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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, 1997
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)
OHIO 31-0958666
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5555 GLENDON COURT, DUBLIN, OHIO 43016
(Address of principal executive offices) (Zip Code)
(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 ______
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 September 12, 1997 was approximately $7,060,251,484.
The number of Registrant's Common Shares outstanding as of September 12,
1997, was as follows:
Common shares, without par value: 109,202,649
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Class B common shares, without par value: 0
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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 1997 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
<TABLE>
<CAPTION>
ITEM PAGE
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Forward-looking Statements.............................................. 3
PART I
1. Business................................................................ 3
2. Properties.............................................................. 6
3. Legal Proceedings....................................................... 6
4. Submission of Matters to a Vote of Security Holders..................... 7
Executive Officers of the Registrant.................................... 7
PART II
5. Market for the Registrant's Common Shares and Related
Shareholder 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............................. 13
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................ 35
PART III
10. Directors and Executive Officers of the Registrant...................... 35
11. Executive Compensation.................................................. 35
12. Security Ownership of Certain Beneficial Owners and Management.......... 35
13. Certain Relationships and Related Transactions.......................... 35
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........ 36
Signatures.............................................................. 40
</TABLE>
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Portions of this Annual Report on Form 10-K include "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to risks, uncertainties and other
factors which could cause actual results to materially differ from those
projected or implied. The most significant of such risks, uncertainties and
other factors are described in Exhibit 99.01 to this Form 10-K.
PART I
ITEM 1: BUSINESS
GENERAL
Cardinal Health, Inc., an Ohio corporation formed in 1979, is structured
as a holding company operating through a number of 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 healthcare service provider which offers an array
of value-added pharmaceutical distribution services and pharmaceutical-related
products and services to a broad base of customers. It is one of the country's
leading wholesale distributors of pharmaceutical and related healthcare
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, manufactures, leases, sells and
services unique point-of-use systems which automate the distribution,
management and control of medications and supplies in hospitals and alternate
care facilities. Through its Owen Healthcare, Inc. subsidiary ("Owen"), the
Company provides pharmacy management and information services to hospitals. The
Company is also the largest franchisor of independent retail pharmacies in the
United States through its Medicine Shoppe International, Inc. subsidiary
("Medicine Shoppe"). PCI Services, Inc. ("PCI"), another one of the Company's
subsidiaries, is a leading international provider of integrated packaging
services to pharmaceutical manufacturers.
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 sales volumes. 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 healthcare 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, oncology 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
Over the last five years, the Company has completed the following business
combinations. 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
1.6 million Cardinal Common Shares, without par value, ("Common Shares"). In
December 1993, the Company issued approximately 0.4 million Common Shares in a
merger transaction for all of the capital stock of 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") and issued approximately 15.6
million Common Shares in the transaction. Following the Whitmire Merger, the
Company had a network of distribution centers enabling it to routinely serve
the entire population of the continental U.S. on a next-day basis. On July 1,
1994, the Company purchased Humiston-Keeling, Inc., a Calumet City, Illinois
based pharmaceutical wholesaler serving customers located primarily in the
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upper Midwest region of the United States for cash of $33 million and assumed
liabilities of $94 million. On July 18, 1994, the Company issued approximately
1.4 million Common Shares in a merger transaction 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 healthcare facilities. On October 11, 1996, the Company
merged with PCI, a Philadelphia, Pennsylvania based provider of diversified
packaging services to the pharmaceutical industry in the United States and
Europe. On March 18, 1997, the Company merged with Owen, a Houston, Texas based
provider of pharmacy management and information services to hospitals.
On May 27, 1997, the Company and MediQual Systems, Inc. ("MediQual")
announced that they had entered into a definitive merger agreement pursuant to
which a wholly owned subsidiary of the Company will be merged with and into
MediQual. Under the terms of the transaction, shareholders of MediQual will
receive a fraction of a Common Share in exchange for each common share of
MediQual and a fraction of a Common Share in exchange for each preferred share
of MediQual. The Company has also agreed to convert existing MediQual warrants
and stock options into Company warrants and options, respectively, at the same
exchange ratio as described above for MediQual common shares. The Company
estimates that it will issue approximately 0.6 million Common Shares in the
transaction, depending in part upon the average closing price of the Common
Shares over a specified period. The merger is intended to be tax-free and to
qualify as a pooling of interests for financial reporting purposes. Consummation
of the transaction is subject to the satisfaction of certain conditions,
including approval by the shareholders of MediQual.
On August 24, 1997, the Company and Bergen Brunswig Corporation ("Bergen")
announced that they had entered into a definitive merger agreement pursuant to
which a wholly owned subsidiary of the Company will be merged with and into
Bergen. Under the terms of the merger agreement, shareholders of Bergen will
receive 0.775 of a Common Share for each share of Bergen common stock they
hold. The Company has also agreed to convert existing Bergen stock options
into Company options at the same exchange ratio. The Company will issue
approximately 40 million Common Shares in the transaction and will also assume
approximately $386 million in long-term debt. The merger is intended to be
tax-free and to qualify as a pooling of interests for financial reporting
purposes. Consummation of the transaction is subject to the satisfaction of
certain conditions, including approvals by the shareholders of Bergen and the
Company and receipt of certain regulatory approvals.
The Company continually evaluates possible candidates for acquisition and
intends to continue to seek opportunities to expand its healthcare operations
and services. For additional information concerning the acquisitions described
above, see Notes 2 and 16 of "Notes to Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CUSTOMERS AND SUPPLIERS
The Company 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. Owen provides pharmacy management and
information services to hospitals throughout the United States. PCI provides
integrated packaging services to pharmaceutical manufacturers located in the
United States, Canada and Europe. In fiscal 1997, 89% of the Company's total
revenues were derived from distribution activities. The Company's largest
customer, Kmart Corporation ("Kmart"), accounted for approximately 13% of net
revenues (by dollar volume) in fiscal 1997. 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 6% (by dollar volume) of its net
revenues in fiscal 1997. The Company's five largest suppliers accounted for
approximately 20% (by dollar volume) of its net revenues during fiscal 1997,
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.
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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 numerous 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 support
services. As a marketer of automated pharmaceutical dispensing systems through
Pyxis, the Company competes based upon its installed base of systems,
relationships with customers, customer service and support capabilities,
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. With its Owen subsidiary, the Company competes with both national
and regional hospital pharmacy management firms and self-managed hospitals and
hospital systems on the basis of its established base of business, the
effective use of information systems, the development of clinical programs, and
the quality of the services it provides to its customers. 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. Through PCI, the Company competes with companies that provide
many types of packaging services and those that provide one or a few types of
packaging services, based primarily upon quality, variety of available
packaging services, customer service, responsiveness, and price.
EMPLOYEES
At September 12, 1997, the Company had approximately 11,000 employees, of
whom approximately 1,000 are subject to collective bargaining agreements.
Overall 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 and service marks, certain of which
have been registered, and also holds common law rights in various trademarks
and service marks. The Company has also applied for trademark and service mark
registrations for certain of its trademarks and service marks in certain
foreign countries. There can be no assurance that the Company will obtain the
registrations for trademarks and service marks for which it has applied. The
Company's principal trademarks include CardinalCHOICE (and Design)(R),
LEADER(R) DRUGSTORES, PYXIS(R), MEDSTATION(R), SUPPLYSTATION(R), THE MEDICINE
SHOPPE(R), and OMEGA-Rx(R).
The Company holds certain United States patents relating to certain
aspects of its automated pharmaceutical dispensing systems, its automated
medication management systems, and medication packaging. The Company has a
number of pending patent applications in the United States and certain foreign
countries, 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), an operator of pharmacy operations, and a
pharmaceutical packager 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
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pharmaceutical dispensing systems. There can be no assurance, however, that FDA
policy in this regard will not change. 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 or pending 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. Owen's pharmacy
operations and its pharmacies are subject to comprehensive regulation by state
and federal authorities, including state boards of pharmacy and federal
authorities with responsibility for monitoring the storage, handling, and
dispensing of narcotics and other controlled substances. Owen's contractual
arrangements with pharmaceutical manufacturers and healthcare providers also
subject it to certain provisions of the federal Social Security Act which (a)
prohibit financial arrangements between providers of healthcare services to
government healthcare program (including Medicare and Medicaid) beneficiaries
and potential referral sources that are designed to induce patient referrals or
the purchasing, leasing, ordering or arranging for any good, service or item
paid for by such government programs, and (b) impose certain restrictions upon
referring physicians and providers of certain designated health services under
Medicare and Medicaid programs. The Company's PCI operations in the United
Kingdom and Germany are subject to state and local certification requirements,
including compliance with the Good Manufacturing Practices adopted by the
European Community. 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.
ITEM 2: PROPERTIES
At September 12, 1997, the Company had 26 principal pharmaceutical
distribution facilities; 4 specialty distribution facilities; 1
medical/surgical distribution facility; the Pyxis assembly operation; 6
packaging facilities (2 of which are located in the United Kingdom and 1 of
which is located in Germany); and 4 PCI printing facilities (2 of which are
located in Puerto Rico). The Company's facilities are located in an aggregate
of 22 states, Puerto Rico, the United Kingdom and Germany. Fourteen of these
facilities are owned by the Company and the balance are leased. The Company's
principal executive offices are currently located in a leased four-story
building located at 5555 Glendon Court, Dublin, Ohio, pending construction of a
new leased headquarters facility in Dublin, Ohio. The new facility is scheduled
to be completed by the end of calendar 1998. 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 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
appealed this decision. On August 15, 1997, the Court of Appeals for the
Seventh Circuit, along with other rulings, reversed the District Court's
decision granting summary judgment to the wholesaler defendants. On September
5, 1997, the wholesaler defendants filed a motion for this decision to be
reconsidered by the Court of Appeals en banc. The Company continues to believe
that the allegations against Cardinal and Whitmire in such litigation are
without merit, and it intends to contest such allegations vigorously. The
Company also becomes involved from time to time in litigation incidental to its
business. Although the ultimate resolution of the litigation referenced herein
cannot be forecast with certainty, the Company does not believe that the
outcome of these lawsuits will have a material adverse effect on the Company's
financial conditions or results of operations.
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ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
The executive officers of the Company are as follows (information provided as
of September 12, 1997):
<TABLE>
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NAME AGE POSITION
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Robert D. Walter 52 Chairman and Chief Executive Officer
John C. Kane 57 President and Chief Operating Officer
David A. Abrahamson 57 Executive Vice President; President - Medicine Shoppe
International, Inc.
David Bearman 51 Executive Vice President and Chief Financial Officer
George H. Bennett, Jr. 44 Executive Vice President, General Counsel and Secretary
Lisa M. Dolin 38 Senior Vice President-- Specialty Companies
Daniel F. Gerner 51 Executive Vice President; President - PCI Services, Inc.
James F. Millar 49 Executive Vice President; Group President - Cardinal
Distribution
Richard J. Miller 40 Vice President, Controller and Principal Accounting Officer
Robert J. Zollars 40 Executive Vice President; Group President - Pharmacy
Automation and Management
</TABLE>
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.
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 healthcare manufacturer), where he served
most recently as President of the Ross Laboratories Division. Mr. Kane also
serves as director of Connetics Corporation.
DAVID A. ABRAHAMSON has been an Executive Vice President of the Company
since August 1996 and President of Medicine Shoppe International, Inc. 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.
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.
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
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February 1995. Prior to that, Ms. Dolin served as National PharmPak's Vice
President and General Manager beginning in October 1990.
DANIEL F. GERNER has served as an Executive Vice President of the Company
since February 1997 and President of PCI Services, Inc. since 1986.
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.
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).
ROBERT J. ZOLLARS joined the Company in January 1997 as an Executive Vice
President and Group President Pharmacy Automation and Management. Prior to
that, Mr. Zollars served as President of Allegiance Corporation since October
1996 and held various positions at Baxter Healthcare, Inc., most recently that
of President, U.S. Distribution.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER
MATTERS
The Common Shares are quoted on the New York Stock Exchange under the
symbol "CAH." 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 and the per share dividends declared thereon for the
fiscal years ended June 30, 1997 and 1996. The information in the table has
been adjusted to reflect retroactively all applicable stock splits.
<TABLE>
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HIGH LOW DIVIDENDS
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Fiscal 1996:
Quarter Ended
September 30, 1995 $ 37.67 $ 29.17 $ 0.02
December 31, 1995 38.58 34.08 0.02
March 31, 1996 42.83 35.00 0.02
June 30, 1996 50.17 40.17 0.02
Fiscal 1997:
Quarter Ended
September 30, 1996 $ 55.08 $ 44.67 $ 0.02
December 31, 1996 58.38 51.92 0.025
March 31, 1997 64.13 54.38 0.025
June 30, 1997 62.00 51.63 0.025
Fiscal 1998:
Through September 12, 1997 $ 70.00 $ 54.63 $ 0.025
</TABLE>
As of September 12, 1997, there were approximately 2,800 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, Pyxis Corporation
("Pyxis") on May 7, 1996 and Owen Healthcare Inc. ("Owen") on March 18, 1997,
all of which were accounted for as pooling-of-interests transactions. The
consolidated financial data includes all purchase transactions that occurred
during these periods. See "Item 1: Business" for further discussion.
On March 1, 1994, the Company changed its fiscal year end from March 31 to
June 30. As a result, for the fiscal year ended March 31, 1993, the information
presented is derived from consolidated financial statements which combine data
from Cardinal, Medicine Shoppe and Pyxis for the fiscal year ended March 31,
1993 with data from Whitmire for the fiscal year ended July 3, 1993 and Owen
for the fiscal year ended November 30, 1992. 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 with
data from Owen for the fiscal years ending November 30, 1995, 1994 and 1993,
respectively. For the fiscal year ended June 30, 1997, the information
presented is derived from the consolidated financial statements which combine
Cardinal for the fiscal year ended June 30, 1997 with Owen's financial results
for the period of June 1, 1996 to June 30, 1997 (excluding Owen's financial
results for December 1996 in order to change Owen's November 30, fiscal year
end to June 30 ). 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."
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, MARCH 31,
1997 1996 1995 1994 1993
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Earnings Statement Data:
Net revenues $ 10,968,042 $ 9,246,420 $ 8,342,517 $ 6,253,557 $ 4,991,241
Earnings before cummulative effect
of change in accounting
principle $ 181,119 $ 117,634 $ 142,515 $ 84,628 $ 67,669
Cumulative effect of change in accounting
principle (10,000)
------------- -------------- ------------- -------------- -------------
Net earnings $ 181,119 $ 117,634 $ 142,515 $ 84,628 $ 57,669
============= ============== ============= ============== =============
Primary earnings per Common Share:
Before cumulative effect of change in
accounting principle $ 1.66 $ 1.14 $ 1.42 $ .88 $ .79
Cumulative effect of change in accounting
principle (.12)
------------- -------------- ------------- -------------- -------------
Net $ 1.66 $ 1.14 $ 1.42 $ .88 $ .67
============= ============== ============= ============== =============
Fully diluted earnings per Common Share:
Before cumulative effect of change in
accounting principle $ 1.66 $ 1.14 $ 1.40 $ .88 $ .76
Cumulative effect of change in accounting
principle (.10)
------------- -------------- ------------- -------------- -------------
Net $ 1.66 $ 1.14 $ 1.40 $ .88 $ .66
============= ============== ============= ============== =============
Balance Sheet Data:
Total assets $ 3,108,546 $ 2,825,175 $ 2,264,726 $ 1,710,949 $ 1,333,601
Long-term obligations 277,766 265,146 240,469 232,955 293,760
Redeemable preferred stock 20,400
Shareholders' equity 1,332,200 1,035,838 817,038 572,720 397,437
Cash dividends declared per Common Share $ 0.095 $ 0.08 $ 0.08 $ 0.07 $ 0.05
</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 1997, 1996, 1995 and 1994. Fiscal 1997, 1996, 1994 and
1993 amounts reflect the impact of merger related costs. See Note 2 of "Notes
to Consolidated Financial Statements" for a further discussion of merger
related costs affecting fiscal 1997 and 1996.
9
<PAGE> 10
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 on November 13, 1995, Pyxis on May 7, 1996 and Owen on March
18, 1997 (see Note 2 of "Notes to Consolidated Financial Statements"). On
October 11, 1996, the Company completed a merger with PCI, which was also
accounted for as a pooling-of-interests. The impact of the PCI merger, on a
historical basis, is not significant. Accordingly, prior period financial
statements have not been restated for the PCI merger (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 for fiscal 1997 increased 19%, as compared to
the prior year, primarily due to growth in the Company's pharmaceutical
distribution and pharmacy management service businesses. The increase resulted
mostly from internal growth generated primarily by the addition of new
customers, and, to a lesser extent, increased volume from existing customers and
price increases. Expansion of the Company's relationship with Kmart Corporation
("Kmart") and opportunities created by the deterioration of the financial
condition of a major pharmaceutical distribution competitor also contributed to
the increases during fiscal 1997.
Net revenues in fiscal 1996 increased 11% compared with fiscal 1995
primarily due to internal growth from pharmaceutical wholesaling activities,
mostly due to the addition of new customers, and, to a lesser extent, increased
sales to existing customers and price increases.
GROSS MARGIN. For fiscal 1997 and 1996, gross margin as a percentage of net
revenues was 8.25% and 8.36%, respectively. The change in gross margin for the
year is primarily due to the shift in net revenue mix caused by significant
increases in the relatively lower margin pharmaceutical distribution activities
The impact of this shift was partially offset by increased merchandising and
marketing programs with customers and suppliers. The Company's gross margin
continues to be affected by the combination of a highly competitive environment
and a greater mix of high volume customers, where a lower cost of service and
better asset management enable the Company to offer lower selling margins and
still achieve higher operating margins relative to other customer business.
The gross margin ratio increased to 8.36% for fiscal 1996 from 8.02% in
fiscal 1995. This increase was primarily due to the gross margin generated from
the acquisition of a pharmacy management operation in fiscal 1996 (see Note 2
of "Notes to Consolidated Financial Statements"). Pharmacy management
operations generally provide a higher gross margin than pharmaceutical
wholesaling activities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of net revenues improved to 4.68% in
fiscal 1997 compared to 5.19% in fiscal 1996. The improvements in fiscal 1997
reflect the economies associated with the Company's revenue growth, as well as
significant productivity gains resulting from continued cost control efforts
and the consolidation and selective automation of operating facilities.
Selling, general and administrative expenses as a percentage of net
revenues increased to 5.19% in fiscal 1996 compared to 4.96% in fiscal 1995 due
to the inclusion of pharmacy management services in fiscal 1996 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.
MERGER RELATED COSTS. The Company recorded charges to reflect the estimated
PCI and Owen merger related costs during fiscal 1997. During fiscal 1996, the
Company recorded charges to reflect the estimated Medicine Shoppe and Pyxis
merger related costs. See further discussion in Note 2 of "Notes to
Consolidated Financial Statements."
10
<PAGE> 11
The Company classifies incremental costs associated with a merger
transaction as "merger related costs" as these costs would not have been
incurred in the absence of the business combination. It should be noted that the
amounts presented may not be comparable to similarly titled amounts reported by
other companies.
The following is a summary of the merger related costs:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
June 30, June 30,
(In thousands, except per share amounts) 1997 1996
--------- ---------
<S> <C> <C>
Transaction and Employee Related Costs:
Transaction Costs $(15,700) $(23,400)
PCI Vested Retirement Benefits and Incentive Fees (7,600) --
Pyxis Stay Bonuses -- (7,600)
Employee Severance/Termination (4,900) (5,400)
Other (3,000) (300)
-------- --------
Total Transaction and Employee Related Costs (31,200) (36,700)
-------- --------
Other Merger Related Costs:
Asset Impairments (13,200) (1,500)
Exit and Restructuring Costs (3,100) (17,600)
Duplicate Facilities Elimination (1,700) --
Integration and Efficiency Implementation (7,763) (11,450)
-------- --------
Total Other (25,763) (30,550)
-------- --------
Total Merger Related Costs (56,963) (67,250)
Tax Effect 16,786 19,417
-------- --------
Effect on Net Earnings $(40,177) $(47,833)
======== ========
Effect on Fully Diluted Earnings Per Share $ (0.37) $ (0.46)
======== ========
</TABLE>
The effects of the merger related costs are included in the reported net
earnings of $181.1 million in fiscal 1997 and $117.6 million in fiscal 1996 and
in the reported fully diluted earnings per common share of $1.66 in fiscal
1997 and $1.14 in fiscal 1996.
Asset impairments in fiscal 1997 include the write off of a patent ($7.4
million) and the write down of certain operating assets ($3.2 million) related
to MediTROL (a wholly owned subsidiary of Owen) as a result of management's
decision to merge the operations of MediTROL into Pyxis and phase-out production
of the separate MediTROL product line.
Exit and restructuring costs in fiscal 1996 include $17.2 million related
to management's commitment to exit a long term contract with a financing company
at the time of the Pyxis Merger (see further discussion in Note 3 of "Notes to
Consolidated Financial Statements"). Additionally, in fiscal 1996, $7.4 million
of unconditional commitments made by the Company to Medicine Shoppe franchisees
as a result of the Medicine Shoppe Merger is included in the Integration and
Efficiency Implementation category above.
The Company's trend with regard to acquisitions has been to expand its
role as a provider of services to the healthcare industry. This trend has
resulted in both expansion of its pharmaceutical distribution business and
diversification into related service areas 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 margins as a percentage of net revenues than
pharmaceutical distribution. As the healthcare industry continues to change,
the Company is constantly evaluating acquisition candidates in pharmaceutical
distribution, as well as related sectors of the healthcare industry that would
expand its role as a service provider; however, there can be no assurance that
it will be able to successfully pursue any such opportunity or consummate any
such transaction. If a transaction was consummated, additional merger related
costs would be incurred by the Company.
INTEREST EXPENSE. Growth in the Company's business and the resultant need
for additional working capital led to the Company's issuance of $150 million 6%
Notes due 2006, in a public offering in January 1996. This caused the increase
in interest expense of $1.1 million in fiscal 1997, as compared to fiscal 1996,
and the increase in interest expense of $4.8 million in fiscal 1996 compared to
fiscal 1995 (see "Liquidity and Capital Resources"). Partially offsetting this
increase in fiscal 1997 is the impact of the extinguishment of the Company's
$100 million 8% Notes on March 1, 1997.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
relative to pretax earnings was 42%, 44.5%, and 41.1% for fiscal years 1997,
1996, and 1995, respectively. The fluctuation in the tax rate is primarily due
to certain nondeductible costs associated with the business combinations in
fiscal 1997 and 1996 (see Note 7 of "Notes to Consolidated Financial
Statements").
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $1,095 million at June 30, 1997 from $924.4
million at June 30, 1996. This increase included additional investments in
merchandise inventories and trade receivables of $180.1 million and $59.9
million, respectively, and a decrease in accounts payable of $2.4 million.
Offsetting the increases in working capital were decreases in cash and
equivalents, and marketable securities available-for-sale of $61.2 million and
$54.3 million, respectively. Increases in merchandise inventories reflect the
higher level of business volume in pharmaceutical distribution activities,
including higher inventories required by the Company's new pharmaceutical
services agreement with Kmart. The increase in trade receivables is consistent
with the Company's revenue growth (see "Net Revenues" above). The change in
cash and equivalents, marketable securities available-for-sale and accounts
payable is due to the timing of inventory purchases and related payments.
The Company fully redeemed $100 million of long-term debt during fiscal
1997 and currently has the capacity to issue $400 million of additional
long-term debt pursuant to shelf debt registration statements filed with the
Securities and Exchange Commission (see Note 5 of "Notes to Consolidated
Financial Statements"). The Company does not currently have any specific plans
to issue additional debt under these facilities.
Property and equipment, at cost, increased by $176.2 million in fiscal
1997. Of this amount, $111.5 million was attributable to the merger with PCI.
The remaining increase in property and equipment included additional
investments in management information systems and customer support systems, as
well as upgrades to distribution facilities. The Company has several operating
lease agreements for the construction of new facilities. See further discussion
in Note 9 of "Notes to Consolidated Financial Statements".
Shareholders' equity increased to $1,332.2 million at June 30, 1997 from
$1,035.8 million at June 30, 1996, primarily due to net earnings of $181.1
million and the investment of $61.4 million by employees of the Company through
various stock ownership plans.
The Company has line-of-credit agreements with various bank sources
aggregating $374 million, of which $95 million is represented by committed
line-of-credit agreements and the balance is uncommitted. The Company had $22.2
million outstanding under these lines at June 30, 1997.
The Company believes that it has adequate capital resources at its
disposal to fund currently anticipated capital expenditures, business growth
and expansion, and current and projected debt service requirements.
OTHER
PENDING BUSINESS COMBINATIONS. On May 27, 1997, the Company announced that
it had entered into a definitive merger agreement with MediQual Systems, Inc.
("MediQual"), pursuant to which MediQual 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 0.6 million
Common Shares. The merger is expected to be completed in the first half of
fiscal 1998, subject to satisfaction of certain conditions, including approval
by shareholders of MediQual.
On August 23, 1997, the Company signed a definitive merger agreement with
Bergen Brunswig Corporation ("Bergen"), a distributor of pharmaceuticals and
medical-surgical supplies. Under the terms of the transaction, shareholders of
Bergen will receive a fixed exchange ratio of .775 of the Company's Common
Shares in exchange for each common share of Bergen. The Company will issue
approximately 40 million Common Shares in the transaction and will also assume
approximately $386 million in long-term debt. The merger is expected to be
completed by the end of the third quarter of fiscal 1998, subject to certain
conditions, including approval by shareholders and receipt of certain
regulatory approvals. The transaction is expected to be accounted for as a
pooling-of-interests.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS. In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," which will
require retroactive adoption in the Company's fiscal quarter ending December
31, 1997. The new standard simplifies the computation of earnings per share and
requires the presentation of basic and diluted earnings per share. In light of
the present capital structure, the impact of adopting SFAS 128 will not be
significant.
12
<PAGE> 13
In June 1997, FASB issued Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income," which will require adoption
no later than the Company's fiscal quarter ending September 30, 1998. This new
statement defines comprehensive income as "all changes in equity during a
period, with the exception of stock issuances and dividends." The new
pronouncement establishes standards for the reporting and display of
comprehensive income and its components in the financial statements.
In June 1997, FASB also issued Statement of Financial Accounting Standards
No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information," which will require adoption no later than fiscal 1999. SFAS 131
requires companies to define and report financial and descriptive information
about its operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company is presently evaluating the applicability of SFAS 130 and 131
to its operations.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Reports
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1997, 1996 and 1995
Consolidated Balance Sheets at June 30, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Fiscal Years Ended June
30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
13
<PAGE> 14
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, 1997 and 1996, and the related
statements of earnings, shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 1997. Our audits also included the
consolidated financial statement schedule listed in the Index at Item 14. These
consolidated financial statements and consolidated financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and consolidated
financial statement schedule based on our audits. We did not audit the
financial statements of Owen Healthcare, Inc. ("Owen") and of Pyxis Corporation
("Pyxis"), both wholly owned subsidiaries of Cardinal Health, Inc., for the
years ended June 30, 1996 and 1995. The combined financial statement amounts of
Owen and Pyxis represent approximately 13% of consolidated total assets at June
30, 1996 and represent combined revenues and net income of approximately 6% and
6%, and 37% and 29%, respectively, of consolidated amounts for each of the two
years in the period ended June 30, 1996. These statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as
it relates to the amounts included for Owen and Pyxis, is based solely on the
reports 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1997
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 12, 1997, except for Note 16
as to which the date is August 23, 1997
14
<PAGE> 15
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 the related consolidated statements of income, shareholder's
equity, and cash flows for each of the two 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 the consolidated results of its operations and its cash
flows for each of the two years in the period ended June 30,1996, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
August 2, 1996
15
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Owen Healthcare, Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of income, of stockholders' equity and of cash flows of Owen
Healthcare, Inc. and its subsidiaries (not presented separately herein) present
fairly, in all material respects, the financial position of Owen Healthcare,
Inc. and its subsidiaries (Owen) at November 30, 1995, and the results of their
operations and their cash flows for each of the two years in the period ended
November 30, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Owen's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
January 30, 1997
16
<PAGE> 17
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------------------------
1997 1996 1995
-------------------------------------------------
<S> <C>
Net revenues $ 10,968,042 $ 9,246,420 $ 8,342,517
Cost of products sold 10,063,084 8,473,186 7,673,044
---------------- --------------- ---------------
Gross margin 904,958 773,234 669,473
Selling, general and administrative expenses 513,617 479,440 413,630
Merger related costs:
Transaction and employee related costs (31,200) (36,700) --
Other (25,763) (30,550) --
---------------- --------------- ---------------
Operating earnings 334,378 226,544 255,843
Other income (expense):
Interest expense (27,974) (26,903) (22,110)
Other, net-- primarily interest income 5,876 12,422 8,386
---------------- --------------- ---------------
Earnings before income taxes 312,280 212,063 242,119
Provision for income taxes 131,161 94,429 99,604
---------------- --------------- ---------------
Net earnings $ 181,119 $ 117,634 $ 142,515
================ =============== ===============
Earnings per Common Share:
Primary $ 1.66 $ 1.14 $ 1.42
Fully diluted $ 1.66 $ 1.14 $ 1.40
Weighted average number of Common Shares outstanding:
Primary 109,118 102,922 100,566
Fully diluted 109,172 103,832 101,756
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE> 18
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1997 1996
---------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 243,061 $ 304,281
Marketable securities available-for-sale - 54,335
Trade receivables, net 672,164 612,277
Current portion of net investment in sales-type leases 40,720 37,953
Merchandise inventories 1,453,120 1,272,616
Prepaid expenses and other 94,668 62,826
---------------- ---------------
Total current assets 2,503,733 2,344,288
---------------- ---------------
Property and equipment, at cost:
Land, buildings and improvements 110,552 62,534
Machinery and equipment 304,946 182,999
Furniture and fixtures 61,046 54,795
---------------- ---------------
Total 476,544 300,328
Accumulated depreciation and amortization (199,869) (133,472)
---------------- ---------------
Property and equipment, net 276,675 166,856
Other assets:
Net investment in sales-type leases, less current portion 119,532 111,604
Goodwill and other intangibles 122,104 114,901
Other 86,502 87,526
---------------- ---------------
Total $ 3,108,546 $ 2,825,175
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 22,159 $ -
Current portion of long-term obligations 6,158 106,008
Accounts payable 1,135,951 1,138,368
Other accrued liabilities 244,491 175,498
---------------- ---------------
Total current liabilities 1,408,759 1,419,874
---------------- ---------------
Long-term obligations, less current portion 277,766 265,146
Deferred income taxes and other liabilities 89,821 104,317
Shareholders' equity:
Common Shares, without par value 645,051 558,598
Retained earnings 699,366 492,762
Common Shares in treasury, at cost (6,373) (11,522)
Other (5,844) (4,000)
---------------- ---------------
Total shareholders' equity 1,332,200 1,035,838
---------------- ---------------
Total $ 3,108,546 $ 2,825,175
================ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 19
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON SHARES
-------------------------
SHARES RETAINED TREASURY SHARES
-----------------------
ISSUED AMOUNT EARNINGS SHARES AMOUNT
---------- ------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1994 63,391 $ 360,052 $ 244,812 (1,075) $ (9,164)
Net earnings 142,515
Employee stock plans activity, including
tax benefits of $22,236 1,684 27,605 6 45
Treasury shares acquired and shares retired (186) (300) (4,805) (47) (1,185)
Change in unrealized loss on marketable securities
available-for-sale, net of tax
Dividends paid (9,107)
Adjustment for ESOP
Acquisition of subsidiaries (See Note 2) 1,784 11,650 9,328
Shares issued in connection with stock offering 1,867 70,468
---------- ------------- ------------- --------- ------------
BALANCE, JUNE 30, 1995 68,540 469,475 382,743 (1,116) (10,304)
Net earnings 117,634
Employee stock plans activity, including tax
benefits of $11,168 982 28,682 134 922
Treasury shares acquired and restricted stock forfeitures (70) (2,140)
Change in unrealized loss on marketable securities
available-for-sale, net of tax
Dividends paid (7,615)
Adjustment for ESOP
Shares issued in connection with stock offering 2,069 50,654
Conversion of subordinated debt, net 1,071 9,787
---------- ------------- ------------- --------- ------------
BALANCE, JUNE 30, 1996 72,662 558,598 492,762 (1,052) (11,522)
Net earnings 181,119
Employee stock plans activity, including tax
benefits of $18,459 1,655 62,483
Treasury shares acquired and shares retired (748) (7,051) 728 5,076
Dividends paid (9,045)
Foreign currency translation adjustment
3-for-2 stock split effected as a stock dividend
and cash paid in lieu of fractional shares 33,411 (30)
Acquisition of subsidiary (See Note 2) 2,092 30,878 28,854
Adjustment for change in fiscal year of an
acquired subsidiary (See Note 1) 143 5,706 84 73
---------- ------------- ------------- --------- ------------
BALANCE, JUNE 30, 1997 109,072 $ 645,051 $ 699,366 (240) $ (6,373)
========== ============= ============= ========= ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ADJUSTMENT SHAREHOLDERS'
FOR ESOP OTHER EQUITY
-------------- ------------ ----------------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1994 $ (17,736) $ (5,244) $ 572,720
Net earnings 142,515
Employee stock plans activity, including
tax benefits of $22,236 839 28,489
Treasury shares acquired and shares retired (6,290)
Change in unrealized loss on marketable securities
available-for-sale, net of tax 825 825
Dividends paid (9,107)
Adjustment for ESOP (3,560) (3,560)
Acquisition of subsidiaries (See Note 2) 20,978
Shares issued in connection with stock offering 70,468
----------------- ------------ ----------------
BALANCE, JUNE 30, 1995 (21,296) (3,580) 817,038
Net earnings 117,634
Employee stock plans activity, including tax
benefits of $11,168 (1,173) 28,431
Treasury shares acquired and restricted stock forfeitures 307 (1,833)
Change in unrealized loss on marketable securities
available-for-sale, net of tax 446 446
Dividends paid (7,615)
Adjustment for ESOP 21,296 21,296
Shares issued in connection with stock offering 50,654
Conversion of subordinated debt, net 9,787
----------------- ------------ ----------------
BALANCE, JUNE 30, 1996 -- (4,000) 1,035,838
Net earnings 181,119
Employee stock plans activity, including tax
benefits of $18,459 (1,098) 61,385
Treasury shares acquired and shares retired (1,975)
Dividends paid (9,045)
Foreign currency translation adjustment (1,373) (1,373)
3-for-2 stock split effected as a stock dividend
and cash paid in lieu of fractional shares (30)
Acquisition of subsidiary (See Note 2) 627 60,359
Adjustment for change in fiscal year of an
acquired subsidiary (See Note 1) 5,922
----------------- ------------ ----------------
BALANCE, JUNE 30, 1997 $ -- $ (5,844) $ 1,332,200
================= ============ ================
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 20
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------------------------
1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 181,119 $ 117,634 $ 142,515
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 51,288 39,501 29,455
Provision for deferred income taxes 15,897 21,502 48,454
Provision for bad debts 8,073 10,111 14,659
Change in operating assets and liabilities, net of effects from acquisitions:
Increase in trade receivables (46,971) (62,646) (140,336)
Increase in merchandise inventories (169,408) (159,616) (161,558)
Increase in net investment in sales-type leases (10,695) (34,125) (40,584)
Increase (decrease) in accounts payable (10,778) 162,996 156,687
Increase (decrease) in accrued other 22,488 41,523 (24,185)
Other operating items, net (1,862) (22,492) 12,718
-------------- ------------- -------------
Net cash provided by operating activities 39,151 114,388 37,825
-------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired - (36,244) (19,632)
Proceeds from sale of property and equipment 2,986 1,038 764
Additions to property and equipment (75,213) (83,385) (56,377)
Purchase of marketable securities available-for-sale (3,400) (163,719) (169,599)
Proceeds from sale of marketable securities available-for-sale 57,735 218,019 143,501
-------------- ------------- -------------
Net cash used in investing activities (17,892) (64,291) (101,343)
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowing activity 3,347 (3,000) (22,500)
Reduction of long-term obligations (134,479) (33,075) (7,393)
Proceeds from long-term obligations, net of issuance costs - 148,960 76
Proceeds from issuance of Common Shares 41,244 68,919 75,818
Tax benefit of stock options 18,459 11,168 22,236
Dividends on common shares and cash paid
in lieu of fractional shares (9,075) (7,615) (9,107)
Purchase of treasury shares (1,975) (1,833) (6,290)
-------------- ------------- -------------
Net cash (used in) provided by financing activities (82,479) 183,524 52,840
-------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (61,220) 233,621 (10,678)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 304,281 70,660 81,338
-------------- ------------- -------------
CASH AND EQUIVALENTS AT END OF YEAR $ 243,061 $ 304,281 $ 70,660
============== ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 21
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 provider of
services to the healthcare industry offering an array of value-added
pharmaceutical distribution services and pharmaceutical-related products and
services to a broad base of customers. The Company 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 healthcare
providers. The Company also operates a variety of related healthcare service
businesses, including Pyxis Corporation ("Pyxis") (which develops,
manufactures, leases, sells and services point-of-use pharmacy systems which
automate the distribution and management of medications and supplies in
hospitals and other healthcare facilities); Medicine Shoppe International, Inc.
