, arising directly or indirectly, in whole or in part,
out of
(i) the presence on or under any Land of any Hazardous
Materials, or any releases or discharges of any Hazardous Materials on,
under, from or onto any Land,
(ii) any activity, including, without limitation,
construction, carried on or undertaken on or off any Land, and whether
by a Lessee, Cardinal or any predecessor in title or any employees,
agents, contractors or subcontractors of a Lessee, Cardinal or any
predecessor in title, or any other Persons, in connection with the
handling, treatment, removal, storage, decontamination, clean-up,
transport or disposal of any Hazardous Materials that at any time are
located or present on or under or that at any time migrate, flow,
percolate, diffuse or in any way move onto or under any Land,
(iii) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs,
remediation and removal costs, cost of corrective action, costs of
financial assurance, fines and penalties and natural resource damages),
or death or injury to any Person, and all expenses associated with the
protection of wildlife, aquatic species, vegetation, flora and fauna,
and any mitigative action required by or under Environmental Laws,
(iv) any claim concerning lack of compliance with
Environmental Laws, or any act or omission causing an environmental
condition that requires remediation or would allow any governmental
agency to record a lien or encumbrance on the land records, or
(v) any residual contamination on or under any Land, or
affecting any natural resources, and to any contamination of any
property or natural resources arising in connection with the
generation, use, handling, storage, transport or disposal of any such
Hazardous Materials; in each case irrespective of whether any of such
activities were or will be undertaken in accordance with applicable
laws, regulations, codes and ordinances;
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in any case with respect to the matters described in the foregoing CLAUSES (I)
through (V) that arise or occur
(w) prior to or during the Lease Term,
(x) at any time during which a Lessee or any Affiliate thereof
owns any interest in or otherwise occupies or possesses any Leased
Property or any portion thereof, or
(y) during any period after and during the continuance
of any Event of Default;
PROVIDED, HOWEVER, neither any Lessee nor the Guarantor shall be required to
indemnify any Indemnitee under this SECTION 7.2 for (1) any Claim to the extent
that such Claim results from the willful misconduct or gross negligence of such
Indemnitee and (2) any Claim to the extent attributable to acts or events
occurring after the expiration of the Lease Term and the return of the Leased
Property to the Lessor pursuant to the related Lease. It is expressly understood
and agreed that the indemnity provided for herein shall survive the expiration
or termination of and shall be separate and independent from any other remedy
under this Master Agreement, any Lease or any other Operative Document.
SECTION 7.3 PROCEEDINGS IN RESPECT OF CLAIMS. With respect to any
amount that a Lessee or the Guarantor is requested by an Indemnitee to pay by
reason of SECTION 7.1 or 7.2, such Indemnitee shall, if so requested by such
Lessee or the Guarantor and prior to any payment, submit such additional
information to such Lessee or the Guarantor as such Lessee or the Guarantor may
reasonably request and which is in the possession of such Indemnitee to
substantiate properly the requested payment. In case any action, suit or
proceeding shall be brought against any Indemnitee, such Indemnitee shall notify
the related Lessee or Cardinal of the commencement thereof, and such Lessee
shall be entitled, at its expense, to participate in, and, to the extent that
such Lessee desires to, assume and control the defense thereof with counsel
reasonably satisfactory to such Indemnitee; PROVIDED, HOWEVER, that such
Indemnitee may pursue a motion to dismiss such Indemnitee from such action, suit
or proceeding with counsel of such Indemnitee's choice at such Lessee's expense;
and PROVIDED FURTHER that the related Lessee and the Guarantor jointly and
severally may assume and control the defense of such proceeding only if the
related Lessee and the Guarantor shall have acknowledged in writing their
obligations to fully indemnify such Indemnitee in respect of such action, suit
or proceeding, such Lessee and the Guarantor jointly and severally shall pay all
costs and expenses related to such action, suit or proceeding as and when
incurred and such Lessee shall keep such Indemnitee fully apprised of the status
of such action suit or proceeding and shall provide such Indemnitee with all
information with
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respect to such action suit or proceeding as such Indemnitee shall reasonably
request; and, PROVIDED FURTHER, that such Lessee shall not be entitled to assume
and control the defense of any such action, suit or proceeding if and to the
extent that, (A) in the reasonable opinion of such Indemnitee, (x) such action,
suit or proceeding involves any possibility of imposition of criminal liability
or any material risk of material civil liability on such Indemnitee or (y) such
action, suit or proceeding will involve a material risk of the sale, forfeiture
or loss of, or the creation of any Lien (other than a Permitted Lien) on any
Leased Property or any part thereof unless such Lessee shall have posted a bond
or other security satisfactory to the relevant Indemnitees in respect to such
risk or (z) the control of such action, suit or proceeding would involve an
actual or potential conflict of interest, (B) such proceeding involves Claims
not fully indemnified by such Lessee which such Lessee and the Indemnitee have
been unable to sever from the indemnified claim(s), or (C) an Event of Default
has occurred and is continuing. The Indemnitee may participate in a reasonable
manner at its own expense and with its own counsel in any proceeding conducted
by a Lessee in accordance with the foregoing.
If the related Lessee fails to fulfill the conditions to such Lessee's
assuming the defense of any claim on or prior to the date that is 15 days prior
to the date that an answer or response is required, the Indemnitee may undertake
such defense, at such Lessee's and Guarantor's joint and several expense. No
Lessee shall enter into any settlement or other compromise with respect to any
Claim which is entitled to be indemnified under SECTION 7.1 or 7.2 without the
prior written consent of the related Indemnitee, which consent shall not be
unreasonably withheld. Unless an Event of Default shall have occurred and be
continuing, no Indemnitee shall enter into any settlement or other compromise
with respect to any claim which is entitled to be indemnified under SECTION 7.1
or 7.2 without the prior written consent of the Guarantor, which consent shall
not be unreasonably withheld, unless such Indemnitee waives its right to be
indemnified under SECTION 7.1 or 7.2 with respect to such Claim.
Upon payment in full of any Claim by a Lessee and the Guarantor
pursuant to SECTION 7.1 or 7.2 to or on behalf of an Indemnitee, such Lessee and
the Guarantor, without any further action, shall be subrogated to any and all
claims that such Indemnitee may have relating thereto (other than claims in
respect of insurance policies maintained by such Indemnitee at its own expense),
and such Indemnitee shall execute such instruments of assignment and conveyance,
evidence of claims and payment and such other documents, instruments and
agreements as may be reasonably necessary to preserve any such claims and
otherwise cooperate with such Lessee and the Guarantor and give
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such further assurances as are reasonably necessary or advisable to enable such
Lessee and the Guarantor vigorously to pursue such claims.
Any amount payable to an Indemnitee pursuant to SECTION 7.1 or 7.2
shall be paid to such Indemnitee promptly upon, but in no event later than 30
days after, receipt of a written demand therefor from such Indemnitee,
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable.
If for any reason the indemnification provided for in SECTION 7.1 or
7.2 is unavailable to an Indemnitee or is insufficient to hold an Indemnitee
harmless, then such Lessee and the Guarantor jointly and severally agree to
contribute to the amount paid or payable by such Indemnitee as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by such Indemnitee on the one hand and
by such Lessee and the Guarantor on the other hand but also the relative fault
of such Indemnitee as well as any other relevant equitable considerations. It is
expressly understood and agreed that the right to contribution provided for
herein shall survive the expiration or termination of and shall be separate and
independent from any other remedy under this Master Agreement, the Leases or any
other Operative Document.
SECTION 7.4 GENERAL TAX INDEMNITY. (a) TAX INDEMNITY. Except as
otherwise provided in this SECTION 7.4, each Lessee and the Guarantor, jointly
and severally, shall pay on an After-Tax Basis, and on written demand shall
indemnify and hold each Tax Indemnitee harmless from and against, any and all
fees (including, without limitation, documentation, recording, license and
registration fees), taxes (including, without limitation, income, gross
receipts, sales, rental, use, turnover, value-added, property, excise and stamp
taxes), levies, imposts, duties, charges, assessments or withholdings of any
nature whatsoever, together with any penalties, fines or interest thereon or
additions thereto (any of the foregoing being referred to herein as "TAXES" and
individually as a "TAX" (for the purposes of this SECTION 7.4, the definition of
"Taxes" includes amounts imposed on, incurred by, or asserted against each Tax
Indemnitee as the result of any prohibited transaction, within the meaning of
Section 406 or 407 of ERISA or Section 4975(c) of the Code, arising out of the
transactions contemplated hereby or by any other Operative Document)) imposed on
or with respect to any Tax Indemnitee, any Lessee, the Guarantor, any Leased
Property or any portion thereof or any Land, or any sublessee or user thereof,
by the United States or by any state or local government or other taxing
authority in the United States in connection with or in any way relating to (i)
the acquisition,
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financing, mortgaging, construction, preparation, installation, inspection,
delivery, non-delivery, acceptance, rejection, purchase, ownership, possession,
rental, lease, sublease, maintenance, repair, storage, transfer of title,
redelivery, use, operation, condition, sale, return or other application or
disposition of all or any part of any Leased Property or the imposition of any
Lien (or incurrence of any liability to refund or pay over any amount as a
result of any Lien) thereon, (ii) Basic Rent or Supplemental Rent or the
receipts or earnings arising from or received with respect to any Leased
Property or any part thereof, or any interest therein or any applications or
dispositions thereof, (iii) any other amount paid or payable pursuant to the
Notes, the IDB Documentation, or any other Operative Documents, (iv) any Leased
Property, any Land or any part thereof or any interest therein (including,
without limitation, all assessments payable in respect thereof, including,
without limitation, all assessments noted on the related Title Policy), (v) all
or any of the Operative Documents, any other documents contemplated thereby, any
amendments and supplements thereto, and (vi) otherwise with respect to or in
connection with the transactions contemplated by the Operative Documents. The
Lessor shall promptly notify Cardinal of any change in law of which an officer
of Lessor has actual knowledge that will result in a claim pursuant to this
SECTION 7.4.
(b) EXCLUSIONS FROM GENERAL TAX INDEMNITY. SECTION 7.4(A)
shall not apply to:
(i) Taxes on, based on, or measured by or with
respect to net income of the Lessor, the Lease Participant and the
Lenders (including, without limitation, minimum Taxes, capital gains
Taxes, Taxes on or measured by items of tax preference or alternative
minimum Taxes) other than (A) any such Taxes that are, or are in the
nature of, sales, use, license, rental or property Taxes, and (B)
withholding Taxes imposed by the United States or any state in which
Leased Property is located (i) on payments with respect to the Notes,
to the extent imposed by reason of a change in Applicable Law occurring
after the date on which the holder of such Note became the holder of
such Note, or (ii) on Rent, to the extent the net payment of Rent after
deduction of such withholding Taxes would be less than amounts
currently payable with respect to the Funded Amounts;
(ii) Taxes on, based on, or in the nature of or
measured by Taxes on doing business, business privilege, capital,
capital stock, net worth, or mercantile license or similar taxes other
than (A) any increase in such Taxes imposed on such Tax Indemnitee by
any state in which Leased Property is located, net of any decrease in
such taxes realized by such Tax Indemnitee, to the extent that such tax
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increase would not have occurred if on each Funding Date the Lessor,
the Lease Participant and the Lenders had advanced funds to the related
Lessee in the form of loans secured by the Leased Property in an amount
equal to the Funded Amounts funded on such Funding Date, with debt
service for such loans equal to the Basic Rent payable on each Payment
Date and a principal balance at the maturity of such loans in a total
amount equal to the Funded Amounts at the end of the Lease Term, or (B)
any Taxes that are or are in the nature of sales, use, rental, license
or property Taxes;
(iii) Taxes that are based on, or measured by, the
fees or other compensation received by a Person acting as Agent (in its
individual capacities) or any Affiliate of any thereof for acting as
trustee under the Loan Agreement or the Lease Participation Agreement;
(iv) Taxes that result from any act, event or
omission, or are attributable to any period of time, that occurs after
the earliest of (A) the expiration of the Lease Term with respect to
any Leased Property and, if such Leased Property is required to be
returned to the Lessor in accordance with the related Lease, such
return and (B) the discharge in full of the related Lessee's
obligations to pay the Lease Balance, or any amount determined by
reference thereto, with respect to any Leased Property and all other
amounts due under the related Lease, unless such Taxes relate to acts,
events or matters occurring prior to the earliest of such times or are
imposed on or with respect to any payments due under the Operative
Documents after such expiration or discharge;
(v) Taxes imposed on a Tax Indemnitee that result
from any voluntary sale, assignment, transfer or other disposition by
such Tax Indemnitee or any related Tax Indemnitee of any interest in
any Leased Property or any part thereof, or any interest therein or any
interest or obligation arising under the Operative Documents, or from
any sale, assignment, transfer or other disposition of any interest in
such Tax Indemnitee or any related Tax Indemnitee, it being understood
that each of the following shall not be considered a voluntary sale:
(A) any substitution, replacement or removal of any of the property by
a Lessee, (B) any sale or transfer resulting from the exercise by a
Lessee of any termination option, any purchase option or sale option,
(C) any sale or transfer while an Event of Default shall have occurred
and be continuing under any Lease, and (D) any sale or transfer
resulting from the Lessor's exercise of remedies under any Lease;
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(vi) any Tax which is being contested in accordance
with the provisions of SECTION 7.4(C), during the pendency of such
contest;
(vii) any Tax that is imposed on a Tax Indemnitee as
a result of such Tax Indemnitee's gross negligence or willful
misconduct (other than gross negligence or willful misconduct imputed
to such Tax Indemnitee solely by reason of its interest in any Leased
Property);
(viii) any Tax that results from a Tax Indemnitee
engaging, with respect to any Leased Property, in transactions other
than those permitted by the Operative Documents;
(ix) to the extent any interest, penalties or
additions to tax result in whole or in part from the failure of a Tax
Indemnitee to file a return that it is required to file in a proper and
timely manner, unless such failure (A) results from the transactions
contemplated by the Operative Documents in circumstances where a Lessee
did not give timely notice to such Tax Indemnitee (and such Tax
Indemnitee otherwise had no actual knowledge) of such filing
requirement that would have permitted a proper and timely filing of
such return, or (B) results from the failure of any Lessee to supply
information necessary for the proper and timely filing of such return
that was not in the possession of such Tax Indemnitee; and
(x) any Tax that results from the breach by Lessor of
its representation and warranty made in SECTION 4.2(B) or the breach of
any Lender of its representation and warranty made in SECTION 4.3(B).
(c) CONTESTS. If any claim shall be made against any Tax
Indemnitee or if any proceeding shall be commenced against any Tax Indemnitee
(including a written notice of such proceeding) for any Taxes as to which a
Lessee and the Guarantor may have an indemnity obligation pursuant to SECTION
7.4, or if any Tax Indemnitee shall determine that any Taxes as to which a
Lessee and the Guarantor may have an indemnity obligation pursuant to SECTION
7.4 may be payable, such Tax Indemnitee shall promptly notify the Lessee and the
Guarantor. The related Lessee and the Guarantor shall be entitled, at their
expense, to participate in, and, to the extent that such Lessee and the
Guarantor desire to, assume and control the defense thereof; PROVIDED, HOWEVER,
that such Lessee and the Guarantor shall have acknowledged in writing their
obligation to fully indemnify such Tax Indemnitee in respect of such action,
suit or proceeding if the contest is unsuccessful; and, PROVIDED FURTHER, that
such Lessee and the Guarantor shall not be entitled to assume and
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control the defense of any such action, suit or proceeding (but the Tax
Indemnitee shall then contest, at the sole cost and expense of such Lessee and
the Guarantor, on behalf of such Lessee and the Guarantor with representatives
reasonably satisfactory to such Lessee and the Guarantor) if and to the extent
that, (A) in the reasonable opinion of such Tax Indemnitee, such action, suit or
proceeding (x) involves any meaningful risk of imposition of criminal liability
or any material risk of material civil liability on such Tax Indemnitee or (y)
will involve a material risk of the sale, forfeiture or loss of, or the creation
of any Lien (other than a Permitted Lien) on any Leased Property or any part
thereof unless such Lessee shall have posted a bond or other security
satisfactory to the relevant Tax Indemnitees in respect to such risk, (B) such
proceeding involves Claims not fully indemnified by such Lessee and the
Guarantor which such Lessee and the Guarantor and the Tax Indemnitee have been
unable to sever from the indemnified claim(s), (C) an Event of Default has
occurred and is continuing, (D) such action, suit or proceeding involves matters
which extend beyond or are unrelated to the Transaction and if determined
adversely could be materially detrimental to the interests of such Tax
Indemnitee notwithstanding indemnification by a Lessee and the Guarantor or (E)
such action, suit or proceeding involves the federal or any state income tax
liability of the Tax Indemnitee. With respect to any contests controlled by a
Tax Indemnitee, (i) if such contest relates to the federal or any state income
tax liability of such Tax Indemnitee, such Tax Indemnitee shall be required to
conduct such contest only if the related Lessee and the Guarantor shall have
provided to such Tax Indemnitee an opinion of independent tax counsel selected
by the Tax Indemnitee and reasonably satisfactory to such Lessee and the
Guarantor stating that a reasonable basis exists to contest such claim or (ii)
in the case of an appeal of an adverse determination of any contest relating to
any Taxes, an opinion of such counsel to the effect that such appeal is more
likely than not to be successful, PROVIDED, HOWEVER, such Tax Indemnitee shall
in no event be required to appeal an adverse determination to the United States
Supreme Court. The Tax Indemnitee may participate in a reasonable manner at its
own expense and with its own counsel in any proceeding conducted by a Lessee and
the Guarantor in accordance with the foregoing.
Each Tax Indemnitee shall at the related Lessee's and the Guarantor's
expense supply such Lessee and the Guarantor with such information and documents
in such Tax Indemnitee's possession reasonably requested by such Lessee and the
Guarantor as are necessary or advisable for such Lessee and the Guarantor to
participate in any action, suit or proceeding to the extent permitted by this
SECTION 7.4. Unless an Event of Default shall have occurred and be continuing,
no Tax Indemnitee shall enter into any settlement or other compromise with
respect to any Claim
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which is entitled to be indemnified under this SECTION 7.4 without the prior
written consent of the related Lessee and the Guarantor, which consent shall not
be unreasonably withheld, unless such Tax Indemnitee waives its right to be
indemnified under this SECTION 7.4 with respect to such Claim.
Notwithstanding anything contained herein to the contrary, (a) a Tax
Indemnitee will not be required to contest (and neither any Lessee nor the
Guarantor shall be permitted to contest) a claim with respect to the imposition
of any Tax if such Tax Indemnitee shall waive its right to indemnification under
this SECTION 7.4 with respect to such claim (and any related claim with respect
to other taxable years the contest of which is precluded as a result of such
waiver) and (b) no Tax Indemnitee shall be required to contest any claim if the
subject matter thereof shall be of a continuing nature and shall have previously
been decided adversely, unless there has been a change in law which in the
opinion of Tax Indemnitee's counsel creates substantial authority for the
success of such contest. Each Tax Indemnitee and the related Lessee and the
Guarantor shall consult in good faith with each other regarding the conduct of
such contest controlled by either.
(d) REIMBURSEMENT FOR TAX SAVINGS. If (x) a Tax Indemnitee
shall obtain a credit or refund of any Taxes paid by a Lessee and the Guarantor
pursuant to this SECTION 7.4 or (y) by reason of the incurrence or imposition of
any Tax for which a Tax Indemnitee is indemnified hereunder or any payment made
to or for the account of such Tax Indemnitee by a Lessee and the Guarantor
pursuant to this SECTION 7.4, such Tax Indemnitee at any time realizes a
reduction in any Taxes for which a Lessee is not required to indemnify such Tax
Indemnitee pursuant to this SECTION 7.4, which reduction in Taxes was not taken
into account in computing such payment by such Lessee and the Guarantor to or
for the account of such Tax Indemnitee, then such Tax Indemnitee shall promptly
pay to the Guarantor (xx) the amount of such credit or refund, together with the
amount of any interest received by such Tax Indemnitee on account of such credit
or refund or (yy) an amount equal to such reduction in Taxes, as the case may
be; PROVIDED that no such payment shall be made so long as an Event of Default
shall have occurred and be continuing and, PROVIDED, FURTHER, that the amount
payable to the Guarantor by any Tax Indemnitee pursuant to this SECTION 7.4(D)
shall not at any time exceed the aggregate amount of all indemnity payments made
by the Lessees and the Guarantor under this SECTION 7.4 to such Tax Indemnitee
with respect to the Taxes which gave rise to the credit or refund or with
respect to the Tax which gave rise to the reduction in Taxes less the amount of
all prior payments made to the Guarantor by such Tax Indemnitee under this
SECTION 7.4(D). Each Tax Indemnitee agrees to act in good faith to claim such
refunds and other available Tax benefits, and take such
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other actions as may be reasonable to minimize any payment due from the Lessees
and the Guarantor pursuant to this SECTION 7.4. The disallowance or reduction of
any credit, refund or other tax savings with respect to which a Tax Indemnitee
has made a payment to the Guarantor under this SECTION 7.4(D) shall be treated
as a Tax for which the Lessees and the Guarantor are obligated to indemnify such
Tax Indemnitee hereunder without regard to SECTION 7.4(B) hereof.
(e) PAYMENTS. Any Tax indemnifiable under this SECTION 7.4
shall be paid directly when due to the applicable taxing authority if direct
payment is practicable and permitted. If direct payment to the applicable taxing
authority is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to SECTION 7.4 shall be paid within thirty (30) days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made pursuant to
SECTION 7.4 shall be made to the Tax Indemnitee entitled thereto or the
Guarantor, as the case may be, in immediately available funds at such bank or to
such account as specified by the payee in written directions to the payor, or,
if no such direction shall have been given, by check of the payor payable to the
order of the payee by certified mail, postage prepaid at its address as set
forth in this Master Agreement. Upon the request of any Tax Indemnitee with
respect to a Tax that the Lessees and the Guarantor are required to pay, the
related Lessee and the Guarantor shall furnish to such Tax Indemnitee the
original or a certified copy of a receipt for such Lessee's and the Guarantor's
payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(f) REPORTS. If any Lessee or the Guarantor knows of any
report, return or statement required to be filed with respect to any Taxes that
are subject to indemnification under this SECTION 7.4, such Lessee or the
Guarantor shall, if such Lessee or the Guarantor is permitted by Applicable Law,
timely file such report, return or statement (and, to the extent permitted by
law, show ownership of the applicable Leased Property in the related Lessee);
PROVIDED, HOWEVER, that if the related Lessee and the Guarantor are not
permitted by Applicable Law or do not have access to the information required to
file any such report, return or statement, such Lessee and the Guarantor will
promptly so notify the appropriate Tax Indemnitee, in which case Tax Indemnitee
will file such report. In any case in which the Tax Indemnitee will file any
such report, return or statement, the related Lessee and the Guarantor shall,
upon written request of such Tax Indemnitee, prepare such report, return or
statement for filing by such Tax Indemnitee or, if such Tax Indemnitee so
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requests, provide such Tax Indemnitee with such information as is reasonably
available to such Lessee and the Guarantor.
(g) VERIFICATION. At a Lessee's or the Guarantor's request,
the amount of any indemnity payment by such Lessee or the Guarantor or any
payment by a Tax Indemnitee to the Guarantor pursuant to this SECTION 7.4 shall
be verified and certified by an independent public accounting firm selected by
the Guarantor and reasonably acceptable to the Tax Indemnitee. Unless such
verification shall disclose an error in the related Lessee's and the Guarantor's
favor of 5% or more, the costs of such verification shall be borne by such
Lessee and the Guarantor. In no event shall any Lessee or the Guarantor have the
right to review the Tax Indemnitee's tax returns or receive any other
confidential information from the Tax Indemnitee in connection with such
verification. The Tax Indemnitee agrees to cooperate with the independent public
accounting firm performing the verification and to supply such firm with all
information reasonably necessary to permit it to accomplish such verification,
PROVIDED that the information provided to such firm by such Tax Indemnitee shall
be for its confidential use. The parties agree that the sole responsibility of
the independent public accounting firm shall be to verify the amount of a
payment pursuant to this Master Agreement and that matters of interpretation of
this Master Agreement are not within the scope of the independent accounting
firm's responsibilities.
SECTION 7.5 INCREASED COSTS, ETC.
(a) Notwithstanding any other provisions herein, if any
requirement of law, regulation, order or decree or any change therein or in the
interpretation or application thereof shall make it unlawful for the Funding
Parties to make or maintain Funded Amounts at a rate based on the LIBOR Rate as
contemplated by the Operative Documents, the Commitments of the Funding Parties
hereunder and under the other Operative Documents to fund Lease Participant
Amounts or make Funded Amounts at a rate based on the LIBOR Rate shall forthwith
be canceled and the Funded Amounts then outstanding, if any, shall, if and when
required by such law, be converted automatically to bear interest at a rate
reasonably comparable to the LIBOR Rate, plus .44475% per annum or, if such rate
is not available, at the Alternative Rate. If any such conversion of the
interest or yield rate applicable to the Funded Amounts is made on a day which
is not the end of a Rent Period, the Lessees shall pay, on a pro rata basis, to
the Agent for the account of the Funding Parties on such conversion date
interest at the related LIBOR Rate plus .44475% per annum on the affected Funded
Amounts to the date of such automatic conversion and, upon the request of any
Funding Party, shall pay to the Agent for the account of such Funding Party such
other amount or amounts as may be necessary to compensate such Funding
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Party for any loss or expense which such Funding Party deems to be material as
determined by such Funding Party and which has been sustained or incurred by
such Funding Party in respect of such Funded Amounts as a result of such
conversion. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by a Funding Party to the Guarantor shall be
conclusive absent manifest error. As soon as practicable, the Agent or any
Funding Party shall notify the Guarantor of any event of which it has knowledge
occurring after the date of this Master Agreement, which will cause or is likely
to cause a conversion of the interest or yield rate applicable to Funded Amounts
pursuant to this SECTION 7.5, and the Agent or such Funding Party shall
designate a different funding office or take such other action to avoid the need
for, or to reduce the amount of compensation related to, such conversion of the
interest or yield rate applicable to Funded Amounts which would not, in the sole
opinion of the Agent or such Funding Party, be otherwise disadvantageous to the
Agent or the Funding Parties.
(b) If Regulation D of the Board of Governors of the Federal
Reserve System, as the same may be amended or supplemented from time to time, or
in the event that at any time or from time to time any change occurring after
the date hereof in any requirement of law, regulation, order or decree or in the
interpretation or application thereof or compliance by a Funding Party with any
request or directive (whether or not having the force of law) occurring after
the date hereof from any central bank or monetary authority or other
governmental authority:
(1) does or shall impose, modify or hold applicable
or change any reserve, special deposit, Federal Deposit
Insurance Corporation premium, compulsory loan or similar
requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds
by, any office of such Funding Party which are not otherwise
included in the determination of the LIBOR Rate under the
Operative Documents; or
(2) does or shall impose on such Funding Party
any other condition;
and the result of any of the foregoing is to increase the cost to such Funding
Party of making, renewing, converting or maintaining advances or extensions of
credit as Funded Amounts bearing interest or Yield at a rate based on the LIBOR
Rate or to reduce any amount receivable in respect of such Funded Amounts, then,
in any such case, the Lessees shall pay, on a pro rata basis, to such Funding
Party, such additional amount which will compensate such Funding Party for such
additional cost or reduced amount
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receivable which such Funding Party deems to be material as determined by such
Funding Party with respect to the Operative Documents or its Funded Amounts. The
Lessees shall pay such amount within thirty (30) days after the Guarantor's
receipt of a certificate from such Funding Party identifying the amount to be
paid to such Funding Party and the basis for the computation thereof.
(c) If any Funding Party shall have determined that compliance
by such Funding Party with any applicable law, governmental rule, regulation or
order regarding capital adequacy of banks or bank holding companies, or any
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Funding Party with any request or directive
regarding capital adequacy (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Funding Party's capital as a consequence of such Funding
Party's obligations hereunder to a level below that which such Funding Party
could have achieved but for such compliance (taking into consideration such
Funding Party's policies with respect to capital adequacy immediately before
such compliance and assuming that such Funding Party's capital was fully
utilized prior to such compliance) by an amount deemed by such Funding Party to
be material, then, within thirty (30) days after demand on the Guarantor, the
Lessees shall pay, on a pro rata basis, to such Funding Party as are so affected
such additional amounts as shall be sufficient to compensate such Funding
Parties for such reduced return. A certificate of an officer of any such Funding
Party setting forth the amount to be paid to it and the basis for computation
thereof hereunder shall, in the absence of manifest error, be conclusive. In
determining such amount, such Funding Party may use any reasonable averaging and
attribution methods.
(d) If a Funding Party becomes entitled to claim any
additional amounts pursuant to this SECTION 7.5, it shall promptly notify the
Guarantor thereof. A certificate as to any additional amounts payable pursuant
to the foregoing submitted by a Funding Party to the Guarantor shall be
conclusive absent manifest error. For purposes of the application of this
SECTION 7.5, and in calculating the amount necessary to compensate such Funding
Party for any imposition of or increase in capital requirements, such Funding
Party shall determine the applicability of this provision and calculate the
amount payable to it hereunder in a manner consistent with the manner in which
it shall apply and calculate similar compensation payable to it by other
borrowers having provisions in their credit agreements comparable to this
Section.
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(e) If any Funding Party shall, at any time, incur costs
associated with reserve requirements pursuant to Regulation D in connection with
the making or maintenance of any Funded Amount, then the Lessees shall
immediately pay, on a pro rata basis, such costs to such Funding Party in
accordance with SECTION 7.5(D).
(f) Each Lessee and the Guarantor, jointly and severally,
shall indemnify each Funding Party against any loss, funding cost, expense or
loss of earnings, which such Funding Party may, as a consequence of any Lessee's
failure to accept Funded Amounts requested by a Lessee at any time, failure to
make a payment on the due date thereof or the payment, prepayment or conversion
of any Funded Amounts (including pursuant to Article XIV of any Lease) subject
to LIBOR Rate options hereunder on a day other than a Payment Date, sustain or
incur in liquidating or employing deposits from third parties acquired to
effect, fund or maintain such or any part thereof. If a Funding Party becomes
entitled to claim any additional amounts pursuant to this Section, it shall
promptly notify the Agent, which shall promptly notify the Guarantor thereof.
SECTION 7.6 END OF TERM INDEMNITY. In the event that at the end of the
Lease Term for a Leased Property: (i) the related Lessee elects the option set
forth in Section 14.6 of the related Lease, and (ii) after the Lessor receives
the sales proceeds from such Leased Property under Section 14.6 or 14.7 of the
related Lease, together with such Lessee's payment of the Recourse Deficiency
Amount, the Lessor shall not have received the entire Lease Balance, then,
within 60 days after the end of the Lease Term, the Lessor or the Agent may
obtain, at the Lessee's sole cost and expense, a report from the Appraiser (or,
if the Appraiser is not available, another appraiser reasonably satisfactory to
the Lessor or the Agent, as the case may be, and approved by the Guarantor, such
approval not to be unreasonably withheld) in form and substance satisfactory to
the Lessor and the Agent (the "REPORT") to establish the reason for any decline
in value of such Leased Property from the Lease Balance. The related Lessee
shall promptly reimburse the Lessor for the amount equal to such decline in
value to the extent that the Report indicates that such decline was due to
(w) extraordinary use, failure to maintain, to repair, to
restore, to rebuild or to replace, failure to comply with all
Applicable Laws, failure to use, workmanship, method of installation or
removal or maintenance, repair, rebuilding or replacement, or any other
cause or condition within the power of the related Lessee to control or
effect resulting in the Building failing to be a warehouse of the type
and quality contemplated by the Appraisal (excepting in each case
ordinary wear and tear), or
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(x) any Alteration made to, or any rebuilding of, the
Leased Property or any part thereof by the related Lessee,
or
(y) any restoration or rebuilding carried out by the related
Lessee or any condemnation of any portion of the Leased Property
pursuant to Article X of the related Lease, or
(z) any use of such Leased Property or any part thereof by the
related Lessee other than as permitted by the related Lease, or any act
or omission constituting a breach of any requirement, condition,
restriction or limitation set forth in the related Deed or the related
Purchase Agreement.
SECTION 8
MISCELLANEOUS
SECTION 8.1 SURVIVAL OF AGREEMENTS. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery and the termination or expiration of
this Master Agreement and any of the Operative Documents, the transfer of any
Land to the Lessor as provided herein (and shall not be merged into any Deed),
any disposition of any interest of the Lessor in any Leased Property, the
purchase and sale of the Notes, payment therefor and any disposition thereof and
shall be and continue in effect notwithstanding any investigation made by any
party hereto or to any of the other Operative Documents and the fact that any
such party may waive compliance with any of the other terms, provisions or
conditions of any of the Operative Documents.
SECTION 8.2 NOTICES. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be addressed to such parties at the addresses therefor as set forth
in SCHEDULE 8.2, as such other address as any such party shall specify to the
other parties hereto, and shall be deemed to have been given (i) the Business
Day after being sent, if sent by overnight courier service; (ii) the Business
Day sent, if sent by messenger; (iii) the day sent, if sent by facsimile and
confirmed electronically or otherwise during business hours of a Business Day
(or on the next Business Day if otherwise sent by facsimile and confirmed
electronically or otherwise); or (iv) three Business Days after being sent, if
sent by registered or certified mail, postage prepaid.
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SECTION 8.3 COUNTERPARTS. This Master Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.4 AMENDMENTS. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified with
respect to a Lessee, the Guarantor or any Funding Party, except (a) in the case
of a termination, amendment, supplement, waiver or modification to be binding on
a Lessee or the Guarantor, with the written agreement or consent of such Lessee
or the Guarantor, and (b) in the case of a termination, amendment, supplement,
waiver or modification to be binding on the Funding Parties, with the written
agreement or consent of the Lessor and the Required Funding Parties; PROVIDED,
HOWEVER, that
(x) notwithstanding the foregoing provisions of this SECTION
8.4, the consent of each Funding Party affected thereby shall be required for
any amendment, modification or waiver directly:
(i) modifying any of the provisions of this SECTION 8.4,
changing the definition of "REQUIRED FUNDING PARTIES", or increasing
the Commitment of such Funding Party;
(ii) amending, modifying, waiving or supplementing any of the
provisions of Section 3 of the Loan Agreement or Section 3 of the Lease
Participation Agreement or the representations of such Funding Party in
SECTION 4.2 or 4.3 or the covenants of such Funding Party in SECTION 6
of this Master Agreement;
(iii) reducing any amount payable to such Funding Party under
the Operative Documents or extending the time for payment of any such
amount, including, without limitation, any Rent, any Funded Amount, any
fees, any indemnity, the Leased Property Balance, the Lease Balance,
any Funding Party Balance, Recourse Deficiency Amount, interest or
Yield; or
(iv) consenting to any assignment of a Lease, releasing any of
the collateral assigned to the Agent and the Lenders pursuant to any
Mortgage and any Assignment of Lease and Rents (but excluding a release
of any rights that the Lenders may have in any Leased Property, or the
proceeds thereof as contemplated in the definition of "Release Date"),
releasing any Lessee from its obligations in respect of the payments of
Rent and the Lease Balance, releasing the
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Guarantor from its obligations under the Guaranty or the other
Operative Documents or changing the absolute and unconditional
character of any such obligation; and
(y) no such termination, amendment, supplement, waiver or
modification shall, without the written agreement or consent of the Lessor, the
Lease Participant and the Lenders, be made to a Lease; and
(z) subject to the foregoing CLAUSES (X) and (Y), so long as
no Event of Default has occurred and is continuing, the Lessor, the Agent, the
Lease Participant and the Lenders may not amend, supplement, waive or modify any
terms of the Loan Agreement, the Notes, the Mortgages and the Assignments of
Lease and Rents without the consent of the related Lessee (such consent not to
be unreasonably withheld or delayed); the Lessor and the related Lessee may not
amend, supplement, waive or modify any terms of any Lease or any Security
Agreement and Assignment without the consent of the Agent, the Lease Participant
and the Lenders.
SECTION 8.5 HEADINGS, ETC. The Table of Contents and headings of the
various Articles and Sections of this Master Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 8.6 PARTIES IN INTEREST. Except as expressly provided herein,
none of the provisions of this Master Agreement is intended for the benefit of
any Person except the parties hereto, the Lease Participant, the Authorities and
their respective successors and permitted assigns.
SECTION 8.7 GOVERNING LAW. THIS MASTER AGREEMENT HAS BEEN DELIVERED IN,
AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
SECTION 8.8 EXPENSES. Whether or not the transactions herein
contemplated are consummated, the Lessees and the Guarantor, jointly and
severally, agree to pay, as Supplemental Rent, all reasonable and documented
out-of-pocket costs and expenses of the Lessor, the Lease Participant, the Agent
and the Lenders in connection with the preparation, execution and delivery of
the Operative Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto (including, without
limitation, the fees and disbursements of Mayer, Brown & Platt) and of the
Lessor, the Agent, the Lease Participant and the Lenders in connection with
43
<PAGE> 48
the enforcement of the Operative Documents and the documents and instruments
referred to therein (including, without limitation, the reasonable fees and
disbursements of counsel for the Lessor, the Agent, the Lease Participant and
the Lenders).