("Medicine Shoppe") (a franchisor of apothecary-style retail pharmacies); PCI
Services, Inc. ("PCI") (an international provider of integrated packaging
services to pharmaceutical manufacturers); and Owen Healthcare, Inc. ("Owen")
(a provider of pharmacy management and information services to hospitals). See
"Basis of Presentation" below. The Company is currently operating in 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 mergers with Medicine Shoppe on
November 13, 1995, Pyxis on May 7, 1996 and Owen on March 18, 1997 (see Note
2). Such business combinations were accounted for under the pooling-of-
interests method.
On October 11, 1996, the Company completed a merger with PCI (the "PCI
Merger"). The PCI Merger was accounted for as a pooling-of-interests. The
Company issued approximately 3.1 million Common Shares to PCI shareholders and
PCI's outstanding stock options were converted into options to purchase
approximately 0.2 million Common Shares. Because the impact of the PCI Merger,
on a historical basis, was not significant, prior period financial statements
have not been restated.
On March 18, 1997, the Company completed a merger with Owen (the "Owen
Merger"). The Company issued approximately 7.7 million Common Shares to Owen
shareholders and Owen's outstanding stock options were converted into options
to purchase approximately 0.7 million Common Shares. The term "Cardinal" as
used in this footnote refers to Cardinal Health, Inc. and subsidiaries prior to
the Owen Merger.
Cardinal's fiscal year end is June 30 and Owen's fiscal year end was
November 30. For fiscal years ended June 30, 1996 and 1995, the consolidated
financial statements combine Cardinal's fiscal year ended June 30, 1996 and
1995 with the financial results for Owen's fiscal years ended November 30, 1995
and 1994, respectively. For the fiscal year ended June 30, 1997, the
consolidated financial statements combine Cardinal's fiscal year ended June 30,
1997 with Owen's financial results for the period of June 1, 1996 to June 30,
1997 (excluding Owen's financial results for December 1996 in order to change
Owen's November 30 fiscal year end to June 30). Due to the change in Owen's
fiscal year from November 30 to conform with Cardinal's June 30 fiscal year
end, Owen's results of operations for the periods from December 1, 1995 through
May 31, 1996 and the month of December 1996 will not be included in the
combined results of operations but are reflected as an adjustment in the
Consolidated Statements of Shareholders' Equity. Owen's net revenues and net
earnings for these periods were $260.1 million and $5.7 million, respectively.
Owen's cash flows from operating and financing activities for these periods
were $0.9 million and $0.7 million, respectively, while cash flows used in
investing activities were $5.6 million.
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 estimated amounts.
21
<PAGE> 22
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
As of June 30, 1996, 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 adjusted book value 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.
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 $ 35.0 million and $36.2 million at June 30,
1997 and 1996, respectively.
The Company provides financing to various customers. Such financing
arrangements range from one year to ten years, at interest rates which
generally fluctuate with the prime rate. The financings may be collateralized,
guaranteed by third parties or unsecured. Finance notes and accrued interest
receivable are $52.5 million and $59.1 million at June 30, 1997 and 1996,
respectively (the current portion was $12.1 million and $14.8 million,
respectively), and are included in other assets. These amounts are reported net
of an allowance for doubtful accounts of $8.2 million and $9.1 million at June
30, 1997 and 1996, respectively.
MERCHANDISE INVENTORIES
Substantially all merchandise inventories (86% in 1997 and 81% in 1996)
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, 1997, by $69.6 million and at
June 30, 1996, by $76.3 million.
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 1997 and 1996, the Company had partial inventory
liquidations in certain LIFO pools which reduced the LIFO provision by
approximately $2 million and $7 million, respectively.
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 $20.3 million
and $25.6 million at June 30, 1997 and 1996, respectively. At each balance
sheet date, a determination is made by management to ascertain whether there is
an indication that the intangible assets may have been impaired based on
undiscounted operating cash flows.
22
<PAGE> 23
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVENUE RECOGNITION
The Company records distribution 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 bulk deliveries to
be made to customer warehouses which are excluded from net revenues and totaled
$2.5 billion, $2.2 billion and $1.8 billion in fiscal 1997, 1996 and 1995,
respectively. The service fees related to bulk 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 delivered, and 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 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 as the related services are
rendered 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. Under certain
contracts, fees for management services are guaranteed by the Company not to
exceed stipulated amounts or have other risk-sharing provisions. Revenues
include the estimated effects of such contractual guarantees and risk-sharing
provisions.
Packaging revenues are recognized from services provided upon the
completion of such services.
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. Additionally, fully diluted earnings per share for all
periods prior to the conversion include the effect of the shares assumed to be
issued upon conversion of the convertible subordinated notes (see Note 5).
Excluding dividends paid by all entities with which the Company has
merged, the Company paid cash dividends per Common Share of $0.09 for the
fiscal year ended June 30, 1997 and $0.08 for each of the fiscal years ended
June 30, 1996 and 1995.
STOCK SPLITS
On October 29, 1996, the Company declared a three-for-two stock split
which was effected as a stock dividend and distributed on December 16, 1996 to
shareholders of record on December 2, 1996. All share and per share amounts
included in the consolidated financial statements, except the Consolidated
Statements of Shareholders' Equity, have been adjusted to retroactively reflect
this stock split.
23
<PAGE> 24
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting For
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which the Company adopted at the beginning of fiscal 1997. SFAS 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 121 also addresses accounting for long-lived assets that
are expected to be disposed of. The impact of adopting SFAS 121 has had an
immaterial effect on the Company's financial condition and results of
operations.
2. BUSINESS COMBINATIONS
On March 18, 1997, the Company completed the Owen Merger. The Owen Merger
was accounted for as a pooling-of-interests business combination and the Company
issued approximately 7.7 million Common Shares to Owen shareholders and Owen's
outstanding stock options were converted into options to purchase approximately
0.7 million Common Shares. The Company recorded costs of approximately $39.6
million ($27.5 million, net of tax) related to the Owen Merger. These costs
include $16.7 million for transaction and employee related costs associated with
the merger, $13.2 million for asset impairments ($10.6 million of which related
to MediTROL, as further discussed below), and $9.7 million related to other
integration activities, including the elimination of duplicate facilities and
certain exit and restructuring costs. At the time of the Owen Merger, Owen had a
wholly-owned subsidiary, MediTROL, that manufactured, marketed, sold and
serviced point-of-use medication distribution systems similar to Pyxis. Upon
consummation of the Owen Merger, management committed to merge the operations of
MediTROL into Pyxis, and phase-out production of the separate MediTROL product
line. As a result of this decision, a MediTROL patent ($7.4 million) and certain
other operating assets ($3.2 million) were written off as impaired.
On October 11, 1996, the Company completed the PCI Merger. The PCI Merger
was accounted for as a pooling-of-interests business combination and the Company
issued approximately 3.1 million Common Shares to PCI shareholders and PCI's
outstanding stock options were converted into options to purchase approximately
0.2 million Common Shares. The historical cost of PCI assets combined was
approximately $147.6 million and the total liabilities assumed (including total
debt of approximately $62.0 million) were approximately $87.2 million. Because
the impact of the PCI Merger, on a historical basis, was not significant, prior
period financial statements have not been restated. The Company recorded costs
totaling approximately $17.4 million ($12.7 million, net of tax) related to the
PCI Merger. These costs include $14.5 million for transaction and employee
related costs associated with the PCI Merger, (including $7.6 million for
retirement benefits and incentive fees to two executives of PCI, which vested
and became payable upon consummation of the merger) and $2.9 million related to
other integration activities, including exit costs.
The effect of the merger related costs recorded in fiscal 1997 was to
reduce reported net earnings by $40.2 million to $181.1 million and to reduce
reported fully diluted earnings per common share by $.37 per share to $1.66 per
share. Certain merger related costs are based upon estimates, and actual
amounts paid may ultimately differ from these estimates. If additional costs
are incurred, such items will be expensed in subsequent periods.
The table below presents a reconciliation of net revenues and net earnings
as reported in the accompanying consolidated financial statements with those
previously reported by the Company. The term "Cardinal" as used in this
footnote refers to Cardinal Health, Inc. and subsidiaries prior to the Owen
Merger.
<TABLE>
<CAPTION>
(In Thousands) Cardinal Owen Combined
---------------- ---------------- ----------------
<S> <C> <C> <C>
Fiscal year ended June 30, 1995:
Net revenues $ 8,022,108 $ 320,409 $ 8,342,517
Net earnings $ 137,534 $ 4,981 $ 142,515
Fiscal Year Ended June 30, 1996:
Net revenues $ 8,862,425 $ 383,995 $ 9,246,420
Net earnings $ 111,864 $ 5,770 $ 117,634
Six Months Ended December 31, 1996
Net revenues $ 5,116,996 $ 234,886 $ 5,351,882
Net earnings $ 78,251 $ 4,750 $ 83,001
</TABLE>
Adjustments affecting net income and shareholders' equity resulting from
the merger to adopt the same accounting practices were not material for the
periods presented herein.
24
<PAGE> 25
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 7, 1996, the Company completed a merger with Pyxis (the "Pyxis
Merger"). The Pyxis Merger was accounted for as a pooling-of-interests business
combination, and the Company issued approximately 22.6 million Common Shares to
Pyxis shareholders. In addition, Pyxis' outstanding stock options were converted
into options to purchase approximately 2.3 million additional Common Shares. The
Company recorded costs totaling approximately $50.7 million ($35.3 million, net
of tax) related to the Pyxis Merger. These costs include $30 million for
transaction and employee related costs associated with the merger (including
$7.6 million for vested stay bonuses covering substantially all Pyxis
employees), $17.6 million related to certain exit and lease termination costs
(including $17.2 million to exit a long term contract with a financing company,
see Note 3), and $3.1 million related to asset impairments and other integration
activities.
On November 13, 1995, the Company completed a merger with Medicine Shoppe
(the "Medicine Shoppe Merger"). The Medicine Shoppe Merger was accounted for as
a pooling-of-interests business combination and the Company issued
approximately 9.6 million Common Shares to Medicine Shoppe shareholders. In
addition, Medicine Shoppe's outstanding stock options were converted into
options to purchase approximately 0.2 million Common Shares. The Company
recorded costs totaling approximately $16.6 million ($12.5 million, net of tax)
related to the Medicine Shoppe Merger. These costs include $6.7 million for
transaction and employee related costs associated with the Medicine Shoppe
Merger, $7.4 million for unconditional commitments to franchisees, and $2.5
million related to other integration activities.
The effect of the merger related costs recorded in fiscal 1996 was to
reduce reported net earnings by $47.8 million to $117.6 million and to reduce
reported fully diluted earnings per common share by $.46 per share to $1.14 per
share. Certain merger related costs are based upon estimates, and actual
amounts paid may ultimately differ from these estimates. If additional costs
are incurred, such items will be expensed in subsequent periods.
As of June 30, 1997 and 1996, the Company had incurred approximately
$101.9 million and $22.1 million, respectively, related to the costs recorded
at the time of the various mergers. The Company's current estimates of the
merger related costs ultimately to be incurred are not materially different
from the amounts originally recorded.
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 1.4 million 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 $25.4 million, and
the total liabilities assumed (including total debt of approximately $1.3
million) were approximately $15.6 million. Because the impact of the Behrens
merger, on both an historical and pro forma basis, was not significant, prior
periods have not been restated.
During fiscal 1995, 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 drug distribution and
point-of-use pharmacy systems. The aggregate purchase price was $54.5 million
($8.9 million was assumed debt), which included approximately 0.8 million
Common Shares valued at $11.2 million. Liabilities of the operations assumed
were approximately $98.9 million, consisting of $1.7 million of debt. Had the
purchases occurred at the beginning of fiscal 1995, operating results for
fiscal 1995 on a pro forma basis would not have been significantly different.
25
<PAGE> 26
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 by 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,
1997 1996
--------------- --------------
<S> <C> <C>
Future minimum lease payments receivable $ 189,810 $ 176,963
Unguaranteed residual values 1,333 1,457
Unearned income (27,817) (25,637)
Allowance for uncollectible minimum lease payments
receivable (3,074) (3,226)
--------------- --------------
Net investment in sales-type leases $ 160,252 $ 149,557
Less: current portion 40,720 37,953
--------------- --------------
Net investment in sales-type leases, less current portion $ 119,532 $ 111,604
=============== ==============
</TABLE>
Future minimum lease payments to be received pursuant to sales-type leases
are as follows at June 30, 1997
1998 $ 52,104
1999 51,166
2000 41,511
2001 28,246
2002 15,813
Thereafter 970
-------------
Total $ 189,810
=============
Lease Related Financing Arrangements
Prior to the Pyxis Merger, 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 did
not exceed $350 million. As of June 30, 1997, $203 million of lease receivables
were owned by the financing company. The aggregate lease receivables sold under
this arrangement totaled approximately $312 million and $233 million at June 30,
1997 and 1996, respectively. As a result of the Pyxis Merger, the Company
entered into negotiations with the financing company to amend and terminate this
arrangement. In June 1997, the agreement with the financing company was amended
to modify financing levels over the remaining term of the agreement and to
terminate the lease portfolio servicing responsibilities of the financing
company. The Company made provision for the estimated costs associated with the
exiting of this arrangement at the time of the Pyxis Merger.
4. NOTES PAYABLE, BANKS
The Company has entered into various unsecured, uncommitted line-of-credit
arrangements which allow for borrowings up to $279 million at June 30, 1997, at
various money market rates. At June 30, 1997, $22.2 million, at a weighted
average interest rate of 6.26%, was outstanding under such arrangements and no
amounts were outstanding as of June 30, 1996. 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 million (none of which was in use at June
30, 1997). The Company is required to pay a
26
<PAGE> 27
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1997 were $352 million.
5. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
--------------- --------------
<S> <C> <C>
Notes; 6.0% due 2006 $ 150,000 $ 150,000
Notes; 6.5% due 2004 100,000 100,000
Notes; 8% paid in 1997 - 100,000
Other obligations; interest averaging 6.38% in 1997 and
7.14% in 1996, due in varying installments
through 2011 33,924 21,154
--------------- --------------
Total $ 283,924 $ 371,154
Less: current portion 6,158 106,008
--------------- --------------
Long-term obligations, less current portion $ 277,766 $ 265,146
=============== ==============
</TABLE>
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.
During fiscal 1996, holders of the $10 million, 9.53% convertible
subordinated notes due 2002, originally issued by Owen, converted the notes
into the equivalent of approximately 1.1 million Common Shares. Additionally,
Owen repaid $34.8 million of debt with proceeds from a common stock offering.
If the previously mentioned conversion and retirement of debt had occurred at
the beginning of all periods presented, the changes to primary earnings per
share would be less than 3%.
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 these Notes are
being amortized on a straight-line basis over the period the 6.5% Notes will be
outstanding.
The 8% Notes represented unsecured obligations of the Company, were not
redeemable prior to their maturity on March 1, 1997 and were not subject to a
sinking fund.
Certain long-term obligations are collateralized by property and equipment
of the Company with an aggregate book value of approximately $33.5 million at
June 30, 1997.
Maturities of long-term obligations for future fiscal years are as follows
(in thousands):
1998 $ 6,158
1999 6,706
2000 3,985
2001 3,016
2002 1,890
Thereafter 262,169
-------------
Total $ 283,924
=============
27
<PAGE> 28
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company filed a shelf debt registration statement on Form S-3 with the
Securities and Exchange Commission, which was declared effective on April 21,
1997. The registration increases the Company's shelf debt capacity by $350
million to a total of $400 million. No securities have been sold under this
registration statement.
6. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and equivalents, marketable securities, trade
receivables, accounts payables, notes payable--banks and other accrued
liabilities at June 30, 1997 and 1996, 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 $270.1
million and $354.2 million as compared to the carrying amounts of $283.9
million and $371.2 million at June 30, 1997 and 1996, 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.
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,
1997 1996 1995
--------------- -------------- ---------------
<S> <C> <C> <C>
Current:
Federal $ 101,877 $ 64,480 $ 45,654
State 13,387 8,447 5,496
--------------- -------------- ---------------
Total 115,264 72,927 51,150
Deferred 15,897 21,502 48,454
--------------- -------------- ---------------
Total provision $ 131,161 $ 94,429 $ 99,604
=============== ============== ==============
</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,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Provision at Federal
statutory rate 35.0% 35.0% 35.0%
State income taxes, net of
Federal benefit 4.3 4.8 4.7
Nondeductible expenses 2.4 4.3 0.1
Other 0.3 0.4 1.3
--------------- --------------- ---------------
Effective income tax rate 42.0% 44.5% 41.1%
=============== =============== ===============
</TABLE>
28
<PAGE> 29
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Amounts for fiscal 1996 have
been reclassified to conform to the fiscal 1997 presentation. The components of
the deferred income tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------------- --------------
<S> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts $ 18,669 $ 19,020
Accrued liabilities 32,017 23,775
Net operating loss carryforwards 30,978 35,023
Other 38,285 48,281
-------------- --------------
Total deferred income tax assets 119,949 126,099
Valuation allowance for deferred income tax assets (2,696) (3,008)
-------------- --------------
Net deferred income tax assets 117,253 123,091
-------------- --------------
Deferred income tax liabilities:
Inventory basis differences (58,077) (55,431)
Property related (63,171) (55,962)
Revenues on lease contracts (89,101) (91,996)
Other (13,128) (10,029)
-------------- --------------
Total deferred income tax liabilities (223,477) (213,418)
-------------- --------------
Net deferred income tax liabilities $ (106,224) $ (90,327)
============== ==============
</TABLE>
The above amounts are classified in the consolidated balance sheets as
follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------------- --------------
<S> <C> <C>
Other current assets (liabilities) $ (30,858) 3,335
Deferred income taxes and other liabilities (75,366) (93,662)
-------------- --------------
Net deferred income tax liabilities $ (106,224) $ (90,327)
============== ==============
</TABLE>
The Company had Federal net operating loss carryforwards of $91 million as
of June 30, 1997 and 1996. Also at June 30, 1997 and 1996, the Company had state
net operating loss carryforwards of $56 million and $63 million, respectively. A
valuation allowance of $2.7 million and $3.0 million at June 30, 1997 and 1996,
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 Pyxis Merger and the carryforwards are also only
available to offset future taxable income of Pyxis. However, with the exception
of the valuation allowance described above, the Company anticipates that no
limitations will apply. 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 eligible to be
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.
29
<PAGE> 30
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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,
1997 1996 1995
-------------- --------------- --------------
<S> <C> <C> <C>
Defined contribution plans $ 10,765 $ 8,107 $ 6,033
Multiemployer plans 947 711 637
ESOP compensation -- 257 533
-------------- --------------- --------------
Total $ 11,712 $ 9,075 $ 7,203
============== =============== ==============
</TABLE>
Prior to the Owen Merger, Owen established an Employee Stock Ownership
Plan (ESOP). Costs for the ESOP debt service were recognized for additional
contributions to satisfy ESOP obligations and plan operating expenses. As of
January 2, 1996, contributions to the ESOP were suspended and all participants
became fully vested.
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, 1997, are
as follows (in thousands):
1998 $ 17,083
1999 12,626
2000 7,655
2001 6,339
2002 5,601
Thereafter 22,341
-------------
Total $ 71,645
=============
Rental expense relating to operating leases was approximately $23 million,
$22.6 million and $16.4 million in fiscal 1997, 1996, and 1995, respectively.
Sublease rental income was not material for any period presented herein.
The Company has entered into operating lease agreements with several banks
for the construction of various new facilities. The initial terms of the lease
agreements extend through April 2003, with optional five year renewal periods.
In the event of termination, the Company is required to either purchase the
facility or vacate the property and make reimbursement for a portion of the
uncompensated price of the property cost. The instruments provide for maximum
fundings of $159 million, which is the total estimated cost of the construction
projects. As of June 30, 1997, the amount expended was $32.5 million. Currently,
the Company's minimum annual lease payments under the agreements are
approximately $2.2 million.
As of June 30, 1997, amounts outstanding on customer notes receivable sold
with full recourse to a commercial bank totaled approximately $12.9 million.
The Company also has outstanding guarantees of indebtedness and financial
assistance commitments which totaled approximately $3 million at June 30, 1997.
The Company becomes involved from time-to-time in litigation incidental to
its business. 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. Although the
ultimate resolution of litigation cannot be forecast with certainty, the
Company does not believe that the outcome of any pending litigation would have
a material adverse effect on the Company's financial statements.
30
<PAGE> 31
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SHAREHOLDERS' EQUITY
At June 30, 1997, the Company's authorized capital shares consisted of (a)
150,000,000 Class A common shares, without par value; (b) 5,000,000 Class B
common shares, without par value; and (c) 500,000 non-voting preferred shares
without par value. At June 30, 1996, the Company's authorized capital shares
consisted of (a) 100,000,000 Class A common shares, without par value; (b)
5,000,000 Class B common shares, without par value; and (c) 500,000 non-voting
preferred shares without par value. The Class A common shares and Class B
common shares are collectively referred to as Common Shares. Holders of Class A
and Class B common shares are entitled to share equally in any dividends
declared by the Company's Board of Directors and to participate equally in all
distributions of assets upon liquidation. Generally, the holders of Class A
common shares are entitled to one vote per share and the holders of Class B
common shares are entitled to one-fifth of one vote per share on proposals
presented to shareholders for vote. Under certain circumstances, the holders of
Class B common shares are entitled to vote as a separate class. Only Class A
common shares were outstanding as of June 30, 1997 and 1996.
On September 26, 1994, approximately 12.1 million of the Company's Common
Shares were sold pursuant to a public offering. Approximately 2.8 million
Common Shares were sold by the Company, and approximately 9.3 million 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.
11. 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 healthcare sectors. Credit risk can be
affected by changes in reimbursement and other economic pressures impacting the
acute care portion of the healthcare industry. 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 1997, the Company's two largest customers individually
accounted for 13% of net revenues and 62% of bulk deliveries, respectively.
During fiscal 1996, the Company's two largest customers individually accounted
for 12% of net revenues and 70% of bulk deliveries, respectively. During fiscal
1995, the Company's two largest customers individually accounted for 11% of net
revenues and 82% of bulk deliveries, respectively. Trade receivables due from
these two customers aggregated approximately 23% of total trade receivables at
June 30, 1997 and 1996.
12. STOCK OPTIONS AND RESTRICTED SHARES
The Company maintains stock incentive plans (the "Plans") for the benefit
of certain officers, directors and employees. Options granted generally vest
over three years and are 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.
The Company accounts for the Plans in accordance with APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation cost
for the Plans been determined consistent with the Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would have been
reduced by $2.3 million and $.02 per share, respectively, for fiscal 1997 and
$6.4 million and $.07 per share, respectively, for fiscal 1996.
Because the SFAS 123 method of accounting has not been applied to options
granted prior to July 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The following summarizes all stock option transactions for the Company
(excluding Whitmire, see below) under the Plans from June 30, 1994, through
June 30, 1997, giving retroactive effect to conversions of options in
connection with merger transactions and stock splits (in thousands, except per
share amounts):
31
<PAGE> 32
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996 Fiscal 1995
--------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
Options average Options average Options average
exercise price exercise price exercise price
--------------------------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of
year 6,432 $24.15 5,737 $20.98 4,675 $18.22
Granted 840 54.88 1,382 36.82 1,196 31.04
Exercised (2,284) 19.87 (527) 21.10 (92) 9.43
Canceled (240) 27.27 (160) 29.93 (42) 25.19
--------------------------- ---------------------------- -----------------------------
Outstanding,
end of year 4,748 $ 31.49 6,432 $24.15 5,737 $20.98
=========================== ============================ =============================
Exercisable, end
of year 2,718 $23.15 4,076 $20.89 1,816 $10.25
--------------------------- ---------------------------- -----------------------------
</TABLE>
The weighted average fair value of options granted during fiscal 1997 and
1996 was $14.48 and $14.50, respectively. The fair value of the options granted
were estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions for grants in both fiscal 1997 and 1996: risk
free interest rate of 6.23%, expected life of 3 years, expected volatility of
.25% and dividend yield of .17%.
Information relative to stock options outstanding as of June 30, 1997:
<TABLE>
Options Outstanding Options Exercisable
----------------------------------------------------- ------------------------------
Weighted
average
remaining Weighted Weighted
Range of contractual average average
exercise prices Options life in years exercise price Options exercise price
- ------------------------------------------------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ .08-$23.07 1,737 4.99 $15.35 1,584 $15.30
$23.27-$39.92 1,905 7.76 33.11 842 30.20
$40.00-$63.00 1,106 8.84 54.02 292 45.39
----------------------------------------------------- ------------------------------
4,748 7.00 $31.49 2,718 $23.15
===================================================== ==============================
</TABLE>
As of June 30, 1997, there remained approximately 1.5 million additional
shares 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 2.6 million additional Common Shares. Under the terms of their
original issuance, the exercise price for substantially all of the Cardinal
Exchange Options is remitted to certain former investors of Whitmire. Cardinal
Exchange Options to purchase 0.3 million and 1.9 million Common Shares, with an
average option price of $1.37 and $1.01 were exercised in fiscal 1996 and 1995,
respectively. At June 30, 1996, 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,
1997, approximately 0.7
32
<PAGE> 33
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
million restricted shares had been issued, of which approximately 0.2 million
shares remained restricted and subject to forfeiture and approximately 67,000
shares had been forfeited.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following selected quarterly financial data (in thousands, except per
share amounts) for fiscal 1997 and 1996 has been restated to reflect the
pooling-of-interests business combinations (see Note 2):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1997:
Net revenues $ 2,535,476 $ 2,816,406 $ 2,825,500 2,790,660
Gross margin 197,128 223,558 243,658 240,614
Selling, general and administrative
expenses 124,156 127,313 129,702 132,446
Operating earnings 72,972 78,886 74,352 108,168
Net earnings 41,401 41,600 36,228 61,890
Net earnings per Common Share:
Primary $ .39 $ .38 $ .33 $ .56
Fully diluted .39 .38 .33 .56
- -----------------------------------------------------------------------------------------------------
Fiscal 1996:
Net revenues $ 2,187,518 $ 2,284,993 $ 2,352,254 $ 2,421,655
Gross margin 177,420 188,473 203,587 203,754
Selling, general and administrative
expenses 116,899 117,323 122,382 122,836
Operating earnings 60,521 53,598 81,205 31,220
Net earnings 33,775 28,154 44,691 11,014
Net earnings per Common Share:
Primary $ .33 $ .28 $ .43 $ .10
Fully diluted .33 .28 .43 .10
</TABLE>
As more fully discussed in Note 2, merger related costs were recorded in
various quarters in fiscal 1997 and 1996. The following table summarizes the
impact of such costs on net earnings and fully diluted earnings per share in
the quarters in which they were recorded:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1997:
Net earnings $ 0 $ (12,655) $ (27,522) $ 0
Fully diluted net earnings per
Common Share $ 0 $ (.12) $ (.25) $ 0
- -----------------------------------------------------------------------------------------------------
Fiscal 1996:
Net earnings $ 0 $ (12,495) $ 0 $ (35,338)
Fully diluted net earnings per
Common Share $ 0 $ (.12) $ 0 $ (.34)
</TABLE>
14. SUPPLEMENTAL CASH FLOW INFORMATION
Income tax and interest payments for the fiscal years ended June 30, 1997,
1996 and 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
June 30, June 30, June 30,
1997 1996 1995
--------------- -------------- --------------
<S> <C> <C> <C>
Interest paid $ 30,487 $ 21,619 $ 23,002
Income taxes paid $ 83,639 $ 61,897 $ 25,262
</TABLE>
See Notes 2 and 5 for additional information regarding non cash investing and
financing activities.
15. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In February 1997, FASB issued Statement of Financial Accounting Standards
No. 128 ("SFAS 128"), "Earnings per Share," which will require retroactive
adoption in the Company's fiscal quarter ending December 31, 1997. The new
standard simplifies the computation of earnings per share and requires the
presentation of basic and diluted earnings per share. In light of the present
capital structure, the impact of adopting SFAS 128 will not be significant.
In June 1997, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income," which will require adoption no later than the Company's
fiscal quarter ending September 30, 1998. This new statement defines
comprehensive income as "all changes in equity during a period, with the
exception of stock issuances and dividends." The new pronouncement establishes
standards for reporting and display of comprehensive income and its components
in the financial statements.
33
<PAGE> 34
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), " Disclosures about
Segments of an Enterprise and Related Information," which will require adoption
no later than fiscal 1999. SFAS 131 requires companies to define and report
financial and descriptive information about its operating segments. It also
establishes standards for related disclosure about products and services,
geographic areas, and major customers.
The Company is presently evaluating the applicability of SFAS 130 and 131
to its operations.
16. PENDING MERGERS
On May 27, 1997, the Company announced that it had entered into a
definitive merger agreement with MediQual Systems, Inc. ("MediQual"), pursuant
to which MediQual 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. Upon consummation of the merger, the Company
will record a merger related charge to reflect transaction and other costs
incurred as a result of the merger. The amount of this charge is not expected to
be significant. In connection with the merger, the Company estimates that it
will issue approximately 0.6 million Common Shares. The merger is expected to be
completed in the first half of fiscal 1998, subject to satisfaction of certain
conditions, including approval by shareholders of MediQual.
On August 23, 1997, the Company signed a definitive merger agreement with
Bergen Brunswig Corporation ("Bergen"), a distributor of pharmaceuticals and
medical-surgical supplies. Under the terms of the transaction, shareholders of
Bergen will receive a fixed exchange ratio of .775 of the Company' s Common
Shares in exchange for each common share of Bergen. The Company will issue
approximately 40 million Common Shares in the transaction and will also assume
approximately $386 million in long-term debt. The merger is expected to be
completed by the end of the third quarter of fiscal 1998, subject to certain
conditions, including approval by shareholders and receipt of certain
regulatory approvals. The transaction is expected to be accounted for as a
pooling-of-interests.
34
<PAGE> 35
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".
35
<PAGE> 36
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..................................... 14
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1997, 1996 and 1995.................................... 17
Consolidated Balance Sheets at June 30, 1997 and 1996............. 18
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1997, 1996 and 1995........................ 19
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 30, 1997, 1996 and 1995.................................... 20
Notes to Consolidated Financial Statements........................ 21
(a)(2) The following Supplemental Schedule is included in this report:
PAGE
----
Schedule II - Valuation and Qualifying Accounts................... 41
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 Amended and Restated Agreement and Plan of Merger dated as of July
7, 1997, among MediQual Systems, Inc., Hub Merger Corp., and
Registrant (1)
2.02 Agreement and Plan of Merger dated as of August 23, 1997, among the
Registrant, Bruin Merger Corp., and Bergen Brunswig Corporation (14)
3.01 Amended and Restated Articles of Incorporation of the Registrant, as
amended. (2)
3.02 Restated Code of Regulations of the Registrant, as amended. (3)
4.01 Specimen Certificate for the Registrant's Class A Common Shares.
4.02 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. (3)
4.03 Indenture between the Registrant and Bank One, Columbus, NA, Trustee
dated as of April 18, 1997 (as of the date hereof, no securities
have been issued pursuant to the Indenture). (4)
36
<PAGE> 37
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.
10.01 Stock Incentive Plan of the Registrant, as amended. (10)*
10.02 Directors' Stock Option Plan of the Registrant, as amended and
restated. (10)
10.03 Equity Incentive Plan of the Registrant (5)*
10.04 1990 Stock Option Plan of Medicine Shoppe International, Inc. (12)*
10.05 Employee Incentive Stock Option Plan of Medicine Shoppe
International, Inc. (12)*
10.06 Executive Choice Plan of Medicine Shoppe International, Inc. (12)*
10.07 PCI Services, Inc. Stock Option Plan, as amended (11)*
10.08 Employment Agreement dated August 26, 1995, among Medicine Shoppe,
David A. Abrahamson and the Registrant. (13)*
10.09 Employment Agreement dated July 23, 1996, among PCI Services, Inc.,
Daniel F. Gerner, and the Registrant. (15)*
10.10 Form of Indemnification Agreement between the Registrant and
individual directors. (6)
10.11 Form of Indemnification Agreement between the Registrant and
individual officers. (7)*
10.12 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. (10)*
10.13 Lease for portions of the Registrant's Columbus Investment Property
dated July 7, 1958, as amended. (8)
10.14 Cardinal Health, Inc. Incentive Deferred Compensation Plan, Amended
and Restated Effective November 13, 1995. (13)*
10.15 Cardinal Health, Inc. Performance-Based Incentive Compensation
Plan. (16)*
10.16 Shareholders Agreement dated July 13, 1984, as amended. (9)
10.17 Master Agreement and related documents, dated as of July 16, 1996
among the Registrant and/or its subsidiaries, SunTrust Banks, Inc.,
PNC Leasing Corp. and SunTrust Bank, Atlanta. (13)
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, March 10, 1994, and
June 23, 1997. (13, except for Rider 5, which is included in this
Annual Report on Form 10-K).
10.19 Participation Agreement and related documents, dated as of June 23,
1997, among the Registrant and certain of its subsidiaries, Bank of
Montreal and BMO Leasing (U.S.), Inc.
10.20 Pharmaceutical Services Agreement, dated as of August 1, 1996,
between Kmart Coporation and Cardinal Health. (15).
11.01 Statement concerning computation of per share earnings.
21.01 List of subsidiaries of the Registrant.
37
<PAGE> 38
23.01 Consent of Deloitte & Touche LLP.
23.02 Consent of Ernst & Young LLP.
23.03 Consent of Price Waterhouse LLP.
27.01 Financial Data Table
99.01 Statement Regarding Forward-Looking Information.
- ------------------
(1) Filed as an annex to the Registrant's Registration Statement on Form
S-4 (No. 333-30889) and incorporated herein by reference.
(2) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1996 (No. 0-12591) and
incorporated herein by reference.
(3) 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.
(4) Included as an exhibit to the Registrant's Current Report on Form
8-K filed with the SEC on April 21, 1997, and incorporated herein by
reference.
(5) 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.
(6) 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.
(7) 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.
(8) Included as an exhibit to the Registrant's Registration Statement on
Form S-1 (No. 2-84444) 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 31, 1993 (No. 0-12592) and
incorporated herein by reference.
(10) 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.
(11) Included as an exhibit to the Registrant's Post-Effective Amendment
No. 1 on Form S-8 to Form S-4 Registration Statement (No.
333-11803-01) and incorporated herein by reference.
(12) 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) and incorporated herein by reference.
(13) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1996 (No. 0-12591) and
incorporated herein by reference.
(14) Included as an exhibit to the Registrant's current report on Form
8-K/A filed with the SEC on August 27, 1997, and incorporated herein
by reference.
(15) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996 (No. 0-12591) and
incorporated herein by reference.
38
<PAGE> 39
(16) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 (No. 0-12591) and
incorporated herein by reference.
* Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K:
On April 21, 1997, the Company filed a Report on Form 8-K under Item 7
which filed as an exhibit an Indenture dated as of April 18, 1997, between the
Company and Bank One Columbus, NA, Trustee.
On June 10, 1997, the Company filed a Report on Form 8-K under Item 5
announcing that it was filing under Item 7 restated consolidated financial
statements of the Company giving effect to the merger with Owen.
On August 26 and 27, 1997, the Company filed a report on Form 8-K and
8-K/A, respectively, under Items 5 and 7 which reported that it had signed an
Agreement and Plan of Merger, dated as of August 23, 1997, among the Company,
Bruin Merger Corporation and Bergen Brunswig Corporation.
39
<PAGE> 40
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.
September 29, 1997 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 September 29, 1997
- --------------------------------------- Director (principal executive officer)
Robert D. Walter
/s/ DAVID BEARMAN Executive Vice President and Chief Financial September 29, 1997
- --------------------------------------- Officer (principal financial officer)
David Bearman
/s/ RICHARD J. MILLER Vice President, Controller and Principal September 29, 1997
- --------------------------------------- Accounting Officer
Richard J. Miller
/s/ JOHN C. KANE President, Chief Operating Officer September 29, 1997
- --------------------------------------- and Director
John C. Kane
/s/ JOHN F. FINN Director September 29, 1997
- ---------------------------------------
John F. Finn
/s/ ROBERT L. GERBIG Director September 29, 1997
- ---------------------------------------
Robert L. Gerbig
/s/ JOHN F. HAVENS Director September 29, 1997
- ---------------------------------------
John F. Havens
/s/ REGINA E. HERZLINGER Director September 29, 1997
- ---------------------------------------
Regina E. Herzlinger
/s/ J. MICHAEL LOSH Director September 29, 1997
- ---------------------------------------
J. Michael Losh
/s/ GEORGE R. MANSER Director September 29, 1997
- ---------------------------------------
George R. Manser
/s/ JOHN B. McCOY Director September 29, 1997
- ---------------------------------------
John B. McCoy
/s/ JERRY E. ROBERTSON Director September 29, 1997
- ---------------------------------------
Jerry E. Robertson
/s/ L. JACK VAN FOSSEN Director September 29, 1997
- ---------------------------------------
L. Jack Van Fossen
/s/ MELBURN G. WHITMIRE Director September 29, 1997
- ---------------------------------------
Melburn G. Whitmire
</TABLE>
40
<PAGE> 41
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 1997:
Accounts receivable $ 36,176 $ 8,073 $ 1,038 $ (10,335) $ 34,952
Finance notes receivable 9,081 (902) 8,179
Net investment in sales-type leases 3,226 (152) 3,074
--------------- ---------------- --------------- ---------------- ---------------
$ 48,483 $ 8,073 $ 1,038 $ (11,389) $ 46,205
=============== ================ =============== ================ ===============
Fiscal Year 1996:
Accounts receivable $ 34,395 $ 9,135 $ 1,452 $ (8,806) $ 36,176
Finance notes receivable 9,274 650 (843) 9,081
Net investment in sales-type leases 2,900 326 3,226
--------------- ---------------- --------------- ---------------- ---------------
$ 46,569 $ 10,111 $ 1,452 $ (9,649) $ 48,483
=============== ================ =============== ================ ===============
Fiscal Year 1995:
Accounts receivable $ 27,078 $ 12,740 $ 2,025 $ (7,448) $ 34,395
Finance notes receivable 8,661 1,766 (1,153) 9,274
Net investment in sales-type leases 2,747 153 2,900
--------------- ---------------- --------------- ---------------- ---------------
$ 38,486 $ 14,659 $ 2,025 $ (8,601) $ 46,569
=============== ================ =============== ================ ===============
</TABLE>
1 During fiscal 1997, 1996 and 1995 recoveries of amounts provided for or
written off in prior years were $410,000, $332,000 and $197,000,
respectively, and increases from acquisitions were $628,000, $1,120,000
and $1,828,000, respectively.
2 Write-off of uncollectible accounts.
41
<PAGE> 1
Exhibit 4.01
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMMON STOCK
[CARDINAL LOGO]
NUMBER INCORPORATED UNDER THE LAWS OF THE SHARES
A STATE OF OHIO
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 14149Y 10 8
NEW YORK, NY AND RIDGEFIELD PARK, NJ
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable Common Shares, without par value, of
Cardinal Health, Inc., transferable only on the books of the corporation by the holder of this
certificate in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
Dated: [STATUE OF LIBERTY LOGO]
/s/ Robert D. Walter
CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT /s/ George H. Bennett, Jr.
AND REGISTRAR SECRETARY
BY AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
Cardinal Health, Inc. will mail to each shareholder without charge within five
days of receipt of written request therefor a copy of the express terms, if any,
of the shares represented by this certificate and of the other class or classes
and series of shares, if any, which the corporation is authorized to issue.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________Custodian ________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For value received, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C>
(PLEASE PRINT OR TYPE ASSIGNEE'S NAME AND ADDRESS, INCLUDING ZIP CODE)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
of the shares represented by this certificate, and hereby irrevocably constitute(s) and appoint(s)
- ----------------------------------------------------------------------------------------------------
attorney, with full power of substitution, to transfer the shares on the books of the corporation.
Dated _______________________________________ __________________________________________
x
------------------------------------------
(Signature)
AFFIX MEDALLION SIGNATURE x
GUARANTEE IMPRINT BELOW ------------------------------------------
(Signature)
------------------------------------------
ABOVE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION SUCH AS A
SECURITIES BROKER/DEALER, COMMERCIAL BANK &
TRUST COMPANY, SAVINGS AND LOAN ASSOCIATION
OR A CREDIT UNION PARTICIPATING IN A
MEDALLION PROGRAM APPROVED BY THE SECURITIES
TRANSFER ASSOCIATION, INC.
</TABLE>
<PAGE> 1
EXHIBIT 10.18
RIDER NO. 5
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 applicable terms and provisions of the
Agreement. Capitalized terms used and not defined herein shall have the meanings
set forth in the Agreement.
WHEREAS, PYXIS was merged into a wholly-owned subsidiary of Cardinal
Health, Inc. ("CARDINAL"), located at 5555 Glendon Court, Dublin, Ohio 43016
pursuant to an Agreement and Plan of Merger, dated February 7, 1996.
WHEREAS, PYXIS has requested that CARDINAL be made a party to the
Agreement.
WHEREAS, PYXIS and CARDINAL have requested that the Agreement be
modified, inter alia, to permit PYXIS to administer both the Owned Accounts and
the Serviced Accounts (as such terms are defined in Section I of Rider No. 3 to
the Agreement) upon PYXIS' attainment of certain performance standards with
respect to the administration of the Owned and Serviced Accounts and to ensure
that GE CAPITAL is afforded the opportunity to finance a specified number of
additional Rental Agreements from January 1, 1997 through March 10, 1999 (the
"Term").
WHEREAS, GE CAPITAL has agreed to modify the Agreement to accommodate
PYXIS' and CARDINAL's requests in the manner set forth below.
NOW THEREFORE, for the consideration set forth herein and in the
Agreement, GE CAPITAL, PYXIS and CARDINAL hereby agree as follows:
A. FINANCING COMMITMENT.
(1) PYXIS and CARDINAL hereby agree that PYXIS shall on a quarterly
basis during the Term offer financing rights to GE CAPITAL for the requisite
number of Rental Agreements, which meet the criteria established pursuant to
Sections (A3) through A(7) below, which shall provide GE CAPITAL with an annual
aggregate of Eighty Million Dollars ($80,000,000) in new fundings during 1997
and 1998 and an aggregate of Fifteen Million Five Hundred Thousand Dollars
($15,500,000) in new fundings during the period from January 1, 1999 through
March 10, 1999. Without limiting the generality of the foregoing, PYXIS shall
use its reasonable efforts to offer financing rights to GE CAPITAL for an
aggregate of Twenty Million Dollars ($20,000,000) in new fundings each calendar
quarter during 1997 and 1998 and an aggregate of Fifteen Million Five Hundred
Thousand Dollars ($15,500,000) in new fundings during the period from January 1,
1999 through March 10, 1999 (each quarterly portfolio of Rental Agreements
offered to GE CAPITAL for financing pursuant to this Section A(1) being
hereinafter referred to as a "Quarterly New Portfolio"). The aggregate dollar
amount of the new fundings described in the preceding two sentences shall be
calculated on the basis of the net present value of the remaining payments due
over the remaining term of such Rental Agreements discounted at the applicable
Standard Rate described in Section C below and shall exclude any accounts
currently on GE CAPITAL's books
-1-
<PAGE> 2
which are refinanced by GE CAPITAL. To the extent that any Rental Agreement
contained in and financed as a part of a Quarterly New Portfolio is subsequently
terminated as a result of an upgrading of Equipment or any other event which
PYXIS and the applicable Customer mutually agree upon, PYXIS, shall (a) pay GE
CAPITAL all accrued payments which are due and unpaid under such terminated
Rental Agreement and (b) offer GE CAPITAL the right to finance another Rental
Agreement having (i) a credit rating classification equal to or better than the
credit rating classification of the terminated Rental Agreement as mutually
determined by PYXIS and GE CAPITAL as of the date of the termination of such
Rental Agreement, (ii) a funding amount equal to or greater than the net present
value of the remaining payments to be made under the terminated Rental Agreement
at the time of termination discounted to present value at the applicable
Standard Rate, (iii) a Standard Rate equal to the Standard Rate of the
terminated Rental Agreement, and (iv) a term equal to or greater than the
remaining term of the terminated Rental Agreement at the time of termination.
(2) The Rental Agreements to be financed by GE CAPITAL pursuant to
Section A(1) will typically have payment terms of forty-eight (48) and sixty
(60) months, although GE CAPITAL may consider other payment terms on a
transaction-by-transaction basis.
(3) PYXIS shall provide GE CAPITAL with all information available to
PYXIS and reasonably requested by GE CAPITAL to enable GE CAPITAL to verify that
PYXIS has correctly classified the related Customer in the credit rating
category of A, B, C or D described below.
(4) Prospective Customers shall include, without limitation, hospitals
having one hundred (100) or more beds and well-established alternate care
facilities. GE CAPITAL and PYXIS shall mutually establish credit rating
classifications of A, B, C and D for prospective Customers. PYXIS shall apply
such guidelines to the classification of each Customer. The credit rating
classifications shall be used to establish the quality of each Quarterly New
Portfolio and to establish the applicable Loss Pool Credit for each Quarterly
New Portfolio. Each Rental Agreement financed by GE CAPITAL pursuant to Section
A(1) (a "New Portfolio Rental Agreement") shall be given a numerical rating
based on its credit rating classification, with New Portfolio Rental Agreements
which are classified as "A" rated credits being given a 4, New Portfolio Rental
Agreements which are classified as "B" rated credits being given a 3, New
Portfolio Rental Agreements which are classified as "C" rated credits being
given a 2, and New Portfolio Rental Agreements which are classified as "D" rated
credits being given a 1.
(5) PYXIS shall provide the credit rating classifications to GE CAPITAL
at the same time as the applicable Rental Agreements are offered to GE CAPITAL
for financing, provided that GE CAPITAL shall receive all such credit rating
classifications at least twenty (20) business days prior to the financing of any
Quarterly New Portfolio by GE CAPITAL. GE CAPITAL shall then review the credit
rating classifications to independently determine its assessment of the credit
rating classification assigned to each Customer. In the event that GE CAPITAL
determines in its reasonable discretion that PYXIS has not correctly classified
a Customer's credit rating, GE CAPITAL shall notify PYXIS in writing within ten
(10) business days after its receipt of the credit rating classifications from
PYXIS. If PYXIS cannot demonstrate to GE CAPITAL's satisfaction that the credit
rating assigned to such Customer was in fact correct within five (5) business
days after PYXIS' receipt of GE CAPITAL's notification, PYXIS shall reclassify
such Customer based upon GE CAPITAL's assessment and shall notify GE CAPITAL in
writing of the reclassification.
(6) PYXIS shall be required to provide a mix of credit rating
classifications in each Quarterly New Portfolio which results in each Quarterly
New Portfolio having a minimum weighted average numerical score (based on the
aggregate dollar amounts of the New Portfolio Rental Agreements contained in
such Quarterly New Portfolio) of 2.9. The weighted average numerical score of
each Quarterly New Portfolio shall be determined by performing the following
calculation for each New Portfolio Rental Agreement contained therein and adding
the resulting values together: divide the dollar amount of each New Portfolio
Rental Agreement by the aggregate dollar amount of the applicable Quarterly New
Portfolio and multiply the resulting value by the numerical rating of one (1)
through (4)
-2-
<PAGE> 3
assigned to such New Portfolio Rental Agreement. GE CAPITAL shall notify PYXIS
in writing within ten (10) business days after its receipt of the credit rating
classifications from PYXIS of its determination of the weighted average
numerical score of the applicable Quarterly New Portfolio. If the weighted
average numerical score of such Quarterly New Portfolio as determined by GE
CAPITAL in its reasonable discretion is below the minimum requirement of 2.9,
PYXIS shall substitute New Portfolio Rental Agreements to bring the weighted
average numerical score of such Quarterly New Portfolio up to the minimum
requirement of 2.9 prior to the financing of such Quarterly New Portfolio.
(7) A Rental Agreement shall be considered eligible for financing by GE
CAPITAL pursuant to Section A(1) provided: (a) the classification of the
prospective Customer when taken together with the classification of the other
New Portfolio Rental Agreements satisfies the requirements regarding the minimum
weighted average numerical score of the Quarterly New Portfolio set forth in
Section A(6) above, (b) the Customer is not in bankruptcy or otherwise
insolvent, (c) an event which constitutes a default under such Rental Agreement
has not occurred other than (i) the Customer's failure to make up to the first
three (3) monthly rental payments due under such Rental Agreement arising solely
from the failure of PYXIS or GE CAPITAL to bill the Customer under such Rental
Agreement or (ii) an event of default which GE CAPITAL is willing to waive, (d)
there is no known legal action pending with respect to such Rental Agreement or
the related Customer which involves PYXIS or otherwise impacts the Customer's
ability to pay or perform its obligations under such Rental Agreement, (e) there
are no legally binding agreements between PYXIS and the Customer or other
restrictions that would prohibit such Rental Agreement from being financed by GE
CAPITAL or would otherwise limit or encumber GE CAPITAL's security interest in
the related Equipment or its rights to receive all payments thereunder, (f) the
Rental Agreement has not been written-off or deemed uncollectible by the parties
prior to its financing by GE CAPITAL, and (g) the net present value of the
remaining payments due under any Rental Agreement which is classified as an "A"
or "B" rated credit does not exceed the greater of (i) ten percent (10%) of the
net present value of the remaining payments due under all New Portfolio Rental
Agreements contained in the applicable Quarterly New Portfolio or (ii) Two
Million Dollars ($2,000,000) and the net present value of the remaining payments
due under any Rental Agreement which is classified as a "C" or "D" rated credit
does not exceed the greater of (i) two and one-half percent (2.5%) of the net
present value of the remaining payments due under all New Portfolio Rental
Agreements contained in the applicable Quarterly New Portfolio or (ii) Five
Hundred Thousand Dollars ($500,000).
B. NOTIFICATION OF ASSIGNMENT. The Final Document Package for each New
Portfolio Rental Agreement shall include the sole original copy of such New
Portfolio Rental Agreement and shall be held by PYXIS as agent for GE CAPITAL
until such time as GE CAPITAL has received the aggregate rental payments which
were offered to GE CAPITAL for financing with respect to such New Portfolio
Rental Agreement pursuant to Section A(1) or such New Portfolio Rental Agreement
is terminated pursuant to Section A(1). The sole original copy of such New
Portfolio Rental Agreement shall be stamped on the first page of text and on
each signature page with the caption: "All right and interest of Pyxis
Corporation in and to the payments to be made by the Customer hereunder with
respect to the Equipment marked with an asterisk have been assigned to Pyxis
Financial Services in consideration of Pyxis Financial Services providing
certain funding to Pyxis Corporation and Pyxis Corporation has granted Pyxis
Financial Services a security interest in such Equipment." At such time as PYXIS
takes over the servicing of a New Portfolio Rental Agreement, Pyxis Financial
Services and PYXIS shall jointly direct the applicable Customer to make all
future rental payments to PYXIS notwithstanding any previous notification of
assignment.
C. STANDARD RATES.
(1) The Standard Rates used to calculate the financing proceeds for all
New Portfolio Rental Agreements shall be comprised of the applicable Transaction
Rate and the Termination Fee Spread (each of which are hereinafter defined). GE
CAPITAL shall advise PYXIS on the first business day of each calendar month of
the current Standard Rates. The Standard Rates quoted to PYXIS on a monthly
basis
-3-
<PAGE> 4
shall extend from the fifth (5th) day of each calendar month through the fourth
(4th) day of the following calendar month, except as otherwise provided in the
following sentence. The Standard Rate for a New Portfolio Rental Agreement which
replaces a terminated New Portfolio Rental Agreement pursuant to Section A(1)
shall be the same as the Standard Rate of the terminated New Portfolio Rental
Agreement.
(2) The Standard Rates shall be determined in the following manner. GE
CAPITAL shall on a monthly basis calculate the Transaction Rates which shall 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. The Transaction Rate for a forty-eight (48)
month New Portfolio Rental Agreement shall be equal to a financing spread of
fifty (50) basis points over the following blended rate: (a) twenty-two percent
(22%) of a one year Libor, plus (b) twenty-three percent (23%) of a two year
Treasury, plus (c) twenty-six percent (26%) of a three year Treasury, plus (d)
twenty-nine percent (29%) of a four year Treasury. The Transaction Rate for a
sixty (60) month New Portfolio Rental Agreement shall be equal to a financing
spread of fifty (50) basis points over the following blended rate: (a) sixteen
percent (16%) of a one year Libor, plus (b) eighteen percent (18%) of a two year
Treasury, plus (c) nineteen percent (19%) of a three year Treasury, plus (d)
twenty-two percent (22%) of a four year Treasury, plus (e) twenty-five percent
(25%) of a five year Treasury. A termination fee spread of two hundred forty
(240) basis points (the "Termination Fee Spread") shall then be added to the
applicable Transaction Rate for the purpose of calculating the Standard Rate.
(3) GE CAPITAL shall have no obligation to calculate the financing
proceeds of any New Portfolio Rental Agreement at a rate other than the then
current Standard Rate as described above.
D. FUNDING. GE CAPITAL will fund PYXIS on a quarterly basis for all New
Portfolio Rental Agreements financed by GE CAPITAL during such calendar quarter
via wire transfer to an account designated by PYXIS. Such funding will take
place on the earlier of the third business day after GE CAPITAL's receipt of a
written request by PYXIS or the last business day of such calendar quarter.
E. NEW PORTFOLIO LOSS POOL ACCOUNT AND REMARKETING.
(1) Commencing on the effective date of this Rider, GE CAPITAL and
PYXIS shall, for accounting purposes only, establish a new Loss Pool Account
(the "Quarterly New Portfolio Loss Pool Account") for all New Portfolio Rental
Agreements in each Quarterly New Portfolio.
(2) The establishment of each Quarterly New Portfolio Loss Pool Account
shall not impact the annual Loss Pool Accounts established pursuant to Rider No.
2 to the Agreement which shall remain in full force and effect and shall govern
the disposition of all Rental Agreements subject thereto.
(3) Simultaneously with the payment of the financing proceeds for any
Quarterly New Portfolio, GE CAPITAL shall record in the applicable Quarterly New
Portfolio Loss Pool Account an amount equal to the applicable loss pool credit
(the "Quarterly New Portfolio Loss Pool Credit"), which shall be determined in
accordance with Section E(4) below. GE CAPITAL shall on a quarterly basis give
PYXIS written notice of adjustments to each Quarterly New Portfolio Loss Pool
Account and each Quarterly New Portfolio Loss Pool Balance.
(4) Each Quarterly New Portfolio Loss Pool Credit shall be determined
by calculating the weighted average numerical score of the applicable Quarterly
New Portfolio and multiplying the applicable percentage set forth on Exhibit A
attached hereto for such weighted average numerical score by the dollar amount
of the New Portfolio Rental Agreements (a) funded by GE CAPITAL during the
applicable calendar quarter and (b) substituted for terminated New Portfolio
Rental Agreements pursuant to Section A(1) during the applicable calendar
quarter. GE CAPITAL shall notify PYXIS in writing of each Quarterly New
Portfolio Loss Pool Credit prior to the financing of the applicable Quarterly
New Portfolio.
-4-
<PAGE> 5
(5) Upon the occurrence of a Rental Agreement Default under any New
Portfolio Rental Agreement or any Owned Account administered by GE CAPITAL which
arises directly from the applicable 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 its stock or asset ownership (a
"Credit Related Default"), GE CAPITAL shall give PYXIS written notice thereof
and of the applicable Rental Agreement Default Amount. Upon the occurrence of a
Credit Related Default under any New Portfolio Rental Agreement or any Owned
Account administered by PYXIS, PYXIS shall give GE CAPITAL written notice
thereof and of the applicable Rental Agreement Default Amount. Within ten (10)
days of receipt of such notice, PYXIS shall (i) pay GE CAPITAL such Rental
Agreement Default Amount, but not more than the applicable Quarterly New
Portfolio Loss Pool Balance or applicable Loss Pool Balance and (ii) give GE
CAPITAL written notice of the Estimated Remarketing Proceeds of the Equipment
governed by such New Portfolio Rental Agreement or Owned Account, provided that
the amount of the Estimated Remarketing Proceeds may be established by GE
CAPITAL if written notice thereof is not provided by PYXIS in a timely manner.
(6) Upon receipt of the applicable Rental Agreement Default Amount (or
if the applicable Quarterly New Portfolio Loss Pool Balance or applicable Loss
Pool Balance is less than the applicable Rental Agreement Default Amount, upon
receipt of the applicable Quarterly New Portfolio Loss Pool Balance or
applicable Loss Pool Balance), GE CAPITAL shall (i) subtract an amount equal to
the applicable Rental Agreement Default Amount from the applicable Quarterly New
Portfolio Loss Pool Balance or applicable Loss Pool Balance (or if the
applicable Quarterly New Portfolio Loss Pool Balance or the applicable Loss Pool
Balance is less than such Rental Agreement Default Amount, shall reduce the
applicable Quarterly New Portfolio Loss Pool Balance or the applicable Loss Pool
Balance to zero) and (ii) add an amount equal to the Estimated Remarketing
Proceeds to the applicable Quarterly New Portfolio Loss Pool Balance or the
applicable Loss Pool Balance. PYXIS shall make the Equipment legally available
and proceed to remarket the Equipment in accordance with Section 12 of the
Agreement and the remarketing proceeds actually received by PYXIS shall be
distributed in accordance with Section 12 of the Agreement; provided that any
excess referred to in Section 12(b)(iii) of the Agreement shall be retained by
PYXIS. GE CAPITAL's reimbursement to PYXIS for out-of-pocket costs, including
sales commissions, incurred in connection with PYXIS' de-installation, removal,
appraisal, refurbishing, storage (including insurance during storage) and
disposition of the Equipment shall not exceed twenty percent (20%) of the
Estimated Remarketing Proceeds for each piece of Equipment without GE CAPITAL's
prior written approval. GE CAPITAL will adjust the applicable Quarterly New
Portfolio Loss Pool Balance or the applicable Loss Pool Balance if the
remarketing proceeds actually received by PYXIS are more than ten percent (10%)
higher or lower than the Estimated Remarketing Proceeds.
(7) In the event that the applicable Rental Agreement Default Amount is
greater than the sum of the applicable Quarterly New Portfolio Loss Pool Balance
or the applicable Loss Pool Balance and the remarketing proceeds related to such
New Portfolio Rental Agreement or Owned Account which are retained by GE CAPITAL
pursuant to Section 12 of the Agreement, GE CAPITAL shall be entitled to receive
any future collections in regard of such New Portfolio Rental Agreement or Owned
Account, up to an amount equal to GE CAPITAL's full recovery of the applicable
Rental Agreement Default Amount, and any remaining sums received with respect to
such New Portfolio Rental Agreement or Owned Account shall be retained by PYXIS.
(8) Upon the occurrence of a Rental Agreement Default under any New
Portfolio Rental Agreement or Owned Account administered by GE CAPITAL which
does not constitute a Credit Related Default, GE CAPITAL shall give PYXIS
written notice thereof and of the applicable Rental Agreement Default Amount.
Upon the occurrence of a Rental Agreement Default under any New Portfolio Rental
Agreement or Owned Account administered by PYXIS which does not constitute a
Credit Related Default, PYXIS shall give GE CAPITAL written notice thereof and
of the applicable Rental Agreement Default Amount. Within ten (10) days of
receipt of such notice, PYXIS, at its option, shall elect either to (i) pay to
GE CAPITAL the periodic payments described in Section I(3) for up to a total of
six (6) cure payments
-5-
<PAGE> 6
or (ii) pay GE CAPITAL the applicable Rental Agreement Default Amount. Any
payments made by PYXIS pursuant to this Section E(8) shall be made without
regard to, and shall not reduce or otherwise impact, the applicable Quarterly
New Portfolio Loss Pool Account or the applicable Loss Pool Account.
(9) Provided that GE CAPITAL has received from PYXIS the applicable
Rental Agreement Default Amount, GE CAPITAL shall transfer and assign all of its
rights under and interest in such New Portfolio Rental Agreement or Owned
Account and the Equipment governed thereby to PYXIS on an AS-IS WHERE-IS basis,
without recourse or warranty.
F. PYXIS ADMINISTRATION OF NEW PORTFOLIO RENTAL AGREEMENTS AND NEW
SERVICED ACCOUNTS.
(1) GE CAPITAL shall perform the account administration for all New
Portfolio Rental Agreements as well as all existing Owned Accounts, all existing
Serviced Accounts administered by GE CAPITAL as of April 1, 1997 (the "Existing
Serviced Accounts") and all new Serviced Accounts referred to GE CAPITAL by
PYXIS on or after April 1, 1997 (the "New Serviced Accounts"), in accordance
with the terms and conditions of Section I(i) of Rider No. 3 to the Agreement,
until the occurrence of the events specified in Sections F(2), F(3) , G(1) and
H(1) respectively. In consideration of PYXIS' agreement to make the payment
described in Section F(4), GE CAPITAL agrees not to charge the Service Rate
described in Section I(iii) of Rider No. 3 with respect to its administration of
the New Portfolio Rental Agreements. To the extent that GE CAPITAL has charged
or does charge the Service Rate described in Section I(iii) of Rider No. 3 with
respect to its administration of the New Portfolio Rental Agreements, GE CAPITAL
agrees to make an adjustment to the financing proceeds paid or payable to PYXIS
and to pay such adjusted amount within three (3) business days of receipt of
notice from PYXIS requesting such adjustment. In consideration of GE CAPITAL's
agreement to administer the New Serviced Accounts, until PYXIS is able to
commence servicing such accounts pursuant to this Section F, PYXIS agrees to pay
GE CAPITAL in arrears a prorata monthly portion of the total Service Rate
payment for each New Serviced Account which shall be calculated as follows. The
total Service Rate payment for each New Serviced Account shall be equal to the
net present value of the payments to be made by the applicable Customer under
such New Serviced Account discounted at the applicable Standard Rate, less the
net present value of the payments to be made by the applicable Customer under
such New Serviced Account discounted at the applicable Standard Rate less two
hundred and fifty (250) basis points. Commencing on the fifth business day of
May 1997 and continuing on the fifth business day of each month thereafter until
PYXIS has assumed the account administration of such New Serviced Accounts,
PYXIS shall pay a prorata monthly portion of the total Service Rate payment for
each New Serviced Account, with each prorata monthly payment representing (i)
one thirty-sixth of the total Service Rate payment for a New Serviced Account
having a term of thirty-six (36) months, (ii) one forty-eighth of the total
Service Rate payment for a New Serviced Account having a term of forty-eight
(48) months, and (iii) one sixtieth of the total Service Rate payment for a New
Serviced Account having a term of sixty (60) months. PYXIS's obligation to make
any further prorata monthly Service Rate payments shall cease on the date on
which PYXIS commences servicing such New Serviced Accounts. In the event PYXIS
commences servicing such New Serviced Accounts on a day other than the last day
of a month, the amount to be paid by PYXIS to GE CAPITAL shall be adjusted to an
amount equal to the prorata monthly portion of the total Service Rate payment
described above multiplied by a fraction the numerator of which shall be the
number of days that transpire in the month prior to PYXIS' commencement of
servicing such New Serviced Accounts and the denominator of which shall be the
number of days in such month.
(2) PYXIS shall develop sufficient capabilities to service the New
Portfolio Rental Agreements in accordance with servicing standards to be
mutually developed by PYXIS and GE CAPITAL; provided, however, it is understood
and agreed that such servicing standards shall be comparable to the current
standards used by GE CAPITAL in servicing the Owned Accounts and Existing
Serviced Accounts. Said servicing standards shall include, but not be limited
to, state-of-the-art information systems, customized invoicing capabilities,
asset management capabilities, risk management audit procedures and superior
customer service support. In connection therewith, PYXIS shall be required
-6-
<PAGE> 7
to effectively (i) credit review, approve or decline, classify by credit rating
category and communicate to GE CAPITAL the appropriate designations (and any
relevant related information) with respect to each Customer under a proposed New
Portfolio Rental Agreement, (ii) establish appropriate systems for account
administration, (iii) book each New Portfolio Rental Agreement, (iv) invoice and
perform collection activities for each New Portfolio Rental Agreement, (v)
process payments received under each New Portfolio Rental Agreement, (vi)
establish appropriate systems to track each Quarterly New Portfolio by Customer
and by Equipment, (vii) provide superior Customer service support, (viii)
provide the customized monthly reports requested by GE CAPITAL with respect to
each Quarterly New Portfolio described in greater detail in Exhibit B annexed
hereto, and (ix) provide overall account management. The measurements for
satisfactory performance of each of the aforementioned services shall be set
forth in Exhibit B annexed hereto.
(3) PYXIS has determined that it will have developed by July 1, 1997
sufficient capabilities to service the New Portfolio Rental Agreements and New
Serviced Accounts in accordance with Section F(2) and Exhibit B, and by
execution of this Agreement, PYXIS hereby notifies GE CAPITAL of its election to
commence servicing on July 1, 1997 the New Serviced Accounts and all New
Portfolio Rental Agreements financed by GE CAPITAL on and after July 1, 1997
(the "Post July 1 New Portfolio Rental Agreements").
(4) In consideration of GE CAPITAL's agreement not to charge a Service
Rate with respect to its administration of any New Portfolio Rental Agreement,
PYXIS hereby covenants and agrees to pay to GE CAPITAL the amount of One Million
Nine Hundred Seven Thousand Eight Hundred and Eighty Dollars ($1,907,880) (the
"Rate Differential Fee"). The Rate Differential Fee will be paid in installments
as provided in Exhibit C attached hereto.
(5) In the event that GE CAPITAL performs the account administration
for any Post July 1 New Portfolio Rental Agreement on or after July 1, 1997,
PYXIS shall also pay to GE CAPITAL an amount equal to Three Hundred Seventeen
Thousand Nine Hundred and Eighty Dollars ($317,980) for every full month in
which GE CAPITAL continues to service the Post July 1 New Portfolio Rental
Agreements. In the event PYXIS commences servicing the Post July 1 New Portfolio
Rental Agreements on a day other than the last day of a month, the amount to be
paid by PYXIS to GE CAPITAL shall be adjusted to an amount equal to $317,980
multiplied by a fraction the numerator of which shall be the number of days that
transpire in the month prior to PYXIS' commencement of servicing the Post July 1
New Portfolio Rental Agreements and the denominator which shall be the number of
days in such month. During 1997, one-half of each monthly payment of $317,980
(or a prorata portion thereof, if applicable) will be paid on the fifth business
day after the last day of the applicable month. The remaining one-half of each
monthly payment to be made by PYXIS during 1997 (the "Monthly Payment Pool")
will be paid during the period in which the account administration for the Post
July 1 New Portfolio Rental Agreements is being transitioned from GE CAPITAL to
PYXIS. Commencing on the fifth business day after July 31, 1997 and continuing
on the fifth business day after the last day of each month thereafter until
PYXIS has assumed the account administration of the Post July 1 New Portfolio
Rental Agreements, a portion of the Monthly Payment Pool will be paid to GE
CAPITAL in an amount determined by multiplying the total amount of the Monthly
Payment Pool by a fraction the numerator of which shall be the total number of
New Portfolio Rental Agreements (including the Post July 1 New Portfolio Rental
Agreements), Serviced Accounts and Owned Accounts being administered by PYXIS as
of the last day of the month preceding the payment and the denominator of which
shall be the total number of New Portfolio Rental Agreements (including the Post
July 1 New Portfolio Rental Agreements), Serviced Accounts and Owned Accounts
being administered by PYXIS as of the last day of the month preceding the
payment, plus the total number of remaining New Portfolio Rental Agreements
(including the Post July 1 New Portfolio Rental Agreements), Serviced Accounts
and Owned Accounts being administered by GE CAPITAL as of the last day of the
month preceding the payment, and then subtracting from the product of such
multiplication the aggregate amount of previous payments made to GE CAPITAL from
the Monthly Payment Pool. Any undisbursed portion of the Monthly Payment Pool
will be paid to GE CAPITAL no later than December 31, 1997, regardless of
whether or not PYXIS has commenced
-7-
<PAGE> 8
servicing the Post July 1 New Portfolio Rental Agreements by December 31, 1997.