SECTION 8.9 SEVERABILITY. Any provision of this Master Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 8.10 LIABILITIES OF THE FUNDING PARTIES. No Funding Party shall
have any obligation to any other Funding Party, the Guarantor or to any Lessee
with respect to the transactions contemplated by the Operative Documents except
those obligations of such Funding Party expressly set forth in the Operative
Documents or except as set forth in the instruments delivered in connection
therewith, and no Funding Party shall be liable for performance by any other
party hereto of such other party's obligations under the Operative Documents
except as otherwise so set forth. No Lease Participant or Lender shall have any
obligation or duty to any Lessee, any other Funding Parties, the Guarantor or
any other Person with respect to the transactions contemplated hereby except to
the extent expressly set forth in this Master Agreement or the Loan Agreement.
SECTION 8.11 SUBMISSION TO JURISDICTION; WAIVERS. Each party hereto
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Master Agreement or any other Operative
Document, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of Georgia, the courts
of the United States of America for the Northern District of Georgia,
and appellate courts from any thereof;
(ii) consents that any such action or proceedings may be
brought to such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to
44
<PAGE> 49
such party at its address set forth in SCHEDULE 8.2 or at such other
address of which the other parties hereto shall have been notified
pursuant to SECTION 8.2; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law.
SECTION 8.12 LIABILITIES OF THE AGENT. The Agent shall have no duty,
liability or obligation to any party to this Master Agreement with respect to
the transactions contemplated hereby except those duties, liabilities or
obligations expressly set forth in this Master Agreement, the Lease
Participation Agreement or the Loan Agreement, and any such duty, liability or
obligations of the Agent shall be as expressly limited by this Master Agreement,
the Lease Participation Agreement or the Loan Agreement, as the case may be.
45
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused this Master
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
CARDINAL MISSISSIPPI, INC., as a
Lessee
By: /s/ Thomas S. Summer
------------------------------------
Title: Vice President-Treasurer
---------------------------------
MASTER
AGREEMENT
S-1
<PAGE> 51
CARDINAL HEALTH, INC., as
Guarantor
By: /s/ Thomas S. Summer
------------------------------------
Title: Vice President-Treasurer
---------------------------------
MASTER
AGREEMENT
S-2
<PAGE> 52
SUNTRUST BANKS, INC., as Lessor
By: /s/ W. P. O'Halloran
------------------------------------
Title: SVP and Controller
---------------------------------
MASTER
AGREEMENT
S-3
<PAGE> 53
PNC LEASING CORP., as a Lender
By: /s/ David J. Keener
------------------------------------
Title: Vice President
_________________________________
MASTER
AGREEMENT
S-4
<PAGE> 54
SUNTRUST BANK, ATLANTA, as Agent
By: /s/ Kristina L. Anderson
------------------------------------
Title: Asst. Vice President
_________________________________
By: /s/ Ranier Zeck
------------------------------------
Title: Vice President
_________________________________
MASTER
AGREEMENT
S-5
<PAGE> 55
SCHEDULE 2.2
COMMITMENT AMOUNTS
<TABLE>
<S> <C>
Lessor Commitment Percentage: 58.333%
Lender Commitment Percentage: 41.667%
Lessor Commitment: $35,000,000
Lender Commitment: $25,000,000
</TABLE>
<PAGE> 56
SCHEDULE 8.2
ADDRESSES FOR NOTICES
Guarantor and Lessees: 5555 Glendon Court
Dublin, Ohio 43016
Attn: Treasurer (with a copy to
General Counsel)
Facsimile: 614/717-8901
Lessor: SunTrust Banks, Inc.
c/o SunTrust Capital Markets, Inc.
25 Park Place, N.E., Suite 500
Atlanta, Georgia 30303
Attn: Todd Shutley
Facsimile: 404/827-6514
Agent: SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attn: Center 118/Southeastern Corporate
Facsimile: 404/588-8505
Lender: PNC Leasing Corp.
Two PNC Plaza
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Attn: David J. Keener
Facsimile: 412/762-7575
<PAGE> 57
================================================================================
GUARANTY
from
CARDINAL HEALTH, INC.
Dated as of July 16, 1996
================================================================================
<PAGE> 58
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Guaranty............................................................................................ 1
SECTION 2. Bankruptcy.......................................................................................... 2
SECTION 3. Right of Set-Off.................................................................................... 3
SECTION 4. Continuing Guaranty................................................................................. 3
SECTION 5. Reinstatement....................................................................................... 3
SECTION 6. Representations and Warranties...................................................................... 3
Section 6.1 Corporate Status..................................................................... 3
Section 6.2 Corporate Power and Authority........................................................ 4
Section 6.3 No Violation......................................................................... 4
Section 6.4 Litigation........................................................................... 4
Section 6.5 Governmental Approvals............................................................... 4
Section 6.6 Investment Company Act............................................................... 4
Section 6.7 Public Utility Holding Company Act................................................... 4
Section 6.8 True and Complete Disclosure......................................................... 5
Section 6.9 Taxes................................................................................ 5
Section 6.10 Compliance with ERISA................................................................ 5
Section 6.11 Financial Statements................................................................. 5
Section 6.12 Funded Debt.......................................................................... 6
SECTION 7. Covenants........................................................................................... 6
Section 7.1 Financial Statements and Information................................................. 6
Section 7.2 Funded Debt to Total Capital......................................................... 7
Section 7.3 Interest Rent Coverage Ratio......................................................... 7
Section 7.4 Employee Benefit Plans............................................................... 7
Section 7.5 Sale of Assets....................................................................... 8
Section 7.6 Mergers and Acquisitions............................................................. 8
Section 7.7 Limitations on Liens................................................................. 8
SECTION 7.8 Limitation on Sale and Lease-Back.................................................... 11
Section 7.9 Regulations G, T, U and X............................................................ 12
Section 7.10 Corporate Existence.................................................................. 12
Section 7.11 Books and Records.................................................................... 12
Section 7.12 Insurance............................................................................ 12
Section 7.13 Litigation; Event of Default......................................................... 12
Section 7.14 Taxes................................................................................ 13
Section 7.15 Compliance with Laws................................................................. 13
SECTION 8. Certain Actions..................................................................................... 13
SECTION 9. Application......................................................................................... 14
SECTION 10. Waiver.............................................................................................. 14
</TABLE>
-i-
<PAGE> 59
<TABLE>
<S> <C>
SECTION 11. Assignment.......................................................................................... 14
SECTION 12. Miscellaneous....................................................................................... 15
Exhibit I - Funded Debt
</TABLE>
-ii-
<PAGE> 60
GUARANTY
--------
THIS GUARANTY, dated as of July 16, 1996, is made by Cardinal Health,
Inc., an Ohio corporation ("CARDINAL" or the "GUARANTOR").
W I T N E S S E T H:
-------------------
WHEREAS, Cardinal Mississippi, Inc., Cardinal, SunTrust Banks, Inc. as
Lessor, PNC Leasing Corp., as Lender, and SunTrust Bank, Atlanta, as Agent, have
entered into that certain Master Agreement, dated as of July 16, 1996 (as it may
be modified, amended or restated from time to time as and to the extent
permitted thereby, the "MASTER AGREEMENT"; and, unless otherwise defined herein,
terms which are defined or defined by reference in the Master Agreement
(including Appendix A thereto) shall have the same meanings when used herein as
such terms have therein); and
WHEREAS, it is a condition precedent to the Funding Parties
consummating the transactions to be consummated on each Closing Date that the
Guarantor execute and deliver this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor that the
transactions contemplated by the Master Agreement be consummated on each Closing
Date; and
WHEREAS, this Guaranty, and the execution, delivery and performance
hereof, have been duly authorized by all necessary corporate action of the
Guarantor; and
WHEREAS, this Guaranty is offered by the Guarantor as an inducement to
the Funding Parties to consummate the transactions contemplated in the Master
Agreement, which transactions, if consummated, will be of benefit to the
Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Guarantor, the Guarantor hereby agrees as follows:
SECTION 1. GUARANTY. The Guarantor hereby unconditionally guarantees
the full and prompt payment when due, whether by acceleration or otherwise, and
at all times thereafter, and the full and prompt performance, of all of the
Liabilities (as hereinafter defined), including interest and earnings on any
such Liabilities whether accruing before or after any bankruptcy or insolvency
case or proceeding involving Guarantor, any Lessee or any other Person and, if
interest or earnings on any portion of
<PAGE> 61
such obligations ceases to accrue by operation of law by reason of the
commencement of such case or proceeding, including such interest and yield as
would have accrued on any such portion of such obligations if such case or
proceeding had not commenced, and further agrees to pay all expenses (including
reasonable attorneys' fees and legal expenses) paid or incurred by each of the
Funding Parties in endeavoring to collect the Liabilities, or any part thereof,
and in enforcing this Guaranty. The term "LIABILITIES", as used herein, shall
mean all of the following, in each case howsoever created, arising or evidenced,
whether direct or indirect, joint or several, absolute or contingent, or now or
hereafter existing, or due or to become due: (i) all amounts payable by the
Lessees under the Leases (including, without limitation, Basic Rent,
Supplemental Rent and Recourse Deficiency Amounts), the Master Agreement
(including the Commitment Fee) or any other Operative Document, and (ii) all
principal of the Notes and interest accrued thereon, Lease Participant Amounts,
accrued Yield and all additional amounts and other sums at any time due and
owing, and required to be paid, to the Funding Parties under the terms of the
Master Agreement, the Lease Participation Agreement, the Loan Agreement, the
Assignment of Lease and Rent, the Mortgages, the Notes, or any other Operative
Document; PROVIDED, HOWEVER, in no event shall the Guarantor be obligated to pay
under this Guaranty any amounts greater than the Lessees would have had to pay,
in the aggregate, under the Leases, the Master Agreement and the other Operative
Documents assuming that such documents were enforced in accordance with their
terms (and without giving effect to any discharge or limitation thereon
resulting or arising by reason of the bankruptcy or insolvency of any Lessee),
plus all costs of enforcing this Guaranty.
By way of extension but not in limitation of any of its other
obligations hereunder, the Guarantor stipulates and agrees that in the event any
foreclosure proceedings are commenced and result in the entering of a
foreclosure judgment, any such foreclosure judgment, to the extent related to
the Liabilities, shall be treated as part of the Liabilities, and the Guarantor
unconditionally guarantees the full and prompt payment of such judgment.
SECTION 2. BANKRUPTCY. The Guarantor agrees that, in the event of the
dissolution, bankruptcy or insolvency of any of any Lessee or the Guarantor, or
any thereof, or the inability or failure of any Lessee or the Guarantor, or any
thereof, generally to pay debts as they become due, or an assignment by any
Lessee or the Guarantor, or any thereof, for the benefit of creditors, or the
commencement of any case or proceeding in respect of any Lessee or the
Guarantor, or any thereof, under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Liabilities may not then be
due and payable,
2
<PAGE> 62
the Guarantor will pay to the Funding Parties forthwith the full amount which
would be payable hereunder by the Guarantor if all Liabilities were then due and
payable, PROVIDED that if the related Lease has not been terminated, in lieu of
making such payment, Guarantor may assume all of the obligations of the affected
Lessee so long as (i) the documentation evidencing such assumption is reasonably
acceptable to the Agent and the other Funding Parties and (ii) such assumption
is permitted by the applicable bankruptcy court.
SECTION 3. RIGHT OF SET-OFF. To secure all obligations of the Guarantor
hereunder, each Funding Party shall have a right to set-off, without demand or
notice of any kind, at any time and from time to time when any amount shall be
due and payable by the Guarantor hereunder against any and all balances,
credits, deposits, accounts or moneys of or in the Guarantor's name now or
hereafter, for any reason or purpose whatsoever, in the possession or control
of, or in transit to, any Funding Party or any agent or bailee for any Funding
Party, and apply any such amounts toward the payment of the Liabilities in such
order as the Agent may elect in accordance with the Operative Documents.
SECTION 4. CONTINUING GUARANTY. This Guaranty shall in all respects be
a continuing, absolute and unconditional guaranty of prompt and complete payment
and performance (and not merely of collection), and shall remain in full force
and effect (notwithstanding, without limitation, the dissolution of any Lessee
or the Guarantor) until the termination of the Commitments and the full and
final payment of all of the Liabilities.
SECTION 5. REINSTATEMENT. The Guarantor further agrees that, if at any
time all or any part of any payment theretofore applied to any of the
Liabilities is or must be rescinded or returned for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
any Lessee or the Guarantor), such Liabilities shall, for the purposes of this
Guaranty, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application, and
this Guaranty shall continue to be effective or be reinstated, as the case may
be, as to such Liabilities, all as though such application had not been made.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants that:
Section 6.1 CORPORATE STATUS. It (i) is a duly organized and validly
existing corporation in good standing under the laws of the state of its
incorporation and has the corporate power and authority to own its property and
assets and to transact the business in which it is engaged and (ii) has duly
qualified and
3
<PAGE> 63
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified could
have a Material Adverse Effect.
Section 6.2 CORPORATE POWER AND AUTHORITY. It has the corporate power
and authority to execute, deliver and carry out the terms and provisions of the
Operative Documents to which it is or will be a party, has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Operative Documents to which it is or will be a party, has duly executed and
delivered each Operative Document required to be executed and delivered by it
and each such Operative Document constitutes a legal, valid and binding
obligation enforceable against it in accordance with its terms.
Section 6.3 NO VIOLATION. Neither the execution, delivery and
performance by it of the Operative Documents to which it is or will be a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any Applicable Law,
(ii) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
(other than pursuant to the Operative Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of its
property or assets pursuant to the terms of, any Contractual Obligation, that
could have a Material Adverse Effect, or (iii) will violate any provision of its
certificate of incorporation or by-laws.
Section 6.4 LITIGATION. There are no actions, suits or proceedings
pending or, to its knowledge, threatened that could have a Material Adverse
Effect.
Section 6.5 GOVERNMENTAL APPROVALS. No Governmental Action by any
Governmental Authority is required to authorize or is required in connection
with (i) the execution, delivery and performance of any Operative Document to
which it is or will be a party or (ii) the legality, validity, binding effect or
enforceability of any Operative Document with respect to it.
Section 6.6 INVESTMENT COMPANY ACT. It is not an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act.
Section 6.7 PUBLIC UTILITY HOLDING COMPANY ACT. It is not a "holding
company" or a "subsidiary company," or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Company Act of 1935, as amended.
4
<PAGE> 64
Section 6.8 TRUE AND COMPLETE DISCLOSURE. All factual information
heretofore or contemporaneously furnished by it or on its behalf in writing to
any Funding Party (including without limitation all information contained in the
Operative Documents) for purposes of or in connection with any transaction
contemplated by the Master Agreement is, and all other such factual information
hereafter furnished by it or on its behalf in writing to any Funding Party will
be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
Section 6.9 TAXES. All United States Federal income tax returns and all
other material tax returns which are required to be filed have been filed by or
on behalf of Cardinal and its Subsidiaries and all taxes due with respect to
Cardinal and its Subsidiaries pursuant to such returns or pursuant to any
assessment received by Cardinal or any Subsidiary have been paid, or are being
contested by appropriate proceedings being diligently prosecuted. The charges,
accruals and reserves on the books of Cardinal and its Subsidiaries in respect
of taxes or other governmental charges are adequate.
Section 6.10 COMPLIANCE WITH ERISA. Cardinal has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to the Plan.
Cardinal has not (i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Code in an aggregate amount in
excess of $5,000,000 or (iii) incurred any liability under Title IV of ERISA in
an aggregate amount in excess of $5,000,000 (other than a liability to the PBGC
for premiums under Section 4007 of ERISA).
Section 6.11 FINANCIAL STATEMENTS. The consolidated statement of
financial position of Cardinal as of June 30, 1995 and the related statements of
income, shareholders' equity and cash flows for the fiscal year then ended,
reported on by Deloitte & Touche, and the consolidated statements of financial
position of Cardinal as of September 30, 1995, December 31, 1995 and March 31,
1996, respectively, and the related statements of income, shareholders' equity
and cash flows for the three months, six months and nine months, respectively,
then ended, in each
5
<PAGE> 65
case, a copy of which has been delivered to each of the Funding Parties, present
fairly in all material respects, in conformity with GAAP, the consolidated
financial position of Cardinal and its Subsidiaries as of such date and the
results of operations and cash flows of Cardinal and its Subsidiaries for such
fiscal year.
Section 6.12 FUNDED DEBT. Cardinal's Funded Debt as of the date of this
Guaranty is listed on EXHIBIT I.
SECTION 7. COVENANTS. The covenants set forth in this Section shall be
effective until the expiration or prior termination of the Commitments or until
payment in full of all Liabilities, whichever is later.
Section 7.1 FINANCIAL STATEMENTS AND INFORMATION. Cardinal will furnish
to the Agent:
(a) as soon as available and in any event within 60 days after
the end of the first, second and third quarterly accounting periods in
each fiscal year of Cardinal, copies of a consolidated balance sheet of
Cardinal and its Consolidated Subsidiaries as of the end of such
accounting period and of the related consolidated income and retained
earnings statements of Cardinal and its Consolidated Subsidiaries for
the elapsed portion of the fiscal year ended with the last day of such
accounting period, all in reasonable detail and stating in comparative
form the amounts for the corresponding date and period in the previous
fiscal year, and all prepared in accordance with GAAP, subject to year
end audit adjustments and certified by an authorized financial officer
of Cardinal;
(b) as soon as available and in any event within 120 days
after the end of each fiscal year of Cardinal, copies of consolidated
balance sheets of Cardinal and its Consolidated Subsidiaries as of the
end of such fiscal year and consolidated statements of income and
retained earnings of Cardinal and its Consolidated Subsidiaries for
such fiscal year, in reasonable detail and stating in comparative form
the figures as of the end of and for the previous fiscal year prepared
in accordance with GAAP and certified by independent public accountants
of recognized standing as may be selected by Cardinal and satisfactory
to the Agent;
(c) concurrently with each of the financial statements
furnished pursuant to the foregoing SUBSECTIONS (a) and (b), a
certificate of the Chairman of the Board, President, a Vice President
(whose duties are in the finance area), the Treasurer, Assistant
Treasurer, or Chief Financial Officer of Cardinal (a "RESPONSIBLE
FINANCIAL OFFICER"), showing a
6
<PAGE> 66
calculation of the financial covenants contained in this SECTION 7 in
reasonable detail and stating that in the opinion of the signer, based
upon a review made under his or her supervision, Cardinal has performed
and observed all of, and Cardinal is not in default in the performance
or observance of any of, the terms and covenants hereof or, if Cardinal
shall be in default, specifying all such defaults, and the nature
thereof, of which the signer of such certificate may have knowledge;
(d) if requested by the Agent or the Lessor, concurrently with
the financial statements furnished pursuant to the foregoing SUBSECTION
(B), a certificate of a Responsible Financial Officer setting forth a
description of the insurance policies carried by the Lessees as
required by the Leases, in reasonable detail;
(e) concurrently with their being filed, mailed or delivered,
as applicable, copies of all proxy statements, financial statements and
reports which Cardinal shall send or make available generally to its
shareholders, and copies of all reports on Forms 10-K, 10-Q and 8-K and
all other filings and reports specifically requested by any Funding
Party which Cardinal or any Subsidiary may be required to file with the
Securities and Exchange Commission or any similar or corresponding
governmental commission, department or an agency substituted therefor
or with any securities exchange located in the United States of
America; and
(f) such other information relating to the business, affairs
and financial condition of Cardinal and its Subsidiaries as any Funding
Party may from time to time reasonably request.
Section 7.2 FUNDED DEBT TO TOTAL CAPITAL. Cardinal will not permit the
ratio of Funded Debt of Cardinal and its Consolidated Subsidiaries to Total
Capital to exceed .60 to 1.
Section 7.3 INTEREST RENT COVERAGE RATIO. Cardinal will not permit the
ratio of (i) Consolidated EBITR for any four consecutive fiscal quarters to (ii)
Consolidated Interest and Rent Expense for such four fiscal quarters to be less
than 2.0 to 1.
Section 7.4 EMPLOYEE BENEFIT PLANS. Cardinal will (a) comply in all
material respects with the provisions of ERISA to the extent applicable to any
Employee Benefit Plan maintained by it and cause all Employee Benefit Plans
maintained by it to satisfy the conditions under the Internal Revenue Code of
1986, as amended (the "CODE") for tax qualification of all such plans intended
to be tax qualified; and (b) avoid (1) any material
7
<PAGE> 67
accumulated funding deficiency (within the meaning of ERISA section 302 and Code
section 412(a)) (whether or not waived), (2) any act or omission on the basis of
which it might incur a material liability to the PBGC (other than for the
payment of required premiums), (3) any transaction with a principal purpose
described in ERISA section 4069, and (4) any act or omission that might result
in the assessment by a Multiemployer Plan of withdrawal liability against
Cardinal, but only to the extent that the liability arising from a failure to
comply with any covenant set forth in (a) or (b) of this Section could
reasonably be expected to result in a liability to Cardinal for any one such
event in excess of $5,000,000.
Section 7.5 SALE OF ASSETS. Cardinal will not, and will not permit any
Consolidated Subsidiary to, sell, lease or transfer all or substantially all of
its assets unless (i) immediately after giving effect thereto Cardinal is in
compliance with the covenants and provisions of the this Guaranty and (ii)
immediately after giving effect thereto, such sale, lease or transfer would not
have a Material Adverse Effect. Notwithstanding this provision, any Consolidated
Subsidiary that is not a Lessee may sell, lease or transfer all or substantially
all of its assets to any other Consolidated Subsidiary or to Cardinal, and any
Lessee may sell, lease or transfer all or substantially all of its assets to
Cardinal.
Section 7.6 MERGERS AND ACQUISITIONS. Cardinal will not merge or
consolidate with, or otherwise acquire control of the assets of, any other
corporation, unless (i) either Cardinal or any Consolidated Subsidiary is the
surviving or parent corporation of any merger or other acquisition or, in the
event Cardinal or any Consolidated Subsidiary is not the surviving or parent
corporation, the Agent and the Lessor have consented to such merger or
acquisition, which consent shall not be unreasonably withheld, and which consent
shall be deemed to have been given provided that immediately after the merger or
other acquisition a majority of the members of the Board of Directors of the
surviving or parent corporation shall be the same individuals as were serving as
members of the Board of Directors of Cardinal immediately prior to the merger or
acquisition and (ii) Cardinal, any Consolidated Subsidiary or any successor
corporation, as the case may be, is in compliance with the Operative Documents
prior to, and after giving effect to, such merger or acquisition.
Section 7.7 LIMITATIONS ON LIENS. Cardinal will not create or assume,
and will not permit any Consolidated Subsidiary to create or assume, any
Indebtedness for money borrowed which is secured by a Lien of or upon any
assets, whether now owned or hereafter acquired, of Cardinal or any such
Consolidated Subsidiary without equally and ratably securing the Liabilities
8
<PAGE> 68
by a Lien ranking ratably with and equal to (or at Cardinal's option prior to)
such secured Indebtedness. The foregoing restriction, however, will not apply
to:
(a) Liens existing on the date of this Guaranty;
(b) Liens on any assets of any corporation existing at the
time such corporation becomes a Consolidated Subsidiary;
(c) Liens on any assets existing at the time of acquisition of
such assets by Cardinal or a Consolidated Subsidiary, or Liens to
secure the payment of all or any part of the purchase price of such
assets upon the acquisition of such assets by Cardinal or a
Consolidated Subsidiary or to secure any indebtedness incurred or
guaranteed by Cardinal or a Consolidated Subsidiary prior to, at the
time of, or within 360 days after such acquisition (or in the case of
real property, the completion of construction (including any
improvements on an existing asset) or commencement of full operation of
such asset, whichever is later) which indebtedness is incurred or
guaranteed for the purpose of financing all or any part of the purchase
price thereof or, in the case of real property, construction or
improvements thereon; PROVIDED, HOWEVER, that in the case of any such
acquisition, construction or improvement, the Lien shall not apply to
any assets theretofore owned by Cardinal or a Consolidated Subsidiary,
other than, in the case of any such construction or improvement, any
real property on which the property so constructed, or the improvement,
is located;
(d) Liens on any assets to secure indebtedness of a
Consolidated Subsidiary to Cardinal or to another wholly-owned
domestic Subsidiary;
(e) Liens on any assets of a corporation existing at the time
such corporation is merged into or consolidated with Cardinal or a
Subsidiary or at the time of a purchase, lease or other acquisition of
the assets of a corporation or firm as an entirety or substantially as
an entirety by Cardinal or a Subsidiary;
(f) Liens on any assets of Cardinal or a Consolidated
Subsidiary in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or in
favor of any other country, or any political subdivision thereof, to
secure partial, progress, advance or other payments pursuant to any
contract or statute or to secure any indebtedness incurred or
guaranteed for the purpose of financing all or any part of the purchase
9
<PAGE> 69
price) or, in the case of real property, the cost of construction), of
the assets subject to such Liens (including, but not limited to, Liens
incurred in connection with pollution control, industrial revenue or
similar financing);
(g) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any Lien
referred to in the foregoing CLAUSES (a) to (f), inclusive; PROVIDED,
HOWEVER, that the principal amount of indebtedness secured thereby
shall not exceed the principal amount of indebtedness so secured at the
time of such extension, renewal or replacement and that such extension,
renewal or replacement shall be limited to all or a part of the assets
which secured the Lien so extended, renewed or replaced (plus
improvements and construction on such real property);
(h) Liens imposed by law, such as mechanics', worker's,
repairmen's, materialmen's, carriers', warehousemen's, vendors' or
other similar Liens arising in the ordinary course of business, or
governmental (federal, state or municipal) Liens arising out of
contracts for the sale of products or services by Cardinal or any
Consolidated Subsidiary, or deposits or pledges to obtain the release
of any of the foregoing Liens;
(i) pledges, liens, or deposits under worker's compensation
laws or similar legislation and liens or judgments thereunder which are
not currently dischargeable, or in connection with bids, tenders,
contracts (other than for the payment of money) or leases to which
Cardinal or any Consolidated Subsidiary is a party, or to secure public
or statutory obligations of Cardinal or any Consolidated Subsidiary, or
in connection with obtaining or maintaining self-insurance or to obtain
the benefits of any law, regulation or arrangement pertaining to
unemployment insurance, old age pensions, social security or similar
matters, or to secure surety, appeal or customs bonds to which Cardinal
or any Consolidated Subsidiary is a party, or in litigation or other
proceedings such as, but not limited to, interpleader proceedings, and
other similar pledges, liens or deposits made or incurred in the
ordinary course of business;
(j) Liens created by or resulting from any litigation or other
proceeding which is being contested in good faith by appropriate
proceedings, including Liens arising out of judgments or awards against
Cardinal or any Consolidated Subsidiary with respect to which Cardinal
or such Consolidated Subsidiary is in good faith prosecuting an
10
<PAGE> 70
appeal or proceedings for review or for which the time to make an
appeal has not yet expired; or final unappealable judgment Liens which
are satisfied within 15 days of the date of judgment; or Liens incurred
by Cardinal or any Consolidated Subsidiary for the purpose of obtaining
a stay or discharge in the course of any litigation or other proceeding
to which Cardinal or such Consolidated Subsidiary is a party; or
(k) Liens for taxes or assessments or governmental charges or
levies not yet due or delinquent, or which can thereafter be paid
without penalty, or which are being contested in good faith by
appropriate proceedings; landlord's liens on property held under lease;
and any other Liens or charges incidental to the conduct of the
business of Cardinal or any Consolidated Subsidiary or the ownership of
the assets of any of them which were not incurred in connection with
the borrowing of money or the obtaining of advances of credit and which
do not, in the opinion of Cardinal, materially impair the use of such
assets in the operation of the business of Cardinal or such
Consolidated Subsidiary or the value of such assets for the purposes of
such business.
Notwithstanding the restrictions set forth in the preceding paragraph,
Cardinal of any Consolidated Subsidiary will be permitted to create or assume
any Indebtedness which is secured by a Lien without equally and ratably securing
the Liabilities, provided that at the time of such creation or assumption, and
after giving effect thereto, Exempted Debt does not exceed 10% of Consolidated
Net Tangible Assets.
SECTION 7.8 LIMITATION ON SALE AND LEASE-BACK. Cardinal will not, nor
will it permit any Consolidated Subsidiary to, enter into any sale and
lease-back transaction with respect to any assets, other than any such
transaction involving a lease for a term of not more than three years, unless
either (a) Cardinal or such Consolidated Subsidiary would be entitled to incur
Indebtedness secured by a Lien on the assets to be leased, in an amount at least
equal to the Attributable Debt with respect to such sale and lease-back
transaction, without equally and ratably securing the Liabilities, pursuant to
CLAUSES (a) through (k) inclusive of SECTION 7.7, or (b) the proceeds of the
sale of the assets to be leased are at least equal to the fair value of such
assets (as determined by the Board of Directors of Cardinal) and the proceeds
are applied to the purchase or acquisition (or, in the case of property, the
construction) of assets or to the retirement (other than at maturity or pursuant
to a mandatory sinking fund or redemption provision) of Senior Funded
Indebtedness. This limitation, however, will not apply if at the time Cardinal
or any Consolidated Subsidiary enters into such
11
<PAGE> 71
sale and lease-back transaction, and after giving effect thereto, Exempted Debt
does not exceed 10% of Consolidated Net Tangible Assets.
Section 7.9 REGULATIONS G, T, U AND X. Cardinal will not, and will not
permit any Subsidiary, to use Fundings under the Operative Documents in any
manner which may cause a violation of or non-compliance with Regulations G, T, U
or X of the Board of Governors of the Federal Reserve Board.
Section 7.10 CORPORATE EXISTENCE. Cardinal will maintain its existence
and, except as otherwise allowed by SECTION 7.6, the existence of each
Subsidiary in good standing as a business corporation under the laws of the
jurisdiction of its incorporation, and remain qualified and cause each
Subsidiary to remain qualified to do business in all jurisdictions wherein the
nature of the business it transacts or the character of the properties owned by
it makes such qualification necessary.
Section 7.11 BOOKS AND RECORDS. Cardinal will keep and maintain, and
cause each Subsidiary to keep and maintain, satisfactory and adequate books and
records of account, in accordance with GAAP and make or cause the same to be
made available to the Funding Parties or their agents or nominees at any
reasonable time upon reasonable notice for inspection and to make extracts
thereof.
Section 7.12 INSURANCE. Cardinal will insure and keep insured, and
cause each Subsidiary to insure and keep insured, with reputable insurance
companies, so much of their respective properties, to such an extent and against
such risks (including liability and fire) as Cardinal reasonably believes
prudent, based on sound business judgment; or, in lieu thereof, in the case of
itself or of any one or more of its Subsidiaries, maintain or cause to be
maintained a system or systems of self-insurance which will be in accord with a
practice Cardinal reasonably believes prudent, based on sound business judgment,
and, in such cases of self-insurance, maintain or cause to be maintained an
insurance reserve or reserves reasonably deemed adequate by Cardinal.
Section 7.13 LITIGATION; EVENT OF DEFAULT. Cardinal will notify the
Funding Parties in writing immediately of the institution of any litigation, the
commencement of any administrative proceedings, the happening of any event or
the assertion or threat of any claim which could have a Material Adverse Effect,
or the occurrence of any Event of Default or an event which with the passage of
time or the giving of notice or both would constitute an Event of Default.
12
<PAGE> 72
Section 7.14 TAXES. Cardinal will pay and discharge all taxes,
assessments or other governmental charges or levies imposed on it or any of its
property or assets prior to the date on which any material penalty for
non-payment or late payment is incurred, unless the same is currently being
contested in good faith by appropriate proceedings and reserves in accordance
with GAAP are being maintained.
Section 7.15 COMPLIANCE WITH LAWS. Cardinal will comply and cause each
Subsidiary to comply in all material respects with all local, state and federal
laws and regulations material to its business and operations, including but not
limited to: (i) all rules and regulations of the Securities and Exchange
Commission, (ii) local, state and federal laws governing the control, removal,
spill, release, or discharge of hazardous or toxic wastes, substances or
petroleum products, including without limitation all Environmental Laws, and
(iii) the provisions and requirements of all franchises, permits and licenses
applicable to its business, including, but not limited to, those required by any
Environmental Law. Cardinal shall notify the Funding Parties promptly in detail
of any actual or alleged failure to comply with or perform, breach, violation or
default under any such laws or regulations or if Cardinal receives notice of
potential responsibility for the release or threatened release of hazardous
substances, or of the occurrence or existence of any facts or circumstances
which with the passage of time, the giving of notice or both or otherwise could
create such a breach, violation or default or could occasion the termination of
any of such franchises or grants of authority or the creation of potential
responsibility for releases or threatened releases of hazardous substances, if
any of the foregoing would have a Material Adverse Effect.
SECTION 8. CERTAIN ACTIONS. The Funding Parties may, from time to time
at their discretion and without notice to the Guarantor, take any or all of the
following actions: (a) retain or obtain (i) a security interest in the Lessees'
interests in the Leases and (ii) a lien or a security interest hereafter granted
by any Person upon or in any property, in each case to secure any of the
Liabilities or any obligation hereunder; (b) retain or obtain the primary or
secondary obligation of any obligor or obligors, in addition to the Guarantor,
with respect to any of the Liabilities; (c) extend or renew for one or more
periods (regardless of whether longer than the original period), or release or
compromise any obligation of the Guarantor hereunder or any obligation of any
nature of any other obligor (including, without limitation, any Lessor) with
respect to any of the Liabilities; (d) release or fail to perfect its Lien upon
or security interest in, or impair, surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the Liabilities or any obligation hereunder, or
13
<PAGE> 73
extend or renew for one or more periods (regardless of whether longer than the
original period) or release or compromise any obligations of any nature of any
obligor with respect to any such property; and (e) resort to the Guarantor for
payment of any of the Liabilities, regardless of whether the Agent or any other
Person shall have resorted to any property securing any of the Liabilities or
any obligation hereunder or shall have proceeded against any other obligor
primarily or secondarily obligated with respect to any of the Liabilities (all
of the actions referred to in this CLAUSE (e) being hereby expressly waived by
the Guarantor).
SECTION 9. APPLICATION. Any amounts received by any Funding Party from
whatever source on account of the Liabilities shall be applied by it toward the
payment of such of the Liabilities, and in such order of application, as is set
forth in the Operative Documents. The Guarantor hereby agrees that no payment
made by or for the account of the Guarantor pursuant to this Guaranty shall
entitle the Guarantor by subrogation, indemnification, exoneration,
contribution, reimbursement or otherwise to any payment by any Lessee or Lessor
or from or out of any property of any Lessee or Lessor and the Guarantor hereby
expressly waives, to the fullest extent possible, and shall not exercise, any
right or remedy against any Lessee or Lessor or any property of any Lessee or
Lessor by reason of any performance by the Guarantor of this Guaranty. If, and
to the extent that, any such rights or remedies against a Lessee or Lessor may
not be waived under Applicable Law, the Guarantor shall be deemed to have
contributed any such rights to such Lessee or Lessor effective immediately upon
the arising of such rights or remedies, which contribution shall give rise to
obligations of such Lessee or Lessor to the Guarantor which are subordinate in
all respects to the Liabilities.
SECTION 10. WAIVER. The Guarantor hereby expressly waives: (a) notice
of the acceptance of this Guaranty; (b) notice of the existence or creation or
non-payment of all or any of the Liabilities; (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever; and (d) all diligence in
collection or protection of or realization upon the Liabilities or any thereof,
any obligation hereunder, or any security for or guaranty of any of the
foregoing.
SECTION 11. ASSIGNMENT. Subject to Section 6 of the Master Agreement,
each Funding Party may, from time to time, whether before or after any
discontinuance of this Guaranty, at its sole discretion and without notice to
the Guarantor, assign or transfer any or all of its portion of the Liabilities
or any interest therein; and, notwithstanding any such assignment or transfer or
any subsequent assignment or transfer thereof, such Liabilities shall be and
remain Liabilities for the purposes of
14
<PAGE> 74
this Guaranty, and each and every such immediate and successive assignee or
transferee of any of the Liabilities or of any interest therein shall, to the
extent of such assignee's or transferee's interest in the Liabilities, be
entitled to the benefits of this Guaranty to the same extent as if such assignee
or transferee were such Funding Party.
SECTION 12. MISCELLANEOUS. No delay in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy; nor shall any modification or waiver of
any of the provisions of this Guaranty be binding upon any Funding Party except
as expressly set forth in a writing duly signed and delivered on its behalf. No
action permitted hereunder shall in any way affect or impair any Funding Party's
rights or the Guarantor's obligations under this Guaranty. For the purposes of
this Guaranty, Liabilities shall include all of the obligations described in the
definition thereof, notwithstanding any right or power of any Lessee or the
Lessor or anyone else to assert any claim or defense (other than final payment)
as to the invalidity or unenforceability of any such obligation, and no such
claim or defense shall affect or impair the obligations of the Guarantor
hereunder. The Guarantor's obligations under this Guaranty shall be absolute and
unconditional irrespective of any circumstance whatsoever which might constitute
a legal or equitable discharge or defense of the Guarantor. The Guarantor hereby
acknowledges that there are no conditions to the effectiveness of this Guaranty.