In the event that PYXIS does not commence servicing the Post July 1 New
Portfolio Rental Agreements by December 31, 1997, PYXIS shall commence paying GE
CAPITAL a lump sum payment of Three Hundred Seventeen Thousand Nine Hundred and
Eighty Dollars ($317,980) for every full month thereafter in which GE CAPITAL
continues to service the Post July 1 New Portfolio Rental Agreements. Such
payments will be made on the fifth business day after the last day of the
applicable month. In the event PYXIS commences servicing the Post July 1 New
Portfolio Rental Agreements on a day other than the first day of the month, the
amount to be paid by PYXIS shall be prorated in the manner described in the
second sentence of this Section F(5).
G. PYXIS ADMINISTRATION OF EXISTING SERVICED ACCOUNTS.
(1) PYXIS has determined that it will have developed by July 25, 1997
sufficient capabilities to service the Existing Serviced Accounts in accordance
with Section F(2) and Exhibit B, and by execution of this Agreement, PYXIS
hereby notifies GE CAPITAL of its election to commence servicing all Existing
Serviced Accounts on and after July 25, 1997.
(2) Within fifteen (15) business days following the date on which PYXIS
commences servicing the Existing Serviced Accounts, GE CAPITAL shall remit to
PYXIS any unamortized Service Rate payments, calculated on the basis of a loan
amortization method, which were made by PYXIS pursuant to Sections I(ii) and
I(iii) of Rider No. 3 with respect to the Existing Serviced Accounts.
H. PYXIS ADMINISTRATION OF ALL OTHER OWNED ACCOUNTS.
(1) Provided that PYXIS has commenced servicing the Post July 1 New
Portfolio Rental Agreements and the Serviced Accounts in accordance with
Sections F(2), G(1) and Exhibit B, PYXIS shall be entitled to deliver a ninety
(90) day written notice to GE CAPITAL of its election to commence servicing all
additional Owned Accounts and New Portfolio Rental Agreements after the
effective date of such written notice.
I. TRANSITION OF ACCOUNT ADMINISTRATION.
(1) In order to effect a smooth transition in account administration
from GE CAPITAL to PYXIS, the parties agree to comply with the delivery and
response time periods set forth in the Conversion Plan (identified and defined
in Exhibit D attached hereto). It is understood and agreed that the ability of
PYXIS to complete the transition is contingent upon the timely performance of GE
CAPITAL in accordance with the Conversion Plan and any delay by GE CAPITAL in
providing the information to PYXIS in accordance with the Conversion Plan may
result in corresponding delays in the complete payment of (i) the Conversion
Support Pool (identified and defined in Exhibit C attached hereto) and (ii) all
amounts, if any, owed by PYXIS to GE CAPITAL pursuant to Section F(5) of this
Rider No. 5. Accordingly, if it is determined by the Management Committee
pursuant to Section G(vii) of Rider No. 3 that GE CAPITAL failed to timely
perform any of its responsibilities or to provide any information to PYXIS which
is required under the Conversion Plan for reasons other than PYXIS's failure to
timely perform its responsibilities or to provide information to GE CAPITAL
which is required under the Conversion Plan, then PYXIS' obligation to remit the
Conversion Support Pool payments or the monthly payments described in Section
F(5) of this Agreement shall be stayed until such time as GE CAPITAL furnishes
the service or information required under the Conversion Plan. If it is
determined by the Management Committee pursuant to Section G(vii) of Rider No. 3
that GE CAPITAL's inability to perform any of its responsibilities or to provide
any information to PYXIS which is required under the Conversion Plan resulted
from PYXIS's failure to timely perform its responsibilities or to provide
information which is required under the Conversion Plan, then the preceding
sentence shall not apply and payments shall be made by PYXIS to GE CAPITAL in
accordance with the terms of Exhibit C and Section F(5). In addition, the
parties agree, in such event, to work diligently to correct any basis for delay
in the performance of the Conversion Plan. GE CAPITAL shall dedicate sufficient
personnel to assist
-8-
<PAGE> 9
with the transition in account administration and shall provide monthly updates
of the service history of each account scheduled to be transferred until the
transition of such accounts. The Relationship Managers appointed pursuant to
Section F of Rider No. 3 to the Agreement shall be responsible for managing the
smooth transition in account administration from GE CAPITAL to PYXIS.
(2) In providing account administration services for the Owned Accounts
and the New Portfolio Rental Agreements, PYXIS shall perform in a
non-discriminatory manner, utilizing the same state of the art practices and
procedures as are used in administering its own portfolio of accounts. Without
limiting the generality of the foregoing, PYXIS' practices and procedures shall
not deviate from the servicing standards described in Section F(2) and Exhibit
B.
(3) In connection with providing account administration services for
the Owned Accounts and the New Portfolio Rental Agreements, PYXIS will remit to
the appropriate taxing authority all sales, use or property taxes which may
apply to the related rental of the Equipment and which are assessed or imposed
on or after the date PYXIS assumes responsibility for such account
administration, and will, upon request, provide GE CAPITAL in connection with
the funding or administration of such Owned Accounts and New Portfolio Rental
Agreements with proof of such payment as promptly as possible. PYXIS agrees to
release GE CAPITAL from tax administration liability for all sales or use taxes
which may apply to the related rental of the Equipment and which are assessed or
imposed on or after the date PYXIS assumes responsibility for such account
administration. PYXIS hereby agrees to indemnify GE CAPITAL against all losses,
claims or liabilities (including interest and penalties) which result from the
failure on PYXIS' part on or after the date PYXIS assumes the account
administration services for such Owned Accounts and New Portfolio Rental
Agreements to timely remit such taxes to the appropriate taxing authority on or
after the date PYXIS assumes account administration service for the Owned
Accounts and the New Portfolio Rental Agreements. GE CAPITAL will, upon request,
provide proof of timely remittance of all such sales or use taxes which apply to
the related rental of the Equipment which were due for the period prior to the
assumption of account administration by PYXIS.
(4) In consideration of GE CAPITAL's agreement to allow PYXIS to
administer the Owned Accounts and the New Portfolio Rental Agreements, PYXIS
agrees to remit to GE CAPITAL, when and as due, all monthly payments due under
any Owned Accounts being administered by PYXIS and any New Portfolio Rental
Agreements being administered by PYXIS (other than payments related to service
agreements GE CAPITAL did not finance) WHETHER OR NOT ACTUALLY COLLECTED BY
PYXIS, unless the failure to collect such payments results directly from a
Credit Related Default. If a Customer's failure to make a monthly payment under
an Owned Account or a New Portfolio Rental Agreement results from an agreement
between PYXIS and such Customer that such payment may be deferred until the
occurrence of a particular event (as described in Section 3(c) of Rider No. 4 to
the Agreement), then the related payments made by PYXIS pursuant to this Section
I(4) shall be deemed to be cure payments for purposes of Section 3(c) of Rider
No. 4 to the Agreement and shall be subject to the terms and conditions thereof.
(5) Notwithstanding anything herein to the contrary, if at the time
PYXIS commences servicing the Post July 1 New Portfolio Rental Agreements and
New Serviced Accounts, any Customer under the Post July 1 New Portfolio Rental
Agreements or New Serviced Accounts is also a Customer under any other New
Portfolio Rental Agreement, any Existing Serviced Account or any Owned Account,
then PYXIS, at its option, shall also have the right to commence servicing the
New Portfolio Rental Agreement, Existing Serviced Account and/or Owned Account
of such Customer at the same time as it commences servicing the Post July 1 New
Portfolio Rental Agreements or New Serviced Accounts of such Customer. Likewise,
if at the time PYXIS commences servicing the Existing Serviced Accounts, any
Customer under the Existing Serviced Accounts is also a Customer under any New
Portfolio Rental Agreement or any Owned Account, then PYXIS, at its option,
shall also have the right to commence servicing the New Portfolio Rental
Agreement or Owned Account of such Customer at the same time as it commences
servicing the Existing Serviced Accounts of such Customer. In consideration of
GE CAPITAL's agreement to allow PYXIS to begin servicing any additional New
Portfolio Rental Agreements or Owned Accounts at the same time as it commences
servicing the Post July 1 New Portfolio Rental
-9-
<PAGE> 10
Agreements, the New Serviced Accounts and/or the Existing Serviced Accounts of
the same Customer, PYXIS agrees to remit to GE CAPITAL, when and as due, all
monthly payments due under any such New Portfolio Rental Agreements or Owned
Accounts being administered by PYXIS (other than payments related to service
agreements GE CAPITAL did not finance) WHETHER OR NOT ACTUALLY COLLECTED BY
PYXIS, unless the failure to collect such payments results directly from a
Credit Related Default.
(6) GE CAPITAL shall use its best efforts to provide to PYXIS the
original copies of the Rental Agreements which comprise the Owned Accounts, the
New Portfolio Rental Agreements (including the Post July 1 New Portfolio Rental
Agreements), and the Serviced Accounts on or prior to the date PYXIS commences
administering each such account. The original copies of the Rental Agreements
which comprise each Owned Account and each New Portfolio Rental Agreement
(including each Post July 1 New Portfolio Rental Agreement) which GE CAPITAL
provides to PYXIS shall be stamped by GE CAPITAL on the first page of text and
on each signature page with the caption: "All right and interest of Pyxis
Corporation in and to the payments to be made by the Customer hereunder have
been assigned to Pyxis Financial Services in consideration of Pyxis Financial
Services providing certain funding to Pyxis Corporation and Pyxis Corporation
has granted Pyxis Financial Services a security interest in such Equipment."
(J) AUDITS.
(1) During the Term GE CAPITAL shall have the right, on a quarterly
basis, upon forty-eight (48) hours advance written notice to PYXIS, to conduct
an audit of PYXIS' account administration processes. Any such audit shall
include a review of all Owned Accounts and New Portfolio Rental Agreements to
determine whether PYXIS has performed in compliance with the predetermined
standards described in Section F(2) and Exhibit B. Such audit shall include, but
not be limited to, the credit rating classifications and the numerical scoring
of the New Portfolio Rental Agreements collection activity, cash application,
defaults and delinquencies, and repossession and remarketing activity.
(2) GE CAPITAL shall conduct the audits in a professional manner, with
the objective, where possible, of causing the least amount of disruption to the
day-to-day operations of PYXIS. Any information reviewed by GE CAPITAL while
conducting such audits shall be kept confidential by GE CAPITAL and shall be
disclosed by GE CAPITAL to third parties only if required by applicable law.
(K) TERMINATION. In the event that either CARDINAL's credit rating
falls below BBB, as defined by Standard & Poors, or PYXIS' account
administration falls below the mutually agreed upon predetermined standards
described in Section F(2) and Exhibit B, and PYXIS fails to correct any
deficiencies in its account administration within thirty (30) business days
following receipt of written notice from GE CAPITAL identifying such
deficiencies, GE CAPITAL shall have the right to take either of the following
actions. GE CAPITAL may, upon ten (10) business days written notice, assume the
administration of all Owned Accounts and New Portfolio Rental Agreements
(including the Post July 1 New Portfolio Rental Agreements). Should GE CAPITAL
elect this option, PYXIS shall remit to GE CAPITAL a service fee for each Post
July 1 New Portfolio Rental Agreement in an amount to be mutually agreed upon by
PYXIS and GE CAPITAL. GE CAPITAL may also elect, upon ten (10) business days
written notice, to terminate the Agreement. Should GE CAPITAL elect this option,
PYXIS shall remit to GE CAPITAL on the termination date a termination fee (the
"Termination Fee") equal to (a) the Aggregate Portfolio Net Book Value (as
hereinafter defined), plus (b) the net present value of the remainder of the
monthly payment amounts that would be due under the New Portfolio Rental
Agreements PYXIS is committed to provide to GE CAPITAL pursuant to Section A
discounted at a rate equal to the Transaction Rate for a sixty (60) month New
Portfolio Rental Agreement, less the net present value of the remainder of the
monthly payment amounts that would be due under the New Portfolio Rental
Agreements PYXIS is committed to provide to GE CAPITAL pursuant to Section A
discounted at a rate equal to the sum of (i) the Transaction Rate for a sixty
(60) month New Portfolio Rental Agreement and
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<PAGE> 11
(ii) two hundred and ninety (290) basis points. The Aggregate Portfolio Net Book
Value shall mean (i) the aggregate amount due and owing under all Owned Accounts
and all New Portfolio Rental Agreements financed by GE CAPITAL as of the
termination date, less payments made by PYXIS to GE CAPITAL pursuant to Sections
I(4) and I(5) hereof and Section 3(c) of Rider No. 4 to the Agreement, including
interest on the unpaid balance, and (ii) all remaining scheduled payments under
such Owned Accounts and New Portfolio Rental Agreements, discounted to present
value at the applicable Standard Rate. Upon receipt of the Termination Fee, GE
CAPITAL shall transfer to PYXIS, on an AS-IS WHERE-IS basis without recourse or
warranty, all of its rights under and interest in the Owned Accounts and the New
Portfolio Rental Agreements and the Equipment subject thereto.
L. TRADEMARKS.
(1) During any period in which GE CAPITAL performs account
administration for any Owned Accounts, New Portfolio Rental Agreements or
Serviced Accounts, PYXIS shall permit GE CAPITAL to use certain trademarks of
PYXIS and the assumed business or trade name "PYXIS Financial Services" in
connection with such account administration. Any use of such trademarks or of
PYXIS' name in connection with such account administration shall be subject to
PYXIS' policy for sharing intellectual property rights. GE CAPITAL acknowledges
the ownership of such trademarks in PYXIS and the value of the goodwill
associated therewith and agrees that it will do nothing inconsistent with such
ownership. GE CAPITAL acknowledges PYXIS's right to dictate the nature and
quality of GE CAPITAL's use of such trademarks and agrees to comply with any
instructions received from PYXIS with respect to the use and application of such
trademarks.
(2) During the period in which GE CAPITAL continues to administer any
Owned Account, New Portfolio Rental Agreement or Serviced Account, PYXIS shall
not grant any other party any rights to register under the assumed business name
"PYXIS Financial Services". Upon the expiration of the last Owned Account, New
Portfolio Rental Agreement or Serviced Account which is administered by GE
CAPITAL, GE CAPITAL shall terminate its registration and use of the assumed
business name PYXIS Financial Services. During the period in which both PYXIS
and GE CAPITAL may be administering Rental Agreements under the name "PYXIS
Financial Services", each party agrees that it shall not take any action which
might jeopardize the other party's good standing or ability to administer Rental
Agreements under said name.
M. EXCLUSIVITY.
(1) In the event that prior to the expiration of the Term, PYXIS shall
elect to outsource the account administration of any Serviced Accounts, PYXIS
shall notify GE CAPITAL of such event and shall offer GE CAPITAL the right of
first refusal to administer the Serviced Accounts for which PYXIS proposes to
outsource the account administration
(2) Prior to the expiration of the Term, in the event that in any given
calendar quarter the product resulting from the multiplication of (i) the
aggregate dollar amount of the Rental Agreements PYXIS elects to finance with a
third party having a term which is greater than thirty-six (36) months entered
into by PYXIS during such calendar quarter by (ii) .5 exceeds $20,000,000 (the
"Excess Amount"), then GE CAPITAL shall have the right of first refusal to
finance a portion of such Rental Agreements totaling the Excess Amount.
(3) In the event that GE CAPITAL does not notify PYXIS in writing of
its decision to administer any such Serviced Accounts, as described in Section
M(1) above, or to finance any such Rental Agreements, as described in Section
M(2) above, within fifteen (15) business days of receipt of PYXIS' offer or if
GE CAPITAL does not offer PYXIS equivalent pricing, terms and conditions as
PYXIS has been quoted in writing by a third party (with a copy of such written
quote to be provided to, and subject to verification by, GE CAPITAL), PYXIS may
outsource the administration of such Serviced Accounts, as
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<PAGE> 12
described in Section M(1) above, or finance such Rental Agreements, as described
in Section M(2) above, with a third party.
N. PARTIES TO THIS AGREEMENT. PYXIS, CARDINAL and GE CAPITAL agree that
the obligations of PYXIS described in the Agreement are joint and several
obligations of PYXIS and CARDINAL. In the event that PYXIS fails to perform any
of its obligations under the Agreement, GE CAPITAL may demand performance by
CARDINAL who waives notice of default by PYXIS and any requirement that GE
CAPITAL be required to first proceed against PYXIS or exhaust any collateral or
security of PYXIS before requiring CARDINAL to perform any of the obligations of
PYXIS under the Agreement.
O. NO FURTHER AMENDMENTS. 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 No. 5 to be
executed by their duly authorized representatives as of the dates set forth
below.
PYXIS CORPORATION GENERAL ELECTRIC CAPITAL CORPORATION
By: By:
---------------------------- ------------------------------------
Title: Title:
------------------------- ---------------------------------
Date: Date:
-------------------------- ----------------------------------
CARDINAL HEALTH, INC.
By:
----------------------------
Title:
-------------------------
Date:
--------------------------
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<PAGE> 13
EXHIBIT A
Averaging Method: A=4; B=3; C=2; D=1
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------
Quarterly New Portfolio Weighted Average Numerical
Score Greater than or Equal to Loss Pool Credit
- ------------------------------------------------------ -----------------------------------------------------
<S> <C>
3.4 2.5%
- ------------------------------------------------------ -----------------------------------------------------
3.3 5.0%
- ------------------------------------------------------ -----------------------------------------------------
3.2 7.5%
- ------------------------------------------------------ -----------------------------------------------------
3.1 10.0%
- ------------------------------------------------------ -----------------------------------------------------
3.0 12.5%
- ------------------------------------------------------ -----------------------------------------------------
2.9* 15.0%
- ------------------------------------------------------ -----------------------------------------------------
<FN>
*Minimum
</TABLE>
Credit Criteria
Credit Ratings of A-D Will Be Assigned to PYXIS Customers Based on Ratings
Guidelines and Credit Criteria Mutually Established by GE CAPITAL and PYXIS
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<PAGE> 14
EXHIBIT B
Invoicing
- ---------
- - PYXIS shall invoice and perform collections activities for each payment
obligation as it becomes due under the applicable Owned Account and New
Portfolio Rental Agreement.
- - Each Owned Account and New Portfolio Rental Agreement will be invoiced no
later than thirty (30) days prior to the due date of any financed payment
obligation.
- - PYXIS has the option to send late notice invoices via regular mail, fifteen
(15) days after the due date of the respective payment obligation for any
Owned Account or New Portfolio Rental Agreement.
- - PYXIS has the option to send delinquent notices via regular mail if a
payment obligation for any Owned Account or New Portfolio Rental Agreement
is thirty (30) days past due.
- - PYXIS is required to send default notices via certified mail for any Owned
Account or New Portfolio Rental Agreement it chooses to default.
- - PYXIS is required to send copies of all default notices to GE CAPITAL for
any Owned Account or New Portfolio Rental Agreement.
Collection
- ----------
- - PYXIS will use reasonable efforts to make collection calls in intervals of
ten (10) days for a payment obligation under any Owned Account or New
Portfolio Rental Agreement that is more than thirty (30) days past its
scheduled due date.
- - PYXIS will document each collection call for any Owned Account or New
Portfolio Rental Agreement and classify it as either administrative or
collection issue.
- - Collection calls may be made on a more frequent basis than referenced above
with respect to any payment obligation for any Owned Account or New
Portfolio Rental Agreement that is more than forty-five (45) days past its
scheduled due date to ensure that promises for payment are adhered to.
Processing and Remittance
- -------------------------
- - Payments received by PYXIS with respect to each payment obligation under a
New Portfolio Rental Agreement or an Owned Account will be promptly
remitted to an electronic lockbox which shall be accessible only to PYXIS
or CARDINAL.
- - PYXIS will identify all payments deposited into such electronic lockbox for
an Owned Account or New Portfolio Rental Agreement by Customer name,
invoice number, account number, dollar amount received and other
identifying traits used by PYXIS.
Aging and Delinquency Reports
- -----------------------------
- - PYXIS will provide GE CAPITAL with periodic aging reports regarding all New
Portfolio Rental Agreements and all Owned Accounts on not less than a
monthly basis which shall describe past due payment obligations by Customer
name, amount past due, gross payments outstanding ,and the net book
balance. For each Quarterly New Portfolio, PYXIS will identify each
Customer with the date of the funding and/or an assigned New Quarterly
Portfolio number. For Owned Accounts, PYXIS will reference GE CAPITAL's
account schedule numbers and/or an assigned Loss Pool Account number.
- - PYXIS will provide GE CAPITAL with periodic delinquency reports regarding
all New Portfolio Rental Agreements and all Owned Accounts on not less than
a monthly basis which shall contain collection comments for those payment
obligations that are sixty one (61) days or more past due.
-14-
<PAGE> 15
Reports and Data Tapes Regarding New Portfolio Rental Agreements and Owned
- --------------------------------------------------------------------------
Accounts
- --------
- - On the fifth business day of each calendar quarter, PYXIS shall deliver to
GE CAPITAL a list of all New Portfolio Rental Agreements, identified by
schedule number, funded by GE CAPITAL during the preceding calendar quarter
or substituted for terminated New Portfolio Rental Agreements under Section
A(1), together with the make, model, and serial numbers of all Equipment
subject to such New Portfolio Rental Agreements in which GE CAPITAL has
been granted a security interest.
- - On the fifth business day of each calendar quarter, PYXIS shall provide GE
CAPITAL with an electronic data tape on servicing history for all Owned
Accounts and all New Portfolio Rental Agreements (including all Post July 1
New Portfolio Rental Agreements) which PYXIS has commenced administering.
Customer Service Support
- ------------------------
- - All invoices of payment obligations under New Portfolio Rental Agreements
and Owned Accounts will include a customer service telephone number which
shall be staffed by PYXIS personnel.
- - PYXIS personnel will be on hand during normal business hours for all
incoming Customer inquiries.
- - Customer inquiries to PYXIS which are made after PYXIS close of business
will be recorded electronically and return calls will be made within forty
eight (48) hours after receipt.
- - PYXIS will diligently pursue all Customer disputes and will use its
reasonable efforts to resolve all Customer disputes which might reasonably
be expected to impact any payment obligations under a New Portfolio Rental
Agreement or an Owned Account.
- - PYXIS will notify GE CAPITAL in writing of any change in Equipment location
under a New Portfolio Rental Agreement or an Owned Account within three (3)
business days of receipt by PYXIS in-house servicing personnel.
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<PAGE> 16
EXHIBIT C
---------
In order to insure the support of GE CAPITAL during the transition of
the account administration for the New Portfolio Rental Agreements and Serviced
Accounts, the Rate Differential Fee will be paid in installments upon the
achievement of certain milestones as follows:
1. $953,940 will be paid within five (5) business days following
receipt by PYXIS from GE CAPITAL of a copy of Rider No. 5 to
Vendor Program Agreement executed by GE CAPITAL, PYXIS and
Cardinal.
2. $453,940 (the "Conversion Support Pool") will be paid during the
period the account administration for the Serviced Accounts is
being transitioned from GE CAPITAL to PYXIS. Commencing on the
fifth business day after July 31, 1997 and continuing on the fifth
business day after the last day of each month thereafter until
PYXIS has assumed the account administration of all Serviced
Accounts, a portion of the Conversion Support Pool will be paid to
GE CAPITAL in an amount determined by multiplying $453,940 by a
fraction the numerator of which shall be the total number of New
Portfolio Rental Agreements (including without limitation Post
July 1 New Portfolio Rental Agreements), Serviced Accounts and
Owned Accounts being administered by PYXIS as of the last day of
the month preceding the payment and the denominator of which shall
be the total number of New Portfolio Rental Agreements (including
without limitation Post July 1 New Portfolio Rental Agreements),
Serviced Accounts and Owned Accounts being administered by PYXIS
as of the last day of the month preceding the payment, plus the
total number of remaining New Portfolio Rental Agreements
(including without limitation Post July 1 New Portfolio Rental
Agreements), Serviced Accounts and Owned Accounts being
administered by GE CAPITAL as of the last day of the month
preceding the payment, and then subtracting from the product of
such multiplication the aggregate amount of previous payments made
to GE CAPITAL from the Conversion Support Pool.
3. $500,000, plus any undisbursed portion of the Conversion Support
Pool, will be paid upon the earlier of the following: (a) within
five (5) business days after PYXIS has assumed the account
administration of all Serviced Accounts or (b) December 31, 1997;
provided, however, if PYXIS has not assumed the account
administration of all Serviced Accounts on account of delays by GE
CAPITAL in meeting the Conversion Plan set forth on Exhibit D
which were not caused by PYXIS's failure to timely perform its
responsibilities or to provide required information to GE CAPITAL
under the Conversion Plan, then the remaining amounts shall be
paid upon completion of 3(a) above.
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<PAGE> 17
EXHIBIT D
---------
Conversion Plan
---------------
A. DATE SPECIFIC:
1. April 15.
---------
A) GE CAPITAL to provide identifiable data by position and
description contained in the electronic file ("file structure
layouts") for data needed by PYXIS for the conversion and for any
data fields that are coded, GE CAPITAL will provide definitions of
the valid codes.
(i) GE CAPITAL to provide the above information on 15 preliminary
records for Serviced Accounts submitted by PYXIS.
(ii)PYXIS to remit to GE CAPITAL any additional fields requested
or additional information required within 30 days of receipt of
the information supplied by GE CAPITAL in (i) above.
B) GE CAPITAL to provide copies of the accounts receivable aging
report twice monthly (first and fifteenth of the month).
C) GE CAPITAL to provide copies of all invoices sent monthly through
conversion date.
2. May 15.
-------
A) GE CAPITAL to provide, in computer readable format ("electronic
format"), the complete account administration history of each
Serviced Account for the prior six months in the same format as
1(A) above.
B) PYXIS to identify all Serviced Accounts with remaining balances
that differ on the books of GE CAPITAL and PYXIS. GE CAPITAL and
PYXIS to mutually work together to reconcile the amounts.
3. June 15.
--------
A) GE CAPITAL and PYXIS to agree upon timetable in which the
remaining balances are in agreement between GE CAPITAL and PYXIS
for the Serviced Accounts.
4. July 15.
--------
A) PYXIS to adhere to servicing standard requirements pursuant to
Exhibit B in order to commence servicing Owned Accounts.
B) PYXIS to provide a sample of file structure layouts to GE CAPITAL
on servicing experience in the same electronic format as GE
CAPITAL has provided to PYXIS above. Upon PYXIS' commencement of
servicing such accounts, PYXIS will provide to GE CAPITAL such
file structure layouts on a quarterly basis or more frequently if
requested.
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<PAGE> 18
5. September 15.
-------------
A) GE CAPITAL and PYXIS to agree upon timetable in which the
remaining net investment balances are in agreement between GE
CAPITAL and PYXIS for the Owned Accounts.
6. October 15.
-----------
A) GE CAPITAL to provide in electronic format the complete service
history of each Owned Account for the prior six months.
B. GENERAL PLAN:
-------------
1. In the event that payments are made to GE CAPITAL after the conversion
date:
(i) GE CAPITAL to provide on a weekly basis, all cash payments
received on conversion accounts.
(ii) PYXIS to request from GE CAPITAL back-up information on an
exception basis to help in cash applications.
(iii) After conversion of the Owned Accounts, GE CAPITAL to forward all
payments to the PYXIS-owned lockbox.
2. PYXIS will not re-invoice for payments that have already been invoiced
by GE CAPITAL. PYXIS will be required to send notices to all converted
accounts notifying customers of the new mailing address and lockbox
locations.
3. After April 1, GE CAPITAL will provide an updated copy of its trend
report twice a month within five business days.
4. GE CAPITAL will respond within 24 hours (within a business week) to a
conversion request. GE CAPITAL and PYXIS will mutually agree upon a
plan of resolution to such request.
5. GE CAPITAL will provide on a monthly basis, unless PYXIS advises
otherwise, copies of all invoices sent out for the previous month. GE
CAPITAL will continue to provide these copies until PYXIS has commenced
servicing all accounts.
6. GE CAPITAL will forward all calls received by its toll-free number from
a converted account within 24 hours of receipt by GE CAPITAL.
7. All written correspondence on a converted account will be forwarded to
PYXIS within three business days of receipt by GE CAPITAL in Danbury.
8. Within ten business days of GE CAPITAL's monthly close, PYXIS will
provide GE CAPITAL with a list of accounts it wishes to convert for
that month. GE CAPITAL will provide PYXIS with its customer files
(including originals, if any) including all customer correspondence. GE
CAPITAL and PYXIS will convert those listed accounts on the weekend of
GE CAPITAL's monthly fiscal close.
9. GE CAPITAL will provide a data transfer of all data of each converted
account on the weekend of GE CAPITAL's respective monthly close.
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<PAGE> 1
EXHIBIT 10.19
================================================================================
MASTER LEASE AND OPEN END MORTGAGE
THIS DOCUMENT SECURES FUTURE ADVANCES
Dated as of June 23, 1997
among
CARDINAL HEALTH, INC. AND
CERTAIN SUBSIDIARIES OF CARDINAL HEALTH, INC.
that may from time to time become parties hereto,
as Lessees or Mortgagors
and
BMO LEASING (U.S.), INC.,
as Lessor.
================================================================================
This Master Lease and Open End Mortgage has been executed in several
counterparts. To the extent, if any, that this Master Lease and Open End
Mortgage constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no lien on this
Master Lease and Open End Mortgage may be created through the transfer or
possession of any counterpart other than the original counterpart containing the
receipt therefor executed by BANK OF MONTREAL, as the Administrative Agent for
the Lenders, on or following the signature page hereof.
This counterpart is not the original counterpart.
<PAGE> 2
MASTER LEASE AND OPEN END MORTGAGE
THIS DOCUMENT SECURES FUTURE ADVANCES
THIS MASTER LEASE AND OPEN END MORTGAGE (this "MASTER LEASE"), dated as
of June 23, 1997, among CARDINAL HEALTH, INC., an Ohio corporation (the
"COMPANY"), and certain subsidiaries of the Company as may from time to time
become party hereto, each having a principal office at 5555 Glendon Court,
Dublin, Ohio 43016, as Lessees (the "LESSEES") and as mortgagors; and BMO
LEASING (U.S.), INC., a Delaware corporation, as Lessor (in such capacity, the
"LESSOR").
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to a Participation Agreement dated as of the date
hereof (as amended, modified, restated or supplemented from time to time, the
"PARTICIPATION AGREEMENT"), among the Company, as the Guarantor and Construction
Agent, the Lessees, the Lessor, the various financial institutions (the
"LENDERS") as are or may from time to time become Lenders under the Loan
Agreement, and Bank of Montreal, as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT") for the Lenders, the Lenders and the Lessor have agreed
to finance the acquisition of each Property and the construction of Improvements
thereon;
WHEREAS, on each Acquisition Date, pursuant to a Funding Request
delivered by a Lessee, the Lessor will (a) purchase from one or more third
parties designated by such Lessee certain parcels of Land specified by such
Lessee, together with any Improvements thereon and (b) with regard to the
Headquarters Building, enter into a Ground Lease with the Company, which Ground
Lease shall convey to the Lessor a leasehold interest in the Land conveyed
thereby;
WHEREAS, the Construction Agent will construct certain Improvements on
the Properties subject to Lease Supplements to which such Lessee is a party,
which Improvements as constructed will be the property of the Lessor and will
become part of such Property;
WHEREAS, the Lessor desires to lease to each Lessee, and each Lessee
desires to lease from the Lessor, the Properties described on the Lease
Supplements to which such Lessee is a party; and
WHEREAS, each Property will be subject to the terms of this Master
Lease;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
I.1. DEFINITIONS; INTERPRETATION. Capitalized terms used but not
otherwise defined in this Master Lease have the respective meanings specified in
APPENDIX A to this Master Lease; and the rules of
<PAGE> 3
Master Lease
interpretation set forth in APPENDIX A to this Master Lease shall apply to this
Master Lease.
ARTICLE II
MASTER LEASE
II.1. ACCEPTANCE AND LEASE OF PROPERTY. Subject to the conditions set
forth in the Participation Agreement, including without limitation the
satisfaction or waiver of the conditions set forth in Article VI thereof, the
Lessor hereby agrees to accept delivery on each Acquisition Date of the Land or
leasehold interest therein, as applicable to the Headquarters Building, to be
delivered by the seller of such Land or, in the case of the Headquarters
Building, the Company on such Acquisition Date pursuant to the terms of the
Participation Agreement together with any Improvements thereon and
simultaneously to demise and lease to the applicable Lessee hereunder and under
the Lease Supplement to which such Lessee is a party, for the Lease Term, the
Lessor's interest in such Land and in such Improvements together with any
Improvements which thereafter may be constructed on such Land pursuant to the
Construction Agency Agreement or this Master Lease, and each Lessee hereby
agrees, expressly for the direct benefit of the Lessor, to lease from the Lessor
for the Lease Term, the interest of the Lessor in such Land (including any and
all of the Lessor's contractual rights and benefits relating thereto) and in
such Improvements together with any Improvements which thereafter may be
constructed on such Land pursuant to the Construction Agency Agreement and this
Master Lease.
II.2. ACCEPTANCE PROCEDURE. Each Lessee hereby agrees that the
execution and delivery by such Lessee on each Acquisition Date of an
appropriately completed Lease Supplement in the form of EXHIBIT A hereto
covering the Land (including any and all of the Lessor's contractual rights and
benefits relating thereto) and all Improvements thereon to be acquired by the
Lessor on such Acquisition Date and all other Improvements which thereafter may
be constructed thereon pursuant to the Construction Agency Agreement and this
Master Lease, shall, without further act, constitute the irrevocable acceptance
by such Lessee of all of the Property which is the subject of such Lease
Supplement for all purposes of this Master Lease and the other Operative
Documents on the terms set forth therein and herein, and that such Property,
together with any Improvements constructed on such Property pursuant to the
Construction Agency Agreement and this Master Lease, shall be deemed to be
included in the leasehold estate of this Master Lease and shall be subject to
the terms and conditions of this Master Lease as of such Acquisition Date.
II.3. LEASE TERM. The basic term (the "BASIC TERM") of this Master
Lease with respect to any Property shall begin on the Acquisition Date for such
Property and shall end on the Expiration Date, unless the Lease Term is extended
or earlier terminated in accordance with the provisions of this Master Lease or
the Operative Documents.
II.4. TITLE. Each Property is leased to the Lessees without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, all Liens other than Lessor Liens) and all applicable Requirements
of Law and Property Legal Requirements. No Lessee shall in any event have any
recourse against the Lessor for any defect in or exception to title to any
Property other than resulting from Lessor Liens attributable to the Lessor. Upon
termination of this Master Lease with respect to any property, the applicable
Lessees shall
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<PAGE> 4
Master Lease
have no continuing obligations to the Lessor under this Master Lease with
respect to such property except as expressly set forth herein.
ARTICLE III
PAYMENT OF RENT
III.1. RENT.
(a) During the Lease Term, the Lessees shall pay to the Lessor
Basic Rent on each Payment Date, on the date required under SECTION
20.1(k) in connection with exercise of the Remarketing Option and on
any date on which this Master Lease shall terminate with respect to any
or all Properties. On each date that Basic Rent is due hereunder, each
Lessee shall pay a portion of the Basic Rent equal to such Lessee's
Allocation Percentage multiplied by the Basic Rent due and owing on
such date.
(b) Neither any Lessee's inability or failure to take
possession of all or any portion of any Property when delivered by the
Lessor, nor the inability or failure of the Lessor to deliver all or
any portion of any Property to any Lessee on or before the applicable
Acquisition Date, whether or not attributable to any act or omission of
any Lessee or any act or omission of the Lessor, or for any other
reason whatsoever, shall delay or otherwise affect any Lessee's
obligation to pay Rent for such Property after the Acquisition Date
therefor in accordance with the terms of this Master Lease.
III.2. PAYMENT OF BASIC RENT. Basic Rent shall be paid absolutely net
to each Person entitled thereto, so that this Master Lease shall yield to such
Person the full amount thereof, without setoff, deduction or reduction.
III.3. SUPPLEMENTAL RENT. Each Lessee shall pay to the Lessor or any
other Person entitled thereto any and all Supplemental Rent promptly as the same
shall become due and payable, and if any Lessee fails to pay any Supplemental
Rent, the Lessor and such other Persons shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise in the case of
nonpayment of Basic Rent. Each Lessee shall pay to the Lessor or the Person
entitled thereto, as Supplemental Rent, among other things, on demand, to the
extent permitted by applicable Requirements of Law, interest at the applicable
Overdue Rate on any installment of Basic Rent not paid within ten (10) days
after receipt of notice for the period for which the same shall be overdue and
on any payment of Supplemental Rent not paid within ten (10) days after receipt
of notice for the period from the due date thereof until the same shall be paid.
The expiration or other termination of the obligations of the Lessees to pay
Basic Rent hereunder shall not limit or modify the obligations of the Lessees
with respect to Supplemental Rent. Unless expressly provided otherwise in this
Master Lease, in the event of any failure on the part of any Lessee to pay and
discharge any Supplemental Rent as and when due, such Lessee shall also promptly
pay and discharge any fine, penalty, interest or cost which may be assessed or
added under any agreement with a third party, for which such Lessee is
responsible under this Master Lease or any other Operative Document, for
nonpayment or late payment of such Supplemental Rent, all of which shall also
constitute Supplemental Rent.
-3-
<PAGE> 5
Master Lease
III.4. METHOD OF PAYMENT. Each payment of Rent payable by any Lessee
under this Master Lease or any other Operative Document shall be made by the
applicable Lessee to the Administrative Agent, as assignee of the Lessor under
the Assignment of Leases and Rents, until such time as the Loan Balance shall
have been paid in full and the Commitments of the Lenders shall have been
permanently terminated (at which time such payments shall be made to the Lessor)
by wire transfer prior to 1:00 p.m., Chicago time to the Administrative Agent's
(or Lessor's, as the case may be) account specified on Schedule III to the
Participation Agreement under the heading "Wire Transfer Instructions for
Obligors" 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. Payments received after 1:00 p.m., Chicago time on the date due
shall for the purpose of SECTION 16.1 hereof be deemed received on such day;
PROVIDED, HOWEVER, that for the purposes of the second sentence of SECTION 3.3
hereof, such payments shall be deemed received on the next succeeding Business
Day and, unless the Administrative Agent (or the Lessor, as applicable) is
otherwise able to invest or employ such funds on the date received, subject to
interest at the Overdue Rate as provided in such SECTION 3.3.
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
IV.1. QUIET ENJOYMENT. Subject to SECTIONS 2.4 and 4.2, and subject to
the rights of the Lessor contained in ARTICLE XV and the other terms of the
Operative Documents to which any Lessee is a party, each Lessee shall peaceably
and quietly have, hold and enjoy each Property for the Lease Term, free of any
claim or other action by the Lessor or anyone claiming by, through or under the
Lessor (other than the Lessees). Subject to the rights of the Lessor contained
in ARTICLE XVI, the Lessor shall not take any action that shall interfere or
adversely effect the Lessees' rights of quiet enjoyment. Such rights of quiet
enjoyment are independent of, and shall not affect the rights of the Lessor
otherwise to initiate legal action to enforce, the obligations of the Lessees
under this Master Lease.
IV.2. RIGHT TO INSPECT. During the Lease Term, each Lessee shall upon
reasonable notice from the Lessor (except that no notice shall be required if a
Lease Event of Default has occurred and is continuing), permit the Lessor, the
Lenders and their respective authorized representatives to inspect any Property
subject to this Master Lease during normal business hours, provided that such
inspections shall not unreasonably interfere with such Lessee's business
operations or activities at such Property and the Lessee shall have the right to
have a representative of the Lessee accompany the Lessor, the Lenders or their
respective authorized representatives (except when a Lease Event of Default has
occurred and is continuing) and if the Lessee elects to have a representative
present at such inspection, the Lessee agrees to make such representative
available at the time of such inspection.
ARTICLE V
NET LEASE, ETC.
V.1. NET LEASE. This Master Lease shall constitute a net lease. Any
present or future law to the contrary notwithstanding, this Master Lease shall
not terminate, nor shall any Lessee be entitled to any
-4-
<PAGE> 6
Master Lease
abatement, suspension, deferment, reduction, setoff, counterclaim, or defense
with respect to the Rent, nor shall the obligations of any Lessee hereunder be
affected (except as expressly herein permitted and by performance of the
obligations in connection therewith) by reason of: (i) any defect in the
condition, merchantability, design, construction, quality or fitness for use of
any Property or any part thereof, or the failure of any Property to comply with
all Requirements of Law and Property Legal Requirements, including any inability
to occupy or use any such Property by reason of such non-compliance; (ii) any
damage to, removal, abandonment, salvage, loss, contamination of or Release
from, scrapping or destruction of or any requisition or taking of any Property
or any part thereof; (iii) any restriction, prevention or curtailment of or
interference with the construction on or any use of any Property or any part
thereof including eviction; (iv) any defect in title to or rights to any
Property or any Lien on such title or rights or on any Property (other than
Lessor Liens); (v) any change, waiver, extension, indulgence or other action or
omission or breach in respect of any obligation or liability of or by the
Administrative Agent, the Lessor or any Participant; (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to any Lessee, the Administrative Agent, the
Lessor, any Participant or any other Person, or any action taken with respect to
this Master Lease by any trustee or receiver of any Lessee, the Administrative
Agent, the Lessor, any Participant or any other Person, or by any court, in any
such proceeding; (vii) any claim that any Lessee has or might have against any
Person, including without limitation the Administrative Agent, the Lessor, any
Participant, or any vendor, manufacturer, contractor of or for any Property;
(viii) any failure on the part of the Lessor to perform or comply with any of
the terms of this Master Lease (other than performance by the Lessor of its
obligations set forth in SECTION 2.1 hereof), of any other Operative Document or
of any other agreement; (ix) any invalidity or unenforceability or illegality or
disaffirmance of this Master Lease against or by any Lessee or any provision
hereof or any of the other Operative Documents or any provision of any thereof;
(x) the impossibility or illegality of performance by any Lessee, the Lessor or
all of them; (xi) any action by any court, administrative agency or other
Governmental Authority; or (xii) any other cause or circumstances whether
similar or dissimilar to the foregoing and whether or not any Lessee shall have
notice or knowledge of any of the foregoing. The agreement of each Lessee in the
preceding sentence shall not affect any claim, action or right that such Lessee
may have against the Lessor or any other Participants. The parties intend that
the obligations of the Lessees hereunder shall be covenants and agreements that
are separate and independent from any obligations of the Lessor hereunder or
under any other Operative Documents and the obligations of the Lessees shall
continue unaffected unless such obligations shall have been modified or
terminated in accordance with an express provision of this Master Lease.
V.2. NO TERMINATION OR ABATEMENT. Each Lessee shall remain obligated
under this Master Lease in accordance with its terms and shall not take any
action to terminate, rescind or avoid this Master Lease (except as provided
herein), notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting any Participant, or any
action with respect to this Master Lease which may be taken by any trustee,
receiver or liquidator of any Participant or by any court with respect to any
Participant. Each Lessee hereby waives all right (i) to terminate or surrender
this Master Lease (except as provided herein) or (ii) to avail itself of any
abatement, suspension, deferment, reduction, setoff, counterclaim or defense
with respect to any Rent. Each Lessee shall remain obligated under this Master
Lease in accordance with its terms and each Lessee hereby waives any and all
rights now or hereafter conferred by statute or otherwise to modify or to avoid
strict compliance with its obligations under this Master Lease. Notwithstanding
any such statute or otherwise, each Lessee shall be
-5-
<PAGE> 7
Master Lease
bound by all of the terms and conditions contained in this Master Lease.
ARTICLE VI
SUBLEASES
VI.1. SUBLETTING. Any Lessee may sublease any Property or any portion
thereof to the Company or any Affiliate of the Company and may sublease a
portion no greater than twenty (20%) percent of the rentable space of the
Headquarters Building for retail, food services and functional support purposes;
PROVIDED, HOWEVER, that: (a) no sublease or other relinquishment of possession
of any Property shall in any way discharge or diminish any of the obligations of
the Lessees to the Lessor hereunder and each Lessee shall remain directly and
primarily liable under this Master Lease as to the Properties, or portion
thereof, so sublet; (b) sublease of any Property shall expressly be made subject
to and subordinated to this Master Lease and to the rights of the Lessor
hereunder; (c) each sublease shall expressly provide for the immediate surrender
of the related Property to the Lessor after notice from the Lessor to such
sublessee of the occurrence of a Lease Event of Default hereunder and a request
for such surrender; and (d) all such subleases shall expressly provide for
automatic termination at or prior to the earlier of (i) the Expiration Date and
(ii) the date the Lease Term is earlier terminated in accordance with the
provisions of this Master Lease or the other Operative Documents unless a Lessee
shall have purchased the related Property pursuant to SECTION 18.1 or 18.2 or
the Lessor shall have elected in writing to any sublessee to recognize such
sublessee as a direct lessee (in which event such sublessee shall attorn to the
Lessor pursuant to the terms and conditions of such sublease).
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
VII.1. CONDITION OF THE PROPERTIES. EACH LESSEE ACKNOWLEDGES AND AGREES
THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, THE
CONSTRUCTION AGENT IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION
AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE
IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. EACH LESSEE FURTHER
ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS IS" WITHOUT
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR, THE
ADMINISTRATIVE AGENT OR ANY LENDER AND IN EACH CASE SUBJECT TO (A) THE EXISTING
STATE OF TITLE (EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN
POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL
INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW AND PROPERTY
LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF OR ON THE ACQUISITION DATE
FOR SUCH PROPERTY. NONE OF THE LESSOR, THE ADMINISTRATIVE AGENT OR ANY LENDER
HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS ATTRIBUTABLE TO SUCH
PERSON), VALUE, HABITABILITY, USE, CONDITION, DESIGN,
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<PAGE> 8
Master Lease
OPERATION, OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND NONE OF THE LESSOR, THE
ADMINISTRATIVE AGENT OR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR
PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS ATTRIBUTABLE TO SUCH PERSON)
OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY
REQUIREMENT OF LAW OR PROPERTY LEGAL REQUIREMENT.
VII.2. RISK OF LOSS. During the Lease Term the risk of loss of or
decrease in the enjoyment and beneficial use of the Properties as a result of
the damage or destruction thereof by fire, the elements, casualties, thefts,
riots, wars or otherwise is assumed by the Lessees, and the Lessor shall not in
any event be answerable or accountable therefor.
VII.3. ASSIGNMENT TO ADMINISTRATIVE AGENT. The Lessor and each Lessee
hereby (a) acknowledges that all of the rights of the Lessor under this Master
Lease and the Lease Supplements (other than Shared Rights and the right to
receive certain Excepted Payments) have been assigned by the Lessor to the
Administrative Agent for the benefit of the Lenders pursuant to the Assignment
of Leases and Rents to secure the obligations of the Lessor under the Loan
Agreement and (b) agrees that the Administrative Agent may (x) exercise any
rights granted to the Lessor and (y) accept payments otherwise payable to or
receivable by the Lessor under this Master Lease (other than payments with
respect to Excepted Payments payable to the Lessor).
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTIES, ETC.
VIII.1. UTILITY CHARGES. Each Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Properties leased by
such Lessee during the Lease Term. The Lessees shall be entitled to receive any
credit or refund with respect to any utility charge paid by the Lessees and the
amount of any credit or refund received by the Lessor on account of any utility
charges paid by the Lessees, net of the costs and expenses reasonably incurred
by the Lessor in obtaining such credit or refund, shall be promptly paid over to
the applicable Lessee.
VIII.2. USE OF THE PROPERTIES. Prior to the Completion Date, each
Property shall be used in a manner consistent with the Construction Agency
Agreement and, after the Completion Date for such Property, (a) the Headquarters
Building shall be used as a corporate headquarters building and (b) the other
Properties shall be used as distribution centers, except as otherwise consented
to by the Lessor which consent shall not be unreasonably withheld. Each Lessee
shall pay, or cause to be paid, all charges and costs required in connection
with the use of the Properties as contemplated by this Master Lease and the
Construction Agency Agreement. No Lessee shall commit or permit any waste of the
Properties or any part thereof.
VIII.3. COMPLIANCE WITH REQUIREMENTS OF LAW, PROPERTY LEGAL
REQUIREMENTS AND INSURANCE
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REQUIREMENTS. Subject to the terms of ARTICLE XII relating to permitted
contests, each Lessee, at its sole cost and expense, shall (a) comply with all
Requirements of Law (including all Hazardous Materials Laws), Property Legal
Requirements and Insurance Requirements relating to the Properties, including
the use, construction, operation, maintenance, repair and restoration thereof,
whether or not compliance therewith shall require structural or extraordinary
changes in the Improvements or interfere with the use and enjoyment of the
Properties, and (b) procure, maintain and comply with all licenses, permits,
orders, approvals, consents and other authorizations required for the
construction, use, maintenance and operation of the Properties and for the use,
operation, maintenance, repair and restoration of the Improvements.
Notwithstanding the preceding sentence, a Lessee shall be deemed to be in
compliance with all Hazardous Materials Laws for purposes of this Master Lease
notwithstanding any Environmental Violation if the severity of such
Environmental Violation is less than Federal, state or local standards requiring
remediation or removal or, if such standards are exceeded, remediation or
removal is proceeding in accordance with all applicable Hazardous Materials
Laws.
VIII.4. ASSIGNMENT BY LESSEES. No Lessee may assign this Master Lease
or any of its rights or obligations hereunder in whole or in part to any Person;
PROVIDED, HOWEVER, that (a) any Lessee may assign all or any of its rights and
obligations (in each case, to the extent its relating to status as a Lessee)
under the Operative Documents to any other Lessee, the Company or any Subsidiary
of the Company and (b) any Lessee may sublease any Property leased by it
hereunder or portion thereof as permitted under SECTION 6.1.
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
IX.1. MAINTENANCE AND REPAIR; RETURN.
(a) Each Lessee, at its sole cost and expense, shall maintain
(i) the Headquarters Building as a first-class office building; (ii)
each Property other than the Headquarters Building as a distribution
facility for pharmaceutical products; and (iii) each Property in good
condition (ordinary wear and tear excepted) and make all necessary
repairs thereto, of every kind and nature whatsoever, whether interior
or exterior, ordinary or extraordinary, structural or nonstructural or
foreseen or unforeseen, in each case as required by all Requirements of
Law, Property Legal Requirements and Insurance Requirements and on a
basis consistent with the operation and maintenance of properties
comparable in type, use and location to the applicable Property and in
no event less than the standards applied by the Company in the
operation and maintenance of other comparable properties owned or
leased by the Company or its Affiliates.
(b) The Lessor shall not under any circumstances be required
to build any improvements on any Property, make any repairs,
replacements, alterations or renewals of any nature or description to
any Property, make any expenditure whatsoever in connection with this
Master Lease (other than for Advances made in accordance with and
pursuant to the terms of the Participation Agreement and the
Construction Agency Agreement) or maintain any Property in any way.
Each Lessee waives any right to (i) require the Lessor to maintain,
repair, or rebuild all or any part of any Property or (ii) make repairs
at the expense of the Lessor pursuant to any
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Requirement of Law, Property Legal Requirement, Insurance Requirement,
contract, agreement, or covenant, condition or restriction in effect at
any time during the Lease Term.
(c) Each Lessee shall, upon the expiration or earlier
termination of this Master Lease with respect to any Property (other
than as a result of such Lessee's purchase of such Property from the
Lessor as provided herein), vacate and surrender such Property to the
Lessor in its then-current, "AS IS" condition, subject to such Lessee's
obligations under SECTIONS 8.3, 9.1(a), 10.1, 11.1, 14.1(d), 14.2 and
20.1.
ARTICLE X
MODIFICATIONS, ETC.
X.1. MODIFICATIONS, SUBSTITUTIONS AND REPLACEMENTS. Each Lessee, at its
sole cost and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to any Property or any part thereof and
substitutions and replacements therefor (collectively, "MODIFICATIONS");
PROVIDED, HOWEVER, that:
(i) except for any Modification required to be made pursuant
to a Requirement of Law or Property Legal Requirement (a "REQUIRED
MODIFICATION"), no Modification shall impair the value or useful life
of such Property or any part thereof from that which existed
immediately prior to such Modification;
(ii) the Modification shall be done in a good and workmanlike
manner;
(iii) such Lessee shall comply with all Requirements of Law
(including all Hazardous Materials Laws), Property Legal Requirements
and Insurance Requirements applicable to the Modification, including
the obtaining of all permits and certificates of occupancy;
(iv) subject to the terms of ARTICLE XII relating to permitted
contests, such Lessee shall pay all costs and expenses and shall
discharge (or cause to be insured or bonded over) within sixty (60)
days after the same shall be filed (or otherwise become effective) any
Liens arising with respect to the Modification;
(v) such Modifications shall comply with SECTIONS 8.3 and
9.1(a); and
(vi) such Lessee shall be required to obtain the prior written
approval of the Lessor, which approval shall not be unreasonably
withheld, with respect to any alterations (other than Required
Modifications and/or alterations authorized by the Construction Agency
Agreement or alterations that are merely cosmetic) that shall have an
estimated cost greater than thirty (30%) percent of such Property's
Property Cost or shall affect any structural element of any
Improvements.
All Modifications shall remain part of the realty and shall be subject to this
Master Lease and title thereto shall immediately vest in the Lessor; PROVIDED,
HOWEVER, that Modifications that (x) are not Required Modifications, (y) were
not financed by the Participants and (z) are readily removable without impairing
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the value, utility or remaining useful life of the applicable Property, shall be
the property of the Lessee of the applicable Property and shall not be subject
to this Master Lease. So long as no Lease Event of Default has occurred and is
continuing, any Lessee may place upon the Properties any trade fixtures,
machinery, equipment, inventory or other property belonging to such Lessee or
third parties (including tanks and associated pumps used for storage of
materials in such Lessee's business), and may remove the same at any time during
the Lease Term, subject, however, to the terms of SECTION 9.1(a); PROVIDED,
HOWEVER, that such trade fixtures, machinery, equipment, inventory or other
property do not impair the value or useful life of the applicable Property;
provided, FURTHER, HOWEVER, that the Lessees shall keep and maintain at the
Properties and shall not remove from the Properties any Equipment financed or
otherwise paid for by the Lessor or any Participant pursuant to the
Participation Agreement.
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
XI.1. WARRANT OF TITLE.
(a) Each Lessee agrees that except as otherwise provided
herein and subject to the terms of ARTICLE XII relating to permitted
contests, such Lessee shall not directly or indirectly create or allow
to remain, and shall promptly discharge at its sole cost and expense,
any Lien (other than any Lessor Lien), defect, attachment, levy, title
retention agreement or claim upon any Property or any Modifications or
any Lien (other than any Lessor Lien), attachment, levy or claim with
respect to the Rent or with respect to any amounts held by the
Administrative Agent, the Lessor or any Participant pursuant to the
Loan Agreement or the other Operative Documents, other than Permitted
Property Liens and Liens on machinery, equipment, general intangibles
and other personal property not financed by the proceeds of the Loans
or Equity Amounts.
(b) Nothing contained in this Master Lease shall be construed
as constituting the consent or request of the Lessor or any other
Participant, expressed or implied, to or for the performance by any
contractor, mechanic, laborer, materialman, supplier or vendor of any
labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to any
Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF THE
ADMINISTRATIVE AGENT, THE LESSOR OR THE LENDERS IS OR SHALL BE LIABLE
FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO
ANY LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH
OR UNDER ANY LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH
LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF
THE ADMINISTRATIVE AGENT, THE LESSOR OR ANY LENDER IN AND TO ANY
PROPERTY.
XI.2. GRANTS AND RELEASES OF EASEMENTS; LESSOR'S WAIVERS. Provided that
no Lease Event of Default shall have occurred and be continuing and subject to
the provisions of ARTICLES VII, IX and X and SECTION 8.3 the Lessor hereby
consents in each instance to the following actions by the Lessees, in the name
and stead of the Lessor, but at the sole cost and expense of the Lessees: (a)
the granting of easements, licenses, rights-of-way and other rights and
privileges in the nature of easements reasonably necessary or desirable for the
use, repair, or maintenance of any Property as herein provided; (b) the
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release of existing easements or other rights in the nature of easements which
are for the benefit of any Property; (c) if required by applicable Governmental
Authority in connection with the Construction, the dedication or transfer of
unimproved portions of any Property for road, highway or other public purposes;
and (d) the execution of amendments to any covenants and restrictions affecting
any Property; PROVIDED, HOWEVER, that in each case (i) such grant, release,
dedication, transfer or amendment does not impair the value or remaining useful
life of the applicable Property, (ii) such grant, release, dedication, transfer
or amendment is reasonably necessary in connection with the construction, use,
maintenance, alteration or improvement of the applicable Property, (iii) such
grant, release, dedication, transfer or amendment will not cause the applicable
Property or any portion thereof to fail to comply with the provisions of this
Master Lease or any other Operative Documents and all Property Legal
Requirements (including, without limitation, all applicable zoning, planning,
building and subdivision ordinances, all applicable restrictive covenants and
all applicable architectural approval requirements), (iv) all governmental
consents or approvals required prior to such grant, release, dedication,
transfer, annexation or amendment have been obtained, and all filings required
prior to such action have been made, (v) the applicable Lessee shall remain
obligated under this Master Lease and under any instrument executed by such
Lessee consenting to the assignment of the Lessor's interests in this Master
Lease as security for indebtedness, in each such case in accordance with their
terms, as though such grant, release, dedication, transfer or amendment had not
been effected and (vi) the applicable Lessee shall pay and perform any
obligations of the Lessor under such grant, release, dedication, transfer or
amendment. The Lessor acknowledges the right of each Lessee to finance and to
secure under the Uniform Commercial Code, inventory, furnishings, furniture,
equipment, machinery, leasehold improvements and other personal property located
at the Properties other than any such property that is nonseverable from the
Improvements thereon, and the Lessor, the Administrative Agent and each Lender
agrees to execute Lessor waiver forms and release of Lessor Liens and other
Liens in favor of any purchase money seller, lessor or lender which has financed
or may finance in the future such items. Without limiting the effectiveness of
the foregoing, provided that no Lease Event of Default shall have occurred and
be continuing, the Lessor, the Administrative Agent and each Lender shall, upon
the request of any Lessee, and at such Lessee's sole cost and expense, execute
and deliver any instruments necessary or appropriate to confirm any such grant,
release, dedication, transfer, annexation or amendment to any Person permitted
under this SECTION 11.2 including landlord waivers with respect to any of the
foregoing.
XI.3. NO GRANT OF RIGHTS WITHOUT CONSENT OF THE LESSEE. The Lessor
hereby severally agrees that, so long as no Lease Event of Default shall have
occurred and be continuing, the Lessor shall not grant any easements, licenses,
rights-of-way or other rights or privileges of the types described in CLAUSES
(a), (b), (c) and (d) of SECTION 11.2 which, in each case, affect any Property,
except as required under SECTION 11.2 or with the prior written consent of the
applicable Lessee.
ARTICLE XII
PERMITTED CONTESTS
XII.1. PERMITTED CONTESTS IN RESPECT OF APPLICABLE LAW. If, to the
extent and for so long as (a) a test, challenge, appeal or proceeding for review
of any Applicable Law relating to any Property shall be prosecuted diligently
and in good faith in appropriate proceedings by a Lessee or (b) compliance with
such Applicable Law shall have been excused or exempted by a valid nonconforming
use, variance permit,
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waiver, extension or forbearance, such Lessee shall not be required to comply
with such Applicable Law but only if and so long as any such test, challenge,
appeal, proceeding, waiver, extension, forbearance or noncompliance shall not,
in the reasonable opinion of the Administrative Agent, the Lenders and the
Lessor, involve (A) any risk of criminal liability being imposed on the
Administrative Agent, any Lender, the Lessor or such Property or (B) any risk of
(1) foreclosure, forfeiture or loss of such Property, or any material part
thereof, or (2) the nonpayment of Rent or (C) any substantial risk of (1) the
sale of, or the creation of any Lien (other than a Permitted Property Lien) on,
any part of such Property, (2) civil liability being imposed on the
Administrative Agent, the Lender, the Lessor or such Property, or (3) enjoinment
of, or interference with, the use, possession or disposition of such Property in
any material respect.
The Lessor will not be required to join in any proceedings pursuant to
this SECTION 12.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event the
Lessor will join in the proceedings or permit them or any part thereof to be
brought in its name if and so long as (i) no Lessee has elected the Remarketing
Option, (ii) no Default has occurred and is continuing and (iii) the applicable
Lessee pays all related expenses and indemnifies the Lessor and the other
Indemnitees to the satisfaction of the respective Indemnitees.
ARTICLE XIII
INSURANCE
XIII.1. PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE.
(a) During the Lease Term, the Lessees shall procure and
carry, at their sole cost and expense, commercial general liability
insurance for claims for injuries or death sustained by persons or
damage to property while on the Properties and such other public
liability coverages as are ordinarily procured by the Company or its
Affiliates who own or operate similar properties, but in any case shall
provide liability coverage of at least $5,000,000 per person and
$5,000,000 for property damage per occurrence, subject to normal levels
of self-insurance maintained by the Company. Such insurance shall be on
terms and in amounts that are no less favorable than insurance
maintained by the Company or such Affiliates with respect to similar
properties that they own. The policy shall be endorsed to name the
Administrative Agent, the Lessor and each Participant as additional
insureds. The policy shall also specifically provide that the policy
shall be considered primary insurance which shall apply to any loss or
claim before any contribution by any insurance which the Administrative
Agent, the Lessor or any Participant may have in force.
(b) Each Lessee shall, in the construction of the Improvements
(including in connection with any Modifications thereof) and the
operation of the Properties, comply with the applicable workers'
compensation laws.
XIII.2. HAZARD AND OTHER INSURANCE. During the Lease Term, each Lessee
shall keep, or cause to be kept, each Property leased by it hereunder insured
against loss or damage by fire or extended coverage, flood (if such Property is
located in a special flood hazard area, as specified in SECTION 7.2(r) of the
Participation Agreement) and, where required by law, earthquake, on terms that
are no less favorable than insurance covering other similar properties owned by
the Company or its Affiliates, in an amount no less
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than the replacement cost of such Property. During the construction of any
Improvements each Lessee shall also maintain or cause to be maintained builders'
risk insurance. All insurance proceeds in respect of any loss or occurrence for
which the proceeds related thereto are (i) less than or equal to thirty (30%)
percent of the Property Cost of such Property, in the absence of the occurrence
and continuance of a Lease Event of Default, shall be adjusted by and paid to
applicable Lessee for application in accordance with ARTICLE XIV and (ii)
greater than thirty (30%) percent of the Property Cost of such Property, shall
be adjusted jointly by the applicable Lessee and the Lessor (unless a Lease
Event of Default has occurred and is continuing, in which case such proceeds
shall be adjusted solely by the Lessor) and held by the Administrative Agent for
application in accordance with ARTICLE XIV.
XIII.3. INSURANCE COVERAGE.
(a) Each Lessee shall furnish the Administrative Agent, the
Lessor and each Participant with certificates showing the insurance
required under SECTIONS 13.1 and 13.2 to be in effect and naming the
Administrative Agent and the Lessor as additional insureds with respect
to liability coverage (excluding worker's compensation insurance),
naming the Lenders, the Lessor and such Lessee as their interests may
appear with respect to casualty coverage and naming the Administrative
Agent and the Lessor as loss payees with respect to property coverage
and showing the mortgagee endorsement required by SECTION 13.3(c) with
respect to such coverage. All such insurance shall be at the cost and
expense of the Company or such Lessee. Such certificates shall include
a provision for no less than thirty (30) days' advance written notice
by the insurer to the Lessor in the event of cancellation or reduction
of such insurance. In addition, each Lessee shall cause the
Administrative Agent, the Lessor and each Participant to be named as
additional insureds under each liability policy maintained in
connection with the Construction.
(b) Each Lessee agrees that the insurance policy or policies
required by SECTION 13.2 shall include an appropriate clause pursuant
to which such policy shall provide that it will not be invalidated
should the Company or such Lessee waive, in writing, prior to a loss,
any or all rights of recovery against any party for losses covered by
such policy, and that the insurance in favor of the Administrative
Agent, the Lessor, the Lenders and the Lessor and their respective
rights under and interests in said policies shall not be invalidated or
reduced by any act or omission or negligence of the Company or such
Lessee or any other Person having any interest in any Property other
than the Administrative Agent, the Lenders and the Lessor. Each Lessee
hereby waives any and all such rights against the Administrative Agent,
the Lenders and the Lessor to the extent of payments made under such
policies.
(c) Except as otherwise permitted by CLAUSE (d), all such
insurance shall be written by reputable insurance companies that are
financially sound and solvent and otherwise reasonably appropriate
considering the amount and type of insurance being provided by such
companies. Any insurance company selected by any Lessee which is rated
in Best's Insurance Guide or any successor thereto (or if there be
none, an organization having a similar national reputation) shall have
a general policyholder rating of "A" and a financial rating of at least
"9" or be otherwise acceptable to the Lenders and the Lessor (provided
that if the general policyholder rating of such insurer falls below "A"
or the financial rating falls below "9" Lessee shall replace such
insurance policy with a policy issued by an insurer rated at least "A"
and "9" within 180 days of such
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downgrading). All property insurance policies required by SECTION 13.2
shall include a standard form mortgagee endorsement in favor of the
Lenders.
(d) The Lessor shall not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any insurance
required under this ARTICLE XIII except that the Lessor may, at its
expense, carry separate liability insurance so long as (i) the
insurance of the Lessees is designated as primary and in no event
excess or contributory to any insurance the Lessor may have in force
which would apply to a loss covered under the policies of the Lessees
and (ii) each such insurance policy will not cause the Lessees'
insurance required under this ARTICLE XIII to be subject to a
coinsurance exception of any kind.
(e) Each Lessee shall pay as they become due all premiums for
the insurance required by SECTION 13.1 and SECTION 13.2, and shall
renew or replace each policy prior to the expiration date thereof.
Throughout the Lease Term, at the time each of the insurance policies
required hereby is renewed (but in no event less frequently than once
each year), the applicable Lessee shall deliver to the Administrative
Agent, the Lessor and each Participant certificates of insurance
evidencing that all insurance required by this ARTICLE XIII is being
maintained by such Lessee and is in effect.
ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
XIV.1. CASUALTY AND CONDEMNATION.
(a) Subject to the provisions of this ARTICLE XIV and SECTION
13.2, (i) if all or a portion of any Property is damaged or destroyed
in whole or in part by a Casualty, any insurance proceeds payable with
respect to such Casualty shall be paid directly to the Lessee of such
affected Property, or if received by the Lessor, the Lenders or the
Administrative Agent, shall be paid over to such Lessee for the
reconstruction, refurbishment and repair of such Property and (ii) if
the use, access, occupancy, easement rights or title to any Property or
any part thereof is the subject of a Condemnation, then any award or
compensation relating thereto shall be paid to the Lessee of such
affected Property to repair the damage caused by such Condemnation or
at the option of the applicable Lessee, be applied to the purchase
price of the related Property purchased in accordance with SECTION 18.1
with Excess Casualty/Condemnation Proceeds, if any, being payable to
the Lessee of the affected Property; PROVIDED, HOWEVER, that, in each
case, if a Lease Event of Default shall have occurred and be
continuing, such award, compensation or insurance proceeds shall be
paid directly to the Administrative Agent or, if received by any
Lessee, shall be held in trust for the Administrative Agent, the
Lenders and the Lessor, and shall be paid over by each such Lessee to
the Administrative Agent to be distributed by the Administrative Agent
in accordance with the Participation Agreement. All amounts held by the
Administrative Agent, any Lender or the Lessor when a Lease Event of
Default exists hereunder on account of any award, compensation or
insurance proceeds either paid directly to the Administrative Agent,
such Lender or the Lessor or turned over to the Administrative Agent,
such Lender or the Lessor shall at the option of the Lessor either be
(i) paid to the Lessee of the affected Property for the repair of
damage caused by such Casualty or Condemnation in accordance with
CLAUSE (d) of this SECTION
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14.1, or (ii) applied to the purchase price of the related Property on
the purchase date with respect to such Property in accordance with
SECTION 18.1, with any Excess Casualty/Condemnation Proceeds being
payable to the Lessee of the affected Property.
(b) Any Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the reasonable
request of a Lessee, and at such Lessee's sole cost and expense, the
Lessor and the Lenders shall participate in any such proceeding,
action, negotiation, prosecution or adjustment. The Lessor and the
Lessees agree that this Master Lease shall control the rights of the
Lessor and the Lessees in and to any such award, compensation or
insurance payment.
(c) If Lessor or any Lessee shall receive notice of a Casualty
or of an actual, pending or threatened Condemnation of any Property or
any interest therein, the Lessor or such Lessee, as the case may be,
shall give notice thereof to the Lessor, the Company and the
Administrative Agent promptly after the receipt of such notice.
(d) If the applicable Lessee shall not have given notice (or
shall not have been permitted to have given notice) of its election of
the Purchase Option with respect to any Property following a Casualty
or Condemnation with respect thereto (or, following such notice shall
not have purchased such Property in accordance with SECTION 18.1 within
sixty (60) days of the occurrence of such Casualty or Condemnation),
then such Lessee shall, at its sole cost and expense (and, without
limitation, if any award, compensation or insurance payment is not
sufficient to restore such Property in accordance with this CLAUSE (d),
such Lessee shall pay the shortfall), promptly and diligently repair
any damage to such Property caused by such Casualty or Condemnation in
conformity with the requirements of SECTIONS 9.1 and 10.1 using the
as-built Plans and Specifications for such Property (as modified to
give effect to any subsequent Modifications, any Condemnation affecting
such Property and all applicable Property Legal Requirements) so as to
restore such Property to at least the same condition, operation,
function and value as existed immediately prior to such Casualty or
Condemnation with such Modification as such Lessee may elect in
accordance with SECTION 10.1; PROVIDED, HOWEVER, that any such
restoration of Property shall be completed within the earlier of (x)
twelve (12) months following a Casualty or Condemnation or (y) the
Expiration Date. In such event, title to such Property shall remain
with the Lessor subject to the terms of this Master Lease, and this
Master Lease shall continue in full force and effect with respect to
such Property. Upon completion of such restoration, the Lessee of the
affected Property shall furnish the Lessor a Responsible Officer's
Certificate confirming that such restoration has been completed
pursuant to this Master Lease.