This Guaranty shall be binding upon the Guarantor and upon the
Guarantor's successors and permitted assigns; and all references herein to the
Guarantor shall be deemed to include any successor or successors, whether
immediate or remote, to such Person; PROVIDED that the Guarantor shall not
assign its obligations hereunder without the prior written consent of the
Funding Parties.
Wherever possible each provision of this Guaranty shall be interpreted
in such manner as to be effective and valid under Applicable Law, but if any
provision of this Guaranty shall be prohibited by or invalid thereunder, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
The Guarantor: (a) Submits for itself and its property in any legal
action or proceeding relating to this Guaranty, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive General
Jurisdiction of the Courts of the State of Georgia, the Courts of the United
States of America for
15
<PAGE> 75
the Northern District of Georgia, and Appellate Courts from any thereof; (b)
consents that any such action or proceedings may be brought to such Courts, and
waives any objection that it may now or hereafter have to the Venue of any such
action or proceeding in any such Court or that such action or proceeding was
brought in an inconvenient Court and agrees not to plead or claim the same; (c)
agrees that Service of Process in any such action or proceeding may be effected
by delivering a copy thereof to it at its address set forth below or at such
other address of which the other parties to the Master Agreement shall have been
notified pursuant to Section 8.2 of the Master Agreement; and (d) agrees that
nothing herein shall affect the right to effect Service of Process in any other
manner permitted by law or shall limit the right of the funding parties to sue
in any other jurisdiction.
All notices, demands, declarations, consents, directions, approvals,
instructions, requests and other communications required or permitted by this
Guaranty shall be in writing and shall be deemed to have been duly given when
addressed to the appropriate Person and delivered in the manner specified in
Section 8.2 of the Master Agreement. The initial address for notices to each
Guarantor is set forth below.
THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
16
<PAGE> 76
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
IMPORTANT: READ BEFORE SIGNING: THE TERMS OF THIS
AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE
TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT
MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF
THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
CARDINAL HEALTH, INC.
By: /s/ Thomas S. Summer
---------------------------------
Name Printed: Thomas S. Summer
-------------------
Title: Vice President-Treasurer
--------------------------
Address: 5555 Glendon Ct.
--------------------------
Dublin, OH 43016
--------------------------
GUARANTY
S-1
<PAGE> 77
EXHIBIT I
---------
FUNDED DEBT
-----------
<TABLE>
<CAPTION>
Amount as of
Obligor Lender July 1, 1996
<S> <C> <C>
</TABLE>
<PAGE> 78
After recordation, this instrument should be returned to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Rex Palmer
================================================================================
================================================================================
LEASE AGREEMENT
Dated as of ________, 1996
between
SUNTRUST BANKS, INC., as Lessor,
and
[Lessee Sub], as Lessee
-------------------------------------------
Warehouses
================================================================================
================================================================================
<PAGE> 79
TABLE OF CONTENTS
(Lease Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.
DEFINITIONS.................................................................. 1
ARTICLE II.
LEASE OF LEASED PROPERTY......................................................... 1
Section 2.1 Acceptance and Lease of Property................................................................... 1
Section 2.2 Acceptance Procedure............................................................................... 2
ARTICLE III.
RENT....................................................................... 2
Section 3.1 Basic Rent......................................................................................... 2
Section 3.2 Supplemental Rent.................................................................................. 2
Section 3.3 Method of Payment.................................................................................. 3
Section 3.4 Late Payment....................................................................................... 3
Section 3.5 Net Lease; No Setoff, Etc.......................................................................... 3
Section 3.6 Certain Taxes...................................................................................... 5
Section 3.7 Utility Charges.................................................................................... 6
ARTICLE IV.
WAIVERS.................................................................... 6
ARTICLE V.
LIENS; EASEMENTS; PARTIAL CONVEYANCES.................................................... 7
ARTICLE VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS.................................................. 8
Section 6.1 Maintenance and Repair; Compliance With Law........................................................ 8
Section 6.2 Alterations........................................................................................ 9
Section 6.3 Title to Alterations............................................................................... 9
ARTICLE VII.
USE....................................................................... 9
ARTICLE VIII.
INSURANCE................................................................... 10
ARTICLE IX.
ASSIGNMENT AND SUBLEASING........................................................... 11
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................................................... 12
Section 10.1 Event of Loss..................................................................................... 12
Section 10.2 Event of Taking................................................................................... 12
Section 10.3 Casualty.......................................................................................... 13
Section 10.4 Condemnation...................................................................................... 13
Section 10.5 Verification of Restoration and Rebuilding........................................................ 14
Section 10.6 Application of Payments........................................................................... 14
Section 10.7 Prosecution of Awards............................................................................. 15
Section 10.8 Application of Certain Payments Not Relating
to an Event of Taking............................................................................. 16
Section 10.9 Other Dispositions................................................................................ 16
Section 10.10 No Rent Abatement................................................................................. 16
ARTICLE XI.
INTEREST CONVEYED TO LESSEE.......................................................... 16
ARTICLE XII.
EVENTS OF DEFAULT............................................................... 17
ARTICLE XIII.
ENFORCEMENT.................................................................. 20
Section 13.1 Remedies........... ........................................................................... 20
Section 13.2 Remedies Cumulative; No Waiver; Consents......................................................... 22
ARTICLE XIV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL ............................................ 23
Section 14.1 Lessee's Option to Purchase....................................................................... 23
Section 14.2 Conveyance to Lessee.............................................................................. 24
Section 14.3 Acceleration of Purchase Obligation............................................................... 24
Section 14.4 Determination of Purchase Price................................................................... 25
Section 14.5 Purchase Procedure................................................................................ 25
Section 14.6 Option to Remarket; Surrender Option.............................................................. 26
Section 14.7 Rejection of Sale................................................................................. 29
Section 14.8 Return of Leased Property......................................................................... 29
Section 14.9 Renewal........................................................................................... 30
ARTICLE XV.
LESSEE'S EQUIPMENT............................................................. 31
ARTICLE XVI.
RIGHT TO PERFORM FOR LESSEE.......................................................... 32
</TABLE>
(ii)
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE XVII.
MISCELLANEOUS................................................................. 32
Section 17.1 Reports.......................................................................................... 32
Section 17.2 Binding Effect; Successors and Assigns;
Survival......................................................................................... 32
Section 17.3 Quiet Enjoyment.................................................................................. 33
Section 17.4 Notices.......................................................................................... 33
Section 17.5 Severability..................................................................................... 33
Section 17.6 Amendment; Complete Agreements................................................................... 34
Section 17.7 Construction..................................................................................... 34
Section 17.8 Headings......................................................................................... 34
Section 17.9 Counterparts..................................................................................... 34
Section 17.10 GOVERNING LAW.................................................................................... 34
Section 17.11 Discharge of Lessee's Obligations by its
Affiliates....................................................................................... 35
Section 17.12 Liability of Lessor Limited...................................................................... 35
Section 17.13 Estoppel Certificates............................................................................ 35
Section 17.14 No Joint Venture................................................................................. 36
Section 17.15 No Accord and Satisfaction....................................................................... 36
Section 17.16 No Merger........................................................................................ 36
Section 17.17 Survival......................................................................................... 36
Section 17.18 Chattel Paper.................................................................................... 36
Section 17.19 Time of Essence.................................................................................. 37
Section 17.20 Recordation of Lease............................................................................. 37
Section 17.21 Investment of Security Funds..................................................................... 37
Section 17.22 IDB Documentation................................................................................ 37
</TABLE>
(iii)
<PAGE> 82
APPENDICES AND EXHIBITS
- -----------------------
APPENDIX A Defined Terms
EXHIBIT A Lease Supplement
(iv)
<PAGE> 83
THIS LEASE AGREEMENT (as from time to time amended or supplemented,
this "LEASE"), dated as of _______, 1996, is between SUNTRUST BANKS, INC., a
Georgia corporation (together with its successors and assigns hereunder, the
"LESSOR"), as Lessor, and _________________________, a ___________ corporation
(together with its successors and permitted assigns hereunder, the "LESSEE"), as
Lessee.
PRELIMINARY STATEMENT
A. Lessor will purchase from one or more third parties designated by
Lessee, on each Closing Date, certain parcels of real property to be specified
by Lessee, together with any improvements thereon.
B. Lessor desires to lease to Lessee, and Lessee desires to lease
from Lessor, each such property.
C. The Lessee may construct certain improvements on such parcels of
real property which as constructed will be the property of the Lessor and will
become part of such property subject to the terms of this Lease.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, Lessor
and Lessee hereby agree as follows:
ARTICLE I.
DEFINITIONS
-----------
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in APPENDIX A hereto for all purposes hereof.
ARTICLE II.
LEASE OF LEASED PROPERTY
------------------------
Section 2.1 ACCEPTANCE AND LEASE OF PROPERTY. On each Closing Date,
Lessor, subject to the satisfaction or waiver of the conditions set forth in
Section 3 of the Master Agreement, hereby agrees to accept delivery on such
Closing Date of the Land designated by Lessee to be delivered on such Closing
Date pursuant to the terms of the Master Agreement, together with any
improvements thereon and simultaneously to lease to Lessee hereunder for the
Lease Term, Lessor's interest in such Land and in such improvements together
with any Building which thereafter may be constructed thereon pursuant to the
Construction Agency
<PAGE> 84
Agreement, and Lessee hereby agrees, expressly for the direct benefit of Lessor,
commencing on such Closing Date for the Lease Term, to lease from Lessor
Lessor's interest in such Land to be delivered on such Closing Date together
with Lessor's interest in any Building and other improvements thereon or which
thereafter may be constructed thereon pursuant to the Construction Agency
Agreement.
Section 2.2 ACCEPTANCE PROCEDURE. Lessor hereby authorizes one or more
employees of Lessee, to be designated by Lessee, as the authorized
representative or representatives of Lessor to accept delivery on behalf of
Lessor of that Leased Property identified on the applicable Funding Request.
Lessee hereby agrees that such acceptance of delivery by such authorized
representative or representatives and the execution and delivery by the Lessee
on each Closing Date of this Lease or, if more than one parcel of land is leased
hereunder, of a Lease Supplement in the form of EXHIBIT A hereto (appropriately
completed) shall, without further act, constitute the irrevocable acceptance by
Lessee of that Leased Property which is the subject thereof for all purposes of
this Lease and the other Operative Documents on the terms set forth therein and
herein, and that such Leased Property, together with any improvements
constructed thereon pursuant to the Construction Agency Agreement, shall be
deemed to be included in the leasehold estate of this Lease and shall be subject
to the terms and conditions of this Lease as of such Closing Date. The demise
and lease of each Building pursuant to this SECTION 2.2 shall include any
additional right, title or interest in such Building which may at any time be
acquired by Lessor, the intent being that all right, title and interest of
Lessor in and to such Building shall at all times be demised and leased to
Lessee hereunder.
ARTICLE III.
RENT
----
Section 3.1 BASIC RENT. Beginning with and including the first Payment
Date occurring after the Closing Date, Lessee shall pay to the Agent the Basic
Rent for the Leased Properties, in installments, payable in arrears on each
Payment Date during the Lease Term, subject to Section 2.3(c) of the Master
Agreement.
Section 3.2 SUPPLEMENTAL RENT. Lessee shall pay to the
Agent, or to whomever shall be entitled thereto as expressly
provided herein or in any other Operative Document, any and all
2
<PAGE> 85
Supplemental Rent within five (5) Business Days of the date the same shall
become due and payable and in the event of any failure on the part of Lessee to
pay any Supplemental Rent, Agent shall have all rights, powers and remedies
provided for herein or by law or in equity or otherwise in the case of
nonpayment of Basic Rent. All Supplemental Rent to be paid pursuant to this
SECTION 3.2 shall be payable in the type of funds and in the manner set forth in
SECTION 3.3.
Section 3.3 METHOD OF PAYMENT. Basic Rent shall be paid to the Agent,
and Supplemental Rent (including amounts due under ARTICLE XIV hereof) shall be
paid to the Agent (or to such Person as may be entitled thereto) or, in each
case, to such Person as the Agent (or such other Person) shall specify in
writing to Lessee, and at such place as the Agent (or such other Person) shall
specify in writing to Lessee, which specifications by the Agent shall be given
by the Agent at least five (5) Business Days prior to the due date therefor.
Each payment of Rent (including payments under ARTICLE XIV hereof) shall be made
by Lessee prior to 12:00 p.m. (noon) Atlanta, Georgia time at the place of
payment in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such payment
shall be due, unless such scheduled date shall not be a Business Day, in which
case such payment shall be made on the next succeeding Business Day.
Section 3.4 LATE PAYMENT. If any Basic Rent shall not be paid within
five (5) days of the date when due, Lessee shall pay to the Agent, as
Supplemental Rent, interest (to the maximum extent permitted by law) on such
overdue amount from and including the due date thereof to but excluding the
Business Day of payment thereof at the Overdue Rate.
Section 3.5 NET LEASE; NO SETOFF, ETC. This Lease is a net lease and
notwithstanding any other provision of this Lease, Lessee shall pay all Basic
Rent and Supplemental Rent, and all costs, charges, taxes, assessments and other
expenses foreseen or unforeseen, for which Lessee or any Indemnitee is or shall
become liable by reason of Lessee's or such Indemnitee's estate, right, title or
interest in the Leased Properties, or that are connected with or arise out of
the acquisition (except the initial costs of purchase by Lessor of its fee
simple interest in any Leased Property, which costs, subject to the terms of the
Master Agreement, shall be funded by the Funding Parties pursuant to the Master
Agreement), installation, possession, use, occupancy, maintenance, ownership,
leasing, repairs and rebuilding of, or addition to, the Leased Properties or any
portion thereof, and any other amounts payable hereunder and under the other
Operative Documents (and, if applicable, any related IDB Documentation) without
counterclaim, setoff, deduction or defense and without
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abatement, suspension, deferment, diminution or reduction, and Lessee's
obligation to pay all such amounts throughout the Lease Term, including the
Construction Term, is absolute and unconditional. The obligations and
liabilities of Lessee hereunder shall in no way be released, discharged or
otherwise affected for any reason, including without limitation: (a) any defect
in the condition, merchantability, design, quality or fitness for use of any
Leased Property or any part thereof, or the failure of any Leased Property to
comply with all Applicable Law, including any inability to occupy or use any
Leased Property by reason of such non-compliance; (b) any damage to, removal,
abandonment, salvage, loss, contamination of or Release from, scrapping or
destruction of or any requisition or taking of any Leased Property or any part
thereof; (c) any restriction, prevention or curtailment of or interference with
any use of any Leased Property or any part thereof including eviction; (d) any
defect in title to or rights to any Leased Property or any Lien on such title or
rights or on any Leased Property; (e) any change, waiver, extension, indulgence
or other action or omission or breach in respect of any obligation or liability
of or by Lessor, the Agent, any Lease Participant or any Lender; (f) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to Lessee, Guarantor, Lessor, any
Lease Participant, any Lender, the Agent or any other Person, or any action
taken with respect to this Lease by any trustee or receiver of Lessee,
Guarantor, Lessor, any Lease Participant, any Lender, the Agent or any other
Person, or by any court, in any such proceeding; (g) any claim that Lessee has
or might have against any Person, including without limitation, Lessor, any
vendor, manufacturer, contractor of or for any Building or any part thereof, the
Agent, any Lease Participant or any Lender; (h) any failure on the part of
Lessor to perform or comply with any of the terms of this Lease, any other
Operative Document, any IDB Documentation or of any other agreement; (i) any
invalidity or unenforceability or illegality or disaffirmance of this Lease
against or by Lessee or any provision hereof or any of the other Operative
Documents or any provision of any thereof whether or not related to the
Transaction; (j) the impossibility or illegality of performance by Lessee,
Lessor or both; (k) any action by any court, administrative agency or other
Governmental Authority; (l) any restriction, prevention or curtailment of or
interference with the Construction or any use of any Leased Property or any part
thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar
to the foregoing, whether or not Lessee shall have notice or knowledge of any of
the foregoing. Except as specifically set forth in ARTICLES XIV or X of this
Lease, this Lease shall be noncancellable by Lessee in any circumstance
whatsoever and Lessee, to the extent permitted by Applicable Law, waives all
rights now or hereafter conferred by statute or
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otherwise to quit, terminate or surrender this Lease, or to any diminution,
abatement or reduction of Rent payable by Lessee hereunder. Each payment of Rent
made by Lessee hereunder shall be final and Lessee shall not seek or have any
right to recover all or any part of such payment from Lessor, the Agent, any
Lease Participant, any Lender or any party to any agreements related thereto for
any reason whatsoever. Lessee assumes the sole responsibility for the condition,
use, operation, maintenance, and management of the Leased Properties and Lessor
shall have no responsibility in respect thereof and shall have no liability for
damage to the property of either Lessee or any subtenant of Lessee on any
account or for any reason whatsoever, other than solely by reason of Lessor's
willful misconduct or gross negligence.
Section 3.6 CERTAIN TAXES. Without limiting the generality of SECTION
3.5, Lessee agrees to pay when due all real estate taxes, personal property
taxes, gross sales taxes, including any sales or lease tax imposed upon the
rental payments hereunder or under a sublease, occupational license taxes, water
charges, sewer charges, assessments of any nature and all other governmental
impositions and charges of every kind and nature whatsoever (the "TAX(ES)"),
when the same shall be due and payable without penalty or interest. It is the
intention of the parties hereto that, insofar as the same may lawfully be done,
Lessor shall be, except as specifically provided for herein, free from all
expenses in any way related to the Leased Properties and the use and occupancy
thereof. Any tax relating to a fiscal period of any taxing authority falling
partially within and partially outside the Lease Term, shall be apportioned and
adjusted between Lessor and Lessee. Lessee covenants to furnish Lessor and the
Agent, upon the Agent's request, within forty-five (45) days after the last date
when any Tax must be paid by Lessee as provided in this SECTION 3.6, official
receipts of the appropriate taxing, authority or other proof satisfactory to
Lessor, evidencing the payment thereof.
With Lessor's consent Lessee may defer payment of a tax so long as the
validity or the amount thereof is contested by Lessee with diligence and in good
faith; PROVIDED, HOWEVER, that Lessee shall furnish to Lessor and the Agent a
bond in an amount and on terms satisfactory to Lessor and the Agent and shall
pay the tax in sufficient time to prevent delivery of a tax deed. Such contest
shall be at Lessee's sole cost and expense. Lessee covenants to indemnify and
save harmless Lessor, the Agent, each Lease Participant and each Lender from any
costs or expenses incurred by Lessor, the Agent, any Lease Participant or any
Lender as a result of such contest.
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Section 3.7 UTILITY CHARGES. Lessee agrees to pay or cause to be paid
as and when the same are due and payable all charges for gas, water, sewer,
electricity, lights, heat, power, telephone or other communication service and
all other utility services used, rendered or supplied to, upon or in connection
with the Leased Properties.
ARTICLE IV.
WAIVERS
-------
During the Lease Term, Lessor's interest in the Building(s) (whether or
not completed) and the Land is demised and let by Lessor "AS IS" subject to (a)
the rights of any parties in possession thereof, (b) the state of the title
thereto existing at the time Lessor acquired its interest in the Leased
Properties, (c) any state of facts which an accurate survey or physical
inspection might show (including the survey delivered on the Closing Date), (d)
all Applicable Law, and (e) any violations of Applicable Law which may exist
upon or subsequent to the commencement of the Lease Term. LESSEE ACKNOWLEDGES
THAT, ALTHOUGH LESSOR MAY OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS
NOT RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE
BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT, ANY LEASE PARTICIPANT
NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY, CONDITION,
DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL SUCH
WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR, THE AGENT, ANY LEASE
PARTICIPANT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT
DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby represents and
warrants that each Leased Property is and shall be free of Lessor Liens. As
between Lessor and Lessee, Lessee has been afforded full opportunity to inspect
each Leased Property, is satisfied with the results of its inspections of such
Leased Property and is entering into this Lease solely on the basis of the
results of its own inspections and all risks incident to the matters discussed
in the two preceding sentences, as between Lessor, the Agent, the Lease
Participants or the Lenders on the one hand, and Lessee, on the other, are to be
borne by Lessee. The provisions of this ARTICLE IV have been negotiated, and,
except to the extent otherwise expressly stated, the foregoing provisions are
intended to be a complete exclusion and negation of any representations or
warranties by Lessor, the Agent, the Lease Participants or the
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Lenders, express or implied, with respect to the Leased Properties, that may
arise pursuant to any law now or hereafter in effect, or otherwise.
ARTICLE V.
LIENS; EASEMENTS; PARTIAL CONVEYANCES
-------------------------------------
Lessee shall not directly or indirectly create, incur or assume, any
Lien on or with respect to any Leased Property, the title thereto, or any
interest therein, including any Liens which arise out of or by reason of (i) the
possession, use, occupancy, construction, repair or rebuilding of any Leased
Property or (ii) labor or materials furnished or claimed to have been furnished
to Lessee, or any of its contractors or agents or (iii) the financing of any
personalty or equipment purchased or leased by Lessee from third parties and not
financed by Lessor or (iv) Alterations constructed by Lessee, except, in all
cases, Permitted Liens.
Notwithstanding the foregoing paragraph, at the request of Lessee,
Lessor shall, from time to time during the Lease Term and upon reasonable
advance written notice from Lessee, and receipt of the materials specified in
the next succeeding sentence, consent to and join in any (i) grant of easements,
licenses, rights of way and other rights in the nature of easements, including,
without limitation, utility easements to facilitate Lessee's use, development
and construction of the Leased Properties, (ii) release or termination of
easements, licenses, rights of way or other rights in the nature of easements
which are for the benefit of the Land or the Building(s) or any portion thereof,
(iii) dedication or transfer of portions of the Land, not improved with a
building, for road, highway or other public purposes, (iv) execution of
agreements for ingress and egress and amendments to any covenants and
restrictions affecting the Land or the Building(s) or any portion thereof and
(v) request to any Governmental Authority for platting or subdivision or
replatting or resubdivision approval with respect to the Land or any portion
thereof or any parcel of land of which the Land or any portion thereof forms a
part or a request for any variance from zoning or other governmental
requirements. Lessor's obligations pursuant to the preceding sentence shall be
subject to the requirements that:
(a) any such action shall be at the sole cost and expense of
Lessee and Lessee shall pay all reasonable out-of-pocket costs of Lessor, the
Agent, any Lease Participant and any Lender in connection therewith (including,
without limitation, the reasonable fees of attorneys, architects, engineers,
planners, appraisers and other professionals reasonably retained
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by Lessor, the Agent, any Lease Participant or any Lender in connection with any
such action),
(b) Lessee shall have delivered to Lessor and Agent a
certificate of a Responsible Officer of Lessee stating that
(1) such action will not cause any Leased Property,
the Land or any Building or any portion thereof to fail to comply in
any respect with the provisions of the Lease or any other Operative
Documents, or in any respect with Applicable Law; and
(2) such action will not materially reduce the Fair
Market Sales Value, utility or useful life of any Leased Property, the
Land or any Building nor Lessor's interest therein; and
(c) in the case of any release or conveyance, if Lessor, the
Agent, any Lease Participant or any Lender so reasonably requests, Lessee will
cause to be issued and delivered to Lessor and the Agent by the Title Insurance
Company an endorsement to the Title Policy pursuant to which the Title Insurance
Company agrees that its liability for the payment of any loss or damage under
the terms and provisions of the Title Policy will not be affected by reason of
the fact that a portion of the real property referred to in Schedule A of the
Title Policy has been released or conveyed by Lessor.
ARTICLE VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
----------------------------------------
Section 6.1 MAINTENANCE AND REPAIR; COMPLIANCE WITH LAW. Lessee, at its
own expense, shall at all times (a) maintain each Leased Property in good repair
and condition (subject to ordinary wear and tear), in accordance with prudent
industry standards and, in any event, in no less a manner as other similar
office, warehouse and distribution centers owned or leased by Lessee or its
Affiliates, (b) make all Alterations in accordance with, and maintain (whether
or not such maintenance requires structural modifications or Alterations) and
operate and otherwise keep each Leased Property in compliance with, all
Applicable Laws, and (c) make all material repairs, replacements and renewals of
each Leased Property or any part thereof which may be required to keep such
Leased Property in the condition required by the preceding CLAUSES (a) and (b).
Lessee shall perform the foregoing maintenance obligations regardless of whether
any Leased Property is occupied or unoccupied. Lessee waives any right that it
may now have or hereafter acquire to (i) require Lessor, the Agent,
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any Lease Participant or any Lender to maintain, repair, replace, alter, remove
or rebuild all or any part of any Leased Property or (ii) make repairs at the
expense of Lessor, the Agent, any Lease Participant or any Lender pursuant to
any Applicable Law or other agreements or otherwise. NEITHER LESSOR, THE AGENT,
ANY LEASE PARTICIPANT NOR ANY LENDER SHALL BE LIABLE TO LESSEE OR TO ANY
CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR
SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED
PROPERTY OR ANY PART THEREOF. Neither Lessor, the Agent, any Lease Participant
nor any Lender shall be required to maintain, alter, repair, rebuild or replace
any Leased Property in any way.
Section 6.2 ALTERATIONS. Lessee may, without the consent of Lessor, at
Lessee's own cost and expense, make Alterations which do not diminish the value,
utility or useful life of any Leased Property.
Section 6.3 TITLE TO ALTERATIONS. Title to all Alterations shall
without further act vest in Lessor (subject to Lessee's right to remove trade
fixtures, personal property and equipment which were not acquired with funds
advanced by Lessor, any Lease Participant or any Lender at a time when no Event
of Default has occurred and is continuing) and shall be deemed to constitute a
part of the Leased Properties and be subject to this Lease.
ARTICLE VII.
USE
---
Lessee may use each Leased Property or any part thereof for any lawful
purpose, and in a manner consistent with the standards applicable to properties
of a similar nature in the geographic area in which such Leased Property is
located, PROVIDED that such use does not materially adversely affect the Fair
Market Sales Value, utility, remaining useful life or residual value of such
Leased Property, and does not violate or conflict with, or constitute or result
in a default under, any Applicable Law or any insurance policy required
hereunder. In the event Lessee's use substantially changes the character of any
Building in a manner or to an extent that, in Lessor's, the Lease Participants'
and the Lenders' reasonable opinion, adversely affects the Fair Market Sales
Value and/or marketability of such Building, Lessee shall, upon the termination
or expiration of this Lease, at Lessor's request, restore such Leased Property
to its general character at the Completion Date (ordinary wear and tear
excepted). Lessee shall not commit or permit any waste of any Leased Property or
any part thereof.
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ARTICLE VIII.
INSURANCE
---------
(a) At any time during which any part of any Building or any
Alteration is under construction and as to any part of any Building or any
Alteration under construction, Lessee shall maintain, or cause to be maintained,
at its sole cost and expense, as a part of its blanket policies or otherwise,
"all risks" non-reporting completed value form of builder's risk insurance.
(b) During the Lease Term, Lessee shall maintain, at its sole
cost and expense, as a part of its blanket policies or otherwise, insurance
against loss or damage to any Building by fire and other risks, including
comprehensive boiler and machinery coverage, on terms and in amounts no less
favorable than insurance covering other similar properties owned or leased by
Lessee and that are in accordance with normal industry practice, but in no event
less than the replacement cost of such Building from time to time.
(c) During the Lease Term, Lessee shall maintain, at its sole
cost and expense, commercial general liability insurance with respect to the
Leased Properties, as is ordinarily procured by Persons who own or operate
similar properties in the same geographic area. Such insurance shall be on terms
and in amounts that are no less favorable than insurance maintained by Lessee or
its Affiliates with respect to similar properties that it owns or leases and
that are in accordance with normal industry practice, but in no event less than
$5,000,000 per occurrence. Such insurance policies shall also provide that
Lessee's insurance shall be considered primary insurance. Nothing in this
ARTICLE VIII shall prohibit Lessor, the Agent, any Lease Participant or any
Lender from carrying at its own expense other insurance on or with respect to
the Leased Properties, PROVIDED that any insurance carried by Lessor, the Agent,
any Lease Participant or any Lender shall not prevent Lessee from carrying the
insurance required hereby.
(d) Each policy of insurance maintained by Lessee pursuant to
CLAUSES (a) and (b) of this ARTICLE IX shall provide that all insurance proceeds
in respect of any loss or occurrence shall be adjusted by Lessee, except (a)
that with respect to any loss, the estimated cost of restoration of which is in
excess of 50% of the Funded Amounts with respect to the related Leased Property,
the adjustment thereof shall be subject to the prior written approval of the
Agent (or of Lessor if the Funded Amounts have been fully paid) and the
insurance proceeds therefor shall be paid to the Agent (or to Lessor if the
Funded Amounts have been fully paid) for application in accordance with this
Lease,
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and (b) from and after the date on which an Event of Default exists, all losses
shall be adjusted solely by, and all insurance proceeds shall be paid solely to,
the Agent (or Lessor if the Funded Amounts have been fully paid) for application
pursuant to this Lease.
(e) On the Closing Date, on the Completion Date and on each
anniversary of the Closing Date, Lessee shall furnish Lessor with certificates
showing the insurance required under this ARTICLE VIII to be in effect and
naming Lessor, the Agent, the Lease Participants and the Lenders as additional
insureds. Such certificates shall include a provision for thirty (30) days'
advance written notice by the insurer to Lessor and the Agent in the event of
cancellation or expiration or nonpayment of premium with respect to such
insurance, and shall include a customary breach of warranty clause.
(f) Each policy of insurance maintained by Lessee pursuant to
this ARTICLE VIII shall (1) contain the waiver of any right of subrogation of
the insurer against Lessor, the Agent, the Lease Participants and the Lenders,
and (2) provide that in respect of the interests of Lessor, the Agent, the Lease
Participants and the Lenders, such policies shall not be invalidated by any
fraud, action, inaction or misrepresentation of Lessee or any other Person
acting on behalf of Lessee.
(g) All insurance policies carried in accordance with this
ARTICLE VIII shall be maintained with insurers rated at the inception of such
policies at least A by A.M. Best & Company (PROVIDED that if the rating of any
such insurer falls below A, Lessee shall replace such insurance policy with a
policy issued by an insurer rated at least A within 180 days of such
downgrading), and in all cases the insurer shall be qualified to insure risks in
the State where such Leased Property is located.
ARTICLE IX.
ASSIGNMENT AND SUBLEASING
-------------------------
Lessee may not assign any of its right, title or interest in, to or
under this Lease, except to Cardinal or another Subsidiary of Cardinal pursuant
to an assignment agreement reasonably acceptable to the Agent, the Lease
Participants, the Lenders and the Lessor. Lessee may sublease all or any portion
of any Leased Property, PROVIDED that (a) all obligations of Lessee shall
continue in full effect as obligations of a principal and not of a guarantor or
surety, as though no sublease had been made; (b) such sublease shall be
expressly subject and subordinate to this Lease, the Lease Participation
Agreement, the Loan Agreement and the other Operative Documents; and (c) each
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such sublease shall terminate on or before the Lease Termination
Date.
Except pursuant to an Operative Document, this Lease shall not be
mortgaged or pledged by Lessee, nor shall Lessee mortgage or pledge any interest
in any Leased Property or any portion thereof. Any such mortgage or pledge shall
be void.
ARTICLE X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
-----------------------------------------
Section 10.1 EVENT OF LOSS. Any event (i) which would otherwise
constitute a Casualty during the Base Term, and (ii) which, in the good-faith
judgment of Lessee, renders repair and restoration of a Leased Property
impractical or uneconomical, and (iii) as to which Lessee, within sixty (60)
days after the occurrence of such event, delivers to Lessor an Officer's
Certificate notifying Lessor of such event and of such judgment, shall
constitute an "EVENT OF LOSS". In the case of any other event which constitutes
a Casualty, Lessee shall restore such Leased Property pursuant to SECTION 10.3.
If an Event of Loss other than an Event of Taking shall occur, Lessee shall pay
to Lessor on the next Payment Date following delivery of the Officer's
Certificate pursuant to CLAUSE (iii) above an amount equal to the related Leased
Property Balance. Upon Lessor's receipt of such Leased Property Balance on such
date, Lessor shall cause Lessor's interest in such Leased Property to be
conveyed to Lessee in accordance with and subject to the provisions of SECTION
14.5 hereof; upon completion of such purchase, but not prior thereto, this Lease
and all obligations hereunder with respect to such Leased Property shall
terminate, except with respect to obligations and liabilities hereunder, actual
or contingent, that have arisen or relate to events occurring on or prior to
such date of purchase, or which are expressly stated herein to survive
termination of this Lease.
Upon the consummation of the purchase of any Leased Property pursuant
to this SECTION 10.1, any proceeds derived from insurance required to be
maintained by Lessee pursuant to this Lease for any Leased Property remaining
after payment of such purchase price shall be paid over to, or retained by,
Lessee or as it may direct, and Lessor shall assign to Lessee, without warranty,
all of Lessor's rights to and interest in insurance required to be maintained by
Lessee pursuant to this Lease.
Section 10.2 EVENT OF TAKING. Any event (i) which constitutes a taking
of title to all of, or substantially all of, a Leased Property, or (ii) (A)
which would otherwise constitute a Condemnation, and (B) which, in the
good-faith judgment of
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Lessee, renders restoration and rebuilding of a Leased Property impossible,
impractical or uneconomical, and (C) as to which Lessee, within sixty (60) days
after the occurrence of such event, delivers to Lessor an Officer's Certificate
notifying Lessor of such event and of such judgment, shall constitute an "EVENT
OF TAKING". In the case of any other event which constitutes a Condemnation,
Lessee shall restore and rebuild such Leased Property pursuant to SECTION 10.4.
If an Event of Taking shall occur, Lessee shall pay to Lessor (1) on the next
Payment Date following the occurrence of such Event of Taking, in the case of an
Event of Taking described in CLAUSE (i) above, or (2) on the next Payment Date
following delivery of the Officer's Certificate pursuant to CLAUSE (ii) above,
in the case of an Event of Taking described in CLAUSE (ii) above, an amount
equal to the related Leased Property Balance. Upon Lessor's receipt of such
Leased Property Balance on such date, Lessor shall cause Lessor's interest in
such Leased Property to be conveyed to Lessee in accordance with and subject to
the provisions of SECTION 14.5 hereof (provided that such conveyance shall be
subject to all rights of the condemning authority); upon completion of such
purchase, but not prior thereto, this Lease and all obligations hereunder with
respect to such Leased Property shall terminate, except with respect to
obligations and liabilities hereunder, actual or contingent, that have arisen or
relate to events occurring on or prior to such date of purchase, or which are
expressly stated herein to survive termination of this Lease.
Upon the consummation of the purchase of such Leased Property pursuant
to this SECTION 10.2, all Awards received by Lessor, after deducting any
reasonable costs incurred by Lessor in collecting such Awards, received or
payable on account of an Event of Taking with respect to such Leased Property
during the related Lease Term shall be paid to Lessee, and all rights of Lessor
in Awards not then received shall be assigned to Lessee by Lessor.
Section 10.3 CASUALTY. If a Casualty shall occur, Lessee shall rebuild
and restore the affected Leased Property, will complete the same prior to the
Lease Termination Date, and will cause the condition set forth in SECTION 3.5
(C) of the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date, regardless of whether insurance
proceeds received as a result of such Casualty are sufficient for such purpose.
Section 10.4 CONDEMNATION. If a Condemnation shall occur, Lessee shall
rebuild and restore the affected Leased Property, will complete the same prior
to the Lease Termination Date, and will cause the condition set forth in SECTION
3.5 (c) of the
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Master Agreement to be fulfilled with respect to such restoration and rebuilding
prior to the Lease Termination Date.
Section 10.5 VERIFICATION OF RESTORATION AND REBUILDING. In the event
of Casualty or Condemnation, to verify Lessee's compliance with the foregoing
SECTIONS 10.3 and 10.4, Lessor, the Agent, the Lease Participants, the Lenders
and their respective authorized representatives may, upon five (5) Business
Days' notice to Lessee, make inspections of the affected Leased Property with
respect to (i) the extent of the Casualty or Condemnation and (ii) the
restoration and rebuilding of the related Building and the Land. All reasonable
out-of-pocket costs of such inspections incurred by the Lessor, the Agent, any
Lease Participant or any Lender will be paid by Lessee promptly after written
request. No such inspection shall unreasonably interfere with Lessee's
operations or the operations of any other occupant of such Leased Property. None
of the inspecting parties shall have any duty to make any such inspection or
inquiry and none of the inspecting parties shall incur any liability or
obligation by reason of making or not making any such inspection or inquiry.