(e) In no event shall a Casualty or Condemnation affect any
Lessee's obligations to pay Rent pursuant to SECTION 3.1 or to perform
its obligations and pay any amounts due on the Expiration Date or
pursuant to ARTICLES XVIII and XXI.
(f) In the absence of any Lease Event of Default, any Excess
Casualty/Condemnation Proceeds received by the Administrative Agent,
the Lenders or the Lessor in respect of a Casualty or Condemnation
shall be turned over to the Lessee of the affected Property.
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XIV.2. ENVIRONMENTAL MATTERS. Promptly upon any Lessee's knowledge of
the existence of an Environmental Violation with respect to any Property, such
Lessee shall notify the Lessor in writing of such Environmental Violation. If
the Lessee of the affected Property elects to remediate pursuant to SECTION
15.1, then such Lessee shall promptly and diligently commence any response,
clean up, remedial or other action necessary to remove, clean up or remediate
the Environmental Violation in accordance with the terms of SECTION 8.3
(including the last sentence thereof) at the sole cost and expense of such
Lessee. Such Lessee shall, upon completion of remedial action by such Lessee,
cause to be prepared by an environmental consultant reasonably acceptable to the
Lessor a report describing the Environmental Violation and the actions taken by
such Lessee (or its agents) in response to such Environmental Violation, and a
statement by Lessee or the consultant that the Environmental Violation has been
remedied in compliance in all material respects with applicable Hazardous
Materials Laws. Each such Environmental Violation shall be remedied prior to the
Expiration Date unless each Property with respect to which an Environmental
Violation has occurred but has not been remedied has been purchased by a Lessee
in accordance with SECTION 18.1 or 18.2. Nothing in this ARTICLE XIV shall
reduce or limit the obligations of the Lessees under Sections 11.1, 11.2 or 11.3
of the Participation Agreement.
XIV.3. NOTICE OF ENVIRONMENTAL MATTERS. Promptly, but in any event
within sixty (60) Business Days from the date any Lessee has knowledge thereof,
such Lessee shall provide to the Lessor written notice of any pending or
threatened claim, action or proceeding involving any Hazardous Materials Laws or
any Release on or in connection with any Property. All such notices shall
describe in reasonable detail the nature of the claim, action or proceeding and
such Lessee's proposed response thereto. In addition, each Lessee shall provide
to the Lessor, within sixty (60) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental
Violation in connection with any Property. Each Lessee shall also promptly
provide such detailed reports of any such environmental claims as may reasonably
be requested by the Administrative Agent, the Lessor or any Lender. In the event
that the Lessor receives written notice of any pending or threatened claim,
action or proceeding involving any Hazardous Materials Laws or any Release on or
in connection with any Property, the Lessor shall promptly give notice thereof
to the Company.
ARTICLE XV
PARTIAL TERMINATION OF LEASE
XV.1. PARTIAL TERMINATION UPON CERTAIN EVENTS. With respect to any
Property, if either:
(i) a Significant Condemnation or Significant Casualty occurs;
or
(ii) an Environmental Violation occurs or is discovered the
cost of remediation of which would exceed $5,000,000;
and the Lessor or the applicable Lessee shall have given written notice (a
"TERMINATION NOTICE") to the other party that as a consequence of the occurrence
of such event, (x) the Lease Supplement relating to such Property is to be
terminated and (y) this Master Lease is to be terminated with respect to such
Property, then such Lessee shall be obligated to purchase the interest of the
Lessor in such affected Property on the Payment Date immediately following the
date occurring ninety (90) days after the Lessee's
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Master Lease
or the Lessor's, as applicable, receipt of the applicable Termination Notice by
paying to the Administrative Agent an amount equal to the Property Balance for
such affected Property; PROVIDED, HOWEVER, that with respect to subsection (ii)
above, if (x) such Lessee delivers or causes to be delivered to the Lessor
within ninety (90) days following the Lessee's or the Lessor's, as applicable,
receipt of the applicable Termination Notice, a report from the environmental
consultant that delivered the Environmental Audit for such affected Property on
the Acquisition Date therefor (or such other environmental consultant selected
by such Lessee and satisfactory to the Lessor and each Participant), which
report describes the Environmental Violation in detail reasonably satisfactory
to the Lessor and the Participants, states the estimated cost of remediation
thereof, and states that such Environmental Violation or Release can, with
reasonable efforts, be remediated prior to the Expiration Date, (y) such Lessee
delivers, concurrently with the report described in CLAUSE (X), a Responsible
Officer's Certificate to the Lessor certifying to the Lessor, the Administrative
Agent and each Participant that such Lessee is capable (financially and
otherwise) of causing such remediation and (z) such Lessee promptly commences
and diligently pursues such remediation, then such Lessee shall not be obligated
to purchase such affected Property.
XV.2. PARTIAL TERMINATION PROCEDURES. On the date of the payment by a
Lessee of the Property Balance with respect to any Property in accordance with
SECTION 15.1 (such date, the "PARTIAL TERMINATION DATE"), the Lease Supplement
relating to such affected Property shall terminate and this Master Lease shall
terminate with respect to such Property and, concurrent with the Lessor's
receipt of such payment,
(a) the Lessor shall execute and deliver to the Lessee of such
Property (or to such Lessee's designee) at such Lessee's cost and
expense: (x) a deed with respect to such Property (and, with respect to
the Headquarters Building, such deed shall apply only to Improvements
located on such Property and shall be accompanied by a termination of
the Ground Lease) without recourse, representation or warranty except
with respect to covenants against grantor's acts and to Lessor Liens,
(y) a quitclaim bill of sale with respect to the Equipment located on
such Property and (z) an assignment of the entire interest of the
Lessor held in such Property (which shall include an assignment of all
of the right, title and interest of the Lessor in and to any Net
Proceeds with respect to such Property not previously received by the
Lessor), in each case in recordable form and otherwise in conformity
with local custom and free and clear of the Lien of the Lessor Mortgage
and any Lessor Liens attributable to the Lessor; and
(b) such Property shall be conveyed to the Lessee of such
Property (or to such Lessee's designee) "AS IS" and in its then present
physical condition; and
(c) the Lessor shall execute and deliver to the Lessees and
the Lessees' title insurance company an affidavit as to the Lessor's
title and Lessor Liens attributable to it and shall execute and deliver
to Lessee a statement of termination of this Master Lease, the
applicable Lease Supplement and the Construction Agency Agreement, in
each case to the extent such Operative Documents relate to such
Property, and shall use reasonable efforts to cause the Lenders to
execute and deliver a release of the Assignment of Leases and Rents,
the Lease Supplement, the Lessor Mortgage, the Lessor Financing
Statements and the Construction Agency Agreement Assignment and, to the
extent reasonably requested by the Lessees, any other Operative
Documents, in each case to the extent relating to such Property.
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ARTICLE XVI
EVENTS OF DEFAULT
XVI.1. LEASE EVENTS OF DEFAULT. The occurrence of any one or more of
the following events (whether 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) shall constitute a "LEASE EVENT OF
DEFAULT":
(a) any Lessee shall fail to make payment of (i) any Basic
Rent within seven (7) Business Days after the same has become due and
payable or (ii) any Property Balance, Purchase Option Price, Loan
Balance or Lease Balance, including, without limitation, amounts due
pursuant to SECTIONS 15.1, 18.1, 18.2, 18.3 or 20.1, on the date due
therefor; or
(b) any Lessee shall fail to make payment of any Supplemental
Rent (other than Supplemental Rent referred to in CLAUSE (a) of this
Section) due and payable within five (5) days after receipt of notice
thereof; or
(c) any Lessee shall fail to maintain insurance as required by
ARTICLE XIII of this Master Lease; or
(d) any Lessee shall fail to observe or perform any term,
covenant or condition of such Lessee under this Master Lease, the
Participation Agreement or any other Operative Document to which it is
a party other than those described in CLAUSE (a), (b) or (c) of this
SECTION 16.1 and, in each such case, such failure shall have continued
for thirty (30) days after the earlier of (i) delivery to the Company
of written notice thereof from the Lessor or (ii) a Responsible Officer
of such Lessee or the Company charged with the duty to administer this
arrangement shall have actual knowledge of such failure; PROVIDED,
HOWEVER, that if such failure is capable of cure but cannot be cured by
payment of money or cannot be cured by diligent efforts within such
thirty (30)-day period but such diligent efforts shall be properly
commenced within the cure period and such Lessee is diligently
pursuing, and shall continue to pursue diligently, remedy of such
failure, the cure period shall be extended for an additional period of
time as may be necessary to cure, not to exceed an additional
forty-five (45) days and not to extend beyond the Expiration Date;
PROVIDED, FURTHER, HOWEVER, that failure by any Lessee to fully comply
with the requirements of SECTION 20.1 shall not be subject to any cure
period; or
(e) any representation or warranty made by any Lessee or the
Guarantor in any of the Operative Documents to which it is a party
shall have been inaccurate in any material respect at the time made; or
(f) a Construction Agency Agreement Event of Default or a
default by the Guarantor shall have occurred and be continuing under
the Guaranty; or
(g) any Lessee or the Guarantor shall (i) admit in writing its
inability to pay its debts generally as they become due, (ii) file a
petition under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America or
any State or
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Commonwealth thereof, (iii) make a general assignment for the benefit
of its creditors, (iv) consent to the appointment of a receiver of
itself or the whole or any substantial part of its property, (v) fail
to cause the discharge of any custodian, trustee or receiver appointed
for such Lessee or the Guarantor, as the case may be, or the whole or a
substantial part of its property within sixty (60) days after such
appointment, or (vi) file a petition or answer seeking or consenting to
reorganization under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America or
any State or Commonwealth thereof; or
(h) insolvency proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof shall be filed against any Lessee or the Guarantor and not
dismissed within sixty (60) days from the date of its filing (PROVIDED,
that each Lessee hereby expressly authorizes the Lessor and each
Participant to appear in any court conducting any such proceeding
during such sixty (60) day period to preserve, protect and defend their
respective rights under the Operative Documents), or a court of
competent jurisdiction shall enter an order or decree appointing,
without the consent of any Lessee or the Guarantor, as the case may be,
a receiver of such Lessee, the Guarantor or the whole or a substantial
part of any of their respective property, and such order or decree
shall not be vacated or set aside within sixty (60) days from the date
of the entry thereof; or
(i) any final judgments or orders for the payment of money
individually or in the aggregate in excess of $25,000,000 shall be
rendered against the Company, any Lessee, or any of their respective
Subsidiaries and such judgment or order shall continue unsatisfied and
unstayed (pursuant to laws, rules or court orders) for a period of
thirty (30) days or if after the expiration of such stay, such judgment
or order shall not have been paid or discharged; or
(j) a default or the happening of any event shall occur under
any indenture, agreement or other instrument under which any Material
Commitment is made or any Debt of the Company or any Subsidiary in an
aggregate amount of $25,000,000 or more is outstanding and such default
or event shall continue for a period of time sufficient to permit the
acceleration of the maturity of such Debt of the Company or any
Subsidiary outstanding thereunder or to permit termination of such
Material Commitment; or
(k) any Operative Document to which any Lessee or the
Guarantor is a party or any Lien granted under any such Operative
Document shall, in whole or in part, terminate, cease to be effective
against, or cease to be the legally valid, binding and enforceable
obligation of, such Lessee or the Guarantor, as the case may be and
such occurrence creates an adverse effect upon the priority, perfection
or status of Participant's interest in any Property (other than in
accordance with its terms or with the consent of Lessor or rights to
terminate contained in such documents); or
(l) the Company or any Lessee shall directly or indirectly
contest in any manner the effectiveness, validity, binding nature or
enforceability of any Operative Document or any Lien granted under any
Operative Document, or the Guarantor shall repudiate, or purport to
discontinue or terminate, the Guaranty; or
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(m) any Change of Control shall occur.
XVI.2. REMEDIES. Upon the occurrence of any Lease Event of Default and
at any time thereafter, the Lessor may, so long as such Lease Event of Default
is continuing, do one or more of the following as the Lessor in its sole
discretion shall determine, without limiting any other right or remedy the
Lessor may have on account of such Lease Event of Default (including, without
limitation, the obligation of the Lessees to purchase the Properties as set
forth in SECTION 18.3):
(a) The Lessor may, by notice to the Lessee, rescind or
terminate this Master Lease as to any Property or all of the Properties
as of the date specified in such notice; however, (i) no reletting,
reentry or taking of possession of any Property (or any portion
thereof) by the Lessor will be construed as an election on the Lessor's
part to terminate this Master Lease unless a written notice of such
intention is given to the Lessee, (ii) notwithstanding any reletting,
reentry or taking of possession, the Lessor may at any time thereafter
elect to terminate this Master Lease for a continuing Lease Event of
Default and (iii) no act or thing done by the Lessor or any of its
agents, representatives or employees and no agreement accepting a
surrender of the Properties shall be valid unless the same be made in
writing and executed by the Lessor;
(b) The Lessor may (i) demand that any or all of the Lessees,
and each Lessee shall upon the written demand of the Lessor, return any
Property promptly to the Lessor in the manner and condition required
by, and otherwise in accordance with all of the provisions of, ARTICLES
VII and IX and SECTION 8.3 as if such Property were being returned at
the end of the Lease Term, and the Lessor shall not be liable for the
reimbursement of any Lessee for any costs and expenses incurred by such
Lessee in connection therewith and (ii) without prejudice to any other
remedy which the Lessor may have for possession of any Property, and to
the extent and in the manner permitted by Applicable Law, enter upon
such Property and take immediate possession of (to the exclusion of the
Lessees) such Property or any part thereof and expel or remove the
applicable Lessee and any other Person who may be occupying such
Property, by summary proceedings or otherwise, all without liability to
any 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 the other damages of the Lessor, the
Lessees shall be jointly and severally responsible for all costs and
expenses incurred by the Administrative Agent, the Lenders and/or the
Lessor in connection with any reletting, including, without limitation,
reasonable brokers' fees and all costs of any alterations needed to
return the property to its original condition as constructed in
accordance with the Plans and Specifications or repairs made by the
Administrative Agent, the Lessor or any Participant;
(c) The Lessor may (i) sell all or any part of any one or more
Properties at public or private sale, as the Lessor may determine, free
and clear of any rights of the Lessees (except that Excess Sales
Proceeds are payable to and shall be paid to the Lessee) with respect
thereto (except to the extent required by CLAUSE (ii) below if the
Lessor shall elect to exercise its rights thereunder) in which event
the obligation of the Lessee of any such sold Property 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 the Lessor shall so elect, demand that the Lessee pay to the Lessor,
and the Lessee shall pay to the Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (the
parties agreeing that the Lessor's actual damages would be
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Master Lease
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 Lease Balance calculated as of such
Payment Date (including all Rent due and unpaid to and including such
Payment Date), over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by the Administrative Agent,
the Lessor or any Participant(s) incident to such conveyance,
including, without limitation, repossession costs, brokerage
commissions, prorations, transfer taxes, fees and expenses for counsel,
title insurance fees, survey costs, recording fees, and any repair
costs); plus (B) interest at the Overdue Rate on the foregoing amount
from such Payment Date until the date of payment;
(d) The Lessor may, at its option, elect not to terminate this
Master Lease with respect to any Property or all of the Properties and
continue to collect all Basic Rent, Supplemental Rent, and all other
amounts due to the Lessor (together with all costs of collection) and
enforce the respective obligations of the Lessees under this Master
Lease as and when the same become due, or are to be performed, and at
the option of the Lessor, upon any abandonment of any Property by any
Lessee or re-entry of same by the Lessor, the Lessor may, in its sole
and absolute discretion, elect not to terminate this Master Lease and
may make the necessary repairs in order to relet such Property, and
relet such Property or any part thereof for such term or terms (which
may be for a term extending beyond the Lease Term of this Master Lease)
and at such rental or rentals and upon such other terms and conditions
as the Lessor in its reasonable discretion may deem advisable; and upon
each such reletting all rentals actually received by the Lessor from
such reletting shall be applied to the obligations of the Lessees
hereunder and under the other Operative Documents in accordance with
the Operative Documents. If such rentals received from such reletting
during any period are less than the Rent with respect to such Property
to be paid during that period by the applicable Lessee hereunder, such
Lessee shall pay any deficiency, as calculated by the Lessor, to the
Lessor on the next Payment Date;
(e) Unless all of the Properties have been sold in their
entirety, the Lessor may, whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights
under CLAUSE (b), (c) or (d) of this SECTION 16.2 with respect to any
Properties or any portions thereof, demand, by written notice to the
applicable Lessee specifying a date (a "TERMINATION DATE") not earlier
than twenty-five (25) days after the date of such notice, that the
applicable Lessee purchase, on such Termination Date, all unsold
Properties and all unsold portions of Properties in accordance with the
provisions of ARTICLE XXI and SECTION 18.2;
(f) The 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 period(s), and such suits shall not in
any manner prejudice the Lessor's right to collect any such damages for
any subsequent period(s), or the 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;
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Master Lease
(g) The Lessor may retain and apply against the Lease Balance
all sums which the Lessor would, absent such Lease Event of Default, be
required to pay to, or turn over to, any Lessee pursuant to the terms
of this Master Lease;
(h) If a Lease Event of Default shall have occurred and be
continuing, the Lessor, as a matter of right and without notice to any
Lessee, shall have the right to apply to any court having jurisdiction
to appoint a receiver or receivers of any Property, and each Lessee
hereby irrevocably consents to any such appointment. Any such
receiver(s) shall have all of the usual powers and duties of receivers
in like or similar cases and all of the powers and duties of the Lessor
in case of entry, and shall continue as such and exercise such powers
until the date of confirmation of the sale of such Property unless such
receivership is sooner terminated;
(i) To the maximum extent permitted by law, each Lessee hereby
waives the benefit of any appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale of any Property or any
interest therein; or
(j) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of
the other Operative Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the obligations
secured hereby may now or hereafter be otherwise secured, whether by
mortgage, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this instrument nor its enforcement, shall
prejudice or in any manner affect the Lessor's right to realize upon or
enforce any other security now or hereafter held by the Lessor, it
being agreed that the Lessor shall be entitled to enforce this
instrument and any other security now or hereafter held by the Lessor
in such order and manner as the Lessor may determine in its absolute
discretion. No remedy herein conferred upon or reserved to the Lessor
is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given
by any of the Operative Documents to the Lessor or to which it may
otherwise be entitled, may be exercised, concurrently or independently,
from time to time and as often as may be deemed expedient by the
Lessor. In no event shall the Lessor, in the exercise of the remedies
provided in this instrument (including, without limitation, in
connection with the assignment of rents to the Lessor, or the
appointment of a receiver and the entry of such receiver onto all or
any part of the Properties), be deemed a "mortgagee in possession," and
the Lessor shall not in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such
remedies.
If, pursuant to the exercise by the Lessor of its remedies pursuant to this
SECTION 16.2 or SECTION 16.4, the Lease Balance and all other amounts due and
owing from the Lessees under this Master Lease and the other Operative Documents
have been paid in full, then the Lessor shall remit to the Company any excess
amounts or Property received by the Lessor.
XVI.3. WAIVER OF CERTAIN RIGHTS. If this Master Lease shall be
terminated pursuant to SECTION 16.2, each Lessee waives, to the fullest extent
permitted by law, (a) any notice of re-entry or the institution
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of legal proceedings to obtain re-entry or possession; (b) any right of
redemption, re-entry or repossession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt or
limiting the Lessor with respect to the election of remedies; and (d) any other
rights which might otherwise limit or modify any of the Lessor's rights or
remedies under this ARTICLE XVI.
XVI.4. POWER OF SALE AND FORECLOSURE. To the extent available under
Applicable Law, in the event that a court of competent jurisdiction rules that
this Master Lease constitutes a mortgage, deed of trust or other secured
financing with respect to any Property as is the intent of the parties pursuant
to ARTICLE XXV, then the Lessor and each Lessee agree that (i) each Lessee
hereby grants a Lien to the Lessor and the Lenders to secure all Equity Amounts
and Loans advanced by the Participants for the acquisition of Land and
construction of the Improvements located on each of the Properties
(corresponding to the value of such Properties as indicated on the Appraisal for
each such Property), together with interest thereon, and all other amounts
payable under the Operative Documents in connection therewith, against each such
Property WITH POWER OF SALE, to the extent permitted by law, and that, upon the
occurrence of any Lease Event of Default, the Lessor shall have the power and
authority, to the extent provided by law, after proper notice and lapse of such
time as may be required by law, to sell such Properties at the time and place of
sale fixed by the Lessor in such notice of sale, either as a whole, or in
separate lots or parcels or items and in such order as the Lessor may elect, at
auction to the highest bidder for cash in lawful money of the United States
payable at the time of sale; accordingly, it is acknowledged that A POWER OF
SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSOR
TO TAKE THE PROPERTIES AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE
ACTION UPON THE OCCURRENCE AND CONTINUANCE OF A LEASE EVENT OF DEFAULT, and (ii)
upon the occurrence of a Lease Event of Default, the Lessor, in lieu of or in
addition to exercising any power of sale hereinabove given, may proceed by a
suit or suits in equity or at law, whether for a foreclosure hereunder, or for
the sale of the Properties, or against any Lessee on a recourse basis for the
Lease Balance, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Properties, or for the enforcement of any other appropriate legal or
equitable remedy.
ARTICLE XVII
LESSOR'S RIGHT TO CURE
XVII.1. THE LESSOR'S RIGHT TO CURE THE LESSEES' LEASE DEFAULTS. The
Lessor, without waiving or releasing any obligation or Lease Event of Default,
may (but shall be under no obligation to) remedy any Lease Event of Default for
the account and at the sole cost and expense of the Lessees, including the
failure by any Lessee to maintain the insurance required by ARTICLE XIII, and
may, to the fullest extent permitted by law, and notwithstanding any right of
quiet enjoyment in favor of the Lessees, enter upon any Property for such
purpose and take all such action thereon as may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of any Lessee. All
reasonable out-of-pocket costs and expenses so incurred (including reasonable
fees and expenses of counsel), together with interest thereon at the Overdue
Rate from the date on which such sums or expenses are paid by the Lessor, shall
be paid by the Lessees to the Lessor as Supplemental Rent.
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ARTICLE XVIII
PURCHASE PROVISIONS
XVIII.1. OPTIONAL PURCHASE OF THE PROPERTY OR PROPERTIES. Subject to
the conditions contained herein, and without limitation of the purchase
obligation of the Lessees pursuant to SECTION 18.2 or 18.3, each Lessee shall
have the irrevocable option on any Business Day to purchase, subject to the last
sentence of this SECTION 18.1, any or all of the Properties subject to this
Master Lease at a price equal to the aggregate Property Balances of the
applicable Properties on the date of such purchase (including all accrued Rent
and other amounts due and owing on such Properties on such date of purchase). A
Lessee's exercise of its option pursuant to this SECTION 18.1 shall be subject
to the following conditions:
(a) such Lessee shall have delivered a Purchase Notice to the
Lessor and the Administrative Agent not less than thirty (30) days
prior to such purchase, specifying the date of such purchase;
(b) no Lease Event of Default shall have occurred and be
continuing; and
(c) no Lessee shall have given notice of its intention to
exercise the Remarketing Option.
If a Lessee exercises its option pursuant to this SECTION 18.1 then, upon the
receipt by the Lessor of all amounts due in connection therewith, the Lessor
shall transfer to such Lessee or its designee all of the Lessor's right, title
and interest in and to all of the Properties in accordance with the terms and
procedures set forth in SECTION 21.1(A), such transfer to be effective as of the
date specified in the Purchase Notice.
Notwithstanding anything herein to the contrary and subject to Article
XV, the Lessee may only exercise its Purchase Option for less than all of the
Properties (but in no event shall such election include the Headquarters
Building) so long as (i) the Property is no longer of strategic importance to
such Lessee's operations; (ii) any such purchase shall be in connection with the
sale of such Property to a Person other than an Affiliate of the Company; and
(iii) no Affiliate of the Company shall operate or manage such Property after
its conveyance (other than on a temporary basis in connection with such
conveyance).
XVIII.2. EXPIRATION DATE PURCHASE OBLIGATION. Unless (a) a Lessee shall
have properly exercised its option pursuant to SECTION 18.1 and purchased all of
the Properties pursuant thereto, or (b) a Lessee shall have properly exercised
the Remarketing Option and shall have fulfilled all of the conditions of CLAUSES
(a) through (l) of SECTION 20.1 hereof, then, subject to the terms, conditions
and provisions set forth in this Article, and in accordance with the terms of
SECTION 21.1(a), the Lessees shall purchase from the Lessor, and the Lessor
shall convey to the Lessees (or their designee), on the Expiration of the Term
all of the interest of the Lessor in all of the Properties for an amount equal
to the Lease Balance. A Lessee may designate, in a notice given to the Lessor
not less than ten (10) Business Days prior to the closing of such purchase (time
being of the essence), the transferee or transferees to whom the conveyance
shall be made (if other than to a 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 or transferees shall
not cause the Lessee to be released, fully or partially, from any of its
obligations under this Master Lease, including, without limitation, the
obligation to pay the Lessor the Lease Balance on such Expiration Date.
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Master Lease
XVIII.3. ACCELERATION OF PURCHASE OBLIGATION.
(a) The Lessees shall be obligated to purchase for an amount
equal to the Lease Balance the interest of the Lessor in all of the
Properties (notwithstanding any prior election to exercise its Purchase
Option pursuant to SECTION 18.1) (i) automatically and without notice
upon the occurrence of any Lease Event of Default specified in CLAUSE
(G) or (H) of SECTION 16.1 and (ii) as provided for at SECTION 16.2(E)
upon written demand of the Lessor upon the occurrence and during the
continuance of any other Lease Event of Default.
(b) The Lessees shall be obligated to purchase for an amount
equal to the Lease Balance (plus all other amounts owing in respect of
Rent (including Supplemental Rent) theretofore accruing) within
twenty-five (25) days after receipt of written demand of the Lessor the
interest of the Lessor in all of the Properties at any time during the
Lease Term when any related Operative Document to which any Lessee is a
party shall cease to give the Lessor or the Lenders the Liens, rights,
powers and privileges purported to be created thereby and such
occurrence creates an adverse effect upon the Lessor or the Lenders
(other than, in each case, as a result of an act or omission by the
Lessor, the Administrative Agent or any Participant).
(c) Any purchase under this SECTION 18.3 shall be in
accordance with ARTICLE XXI.
ARTICLE XIX
EXTENSION OF EXPIRATION DATE
XIX.1. EXTENSION OF EXPIRATION DATE. Subject to the conditions set
forth herein, the Lessees shall have the option (the "EXTENSION OPTION") to
extend the Expiration Date for all, but not less than all, of the Properties
then subject to this Master Lease, for an additional term (each, an "EXTENSION
TERM"), commencing on the first day following the Expiration Date then in
effect, PROVIDED, HOWEVER, that:
(a) the Lessees shall have provided written notice thereof to
the Lessor, the Administrative Agent and each Participant no less than
twelve (12) months prior to the Expiration Date;
(b) on the Expiration Date, (i) no Lease Event of Default
shall have occurred and be continuing and (ii) by exercise of such
Extension Option, the Lessees shall be deemed to represent to the
Lessor as to the matters set forth in CLAUSE (i) of this CONDITION (b);
(c) no Lessee shall have exercised the Remarketing Option; and
(d) the Lessees shall have requested the consent of each
Participant to such extension of the Expiration Date in accordance with
the provisions of Section 9.2 of the Participation Agreement, and each
Participant shall have consented to such request pursuant to Section
9.2 of the Participation Agreement.
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Each Extension Term shall be on the terms and conditions agreed to by
the parties to this Master Lease, except that the Administrative Agent, the
Lessor and the Participants may condition their respective consents to any
request for an extension of the Lease Term on receipt of such fees and
adjustments to Rent as such Persons may, in their sole discretion, require.
ARTICLE XX
REMARKETING OPTION
XX.1. OPTION TO REMARKET. Subject to the fulfillment of each of the
conditions set forth in this SECTION 20.1, each Lessee shall have the option
(the "REMARKETING OPTION") to market and complete the sale of all of the
Properties for the Lessor.
The effective exercise and consummation of the Remarketing Option by a
Lessee shall be subject to the due and timely fulfillment of each of the
following provisions as to each of the Properties as of the dates set forth
below.
(a) Not later than twelve (12) months prior to the Expiration
Date, a Lessee (the "REMARKETING LESSEE") shall give to the Lessor
written notice of such Lessee's exercise of the Remarketing Option,
which exercise shall be irrevocable. Failure by any Lessee to give
timely notice of an election of the Remarketing Option shall be deemed
to be an election by the Lessees, without further act thereby, of the
Purchase Option for all of the Properties.
(b) Not later than three (3) months prior to the Expiration
Date, such Lessee shall deliver, or cause to be delivered, to the
Lessor an Environmental Audit for each of the Properties. Such
Environmental Audit shall be prepared by an environmental consultant
approved by the Lessor in the Lessor's reasonable discretion and shall
contain conclusions reasonably satisfactory to the Lessor as to the
environmental status of the Properties. If any such Environmental Audit
indicates any exceptions, such Lessee shall have also delivered, or
cause to be delivered, prior to the Expiration Date a Phase Two
environmental assessment by such environmental consultant and a written
statement by such environmental consultant indicating that all such
exceptions have been remedied in compliance with Applicable Law.
(c) On the date of a Lessee's notice to the Lessor of such
Lessee's exercise of the Remarketing Option, no Lease Event of Default
or Lease Default shall exist, and thereafter, no Lease Event of Default
or Lease Default shall occur.
(d) The Completion Date shall have occurred with respect to
each Property prior to any Lessee's delivery of notice of its intention
to exercise the Remarketing Option.
(e) All of the Lessees shall have completed all Modifications,
restoration, rebuilding and remediation of all affected Properties
pursuant to SECTIONS 10.1, 14.1 and 15.1 (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 prior to the date on
which the Lessor receives notice of a Lessee's intention to exercise
the Remarketing Option (time being of the essence), regardless of
whether the
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Master Lease
same shall be within any Lessee's control; provided, however, if any
Property is damaged by a Casualty or Condemnation and cannot be
restored by the exercise of reasonable diligence by the date of
Lessee's notice, or if any Property is damaged by a Casualty or
Condemnation after Lessee's notice and cannot be restored by the
exercise of reasonable diligence by the Expiration Date, Lessee shall
have the right to purchase such Property for the Lease Balance thereof
on the Expiration Date and to exercise the Remarketing Option with
respect to the other Properties. All of the Lessees shall have also
paid the cost of all Modifications commenced prior to the Expiration
Date. No Lessee shall have been excused pursuant to SECTION 12.1 from
complying with any Applicable Law that involved the extension of the
ultimate imposition of such Applicable Law beyond the Expiration of the
Term. Any Permitted Property Liens (other than Lessor Liens) on any
Property that were contested by any Lessee shall have been removed.
(f) During the Marketing Period, the Remarketing Lessee shall,
as nonexclusive agent for the Lessor, use its best efforts to sell the
interest of the Lessor in all of the Properties and will attempt to
obtain the highest purchase price therefor and for not less than the
Fair Market Sales Value. In addition, in order to facilitate such
sale(s), a Lessee shall cause the Company to offer all of the Company's
interest in the Headquarters Building covered by the Ground Lease to
any prospective purchaser thereof, and the amount of the purchase price
of such Property allocated to such Land shall be the Fair Market Sales
Value of such Land as if such Land were vacant and had no Improvements
whatsoever. The Remarketing Lessee will be responsible for hiring
brokers and making the Properties available for inspection by
prospective purchasers. Each Lessee shall promptly upon request permit
inspection of any Property and any maintenance records relating to any
Property by the Administrative Agent, the Lessor, any Participant and
any potential purchasers, and shall otherwise do all things necessary
to sell and deliver possession of the Properties to any purchaser. All
such marketing of the Properties shall be at the sole expense of the
Remarketing Lessee and the other Lessees. Each Lessee shall allow the
Administrative Agent, the Lessor, any Participant and any potential
qualified purchaser reasonable access to the Properties for the purpose
of inspecting the same.
(g) The Remarketing Lessee shall use good faith efforts to
attempt to procure bids from one or more bona fide prospective
purchasers and shall deliver to the Lessor and the Participants not
less than ninety (90) days prior to the Expiration Date all binding
written and, except as set forth below, irrevocable offers by such
purchaser or purchasers offering to purchase the Properties. No such
purchaser shall be a Lessee or any Subsidiary or Affiliate of a Lessee.
The written offers must specify the Expiration Date as the closing date
unless the Administrative Agent, the Lessor and the Participants shall
otherwise agree in their sole discretion.
(h) The Remarketing Lessee shall submit all bids, if any, to
the Lessor and the Participants, and the Lessor will have the right to
submit any one or more bids. Any sale by the Remarketing Lessee shall
be for the highest cash bid submitted to the Lessor. The determination
of the highest bid shall be made by the Lessor thirty (30) days prior
to the end of the Marketing Period, but in any event, the Lessor shall
have no obligation to approve any bid for any Property unless each
highest bid for each of the respective Properties, in the aggregate,
equal or exceed the Equity Balance, after giving effect to the payment
required to be made pursuant to Section 20.1(k) regarding the Loan
Balance. (Lessor's rejection of any bid shall not be considered as a
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Master Lease
fulfillment of this provision.) All bids shall be on an all-cash basis
unless the Administrative Agent, the Lessor and the Participants shall
otherwise agree in their sole discretion.
(i) In connection with any such sale of any Property, the
Lessee of such Property 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 such
Property, including, without limitation, an environmental indemnity to
the extent the same are reasonably requested by the purchaser and
consistent in scope, duration and form with indemnities,
representations and warranties provided for similar types of properties
located in the jurisdiction. The Lessee of such Property shall have
obtained, at its cost and expense, all required governmental and
regulatory consents and approvals and shall have made all filings as
required by Applicable Law in order to carry out and complete the
transfer of each of the Properties. As to the Lessor, any such sale
shall be made on an "as is, with all faults" basis without
representation or warranty by the Lessor other than the absence of
Lessor Liens attributable to the Lessor. Any agreement as to such sale
shall be made subject to the rights of the Lessor.
(j) The Remarketing Lessee shall pay directly, and not from
the sale proceeds, all prorations, credits, costs and expenses of the
sale of the Properties, whether incurred by the Administrative Agent,
the Lessor, the Remarketing Lessee or any other Lessee, including
without limitation, the cost of all title insurance, surveys,
environmental reports, appraisals, transfer taxes, the reasonable
attorneys' fees of the Administrative Agent, the Lessor and
Participants, the Lessees' attorneys' fees, commissions, escrow fees,
recording fees, and all applicable documentary and other transfer
taxes.
(k) The Remarketing Lessee shall pay to the Lessor on or prior
to the Expiration Date (or in the case of Supplemental Rent, to the
Person entitled thereto) an amount equal to the Loan Balance (including
all accrued and unpaid Rent (including Supplemental Rent, if any) and
all other amounts hereunder which have accrued or will accrue prior to
or as of the Expiration Date), in the type of funds specified in
SECTION 3.4 hereof.
(l) The Remarketing Lessee shall pay to the Lessor on or prior
to the Expiration Date the amounts, if any, required to be paid
pursuant to Section 11.2 of the Participation Agreement.
(m) The sale of all of the Properties for which bids have been
submitted pursuant to CLAUSE (h) above and approved by the Lessor shall
be consummated on the Expiration Date and the gross proceeds (the
"GROSS REMARKETING PROCEEDS") of the sale of the Properties (i.e.,
without deduction for any marketing, closing or other costs, prorations
or commissions) shall be paid directly to the Lessor; PROVIDED,
HOWEVER, that if the sum of (x) the Gross Remarketing Proceeds from
such sale PLUS (y) the Loan Balance received by the Lessor pursuant to
CLAUSE (k) exceeds the Lease Balance as of such date, then the excess
shall be paid to the Remarketing Lessee on the Expiration Date.
If one or more of the foregoing provisions shall not be fulfilled as of
the date set forth above with respect to any Property, the Lessor shall declare
by written notice to the Lessees the Remarketing Option to be null and void
(whether or not it has been theretofore exercised by any Lessee) as to all of
the Properties, in which event all of the rights of the Lessees under this
SECTION 20.1 shall immediately
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Master Lease
terminate and the Lessees shall be obligated to purchase all of the Properties
pursuant to SECTION 18.2 on the Expiration Date. If the Remarketing Lessee has
fulfilled all of the foregoing provisions of this SECTION 20.1 as of the
Expiration Date, then the Lessees will have no obligation to purchase any unsold
properties on or after such date.
Except as expressly set forth herein, no Lessee shall have the right,
power or authority to bind the Lessor in connection with any proposed sale of
any Property.
XX.2. CERTAIN OBLIGATIONS CONTINUE. During the Marketing Period, the
obligations of the Lessees to pay Rent with respect to each Property leased by
such Lessee (including the installment of Rent due on the Expiration Date) shall
continue undiminished until payment in full of the Loan Balance and all other
amounts due to the Participants with respect to the Properties under the
Operative Documents to which any Lessee is a party. The Lessor shall have the
right, but shall be under no duty, to solicit bids, to inquire into the efforts
of the Remarketing Lessee to obtain bids or otherwise to take action in
connection with any such sale.
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
XXI.1. PROVISIONS RELATING TO THE EXERCISE OF PURCHASE OPTION OR
OBLIGATION AND CONVEYANCE UPON REMARKETING AND CONVEYANCE UPON CERTAIN OTHER
EVENTS.
(a) In connection with any termination of this Master Lease
with respect to any Property pursuant to the terms of ARTICLE XV, in
connection with any purchase or in connection with any Lessee's
purchase of any Property in accordance with ARTICLE XIV, ARTICLE XVIII
or obligations under SECTION 16.2(e) or the payment of all amounts due
under Section 5.1 of the Construction Agency Agreement, then, upon the
date on which this Master Lease is to terminate with respect to the
applicable Property and upon tender by a Lessee of the amounts set
forth in ARTICLE XV, SECTION 16.2(e), 18.1, 18.2, 18.3 or Section 5.1
of the Construction Agency Agreement, as applicable:
(i) the Lessor shall execute and deliver to the
Lessees (or to the Lessees' designee) at the Lessees' cost and
expense: (x) a deed with respect to such Property (and, with
respect to the Headquarters Building, such deed shall apply
only to Improvements located on such Property and shall be
accompanied by a termination of the Ground Lease) without
recourse, representation or warranty, except with respect to
grantor's acts and to Lessor Liens, (y) a quitclaim bill of
sale with respect to the Equipment located on such Property
and (z) an assignment of the entire interest of the Lessor in
such Property or Properties (which shall include an assignment
of all of the right, title and interest of the Lessor in and
to any Net Proceeds with respect to such Property or
Properties not previously received by the Lessor and an
assignment of leases of the Properties), in each case in
recordable form and otherwise in conformity with local custom
and free and clear of the Lien of the Lessor Mortgage and any
Lessor Liens;
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Master Lease
(ii) such Property shall be conveyed to the Lessees
(or their designee) "AS IS" and in its then present physical
condition; and
(iii) the Lessor shall execute and deliver to the
Lessees and the Lessees' title insurance company an affidavit
as to the Lessor's title and Lessor Liens attributable to it
and shall execute and deliver to Lessee a statement of
termination of this Master Lease, the applicable Lease
Supplement and the Construction Agency Agreement, in each case
to the extent such Operative Documents relate to such
Property, and shall use reasonable efforts to cause the
Lenders to execute and deliver a release of the Assignment of
Leases and Rents, the Lease Supplement, the Lessor Mortgage,
the Lessor Financing Statements and the Construction Agency
Agreement Assignment and, to the extent reasonably requested
by the Lessees, any other Operative Documents, in each case to
the extent relating to such Property.
(b) If any Lessee properly exercises the Remarketing Option,
then each Lessee shall, on the Expiration Date, and at its own cost,
transfer possession of all of the Properties to the independent
purchaser(s) thereof or, if no sale has been so consummated, to the
Lessor, in each case by surrendering the same into the possession of
the Lessor or such purchaser(s), as the case may be, free and clear of
all Liens other than Lessor Liens and the lien of the Lessor Mortgage,
in good condition (as modified by Modifications permitted by this
Master Lease), ordinary wear and tear excepted, and in compliance with
Applicable Law. With respect to the Headquarters Building (i) the
Lessor Mortgage shall be released as to the Company's fee interest in
the Land and (ii) the Company shall retain its fee interest in the
Land. Each Lessee shall, on and within a reasonable time before and up
to one year after the Expiration Date, cooperate reasonably with the
Administrative Agent, the Lessor and the independent purchaser(s) of
the Properties in order to facilitate the purchase by such purchaser(s)
of the Properties, which cooperation shall include the following, all
of which each Lessee shall do on or before the Expiration Date or as
soon thereafter as is reasonably practicable: providing copies of all
books and records regarding the maintenance and ownership of the
Properties and all know-how, data and technical information relating
thereto, providing a current copy of the Plans and Specifications for
each Property, granting or assigning all licenses in such Lessee's name
necessary for the operation and maintenance of each Property and
cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of each Lessee under this
paragraph shall survive the expiration or termination of this Master
Lease.
ARTICLE XXII
ESTOPPEL CERTIFICATES
XXII.1. ESTOPPEL CERTIFICATES. At any time and from time to time upon
not less than ten (10) Business Days' prior request by the Lessor or any Lessee
(the "REQUESTING PARTY"), the other party (whichever party shall have received
such request, the "CERTIFYING PARTY") shall furnish to the Requesting Party a
certificate signed by an individual having the office of vice president or
higher in the Certifying Party certifying that this Master Lease is in full
force and effect (or that this Master Lease is in full force and effect as
modified and setting forth the modifications); the dates to which the Basic Rent
and
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Master Lease
Supplemental Rent have been paid; to the best knowledge of the signer of such
certificate, whether or not the Requesting Party is in default under any of its
obligations hereunder (and, if so, the nature of such alleged default); and such
other matters under this Master Lease as the Requesting Party may reasonably
request. Any such certificate furnished pursuant to this ARTICLE XXII may be
relied upon by the Requesting Party, and any existing or prospective mortgagee,
purchaser or lender, and any accountant or auditor, of, from or to the
Requesting Party (or any Affiliate thereof).
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
XXIII.1. ACCEPTANCE OF SURRENDER. No surrender to the Lessor of this
Master Lease or of all or any of the Properties or of any part of any thereof or
of any interest therein shall be valid or effective unless agreed to and
accepted in writing by the Lessor and, prior to the payment or performance of
all obligations under the Loan Agreement and termination of the Commitments, the
Administrative Agent, and no act by the Lessor or any Lender or any
representative or agent of the Lessor or any Lender, other than a written
acceptance, shall constitute an acceptance of any such surrender.
ARTICLE XXIV
NO MERGER OF TITLE
XXIV.1. NO MERGER OF TITLE. There shall be no merger of this Master
Lease or of the leasehold estate created hereby by reason of the fact that the
same Person may acquire, own or hold, directly or indirectly, in whole or in
part, (a) this Master Lease or the leasehold estate created hereby or any
interest in this Master Lease or such leasehold estate, (b) the fee or ground
leasehold estate in any Property, except as may expressly be stated in a written
instrument duly executed and delivered by the appropriate Person or (c) a
beneficial interest in the Lessor.
ARTICLE XXV
INTENT OF THE PARTIES
XXV.1. NATURE OF TRANSACTION. It is the intent of the parties that: (i)
the Master Lease and Lease Supplements constitute operating leases from the
Lessor to the Lessees for purposes of the Lessees' financial reporting, (ii) the
Master Lease, Lease Supplements and other transactions contemplated hereby
preserve ownership of the Properties in the Lessees and the obligations of the
Lessees to pay Basic Rent and any part of the Lease Balance shall be treated as
payments of interest and principal, respectively, for Federal, state and local
income tax and bankruptcy purposes, and (iii) the Master Lease and each Lease
Supplement grants to the Lessor a security interest in and mortgage on the
Properties covered thereby.
ARTICLE XXVI
[INTENTIONALLY OMITTED]
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Master Lease
ARTICLE XXVII
MISCELLANEOUS
XXVII.1. SURVIVAL; SEVERABILITY; ETC. Anything contained in this Master
Lease to the contrary notwithstanding, all claims against and liabilities of the
Lessees or the Lessor arising from events commencing prior to the expiration or
earlier termination of this Master Lease shall survive such expiration or
earlier termination for a period of one year except as to indemnification,
representations and warranties which shall continue to survive. If any term or
provision of this Master Lease or any application thereof shall be declared
invalid or unenforceable, the remainder of this Master Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of any Lessee provided in this Master Lease, including any right
or option described in ARTICLE XIV, XV, XVIII or XX, would, in the absence of
the limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the date of death of the last
survivor of the descendants of Franklin D. Roosevelt, the former President of
the United States, Henry Ford, the deceased automobile manufacturer, and John D.
Rockefeller, the founder of the Standard Oil Company, known to be alive on the
date of the execution, acknowledgement and delivery of this Master Lease.
XXVII.2. AMENDMENTS AND MODIFICATIONS. Subject to the requirements,
restrictions and conditions set forth in the Participation Agreement, neither
this Master Lease nor any provision hereof may be amended, waived, discharged or
terminated except by an instrument in writing in recordable form signed by the
Lessor and each Lessee.
XXVII.3. NO WAIVER. No failure by the Administrative Agent, the Lessor,
any Participant or any Lessee to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy upon a default hereunder, and
no acceptance of full or partial payment of Rent during the continuance of any
such default, shall constitute a waiver of any such default or of any such term.
To the fullest extent permitted by law, no waiver of any default shall affect or
alter this Master Lease, and this Master Lease shall continue in full force and
effect with respect to any other then existing or subsequent default.
XXVII.4. NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and directed to the
address described in, and deemed received in accordance with the provisions of,
Section 15.3 of the Participation Agreement.
XXVII.5. SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Master Lease shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
XXVII.6. HEADINGS AND TABLE OF CONTENTS. The headings and table of
contents in this Master Lease are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
XXVII.7. COUNTERPARTS. This Master Lease may be executed in any number
of counterparts,
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Master Lease
each of which shall be an original, but all of which shall together constitute
one and the same instrument.
XXVII.8. GOVERNING LAW. THIS MASTER LEASE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO
THE CREATION OF THE LEASEHOLD ESTATES 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 STATES IN WHICH SUCH ESTATES ARE LOCATED. WITHOUT
LIMITING THE FOREGOING, IN THE EVENT THAT THIS MASTER LEASE IS DEEMED TO
CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN
THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT THE
LIEN CREATED HEREBY AND THE CREATION AND THE ENFORCEMENT OF SAID LIEN SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH
ESTATES ARE LOCATED.
XXVII.9. LIMITATIONS ON RECOURSE. The parties hereto agree that the
Lessor shall not have any personal liability whatever to the Company or the
Lessees or their respective successors and assigns for any claim based on or in
respect of this Master Lease or any of the other Operative Documents or arising
in any way from the transactions contemplated hereby or thereby; PROVIDED,
HOWEVER, that the Lessor shall be personally liable (a) for its own willful
misconduct or gross negligence, (b) for liabilities that may result from its
breach of any of its covenants, agreements or obligations set for in or from any
misrepresentation of the Lessor (in its capacity as such) in any of the
Operative Documents, (c) for any Tax based on or measured by any fees,
commission or compensation received by it for acting as the Lessor (in its
capacity as such) as contemplated by the Operative Documents or (d) as the other
Operative Documents expressly provide that Lessor (in its capacity as such)
shall have personal liability. It is understood and agreed that, except as
provided in the preceding sentence: (i) the Lessor (acting in such capacity)
shall not have any personal liability for any of the Operative Documents as a
result of acting pursuant to and consistent with any of the Operative Documents;
(ii) all obligations of the Lessor to the Company and the Lessees under the
Operative Documents and in connection with the transactions contemplated thereby
are solely nonrecourse obligations and shall be enforceable solely against the
interest of the Lessor in the Properties; and (iii) all such personal liability
of the Lessor is expressly waived and released as a condition of, and as
consideration for, the execution and delivery of the Operative Documents by the
Lessor.
XXVII.10. ORIGINAL LEASE. The single executed original of this Master
Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the
signature page thereof and containing the receipt thereof of the Administrative
Agent on or following the signature page thereof shall be the Original Executed
Counterpart of this Master Lease (the "ORIGINAL EXECUTED COUNTERPART"). To the
extent that this Master Lease 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 Master Lease may be created through the transfer or
possession of any counterpart other than the Original Executed Counterpart.
XXVII.11. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
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Master Lease
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED THEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS MASTER LEASE AND/OR ANY OF THE OTHER
OPERATIVE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
SUCH PARTIES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS MASTER LEASE AND EACH
SUCH OTHER OPERATIVE DOCUMENT.
[THE REMAINDER OF THIS PAGE HAS BEEN
INTENTIONALLY LEFT BLANK]
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Master Lease
IN WITNESS WHEREOF, the parties have caused this Master Lease be duly
executed and delivered as of the date first above written.
CARDINAL HEALTH, INC.
By /s/ David Bearman
-------------------------------
David Bearman
Executive Vice President,
Chief Financial Officer
and Acting Treasurer
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Master Lease
IN WITNESS WHEREOF, the parties have caused this Master Lease be duly
executed and delivered as of the date first above written.
BMO LEASING (U.S.), INC., as Lessor
By /s/ Ernest C. Cechetto
--------------------------------
Ernest C. Cechetto
Managing Director
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<PAGE> 38
Master Lease
THIS COUNTERPART IS NOT THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
BANK OF MONTREAL, as Administrative Agent
By /s/ Peter Steelman
-------------------------------------
Peter Steelman
Director
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<PAGE> 39
Master Lease
EXHIBIT A
TO MASTER LEASE
LEASE SUPPLEMENT NO. __
(And Memorandum of Lease Supplement, Memorandum of Master Lease and
Memorandum of Option to Purchase)
THIS LEASE SUPPLEMENT NO. __ (And Memorandum of Lease Supplement,
Memorandum of Master Lease and Memorandum of Option to Purchase) (this "LEASE
SUPPLEMENT") dated as of _______ __, 199_, between [NAME OF LESSEE], a
_____________________________, having its principal office at
________________________________________________, as the Lessee and as mortgagor
(the "SUBJECT LESSEE"), and BMO LEASING (U.S.), INC., a Delaware corporation,
having its principal office at ________________________________________________,
as the Lessor (the "LESSOR") and as mortgagee for the benefit of the
Participants (as defined in Appendix A to the Master Lease referred to below).
W I T N E S S E T H:
--------------------
WHEREAS, the Lessor is the [record owner] [ground lessee] of the land
described on SCHEDULE I attached hereto (the "SUBJECT LAND") and is the owner of
all Improvements on the Subject Land together with all Improvements which
hereafter may be constructed on the Subject Land (the "SUBJECT IMPROVEMENTS"
and, together with the Subject Land, the "SUBJECT PROPERTY");
WHEREAS, the Lessor desires to lease the Subject Property to the
Subject Lessee and the Subject Lessee wishes to lease the Subject Property from
the Lessor;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree to enter
into this Lease Supplement, as follows:
1. CERTAIN TERMS. Capitalized terms used but not otherwise defined in this Lease
Supplement have the meanings specified in Appendix A to the Master Lease and
Open End Mortgage dated as of June __, 1997 (as amended, restated, supplemented
or otherwise modified from time to time, the "MASTER LEASE"), among the Lessor
and the Lessees party thereto; and the rules of interpretation specified in
Appendix A to the Master Lease shall apply to this Lease Supplement.
2. NATURE OF TRANSACTION. It is the intent of the parties that: (i) the
Master Lease and Lease Supplements constitute operating leases from the Lessor
to the Lessees for purposes of the Lessees' financial reporting, (ii) the Master
Lease, Lease Supplements and other transactions contemplated hereby preserve
ownership of the Properties in the Lessees and the obligations of the Lessees to
pay Basic Rent and any part of the Lease Balance shall be treated as payments of
interest and principal, respectively, for Federal, state and local income tax
and bankruptcy purposes, and (iii) the Master Lease and each Lease Supplement
grants to the Lessor a security interest in and mortgage on the Properties
covered thereby.
<PAGE> 40
Master Lease
3. SUBJECT PROPERTY; MEMORANDUM OF LEASE. Attached hereto as SCHEDULE I
is the description of the Subject Land and attached hereto as SCHEDULE II is the
description of all Improvements located on the Subject Land as of the date
hereof. Effective upon the execution and delivery of this Lease Supplement by
the Lessor and the Subject Lessee, the Subject Property shall be subject to the
terms and provisions of the Master Lease. The Master Lease is incorporated by
reference herein as if set forth herein in its entirety. Subject to the terms
and conditions of the Master Lease, the Lessor hereby leases the Subject
Property to the Subject Lessee for the Lease Term (as defined below) of this
Lease Supplement, and the Subject Lessee hereby agrees, expressly for the direct
benefit of the Lessor, to lease the Subject Property from the Lessor for the
Lease Term.
4. LEASE TERM; OPTION TO PURCHASE; REMARKETING OPTION. The term of this
Lease Supplement (the "LEASE TERM") shall begin on the date hereof and shall end
on the Expiration Date, unless the Lease Term with respect to the Subject
Property is extended or earlier terminated in accordance with the provisions of
the Master Lease or the other Operative Documents. For and in consideration of
good and valuable consideration paid by the Subject Lessee to the Administrative
Agent as described in the Master Lease, the Lessor hereby grants to the Subject
Lessee the right to purchase the Subject Property or to market and sell the
Subject Property during the Lease Term of this Lease Supplement on the terms set
forth in the Master Lease.
5. LIENS AND SECURITY INTERESTS. (a) Specifically, without limiting the
generality of SECTION 2, the Lessor and the Subject Lessee intend and agree that
in the event of any insolvency or receivership proceedings or a petition under
the United States bankruptcy laws or any other applicable insolvency laws or
statute of the United States of America or any State or Commonwealth thereof
affecting any Lessee, the Lessor, any Participant or any collection actions, the
transactions evidenced by the Operative Documents shall be regarded as loans
made by the Lenders and the Lessor as unrelated third party lenders to the
Lessees secured by all Land and Improvements (it being understood that the
Subject Lessee hereby mortgages and warrants and grants a security interest in
the Subject Property (consisting of a fee mortgage with respect to the Subject
Property) to the Lessor and the Lenders to secure all Equity Amounts and Loans
advanced by the Participants for the acquisition of the Land and construction of
the Improvements thereon, together with Equity Yield or interest, as applicable,
thereon, and all other amounts payable under the Operative Documents in
connection therewith, effective on the date hereof).1
(b) Specifically, but without limiting the generality of SECTION 2, the
Lessor and the Subject Lessee further intend and agree that, for the purpose of
securing the obligations of all of the Lessees for the repayment of the
above-described loans from the Lessor and the Lenders to the Lessees, (i) the
Master Lease and Lease Supplements shall also be deemed to be a security
agreement and financing statement within the meaning of Article 9 of the Uniform
Commercial Code and a real property mortgage or deed of trust; (ii) the
conveyance provided for hereby and in Article II of the Master Lease shall be
deemed to be a grant by the Lessees to the Lessor and the Lenders of a mortgage
lien and security interest in all of the right, title and interest of the
Lessees in and to all Land and Improvements (including the Subject Property)
- --------
1 Appropriate granting language for the creation of a mortgage/deed of
trust lien will be used in each jurisdiction.
-2-
<PAGE> 41
Master Lease
and all proceeds of the conversion, voluntary or involuntary, of the foregoing
into cash, investments, securities or other property (it being understood that
the Subject Lessee hereby mortgages and warrants and grants a security interest
in all Land and Improvements (including the Subject Property) to the Lessor for
the benefit of the Lessor and the Lenders to secure all Loans and Equity Amounts
advanced by the Participants for the acquisition of the Land and construction of
Improvements thereon, together with interest thereon, and all other amounts
payable under the Operative Documents in connection therewith)2; (iii) the
possession by the Lessor or any of its agents of notes and such other items of
property as constitute instruments, money, negotiable documents or chattel paper
shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the Uniform
Commercial Code; and (iv) notifications to Persons holding such property, and
acknowledgements, receipts or confirmations from financial intermediaries,
bankers or agents (as applicable) of the Lessees shall be deemed to have been
given for the purpose of perfecting such security interest under Applicable Law.
The Lessor and the Subject Lessee shall, to the extent consistent with the
Master Lease and Lease Supplements, take such actions and execute, deliver, file
and record such other documents, financing statements, mortgages and deeds of
trust as may be necessary to ensure that, if the Lease was deemed to create a
security interest in all Land and Improvements in accordance with this Section,
such security interest would be deemed to be a perfected security interest
(subject only to Permitted Property Liens) and will be maintained as such
throughout the Lease Term.
(c) Notwithstanding any other provision herein, each Lender has agreed
pursuant to the Loan Agreement that it shall not, without the written consent of
the Lessor (which consent may be withheld in the sole and absolute discretion of
the Lessor), take any action, or otherwise request that any action be taken, to
enforce the lien of the Master Lease, any Lease Supplement (including this Lease
Supplement), any Lessor Mortgage, the Assignment of Leases and Rents or the
Construction Agency Agreement Assignment, including, without limitation, (A) any
action (statutory or otherwise) relating to a sale under power of sale, (B)
accepting a deed-in-lieu of foreclosure or otherwise taking title to, or
authorizing the conveyance of, the Subject Property or any portion thereof, (C)
appointing a receiver or taking any other action to obtain possession or control
of the Subject Property or any portion thereof, or (D) commencing or
participating in any foreclosure proceeding, prior to the payment in full of the
Equity Balance and all other amounts payable to the Lessor under the
Participation Agreement and the other Operative Documents, the permanent
termination of all Commitments of the Lessor, and the satisfaction of all other
obligations to the Lessor under the Operative Documents.
(d) Pursuant to the Loan Agreement, the Administrative Agent and each
Lender have covenanted and agreed, for the benefit of the Lessor, that, to the
extent and in the manner set forth in the Loan Agreement and notwithstanding any
other provision of the Loan Agreement, upon the occurrence of a Lease Event of
Default, the rights of the Lenders with respect to amounts received by the
Lessor or by the Administrative Agent in connection with (i) the sale of all or
any part of any one or more Properties (including, without limitation, the
Subject Property) or (ii) any subleases affecting the Properties (including,
without limitation, the Subject Property) or any rents, issues or profits
accruing thereunder, shall be subordinate and subject in right of payment to the
prior payment in full in cash of the Participant
- ----------------
2 Appropriate granting language for the creation of a mortgage/deed of
trust lien will be used in each jurisdiction.
-3-
<PAGE> 42
Master Lease
Balance of the Lessor.
6. POWER OF SALE. To the extent available under Applicable Law, without
limiting any other remedies set forth herein, in the event that a court of
competent jurisdiction rules that each of the Master Lease and this Lease
Supplement constitutes a mortgage, deed of trust or other secured financing with
respect to the Subject Property as is the intent of the parties pursuant to
Article XXV of the Master Lease, then the Lessor and the Subject Lessee agree
that (i) the Subject Lessee hereby grants to the Lessor and the Lenders a Lien
against the Subject Property (including the fee simple estate therein) WITH
POWER OF SALE to the extent permitted by law, and that, upon the occurrence and
during the continuance of any Lease Event of Default, the Lessor shall have the
power and authority, to the extent provided by law, after proper notice and
lapse of such time as may be required by law, to sell the Subject Property
(including the fee simple estate therein) at the time and place of sale fixed by
the Lessor in such notice of sale, either as a whole, or in separate lots or
parcels or items and in such order as the Lessor may elect, at auction to the
highest bidder for cash in lawful money of the United States payable at the time
of sale; accordingly, it is acknowledged that A POWER OF SALE HAS BEEN GRANTED
IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSOR TO TAKE THE SUBJECT
PROPERTY AND SELL THE SUBJECT PROPERTY (INCLUDING THE FEE SIMPLE ESTATE THEREIN)
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE AND
CONTINUANCE OF A LEASE EVENT OF DEFAULT UNDER THE MASTER LEASE, and (ii) upon
the occurrence and during the continuance of a Lease Event of Default, the
Lessor, in lieu of or in addition to exercising any power of sale hereinabove
given, may proceed by a suit or suits in equity or at law, whether for a
foreclosure hereunder, or for the sale of the Properties (including without
limitation the Subject Property), or against the Subject Lessee on a recourse
basis for the Lease Balance, or for the specific performance of any covenant or
agreement contained herein or in the Master Lease or any other Lease or in aid
of the execution of any power granted herein or in the Master Lease or in any
other Lease, or for the appointment of a receiver pending any foreclosure
hereunder or the sale of the Properties (including without limitation, the
Subject Property), or for the enforcement of any other appropriate legal or
equitable remedy. Lessee shall have all rights available to a Mortgagor under
the laws of the jurisdiction in which the Properties are located.3
7. RATIFICATION. The terms and provisions of the Master Lease are
hereby ratified and confirmed and remain in full force and effect. In the event
of any conflict between the terms of the Master Lease and the terms of this
Lease Supplement, the terms of the Master Lease shall control.
8. GOVERNING LAW. THE MASTER LEASE AND THIS LEASE SUPPLEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO
MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES THEREUNDER AND THE
EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT
- --------------------
3 Mortgage remedies are a matter of state law and vary from jurisdiction
to jurisdiction. Local counsel will be consulted to be sure that the
Memorandum covers all remedies available under local law, and that any
waivers or other provisions required by state statutes to ensure
enforceability of particular remedies are included in the Lease
Supplement.
-4-
<PAGE> 43
Master Lease
THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE IN WHICH THE SUBJECT PROPERTY IS LOCATED. WITHOUT LIMITING THE
FOREGOING, IN THE EVENT THAT THE MASTER LEASE AND THIS LEASE SUPPLEMENT ARE
DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED
THEREBY, BUT THE LIEN CREATED THEREBY AND HEREBY AND THE CREATION AND THE
ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE IN WHICH THE SUBJECT PROPERTY IS LOCATED.
9. 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.
10. FUTURE ADVANCES. In the event a court of competent jurisdiction
rules that this instrument constitutes a mortgage, deed of trust or other
secured financing as is the intent of the parties pursuant to SECTION 5 hereof,
then this instrument will be deemed given to secure not only existing financing,
but also future advances of up to ________________________ Dollars
($___________) made pursuant to or as provided in the Master Lease, for the
matters described in SECTION 5, whether such advances are obligatory or to be
made at the option of the Participants, or otherwise, to the same extent as if
such future advances were made on the date of execution of this instrument,
although there may be no advance made at the time of execution hereof, and
although there may be no financing outstanding at the time any advance is made.
To the fullest extent permitted by law, the lien of this instrument shall be
valid as to all such amounts, including all future advances, from the time this
instrument is recorded. Nothing contained herein shall be deemed an obligation
to make future advances to the Subject Lessee or any other Lessee.
-5-
<PAGE> 44
Master Lease
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Lease Supplement as of the date first above written.
LESSEE:
[NAME OF LESSEE]
By
----------------------------------------
Name:
Title:
5-1
<PAGE> 45
Master Lease
LESSOR:
BMO LEASING (U.S.), INC.
By
----------------------------------------
Name:
Title:
5-2
<PAGE> 46
Master Lease
STATE OF ___________ )
) ss.:
COUNTY OF __________ )
The foregoing Lease Supplement No. ___ was acknowledged before me, the
undersigned Notary Public, in the County of ________________, _________ of
_____________, this ____ day of _____________, 199__, by ________________, as
________________ of [NAME OF LESSEE], a ___________________, on behalf of said
_____________________.
[Notarial Seal]
Notary Public ----------------------------
My commission expires:
---------------------
<PAGE> 47
Master Lease
STATE OF ____________ )
) ss.:
COUNTY OF ___________ )
The foregoing Lease Supplement No. ___ was acknowledged before me, the
undersigned Notary Public, in the County of _____________, State of
_____________, this ____ day of ____________, 199__, by __________________, as
________________ of BMO LEASING (U.S.), INC., a Delaware corporation, as Lessor.
[Notarial Seal]
--------------------------------
Notary Public
My commission expires:
------------------------
<PAGE> 48
Master Lease
SCHEDULE I
TO LEASE SUPPLEMENT NO. __
LEGAL DESCRIPTION OF SUBJECT LAND
<PAGE> 49
Master Lease
SCHEDULE II
TO LEASE SUPPLEMENT NO. __
DESCRIPTION OF IMPROVEMENTS ON SUBJECT LAND
<PAGE> 50
Master Lease
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
ARTICLE I DEFINITIONS
<S> <C> <C>
1.1. Definitions; Interpretation.................................................................................1
ARTICLE II MASTER LEASE
2.1. Acceptance and Lease of Property............................................................................2
2.2. Acceptance Procedure........................................................................................2
2.3. Lease Term..................................................................................................2
2.4. Title.......................................................................................................3
ARTICLE III PAYMENT OF RENT
3.1. Rent........................................................................................................3
3.2. Payment of Basic Rent.......................................................................................3
3.3. Supplemental Rent...........................................................................................3
3.4. Method of Payment...........................................................................................4
ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT
4.1. Quiet Enjoyment.............................................................................................4
4.2. Right to Inspect............................................................................................4
ARTICLE V NET LEASE, ETC.
5.1. Net Lease...................................................................................................4
5.2. No Termination or Abatement.................................................................................5
ARTICLE VI SUBLEASES
6.1. Subletting..................................................................................................6
ARTICLE VII LESSEE ACKNOWLEDGMENTS
7.1. Condition of the Properties.................................................................................6
7.2. Risk of Loss................................................................................................7
7.3. Assignment to Administrative Agent..........................................................................7
ARTICLE VIII POSSESSION AND USE OF THE PROPERTIES, ETC.
8.1. Utility Charges.............................................................................................7
8.2. Use of the Properties.......................................................................................7
</TABLE>
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<PAGE> 51
Master Lease
<TABLE>
<S> <C> <C>
8.3. Compliance with Requirements of Law, Property Legal Requirements and Insurance
Requirements............................................................................................7
8.4. Assignment by Lessees.......................................................................................8
ARTICLE IX MAINTENANCE AND REPAIR; RETURN
9.1. Maintenance and Repair; Return..............................................................................8
ARTICLE X MODIFICATIONS, ETC.
10.1. Modifications, Substitutions and Replacements..............................................................9
ARTICLE XI WARRANT OF TITLE; EASEMENTS
11.1. Warrant of Title..........................................................................................10
11.2. Grants and Releases of Easements; Lessor's Waivers........................................................10
11.3. No Grant of Rights Without Consent of the Lessee..........................................................11
ARTICLE XII PERMITTED CONTESTS
12.1. Permitted Contests in Respect of Applicable Law...........................................................11
ARTICLE XIII INSURANCE
13.1. Public Liability and Workers' Compensation Insurance......................................................12
13.2. Hazard and Other Insurance................................................................................12
13.3. Insurance Coverage........................................................................................13
ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
14.1. Casualty and Condemnation.................................................................................14
14.2. Environmental Matters.....................................................................................16
14.3. Notice of Environmental Matters...........................................................................16
ARTICLE XV PARTIAL TERMINATION OF LEASE
15.1. Partial Termination upon Certain Events...................................................................16
15.2. Partial Termination Procedures............................................................................17
ARTICLE XVI EVENTS OF DEFAULT
16.1. Lease Events of Default...................................................................................18
16.2. Remedies..................................................................................................20
16.3. Waiver of Certain Rights..................................................................................22
16.4. Power of Sale and Foreclosure.............................................................................23
</TABLE>
ii-2
<PAGE> 52
Master Lease
<TABLE>
<CAPTION>
ARTICLE XVII LESSOR'S RIGHT TO CURE
<S> <C> <C>
17.1. The Lessor's Right to Cure the Lessees' Lease Defaults....................................................23
ARTICLE XVIII PURCHASE PROVISIONS
18.1. Optional Purchase of the Property or Properties...........................................................24
18.2. Expiration Date Purchase Obligation.......................................................................24
18.3. Acceleration of Purchase Obligation.......................................................................25
ARTICLE XIX EXTENSION OF EXPIRATION DATE
19.1. Extension of Expiration Date..............................................................................25
ARTICLE XX REMARKETING OPTION
20.1. Option to Remarket........................................................................................26
20.2. Certain Obligations Continue..............................................................................29
ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING
21.1. Provisions Relating to the Exercise of Purchase Option or Obligation
and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events..............................29
ARTICLE XXII ESTOPPEL CERTIFICATES
22.1. Estoppel Certificates.....................................................................................30
ARTICLE XXIII ACCEPTANCE OF SURRENDER
23.1. Acceptance of Surrender...................................................................................31
ARTICLE XXIV NO MERGER OF TITLE
24.1. No Merger of Title........................................................................................31
ARTICLE XXV INTENT OF THE PARTIES
25.1. Nature of Transaction.....................................................................................31
ARTICLE XXVI [INTENTIONALLY OMITTED]
ARTICLE XXVII MISCELLANEOUS
27.1. Survival; Severability; Etc...............................................................................32
27.2. Amendments and Modifications..............................................................................32
27.3. No Waiver.................................................................................................32
</TABLE>
iii-2
<PAGE> 53
Master Lease
<TABLE>
<S> <C> <C>
27.4. Notices...................................................................................................32
27.5. Successors and Assigns....................................................................................32
27.6. Headings and Table of Contents............................................................................32
27.7. Counterparts..............................................................................................32
27.8. GOVERNING LAW.............................................................................................33
27.9. Limitations on Recourse...................................................................................33
27.10. Original Lease...........................................................................................33
27.11. WAIVER OF JURY TRIAL.....................................................................................33
</TABLE>
EXHIBIT A Form of Lease Supplement
iv-2
<PAGE> 54
================================================================================
PARTICIPATION AGREEMENT
dated as of June 23, 1997
among
CARDINAL HEALTH, INC.,
as a Lessee, as the Construction Agent and as Guarantor,
CERTAIN SUBSIDIARIES OF
CARDINAL HEALTH, INC.,
as Lessees,
BMO LEASING (U.S.), INC.,
as Lessor,
BANK OF MONTREAL
and
VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED HEREIN,
as Lenders,
and
BANK OF MONTREAL,
as Administrative Agent for the Lenders.