Section 10.6 APPLICATION OF PAYMENTS. All proceeds (except for payments
under insurance policies maintained other than pursuant to ARTICLE VIII of this
Lease) received at any time by Lessor, Lessee or the Agent from any Governmental
Authority or other Person with respect to any Condemnation or Casualty to any
Leased Property or any part thereof or with respect to an Event of Loss or an
Event of Taking, PLUS the amount of any payment that would have been due from an
insurer but for Lessee's self-insurance or deductibles ("LOSS PROCEEDS"), shall
(except to the extent SECTION 10.9 applies) be applied as follows:
(a) In the event Lessee purchases such Leased Property
pursuant to SECTION 10.1 or SECTION 10.2, such Loss Proceeds shall be
applied as set forth in SECTION 10.1 or SECTION 10.2, as the case may
be;
(b) In the event of a Casualty at such time when no Event of
Default has occurred and is continuing and Lessee is obligated to
repair and rebuild such Leased Property pursuant to SECTION 10.3,
Lessee may, in good faith and subsequent to the date of such Casualty,
certify to Lessor and to the applicable insurer that no Event of
Default has occurred, in which event the applicable insurer shall pay
the Loss Proceeds to Lessee, unless the estimated cost of restoration
exceeds 50% of the original cost of such Leased Property, in which case
the Loss Proceeds shall be paid to the Agent (or Lessor if the Funded
Amounts have been paid in full), and shall be promptly released to
Lessee upon
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certification by Lessee to Lessor and the Agent that Lessee has
incurred costs in the amount requested to be released for the repair
and rebuilding of such Leased Property;
(c) In the event of a Condemnation at such time when no Event
of Default has occurred and is continuing and Lessee is obligated to
repair and rebuild such Leased Property pursuant to SECTION 10.4,
Lessor shall upon Lessee's request assign to Lessee Lessor's interest
in any applicable Awards; and
(d) As provided in SECTION 10.8 if such section is applicable.
During any period of repair or rebuilding pursuant to this ARTICLE X,
this Lease will remain in full force and effect and Basic Rent shall continue to
accrue and be payable without abatement or reduction. Lessee shall maintain
records setting forth information relating to the receipt and application of
payments in accordance with this SECTION 10.6. Such records shall be kept on
file by Lessee at its offices and shall be made available to Lessor, the Lease
Participants, the Lenders and the Agent upon request.
Section 10.7 PROSECUTION OF AWARDS. (a) If, during the continuance of
any Event of Default, any Condemnation shall occur, Lessee shall give to Lessor
and the Agent promptly, but in any event within thirty (30) days after the
occurrence thereof, written notice of such occurrence and the date thereof,
generally describing the nature and extent of such Condemnation. With respect to
any Event of Taking or any Condemnation, Lessee shall control the negotiations
with the relevant Governmental Authority as to any proceeding in respect of
which Awards are required, under SECTION 10.6, to be assigned or released to
Lessee, unless an Event of Default shall have occurred and be continuing, in
which case (1) the Agent (or Lessor if the Funded Amounts have been fully paid)
shall control such negotiations; and (2) Lessee hereby irrevocably assigns,
transfers and sets over to Lessor all rights of Lessee to any Award made during
the continuance of an Event of Default on account of any Event of Taking or any
Condemnation and, if there will not be separate Awards to Lessor and Lessee on
account of such Event of Taking or Condemnation, irrevocably authorizes and
empowers the Agent (or Lessor if the Funded Amounts have been fully paid) during
the continuance of an Event of Default, with full power of substitution, in the
name of Lessee or otherwise (but without limiting the obligations of Lessee
under this ARTICLE X), to file and prosecute what would otherwise be Lessee's
claim for any such Award and to collect, receipt for and retain the same;
PROVIDED, HOWEVER, that in any event Lessor and the Agent may participate in
such negotiations,
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and no settlement will be made without the prior consent of the Agent (or Lessor
if the Funded Amounts have been fully paid), not to be unreasonably withheld.
(b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor
shall have no interest in, any claim with respect to Lessee's personal property
and equipment not financed by Lessor and Lessee's relocation expenses.
Section 10.8 APPLICATION OF CERTAIN PAYMENTS NOT RELATING TO AN EVENT
OF TAKING. In case of a requisition for temporary use of all or a portion of any
Leased Property which is not an Event of Taking, this Lease shall remain in full
force and effect with respect to such Leased Property, without any abatement or
reduction of Basic Rent, and the Awards for such Leased Property shall, unless
an Event of Default has occurred and is continuing, be paid to Lessee.
Section 10.9 OTHER DISPOSITIONS. Notwithstanding the foregoing
provisions of this ARTICLE X, so long as an Event of Default shall have occurred
and be continuing, any amount that would otherwise be payable to or for the
account of, or that would otherwise be retained by, Lessee pursuant to this
ARTICLE X shall be paid to the Agent (or Lessor if the Funded Amounts have been
fully paid) as security for the obligations of Lessee under this Lease and, at
such time thereafter as no Event of Default shall be continuing, such amount
shall be paid promptly to Lessee to the extent not previously applied by Lessor
or the Agent in accordance with the terms of this Lease or the other Operative
Documents.
Section 10.10 NO RENT ABATEMENT. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of any Leased Property, and Lessee shall continue to perform and
fulfill all of Lessee's obligations, covenants and agreements hereunder
notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date.
ARTICLE XI.
INTEREST CONVEYED TO LESSEE
---------------------------
Lessor and Lessee intend that this Lease be treated, for accounting
purposes, as an operating lease. For all other purposes, Lessee and Lessor
intend that the transaction represented by this Lease be treated as a financing
transaction; for such purposes, it is the intention of the parties hereto (i)
that this Lease be treated as a mortgage or deed of trust (whichever is
applicable in the jurisdictions in which the Leased
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Properties are located) and security agreement, encumbering the Leased Property,
and that Lessee, as grantor, hereby grants to Lessor, as mortgagee or
beneficiary and secured party, or any successor thereto, a first and paramount
Lien on each Leased Property, (ii) that Lessor shall have, as a result of such
determination, all of the rights, powers and remedies of a mortgagee or deed of
trust beneficiary available under Applicable Law to take possession of and sell
(whether by foreclosure or otherwise) any Leased Property, (iii) that the
effective date of such mortgage or deed of trust shall be the effective date of
this Lease, (iv) that the recording of this Lease or a Lease Supplement shall be
deemed to be the recording of such mortgage or deed of trust, and (v) that the
obligations secured by such mortgage or deed of trust shall include the Funded
Amounts and all Basic Rent and Supplemental Rent hereunder and all other
obligations of and amounts due from Lessee hereunder and under the Operative
Documents.
ARTICLE XII.
EVENTS OF DEFAULT
-----------------
The following events shall constitute Events of Default (whether any
such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) Lessee shall fail to make any payment of Basic Rent when due, and
such failure shall continue for five (5) or more days;
(b) Lessee shall fail to make any payment of Rent (other than Basic
Rent) or any other amount payable hereunder or under any of the other Operative
Documents (other than Basic Rent and other than as set forth in CLAUSE (c)), or
the Guarantor shall fail to make any payment of any amount (other than amounts
described in CLAUSE (c) BELOW) payable under the Guaranty or any other Operative
Document (including payment of the Commitment Fee), and such failure shall, in
either case, continue for a period of ten (10) days after written notice thereof
from Lessor (PROVIDED that, if such payment was payable on demand and demand was
made, such demand shall constitute notice for purposes of this CLAUSE (b));
(c) Lessee shall fail to pay the Funded Amount or Lease Balance when
due pursuant to SECTIONS 10.1, 10.2, 14.1 or 14.2, or Lessee shall fail to pay
the Recourse Deficiency Amount when required pursuant to ARTICLE XIV; or the
Guarantor shall fail to
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make any payment of the Funded Amount, Lease Balance or Recourse Deficiency
Amount when due pursuant to Section 1 of the Guaranty or fail to make any
payment when due under the Construction Agency Agreement;
(d) Lessee shall fail to maintain insurance as required by ARTICLE VIII
hereof, and such failure shall continue until the earlier of (i) 15 days after
written notice thereof from Lessor and (ii) the day immediately preceding the
date on which any applicable insurance coverage would otherwise lapse or
terminate;
(e) the occurrence of any breach under SECTION 7 of the Guaranty and
the continuance thereof for a period of thirty (30) days after the earlier of
(i) written notice thereof from Lessor and (ii) knowledge of such breach by an
officer of Cardinal;
(f) a default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the issuance of
indebtedness in excess of $5,000,000 of, or guaranteed by, Cardinal, Lessee or
any Subsidiary of Cardinal, which default is a failure to pay any amount when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), which default continues after the applicable grace period, if any,
or any other default which, if unremedied, uncured or unwaived, would permit
acceleration of the maturity of such indebtedness;
(g) Lessee or Guarantor shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of itself or of its property,
(ii) be unable, or admit in writing inability, to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy, or a petition or answer seeking reorganization or an arrangement
with creditors to take advantage of any insolvency law or an answer admitting
the material allegations of a bankruptcy, reorganization or insolvency petition
filed against it, (vi) take corporate action for the purpose of effecting any of
the foregoing, or (vii) have an order for relief entered against it in any
proceeding under any bankruptcy law;
(h) An order, judgment or decree shall be entered, without the
application, approval or consent of Lessee or Guarantor, by any court of
competent jurisdiction, approving a petition seeking reorganization of such
entity or appointing a receiver, trustee or liquidator of such entity or of all
or a substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 90 consecutive days;
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(i) any representation or warranty by Lessee or the Guarantor in any
Operative Document or in any certificate or document delivered to Lessor, the
Agent, any Lease Participant or any Lender pursuant to any Operative Document
shall have been incorrect in any material respect when made;
(j) the Guarantor shall repudiate or terminate the Guaranty, or the
Guaranty shall at any time cease to be in full force and effect or cease to be
the legal, valid and binding obligation of the Guarantor;
(k) Lessee shall fail in any material respect to timely, perform or
observe any covenant, condition or agreement (not included in CLAUSE (a), (b),
(c), (d), (e), (f), (g), (h), (i) or (j) of this ARTICLE XII) to be performed or
observed by it hereunder or under any other Operative Document and such failure
shall continue for a period of 30 days after Lessee's receipt of written notice
thereof from Lessor, the Agent, any Lease Participant or any Lender;
(l) a Change in Control shall occur;
(m) One or more judgments, orders, decrees or arbitration awards is
entered against Lessee or the Guarantor involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage), as to any single or related series of
transactions, incidents or conditions, of $5,000,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 30
days after the entry thereof, or Lessee or the Guarantor shall enter into any
agreement to settle or compromise any pending or threatened litigation, as to
any single or related series of claims, involving payment by Lessee or the
Guarantor of $5,000,000 or more;
(n) An event shall occur with respect to a Plan or Multiemployer Plan
which has resulted or could reasonably be expected to result in liability of
Lessee or the Guarantor under Title IV of ERISA to the Plan, Multiemployer Plan
or the PBGC in an aggregate amount in excess of $5,000,000; or a contribution
failure shall have occurred with respect to a Plan sufficient to give rise to a
Lien under Section 302(f) of ERISA in an aggregate amount in excess of
$5,000,000; or the aggregate amount of unfunded pension liability among all
Plans at any time exceeds $5,000,000; or Lessee or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$5,000,000; and
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(o) An "Event of Default" shall occur under any other Lease.
ARTICLE XIII.
ENFORCEMENT
-----------
Section 13.1 REMEDIES. Upon the occurrence of any Event of Default and
at any time thereafter, Lessor may, so long as such Event of Default is
continuing, do one or more of the following as Lessor in its sole discretion
shall determine, without limiting any other right or remedy Lessor may have on
account of such Event of Default (including, without limitation, the obligation
of Lessee to purchase the Leased Properties as set forth in SECTION 14.3):
(a) Lessor may, by notice to Lessee, rescind or terminate this Lease as
of the date specified in such notice; however, (A) no reletting, reentry or
taking of possession of any Leased Property by Lessor will be construed as an
election on Lessor's part to terminate this Lease unless a written notice of
such intention is given to Lessee, (B) notwithstanding any reletting, reentry or
taking of possession, Lessor may at any time thereafter elect to terminate this
Lease for a continuing Event of Default, and (C) no act or thing done by Lessor
or any of its agents, representatives or employees and no agreement accepting a
surrender of any Leased Property shall be valid unless the same be made in
writing and executed by Lessor;
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the
written demand of Lessor, return the Leased Properties promptly to Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, ARTICLES VI and XIV hereof as if the Leased Properties were being
returned at the end of the Lease Term, and Lessor shall not be liable for the
reimbursement of Lessee for any costs and expenses incurred by Lessee in
connection therewith and (ii) without prejudice to any other remedy which Lessor
may have for possession of the Leased Properties, and to the extent and in the
manner permitted by Applicable Law, enter upon any Leased Property and take
immediate possession of (to the exclusion of Lessee) any Leased Property or any
part thereof and expel or remove Lessee and any other person who may be
occupying such Leased Property, by summary proceedings or otherwise, all without
liability to Lessee for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise and, in addition to Lessor's other damages, Lessee shall be
responsible for the reasonable costs and expenses of reletting, including
brokers' fees and the reasonable costs of any alterations or repairs made by
Lessor;
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(c) Lessor may (i) sell all or any part of any Leased Property at
public or private sale, as Lessor may determine, free and clear of any rights of
Lessee and without any duty to account to Lessee with respect to such action or
inaction or any proceeds with respect thereto (except to the extent required by
CLAUSE (ii) below if Lessor shall elect to exercise its rights thereunder) in
which event Lessee's obligation to pay Basic Rent hereunder for periods
commencing after the date of such sale shall be terminated or proportionately
reduced, as the case may be; and (ii) if Lessor shall so elect, demand that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date of such sale,
as liquidated damages for loss of a bargain and not as a penalty (the parties
agreeing that Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of such
amount) (in lieu of Basic Rent due for periods commencing on or after the
Payment Date coinciding with such date of sale (or, if the sale date is not a
Payment Date, the Payment Date next preceding the date of such sale)), an amount
equal to (a) the excess, if any, of (1) the sum of (A) all Rent due and unpaid
to and including such Payment Date and (B) the Funded Amounts with respect to
such Leased Property, computed as of such date, over (2) the net proceeds of
such sale (that is, after deducting all costs and expenses incurred by Lessor,
the Agent, any Lease Participant or any Lender incident to such conveyance
(including, without limitation, all costs, expenses, fees, premiums and taxes
described in SECTION 14.5(b))); PLUS (b) interest at the Overdue Rate on the
foregoing amount from such Payment Date until the date of payment;
(d) Lessor may, at its option, not terminate this Lease, and continue
to collect all Basic Rent, Supplemental Rent, and all other amounts (including,
without limitation, the Funded Amount) due Lessor (together with all costs of
collection) and enforce Lessee's obligations under this Lease as and when the
same become due, or are to be performed, and at the option of Lessor, upon any
abandonment of any Leased Property by Lessee or re-entry of same by Lessor,
Lessor may, in its sole and absolute discretion, elect not to terminate this
Lease with respect thereto and may make such reasonable alterations and
necessary repairs in order to relet such Leased Property, and relet such Leased
Property or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Lessor in its reasonable discretion may deem
advisable; and upon each such reletting all rentals actually received by Lessor
from such reletting shall be applied to Lessee's obligations hereunder in such
order, proportion and priority as Lessor may elect in Lessor's sole and absolute
discretion; it being agreed that under no circumstances shall Lessee benefit
from its default
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from any increase in market rents. If such rentals received from such reletting
during any Rent Period are less than the Rent to be paid during that Rent Period
by Lessee hereunder, Lessee shall pay any deficiency, as calculated by Lessor,
to Lessor on the Payment Date for such Rent Period;
(e) If any Leased Property has not been sold, Lessor may, whether or
not Lessor shall have exercised or shall thereafter at any time exercise any of
its rights under PARAGRAPH (b), (c) or (d) of this ARTICLE XIII with respect to
such Leased Property, demand, by written notice to Lessee specifying a date (the
"FINAL RENT PAYMENT DATE") not earlier than 30 days after the date of such
notice, that Lessee purchase, on the Final Rent Payment Date, such Leased
Property in accordance with the provisions of SECTIONS 14.2, 14.4 and 14.5;
PROVIDED, HOWEVER, that (1) such purchase shall occur on the date set forth in
such notice, notwithstanding the provision in SECTION 14.2 calling for such
purchase to occur on the Lease Termination Date; and (2) Lessor's obligations
under SECTION 14.5(A) shall be limited to delivery of a special warranty deed
and quit claim bill of sale of such Leased Property, without recourse or
warranty, but free and clear of Lessor Liens;
(f) Lessor may exercise any other right or remedy that may be available
to it under Applicable Law, or proceed by appropriate court action (legal or
equitable) to enforce the terms hereof or to recover damages for the breach
hereof. Separate suits may be brought to collect any such damages for any Rent
Period(s), and such suits shall not in any manner prejudice Lessor's right to
collect any such damages for any subsequent Rent Period(s), or Lessor may defer
any such suit until after the expiration of the Lease Term, in which event such
suit shall be deemed not to have accrued until the expiration of the Lease Term;
or
(g) Lessor may retain and apply against Lessor's damages all sums which
Lessor would, absent such Event of Default, be required to pay to, or turn over
to, Lessee pursuant to the terms of this Lease.
Section 13.2 REMEDIES CUMULATIVE; NO WAIVER; CONSENTS. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and
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the exercise or the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of Lessee or to be an acquiescence therein. Lessor's consent
to any request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Event of Default shall
in any way be, or be construed to be, a waiver of any future or subsequent
Potential Event of Default or Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor to sell, lease or otherwise use any
Leased Property or part thereof in mitigation of Lessor's damages upon the
occurrence of an Event of Default or that may otherwise limit or modify any of
Lessor's rights or remedies under this ARTICLE XIII.
ARTICLE XIV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
----------------------------------------------------
Section 14.1 LESSEE'S OPTION TO PURCHASE. (a) Subject to the terms and
conditions and provisions set forth in this ARTICLE XIV, Lessee shall have the
option (the "PURCHASE OPTION"), to be exercised as set forth below at any time,
to purchase from Lessor, Lessor's interest in all of the Leased Properties;
PROVIDED that, such option must be exercised with respect to all, but not less
than all, of the Leased Properties, including those Leased Properties subject to
other Leases. Such option must be exercised by (1) written notice to Lessor not
later than twelve months prior to the Lease Termination Date that Lessee shall
either purchase the Leased Properties or renew this Lease pursuant to SECTION
14.9, which notice shall be irrevocable and (2) written notice to Lessor not
later than six months prior to the Lease Termination Date that Lessee shall
exercise the Purchase Option, which notice shall be irrevocable and shall
specify the date that such purchase shall take place, which date shall be a date
occurring not less than thirty (30) days after such notice or the Lease
Termination Date (whichever is earlier). If the Purchase Option is exercised
pursuant to the foregoing, then, subject to the provisions set forth in this
ARTICLE XIV, on the applicable purchase date or the Lease Termination Date, as
the case may be, Lessor shall convey to Lessee, without recourse or warranty
(other than as to the absence of Lessor Liens) and Lessee shall purchase from
Lessor, Lessor's interest in the Leased Properties.
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(b) Notwithstanding the foregoing, Lessee shall have the option (the
"PARTIAL PURCHASE OPTION") to purchase any one Leased Property without
obligating all of the Lessees to purchase all of the Leased Properties under all
of the Leases; PROVIDED that no more than two Leased Properties are purchased
pursuant to this SECTION 14.1(B) or under Section 14.1(b) of any other Lease in
the aggregate under all of the Leases during the Lease Term (it being understood
that no Leased Property purchased pursuant to SECTION 10.1 or 10.2 of any Lease
shall be included for purposes of the limitation on the number of purchases
pursuant to this SECTION 4.1(b)). Such option must be exercised by written
notice to Lessor not later than twelve months prior to the Lease Termination
Date, which exercise shall be irrevocable; such notice shall specify the Leased
Property to be so purchased, and the date that such purchase shall take place,
which date shall be a date occurring not less than thirty (30) days after such
notice or the Lease Termination Date (whichever is earlier). If the Partial
Purchase Option is exercised pursuant to the foregoing, then, subject to the
applicable provisions set forth in this ARTICLE XIV, on the applicable purchase
date or the Lease Termination Date, as the case may be, Lessor shall convey to
Lessee, without recourse or warranty (other than as to the absence of Lessor
Liens) and Lessee shall purchase from Lessor, Lessor's interest in the Leased
Property that is the subject of such Partial Purchase Option.
Section 14.2 CONVEYANCE TO LESSEE. Unless (a) Lessee shall have
properly exercised the Purchase Option and purchased the Leased Properties
pursuant thereto, or (b) Lessee shall have properly exercised the Remarketing
Option or the Surrender Option and shall have fulfilled all of the conditions of
SECTION 14.6 hereof, then, subject to the terms, conditions and provisions set
forth in this ARTICLE XIV, Lessee shall purchase from Lessor, and Lessor shall
convey to Lessee, on the Lease Termination Date all of Lessor's interest in the
Leased Properties. Lessee may designate, in a notice given to Lessor not less
than ten (10) Business Days prior to the closing of such purchase (time being of
the essence), the transferee to whom the conveyance shall be made (if other than
to Lessee), in which case such conveyance shall (subject to the terms and
conditions set forth herein) be made to such designee; PROVIDED, HOWEVER, that
such designation of a transferee shall not cause Lessee to be released, fully or
partially, from any of its obligations under this Lease.
Section 14.3 ACCELERATION OF PURCHASE OBLIGATION. Lessee shall be
obligated to purchase Lessor's interest in the Leased Properties (i)
immediately, automatically and without notice upon the occurrence of any Event
of Default specified in CLAUSE (g) of ARTICLE XII, and (ii) if any other Lessee
exercises its "Purchase Option" pursuant to any other Lease (except as permitted
by
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Section 14.1(b) of any Lease), in each case for the purchase price set forth in
SECTION 14.4. Upon the occurrence of any other Event of Default, Lessee shall be
obligated to purchase Lessor's interest in the Leased Properties upon notice of
such obligation from Lessor.
Section 14.4 DETERMINATION OF PURCHASE PRICE. Upon the purchase by
Lessee of Lessor's interest in the Leased Properties upon the exercise of the
Purchase Option or pursuant to SECTION 14.2 or 14.3, the aggregate purchase
price for all of the Leased Properties (including those subject to other Leases)
shall be an amount equal to the Lease Balance as of the closing date for such
purchase, PLUS any amount due pursuant to Section 7.5(f) of the Master Agreement
as a result of such purchase; each Lessee shall be obligated to purchase the
Leased Property subject to its Lease for a purchase price equal to the aggregate
Leased Property Balance therefor, PLUS any amount due pursuant to Section 7.5(f)
of the Master Agreement as a result of such purchase. Upon the purchase by
Lessee of Lessor's interest in a Leased Property upon the exercise of a Partial
Purchase Option, the purchase price for the Leased Property that is the subject
of such Partial Purchase Option shall be the Leased Property Balance therefor,
plus any amount due pursuant to Section 7.5(f) of the Master Agreement as a
result of such purchase.
Section 14.5 PURCHASE PROCEDURE. (a) If Lessee shall purchase Lessor's
interest in a Leased Property pursuant to any provision of this Lease, (i)
Lessee shall accept from Lessor and Lessor shall convey such Leased Property by
a duly executed and acknowledged special warranty deed and quit claim bill of
sale of such Leased Property in recordable form, (ii) upon the date fixed for
any purchase of Lessor's interest in Leased Property hereunder, Lessee shall pay
to the order of the Agent (or Lessor if the Lease Participant Amounts and the
Loans have been paid in full) the Lease Balance or Leased Property Balance, as
applicable, plus any amount due pursuant to Section 7.5(f) of the Master
Agreement as a result of such purchase by wire transfer of immediately available
funds, and (iii) Lessor will execute and deliver to Lessee, or cause the other
Funding Parties to execute and deliver to Lessee, such other documents,
including releases, termination agreements and termination statements, as may be
legally required or as may be reasonably requested by Lessee in order to effect
such conveyance, free and clear of Lessor Liens and the Liens of the Operative
Documents.
(b) Lessee shall, at Lessee's sole cost and expense, obtain all
required governmental and regulatory approval and consents and shall make such
filings as required by Applicable Law; in the event that Lessor is required by
Applicable Law to take any action in connection with such purchase and sale,
Lessee shall
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pay all costs incurred by Lessor in connection therewith. In addition, all
charges incident to such conveyance, including, without limitation, Lessee's
attorneys' fees, Lessor's attorneys' fees, commissions, Lessee's and Lessor's
escrow fees, recording fees, title insurance premiums and all applicable
documentary transfer or other transfer taxes and other taxes required to be paid
in order to record the transfer documents that might be imposed by reason of
such conveyance and the delivery of such deed shall be borne entirely and paid
by Lessee.
(c) Upon expiration or termination of this Lease resulting in
conveyance of Lessor's interest in the title to the Leased Properties to Lessee,
there shall be no apportionment of rents (including, without limitation, water
rents and sewer rents), taxes, insurance, utility charges or other charges
payable with respect to the Leased Properties, all of such rents, taxes,
insurance, utility or other charges due and payable with respect to the Leased
Properties prior to termination being payable by Lessee hereunder and all due
after such time being payable by Lessee as the then owner of the Leased
Properties.
Section 14.6 OPTION TO REMARKET; SURRENDER OPTION. Subject to the
fulfillment of each of the conditions set forth in this SECTION 14.6, Lessee
shall have the option to either (i) market all of, but not less than all of, the
Leased Properties (except those purchased pursuant to a Partial Purchase Option)
for Lessor (the "REMARKETING OPTION") or (ii) surrender all of, but not less
than all of, the Leased Properties (except those purchased pursuant to a Partial
Purchase Option) to Lessor (the "SURRENDER OPTION").
Lessee's effective exercise and consummation of the Remarketing Option
or the Surrender Option, as the case may be, shall be subject to the due and
timely fulfillment of each of the following provisions, the failure of any of
which shall render the Remarketing Option or the Surrender Option, as the case
may be, and Lessee's exercise thereof null and void, in which event, Lessee
shall be obligated to perform its obligations under SECTION 14.2.
(a) Not later than twelve months prior to the Lease
Termination Date, Lessee shall give to Lessor and the Agent written
notice of Lessee's exercise of the Remarketing Option or the Surrender
Option, as the case may be, which exercise shall be irrevocable and
shall state whether Lessee has exercised the Remarketing Option or the
Surrender Option. The exercise by any Lessee under any Lease of the
Remarketing Option or Surrender Option in accordance with the terms of
such Lease shall be deemed to be the exercise of such option by all
Lessees under all of the Leases.
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(b) Not later than ten (10) Business Days prior to the Lease
Termination Date, Lessee shall deliver to Lessor and the Agent an
environmental assessment of each Leased Property dated not later than
forty-five (45) days prior to the Lease Termination Date. Such
environmental assessment shall be prepared by an environmental
consultant selected by the Required Funding Parties, shall be in form,
detail and substance satisfactory to the Required Funding Parties, and
shall otherwise indicate the environmental condition of each Leased
Property to be the same as described in the related Environmental
Audit.
(c) On the date of Lessee's notice to Lessor and the Agent of
Lessee's exercise of the Remarketing Option, or the Surrender Option,
as the case may be, each of the Construction Conditions shall have been
timely satisfied and no Event of Default or Potential Event of Default
shall exist, and thereafter, no Event of Default or Potential Event of
Default shall exist under this Lease.
(d) Lessee shall have completed all Alterations, restoration
and rebuilding of the Leased Properties pursuant to SECTIONS 6.1, 6.2,
10.3 and 10.4 (as the case may be) and shall have fulfilled all of the
conditions and requirements in connection therewith pursuant to said
SECTIONS, in each case by the date on which Lessor and the Agent
receive Lessee's notice of Lessee's exercise of the Remarketing Option
or the Surrender Option, as the case may be (time being of the
essence), regardless of whether the same shall be within Lessee's
control. If any Building is damaged by a Casualty or Condemnation and
cannot be restored by the exercise of reasonable diligence by the date
of Lessee's notice, Lessee shall have the right to purchase such
Building for the Leased Property Balance thereof on the Lease
Termination Date, and to exercise the Remarketing or Surrender Option
with respect to the other Leased Properties.
(e) Lessee shall promptly provide any maintenance records
relating to each Leased Property to Lessor, the Agent and any potential
purchaser upon request, and shall otherwise do all things necessary to
deliver possession of such Leased Property to the purchaser. Lessee
shall allow Lessor, the Agent and any potential purchaser access to any
Leased Property for the purpose of inspecting the same.
(f) On the Lease Termination Date, Lessee shall surrender the
Leased Properties in accordance with SECTION 14.8 hereof.
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(g) In connection with any such sale of the Leased Properties,
Lessee will provide to the purchaser all customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor Liens) and the condition of the Leased Properties,
including, without limitation, an environmental indemnity (provided
that such environmental indemnity is consistent, in scope, duration and
form, with environmental indemnities provided for similar types of
property). Lessee shall fulfill all of the requirements set forth in
CLAUSE (b) of SECTION 14.5, and such requirements are incorporated
herein by reference. As to Lessor, any such sale shall be made on an
"as is, with all faults" basis without representation or warranty by
Lessor, other than the absence of Lessor Liens.
(h) In connection with any such sale of Leased Properties,
Lessee shall pay directly, and not from the sale proceeds, all
prorations, credits, costs and expenses of the sale of the Leased
Properties, whether incurred by Lessor, any Lease Participant, any
Lender, the Agent or Lessee, including without limitation, the cost of
all title insurance, surveys, environmental reports, appraisals,
transfer taxes, Lessor's and the Agent's attorneys' fees, Lessee's
attorneys' fees, commissions, escrow fees, recording fees, and all
applicable documentary and other transfer taxes.
(i) Lessee shall pay to the Agent on the Lease Termination
Date (or to such other Person as Agent shall notify Lessee in writing,
or in the case of Supplemental Rent, to the Person entitled thereto) an
amount equal to the Recourse Deficiency Amount, PLUS all Basic Rent and
Supplemental Rent, and all other amounts hereunder which have accrued
prior to or as of such date, in the type of funds specified in SECTION
3.3 hereof.
If Lessee has exercised the Remarketing Option, the following additional
provisions shall apply: During the period commencing on the date twelve months
prior to the scheduled expiration of the Lease Term, Lessee shall, as
nonexclusive agent for Lessor, use commercially reasonable efforts to sell
Lessor's interest in the Leased Properties and will attempt to obtain the
highest purchase price therefor. All such marketing of the Leased Properties
shall be at Lessee's sole expense. Lessee shall submit all bids to Lessor and
the Agent and Lessor and the Agent will have the right to review the same and
the right to submit any one or more bids. All bids shall be on an all-cash
basis. In no event shall such bidder be Lessee, the Guarantor or any Subsidiary
or Affiliate of Lessee or the Guarantor. The written offer must specify the
Lease Termination Date as the closing
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date. If, and only if, the selling price (net of closing costs and prorations,
as reasonably estimated by the Agent) is less than the difference between the
Funded Amount with respect to the Leased Properties at such time minus the
Recourse Deficiency Amount, then Lessor or the Agent may, in its sole and
absolute discretion, by notice to Lessee, reject such offer to purchase, in
which event the parties will proceed according to the provisions of SECTION 14.7
[Rejection of Sale] hereof. If neither Lessor nor the Agent rejects such
purchase offer as provided above, the closing of such purchase of the Leased
Properties by such purchaser shall occur on the Lease Termination Date,
contemporaneously with Lessee's surrender of the Leased Properties in accordance
with SECTION 14.8 hereof, and the gross proceeds of the sale (i.e., without
deduction for any marketing, closing or other costs, prorations or commissions)
shall be paid directly to the Agent (or Lessor if the Funded Amounts have been
fully paid); PROVIDED, HOWEVER, that if the sum of the gross proceeds from such
sale plus the Recourse Deficiency Amount paid by Lessee on the Lease Termination
Date pursuant to SECTION 14.6(I), minus any and all costs and expenses
(including broker fees, appraisal costs, legal fees and transfer taxes) incurred
by the Agent or Lessor in connection with the marketing of the Leased Properties
or the sale thereof exceeds the Funded Amount with respect to the Leased
Properties as of such date, then the excess shall be paid to Lessee on the Lease
Termination Date. Lessee shall have no right, power or authority to bind Lessor
in connection with any proposed sale of the Leased Properties.
Section 14.7 REJECTION OF SALE. Notwithstanding anything contained
herein to the contrary, if Lessor or the Agent rejects the purchase offer for
the Leased Properties as provided in SECTION 14.6, then (a) Lessee shall pay to
the Agent the Recourse Deficiency Amount pursuant to SECTION 14.6(I), (b) Lessor
shall retain title to the Leased Properties, and (c) in addition to Lessee's
other obligations hereunder, Lessee will reimburse Lessor and the Agent, within
ten (10) Business Days after written request, for all reasonable costs and
expenses incurred by Lessor or Agent during the period ending on the first
anniversary of the Lease Termination Date in connection with the marketing,
sale, closing or transfer of the Leased Properties, which obligation shall
survive the Lease Termination Date and the termination or expiration of this
Lease.
Section 14.8 RETURN OF LEASED PROPERTY. If Lessor retains title to any
Leased Property pursuant to SECTION 14.7 hereof, Lessee properly exercises the
Remarketing Option and fulfills all of the conditions of SECTION 14.6 and no
bids are submitted for the Leased Property or Lessee has properly exercised the
Surrender Option, then Lessee shall, on the Lease Termination Date, and at its
own expense, return possession of such Leased
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Property to Lessor for retention by Lessor or, if Lessee properly exercises the
Remarketing Option and fulfills all of the conditions of SECTION 14.6 and
neither Lessor nor the Agent rejects such purchase offer pursuant to SECTION
14.6, then Lessee shall, on such Lease Termination Date, and at its own cost,
transfer possession of the Leased Property to the independent purchaser thereof,
in each case by surrendering the same into the possession of Lessor or such
purchaser, as the case may be, free and clear of all Liens other than Lessor
Liens, in as good condition as it was on the Completion Date (as modified by
Alterations permitted by this Lease), ordinary wear and tear excepted, and in
compliance with Applicable Law. Lessee shall, on and within a reasonable time
before and after the Lease Termination Date, cooperate with Lessor and the
independent purchaser of such Leased Property in order to facilitate the
ownership and operation by such purchaser of such Leased Property after the
Lease Termination Date, which cooperation shall include the following, all of
which Lessee shall do on or before the Lease Termination Date or as soon
thereafter as is reasonably practicable: providing all books and records
regarding the maintenance and ownership of such Leased Property and all
know-how, data and technical information relating thereto, providing a copy of
the Plans and Specifications, granting or assigning all licenses (to the extent
assignable) necessary for the operation and maintenance of such Leased Property,
and cooperating in seeking and obtaining all necessary Governmental Action.
Lessee shall have also paid the cost of all Alterations commenced prior to the
Lease Termination Date. The obligations of Lessee under this ARTICLE XIV shall
survive the expiration or termination of this Lease.
Section 14.9 RENEWAL. Subject to the conditions set forth herein,
Lessee may, (1) by written notice to Lessor and the Agent given not later than
twelve months and not earlier than sixteen months, prior to the Lease
Termination Date then in effect, that Lessee shall either exercise the Purchase
Option or renew this Lease and (2) by written notice to Lessor and the Agent
given not later than six months and not earlier than sixteen months prior to the
Lease Termination Date then in effect that Lessee shall renew this Lease, for up
to five years commencing on the date following the Lease Termination Date then
in effect, PROVIDED that Lessee may only exercise such renewal option twice. No
later than the date that is 45 days after the date the request to renew has been
delivered to each of Lessor and the Agent, the Agent will notify Lessee whether
or not Lessor, the Lease Participants and the Lenders consent to such renewal
request (which consent, in the case of Lessor, the Lease Participants and the
Lenders, may be granted or denied in their sole discretion, and may be
conditioned on such conditions precedent as may be specified by Lessor, the
Lease Participants and the Lenders),
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PROVIDED that if such renewal request is rejected prior to twelve months prior
to the Lease Termination Date, Lessee may exercise any of its other options
pursuant to, and in accordance with, this ARTICLE XIV. If the Agent fails to
respond within such time frame, such failure shall be deemed to be a rejection
of such request. If the Agent notifies Lessee of Lessor's, the Lease
Participants' and the Lenders' consent to such renewal, such renewal shall be
effective. Any renewal of this Lease shall be on the same terms and conditions
as are set forth herein for the original Lease Term, except that the amount of
Basic Rent to be paid by Lessee shall be as mutually agreed upon among Lessee,
Lessor, the Lease Participants and the Lenders prior to such renewal.
ARTICLE XV.
LESSEE'S EQUIPMENT
------------------
After any repossession of any Leased Property (whether or not this
Lease has been terminated), as a result of the exercise of the Surrender Option
or otherwise, Lessee, at its expense and so long as such removal of such
Alteration shall not result in a violation of Applicable Law, shall, within a
reasonable time after such repossession or within sixty (60) days after Lessee's
receipt of Lessor's written request (whichever shall first occur), remove all of
Lessee's trade fixtures, personal property and equipment from such Leased
Property (to the extent that the same can be readily removed from such Leased
Property without causing material damage to such Leased Property); PROVIDED,
HOWEVER, that Lessee shall not remove any such trade fixtures, personal property
or equipment that (i) has been financed by Lessor or otherwise constituting
Leased Property (or that constitutes a replacement of such property) or (ii)
with respect to which Lessor notifies Lessee that it is exercising its purchase
option (in which case, Lessor shall pay to Lessee the fair market value of such
trade fixture, personal property or equipment on such date of repossession and
Lessee shall execute and deliver a bill of sale therefor to Lessor), PROVIDED
that the purchase option set forth in this CLAUSE (II) shall not apply to
Lessee's inventory. Any of Lessee's trade fixtures, personal property and
equipment not so removed by Lessee within such period shall be considered
abandoned by Lessee, and title thereto shall without further act vest in Lessor,
and may be appropriated, sold, destroyed or otherwise disposed of by Lessor
without notice to Lessee and without obligation to account therefor and Lessee
will pay Lessor, upon written demand, all reasonable costs and expenses incurred
by Lessor in removing, storing or disposing of the same and all costs and
expenses incurred by Lessor to repair any damage to such Leased Property caused
by such removal. Lessee will immediately repair at its expense all damage to
such Leased Property caused by any such
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removal (unless such removal is effected by Lessor, in which event Lessee shall
pay all reasonable costs and expenses incurred by Lessor for such repairs).
Lessor shall have no liability in exercising Lessor's rights under this ARTICLE
XV, nor shall Lessor be responsible for any loss of or damage to Lessee's
personal property and equipment.
ARTICLE XVI.
RIGHT TO PERFORM FOR LESSEE
---------------------------
If Lessee shall fail to perform or comply with any of its agreements
contained herein, Lessor may perform or comply with such agreement, and Lessor
shall not thereby be deemed to have waived any default caused by such failure,
and the amount of such payment and the amount of the expenses of Lessor
(including reasonable attorney's fees and expenses) incurred in connection with
such payment or the performance of or compliance with such agreement, as the
case may be, shall be deemed Supplemental Rent, payable by Lessee to Lessor
within thirty (30) days after written demand therefor.
ARTICLE XVII.
MISCELLANEOUS
-------------
Section 17.1 REPORTS. To the extent required under Applicable Law and
to the extent it is reasonably practical for Lessee to do so, Lessee shall
prepare and file in timely fashion, or, where such filing is required to be made
by Lessor or it is otherwise not reasonably practical for Lessee to make such
filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent)
within a reasonable time prior to the date for filing and Lessor shall file, any
material reports with respect to the condition or operation of such Leased
Property that shall be required to be filed with any Governmental Authority.
Section 17.2 BINDING EFFECT; SUCCESSORS AND ASSIGNS; SURVIVAL. The
terms and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and Lessee, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer any Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
to the benefit of their respective permitted successors and assigns, and the
rights hereunder of the Agent, the Lease Participants and the Lenders shall
inure (subject to such conditions as are contained herein) to the benefit of
their respective permitted successors and assigns. Lessee hereby acknowledges
that Lessor has assigned all of its right, title and interest to, in and under
this Lease to
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the Agent, the Lease Participants and the Lenders, and that all of Lessor's
rights hereunder may be exercised by the Agent.
Section 17.3 QUIET ENJOYMENT. Lessor covenants that it will not
interfere in Lessee's or any of its permitted sublessees' quiet enjoyment of the
Leased Properties in accordance with this Lease during the Lease Term, so long
as no Event of Default has occurred and is continuing. Such right of quiet
enjoyment is independent of, and shall not affect, Lessor's rights otherwise to
initiate legal action to enforce the obligations of Lessee under this Lease.
Section 17.4 NOTICES. Unless otherwise specified herein, all notices,
offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in writing and
shall be deemed to have been given as set forth in Section 8.2 of the Master
Agreement. All such notices, offers, acceptances, rejections, consents,
requests, demands or other communications shall be addressed as follows or to
such other address as any of the parties hereto may designate by written notice:
If to Lessor: SunTrust Banks, Inc.
25 Park Place
Atlanta, Georgia 30303
If to Lessee: [Lessee Sub]
5555 Glendon Court
Dublin, Ohio 43016
Attn: Treasurer
with a copy to: General Counsel at same address
If to Agent: SunTrust Bank, Atlanta
c/o SunTrust Capital Markets, Inc.
25 Park Place, N.E., Suite 500
Atlanta, Georgia 30303
Attn: Todd Shutley
If to a Lease Participant or Lender, to the address provided in the
Master Agreement.
Section 17.5 SEVERABILITY. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction,
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and Lessee shall remain liable to perform its obligations hereunder except to
the extent of such unenforceability. To the extent permitted by Applicable Law,
Lessee hereby waives any provision of law that renders any provision hereof
prohibited or unenforceable in any respect.
Section 17.6 AMENDMENT; COMPLETE AGREEMENTS. Neither this Lease nor any
of the terms hereof may be terminated, amended, supplemented, waived or modified
orally, except by an instrument in writing signed by Lessor and Lessee in
accordance with the provisions of Section 8.4 of the Master Agreement. This
Lease, together with the other Operative Documents, is intended by the parties
as a final expression of their lease agreement and as a complete and exclusive
statement of the terms thereof, all negotiations, considerations and
representations between the parties having been incorporated herein and therein.
No course of prior dealings between the parties or their officers, employees,
agents or Affiliates shall be relevant or admissible to supplement, explain, or
vary any of the terms of this Lease or any other Operative Document. Acceptance
of, or acquiescence in, a course of performance rendered under this or any prior
agreement between the parties or their Affiliates shall not be relevant or
admissible to determine the meaning of any of the terms of this Lease or any
other Operative Document. No representations, undertakings, or agreements have
been made or relied upon in the making of this Lease other than those
specifically set forth in the Operative Documents.
Section 17.7 CONSTRUCTION. This Lease shall not be construed more
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.
Section 17.8 HEADINGS. The Table of Contents and headings of the
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.
Section 17.9 COUNTERPARTS. This Lease may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 17.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES
HEREUNDER, AND
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THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH
ESTATES ARE LOCATED.
Section 17.11 DISCHARGE OF LESSEE'S OBLIGATIONS BY ITS AFFILIATES.
Lessor agrees that performance of any of Lessee's obligations hereunder by one
or more of Lessee's Affiliates or one or more of Lessee's sublessees of the
Leased Properties or any part thereof shall constitute performance by Lessee of
such obligations to the same extent and with the same effect hereunder as if
such obligations were performed by Lessee, but no such performance shall excuse
Lessee from any obligation not performed by it or on its behalf under the
Operative Documents.
Section 17.12 LIABILITY OF LESSOR LIMITED. Except as otherwise
expressly provided below in this SECTION 17.12, it is expressly understood and
agreed by and between Lessee, Lessor and their respective successors and assigns
that nothing herein contained shall be construed as creating any liability of
Lessor or any of its Affiliates or any of their respective officers, directors,
employees or agents, individually or personally, to perform any covenant, either
express or implied, contained herein, all such liability, if any, being
expressly waived by Lessee and by each and every Person now or hereafter
claiming by, through or under Lessee, and that, so far as Lessor or any of its
Affiliates or any of their respective officers, directors, employees or agents,
individually or personally, is concerned, Lessee and any Person claiming by,
through or under Lessee shall look solely to the right, title and interest of
Lessor in the Leased Properties and any proceeds from Lessor's sale or
encumbrance thereof (PROVIDED, HOWEVER, that Lessee shall not be entitled to any
double recovery) for the performance of any obligation under this Lease and
under the Operative Documents and the satisfaction of any liability arising
therefrom.
Section 17.13 ESTOPPEL CERTIFICATES. Each party hereto agrees that at
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment or letter of
intent to purchase any Leased Property or any part thereof or any Note or Lease
Participation), assignee or mortgagee or third party designated by such other
party, a certificate stating (a) that this Lease is unmodified and in force and
effect (or if there have been modifications, that this Lease is in force and
effect as modified, and identifying the modification agreements); (b) the date
to which Basic Rent has been paid; (c) whether or not there is any existing
default by Lessee in the payment of Basic Rent or any other sum of money
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hereunder, and whether or not there is any other existing default by either
party with respect to which a notice of default has been served, and, if there
is any such default, specifying the nature and extent thereof; (d) whether or
not, to the knowledge of the signer after due inquiry and investigation, there
are any setoffs, defenses or counterclaims against enforcement of the
obligations to be performed hereunder existing in favor of the party executing
such certificate and (e) other items that may be reasonably requested; PROVIDED
that no such certificate may be requested unless the requesting party has a good
faith reason for such request.
Section 17.14 NO JOINT VENTURE. Any intention to create a joint venture
or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
Section 17.15 NO ACCORD AND SATISFACTION. The acceptance by Lessor of
any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall be construed, to constitute an accord and satisfaction of any dispute
between Lessor and Lessee regarding sums due and payable by Lessee hereunder,
unless Lessor specifically deems it as such in writing.
Section 17.16 NO MERGER. In no event shall the leasehold interests,
estates or rights of Lessee hereunder, or of the holder of any Notes secured by
a security interest in this Lease, or of any Lease Participant, merge with any
interests, estates or rights of Lessor in or to the Leased Properties, it being
understood that such leasehold interests, estates and rights of Lessee
hereunder, and of the holder of any Notes secured by a security interest in this
Lease, and of the Lease Participants, shall be deemed to be separate and
distinct from Lessor's interests, estates and rights in or to the Leased
Properties, notwithstanding that any such interests, estates or rights shall at
any time or times be held by or vested in the same person, corporation or other
entity.
Section 17.17 SURVIVAL. The obligations of Lessee to be performed under
this Lease prior to the Lease Termination Date and the obligations of Lessee
pursuant to ARTICLE III, ARTICLES X, XI, XIII, SECTIONS 14.2, 14.3, 14.4, 14.5,
14.8, ARTICLES XIV, XV, and XVI, and SECTIONS 17.10 and 17.12 shall survive the
expiration or termination of this Lease. The extension of any applicable statute
of limitations by Lessor, Lessee, the Agent or any Indemnitee shall not affect
such survival.
Section 17.18 CHATTEL PAPER. To the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform
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Commercial Code in any applicable jurisdiction), no security interest in this
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart, which shall be identified as the original
counterpart by the receipt of the Agent.
Section 17.19 TIME OF ESSENCE. Time is of the essence of this Lease.
Section 17.20 RECORDATION OF LEASE. Lessee will, at its expense, cause
this Lease or memorandum of lease (if permitted by Applicable Law) to be
recorded in the proper office or offices in the States and the municipalities in
which the Land is located.
Section 17.21 INVESTMENT OF SECURITY FUNDS. Any amounts not payable to
Lessee pursuant to any provision of ARTICLE VIII, X or XIV or this SECTION 17.21
solely because an Event of Default shall have occurred and be continuing shall
be held by the Agent (or Lessor if the Funded Amounts have been fully paid) as
security for the obligations of Lessee under this Lease and the Master
Agreement. At such time as no Event of Default shall be continuing, such
amounts, net of any amounts previously applied to Lessee's obligations hereunder
or under the Master Agreement, shall be paid to Lessee. Any such amounts which
are held by the Agent (or Lessor if the Funded Amounts have been fully paid)
pending payment to Lessee shall until paid to Lessee, as provided hereunder or,
as long as the Lease Participation Agreement or the Loan Agreement is in effect,
until applied against Lessee's obligations herein and under the Master Agreement
and distributed as provided in the Lease Participation Agreement and the Loan
Agreement or herein (after the Lease Participation Agreement and the Loan
Agreement are no longer in effect) in connection with any exercise of remedies
hereunder, be invested by the Agent or Lessor, as the case may be as directed
from time to time in writing by Lessee (PROVIDED, HOWEVER, if an Event of
Default has occurred and is continuing it will be directed by the Agent or, if
the Funded Amounts have been fully paid, Lessor) and at the expense and risk of
Lessee, in Permitted Investments. Any gain (including interest received)
realized as the result of any such investment (net of any fees, commissions and
other expenses, if any, incurred in connection with such investment) shall be
applied in the same manner as the principal invested.
Section 17.22 IDB DOCUMENTATION. If any Leased Property is subject to
an IDB Lease, this Lease shall be deemed to be a sublease. Lessee hereby agrees
to perform all of its obligations and all obligations of Lessor under all IDB
Documentation related to any Leased Property.
[Signature page follows]
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<PAGE> 120
IN WITNESS WHEREOF, the undersigned have each caused this Lease
Agreement to be duly executed and delivered and attested by their respective
officers thereunto duly authorized as of the day and year first above written.
Witnessed: [Lessee Sub],
as Lessee
By______________________ By____________________________
Name: Name:
Title:
By______________________
Name:
LEASE
AGREEMENT
S-1
<PAGE> 121
SUNTRUST BANKS, INC., as
Lessor
Witnessed:
By_______________________ By____________________________
Name: Name:
Title:
By_______________________
Name:
LEASE
AGREEMENT
S-2
<PAGE> 122
STATE OF )
) ss:
COUNTY OF )
The foregoing instrument was acknowledged before me this ___ day of
July, 1996, by ______________________________, ______________________ of
SunTrust Banks, Inc., a Georgia corporation, on behalf of the corporation, as
h___ and its free act and deed.
_________________________
Notary Public
My Commission Expires:
LEASE
AGREEMENT
S-3
<PAGE> 123
STATE OF )
) ss:
COUNTY OF )
The foregoing instrument was acknowledged before me this ___ day of
July, 1996, by ______________________________, ______________________ of
[Lessee Sub], a _____________ corporation, on behalf of the corporation, as
h___ and its free act and deed.
_________________________
Notary Public
My Commission Expires:
LEASE
AGREEMENT
S-4
<PAGE> 124
Recording requested by EXHIBIT A TO
and when recorded mail to: THE LEASE
------------
____________________________
____________________________
____________________________
____________________________
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE
THIS LEASE SUPPLEMENT NO. __ (this "LEASE SUPPLEMENT") dated as of
[ ], between SUNTRUST BANKS, INC., as the lessor (the "LESSOR"),
and [Lessee Sub], a ___________ corporation, as lessee (the "LESSEE").
WHEREAS Lessor is the owner of the Land described on Schedule I hereto
and wishes to lease the Land together with any Building and other improvements
thereon or which thereafter may be constructed thereon pursuant to the Lease to
Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Lease Agreement, dated
as of July 16, 1996, between Lessee and Lessor; and the rules of interpretation
set forth in Appendix A to the Lease shall apply to this Lease Supplement.
SECTION 2. THE PROPERTIES. Attached hereto as Schedule I is the
description of certain Land (the "SUBJECT PROPERTY"). Effective upon the
execution and delivery of this Lease Supplement by Lessor and Lessee, such Land,
together with any Building and other improvements thereon or which thereafter
may be constructed thereon pursuant to the Lease shall be subject to the terms
and provisions of the Lease and Lessor hereby grants, conveys, transfers and
assigns to Lessee those interests, rights, titles, estates, powers and
privileges provided for in the Lease with respect to the Subject Property.
A-1
<PAGE> 125
SECTION 3. AMENDMENTS TO LEASE WITH RESPECT TO SUBJECT PROPERTY.
Effective upon the execution and delivery of this Lease Supplement by Lessor and
Lessee, the following terms and provisions shall apply to the Lease with respect
to the Subject Property:
[Insert Applicable Sections per Local Law]
SECTION 4. RATIFICATION; INCORPORATION. Except as specifically modified
hereby, the terms and provisions of the Lease are hereby ratified and confirmed
and remain in full force and effect. The terms of the Lease (as amended by this
Lease Supplement) are by this reference incorporated herein and made a part
hereof.
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "ORIGINAL EXECUTED
COUNTERPART"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA, BUT EXCLUDING
ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO
MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE HEREUNDER, AND THE
EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATE IS
LOCATED.
SECTION 7. COUNTERPART EXECUTION. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
SUNTRUST BANKS, INC., as the
Lessor
By____________________________
Name:
Title:
[Lessee Sub] as the Lessee
By____________________________
Name:
Title:
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<PAGE> 127
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ____ ____, this
_____ day of __________, _______________, by _____________________, as
____________________ of SunTrust Banks, Inc., on behalf of such corporation.
[Notarial Seal] ___________________________
Notary Public
My commission expires: _____________
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ___ ____, this _____
day of __________, __________, by ___________, as _____________, of [Lessee
Sub], a ____________ corporation, on behalf of the corporation.
[Notarial Seal] ______________________________
Notary Public
My commission expires: ______________
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Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as of the date hereof.
SUNTRUST BANK, ATLANTA, as the
Agent
By___________________________
Name:
Title:
By___________________________
Name:
Title:
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APPENDIX A
to
Master Agreement, Leases,
Loan Agreement, Construction Agency Agreement
and Lease Participation Agreement
---------------------------------
DEFINITIONS AND INTERPRETATION
A. INTERPRETATION. In each Operative Document, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and
vice versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other
gender;
(iv) reference to any agreement (including any Operative
Document), document or instrument means such agreement, document or
instrument as amended, supplemented or modified and in effect from time
to time in accordance with the terms thereof and, if applicable, the
terms of the other Operative Documents and reference to any promissory
note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor;
(v) reference to any Applicable Law means such Applicable Law
as amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision
of any Applicable Law means that provision of such Applicable Law from
time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section
or other provision;
(vi) reference in any Operative Document to any Article,
Section, Appendix, Schedule or Exhibit means such Article or Section
thereof or Appendix, Schedule or Exhibit thereto;
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(vii) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to an Operative Document as a whole
and not to any particular ARTICLE, SECTION or other provision hereof;
(viii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
(ix) "or" is not exclusive; and
(x) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding".
B. ACCOUNTING TERMS. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. CONFLICT IN OPERATIVE DOCUMENTS. If there is any conflict between
any Operative Documents, such Operative Document shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but, to the
extent (and only to the extent) of such conflict, the Master Agreement shall
prevail and control.
D. LEGAL REPRESENTATION OF THE PARTIES. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
E. DEFINED TERMS. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"A LOAN" means the A Percentage of Loans made by Lenders pursuant to
the Loan Agreement and the Master Agreement.
"A NOTE" is defined in Section 2.2 of the Loan Agreement.
"A PERCENTAGE" means 84%.
"ACQUISITION" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of
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any Person, or otherwise causing any Person to become a Subsidiary, or (c) a
merger or consolidation or any other combination with another Person (other than
a Person that is a Subsidiary).
"ADDRESS" means with respect to any Person, its address set forth in
Schedule 8.2 to the Master Agreement or such other address as it shall have
identified to the parties to the Master Agreement in writing.
"AFFECTED FUNDING PARTY" is defined in Section 7.5 of the Master
Agreement.
"AFFILIATE" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
For purposes of this definition, the term "CONTROL" (including the correlative
meanings of the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise, provided (but without limiting the foregoing) that no
pledge of voting securities of any Person without the current right to exercise
voting rights with respect thereto shall by itself be deemed to constitute
control over such Person.
"AFTER-TAX BASIS" means (a) with respect to any payment to be received
by an Indemnitee (which, for purposes of this definition, shall include any Tax
Indemnitee), the amount of such payment supplemented by a further payment or
payments so that, after deducting from such payments the amount of all Taxes
(net of any current credits, deductions or other Tax benefits arising from the
payment by the Indemnitee of any amount, including Taxes, for which the payment
to be received is made) imposed currently on the Indemnitee by any Governmental
Authority or taxing authority with respect to such payments, the balance of such
payments shall be equal to the original payment to be received and (b) with
respect to any payment to be made by any Indemnitee, the amount of such payment
supplemented by a further payment or payments so that, after increasing such
payment by the amount of any current credits or other Tax benefits realized by
the Indemnitee under the laws of any Governmental Authority or taxing authority
resulting from the making of such payments, the sum of such payments (net of
such credits or benefits) shall be equal to the original payment to be made;
PROVIDED, HOWEVER, for the purposes of this definition, and for purposes of any
payment to be made to either a Lessee or an Indemnitee on an after-tax basis, it
shall be assumed that (i) federal, state and local taxes are payable at the
highest combined marginal federal and state statutory income tax rate (taking
into account the
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deductibility of state income taxes for federal income tax purposes) applicable
to corporations from time to time and (ii) such Indemnitee or Lessee has
sufficient income to utilize any deductions, credits (other than foreign tax
credits, the use of which shall be determined on an actual basis) and other Tax
benefits arising from any payments described in CLAUSE (b) of this definition.
"AGENT" means SunTrust Bank, Atlanta, a Georgia banking corporation, in
its capacity as agent under the Master Agreement and the Loan Agreement.
"ALTERATIONS" means, with respect to any Leased Property, fixtures,
alterations, improvements, modifications and additions to such Leased Property.
"ALTERNATIVE RATE" means, for any period, an interest rate per annum
equal to the rate of interest most recently announced by the Agent in Atlanta,
Georgia from time to time as its "prime rate" for calculating interest on
certain loans, which need not be the lowest interest rate charged by such bank.
If such prime rate or equivalent of such bank changes from time to time after
the date hereof, the Alternative Rate shall be automatically increased or
decreased, as the case may be, without notice to any Lessee or the Guarantor as
of the effective time of each change in such prime rate or equivalent.
"APPLICABLE LAW" means all existing and future applicable laws
(including Environmental Laws), rules, regulations (including proposed,
temporary and final income tax regulations), statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment (including,
without limitation, wetlands) and those pertaining to the construction, use or
occupancy of any Leased Property) and any restrictive covenant or deed
restriction or easement of record affecting any Leased Property.
"APPRAISAL" is defined in Section 3.1 of the Master Agreement.
"APPRAISER" means an MAI appraiser satisfactory to the Agent and the
Lessor.
"ARCHITECT" means with respect to any Leased Property the architect
engaged in connection with the construction of the
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related Building, who may be an employee of the General Contractor for such
Leased Property.
"ARCHITECT'S AGREEMENT" means, with respect to any Leased Property, the
architectural services agreement, if any, between the related Lessee or Cardinal
and the related Architect.
"ASSIGNMENT OF LEASE AND RENTS" means, with respect to any Leased
Property, the Assignment of Lease and Rents, dated as of the Closing Date, from
the Lessor to the Agent, substantially in the form of Exhibit K to the Master
Agreement.
"ATTRIBUTABLE DEBT" when used in connection with a sale and lease-back
transaction shall mean, as of any particular time, the lesser of (a) the fair
value of the assets subject to such arrangement or (b) the aggregate of present
values (discounted at a rate per annum as mutually agreed between Cardinal and
the Agent)) of the obligations of Cardinal or any Consolidated Subsidiary for
net rental payments during the remaining term of all leases (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended). The term "net rental payments" under any lease of any
period shall mean the sum of the rental and other payments required to be paid
in such period by the lessee thereunder, not including, however, any amounts
required to be paid by such lessee (whether or not designated as rental or
additional rental) on account of maintenance and repairs, reconstruction,
insurance, taxes, assessments, water rates or similar charges required to be
paid by such lessee thereunder or any amounts required to be paid by such lessee
thereunder contingent upon the amount of sales, maintenance and repairs,
reconstruction, insurance, taxes, assessments, water rates or similar charges.
"AUTHORITY" means a development or similar authority of any state,
county or municipality that is an issuer of Bonds.
"AWARDS" means any award or payment received by or payable to the
Lessor or Lessee on account of any Condemnation or Event of Taking (less the
actual costs, fees and expenses incurred in the collection thereof, for which
the Person incurring the same shall be reimbursed from such award or payment).
"B LOAN" means the B Percentage of Loans made by Lender pursuant to the
Loan Agreement and the Master Agreement.
"B NOTE" is defined in Section 2.2 of the Loan Agreement.
"B PERCENTAGE" means 16%.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as amended.
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"BASE TERM" means, with respect to any Leased Property, (a) the period
commencing on the Initial Closing Date for the first parcel of Land an interest
in which is acquired by the Lessor and ending on the sixth (6th) anniversary of
such Closing Date or (b) such shorter period as may result from earlier
termination of the related Lease as provided therein.
"BASIC RENT" means, for any Lease Term, the rent payable pursuant to
Section 3.1 of the related Lease, determined in accordance with the following:
each installment of Basic Rent payable on any Payment Date shall be in an amount
equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on
such Payment Date, PLUS (B) the aggregate amount of Lessor Basic Rent payable on
such Payment Date, in each case for the Leased Property or Properties that are
subject to such Lease.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BOARD OF DIRECTORS", with respect to a corporation, means either the
Board of Directors or any duly authorized committee of that Board which pursuant
to the by-laws of such corporation has the same authority as that Board as to
the matter at issue.
"BONDS" means industrial revenue or development bonds issued by a
state, county or municipal authority in connection with any Leased Property.
"BUILDING" means, with respect to any Leased Property, the buildings,
structures and improvements located or to be located on the related Land, along
with all fixtures used or useful in connection with the operation of such Leased
Property, including, without limitation, all furnaces, boilers, compressors,
elevators, fittings, pipings, connectives, conduits, ducts, partitions,
equipment and apparatus of every kind and description now or hereafter affixed
or attached or used or useful in connection with the Building, all equipment
financed by the Lessor and/or the Lenders and the Lease Participants and all
Alterations (including all restorations, repairs, replacements and rebuilding of
such buildings, improvements and structures) thereto (but in each case excluding
trade fixtures or equipment financed other than by the Lessor, the Lease
Participant or the Lenders).
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banks are required or authorized to be closed for business in Atlanta,
Georgia.
"CARDINAL" means Cardinal Health, Inc., an Ohio corporation.
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"CASUALTY" means an event of damage or casualty relating to all or part
of any Leased Property that does not constitute an Event of Loss.
"CHANGE IN CONTROL" means a majority of the Board of Directors of
Cardinal shall cease for any reason to consist of (A) individuals who on July
15, 1996 were serving as directors of Cardinal and (B) individuals who
subsequently become members of the Board if such individuals' nomination for
election or election to the Board is recommended or approved by a majority of
the Board of Directors of Cardinal.
"CLAIMS" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, proceedings, settlements,
utility charges, costs, expenses and disbursements (including, without
limitation, reasonable legal fees and expenses) of any kind and nature
whatsoever.
"CLOSING DATE" means, with respect to each parcel of Land or Leased
Property, the date on which such Land or Leased Property, as the case may be, is
acquired by the Lessor and the initial Funding occurs with respect to such Land
or Leased Property, as the case may be, under the Master Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means as to each Funding Party, its obligation to make
Fundings as investments in each Leased Property, or to make Loans to the Lessor,
or to fund a Lease Participation as the case may be, in an aggregate amount not
to exceed at any one time outstanding the amount set forth for such Funding
Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time
to time pursuant to Section 6 of the Master Agreement).
"COMMITMENT FEE" is defined in Section 2.3(d) of the Master Agreement.
"COMMITMENT PERCENTAGE" means as to any Funding Party, at a particular
time, the percentage of the aggregate Commitments in effect at such time
constituted by such Funding Party's Commitment, as such percentage is shown for
such Funding Party on Schedule 2.2 to the Master Agreement (as it may be
adjusted from time to time pursuant to Section 6 of the Master Agreement).
"COMPLETION DATE" with respect to any Leased Property means the
Business Day on which the conditions specified in Section 3.5 of the Master
Agreement have been satisfied with respect to such property.
"COMPLETION DATE APPRAISAL" with respect to any Leased
Property means that appraisal, dated as of the Completion Date,
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delivered by the Appraiser pursuant to Section 3.5 of the Master Agreement with
respect to such Leased Property.
"CONDEMNATION" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, occupancy or title to any Leased
Property or any part thereof in, by or on account of any actual eminent domain
proceeding or other action by any Governmental Authority or other Person under
the power of eminent domain or otherwise or any transfer in lieu of or in
anticipation thereof, which in any case does not constitute an Event of Taking.
A Condemnation shall be deemed to have "occurred" on the earliest of the dates
that use, occupancy or title is taken.
"CONSOLIDATED EBITR" means, for any fiscal period of the Guarantor, an
amount equal to the sum of its Consolidated Net Income (Loss) plus, to the
extent deducted in determining Consolidated Net Income (Loss), (i) provisions
for taxes based on income and (ii) Consolidated Interest and Rent Expense, in
each case, for such fiscal period.
"CONSOLIDATED INTEREST AND RENT EXPENSE" means, for any fiscal period
of the Guarantor, total interest expense (including without limitation, interest
expense attributable to capitalized leases in accordance with GAAP) and rent
expense of the Guarantor and its Subsidiaries on a consolidated basis, in each
case, for such fiscal period.
"CONSOLIDATED NET INCOME (LOSS)" means, for any fiscal period of the
Guarantor, the net income (or loss) of the Guarantor and its Subsidiaries on a
consolidated basis for such period (taken as a single accounting period)
determined in conformity with GAAP; PROVIDED THAT there shall be excluded
therefrom (i) the income (or loss) of any party accrued prior to the date such
party becomes a Subsidiary of the Guarantor or is merged into or consolidated
with the Guarantor or any of its Subsidiaries, or such party's assets are
acquired by the Guarantor or any of its Subsidiaries and (ii) any item of gain
or loss resulting from sale of assets other than in the ordinary course of
business.
"CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets
after deducting therefrom (a) all current liabilities (excluding any thereof
constituting Funded Indebtedness by reason of being renewable or extendible) and
(b) all goodwill, tradenames, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the most recent balance
sheet of Cardinal and its Consolidated Subsidiaries and computed in accordance
with GAAP.
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"CONSOLIDATED SUBSIDIARIES" shall mean all Subsidiaries of Cardinal.
"CONSTRUCTION" means, with respect to any Leased Property, the
construction of the related Building pursuant to the related Plans and
Specifications.
"CONSTRUCTION AGENCY AGREEMENT" means the Construction Agency
Agreement, dated as of July 16, 1996, among Cardinal, the Lessees and the
Lessor.
"CONSTRUCTION AGENT" means Cardinal in its capacity as construction
agent pursuant to the Construction Agency Agreement.
"CONSTRUCTION COMMENCEMENT DATE" is defined in SECTION 2.3 of the
Construction Agency Agreement.
"CONSTRUCTION CONDITIONS" means the conditions set forth in Section 3.5
of the Master Agreement.
"CONSTRUCTION CONTRACT" means, with respect to any Leased Property,
that certain construction contract, if any, between the related Lessee or
Cardinal and a General Contractor for the construction of the related Building,
provided that such contract shall be assigned by such Lessee to the Lessor, and
such assignment shall be consented to by such General Contractor, pursuant to an
assignment of such construction contract substantially in the form of the
Security Agreement and Assignment set forth as Exhibit C to the Master
Agreement.
"CONSTRUCTION FORCE MAJEURE EVENT" means, with respect to
any Leased Property:
(a) an act of God arising after the related Closing Date,
or
(b) any change in any state or local law, regulation or other
legal requirement arising after such Closing Date and relating
to the use of the Land or the construction of a building on
the Land, or
(c) strikes, lockouts, labor troubles, unavailability of
materials, riots, insurrections or other causes beyond
Cardinal's or the related Lessee's control
which prevents the related Lessee from completing the Construction prior to the
Scheduled Construction Termination Date and which could not have been avoided or
which cannot be remedied by such Lessee or the Guarantor through the exercise of
all commercially reasonable efforts or the expenditure of funds and, in the case
of (b) above, the existence or potentiality of which
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was not known to and could not have been discovered prior to such Closing Date
through the exercise of due diligence by such Lessee or the Guarantor.
"CONSTRUCTION LAND INTEREST" means each parcel of Land for which the
Completion Date has not yet occurred.
"CONSTRUCTION TERM" means, with respect to any Leased Property, the
period commencing on the related Closing Date and ending on the related
Construction Term Expiration Date, or such shorter period as may result from
earlier termination of the related Lease as provided therein.
"CONSTRUCTION TERM EXPIRATION DATE" means, with respect to any Leased
Property, the earlier of the following:
(a) the related Completion Date, and
(b) the related Scheduled Construction Termination Date.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision
of any Securities issued by that Person or any indenture, mortgage, deed of
trust, contract, undertaking, agreement, instrument or other document to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject (including, without limitation, any
restrictive covenant affecting any of the properties of such Person).
"DEED" means, with respect to any Land, a General Warranty Deed, dated
the applicable Closing Date, from the applicable Seller to the Lessor, conveying
such Land, in a form reasonably acceptable to the Lessor.
"ENVIRONMENTAL AUDIT" means, with respect to each parcel of Land, a
Phase I Environmental Assessment, dated no more than 60 days prior to the
related Closing Date, by an environmental services firm satisfactory to the
Funding Parties.
"ENVIRONMENTAL LAWS" means and include the Resource Conservation and
Recovery Act of 1976, (RCRA) 42 U.S.C. sections 6901-6987, as amended by the
Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. sections 9601-9657, (CERCLA), the
Hazardous Materials Transportation Act of 1975, 49 U.S.C. sections 1801-1812,
the Toxic Substances Control Act, 15 U.S.C. sections 2601-2671, the Clean Air
Act, 42 U.S.C. section 7401 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. section 136 et seq., and all similar federal, state
and local environmental laws, ordinances, rules, orders, statutes, decrees,
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judgments, injunctions, codes and regulations, and any other federal, state or
local laws, ordinances, rules, codes and regulations, and any other federal,
state or local laws, ordinances, rules, codes and regulations relating to the
environment, human health or natural resources or the regulation or control of
or imposing liability or standards of conduct concerning human health, the
environment, Hazardous Materials or the clean-up or other remediation of any
Leased Property, or any part thereof, as any of the foregoing may have been from
time to time amended, supplemented or supplanted.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities required by Environmental
Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time or any successor federal statute.
"ERISA AFFILIATE" means each entity required to be aggregated with
Cardinal pursuant to the requirements of Section 414(b) or (c) of the Code.
"ERISA GROUP" means Cardinal and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
the control of Cardinal which, together with Cardinal, are treated as a single
employer under Section 414 of the Code.
"EVENT OF DEFAULT" means any event or condition designated as an "Event
of Default" in Article XII of any Lease.
"EVENT OF LOSS" is defined in Section 10.1 of each Lease.
"EVENT OF TAKING" is defined in Section 10.2 of each Lease.
"EXEMPTED DEBT" means the sum of the following items outstanding as of
the date Exempted Debt is to be determined: (a) Indebtedness of Cardinal and its
Consolidated Subsidiaries incurred after the date of the Guaranty and secured by
Liens not permitted to be created or assumed pursuant to Section 7.7 of the
Guaranty, and (b) Attributable Debt of Cardinal and its Consolidated
Subsidiaries in respect of every sale and lease-back transaction entered into
after the date of the Guaranty, other than those leases expressly permitted by
Section 7.8 of the Guaranty.
"FAIR MARKET RENTAL VALUE" means, with respect to any Leased Property,
the fair market rental value as determined by an independent appraiser chosen by
the Lessor that would be obtained in an arm's-length lease between an informed
and willing lessee
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and an informed and willing lessor, in either case under no compulsion to lease,
and neither of which is related to the Lessor or Lessee for the lease of such
Leased Property on the terms set forth, or referred to, in the related Lease.
Such fair market rental value shall be calculated as the value for the use of
such Leased Property to be leased in place at the Land, assuming, in the
determination of such fair market rental value, that such Leased Property is in
the condition and repair required to be maintained by the terms of the related
Lease (unless such fair market rental value is being determined for the purposes
of Section 13.1 of the related Lease and except as otherwise specifically
provided in such Lease, in which case this assumption shall not be made).
"FAIR MARKET SALES VALUE" means, with respect to any Leased Property or
any portion thereof, the fair market sales value as determined by an independent
appraiser chosen by the Lessor or, so long as the Funded Amounts are
outstanding, the Agent that would be obtained in an arm's-length transaction
between an informed and willing buyer (other than a lessee currently in
possession) and an informed and willing seller, under no compulsion,
respectively, to buy or sell and neither of which is related to the Lessor or
Lessee, for the purchase of such Leased Property. Such fair market sales value
shall be calculated as the value for the use of such Leased Property, assuming,
in the determination of such fair market sales value, that such Leased Property
is in the condition and repair required to be maintained by the terms of the
related Lease (unless such fair market sales value is being determined for
purposes of Section 13.1 of the related Lease and except as otherwise
specifically provided in the related Lease or the Master Agreement, in which
case this assumption shall not be made).
"FINAL RENT PAYMENT DATE" with respect to any Leased Property is
defined in Section 13.1(e) of the related Lease.
"FISCAL YEAR" means the fiscal year of the Guarantor and its
Subsidiaries, which shall be the twelve (12) months ending on June 30.
"FUNDED AMOUNT" means, as to the Lessor, the Lessor's Invested Amounts,
and, as to each Lender, the outstanding principal of such Lender's Loans.
"FUNDED DEBT" means, all indebtedness for money borrowed, purchase
money mortgages, capitalized leases, conditional sales contracts and similar
title retention debt instruments, including any current maturities of such
indebtedness. The calculation of Funded Debt shall include all Funded Debt of
the Guarantor and its Subsidiaries, plus all Funded Debt of other entities or
persons, other than Subsidiaries, which has been guaranteed by
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the Guarantor or any Subsidiary or which is supported by a letter of credit
issued for the account of the Guarantor or any Subsidiary. Funded Debt shall
also include the redemption amount with respect to any stock of the Guarantor or
its Subsidiaries required to be redeemed within the next twelve months.
"FUNDED INDEBTEDNESS" means all Indebtedness having a maturity of more
than 12 months from the date as of which the amount thereof is to be determined
or having a maturity of less than 12 months but by its terms being renewable or
extendible beyond 12 months from such date at the option of the borrower.
"FUNDING" means any funding by the Funding Parties pursuant to Section
2.2 of the Master Agreement.
"FUNDING DATE" means collectively, each Closing Date and each other
date during the Construction Term on which a Funding occurs under Section 2 of
the Master Agreement.
"FUNDING PARTIES" means the Lessor, the Agent, the Lease Participant
and the Lenders, collectively.
"FUNDING PARTY BALANCE" means, with respect to any Leased Property, (i)
for the Lessor as of any date of determination, an amount equal to the sum of
the outstanding related Lessor's Invested Amount (less the related Lease
Participant Amount), all accrued and unpaid Yield on such outstanding related
Lessor's Invested Amount (less the related Lease Participant Amount), all unpaid
related fees owing to the Lessor under the Operative Documents, and all other
related amounts owing to the Lessor by the related Lessee or the Guarantor under
the Operative Documents, (ii) for the Lease Participant as of any date of
determination, an amount equal to the sum of the outstanding related Lease
Participant Amount, all accrued and unpaid Yield thereon, all unpaid related
fees owing to the Lease Participant under the Operative Documents, and all other
related amounts owing to the Lease Participant by the related Lessee or the
Guarantor under the Operative Documents, and (iii) for any Lender as of any date
of determination, an amount equal to the sum of the outstanding related Loans of
such Lender, all accrued and unpaid interest thereon, all unpaid related fees
owing to such Lender under the Operative Documents, and all other related
amounts owing to such Lender by the related Lessee or the Guarantor under the
Operative Documents.
"FUNDING REQUEST" is defined in Section 2.2 of the Master Agreement.
"FUNDING TERMINATION DATE" means July 16, 2002.
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"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"GENERAL CONTRACTOR" means with respect to any Leased Property the
general contractor under the related Construction Contract as may be selected by
the related Lessee or Cardinal.
"GOVERNMENTAL ACTION" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, decrees,
licenses, exemptions, publications, filings, notices to and declarations of or
with, or required by, any Governmental Authority, or required by any Applicable
Law and shall include, without limitation, all citings, environmental and
operating permits and licenses that are required for the use, occupancy, zoning
and operation of any Leased Property.
"GOVERNMENTAL AUTHORITY" means any foreign or domestic federal, state,
county, municipal or other governmental or regulatory authority, agency, board,
body, commission, instrumentality, court or any political subdivision thereof.
"GUARANTOR" means Cardinal.
"GUARANTY" means the Guaranty, dated as of July 16, 1996 by the
Guarantor in favor of the Funding Parties.
"HAZARDOUS MATERIAL" means any substance, waste or material which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous, including petroleum, crude oil or any fraction
thereof, petroleum derivatives, by products and other hydrocarbons, or which is
or becomes regulated by any Governmental Authority, including any agency,
department, commission, board or instrumentality of the United States, any
jurisdiction in which a Leased Property is located or any political subdivision
thereof and also including, without limitation, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls ("PCBS") and radon gas.
"IDB DOCUMENTATION" means the Bonds, each IDB Lease and all other
agreements, documents, contracts and instruments entered into in connection with
any Bonds or IDB Property.
"IDB PROPERTY" means each Leased Property that is the
subject of Bonds.
"IDB LEASE" means a lease between the Lessor and an Authority with
respect to a Leased Property.
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"INDEBTEDNESS" means all items classified as indebtedness on the most
recently available balance sheet of Cardinal and its Consolidated Subsidiaries,
in accordance with GAAP.
"INDEMNITEE" means the Agent (in its individual capacity and in its
capacity as Agent), the Lease Participant, each Lender, each Authority and the
Lessor, and their respective Affiliates, successors, permitted assigns,
permitted transferees, employees, officers, directors and agents; PROVIDED,
HOWEVER, that in no event shall any Lessee or Guarantor be an Indemnitee.
"INDEMNITEE GROUP" means the respective Affiliates, employees,
officers, directors and agents of the Agent (in its individual capacity), the
Lease Participant, each Lender, each Authority or the Lessor, as applicable;
PROVIDED, HOWEVER, that in no event shall any Lessee or Guarantor be a member of
the Indemnitee Group.
"INITIAL CLOSING DATE" means the Closing Date for the first parcel of
Land or Leased Property, as the case may be, acquired by the Lessor.
"INVESTMENTS" is defined in Section 7.18 of the Guaranty.
"LAND" means, with respect to any Lease, the land described in Appendix
B to the related Lease Supplement or Lease, as applicable.
"LAWS" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, treaties or decrees of any governmental or political
subdivision or agency thereof, or of any court or similar entity established by
any thereof.
"LEASE" means each Lease Agreement, together with each Lease Supplement
thereto, between a Lessee and the Lessor, substantially in the form of Exhibit E
to the Master Agreement, with such modifications as are satisfactory to the
Lessor and the Agent in conformity with Applicable Law to assure customary
remedies in favor of the Funding Parties in the jurisdiction where the Leased
Property is located.
"LEASE BALANCE" means, with respect to the Leased Properties, as of any
date of determination, an amount equal to the aggregate sum of the outstanding
Funded Amounts of all Funding Parties, all accrued and unpaid interest on the
Loans, all accrued and unpaid Yield on the Lessor's Invested Amounts, all unpaid
fees owing to the Funding Parties under the Operative Documents, including all
other amounts owing to the Funding Parties by any Lessee or the Guarantor under
the Operative Documents.
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"LEASE PARTICIPANT" means SunTrust Bank, Atlanta and such other
Persons, if any, who may become parties to the Lease Participation Agreement as
Lease Participants.
"LEASE PARTICIPATION AGREEMENT" means the Lease Participation Agreement
dated as of July 16, 1996, between the Lessor and the Lease Participant.
"LEASE PARTICIPANT AMOUNT" means the amounts funded by the Lease
Participant pursuant to Section 2.2 of the Lease Participation Agreement (as
increased during the related Construction Term by a amount equal to the Lease
Participant's Percentage of the increase in the related Lessor's Invested Amount
pursuant to Section 2.3(c) of the Master Agreement), as the purchase price for
the Lease Participation.
"LEASE PARTICIPANT COMMITMENT" is defined in Section 2.2 of
the Lease Participation Agreement.
"LEASE PARTICIPATION" is defined in Section 2.1 of the Lease
Participation Agreement.
"LEASE SUPPLEMENT" is defined in Section 2.1 of each Lease.
"LEASE TERM" with respect to any Lease means (a) the Base Term, as it
may be renewed pursuant to Section 14.9 of such Lease or (b) such shorter period
as may result from earlier termination of such Lease as provided therein.
"LEASE TERMINATION DATE" means the last day of the Lease Term, as the
same may be accelerated pursuant to the Lease.
"LEASED PROPERTY" means Land and the related Building(s). For purpose
of any Lease, "Leased Property" means the property subject to such Lease, unless
the context provides otherwise.
"LEASED PROPERTY BALANCE" means, with respect to any Leased Property,
as of any date of determination, an amount equal to the aggregate sum of the
outstanding related Funded Amounts of all Funding Parties, all accrued and
unpaid interest on the related Loans, all accrued and unpaid Yield on the
related Lease Participant Amounts, all related unpaid fees owing to the Funding
Parties under the Operative Documents, including all other amounts owing to the
Funding Parties by the related Lessee or the Guarantor under the Operative
Documents.
"LENDER BASIC RENT" means, for any Rent Period under any Lease, the
aggregate amount of interest accrued on the Loans related to the Leased Property
subject to such Lease pursuant to Section 2.5 of the Loan Agreement during such
Rent Period, plus
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the amount of principal of such Loans then due pursuant to Section 2.4 of the
Loan Agreement.
"LENDERS" means such financial institutions as are, or who may
hereafter become, parties to the Loan Agreement as Lenders to the Lessor.
"LESSEE" is defined in the preamble to the Master Agreement.
"LESSOR BASIC RENT" means, for any Rent Period under any Lease, the
aggregate amount of Yield accrued on the Lessor's Invested Amounts under any
Lease under Section 2.3(a) of the Master Agreement during such Rent Period.
"LESSOR" is defined in the preamble to the Master Agreement.
"LESSOR LIENS" means Liens on or against any Leased Property, any Lease
or any payment of Rent (a) which result from any act or omission of, or any
Claim against, the Lessor unrelated to the transactions contemplated by the
Operative Documents or the IDB Documentation or (b) which result from any Tax
owed by the Lessor, except any Tax for which a Lessee is obligated to indemnify
(including, without limitation, in the foregoing exception, any assessments with
respect to any Leased Property noted on the related Title Policy or assessed in
connection with any construction or development by a Lessee or Cardinal).
"LESSOR'S INVESTED AMOUNT" means the amounts funded by the Lessor
pursuant to Section 2 of the Master Agreement that are not proceeds of Loans by
a Lender, as increased during the related Construction Term pursuant to Section
2.3(c) of the Master Agreement.
"LIBOR RATE" means, with respect to any Rent Period, the rate per annum
equal to the quotient of (i) the offered rate for deposits in U.S. Dollars of
amounts equal or comparable to the aggregate principal amount of the Lease
Participant Amounts and, if any, the Loans offered for a term comparable to such
Rent Period (or, in the case of the first Rent Period for any Funding made on a
Closing Date, the one, two or three month period beginning on such Closing Date
that ends closest to the first Payment Date thereafter), which rates appear on
the Reuters Screen LIBO Page as of 11:00 a.m. London time, two (2) Business Days
prior to the first day of such Rent Period, PROVIDED that (x) if more than one
such offered rate appears on the Reuters Screen LIBO Page, the rate used to
determine the LIBOR Rate will be the arithmetic average (rounded upward, if
necessary, to the next higher 1/16th of 1%) of such offered rates, or (y) if no
such offered rates appear on such page, the rate used for such Rent Period will
be the arithmetic average (rounded upward, if
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necessary, to the next higher 1/16th of 1%) of rates quoted by not less than two
major banks in New York, New York, selected by the Agent, at approximately 10:00
a.m., New York time, two (2) Business Days prior to the first day of such Rent
Period, for deposits in U.S. Dollars offered to leading European banks for a
period comparable to such Rent Period in an amount comparable to the principal
amount of the Lease Participant Amounts and the Loans, divided by (ii) a number
equal to 1.00 minus the LIBOR Reserve Percentage, the rate so determined to be
rounded upwards to the nearest multiple of 1/100th of 1%. All determinations of
Yield, interest, Lease Participant Basic Rent, Lender Basic Rent, LIBOR Rate,
Alternative Rate, and Overdue Rate by the Agent shall, in the absence of
demonstrable error, be binding and conclusive upon the Lessees.
"LIBOR RESERVE PERCENTAGE" means, for any Rent Period, the aggregate
reserve requirement (including any basic, emergency, supplemental, marginal or
other reserve requirement) which is actually imposed on the Agent during such
Rent Period (or if more than one such percentage shall be so applicable, the
daily average of such percentages) under Regulation D of the Board of Governors
of the Federal Reserve System with respect to liabilities or assets consisting
of or including "Eurocurrency liabilities" having a term equal to the applicable
Rent Period. The LIBOR Rate shall be adjusted automatically on and as of the
effective date of any change in the LIBOR Reserve Percentage.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other right of or arrangement
with any creditor to have its claim satisfied out of any specified property or
asset with the proceeds therefrom prior to the satisfaction of the claims of the
general creditors of the owner thereof, whether or not filed or recorded, or the
filing of, or agreement to execute as "debtor", any financing or continuation
statement under the Uniform Commercial Code of any jurisdiction or any federal,
state or local lien imposed pursuant to any Environmental Law.
"LOAN" shall have the meaning specified in Section 2.1 of the Loan
Agreement.
"LOAN AGREEMENT" means the Loan Agreement, dated as of July 16, 1996,
among the Lessor, the Agent and the Lenders.
"LOAN DOCUMENTS" means the Loan Agreement, the Notes, the Assignments
of Lease and Rents, the Mortgages and all documents and instruments executed and
delivered in connection with each of the foregoing.
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"LOAN EVENT OF DEFAULT" means any of the events specified in Section
5.1 of the Loan Agreement, PROVIDED that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, event or act has
been satisfied.
"LOAN POTENTIAL EVENT OF DEFAULT" means any event, condition or failure
which, with notice or lapse of time or both, would become a Loan Event of
Default.
"LOSS PROCEEDS" is defined in Section 10.6 of each Lease.
"MASTER AGREEMENT" means the Master Agreement, dated as of July 16,
1996 among the Lessees, the Guarantor, the Lessor, the Agent and the Lenders.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
financial condition, operations, performance or properties of a Lessee or the
Guarantor, or the ability of the Guarantor or any Lessee to perform in any
material respect under the Operative Documents or the value, utility or useful
life of any Leased Property, or the validity, enforceability or legality of any
of the Operative Documents, or the priority, perfection or status of any Funding
Party's interest in any Leased Property.
"MORTGAGE" means, with respect to any Leased Property, that certain
mortgage or deed of trust, dated as of the related Closing Date, by the Lessor
to the Agent, in the form of Exhibit D-1 or D-2, as applicable, attached to the
Master Agreement, with such modifications as are satisfactory to the Lessor and
the Agent in conformity with Applicable Law to assure customary remedies in
favor of the Agent in the jurisdiction where the Leased Property is located.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NEW TAXES" is defined in Section 7 of the Master Agreement.
"NOTES" means the A Note and the B Note issued by the Lessor under the
Loan Agreement, and any and all notes issued in replacement or exchange therefor
in accordance with the provisions thereof.
"OFFICER'S CERTIFICATE" of a Person means a certificate signed by the
Chairman of the Board or the President or any Executive Vice President or any
Senior Vice President or any
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other Vice President of such Person signing with the Treasurer or any Assistant
Treasurer or the Controller or any Assistant Controller or the Secretary or any
Assistant Secretary of the such Person, or by any Vice President who is also
Controller or Treasurer signing alone.
"OPERATIVE DOCUMENTS" means the Master Agreement, the Guaranty, the
Deeds, the Leases, the Lease Participation Agreement, the Security Agreement and
Assignment, the Notes, the Joinder Agreements, the Loan Agreement, the
Assignments of Lease and Rents, the Mortgages and the other documents delivered
in connection with the transactions contemplated by the Master Agreement.
"OVERDUE RATE" means the lesser of (a) the highest interest rate
permitted by Applicable Law and (b) an interest rate per annum (calculated on
the basis of a 365-day (or 366-day, if appropriate) year equal to 2.0% above the
Alternative Rate in effect from time to time.
"PARTIAL PURCHASE OPTION" is defined in Section 14.1(b) of each Lease.
"PARTICIPATION PERCENTAGE" is defined in Section 2.1 of the Lease
Participation Agreement.
"PAYMENT DATE" means the first day of each January, April, July and
October, or, if such day is not a Business Day, the next Business Day.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor thereto.
"PERMITTED LIENS" means the following with respect to any Leased
Property: (a) the respective rights and interests of the related Lessee, Lessor,
the Agent, the Lease Participant and any Lender, as provided in the Operative
Documents, (b) Liens for Taxes either not yet due or being contested in good
faith and by appropriate proceedings, so long as enforcement thereof is stayed
pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's,
employees' or other like Liens arising after the related Closing Date in the
ordinary course of business for amounts either not yet due or being contested in
good faith and by appropriate proceedings, so long as enforcement thereof is
stayed pending such proceedings, (d) Liens arising after such Closing Date out
of judgments or awards with respect to which at the time an appeal or proceeding
for review is being prosecuted in good faith, so long as the enforcement thereof
has been stayed pending such appeal or review, (e) easements, rights of way,
reservations, servitudes and rights of others against the Land which are listed
on Schedule B to the Title Policy,
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(f) assignments, leases and subleases expressly permitted by the Operative
Documents and (g) Liens created pursuant to the IDB Documentation.
"PERSON" means an individual, corporation, partnership, joint venture,
association, joint-stock company, trust, nonincorporated organization or
government or any agency or political subdivision thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"PLANS AND SPECIFICATIONS" means with respect to any Building the final
plans and specifications for such Building prepared by the Architect, and
referred to by the Appraiser in the Appraisal, as such Plans and Specifications
may be hereafter amended, supplemented or otherwise modified from time to time.
"PNC" is defined in the preamble to the Master Agreement.
"POTENTIAL EVENT OF DEFAULT" means any event, condition or failure
which, with notice or lapse of time or both, would become an Event of Default.
"PURCHASE AGREEMENT" means with respect to any Land, the purchase
agreement with the Seller for the conveyance of such Land to the Lessor.
"PURCHASE OPTION" is defined in Section 14.1 of each Lease.
"RECOURSE DEFICIENCY AMOUNT" means the sum of (i) the aggregate
principal amount of the A Loans, PLUS the A Percentage of the Lessor's Invested
Amounts, PLUS (ii) all accrued and unpaid Yield on the A Percentage of the
Lessor's Invested Amounts and all accrued and unpaid interest on the A Loans.
"REGULATIONS" means the income tax regulations promulgated from time to
time under and pursuant to the Code.
"RELEASE" means the release, deposit, disposal or leak of any Hazardous
Material into or upon or under any land or water or air, or otherwise into the
environment, including, without limitation, by means of burial, disposal,
discharge, emission,
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injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring,
escaping, emptying, placement and the like.
"RELEASE DATE" means, with respect to any Leased Property, the earlier
of (i) the date that the related Leased Property Balance has been paid in full,
and (ii) the date on which the Agent gives notice to the Lessor that the Lease
Participant and the Lenders release any and all interest they may have in such
Leased Property, and all proceeds thereof, and any rights to direct, consent or
deny consent to any action by the Lessor with respect to such Leased Property.
"REMARKETING OPTION" is defined in Section 14.6 of each
Lease.
"RENT" means Basic Rent and Supplemental Rent, collectively.
"RENT PERIOD" means, with respect to any Leased Property, initially the
period commencing on the related Closing Date and ending on the first Payment
Date, and thereafter each period from one Payment Date to the next following
Payment Date.
"REPORT" is defined in Section 7.5 of the Master Agreement.
"REQUIRED LENDERS" means, at any time, Lenders holding an aggregate
outstanding principal amount of Loans equal to at least 66-2/3% of the aggregate
outstanding principal amount of all Loans.
"REQUIRED FUNDING PARTIES" means, at any time, Funding Parties holding
an aggregate outstanding principal amount of Funded Amounts equal to at least
66-2/3% of the aggregate outstanding principal amount of all Funded Amounts.
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, permit, approval, authorization, license or variance, order or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject, including, without
limitation, the Securities Act, the Securities Exchange Act, Regulations G, T, U
and X, and any building, environmental or land use requirement or permit or
occupational safety or health law, rule or regulation.
"RESPONSIBLE FINANCIAL OFFICER" is defined in Section 7.1(c) of the
Guaranty.
"RESPONSIBLE OFFICER" means the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the
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Executive Committee of the Board of Directors, the President, any Senior Vice
President or Executive Vice President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer, or any Assistant Treasurer.
"SCHEDULED CONSTRUCTION TERMINATION DATE" means with respect to any
Building the twenty-four-month anniversary of the Closing Date for the related
Land.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES" means any stock, shares, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY AGREEMENT AND ASSIGNMENT" means, with respect to any Leased
Property, the Security Agreement and Assignment (Construction Contract,
Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans,
Specifications and Drawings) from the related Lessee to the Lessor,
substantially in the form of Exhibit C to the Master Agreement.
"SELLER" means as to any Leased Property, the seller thereof to the
Lessor or an Authority, as applicable, on the related Closing Date.
"SENIOR FUNDED INDEBTEDNESS" means any Funded Indebtedness of Cardinal
that is not subordinated in right of payment to any other Indebtedness of
Cardinal.
"SUBSIDIARY" means for any Person any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"SUNTRUST" means SunTrust Banks, Inc., a Georgia corporation.
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"SUNTRUST BANK" is defined in the preamble to the Master Agreement.
"SUPPLEMENTAL RENT" means any and all amounts, liabilities and
obligations other than Basic Rent which a Lessee assumes or agrees or is
otherwise obligated to pay under the related Lease or any other Operative
Document (whether or not designated as Supplemental Rent) to the Lessor, the
Agent, the Lease Participant, any Lender or any other party, including, without
limitation, amounts under Article XVI of such Lease, and indemnities and damages
for breach of any covenants, representations, warranties or agreements, and all
overdue or late payment charges in respect of any Funded Amount.
"SURRENDER OPTION" is defined in Section 14.6 of each Lease.
"TAX" or "TAXES" is defined in Section 7.4 of the Master Agreement.
"TAX INDEMNITEE" means the Lessor, the Lease Participant, the Agent,
any Lender and their respective Affiliates, successors, permitted assigns,
permitted transferees, employees, officers, directors and agents thereof,
PROVIDED, HOWEVER, that in no event shall any Lessee or the Guarantor be a Tax
Indemnitee.
"TITLE INSURANCE COMPANY" means the company that has or will issue the
title policies with respect to a Leased Property, which company shall be
reasonably acceptable to the Funding Parties.
"TITLE POLICY" is defined in Section 3.1 of the Master Agreement.
"TOTAL CAPITAL" means the sum of Funded Debt, PLUS tangible
shareholders' equity (as determined in accordance with GAAP).
"TRANSACTION" means all the transactions and activities referred to in
or contemplated by the Operative Documents.
"UCC" means the Uniform Commercial Code of Georgia, as in effect from
time to time.
"UNFUNDED BENEFIT LIABILITIES" means with respect to any Plan or
Multiemployer Plan at any time, the amount of unfunded benefit liabilities of
such Plan or Multiemployer Plan at such time as determined under ERISA Section
4001(a)(18) which shall not be less than the accumulated benefit obligation, as
disclosed in accordance with FAS 87, over the fair market value of Plan or
Multiemployer Plan assets.
"YIELD" is defined in Section 2.3 of the Master Agreement.
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Exhibit 10.18
VENDOR PROGRAM AGREEMENT
THIS VENDOR PROGRAM AGREEMENT ("Agreement") is dated as of October 10,
1991 by and between GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL"), a New
York corporation, with an address at 55 Federal Road, POB 3199, Danbury, CT
06813-3199, Attn: Manager of Operations, Vendor Financial Services, and PYXIS
CORPORATION, its successors and assigns ("PYXIS"), a Delaware corporation with
its principal place of business and address at 11425 Sorrento Valley Road, San
Diego, CA 92121, Attn: Chief Financial Officer.
R E C I T A L S
PYXIS and GE CAPITAL are entering into this Agreement with the principal
objective of providing a customer financing capability in the form of leases
and/or secured financing to support PYXIS's domestic sales (the "Program") of
new equipment manufactured and distributed by PYXIS ("Equipment").
PYXIS proposes, from time to time, to sell and/or assign to GE CAPITAL all
of its right, title and interest in and to all payments due under certain Rental
Agreements ("Rental Agreements") by and between PYXIS and PYXIS's customers
("Customers"). GE CAPITAL may, from time to time, agree to purchase and take
assignment of the Rental Agreements upon the terms and conditions described
herein.
All capitalized terms are defined in Section 16.
NOW THEREFORE, in consideration of the above premises and of the
representations, warranties and agreements contained herein, the parties hereby
agree as follows:
1. FINANCING. GE CAPITAL and PYXIS agree that, subject to the terms hereof,
and provided that no Default has occurred, GE CAPITAL may from time to time
offer to develop certain financing products for use in the Program and make them
available to Customers. Nothing contained herein shall require PYXIS to accept
such products or to refer any Customers to GE CAPITAL or require GE CAPITAL to
develop or make or continue to make available specific products or approve any
Customer referred by PYXIS.
2. RENTAL AGREEMENTS. PYXIS shall cause a prospective Customer to complete
and deliver to GE CAPITAL an Offer Document Package. Upon receipt thereof, GE
CAPITAL shall review and either approve or reject the Offer Document Package and
shall notify PYXIS of its determination; provided that GE CAPITAL shall make
such determination within two (2) business days from its receipt of a completed
Offer Document Package for any Rental Agreement where the Proposed Purchase
Price is less than $500,000. Upon notification, PYXIS shall (a) advise the
Customer of the approval of a proposed Rental Agreement, and shall cause the
Final Document Package to be delivered to GE CAPITAL or (b) provide the
Customer with any required ECOA Notices.
<PAGE> 2
3. REVOCATION OF APPROVAL. Notwithstanding anything to the contrary
contained herein, GE CAPITAL may revoke its agreement to accept assignment of a
Rental Agreement, and may transfer to PYXIS any right, title or interest which
it may have acquired in such Rental Agreement or the Equipment governed thereby
if either (a) GE CAPITAL has not received the Final Document Package within
sixty (60) days after the date GE CAPITAL notified PYXIS of the approval of a
Rental Agreement, or (b) the Rental Agreement is terminated by the Customer at
any time during the Free Use Period or (c) prior to either receipt by GE
CAPITAL of the Final Document Package or payment by GE CAPITAL of the Purchase
Price, GE CAPITAL determines, in its good faith judgment, that an Event of
Cancellation has occurred. Upon revocation of its agreement to accept
assignment of a Rental Agreement, GE CAPITAL shall have no further liability to
the Customer or to PYXIS in connection with the Rental Agreement.
4. ACQUISITION OF TRANSACTION. Provided that: (a) GE CAPITAL has not
revoked its approval of a Rental Agreement, (b) no Default has occurred, (c)
GE CAPITAL has received the Final Document Package, (d) the Customer has
accepted the Equipment for all purposes under the Rental Agreement, and (e) the
Free Use Period has expired, GE CAPITAL shall pay PYXIS the Purchase Price of
the Equipment. Title to the Rental Agreement (to be evidenced by documents in
form and substance satisfactory to GE CAPITAL) will pass to GE CAPITAL upon the
expiration of the Free Use Period, free of all liens, claims and encumbrances
whatsoever except the rights of the Customer thereunder.
5. GRANT OF SECURITY INTEREST. As security for the payment and
performance of each obligation of a Customer under each Rental Agreement,
whether due or to become due, now existing or hereafter contracted for and any
renewals, novations, extensions and modifications thereof, PYXIS hereby gives,
grants and assigns to GE CAPITAL, its successors and assigns, a security
interest in and against any Equipment governed by such Rental Agreement and in
and against any and all additions, accessories, substitutions, replacements or
exchanges of such Equipment, and any and all insurance and/or other proceeds
thereof (all of which is hereinafter individually and collectively referred to
as the "Collateral").
6. STANDARD RATES. GE CAPITAL shall advise PYXIS from time to time
(but not more often than quarterly) of the Standard Rates applicable to Rental
Agreements. GE CAPITAL shall have no obligation to enter into any Rental
Agreement that provides for a rate different from the then current Standard Rate
or a special rate previously approved by GE CAPITAL in writing. Standard Rates
shall be effective fifteen (15) days after notice to PYXIS. GE CAPITAL shall
honor all Standard Rate quotations by PYXIS which predate the effective date of
a new Standard Rate, provided that a completed and duly executed Offer Document
Package is received by GE CAPITAL within ninety (90) days after the date of
such quotation. PYXIS agrees that it shall not submit any Rental Agreements to
GE CAPITAL pursuant to which the Customer is charged a rate other than such
Standard Rate or other specially approved rate.
7. GENERAL ADMINISTRATIVE SERVICES. (a) GE CAPITAL will provide
general administrative services in connection with the Rental Agreements,
including but not limited to credit investigation, billing and collecting. GE
CAPITAL shall have the right to deal with all Rental Agreements and Customers
in the sole exercise of its business judgment. GE CAPITAL's and PYXIS's rights
and obligations hereunder shall remain unaffected by any such activity. PYXIS
hereby irrevocably appoints GE CAPITAL its attorney-in-fact to act in its name
and stead in regard of the Rental Agreements to endorse or
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<PAGE> 3
sign PYXIS's name on all checks, collections, receipts or other documents with
regard to the Rental Agreements, as GE CAPITAL deems necessary or appropriate
to protect its right and interest in and to the Collateral, the Rental
Agreements.
(b) GE CAPITAL shall designate a manager for the Program and shall
provide a toll-free telephone number for use in connection with the Program. GE
CAPITAL agrees to provide periodic reports to PYXIS showing amounts purchased,
delinquency and such other matters as the parties may agree upon.
(c) GE CAPITAL shall provide monthly billing and collection services to
PYXIS for maintenance payments provided for pursuant to service agreements with
Customers, in such amounts and in connection with such Rental Agreements as
PYXIS shall notify GE CAPITAL, using procedures substantially similar to those
used by GE CAPITAL for its own accounts. Subject to the provisions of this
Agreement, GE CAPITAL shall remit all sums actually collected to PYXIS on a
monthly basis, along with a report summarizing the collection activity for the
previous month. GE CAPITAL shall have no obligation to undertake any collection
activity separate from collection activity on a Rental Agreement with regard to
such payments and shall have no liability to any party in connection therewith.
In consideration of GE CAPITAL's services pursuant to this paragraph, PYXIS
agrees to pay GE CAPITAL a monthly fee of $8 per applicable Rental Agreement,
and agrees that GE CAPITAL may deduct such amount from the amounts remitted to
PYXIS.
8. PYXIS REPRESENTATIONS, WARRANTIES AND COVENANTS. PYXIS hereby
represents, warrants and covenants to GE CAPITAL, its successors and assigns,
as of the date hereof, of the Offer Document Package and of last day of any
Free Use Period, that:
(a) PYXIS is a duly organized and validly existing corporation and has
full power to enter into this Agreement and to carry out the transactions
contemplated hereby and is duly licensed under all applicable federal, state
and local statutes and regulations to carry on its business and possesses
adequate licenses under the applicable patents, patent applications,
copyrights, trademarks and trade names to conduct its business;
(b) the execution and delivery of this Agreement and the performance by
PYXIS of the transactions contemplated hereby have been duly authorized by all
necessary corporate action;
(c) this Agreement constitutes a legal, valid and binding obligation of
PYXIS enforceable in accordance with its terms;
(d) neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will constitute a violation or default of any
statute, rule, or decree of any court, administrative agency or governmental
body to which PYXIS is or may be subject;
(e) the execution and delivery by PYXIS of this Agreement does not
constitute a material default with respect to any indenture, loan agreement or
other agreement to which it is bound, and there are no suits or proceedings
pending or, to the knowledge of PYXIS, threatened in any court or before any
regulatory commission, board or other administrative or governmental agency
against or affecting PYXIS which could materially impair PYXIS's ability to
perform its obligations hereunder;
(f) the financial statements of PYXIS delivered to GE CAPITAL from time
to time fairly present the financial position of PYXIS as of the dates thereof
and the results of operations of PYXIS for the periods covered thereby, all in
conformity with generally accepted accounting principles
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<PAGE> 4
applied on a consistent basis, and since the date of the latest such financial
statements, there has been no Material Adverse Change in the Financial Condition
of PYXIS;
(g) PYXIS will promptly deliver to GE CAPITAL such information concerning
the financial or other condition of PYXIS as GE CAPITAL may reasonably request
from time to time;
(h) all documents relating to any Rental Agreement to which PYXIS is a
party or by which it is bound will be genuine, legal, valid, and binding
obligations of PYXIS, enforceable in accordance with their terms and PYXIS will
not amend, change, settle, or compromise any Rental Agreement or take or agree
to any action which would diminish the value of any Collateral or change the
number or amount of payments due or to become due under any Rental Agreement
without the prior written consent of GE CAPITAL;
(i) all documents relating to any Rental Agreement are the legal, valid and
binding obligation of the Customer named therein, enforceable according to their
respective terms, and the signature of the named Customer is genuine;
(j) there are and will be no agreements made or express or implied
warranties given between PYXIS or its agents and any Customer in connection with
any Rental Agreement, except as contained in any purchase or maintenance
agreement between such Customer and PYXIS or its agents, a true and correct copy
of which has been delivered to GE CAPITAL;
(k) PYXIS has not received and will not receive any rent or other monies
from any Customer in respect of any Rental Agreement (other than any required
advance rent) and will immediately remit any advance rent or other funds to GE
CAPITAL if received;
(l) GE CAPITAL shall have good title to any Rental Agreement and shall have
a first priority security interest in all Equipment and other Collateral, in
each case free and clear of all liens, claims, security interests and
encumbrances on and as of the date the Equipment or other Collateral is accepted
by each Customer and on and as of the last day of the Free Use Period;
(m) PYXIS and its agents have not participated in and have no knowledge of
any fraudulent act in connection with any Rental Agreement or to any Customer;
(n) the Equipment (and any related application or operating system
software) shall have been delivered to and accepted by the named Customer,
properly installed at the location indicated in the applicable Offer Document
Package, and is, and (if required by any agreement between PYXIS and Customer)
shall be, maintained in good working order, condition and repair, conforming to
specifications;
(o) all credit or other information reasonably relevant to a credit
determination concerning the Customer known to PYXIS will have been disclosed to
GE CAPITAL;
(p) all applicable sales, use, or property taxes which may apply to the
Equipment assessed or imposed on or prior to the time GE CAPITAL acquires the
Rental Agreement, shall have been paid or will be timely remitted by PYXIS to
the appropriate taxing authority and PYXIS will on request provide GE CAPITAL
with proof of such payment as promptly as possible;
(q) At all times during the term of any Rental Agreement, PYXIS, through
itself or its agents, shall maintain sufficient facilities, personnel and
supplies (including without limitation necessary replacement and other component
parts) to use, maintain and service the Equipment, and PYXIS shall diligently
perform all warranty and contractual maintenance and service obligations
(whether or not such obligations are part of a Rental Agreement or of a separate
maintenance agreement governing Equipment subject to a Rental
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<PAGE> 5
Agreement). PYXIS shall not transfer or assign its obligation to provide
maintenance to Customers or to maintain service capability without the prior
written consent of GE CAPITAL, which shall not be unreasonably withheld,
provided that this section shall not prohibit the routine subcontracting of
maintenance or service obligations;
(r) PYXIS has the right to assign the Rental Agreement to GE
CAPITAL without the consent of the Customer or has obtained any required
consent; and
(s) At all times during the term of any Rental Agreement, PYXIS
shall maintain liability insurance in the amount of $1,000,000 per occurrence
and shall cause GE CAPITAL to be named thereon as additional insured.
9. GE CAPITAL REPRESENTATIONS AND WARRANTIES. GE CAPITAL hereby
represents and warrants and covenants to PYXIS, its successors and permitted
assigns, as of the date hereof, that:
(a) GE CAPITAL is a corporation duly organized, validly
existing and in good standing under the laws of New York and has the corporate
power and authority to carry on its business.
(b) The execution and delivery of the Agreement by GE
CAPITAL and the performance by GE CAPITAL of its obligations hereunder have
been duly authorized by all necessary corporate action on the part of GE
CAPITAL and do not and will not violate (i) any provision of the charter
documents of GE CAPITAL or constitute default under any statute or law or any
judgment of any court or governmental authority to which GE CAPITAL may be
subject, or (ii) any contract, indenture, mortgage, loan agreement, or other
instrument to which GE CAPITAL may be subject, which violation would have a
material adverse effect upon the operation or properties of GE CAPITAL.
(c) This Agreement constitutes the legal, valid and binding
obligation of GE CAPITAL enforceable against GE CAPITAL in accordance with its
terms, except as the enforcement thereof may be limited by laws now or
hereafter in effect relating to creditors' rights generally.
10. INDEMNIFICATION. PYXIS shall indemnify and hold harmless GE
CAPITAL, its affiliates, subsidiaries, employees, officers, directors and
agents, from and against any and all losses, claims by or against GE CAPITAL,
liabilities, demands and expenses whatsoever, including without limitation
reasonable attorneys' fees and costs, arising out of or in connection with any
breach by PYXIS of its representations, warranties or obligations hereunder or
with any act, failure to act, omission, representation or misrepresentation
(including but not limited to those in connection with any Rental Agreement,
Equipment or other Collateral and any related operating system or application
software and agreements and conduct relating thereto or the services rendered
by GE CAPITAL in connection with the billing and collection of maintenance
payments pursuant hereto, or the sale, use, operation, possession, servicing or
maintenance thereof) by PYXIS, its affiliates, subsidiaries or dealers or the
employees, officers or agents of any of the foregoing. GE CAPITAL shall not be
required as a condition of payment hereunder by PYXIS to contest or permit
PYXIS to contest any of the foregoing or to attempt to recover from any
Customer through legal proceedings or otherwise. All indemnities and
obligations under this Section 10 shall survive the expiration or termination
of this Agreement and the expiration or termination of any Rental Agreement.
11. PYXIS AGREEMENTS. (a) PYXIS hereby agrees (i) that GE CAPITAL
as assignee shall not be liable for any obligations of a Customer thereunder and
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<PAGE> 6
(ii) that within 10 days of receipt of a notice from GE CAPITAL that a default
under a Rental Agreement has been reasonably determined to arise out of the
failure of PYXIS to comply with its maintenance or service obligations in
regard to any Equipment, PYXIS shall pay GE CAPITAL an amount equal to the sum
of (i) all amounts due and owing under such Rental Agreement as of the date of
default, including without limitation late charges and penalties, and (ii) all
remaining scheduled payments thereunder, discounted to present value at the
rate used to calculate the amount of the scheduled payments, as shown on the
books and records of GE CAPITAL in regard of such Rental Agreement.
(b) PYXIS agrees that GE CAPITAL may offset any amount then due GE
CAPITAL against sums then or thereafter due PYXIS, and further agrees that
PYXIS's obligations with respect to a Rental Agreement shall not be conditioned
upon, or in any way affected by: notice of debt or obligation of the Customer
to GE CAPITAL or of default or breach of such debt or obligation; any
requirement that GE CAPITAL exhaust its remedies against the Customer;
presentment, protest and demand and notice of protest and demand (or any of
them) with respect to such Rental Agreement; any extension of time or
performance to, or any settlement or granting of any indulgence to, or any
modification of any obligation of Customer; GE CAPITAL'S failure to enforce
any provision of the Rental Agreement; the acceptance, alteration, or release of
any security provided by Customer; or Customer's voluntary or involuntary
bankruptcy, assignment for the benefit of creditors, reorganization or similar
proceedings affecting Customer or any of its assets, or the release of Customer
from any of its agreements pursuant to the Rental Agreement, by operation of law
or otherwise.
12. REMARKETING ASSISTANCE. (a) Following the termination of a
Rental Agreement upon the default of a Customer, upon GE CAPITAL'S request and
provided that GE CAPITAL has made the Equipment legally available, PYXIS shall
use its best efforts to assist GE CAPITAL in de-installation, removal,
appraisal, refurbishing, storage (including insurance during storage) and
disposition of the Equipment, by sale or re-lease, upon terms and conditions
mutually acceptable to GE CAPITAL and such purchaser or new Customer; provided
that GE CAPITAL shall reimburse PYXIS for out-of-pocket costs previously
approved by GE CAPITAL, including sales commissions, if any, upon presentation
of satisfactory evidence thereof. In the performance of its obligations under
this Section, PYXIS shall not discriminate between Equipment owned by GE
CAPITAL, and equipment owned by PYXIS or any other party to which PYXIS may be
bound to provide remarketing assistance. PYXIS will offer its customary
warranty and maintenance service on comparable used equipment to the purchaser
or lessee of any remarketed Equipment.
(b) PYXIS shall remit the proceeds of remarketing of any Equipment
promptly to GE CAPITAL. GE CAPITAL shall apply such proceeds (i) first, to pay
its costs incurred in connection with the foreclosure, repossession and
remarketing of the Equipment, including without limitation reimbursed costs,
attorneys' fees and costs, (ii) second, to any deficiency balance attributable
to the defaulted Rental Agreements on its books and records, and (iii) third,
unless otherwise required by law, any excess shall be divided equally between
PYXIS and GE CAPITAL.
13. FIRST YEAR PAYMENT. In order to induce GE CAPITAL to enter
into this Agreement, PYXIS has represented that the average Purchase Price for
all Rental Agreements assigned to GE CAPITAL during the twelve month period
from the date hereof (the "First Year") shall equal or exceed $150,000. PYXIS
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agrees that (a) if the average Purchase Price of all such Rental Agreements is
between $50,000 and $149,999, PYXIS shall pay GE CAPITAL promptly upon receipt
of notice an amount equal to $5,000 for each $1,000,000 (or portion thereof)
aggregate Purchase Price paid by GE CAPITAL to PYXIS during the First Year, and
(b) if the average Purchase Price of all such Rental Agreements is less than
$50,000, PYXIS shall pay GE CAPITAL promptly upon receipt of notice an amount
equal to $7,500 for each $1,000,000 (or portion thereof) aggregate Purchase
Price paid by GE CAPITAL to PYXIS during the First Year.
14. TERM AND TERMINATION. This Agreement shall be effective upon
execution by GE CAPITAL and PYXIS and shall continue from such effective date
until terminated by either party at any time upon sixty (60) days prior written
notice; provided that either party may terminate this Agreement immediately upon
notice to the other in the event of a breach by the other party. Upon
termination or expiration of this Agreement, the obligations of the parties
with respect to Rental Agreements not approved by GE CAPITAL shall cease.
15. MISCELLANEOUS. (a) GE CAPITAL and PYXIS acknowledge that they
are separate entities, each of which has entered into this Agreement for
independent business reasons. PYXIS shall have no right or authority to, and
will not attempt to, accept collections, repossess or consent to the return of
the Equipment (other than for repairs or as otherwise consented to in a prior
writing by GE CAPITAL) or otherwise modify the terms of any Rental Agreement in
any way whatsoever.
(b) The rights and obligations of PYXIS hereunder may not be
assigned without the written consent of GE CAPITAL, except that PYXIS may
assign its rights to receive money or other payments under this Agreement.
(c) The provisions of this Agreement and the rights and obligations
of the parties hereto shall survive the execution and delivery hereof, and
except insofar as they relate to entering into further Rental Agreements, shall
survive the termination of this Agreement.
(d) Notices of PYXIS or GE CAPITAL under this Agreement shall be
deemed to have been given if sent by recognized overnight delivery or
registered or certified mail, return receipt requested, to the other party at
the address first stated above or such other address as such party may have
provided by notice.
(e) The parties agree that this Agreement has been executed and
delivered in, and shall be construed in accordance with the laws (other than the
choice of law provisions) of, the State of New York. All actions in connection
with this Agreement shall be maintained in the federal or state courts of New
York.
(f) If any provision of this Agreement shall be held by any court
of competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or unenforceability of such
provision shall have no effect upon and shall not impair the enforceability of
any other provision of this Agreement.
(g) This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof and incorporates all
representations made in connection with negotiation of the same. The terms may
not be terminated or amended orally, but only by a writing duly executed by
each of the parties hereto. Additional terms of this Agreement may from time to
time be set forth in written Riders hereto, all of which are hereby
incorporated by reference herein.
(h) This Agreement and any amendments hereto shall be binding on
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
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<PAGE> 8
(i) In the event there is any conflict between this Agreement and
any ancillary agreements with respect to any Rental Agreement or Equipment,
the terms and conditions of this Agreement shall control.
16. DEFINITIONS.
(a) "Agreement" means this Vendor Program Agreement, as amended
from time to time.
(b) "Customer" means a qualified customer of PYXIS who is an
obligor under a Rental Agreement or guarantor of the obligations of such
Customer.
(c) "Default" means a breach by PYXIS of any representation,
warranty, covenant or term of this Agreement or of any documents by which PYXIS
is bound in connection with a Rental Agreement or a default by PYXIS under any
other agreement by and between PYXIS or any affiliate thereof and GE CAPITAL and
any affiliate thereof.
(d) "ECOA" means the federal Equal Credit Opportunity Act.
(e) "ECOA Notice" means a notice to the Customer whose application
for credit has been denied or conditionally approved in the form required by
the ECOA.
(f) "Event of Cancellation", with respect to a Rental Agreement,
means (i) a Material Adverse Change in Financial Condition, business or
operations of PYXIS since the date of this Agreement or of the Customer since
the date of the related Offer Document Package, the time Equipment related to
such Rental Agreement is to be accepted by the Customer or the last day of a
Free Use Period, or (ii) a breach of any term of such Rental Agreement or of
any related guaranty or credit support agreement, or (iii) any Default, or (iv)
the occurrence of an event which causes a representation made by Customer,
PYXIS or any other party in connection with the Rental Agreement or under this
Agreement to be or become false or misleading in any material respect or, (v)
notification by a Customer to PYXIS or to GE CAPITAL of its intent to cancel
all or any part of the Rental Agreement or to reject or refuse to accept any
Equipment governed thereby.
(g) "Final Document Package" means such other and further documents
as GE CAPITAL shall from time to time require in accordance with its standard
procedures for the Program (including without limitation evidence of the
original cost of any Equipment) in order to complete Rental Agreement and to
pay the Purchase Price of Equipment to PYXIS.
(h) "Free Use Period" means the period so named in a Rental
Agreement during which a Customer is entitled to use of Equipment without
charge and with rights of cancellation.
(i) "Material Adverse Change in Financial Condition" means (i) a
significant negative change in any financial condition from the financial
condition reflected in the most recent financial statements delivered to GE
CAPITAL by PYXIS or a Customer; (ii) insolvency, inability to pay debts as they
mature, failure to operate as a going concern, filing under Title II of the
United States Code or any successor or similar federal or state statute,
assignment for the benefit of creditors, appointment of a receiver, dissolution
or change in the corporate structure or in a material portion of stock or asset
ownership; or (iii) as to a Customer, the death or incapacity of any principal
thereof.
(j) "Offer Document Package" means an application (including credit
information concerning the Customer) and any other documents required by GE
CAPITAL to initiate its consideration of a proposed Rental Agreement.
(k) "Purchase Price" means the present value of the aggregate
rental payments scheduled under a Rental Agreement for the fixed term thereof,
discounted at the Standard Rate applicable thereto or such other special rate
as may have been previously approved by GE CAPITAL in writing.
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<PAGE> 9
(l) "Rental Agreement" means the PYXIS Rental Agreement in
substantially the form attached hereto as Exhibit A, as it may be amended from
time to time with the prior written consent of GE CAPITAL, and any renewal,
extension and novation, guaranty thereof and any credit enhancement required of
a Customer in regard thereto.
(m) "Standard Rates" means the lease or financing rates applicable
to Rental Agreements as defined in Section 6.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives on the date set forth below.
PYXIS CORPORATION GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ G.E. Forth By: /s/ Thomas H. Mann
--------------------------- --------------------------------
Title: V.P. & C.F.O Title: V.P. & Gen. Mgr.
------------------------ -----------------------------
Date: 10/10/91 Date: 10/11/91
------------------------- ------------------------------
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<PAGE> 10
ASSIGNMENT
- ----------
CUSTOMER LEGAL NAME: __________________________________________________________
CREDIT APPROVAL NO. ___________________________________________________________
PURCHASE PRICE: _______________________________________________________________
RENTAL AGREEMENT consisting of:
* Rental Agreement Dated: _____________________________________________________
* Notice of Assignment Dated: _________________________________________________
* Guaranty (Guarantor name and address): ______________________________________
______________________________________
______________________________________
* Other (including UCC-1, if applicable): _____________________________________
_____________________________________
FOR VALUE RECEIVED, PYXIS CORPORATION, a Delaware corporation, as
assignor ("Assignor") hereby GRANTS, TRANSFERS, ASSIGNS, SETS OVER and CONVEYS
to GENERAL ELECTRIC CAPITAL CORPORATION, its successors and assigns, as
assignee ("Assignee") all of the right, title and interest of Assignor in, to
and under the Rental Agreement described above, the true, correct and complete
original of which is attached hereto and made a part hereof, all payments due
or to become due thereunder, and a first priority security interest in the
Equipment described therein, and all present and future accessions,
attachments, replacements, substitutions and additions and all proceeds thereof
(collectively referred to hereafter as the "Account"), WITHOUT RECOURSE or
warranty except as provided herein. Notwithstanding the foregoing, Assignor
shall retain all obligations for training, service and maintenance under said
Rental Agreement and/or related to said Equipment. Assignor authorizes Assignee
to collect any and all installments on the Account and to take action
thereunder which Assignor might otherwise take.
To induce Assignee to purchase the Account, Assignor warrants that:
(a) The Account is a genuine, legal, binding obligation of a bona
fide lessee (hereafter called "Customer") enforceable in
accordance with its terms for the amount owing thereunder as
shown above.
(b) All information contained therein are true and correct.
(c) The Equipment has been previously duly delivered or installed,
as applicable and accepted by Customer.
(d) The Account is and will be free from any liens, setoffs,
counterclaims and other defenses.
(e) Assignor has the right to assign the Account and this
Assignment conveys good title to the Account and Equipment
described therein, free and clear of any other liens and
encumbrances whatsoever.
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This Assignment is governed by and subject to the terms of that
certain Vendor Program Agreement dated as of October , 1991 by and
between Assignor and Assignee.
Dated 19
-------------------- -----
ASSIGNOR: PYXIS CORPORATION
By:
-------------------------------
Title:
-----------------------------
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<PAGE> 12
NOTICE OF ASSIGNMENT
(Insert Date of Transaction)____________
TO: (Insert Customer Legal Name and Address) _________________________________
RE: Rental Agreement No. _______________ Dated ___________________
Dear Customer:
In accordance with your Rental Agreement with Pyxis Corporation
("PYXIS") dated _____________, PYXIS has assigned all payments pursuant to the
Rental Agreement, beginning with your payment due ___________, to GENERAL
ELECTRIC CAPITAL CORPORATION ("GE CAPITAL"). GE CAPITAL will invoice you for
the ______________ remaining payments equal to $__________ per payment. Your
payments should be sent to GE CAPITAL at [P.O. Box 4485, Canton, Ohio 44760].
PYXIS has not transferred its obligations to provide training or
maintenance on the Equipment or any related software. All correspondence,
questions and payments regarding training and maintenance relating to Equipment
or software should be directed to your PYXIS representative. GE CAPITAL will
have no responsibility for training and maintenance. You are obligated to pay
the monthly rental or installment payment required by your Rental Agreement to
GE CAPITAL notwithstanding any complaint you may have against PYXIS for
service, maintenance or otherwise.
The Rental Agreement is the only agreement you have with PYXIS
pertaining to the Equipment or software, except for a service agreement
dated ____________. Also, you have no claim pertaining to the Equipment or
software which has been delivered and accepted by you.
Please acknowledge receipt of this Notice of Assignment ("Notice") in
the space provided below and return this Notice to GE CAPITAL at ____________
__________________. In the event that you do not notify GE CAPITAL in writing
to the above address within ten (10) days of the above date of any disagreement
with the information stated in this Notice, GE CAPITAL will assume you have
read and agreed with the information in this Notice.
Sincerely,
PYXIS CORPORATION I HAVE READ AND AGREED WITH ALL
THE INFORMATION CONTAINED IN THE
NOTICE.
By: ______________________________ CUSTOMER: ____________________
Title: ___________________________ By: __________________________
Title: _______________________
Date: ________________________
cc: All Guarantors
GE CAPITAL
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10/30/91
RIDER #1
TO
VENDOR PROGRAM AGREEMENT
DATED AS OF OCTOBER 10, 1991 BETWEEN
GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL")
AND PYXIS CORPORATION ("COMPANY")
THIS RIDER is hereby incorporated into and made a part of the above
referenced Vendor Program Agreement, as amended from time to time (the
"Agreement") and is subject to all of the terms and provisions thereof. All
terms used and not defined herein shall have the meanings set forth in the
Agreement.
COMPANY and GE CAPITAL wish to amend the Agreement to enhance certain
aspects of the Program, to permit GE CAPITAL to execute certain financing
statements on behalf of COMPANY and to clarify treatment of certain tax
collections.
COMPANY has also requested that GE CAPITAL consider Municipal
Transactions consisting of leases or lease-purchases by certain qualified
municipalities and other political subdivisions be included in the Program, and
GE CAPITAL has agreed to do so, subject to the provisions of this Rider.
COMPANY understands that it shall be the lessor in Municipal Transactions, that
it shall assign its rights thereunder to GE CAPITAL, and that special
documentation shall be required for all Municipal Transactions.
NOW THEREFORE, for the consideration set forth herein and in the
Agreement, GE CAPITAL and COMPANY hereby agree that:
A. AMENDMENTS. The following subsection is added at the end of
Section 7 of the Agreement:
(d) GE CAPITAL shall provide billing and collection services for
sales and use taxes which may be assessed or owing in connection in such
amounts and in connection with such Rental Agreements and Service
Agreements, as applicable, as PYXIS shall notify GE CAPITAL, using
procedures substantially similar to those used by GE CAPITAL for its own
accounts. GE CAPITAL shall remit all sums actually collected to the
appropriate jurisdictions. GE CAPITAL shall have no obligation to
undertake any collection activity separate from collection activity on a
Rental Agreement with regard to such payments and shall have no
liability to any party in connection therewith.
B. LIMITED POWER OF ATTORNEY. PYXIS hereby appoints GE CAPITAL as
its true and lawful attorney, irrevocably and with power of substitution, with
full power (in the name of PYXIS or otherwise) to (a) execute and file all
financing statements under the Uniform Commercial Code or any similar
regulation or statute and any other instrument necessary or desirable for
protection of any security under the Agreement and (b) transfer any rights
under any Transaction under the Agreement or any Equipment governed thereby to
protect GE CAPITAL's rights therein or thereunder.
<PAGE> 14
C. MUNICIPAL TRANSACTIONS.
1. The following definitions shall apply to this Rider:
(a) "Municipal Lease" means a lease or lease-purchase agreement and
all related documents in the form provided by or acceptable to GE CAPITAL,
between COMPANY as lessor and a Municipal Lessee.
(b) "Municipal Lessee" means a Lessee which is a state or a
political subdivision of the state in which it is located and which, if the
Municipal Lease contemplates that interest income received by GE CAPITAL shall
not be included in GE CAPITAL's gross income (any such interest income,
"Tax-Exempt Income") under the Internal Revenue Code of 1986, as amended (the
"Code"), qualifies as an issuer of a State or local bond for purposes of
Section 103 of the Code.
(c) "Municipal Transaction" means a Transaction entered into by
COMPANY as lessor and by a Municipal Lessee and documented on a Municipal Lease.
(d) "Repurchase Amount" means a sum equal to the total of the
following amounts due or to become due under a Municipal Transaction: (i) all
accrued rent or installment payments and other sums due and payable under the
Municipal Transaction as of the date the Repurchase Amount is paid, plus (ii)
the remaining rental or installment payments due during the remainder of the
term of the Municipal Transaction, with each such payment discounted to its net
present value at the applicable Standard Rate (or the special rate quotation if
one was approved) originally used to calculate such payments, plus (iii) the
amount of any purchase option set forth in the Municipal Lease, plus (iv) an
amount necessary to compensate GE CAPITAL for federal income taxes payable on
such Repurchase Amount because of the loss of any expected tax exemption on
applicable interest income.
(e) "RFP" means any Request for Proposal or other purchase or
offering document issued from time to time by a Municipal Lessee in connection
with a Municipal Transaction.
2. COMPANY hereby represents and warrants to GE CAPITAL, its
successors and assigns, in connection with any Municipal Transaction, that:
(a) COMPANY has complied and will comply with all bidding
requirements applicable to the Municipal Transaction and with all requirements
in the RFP, including without limitation those applicable to (i) the Equipment,
(ii) the entity (a "Contractor") submitting a proposal in response to the RFP,
and (iii) compliance with all federal and state statutes and regulations
governing equal employment opportunity, affirmative action and environmental
protection. COMPANY is the Contractor named in and subject to the RFP.
(b) The Lessee under the Municipal Transaction is a Municipal
Lessee.
(c) Each scheduled payment under any Municipal Transaction which
contemplates that Tax-Exempt Income shall be received by GE CAPITAL constitutes
a payment of principal and interest entirely attributable to the use of the
Equipment and no portion thereof is attributable to current expenditures by the
Municipal Lessee for maintenance, service or license fees.
-2-
<PAGE> 15
(d) The Municipal Lessee has complied fully with all applicable law
governing open meetings, public bidding and appropriations in connection with
the Municipal Transaction and the execution of all documents relating to the
Municipal Transaction, and has obtained the necessary unrestricted
appropriations to pay all its obligations under the Municipal Transaction
accruing during its current fiscal year. The Municipal Lessee has consented to
the assignment of the rights of COMPANY in the Municipal Transaction to GE
CAPITAL.
(e) The Equipment governed by any Municipal Transaction which
contemplates that Tax-Exempt Income shall be received by GE CAPITAL will be
used solely by the Municipal Lessee in connection with its governmental and
proprietary functions and will not be used by or for the benefit of any private
entity.
3. (a) COMPANY shall indemnify and hold GE CAPITAL harmless pursuant
to Section 10 of the Agreement in connection with any breach of the
representations and warranties of COMPANY set forth in this Rider.
(b) If any Municipal Transaction contemplates that Tax-Exempt Income
shall be received by GE CAPITAL and any payment or portion thereof under the
applicable Municipal Lease is not deemed to be Tax-Exempt Income, COMPANY shall
reimburse GE CAPITAL upon demand for any federal income taxes payable on such
payment or portion thereof.
(c) Within ten (10) days of demand and the receipt of notice from GE
CAPITAL, COMPANY shall repurchase any Municipal Transaction from GE CAPITAL for
the Repurchase Amount applicable thereto in the event that:
(i) the Municipal Transaction is terminated for the convenience
of the Municipal Lessee, or
(ii) GE CAPITAL is deemed by any third party to be a Contractor
or a sub-contractor under the RFP and GE CAPITAL determines in its sole
judgment that it does not comply with any provision of the RFP which
would be applicable thereto, in which case the repurchase of the
Municipal Transaction shall be effective as of the day preceding the
date on which GE CAPITAL is deemed to be a Contractor, or
(iii) a Non-Appropriation (as described in the Municipal Lease)
occurs and COMPANY agrees to sell, lease, rent or otherwise provide to
the Municipal Lessee equipment serving the same purpose and function as
the Equipment within one (1) year.
(d) Any such repurchase shall be on an AS-IS, WHERE-IS BASIS, with no
recourse to or warranty whatsoever from GE CAPITAL except as to title. COMPANY
agrees that GE CAPITAL may offset any Repurchase Amount then due GE CAPITAL
against sums then or thereafter due COMPANY.
4. COMPANY agrees to execute and deliver to GE CAPITAL such further
documents and instruments as GE CAPITAL may request to protect its interest in
any Municipal Transaction and the Equipment governed thereby, including without
limitation ancillary agreements concerning document changes or deficiencies in
a Municipal Lease.
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<PAGE> 16
5. The parties specifically agree that each and every lease or
lease-purchase agreement with an entity purported to be a Municipal Lessee
which has been approved or entered into by GE CAPITAL prior to the date hereof
shall be deemed to be a Municipal Transaction governed by and subject to the
provisions of the Agreement, as amended, and this Rider.
D. NO OTHER AMENDMENTS. The provisions of this Rider shall be in
addition to and not in the place of any other provision of the Agreement.
Except as specifically amended herein, all other provisions of the Agreement
and the obligations of the parties pursuant thereto shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Rider to be executed
by their duly authorized representatives on the date of and in connection with
the execution of the Agreement.
GENERAL ELECTRICAL CAPITAL CORPORATION PYXIS CORPORATION
By: /s/ Thomas H. Mann By: /s/ Stephen M. Foster
--------------------------- ------------------------------
Title: VP & GM Title: VP Contracts
------------------------ ---------------------------
Date: 12/13/91 Date: 12/9/91
------------------------- ----------------------------
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<PAGE> 17
RIDER NO. 2
TO
VENDOR PROGRAM AGREEMENT
DATED AS OF OCTOBER 10, 1991
BETWEEN
GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL")
AND
PYXIS CORPORATION ("PYXIS")
This Rider is hereby incorporated into and made a part of the above
referenced Vendor Program Agreement, as amended from time to time (the
"Agreement") and is subject to all of the terms and provisions thereof.
Capitalized terms used and not defined herein shall have the meanings set forth
in the Agreement.
PYXIS and GE CAPITAL wish to amend the Agreement to enhance certain
aspects of the Program and to provide for a long-term competitive captive
financing relationship in which GE CAPITAL shall provide additional services
and financing in exchange for its appointment as PYXIS's primary captive
financing partner;
NOW THEREFORE, for the consideration set forth herein and in the
Agreement, GE CAPITAL and PYXIS hereby agree as follows:
A. The term "Equipment" in the first sentence of Section 4 of the
Agreement is hereby deleted and the term "Rental Agreement" substituted in its
place.
B. The terms "renewals" and "extensions" are hereby deleted from
Section 5 of the Agreement.
C. The final four words of Section 7(a) of the Agreement are hereby
amended to read "Rental Agreements and the Collateral."
D. The term "Rental Agreement" in the final sentence of Section 7(c) is
hereby deleted and the term "service agreement" substituted in its place.
E. Section 8(k) is hereby amended in its entirety to read as follows:
"(k) PYXIS has not received and will not receive any rent or
other monies from any Customer in respect of any Rental Agreement (other than
any required advance rent) and will immediately remit any advance rent or other
funds due to GE CAPITAL during the fixed term of such Rental Agreement if
received;"
F. The following sentence is hereby added to the end of Section 11(a):
<PAGE> 18
"Upon receipt of such payment, GE CAPITAL shall assign to PYXIS all of
its right, title and interest in and to such Rental Agreement and the Equipment
subject thereto on an AS-IS, WHERE-AS basis."
G. Clause (iii) of Section 12(b) is hereby amended in its entirety to
read as follows: "(iii) third, any excess shall be paid to PYXIS."
H. The phrase "(including without limitation evidence of the original
cost of any Equipment)" is hereby deleted in its entirety from Section 16(g).
I. The terms "renewal" and "extension" are hereby deleted from Section
16(l).
J. Section C(1)(d) of Rider No. 1 to the Agreement is hereby amended in
its entirety to read as follows:
"(d) "Repurchase Amount" means a sum equal to the total of the
following amounts due or to become due under a Municipal Transaction: (i) all
accrued rent or installment payments and other sums due and payable under the
Municipal Transaction as of the date the Repurchase Amount is paid, plus (ii)
the remaining rental or installment payments due during the remainder of the
term of the Municipal Transaction, with each such payment discounted to its net
present value at the applicable Standard Rate (or the special rate quotation if
one was approved) originally used to calculate such payments, plus (iii) the
amount of any purchase option set forth in the Municipal Lease, if such
purchase option was part of the amount funded by GE CAPITAL, plus (iv) an
amount necessary to compensate GE CAPITAL for federal income taxes payable on
such Repurchase Amount because of the loss of any expected tax exemption of
applicable interest income, if such tax exemption was part of the funding
calculation made by GE CAPITAL with respect to such Municipal Transaction.
K. GE CAPITAL FUNDING COMMITMENT. Provided that the Rental Agreements
which GE CAPITAL is requested to purchase meet the same credit criteria as the
Rental Agreements which GE CAPITAL previously purchased under the Program, GE
CAPITAL will use its best efforts to provide up to Seventy Five Million Dollars
($75,000,000) in financing, subject to the terms of this Rider 2. GE CAPITAL
will notify PYXIS on a quarterly basis if it has reason to believe that during
the next six (6) month period, it will be unable to finance at least one and
a-half (1.5) times the amount financed by GE CAPITAL under the program during
the previous six (6) month period.
L. PYXIS VOLUME COMMITMENT. PYXIS agrees that during the term of the
Agreement, GE CAPITAL shall remain PYXIS's primary captive financing partner,
provided that GE CAPITAL elects to purchase the Rental Agreements which PYXIS
shall offer from time to time. In the event that GE CAPITAL does not elect to
purchase any such Rental Agreement, PYXIS may find a third party purchaser for
any such Rental Agreement. PYXIS represents and warrants that it will provide
GE CAPITAL with the opportunity to purchase Forty Million Dollars ($40,000,000)
in volume under the Program during the eighteen (18) month period commencing
October 15, 1992 through March 15, 1994 (the "Period"). PYXIS will use its best
efforts to provide GE CAPITAL with the opportunity to purchase an additional
Twenty Million Dollars ($20,000,000) in volume under the Program during the
Period. PYXIS agrees to pay to GE CAPITAL a pro-rata portion of a good faith
commitment fee of Two Hundred Thousand Dollars ($200,000) (the "Commitment
Fee") if less than Forty Million Dollars ($40,000,000) in volume is purchased
by GE CAPITAL during the Period.
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<PAGE> 19
The obligation to pay a pro-rata portion of the Commitment Fee shall be subject
to Acts of God or an unforseeable change in the general business environment in
which PYXIS operates.
M. ANNUAL LOSS POOL.
1. The following definitions shall apply to this Section M:
(a) "Estimated Remarketing Proceeds" shall refer to PYXIS's estimate of
the fair market value of the Equipment governed by a Rental Agreement as to
which a Rental Agreement Default has occurred, minus its reasonable remarketing
out-of-pocket costs and applicable taxes.
(b) "Loss Pool Balance" shall refer to the aggregate amount recorded in
any Loss Pool Account at any time.
(c) "Loss Pool Credit shall be two and a-half percent (2.5%) of the
Purchase Price paid by GE CAPITAL for any Rental Agreement.
(d) "Rental Agreement Default" shall refer to (i) the failure of a
Customer to make any payment or perform any obligation due under a Rental
Agreement for a period of 90 days (except for the reasons set forth in Section
11(a) of the Agreement) or (ii) a Customer's insolvency, inability to pay debts
as they mature, failure to operate as a going concern, filing under Title 11 of
the United States Code or any successor or similar federal or state statute,
assignment for the benefit of creditors, appointment of a receiver, dissolution
or change in a material portion of stock or asset ownership.
(e) "Rental Agreement Default Amount" shall refer to (i) all amounts due
and owing under a Rental Agreement as of the date of the Rental Agreement
Default, including, interest on the unpaid balance and (ii) all remaining
scheduled payments thereunder, discounted to their present value at the
applicable Standard Rates.
2. GE CAPITAL and PYXIS shall, for accounting purposes only, establish an
annual Loss Pool Account for all Rental Agreements purchased by GE CAPITAL in
any calendar year (commencing October 15, 1992).
3. Simultaneously with the payment of the Purchase Price for any Rental
Agreement, GE CAPITAL shall record in the applicable Loss Pool Account an amount
equal to the Loss Pool Credit applicable to such Rental Agreement. GE CAPITAL
shall on a quarterly basis give PYXIS notice of adjustments to each Loss Pool
Account and of each Loss Pool Balance.
4. In the event of a Rental Agreement Default, GE CAPITAL shall give PYXIS
written notice thereof and of the Rental Agreement Default Amount. Within ten
(10) days of receipt of such notice, PYXIS shall (i) pay GE CAPITAL the Rental
Agreement Default Amount, but not more than the applicable Loss Pool Balance at
such time and (ii) give GE CAPITAL written notice of the Estimated Remarketing
Proceeds of the Equipment governed by such Rental
-3-
<PAGE> 20
Agreement, provided that the amount of the Estimated Remarketing Proceeds may
be estimated by GE CAPITAL if written notice thereof is not provided by PYXIS
in a timely manner.
5. Upon receipt of the Rental Agreement Default Amount (or if the
applicable Loss Pool Balance is less than the Rental Agreement Default Amount,
upon receipt of the applicable Loss Pool Balance), GE CAPITAL shall (i)
subtract an amount equal to the Rental Agreement Default Amount from the
applicable Loss Pool Balance (of if the applicable Loss Pool Balance is less
than the Rental Agreement Default Amount, shall reduce the applicable Loss Pool
Balance to zero) and (ii) add an amount equal to the Estimated Remarketing
Proceeds to the applicable Loss Pool Balance. The remarketing proceeds actually
received by PYXIS on account of the remarketed Equipment shall be distributed
in accordance with Section 12 of the Agreement. GE CAPITAL will adjust the
applicable Loss Pool Balance if the remarketing proceeds actually received on
account of the remarketed Equipment pursuant to Section 12 of the Agreement are
more than ten percent (10%) higher or lower than the Estimated Remarketing
Proceeds.
6. In the event that the Rental Agreement Default Amount is
greater than the sum of the applicable Loss Pool Balance and the remarketing
proceeds related to such Rental Agreement which are retained by GE CAPITAL
pursuant to Section 12 of the Agreement, GE CAPITAL shall be entitled to retain
any future collections in regard of the Rental Agreement, up to an amount equal
to GE CAPITAL's full recovery of the Rental Agreement Default Amount, and any
remaining sums received by GE CAPITAL with respect to such Rental Agreement
shall be remitted to PYXIS.
7. Provided that (a) GE CAPITAL has received from PYXIS the
applicable Rental Agreement Default Amount and (b) the defaulted Rental
Agreement is not treated as a true lease for federal income tax purposes on the
books and records of GE CAPITAL, GE CAPITAL shall transfer and assign all its
rights under and interest in such Rental Agreement and the Equipment governed
thereby to PYXIS on an AS-IS, WHERE-IS basis, without recourse or warranty.
N. SERVICED ACCOUNTS. (1) AT PYXIS's request, GE CAPITAL shall
provide its customary credit and documentation review and monthly billing and
collections services for any Rental Agreement not purchased by GE CAPITAL and
related servicing agreement, if any (collectively, the "Serviced Account"),
subject to the following terms and conditions. GE CAPITAL shall provide monthly
billing and collection services to PYXIS for Serviced Accounts. GE CAPITAL
shall remit all sums actually collected to PYXIS on a monthly basis, along with
a report summarizing the collection activity for the previous month. GE CAPITAL
shall have no obligation to undertake any separate collection activity with
respect to any Serviced Account. In consideration of GE CAPITAL's services
pursuant to this Section N, PYXIS agrees to pay GE CAPITAL the following
servicing fees ("Servicing Fees") for each Serviced Account and agrees that GE
CAPITAL may deduct such Servicing Fees from the amounts remitted to PYXIS: (i)
an initial charge for credit and documentation review and systems booking in
the amount of One Hundred and Fifty Dollars ($150); (ii) an initial charge for
all subsequent schedules to a Serviced Account which do not require independent
credit review in the amount of Fifty Dollars ($50.00); and (iii) a monthly fee
for billing and collections services in the amount of Twelve Dollars ($12.00)
for each invoice delivered by GE CAPITAL. GE CAPITAL will bill and collect
sales and use tax on Pyxis's behalf and remit all sums collected to Pyxis.
-4-
<PAGE> 21
(2) GE CAPITAL and PYXIS will negotiate new Servicing Fees in the
event the Volume Commitment set forth in the second sentence of Section L of
this Rider 2 is not satisfied.
(3) Notwithstanding any termination of the Agreement pursuant to
Section 14, GE CAPITAL will continue to service for their initial terms any
Serviced Accounts previously serviced by GE CAPITAL. In the event that GE
CAPITAL determines that it no longer desires to provide billing and collections
services for Rental Agreements it has not purchased and related service
agreements, GE CAPITAL shall provide PYXIS with a twenty-four (24) month
written notice before declining to provide such services for new Rental
Agreements and related service agreements.
O. FUTURE PORTFOLIO PURCHASES. At PYXIS's request, GE CAPITAL will
purchase any Rental Agreement described in Section N, provided the applicable
Customer (i) was credit approved by GE CAPITAL pursuant to Section (D) above,
(ii) has made prompt payment under such Rental Agreement for the prior six (6)
months, (iii) has fulfilled all other obligations under such Rental Agreement,
and (iv) has not suffered a Material Adverse Change in Financial Condition. In
determining the Purchase Price which it is willing to pay for such Rental
Agreement, GE CAPITAL will utilize Standard Rates which are no higher than
those used in the Program at such time. If any such Rental Agreement contains a
remaining term of more than thirty (30) months and less than thirty-six (36)
months, GE CAPITAL will utilize the Standard Rates applicable to a thirty-six
(36) month transaction to calculate the Purchase Price. GE CAPITAL may, in its
sole discretion, approve the use of rates lower than the Standard Rates in
calculating the Purchase Price of significant portfolios of Rental Agreements.
Any Servicing Fees (other than the monthly billing and collections fees (unless
prepaid)) previously received by GE CAPITAL with respect to any Rental
Agreement comprising part of a portfolio purchase shall be refunded to PYXIS on
the date of the portfolio purchase.
P. STANDARD RATES. Standard Rates will extend from the fifteenth
(15th) day of each calendar month through the fourteenth (14th) day of the
following calendar month. Subject to the establishment of Loss Pool Accounts
and based upon the Volume Commitment set forth in the second sentence of
Section L, GE CAPITAL will reduce the Standard Rates in accordance with
Schedule A to this Rider 2.
Q. AUTOMATED DOCUMENT SUPPORT. GE CAPITAL will cooperate with
PYXIS to ensure that PYXIS is able to take advantage of any improvements in GE
CAPITAL's Management Information Systems (MIS) which are programmed to produce
automated Rental Agreements.
R. CUSTOM SYSTEMS SUPPORT. GE CAPITAL will use its best efforts to
develop an automated tracking system for PYXIS and its Customers which may be
used to forecast future Equipment sales. GE CAPITAL will train PYXIS personnel
to operate any such automated tracking system it may develop.
-5-
<PAGE> 22
S. DOCUMENTATION DEFICIENCIES. If any Final Document Package contains
documentation deficiencies, GE CAPITAL may, in its sole discretion, approve and
purchase the applicable Rental Agreement, provided that PYXIS agrees to
promptly correct such documentation deficiencies. GE CAPITAL and PYXIS shall
jointly establish procedures for correcting such documentation deficiencies.
T. PRIVATE LABEL PROGRAM. Section 7(b) of the Agreement is hereby
amended to read as follows:
"GE CAPITAL shall designate a manager for the Program and shall provide
a toll-free telephone number for use in connection with the Program. All
Rental Agreements and all Serviced Accounts shall be administered under
the name PYXIS FINANCIAL SERVICES. GE CAPITAL shall cooperate with PYXIS
to develop the necessary documentation and other identification
materials for use in the Program and shall provide to PYXIS periodic
reports showing amounts purchased, delinquencies and such other matters
as the parties may agree upon. In the event of a Default under, or
termination of, the Agreement or a default under any Rental Agreement
purchased by GE CAPITAL, GE CAPITAL shall have the right to distribute a
notification to the applicable Customer executed by PYXIS FINANCIAL
SERVICES of the assignment to GE CAPITAL of such Rental Agreement and
proceed to administer each Rental Agreement purchased by GE CAPITAL in
its own name and shall continue to administer all Serviced Accounts in
the name of PYXIS FINANCIAL SERVICES."
U. NO OTHER AMENDMENTS. The provisions of this Rider 2 shall be in
addition to and not in the place of any other provision of the Agreement.
Except as specifically amended herein, all other provisions of the Agreement
and the obligations of the parties pursuant thereto shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Rider 2 to be executed
by their duly authorized representatives as of the dates set forth below.
PYXIS CORPORATION GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ G.E. Forth By: /s/ Thomas H. Mann
--------------------------- ------------------------------------
Title: VP & CFO Title: Vice President & General Manager
------------------------ ---------------------------------
Date: 1/12/93 Date: 1/15/93
------------------------- ----------------------------------
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<PAGE> 23
EXHIBIT A
<TABLE>
<CAPTION>
Standard Rates for Transactions
Transaction -------------------------------
Term (Months) 12 24 36 48 60
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
Spread to Like-
Term Treasuries
in Basis Points 782 574 363 352 346
</TABLE>
-7-
<PAGE> 24
RIDER NO. 3
TO
VENDOR PROGRAM AGREEMENT
DATED AS OF OCTOBER 10, 1991
BETWEEN
GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL")
AND
PYXIS CORPORATION ("PYXIS")
THIS RIDER is hereby incorporated into and made apart of the above
referenced Vendor Program Agreement, as amended from time to time (the
"Agreement") and is subject to all of the terms and provisions thereof.
Capitalized terms used and not defined herein shall have the meanings set forth
in the Agreement.
PYXIS and GE CAPITAL wish to amend the Agreement to provide for an
enhanced captive financing alliance pursuant to which GE CAPITAL will provide
additional financing and administrative services in exchange for its
appointment as PYXIS's exclusive captive financing partner.
PYXIS and GE CAPITAL desire that the Program operate for the mutual
benefit of the parties and wish to agree upon the means and manner of achieving
the foregoing.
NOW THEREFORE, for the consideration set forth herein and in the
Agreement, GE CAPITAL and PYXIS hereby agree as follows:
A. GE CAPITAL FUNDING COMMITMENT. Section K of Rider No. 2 to the
Agreement ("Rider No. 2") is hereby amended in its entirety to read as follows:
"GE CAPITAL will provide a minimum of Five Hundred Million Dollars
($500,000,000) in financing from the date of this Rider No. 3 through
the end of the term of the Agreement provided that the total amount of
all financings which are outstanding under the Agreement at any one time
shall not exceed Three Hundred and Fifty Million Dollars ($350,000,000)
and provided further that the Rental Agreements which GE CAPITAL is
requested to purchase meet the credit criteria established by GE CAPITAL
for the purchase of Rental Agreements under the Program and have a term
which is greater than thirty-six (36) months."
B. PYXIS VOLUME COMMITMENTS. Section L of Rider No. 2 is hereby
amended in its entirety to read as follows:
"PYXIS agrees that during the term of the Agreement, GE CAPITAL shall
remain PYXIS's exclusive captive financing partner. PYXIS represents and
warrants that it will provide GE CAPITAL with the opportunity to
purchase on a quarterly basis a minimum of fifty percent (50%) of the
aggregate dollar amount of Rental Agreements having a term which is
greater than thirty six (36) months entered into by PYXIS during such
calendar quarter. Each of the Rental Agreements purchased by GE CAPITAL
shall meet the credit criteria ESTABLISHED by GE CAPITAL for the
purchase of Rental Agreements under the Program. PYXIS further agrees
that during the term of the Agreement, PYXIS shall offer to GE CAPITAL a
right of first refusal to purchase all portfolios of Rental Agreements
offered for sale by PYXIS from time to time. In the event that GE
CAPITAL does not notify PYXIS of its decision to purchase any such
portfolio of Rental Agreements within ten (10) business days of receipt
of PYXIS' offer, PYXIS may sell such portfolio of Rental Agreements."
C. COMMITMENT TO CONSULT. GE CAPITAL shall give PYXIS prior
written notice ("Consultation Notice") of the intention of the Vendor Financial
Services division of GE CAPITAL ("VFS") to enter into a Vendor Program
Agreement or Operating Agreement with any company which competes directly with
PYXIS in the sale of drug or supply dispensing products. If PYXIS opposes the
entry by VFS into such an agreement, then the issue shall be referred to VFS'
General Manager and PYXIS' Chief Operating
-1-
<PAGE> 25
days notice to GE CAPITAL agrees that it will not enter into such an agreement
for a period of one hundred and twenty (120) days following the giving of the
Consultation Notice to PYXIS.
D. STANDARD RATES. Section 6 of the Agreement and Section P of
Rider No. 2 are hereby amended in their entirety to read as follows:
"GE CAPITAL shall advise PYXIS on the first business day of each
calendar month of the Standard Rates applicable to each Rental
Agreement. Standard Rates shall be comprised of (i) the cost of capital
to GE CAPITAL for the purchase of such Rental Agreement (the "Capital
Rate") and (ii) a service rate for administration of such Rental
Agreement pursuant to Section I hereof (the "Service Rate"). Capital
Rates will be based on a blend of Treasury Bills ("Treasury") and London
Interbank Offered Rates ("Libor"), as published in The Wall Street
Journal on the last business day of the preceding calendar month.
Capital Rates for a forty-eight (48) month Rental Agreement shall be
equal to two hundred and forty (240) basis points over the following
blended rate: (i) twenty-two percent (22%) of a one year Libor; plus
(ii) twenty three (23%) of a two year Treasury; plus (iii) twenty six
percent (26%) of a three year Treasury; plus (iv) twenty nine percent
(29%) of a four year Treasury. Capital Rates for a sixty (60) month
Rental Agreement shall be equal to two hundred and twenty-five (225)
basis points over the following blended rate: (i) sixteen percent (16%)
of a one year Libor, plus (ii) eighteen percent (18%) of a two year
Treasury, plus (iii) nineteen percent (19%) of a three year Treasury;
plus (iv) twenty two percent (22%) of a four year Treasury; plus (v)
twenty five percent (25%) of a five year Treasury. GE CAPITAL shall have
no obligation to calculate the Purchase Price of any Rental Agreement at
a rate other than the then current Standard Rate as described above. The
Standard Rates quoted to PYXIS on a monthly basis shall extend from the
fifth (5th) day of each calendar month through the fourth (4th) day of
the following calendar month."
E. AUTOMATED DOCUMENT SUPPORT. Section Q of Rider No. 2 is hereby
amended in its entirety to read as follows:
"GE CAPITAL will cooperate with PYXIS to ensure that PYXIS is able to
take advantage of any improvements in GE CAPITAL's Management
Information Systems (MIS) which are programmed to produce automated
Rental Agreements of any other applicable information system
improvements as they become available at VFS."
F. RELATIONSHIP MANAGERS.
(i) GE CAPITAL and PYXIS will each appoint a Relationship Manager
(subject to the approval of GE CAPITAL, in the case of the appointment of the
PYXIS Relationship Manager) and PYXIS (in the case of the appointment of the GE
CAPITAL Relationship Manager) (which approval will in any case not be
unreasonably withheld) who will serve as the primary management contact between
PYXIS and GE CAPITAL under the Program. The Relationship Managers will be
charged with the regular and ongoing monitoring and management of the
relationship between PYXIS and GE CAPITAL under the Program, including
compliance by the parties with the specific provisions of the Agreement. The
Relationship Managers will be available to each other in person or by telephone
on a daily basis (consistent with regular work schedules and vacation time) to
perform the following functions:
(a) review, analyze and recommend changes to the transaction
flow in order to continuously improve performance. GE CAPITAL's
Relationship Manager will utilize GE CAPITAL management tools
like work-out and process mapping as well as other GE CAPITAL
resources to achieve these improvements;
(b) facilitate the day to day interactions between the parties;
(c) assess and resolve disputes between the parties arising from
the day to day operations of the Program;
-2-
<PAGE> 26
(d) report to members of the Management Committee appointed by
GE CAPITAL and PYXIS, respectively, with respect to material
disputes and all other matters which are likely to materially
affect the mutual goals and relationship of the parties;
(e) review from time to time the documents required to be used
under the Program; and
(f) perform such other functions required of each from time to
time pursuant to the terms of the Agreement.
(ii) Each Relationship Manager will be vested with the authority to
bind his or her respective employer with respect to the specific matters
falling within the scope of his or her responsibilities hereunder. Neither
Relationship Manager will have the authority to amend the Agreement or bind his
or her respective employer with respect to matters falling outside the scope of
his or her responsibilities under the Agreement.
(iii) The Relationship Managers will serve at the pleasure of their
respective employers.
G. MANAGEMENT COMMITTEE.
(i) MEMBERS. The overall management of the Program will be subject
to the review and direction of the Management Committee, which will consist of
six (6) members. Three (3) members will be designated by PYXIS and three (3)
members will be designated by GE CAPITAL.
(ii) QUORUM AND MAJORITY. At least two (2) members of the Management
Committee designated by PYXIS and two (2) members of the Management Committee
designated by GE CAPITAL, present either in person or by proxy, will be
required for a quorum for the transaction of business at any meeting of the
Management Committee, which may be held in person or by means of telephonic
conference call in which all parties can communicate with each other. The
approval of at least a majority of the members of the Management Committee who
participate in the meeting will constitute the act of the Management Committee.
(iii) MEETINGS. The Management Committee will meet at least
semi-annually, provided that PYXIS and GE CAPITAL will be permitted to call
meetings of the Management Committee at any time during the term of the
Agreement by delivery of at least ten (10) business days prior written notice
to the other party, which notice will be deemed waived by attendance at such
meeting by the members of the Management Committee.
(iv) TERM OF OFFICE. Each member of the Management Committee will
serve until his or her successor is appointed by the party that appointed that
person. Upon the resignation or inability to serve of any member of the
Management Committee, the party that originally appointed such member will
appoint a successor.
(V) REPORTS. At each semi-annual meeting of the Management
Committee, GE CAPITAL representatives will provide PYXIS representatives with a
report on (i) all finance activity under the Program for the previous six
months (including submittals, approvals and backlogs); (ii) levels of
delinquency; (iii) collections activity; (iv) the Loss Pool Accounts; and (v)
issues of customer service and quality control. At each semi-annual meeting of
the Management Committee, PYXIS representatives will provide GE CAPITAL
representatives with a report on (i) the satisfaction of the volume commitment
set forth in Section B of this Rider No. 3, including the aggregate dollar
amount of Rental Agreements entered into by PYXIS during the previous six
months and the status of all sales and proposed sales of portfolios of Rental
Agreements during the previous six months; (ii) status of remarketing pursuant
to Section 12 of the Agreement and Section M of Rider No. 2 during the previous
six months; (iii) product planning pertinent to the operation of PYXIS
Financial Services, and (iv) sales and promotion plans pertinent to the
operation of PYXIS Financial Services.
-3-
<PAGE> 27
(vi) REVIEW. Members of the Management Committee will review on a
semi-annual basis (i) the Program's financing penetration levels and portfolio
performance; (ii) level of customer service and Program services described in
Section H of this Rider No. 3; (iii) the financial performance of the Program,
including the satisfaction of gross income growth objectives and the return on
equity to GE CAPITAL; (iv) any adjustments to be made to the Standard Rates as
a result of (iii) to meet the parties' objectives on a going-forward basis; and
(v) any other issues which the parties wish to discuss. If the review reveals a
decline in financing penetration levels, portfolio performance or customer
service, the Management Committee will identify and recommend to PYXIS and GE
CAPITAL methods to reverse the decline and to promote their respective goals.
Members of the Management Committee will also review all other areas of the
Program's performance, including the continuous improvement of transaction flow
and the exploitation of new business opportunities, and will recommend the
appropriate action to be taken by PYXIS and GE CAPITAL respectively.
(vii) MEDIATION OF DISPUTES. Members of the Management Committee will
mediate and resolve any disputes between the parties which have not previously
been resolved by the Relationship Managers, and will review proposals for
amendments to the Agreement or changes to any policies implemented pursuant to
the Agreement. Following any necessary discussion, the Management Committee
will either accept or reject such proposed amendments or changes. If the
Management Committee cannot resolve any disputes between the parties, such
matter shall, at the option of GE CAPITAL or PYXIS, be referred to VFS' General
Manager and PYXIS' Chief Operating Officer. The resolution of such dispute by
such officers shall be binding on GE CAPITAL and PYXIS.
(viii) STRATEGIC ALLIANCE. PYXIS and GE CAPITAL have joined in a
strategic alliance to promote their mutual business goals. Nothing contained
herein shall be construed to constitute the creation of a partnership entity
for legal purposes, nor to characterize PYXIS and GE CAPITAL as joint
venturers. PYXIS and GE CAPITAL will at all times remain independent
contractors with respect to the Agreement and otherwise.
H. PROGRAM SERVICES.
(i) GE CAPITAL will, through the term of this Agreement, remain
familiar with the business of PYXIS and will devise and propose to PYXIS
financial products deemed useful and suitable for the promotion of the
Equipment. Such proposals will be considered by the Management Committee, and
if approved, will be implemented by means of documentation proposed by GE
CAPITAL.
(ii) GE CAPITAL will perform annual customer surveys which measure
customer satisfaction with the financial services provided by PYXIS Financial
Services and will share the results of such surveys with PYXIS at the next
meeting of the Management Committee. Any changes in the provision of customer
service which the surveys indicate is necessary will be implemented following a
discussion of the Management Committee.
I. ADMINISTRATION OF SERVICED AND OWNED ACCOUNTS. Section N of
Rider No. 2 is hereby amended in its entirety to read as follows:
"(i) In addition to providing billing and collections services for
all Rental Agreements acquired by GE CAPITAL pursuant to the Program and any
related service agreements (collectively, the "Owned Accounts"), GE CAPITAL
shall provide its customary credit and documentation review and monthly billing
and collections services for all Rental Agreements and any related service
agreements entered into by PYXIS and the end-user of the applicable Equipment
during the term of the Agreement but not acquired by GE CAPITAL (collectively,
the "Serviced Accounts"), subject to the following terms and conditions. GE
CAPITAL shall remit to PYXIS all sums actually collected on a monthly basis
with respect to (A) any service agreements which comprise part of the Owned
Accounts (the "Owned Service Agreements") and (B) the Serviced Accounts,
together with a report which summarizes the collection activity for the
previous month. GE CAPITAL shall utilize procedures which are substantially
similar to those procedures utilized by GE
-4-
<PAGE> 28
CAPITAL for its own accounts in providing billing and collecting services for
any Owned Service Agreement or any Serviced Account.
(ii) With respect to Serviced Accounts administered by GE CAPITAL
prior to the date of this Rider No. 3, PYXIS shall continue to remit to GE
CAPITAL during the term thereof: (A) an initial charge for credit and
documentation review and systems booking in the amount of One Hundred and Fifty
Dollars ($150.00); (B) an initial charge for all subsequent schedules to each
such Serviced Account which do not require independent credit review in the
amount of Fifty Dollars ($50.00); and (C) a monthly fee for billing and
collections services in the amount of Twelve Dollars ($12.00) for each invoice
delivered by GE CAPITAL. With respect to Owned Service Agreements administered
by GE CAPITAL prior to the date of this Rider No. 3, PYXIS shall continue to
remit to GE CAPITAL the monthly fee set forth in Section 7(c) of the Agreement.
(iii) With respect to each Owned Account entered into by PYXIS on or
after the date of this Rider No. 3, the Service Rate shall be included in the
applicable Standard Rate. With respect to each Serviced Account, PYXIS shall
remit to GE CAPITAL a one-time Service Rate payment which shall be equal to the
net present value of the rental payments under the related Rental Agreement
discounted at the applicable Standard Rate, less the net present value of the
rental payments under the related Rental Agreement discounted at the applicable
Capital Rate. PYXIS shall remit to GE CAPITAL the one-time Service Rate payment
for each Serviced Account within thirty (30) days following the receipt of
invoice from GE CAPITAL. The Service Rate established pursuant to this Rider
No. 3 shall initially be two and one-half percent (2.5%) and shall not be
increased above two and one-half percent (2.5%) by more than .125% per year
without the written consent of PYXIS and GE CAPITAL. Any decrease in the
Service Rate shall be made at the discretion of the Management Committee. The
Service Rate payment may be made by check or by set-off or reduction of any
amounts which GE CAPITAL owes to PYXIS pursuant to the Agreement.
(iv) PYXIS agrees to give GE CAPITAL the right to bid on providing
the administrative services described in paragraph (i) above for all Rental
Agreements (or similar agreements) entered into by PYXIS and a party who is not
the end-user of the applicable Equipment during the term of the Agreement.
PYXIS may, in its sole discretion, decide whether or not to accept such bid."
J. TERM AND TERMINATION. Section 14 of the Agreement is hereby
amended in its entirety to read as follows:
"The Agreement will be effective upon execution by GE CAPITAL and PYXIS
and will continue from such effective date for a period of five (5)
years from the date of execution of this Rider No. 3 (the "Term"),
unless sooner terminated by either party as provided herein. Upon
termination or expiration of the Agreement, the obligations of the
parties under the Agreement with respect to Rental Agreements not
purchased by GE CAPITAL will cease, except as otherwise provided herein.
All obligations of the parties under the Agreement with respect to
Rental Agreements which have been purchased by GE CAPITAL shall continue
for the term of such Rental Agreements. Notwithstanding any termination
of the Agreement, GE CAPITAL will, unless otherwise directed by PYXIS,
continue to service for their initial terms in accordance with Section I
of this Rider No. 3 all Owned Accounts and Serviced Accounts then in
existence and shall receive for each such Owned Service Agreement and
each Serviced Account, as applicable, the applicable monthly fee set
forth in Section I(ii) of this Rider No. 3 or the unpaid Service Rate
payment set forth in Section I(iii) of this Rider No. 3. If PYXIS elects
following a termination of the Agreement for GE CAPITAL to discontinue
servicing for its initial term any Serviced Account entered into by
PYXIS on or after the date of this Rider No. 3, GE CAPITAL shall remit
to PYXIS the pro-rata portion of the paid Service Rate payment which
relates to the remainder of the initial term of such Serviced Account.
During the Term, PYXIS may terminate this Agreement for cause upon ten
(10) days prior written notice if any of the following events occur: (i)
all or substantially all of the assets of the Vendor Financial Services
division of GE CAPITAL are sold or otherwise transferred to a party who
is not wholly-owned by General Electric Capital Services, Inc. without
the consent of PYXIS, or (ii) a default by
-5-
<PAGE> 29
GE CAPITAL of its obligations under the Agreement occurs which GE
CAPITAL fails to cure following sixty (60) days written notice or (iii)
a Material Adverse Change in Condition of GE CAPITAL occurs. If PYXIS
exercises its rights of termination under the immediately preceding
sentence, PYXIS may elect to purchase all Rental Agreements previously
purchased by GE CAPITAL for a purchase price equal to the value of (i)
the remaining unbilled rental payments under such Rental Agreements
discounted at the Standard Rate such Rental Agreements were originally
booked at, plus (ii) the billed but uncollected rental payments due
under such Rental Agreements, as reflected on GE CAPITAL's books and
records, together with the reasonable cost to GE CAPITAL of consummating
such sale. Should PYXIS exercise its right to purchase all Rental
Agreements, unless PYXIS elects to have GE CAPITAL continue to bill and
collect on all Serviced Accounts in accordance with Section I of this
Rider No. 3, all obligations of GE CAPITAL with respect to such Rental
Agreements shall cease as of such date of purchase, provided that GE
CAPITAL executes and delivers such documents as are necessary to effect
such purchase. During the Term, GE CAPITAL may also elect to terminate
this Agreement for cause upon ten (10) days prior written notice if (i)
all or substantially all of the assets of PYXIS are sold or otherwise
transferred without the consent of GE CAPITAL, or (ii) a Default occurs
which PYXIS fails to cure following sixty (60) days written notice, or
(iii) a Material Adverse Change in Condition of PYXIS occurs."
K. CONFIDENTIALITY. From time to time GE CAPITAL or PYXIS may
provide confidential information to the other party. GE CAPITAL and PYXIS will
take reasonable steps to preserve the confidential nature of such information
and to prevent its disclosure to third parties. GE CAPITAL and PYXIS will be
deemed to have fulfilled their obligations hereunder if they exercise the same
degree of care to preserve and safeguard such confidential information as they
use to preserve and safeguard their own confidential information. Any such
confidential information shall be used solely in connection with the
transactions contemplated by the Agreement. No other use of such confidential
information may occur without the prior written consent of the other party.
L. DEFINITIONS.
(i) The definition of Material Adverse Change in Financial
Condition set forth in Section 16(i) of the Agreement is hereby amended in its
entirety to read as follows:
"Material Adverse Change in Condition of GE CAPITAL means (i) a
significant negative change in (A) any financial or other condition from
the condition reflected in the most recent financial statements of GE
CAPITAL, or (B) the properties, assets, business or operations of GE
CAPITAL; or (ii) GE CAPITAL's insolvency, inability to pay debts as they
mature, failure to operate as a going concern, filing under Title 11 of
the United States Code or any successor or similar federal or state
statute or any applicable foreign law, assignment for the benefit of
creditors, appointment of a receiver, or dissolution or material change
in the corporate structure or in a material portion of stock or asset
ownership."
"Material Adverse Change in Condition of PYXIS or Customer means (i) a
significant negative change in (A) any financial or other condition from
the condition reflected in the most recent financial statements
delivered to GE CAPITAL by PYXIS or a Customer or (B) the properties,
assets, business, operations or customer base of PYXIS or a Customer,
(ii) as to PYXIS or a Customer, its insolvency, inability to pay debts
as they mature, failure to operate as a going concern, filing under
Title 11 of the United States Code or any successor or similar federal
or state statute or any applicable foreign law, assignment for the
benefit of creditors, appointment of a receiver, or dissolution or
material change in the corporate structure or in a material portion of
stock or asset ownership; or (iii) as to a Customer, the death or
incapacity of any principal thereof."
(ii) The definition of Municipal Transaction set forth in Section
C(1)(c) of Rider No. 1 to the Agreement is hereby amended in its entirety to
read as follows:
-6-
<PAGE> 30
"Municipal Transaction means a Rental Agreement entered into by COMPANY
as lessor and by a Municipal Lessee and documented on a Municipal
Lease."
M. NO OTHER AMENDMENTS. Except as otherwise specifically provided
herein, the provisions of this Rider No. 3 shall be in addition to and not in
the place of any other provision of the Agreement. Except as specifically
amended hereby, all provisions of the Agreement and the obligations of the
parties pursuant thereto shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have cause this Rider No. 3 to be
executed by their duly authorized representatives as of this ___ day of March,
1994.
PYXIS CORPORATION GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ G.E. Forth By: /s/ Thomas H. Mann
------------------------ --------------------------------------
Title: VP, CFO Title: Vice President and General Manager
---------------------
-7-
<PAGE> 31
RIDER NO. 4
TO
VENDOR PROGRAM AGREEMENT
DATED AS OF OCTOBER 10, 1991
BETWEEN
GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL")
AND
PYXIS CORPORATION ("PYXIS")
THIS RIDER is hereby incorporated into and made a part of the above
referenced Vendor Program Agreement, as amended from time to time (the
"Agreement") and is subject to all of the terms and provisions thereof.
Capitalized terms used and not defined herein shall have the meanings set forth
in the Agreement.
PYXIS AND GE CAPITAL wish to amend the Agreement to provide for the
automatic assignment by PYXIS to GE CAPITAL of those Rental Agreements which
PYXIS has agreed to sell to GE CAPITAL and GE CAPITAL has agreed to purchase and
to take assignment of in accordance with the terms and conditions of the
Agreement.
PYXIS and GE CAPITAL further wish to amend the Agreement to provide for the
making of cure payments by PYXIS under a Rental Agreement in the event that the
applicable Customer declines to make scheduled payments under such Rental
Agreement as a result of any agreement between PYXIS and such Customer that such
payments may be deferred until the occurrence of a particular event.
PYXIS and GE CAPITAL further wish to amend the Agreement to redefine the
establishment of Standard Rates.
NOW THEREFORE, for the consideration set forth herein and in the Agreement,
GE CAPITAL and PYXIS hereby agree as follows:
1. Subsection 4(c) of the Agreement is hereby amended to read as follows:
"(c) GE CAPITAL has received the Final Document Package, including the sole
original copy of each Rental Agreement assigned to GE CAPITAL pursuant to this
Agreement."
2. The following sentence is hereby added to the end of Section 4 of the
Agreement. "The designation by PYXIS of a Rental Agreement as available for
assignment to GE CAPITAL and the delivery of the Final Document Package for such
Rental Agreement to GE CAPITAL shall be sufficient evidence of the assignment
and transfer to GE CAPITAL of title to such Rental Agreement and all of PYXIS'
right, title and interest in and to the rental payments due under such Rental
Agreement."
3. A new Section 11(c) is hereby added to the Agreement which shall read as
follows:
"(c) In the event that the applicable Customer declines to make scheduled
payments under any Rental Agreement as a result of an agreement between
PYXIS and such Customer, which agreement is confirmed by PYXIS, that such
payments may be deferred until the occurrence of a particular event,
including an improvement in the performance of the applicable Equipment,
then PYXIS shall make up to six (6) cure payments to GE CAPITAL on the
scheduled payment dates set forth on such Rental Agreement. Each cure
payment shall consist of the monthly payment due under such Rental
Agreement, together with any interest accrued thereon. Upon receipt of the
final cure payment, if the Customer does not commence making the scheduled
monthly payments under such Rental Agreement, then GE CAPITAL may declare a
default under such Rental Agreement and the Equipment shall be remarketed
in accordance with Section 12 of the Agreement. In the event that GE
CAPITAL receives any scheduled payment under such Rental Agreement from the
applicable Customer following the making of a cure payment by PYXIS, then
GE CAPITAL shall promptly remit to PYXIS the applicable cure payment
collected during that month."
<PAGE> 32
4. The definition of "Final Document Package" set forth in Section
16(g) of the Agreement is hereby amended to read as follows: "Final Document
Package" means such other and further documents as GE CAPITAL shall from time
to time require in accordance with its standard procedures for the Program in
order accept assignment of a Rental Agreement and to pay to PYXIS the Purchase
Price under such Rental Agreement."
5. Section D of Rider No. 3 to the Agreement is hereby amended in its
entirety to read as follows:
"GE CAPITAL shall advise PYXIS on the twentieth (20th) day of each
calendar month (or if such day is not a business day, then on the next
succeeding business day) of the Standard Rates applicable to each
Rental Agreement. Standard Rates shall be comprised of (i) the cost of
capital to GE CAPITAL for the purchase of such Rental Agreement (the
"Capital Rate") and (ii) a service rate for administration of such
Rental Agreement pursuant to Section I of Rider No. 3 to the Agreement
(the "Service Rate"). Capital Rates will be based on a blend of U.S.
Treasury Notes ("Treasury") and London Interbank Offered Rates
("Libor"), as published in The Wall Street Journal on the twentieth
(20th) day of each calendar month (or if such day is not a business day,
then on the next succeeding business day). Capital Rates for a forty-
eight (48) month Rental Agreement shall be equal to two hundred and
forty (240) basis points over the following blended rate: (i) twenty-two
percent (22%) of a one year Libor; plus (ii) twenty three percent (23%)
of a two year Treasury; plus (iii) twenty six percent (26%) of a three
year Treasury; plus (iv) twenty nine percent (29%) of a four year
Treasury. Capital Rates for a sixty (60) month Rental Agreement shall
be equal to two hundred and twenty-five (225) basis points over the
following blended rate: (i) sixteen percent (16%) of a one year Libor;
plus (ii) eighteen percent (18%) of a two year Treasury; plus (iii)
nineteen percent (19%) of a three year Treasury; plus (iv) twenty two
percent (22%) of a four year Treasury; plus (v) twenty five percent
(25%) of a five year Treasury. GE CAPITAL shall have no obligation to
calculate the Purchase Price of any Rental Agreement at a rate other
than the then current Standard Rate as described above. The Standard
Rates quoted to PYXIS on a monthly basis shall extend from the
twenty-fifth (25th) day of each calendar month through the twenty-fourth
(24th) day of the following calendar month."
6. The provisions of this Rider No. 4 shall be in addition to and not
in the place of any other provisions of the Agreement. Except as specifically
amended herein, all other provisions of the Agreement and the obligations of
the parties pursuant thereto shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have cause this Rider No. 4 to be
executed by their duly authorized representatives as of the dates set forth
below.
PYXIS CORPORATION GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ G.E. Forth By: /s/ Thomas H. Mann
--------------------------------- ---------------------------------
Title: VP, CFO Title: Vice President and General
------------------------------ Manager
------------------------------
Date: 3/20/95 Date: 4/1/95
------------------------------- -------------------------------
<PAGE> 33
[GE Letterhead]
January 11, 1996
Mr. Scott R. Peterson
Controller and Principal Accounting Officer
Pyxis Corporation
9380 Carroll Park Drive
San Diego, CA 92191
Dear Scott:
This letter will serve to document our mutual understanding of the 1996
"Capital Rate" that GE Capital proposes charging Pyxis for taking assignment of
Pyxis Rental Agreement payment streams. The "Capital Rate" mentioned below only
applies to the transactions listed below and does not amend the Vendor Program
Agreement dated October 10, 1991 and its subsequent Riders except as to the
1996 volume commitment under the agreement.
* GE Capital's "Capital Rate" for sixty (60) month deals will be one
hundred ninety-two (192) basis points over a blended rate of treasuries
as agreed upon in Rider #3, and amended in Rider #4, to the Vendor
Program Agreement dated October 10, 1991.
* Pyxis agrees to assign Rental Agreement payment streams to GE Capital
in the net amount of $78.5MM (i.e., after loss on sale to Pyxis) during
1996.
* Pyxis agrees to increase the $78.5 million dollar commitment:
- In July of 1996 if the first half of 1996 GE Capital's funding
to Pyxis represents less than 50% of Pyxis Sales Type Lease
revenue after loss on sale, then Pyxis' commitment would
increase to 50% of the actual Sales Type Lease revenue after
loss on sale.
- In the fourth quarter of 1996, Pyxis agrees that if the
estimated 1996 total year Sales Type Lease Revenue after loss
on sale, based upon actual results through September 1996 plus
an estimate for the fourth quarter of 1996, is greater than
the $78.5 million commitment, then Pyxis agrees to increase
the commitment to the higher amount and fund the difference in
the fourth quarter of 1996.
* GE Capital agrees to guarantee Pyxis a "Standard Rate" as defined in
Rider #3 and amended in Rider #4 for $39.25 million dollars of the $78.5
million dollars to be funded in 1996 after the receipt of:
- A detail by month of the $39.25 million to be funded and
- Execution of this letter by Pyxis
Note: If the above two requirements are not met by end of day January
12, 1996, this commitment will be deemed to have expired.
* In the event Pyxis elects to break the $39.25 million dollar guarantee
commitment mentioned above they will be subject to the following break
charge:
- for every basis point movement in rate, a charge as defined in
appendix A.
Note: Each monthly guarantee is an individual contract which if broken
does not impact the other commitments.
* GE Capital agrees to provide Pyxis with a facility to guarantee Pyxis a
"Standard Rate" as mentioned above (192 basis point Capital Rate plus
250 basis point Service Rate) at any time during 1996 for whatever
amount Pyxis requires. GE Capital is willing to bear up to 15 basis
point of the cost of the guaranty with Pyxis paying the incremental
portion of the cost of the guaranty.
* GE Capital acknowledges that the reduction in the "Capital Rate", as
defined above, will not effect the Service Rate charged to Pyxis going
forward.
<PAGE> 34
Please acknowledge your concurrence with the above by signing below and faxing
back to me at 203-731-6002. If you have any questions, please feel free to give
me a call.
Respectfully yours,
/s/ Daniel A. Mahoney
- -------------------------------
Daniel A. Mahoney
Pyxis Alliance Manager
Vendor Financial Services
Acknowledged and Agreed To: /s/ Scott R. Peterson 1/11/96
-------------------------------
Mr. Scott R. Peterson
Controller and Principal Accounting Officer
Pyxis Corporation
CC: R. Bestercy
S. Feiner
J. Gioia
V. Streufert
<PAGE> 35
APPENDIX A
1996 CAPITAL RATE
JANUARY 11, 1996
Standard Rate = 9.76%
Capital Rate = 7.26%
Cost of Funds Rate = 5.34%
1 Year Libor 5.375%
2 Year Treasury 5.19%
3 Year Treasury 5.28%
4 Year Treasury 5.37%
5 Year Treasury 5.46%
Funding Schedule - 1996
January $ 3,047,767.00
February $ 3,047,767.00
March $ 3,047,767.00
April $ 3,271,018.00
May $ 3,271,018.00
June $ 3,271,019.00
July $ 3,322,187.00
August $ 3,322,187.00
September $ 3,322,187.00
October $ 3,442,361.00
November $ 3,442,361.00
December $ 3,442,361.00
--------------
Total $39,250,000.00
Breakage Costs - per every basis point (1) in movements in rates, up or down
January $ 595.00
February $ 700.00
March $ 725.00
April $ 827.00
May $ 884.00
June $ 894.00
July $ 935.00
August $ 939.00
September $ 967.00
October $1,038.00
November $1,084.00
December $1,135.00
Acknowledged and Agreed To: /s/ Daniel A. Mahoney
___________________________________________
Mr. Daniel A. Mahoney
Pyxis Alliance Manager
Vendor Financial Services
GE Capital
Acknowledged and Agreed To: /s/ Scott R. Peterson
___________________________________________
Mr. Scott R. Peterson
Controller and Principal Accounting Officer
Pyxis Corporation
<PAGE> 36
PYXIS DISCOUNT RATES
AS OF 1/11/95
1996 RATE FOR $39.25MM
<TABLE>
<CAPTION>
Libor Treasury Cost of Capital Service Standard
Year 1 Year 2 Year 3 Year 4 Year 5 Funds Rate Adder Rates Fee Rates
------------------------------------------ ---------- ----- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/11/95 5.375% 5.190% 5.280% 5.370% 5.460%
60 Months Deals Weighted % 16% 18% 19% 22% 25%
Rate 0.86% 0.93% 1.00% 1.18% 1.37% = 5.34% + 1.92% = 7.26% + 2.50% = 9.76%
</TABLE>
<PAGE> 1
EXHIBIT 11.01
CARDINAL HEALTH, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
PRIMARY:
Net earnings available for Common Shares $111,864 $137,534 $ 79,825
======== ======== ========
Average shares outstanding 63,503 62,141 56,508
Dilutive effect of stock options 1,166 1,978 4,872
-------- -------- --------
Weighted average number of Common
Shares outstanding 64,669 64,119 61,380
======== ======== ========
Primary earnings per Common Share $ 1.73 $ 2.14 $ 1.30
======== ======== ========
FULLY DILUTED:
Net earnings available for Common Shares $111,864 $137,534 $ 79,825
======== ======== ========
Average shares outstanding 63,503 62,141 56,508
Dilutive effect of stock options 1,240 2,029 4,891
-------- -------- --------
Weighted average number of Common
Shares outstanding 64,743 64,170 61,399
======== ======== ========
Fully diluted earnings per Common Share $ 1.73 $ 2.14 $ 1.30
======== ======== ========
</TABLE>
40
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT STATE OF INCORPORATION
- ------------------------------ ----------------------
Allied Pharmacy Service, Inc. Texas
Bailey Drug Company Delaware
Behrens Inc. Texas
Cardal, Inc. Ohio
Cardinal Florida, Inc. Florida
Cardinal Health Systems, Inc. Ohio
Cardinal Mississippi, Inc. Mississippi
Cardinal Syracuse, Inc. New York
Cardinal West, Inc. Nevada
CDI Investments, Inc. Delaware
CORD Logistics, Inc. Ohio
Chapman Drug Company Tennessee
James W. Daly, Inc. Massachusetts
Ellicott Drug Company New York
Humiston-Keeling, Inc. Illinois
Leader Drugstores, Inc. Delaware
Managed Pharmacy Benefits, Inc. Missouri
Marmac Distributors, Inc. Connecticut
Medical Strategies, Inc. Massachusetts
Medicine Shoppe International, Inc. Delaware
National Pharmpak Services, Inc. Ohio
National Specialty Services, Inc. Tennessee
Ohio Valley-Clarksburg, Inc. Delaware
Phillipi Holdings, Inc. Ohio
Pyxis Corporation Delaware
<PAGE> 2
SUBSIDIARIES OF THE REGISTRANT STATE OF INCORPORATION
- ------------------------------ ----------------------
Renlar Systems, Inc. Kentucky
Solomons Company Georgia
Whitmire Distribution Corporation Delaware
<PAGE> 1
Exhibit 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-57223 of Cardinal Health, Inc. on Form S-3 and Registration Statements No.
33-20895, No. 33-38021, No. 33-38022, No. 33-42357, No. 33-52535, No. 33-52537,
No. 33-52539, No. 33-63283-01, No. 33-64337 and No. 333-01927-01 of Cardinal
Health, Inc. on Form S-8 of our report dated August 13, 1996, appearing in this
Annual Report on Form 10-K of Cardinal Health, Inc., for the year ended June
30, 1996.
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 22, 1996
<PAGE> 1
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-57223 of Cardinal Health, Inc. on Form S-3 and Registration Statements No.
33-20895, No. 33-38021, No. 33-38022, No. 33-42357, No. 33-52535, No. 33-52537,
No. 33-52539, No. 33-63283-01, No. 33-64337 and No. 333-01927-01 of Cardinal
Health, Inc. on Form S-8 of our report dated August 2, 1996 with respect to the
financial statements of Pyxis Corporation, appearing in this Annual Report on
Form 10-K of Cardinal Health, Inc., for the year ended June 30, 1996.
ERNST & YOUNG LLP
San Diego, California
August 22, 1996
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