------------------------------------
Lease Financing for Acquisition and Construction of
Corporate Headquarters Building
and
Various Distribution Centers
<PAGE> 55
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "PARTICIPATION AGREEMENT"), dated as
of June 23, 1997, is entered into by and among CARDINAL HEALTH, INC., an Ohio
corporation, as the Guarantor (together with its permitted successors and
assigns, the "COMPANY" or the "GUARANTOR") and as the Construction Agent
(together with its permitted successors and assigns, in its capacity as
Construction Agent, the "CONSTRUCTION AGENT"); THE COMPANY AND THE SUBSIDIARIES
OF THE COMPANY NOW OR HEREAFTER BECOMING PARTIES TO THIS PARTICIPATION
AGREEMENT, as Lessees (collectively, the "LESSEES"); BMO LEASING (U.S.), INC., a
Delaware corporation, as Lessor (the "LESSOR"); BANK OF MONTREAL and the various
other financial institutions as are or may from time to time become Lenders
under the Loan Agreement referred to herein (together with their respective
permitted successors and assigns, the "Lenders"); and BANK OF MONTREAL, as
Administrative Agent for the Lenders (together with its successors in such
capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to obtain financing for (a) the
acquisition of Land and all Improvements located thereon, (b) the construction
of certain Improvements on the Land and (c) certain Transaction Expenses
incurred by the Company in connection with such acquisitions and construction;
WHEREAS, using Advances from the Lessor, the Company, as Construction
Agent, will acquire Land and construct Improvements thereon for the Lessor;
WHEREAS, each Lessee will lease each parcel of Land subject to a Lease
Supplement to which such Lessee is a party, together with all Improvements
thereon, including the Improvements constructed by the Construction Agent, from
the Lessor;
WHEREAS, the Lessor is willing to provide a portion of the funding of
the costs of the acquisition of Land and the construction of the Improvements,
together with certain Transaction Expenses related thereto, in an aggregate
amount not to exceed the Lessor's Commitment, as set forth on SCHEDULE I;
WHEREAS, the Lessor wishes to obtain, and the Lenders are willing to
provide, financing of the remaining portion of the costs of acquisition of Land
and the construction of the Improvements thereon, together with certain
Transaction Expenses related thereto, in an aggregate amount not to exceed the
Commitments of the Lenders; and
WHEREAS, to secure such financing, (a) the Construction Agent shall,
pursuant to the Construction Documents Assignment, grant to the Lessor, for the
benefit of the Participants, a first priority Lien on all of the right, title
and interest of the Construction Agent in the Construction Documents, (b) the
Company and each Lessee shall, pursuant to the Lease Supplements, grant to the
Lessor, for the benefit of the Participants, a first priority Lien on all of the
right, title and interest of the Company and each such Lessee in the Properties,
(c) the Guarantor shall, pursuant to the Guaranty, guarantee the payment and
performance of each Lessee of its obligations under each Operative Document to
which it is a party, (d) the Lessor will have the benefit of the Liens on the
Properties and the Construction Documents, and, subject to certain rights of the
<PAGE> 56
Participation Agreement
Lenders, its rights against the Lessees under the Master Lease and against the
Construction Agent under the Construction Agency Agreement and (e) the Lenders
will have the benefit of (x) the Guaranty from the Company, (y) subject to the
prior Liens of the Lessor, a Lien on all of the right, title and interest of the
Lessees in the Properties and (z) subject to certain retained rights and shared
rights of the Lessor, an assignment from the Lessor of substantially all of its
rights against the Lessees under the Master Lease and against the Construction
Agent under the Construction Agency Agreement;
In consideration of the mutual agreements contained in this
Participation Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
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 Participation Agreement.
ARTICLE II
DOCUMENTATION DATE; ACQUISITION DATES
SECTION II.1. DOCUMENTATION DATE. The Documentation Date (the
"DOCUMENTATION DATE") shall occur on the earliest date on which the following
conditions precedent shall have been satisfied:
(a) PARTICIPATION AGREEMENT. This Participation Agreement
shall have been duly authorized, executed and delivered by the parties
hereto.
(b) LOAN AGREEMENT. The Loan Agreement shall have been duly
authorized, executed and delivered by the parties thereto.
(c) GUARANTY. The Guaranty shall have been duly authorized,
executed and delivered by the Guarantor.
(d) FEES. The Arranger shall have received all fees due and
payable to the Arranger.
(e) CERTAIN TRANSACTION EXPENSES. Counsel for each of the
Administrative Agent, the Lenders and the Lessor shall have received,
to the extent then invoiced, payment in full in cash of all Transaction
Expenses payable to such counsel pursuant to SECTION 10.1.
SECTION II.2. ACQUISITION DATES. Each closing date with respect to an
acquisition of Land (and the Improvements existing thereon, if any) (each an
"ACQUISITION DATE") shall occur on the earliest date after the Documentation
Date on which all the conditions precedent thereto set forth in ARTICLE VI with
respect to
-2-
<PAGE> 57
Participation Agreement
such acquisition of Land shall have been satisfied or waived by the applicable
parties as set forth therein; PROVIDED, HOWEVER, that no Participant shall have
any obligation to fund any amounts with respect to an Acquisition Date after the
Acquisition Period Termination Date. The Acquisition Date for a particular
Property shall be the date the initial Advance is made with respect to such
Property.
ARTICLE III
FUNDING OF ADVANCES
SECTION III.1. ADVANCES BY LESSOR. Subject to the conditions and terms
hereof, the Lessor shall take the following actions at the written request of
any Lessee from time to time during the Commitment Period:
(a) the Lessor shall make Advances (out of funds provided by
the Lenders, together with funds provided by the Lessor) to the
Construction Agent for the purpose of financing the acquisition of Land
(and Improvements existing thereon) and the Construction of
Improvements thereon and, to the extent permitted by the last sentence
of this SECTION 3.1, reimbursing the Construction Agent for certain
Transaction Expenses;
(b) the Lessor shall acquire the Land (and directly take title
to such Land) or enter into a ground lease for the Land and acquire
Improvements (using funds provided by the Lenders, together with funds
provided by the Lessor); and
(c) the Lessor shall lease the Land and Improvements to such
Lessee under the Master Lease and the respective Lease Supplements.
Notwithstanding any other provision hereof, the Lessor shall not be obligated to
make any Advance with respect to any Property if, after giving effect thereto,
(i) the aggregate outstanding amounts of the Loans and Equity Amounts would
exceed the aggregate Loan Commitments or the Lessor Commitment, respectively,
(ii) the Land Acquisition Costs and Existing Improvement Costs for such Property
would exceed the Fair Market Sales Value of such Property as set forth in the
Acquisition Date Appraisal therefor delivered pursuant to SECTION 6.3(i) or
(iii) the Property Improvement Costs for such Property would exceed 117.6% of
(a) the Fair Market Sales Value of the Property as set forth in the As-Built
Appraisal of such Property delivered pursuant to Section 6.2(c) (PROVIDED that,
solely for purposes of CLAUSE (ii), the Property Cost of the Property acquired
on the Initial Acquisition Date shall be deemed to exclude Transaction Expenses
incurred in connection with the negotiation and execution of the Operative
Documents on the Documentation Date) MINUS (b) the Land Acquisition Costs and
Existing Improvement Costs for such Property.
SECTION III.2. LESSOR'S COMMITMENT. Subject to the conditions and terms
hereof, at the request of the Construction Agent from time to time during the
Commitment Period on any Funding Date, (i) the Lessor shall make available to
the Construction Agent an amount (in each case, an "EQUITY AMOUNT") in
immediately available funds equal to the Lessor's Commitment Percentage of the
amount of the Advance being funded on such Funding Date. Notwithstanding any
other provision hereof, the Lessor shall have no obligation to make available
any Equity Amount if, after giving effect to the proposed Equity Amount, the
aggregate outstanding amount of Equity Amounts would exceed the Lessor's
Commitment. On the terms and subject to the
-3-
<PAGE> 58
Participation Agreement
conditions hereof, amounts paid or prepaid with respect to any Equity Amounts
prior to the end of the Commitment Period may be readvanced during the
Commitment Period.
SECTION IV.3. LENDERS' COMMITMENTS. Subject to the conditions and terms
hereof, the Lenders severally shall make Loans to the Lessor, at the request of
the Construction Agent from time to time during the Commitment Period on any
Funding Date in an amount in immediately available funds equal to such Lender's
Commitment Percentage of the amount of the Advance being funded on such
Acquisition Date or Funding Date, as the case may be. Notwithstanding any other
provision hereof, no Lender shall be obligated to make any Loan if, after giving
effect to the proposed Loan, the outstanding aggregate amount of such Lender's
Loans would exceed such Lender's Commitment. On the terms and subject to the
conditions hereof, amounts paid or prepaid with respect to any Loans prior to
the end of the Commitment Period may be readvanced during the Commitment Period.
SECTION IV.4. PROCEDURES FOR ADVANCES. (a) With respect to each funding
of an Advance, the applicable Lessee shall give the Administrative Agent prior
written notice pursuant to a Funding Request substantially in the form of
EXHIBIT A (a "FUNDING REQUEST"), which Funding Request shall be delivered not
later than 12:00 noon, New York City time, three (3) Business Days prior to the
proposed Funding Date, specifying: (i) the proposed Funding Date, (ii) the
amount of Advance requested, (iii) whether such proposed Funding Date will also
be an Acquisition Date and (iv) to which Properties such Advance is being
allocated and the allocation of such Advance to the respective Land Acquisition
Costs, Existing Improvement Costs, and Property Improvement Costs of such
Properties (and PRO RATA portions of the related Equity Amounts and Loans shall
likewise be deemed to be so allocated). With respect to any Funding Request
related to the acquisition of a Property, in addition to the foregoing, the
applicable Lessee shall also specify: (i) the Property to be acquired, (ii) the
seller of the Property (or, in the case of the Headquarters Building, the ground
lessor of such Property), (iii) the Transaction Expenses relating to such
Property that are to be paid with such Advance and (iv) the Estimated
Improvement Costs for such Property. There shall be no more than one
Construction Advance during any calendar month and each such Construction
Advance shall occur only on a Scheduled Funding Date. All Advances made by the
Lessor to the Construction Agent shall be made on the applicable Funding Date in
immediately available federal funds by wire transfer, not later than 1:00 p.m.
New York City time, to the account(s) as may be specified by such Lessee or
Construction Agent in its Funding Request.
(b) Upon (i) a Lessee's receipt of the funds provided by such Advance
and (ii) satisfaction or waiver of the conditions precedent to such Advance set
forth in ARTICLE VI, the applicable Lessee shall (1) in the case of an Advance
for the acquisition of Land, pay on behalf of the Lessor the acquisition price
to the seller for such Land, the title to which will be taken by the Lessor, and
(2) in the case of other Advances, pay or retain as payment or reimbursement of
Property Improvement Costs the funds provided by the Participants for such
Advance. The transfer by the Lessor of its portion of an Advance shall evidence
its satisfaction that the conditions precedent to such Advance have been met or
waived. Except as the parties may otherwise agree in writing, Advances shall be
made solely to provide the Construction Agent with funds with which to pay Land
Acquisition Costs and Existing Improvement Costs or pay or reimburse itself for
Property Improvement Costs, as the case may be, and to pay (or reimburse itself
for) Transaction Expenses related thereto, up to the maximum amounts set forth
in such provisions.
(c) All remittances made by the Lenders and the Lessor for the funding
of any Advance shall be made on the applicable Funding Date in immediately
available federal funds by wire transfer to the account of
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the Administrative Agent specified on SCHEDULE III under the heading "Wire
Transfer Instructions for Participants".
SECTION IV.5. INTEREST RATE; EQUITY YIELD RATE. Each Loan and Equity
Amount shall accrue interest or Equity Yield, as the case may be, as described
in the definition of Rent Period.
ARTICLE IV
EQUITY YIELD; INTEREST; COMMITMENT FEES
SECTION IV.1. EQUITY YIELD. (a) The amount of the Equity Amounts
outstanding from time to time shall accrue yield ("EQUITY YIELD") at the Equity
Yield Rate. If all or any portion of the Equity Amounts, any Equity Yield
payable thereon or any other amount payable hereunder shall not be paid when due
(whether at stated maturity, acceleration thereof or otherwise), such overdue
amount shall bear interest at a rate per annum which is equal to the Overdue
Rate. Equity Yield shall be payable in arrears on each Scheduled Payment Date,
PROVIDED that (i) Equity Yield accruing pursuant to the preceding sentence shall
be payable from time to time on demand and (ii) each payment of Equity Amounts
prior to the Expiration Date shall be accompanied by accrued Equity Yield to the
date of such payment on the amount paid prior to the Expiration Date.
(b) The Administrative Agent shall distribute the Lessor Basic Rent
(determined on the basis of accrued Equity Yield due in accordance with CLAUSE
(A) above) and all other amounts due with respect to the Equity Amounts payable
by the Lessees under the Master Lease from time to time, which amounts are paid
by the Lessees to the Administrative Agent for the benefit of the Lessor.
(c) During the Construction Period for each Property, Equity Yield
shall accrue on outstanding Equity Amounts and shall be payable as Lessor Basic
Rent.
SECTION IV.2. INTEREST ON LOANS. (a) Each Loan shall accrue interest at
the Interest Rate computed and payable in accordance with the terms of the Loan
Agreement.
(b) The Administrative Agent shall distribute the Lender Basic Rent
(determined on the basis of amounts due in accordance with CLAUSE (A) above) and
all other amounts due with respect to the Loans payable by the Lessees under the
Master Lease from time to time, which amounts are paid by the Lessees to the
Administrative Agent for the account of the Lenders, in accordance with the Loan
Agreement.
SECTION IV.3. COMPUTATION OF INTEREST AND EQUITY YIELD. (a) Interest on
the Loans and Equity Yield on the Equity Amounts shall be calculated on the
basis of a 360-day year for the actual days elapsed at all times that the
Interest Rate and Equity Yield Rate are determined by reference to the LIBO Rate
and, at all other times, on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Company, the Lenders and the Lessor of each determination
of a LIBO Rate. Any change in the Interest Rate or Equity Yield Rate resulting
from a change in the Alternate Base Rate or the LIBOR Reserve Percentage shall
become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall as soon as practicable notify
the Company, the Lenders and the Lessor of the effective date and the amount of
each such
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change in interest rate.
(b) Each determination of the Interest Rate or Equity Yield Rate by the
Administrative Agent pursuant to any provision of this Participation Agreement
or any other Operative Document shall be conclusive and binding on the Lessee,
each Lender and the Lessor in the absence of manifest error. The Administrative
Agent shall, at the request of the Company, deliver to the Company a statement
showing the quotations used by the Administrative Agent in determining the
Interest Rate or Equity Yield Rate.
SECTION IV.4. PREPAYMENTS OF LOANS AND EQUITY AMOUNTS. In the event
that any Lessee pays the Property Balance for any Property to the Administrative
Agent in connection with such Lessee's purchase of a Property in accordance with
Section 15.1 or 18.1 of the Master Lease, the Administrative Agent will
distribute such amount to the Lenders and the Lessor in accordance with SECTION
12.3 for application to the prepayment of the outstanding principal amount of
the Loans and Equity Amounts, respectively, related to the Property purchased by
such Lessee. Each Lender and the Lessor hereby acknowledges that its Loans or
Equity Amounts, as the case may be, may be so prepaid. On the terms and subject
to the conditions hereof, amounts paid or prepaid with respect to the Loans and
Equity Amounts may be readvanced.
SECTION IV.5. FEES. The Company agrees to pay the fees set forth in
this SECTION 4.5.
(a) COMMITMENT FEES. The Company agrees to pay to the
Administrative Agent for the account of each Participant, for the
period (including any portion thereof when its Commitment is suspended
by reason of any Lessee's inability to satisfy any condition of ARTICLE
VI) commencing on the earlier of the Initial Acquisition Date or July
15, 1997 and continuing through the Commitment Termination Date, a
commitment fee (collectively, the "COMMITMENT FEES") at a per annum
rate equal to the Commitment Fee Rate on such Participant's Commitment
Percentage of the sum of the average daily unused portion of the
Commitments. The Commitment Fees shall be payable by the Company in
arrears on each Scheduled Payment Date occurring after the earlier of
the Initial Acquisition Date or July 15, 1997 and on or before the
Commitment Termination Date. The Commitment Fees shall be computed on
the basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which such
Commitment Fees are payable over a year of 360 days.
(b) ARRANGEMENT FEES. The Company agrees to pay the fees due
and payable to the Arranger.
ARTICLE V
CERTAIN INTENTIONS OF THE PARTIES
SECTION V.1. NATURE OF TRANSACTION. (a) The parties hereto intend that
(i) for financial accounting purposes with respect to the Lessees, the Lessor
will be treated as the owner and lessor of the Properties and the Lessees will
be treated as the lessees of the Properties and (ii) for all other purposes,
including federal and all state and local income tax purposes, state real estate
and commercial law and bankruptcy purposes, (A) the Master Lease, Lease
Supplements and other transactions contemplated hereby will be treated as a
financing arrangement, (B) the Lessor and the Lenders will be deemed lenders
making
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loans to the Lessees in an amount equal to the sum of the Lessor Amounts and the
outstanding principal amount of the Loans, which amounts are secured by the
Properties and (C) the Lessees will be treated as the owner of the Properties
and will be entitled to all tax benefits ordinarily available to an owner of
properties like the Properties for such tax purposes. Nevertheless, the Company
and each Lessee acknowledges and agrees that neither the Lessor, the
Administrative Agent nor any of the Lenders has made any representations or
warranties to the Company or any Lessee concerning the tax, accounting or legal
characteristics of the Operative Documents and that the Company and the Lessees
have obtained and relied upon such tax, accounting and legal advice concerning
the Operative Documents as it deems appropriate.
(b) Specifically, without limiting the generality of CLAUSE (A) of this
SECTION 5.1, the parties hereto intend and agree that in the event of any
insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting the Company,
any Lessee, the Lessor or the Lenders or any collection actions, the
transactions evidenced by the Operative Documents shall be regarded as loans
made by the Lessor and the Lenders as unrelated third party lenders of the
Lessees.
SECTION V.2. AMOUNTS DUE UNDER LEASE. Anything else herein or
elsewhere to the contrary notwithstanding, it is the intention of the Lessees,
the Lessor and the Lenders that: (i) the amount and timing of installments of
Basic Rent due and payable from time to time from the Lessees under the Master
Lease shall be equal to the aggregate payments due and payable as interest on
the Loans and Equity Yield on the Equity Amounts on each Payment Date; (ii) if
any Lessee elects the Purchase Option or becomes obligated to purchase all of
the Properties under the Master Lease, the Loans, the Equity Amounts, all
interest, Equity Yield and Commitment Fees thereon and all other obligations of
the Lessees owing to the Lessor and the Lenders shall be paid in full by such
Lessee; (iii) if any Lessee properly elects the Remarketing Option, the Lessees
shall only be required to pay to the Administrative Agent (for the account of
the Participants) the proceeds of the sale of each of the Properties, the Loan
Balance and any amounts due pursuant to ARTICLE XI hereof and Section 20.2 of
the Master Lease (which aggregate amounts may be less than the Lease Balance);
and (iv) upon an Event of Default resulting in an acceleration of the obligation
of the Lessees to purchase all of the Properties under the Master Lease, the
amounts then due and payable by the Lessees under the Master Lease shall include
all amounts necessary to pay in full the Lease Balance.
ARTICLE VI
CONDITIONS PRECEDENT TO
ADVANCES AND COMPLETION DATE
SECTION VI.1. CONDITIONS PRECEDENT TO INITIAL ACQUISITION DATE. The
obligations of the Lessor to make an Advance on the initial Acquisition Date
hereunder (the "INITIAL ACQUISITION DATE"), the obligation of the Lessor to make
any related Equity Amount on the Initial Acquisition Date and the obligation of
the Lenders to make any related Loan on the Initial Acquisition Date are subject
to each of the following conditions precedent:
(a) THE COMPANY'S RESOLUTIONS AND INCUMBENCY CERTIFICATE, ETC.
The Company shall have delivered to the Administrative Agent (x) a
certificate of its Secretary or an Assistant Secretary attaching and
certifying as to (A) the resolutions of the Board of Directors or a
committee thereof
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authorizing the execution, delivery and performance by it of each
Operative Document to which it is or will be a party, (B) its
certificate of incorporation and by-laws and (C) the incumbency and
signature of persons authorized to execute and deliver on its behalf
the Operative Documents to which it is a party and (y) a long-form
certificate of good standing with respect to it issued by the Secretary
of State of the State of Ohio, dated no earlier than thirty (30) days
prior to the Initial Acquisition Date.
(b) LESSEES' RESOLUTIONS AND INCUMBENCY CERTIFICATE, ETC. The
Administrative Agent shall have received (x) a certificate of the
Secretary or an Assistant Secretary of each Lessee (if any) attaching
and certifying as to (A) the resolutions of its Board of Directors or
committee thereof duly authorizing the execution, delivery and
performance by it of each Operative Document to which it is or will be
a party, (B) its certificate of incorporation and by-laws and (C) the
incumbency and signature of persons authorized to execute and deliver
on its behalf the Operative Documents to which it is a party and (y) a
long-form certificate of good standing with respect to it issued by the
Secretary of State of the State of its incorporation dated no earlier
than thirty (30) days prior to the Initial Acquisition Date.
(c) NOTES. Each Lender shall have received its Note, dated
the Initial Acquisition Date and duly executed and delivered by the
Lessor in accordance with the Loan Agreement.
(d) OPINION OF COUNSEL TO THE COMPANY AND THE LESSEES. The
Lessor and each Lender shall have received an opinion dated the Initial
Acquisition Date, from Baker & Hostetler LLP, special counsel to the
Company and the Lessees, in form and substance reasonably satisfactory
to the Participants.
(e) MASTER LEASE. The Master Lease shall have been duly
authorized, executed and delivered by the parties thereto.
(f) CONSTRUCTION AGENCY AGREEMENT. The Construction Agency
Agreement shall have been duly authorized, executed and delivered by
the parties thereto.
(g) CONSTRUCTION DOCUMENTS ASSIGNMENT. The Construction
Documents Assignment shall have been duly authorized, executed and
delivered by the Construction Agent in favor of the Lessor for the
benefit of the Participants.
(h) CONSTRUCTION AGENCY AGREEMENT ASSIGNMENT. The Construction
Agency Agreement Assignment shall have been duly authorized, executed
and delivered by the Lessor and consented to and acknowledged by the
Construction Agent.
(i) ASSIGNMENT OF LEASES AND RENTS. The Assignment of Leases
and Rents shall have been duly authorized, executed and delivered by
the Lessor, as assignor, to the Administrative Agent for the benefit of
the Lenders, as assignee, and the Assignment of Leases and Rents shall
have been consented to and acknowledged by the Lessees.
SECTION VI.2. CONDITIONS PRECEDENT TO EACH ADVANCE. The obligations of
the Lessor to make an Advance on each Acquisition Date or Funding Date, as the
case may be, the obligation of the Lessor to make
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any related Equity Amount on such Acquisition Date or Funding Date, as the case
may be, and the obligation of the Lenders to make any related Loan on such
Acquisition Date or Funding Date, as the case may be, are subject to
satisfaction or waiver of the following conditions precedent:
(a) FUNDING REQUEST. Each of the Administrative Agent and the
Lessor shall have received a fully executed counterpart of the
applicable Funding Request, executed by a Lessee, in accordance with
SECTION 3.4. Each of the delivery of a Funding Request and the
acceptance by the Construction Agent, of the proceeds of such Advance
shall constitute a representation and warranty by the Lessees that on
the applicable Funding Date (both immediately before and after giving
effect to the making of such Advance and the application of the
proceeds thereof), the statements made in SECTION 7.4 are true and
correct in all material respects.
(b) CONSTRUCTION CERTIFICATE. With respect to any Property
Improvement Costs to be paid or reimbursed using the proceeds of such
Advance, the Administrative Agent and the Lessor shall have received,
at least three (3) Business Days prior to the applicable Funding Date,
a Construction Certificate in the form of EXHIBIT B hereto (a
"CONSTRUCTION CERTIFICATE"), together with all attachments thereto.
(c) AS-BUILT APPRAISAL. With respect to the first Construction
Advance for each Property, each of the Administrative Agent and the
Lessor shall have received, at least five (5) Business Days prior to
such Construction Advance, an As-Built Appraisal of the applicable
Property, in form and substance satisfactory to the Administrative
Agent and the Lessor, which As-Built Appraisal shall show that (i) in
the case of Property to be acquired by the Lessor in fee simple, as of
the Completion Date and as of the last day of the Basic Term, with
respect to such Property, the Fair Market Sales Value of such Property,
including all Improvements thereon and to be constructed thereon in
accordance with the Plans and Specifications for such Property, shall
not be less than 100% of the sum of the Land Acquisition Cost and
Existing Improvement Costs and 85% of the Estimated Improvement Costs
for such Property and (ii) in the case of Property covered by a Ground
Lease, as of the Completion Date and as of the last day of the Basic
Term with respect to such Property, the Fair Market Sales Value of the
Improvements to be constructed thereon in accordance with the Plans and
Specifications for such Property shall not be less than 85% of the
Estimated Improvement Costs for such Property. With respect to the
As-Built Appraisal, it is agreed that any material handling equipment
will be valued at its installed cost, as opposed to its salvage value.
(d) VALUE OF PROPERTY. With respect to the first Construction
Advance for each Property, the sum of (i) the Acquisition Date Advance
made with respect to such Property and (ii) the Estimated Improvement
Costs for such Property, shall not be less than $5,000,000, unless
mutually agreed to by the Lessor and the Guarantor..
(e) FEES. All fees then due and payable pursuant to this
Agreement (including, if then invoiced, all fees, costs and expenses
due and payable pursuant to SECTION 10.1) shall have been paid, and the
Participants shall have received all Commitment Fees then due and
payable pursuant to SECTION 4.5(A).
(f) REPRESENTATION AND WARRANTIES. On the applicable
Acquisition Date or Funding Date, as the case may be, the
representations and warranties of the Lessees contained herein and in
each of the other Operative Documents shall be true and correct in all
material respects as though made on and
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Participation Agreement
as of such 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.
(g) LITIGATION. On the applicable Acquisition Date or Funding
Date, as the case may be, there shall not be any actions, suits or
proceedings pending or, to the knowledge of any Lessee, threatened,
with respect to any Lessee (i) that are reasonably likely to have a
Material Adverse Effect on such Property or (ii) that question the
validity of the Operative Documents or the rights or remedies of the
Administrative Agent, the Lessor or the Lenders with respect to any
Lessee or any Property under the Operative Documents.
(h) PERFORMANCE BY LESSEES. Each of the Lessees shall have
performed in all material respects its covenants and agreements
contained herein and in the other Operative Documents to be performed
by it on or prior to such date.
(i) DEFAULT OR EVENT OF DEFAULT. There shall not have occurred
and be continuing any Default or Event of Default under the Master
Lease, and no Default or Event of Default under the Master Lease will
have occurred after giving effect to the making of the Advance
requested by such Funding Request.
(j) AVAILABLE COMMITMENTS; PROPERTY BALANCE. After giving
effect to the applicable Advance, the conditions set forth in the last
sentence of SECTION 3.1 shall not be violated.
(k) CONSTRUCTION COSTS. After giving effect to the applicable
Advance, the estimated as yet unpaid cost to the Construction Agent of
completing the Construction pursuant to the Construction Documents
shall not exceed the Available Commitments.
(l) PLANS AND SPECIFICATIONS; CONSTRUCTION BUDGET. With
respect to the first Construction Advance for each Property, the
Administrative Agent and the Lessor shall have received no later than
five (5) days prior to such Construction Advance (i) the Plans and
Specifications, to the extent available, and if not available at such
time, as soon as available, and (ii) a Construction budget and
anticipated disbursement schedule, each in such detail as the
Administrative Agent and the Lessor may reasonably request.
(m) EVIDENCE OF PROPERTY INSURANCE. With respect to the first
Construction Advance for each Property, the Administrative Agent and
the Lessor shall have received evidence that the insurance maintained
by the applicable Lessee with respect to such Property satisfies
requirements set forth in Article XIII of the Master Lease, setting
forth the respective coverage, limits of liability, carrier, policy
number and period of coverage.
(n) GOVERNMENTAL APPROVALS. With respect to each Advance for
each Property, all necessary Governmental Actions required by any
Requirement of Law or any Property Legal Requirements for the purpose
of authorizing the Construction on the applicable Property as of such
Advance shall have been obtained or made and be in full force and
effect.
SECTION VI.3. CONDITIONS TO EACH ACQUISITION DATE. The obligation of
the Lessor to acquire any
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Land on an Acquisition Date and to make the initial Advance (an "ACQUISITION
DATE ADVANCE") in respect of such Property on the Acquisition Date with respect
to such Property, the obligation of the Lessor to advance any related Equity
Amount on such Acquisition Date and the obligation of each Lender to make any
related Loan on such Acquisition Date, are subject to satisfaction or waiver of
the following conditions precedent:
(a) DEED OR GROUND LEASE. On or prior to such Acquisition
Date, the Lessor shall have received (i) in the case of the
Headquarters Building, a Ground Lease covering the Land portion of such
Property, duly executed and delivered by the Company, as ground lessor
thereunder, conveying to the Lessor a leasehold interest in such Land,
which Land shall be a separate tax lot and a legal subdivision under
all applicable zoning laws or (ii) in the case of any other Property, a
Deed with respect to such Property (and/or all Improvements located
thereon) being purchased on such Acquisition Date, conveying fee simple
title to such Property (and/or all Improvements located thereon) to the
Lessor and containing all customary seller's warranties and subject
only to Permitted Exceptions.
(b) BILL OF SALE. On or prior to such Acquisition Date, the
Lessor shall have received a general warranty bill of sale
substantially in the form of EXHIBIT D (a "BILL OF SALE"), conveying
title to the Lessor in any personal property (other than inventory)
comprising part of the applicable Property.
(c) LEASE SUPPLEMENT. On or prior to such Acquisition Date,
the applicable Lessee and the Lessor shall have delivered to the
Administrative Agent the original counterpart of the Lease Supplement
executed by such Lessee and the Lessor with respect to the applicable
Property.
(d) CONSTRUCTION AGENCY AGREEMENT SUPPLEMENT. On or prior to
the Acquisition Date, the Company and the Lessor shall have delivered
to the Administrative Agent a Construction Agency Agreement Supplement
with respect to the applicable Property fully executed by the Company,
as Construction Agent, and the Lessor.
(e) SUPPLEMENT TO ASSIGNMENT OF LEASES AND RENTS. On or prior
to the Acquisition Date, the Lessor shall have delivered to the
Administrative Agent a Supplement to the Assignment of Leases and Rents
substantially in the form of Exhibit A thereto, together with a consent
to and acknowledgment of such Supplement duly executed by the
applicable Lessee.
(f) LESSOR FINANCING STATEMENTS. On or prior to such
Acquisition Date, the applicable Lessee shall have delivered to the
Lessor all Lessor Financing Statements relating to such Property as the
Lessor or any Lender may reasonably request in order to protect the
interest of the Lessor under the Master Lease and the Lease Supplement
relating to the applicable Property to the extent the Master Lease and
such Lease Supplement constitute security agreements.
(g) RECORDATION OF LESSOR MORTGAGE AND LESSOR FINANCING
STATEMENTS. Each of the Lessor and the Administrative Agent shall have
received evidence reasonably satisfactory to it that each of (i) the
Lease Supplement and any other instrument constituting a Lessor
Mortgage and (ii) the Lessor Financing Statements, in each case
relating to such Property, has been, or are being, recorded in a manner
sufficient to properly secure each of their interests therein.
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(h) RESPONSIBLE OFFICER'S CERTIFICATE. The Administrative
Agent and the Lessor shall have received a Responsible Officer's
Certificate of the Company, in substantially the form of EXHIBIT E
attached hereto, dated as of the respective Acquisition Date, stating
that (i) to such Responsible Officer's knowledge each and every
representation and warranty of the Company and the Lessees contained in
each Operative Document to which it is a party is true and correct in
all material respects on and as of the respective Acquisition Date;
(ii) to such Responsible Officer's knowledge no Default or Event of
Default has occurred and is continuing under any Operative Document to
which the Company or any Lessee is a party; (iii) to such Responsible
Officer's knowledge each Operative Document to which the Company or any
Lessee is a party is in full force and effect; and (iv) to such
Responsible Officer's knowledge each Obligor has duly performed and
complied in all material respects with all conditions contained herein
or in any other Operative Document required to be performed or complied
with by it on or prior to such Acquisition Date.
(i) ACQUISITION DATE APPRAISAL. At least five (5) Business
Days prior to such Acquisition Date, the Administrative Agent and the
Lessor shall have received an Acquisition Date Appraisal of the
applicable Property in form and substance satisfactory to the
Administrative Agent and the Lessor (which may be in the form of a
summary report with comparables if such Acquisition Date Appraisal is
for Land only), which Acquisition Date Appraisal shall show that, as of
such Acquisition Date, the Fair Market Sales Value of such Property is
not less than the sum of (i) the Land Acquisition Cost for such
Property and (ii) all Existing Improvement Costs.
(j) ENVIRONMENTAL AUDIT. At least five (5) Business Days prior
to such Acquisition Date, the Administrative Agent and the Lessor shall
have received (x) an Environmental Audit with respect to the applicable
Property, dated no earlier than six (6) months prior to the proposed
Acquisition Date and (y) if the applicable Environmental Audit is dated
earlier than three (3) months prior to the proposed Acquisition Date, a
supplemental report from the environmental consultant that issued the
Environmental Audit, dated no earlier than three (3) months prior to
the proposed Acquisition Date, and each of the Environmental Audit and
supplemental report, if any, shall be satisfactory in form and
substance to the Lessor and Required Lenders, in their sole discretion.
(k) PROPERTY SURVEY. At least five (5) Business Days prior to
such Acquisition Date, the applicable Lessee shall have delivered to
the Administrative Agent and the Lessor an American Land Title
Association ("ALTA")/1992 (Urban) Survey of such Property certified to
the Participants and the title company and otherwise in form reasonably
acceptable to the Participants.
(l) TITLE COMMITMENT. On or prior to such Acquisition Date,
the applicable Lessee shall have delivered to the Administrative Agent,
the Lessor and each Lender a commitment to deliver an ALTA extended
owners and lenders title insurance policy covering such Property in
favor of the Administrative Agent, the Lessor and the Lenders,
respectively, such policy in an amount not less than the sum of the
related Land Acquisition Cost, Existing Improvement Costs and Estimated
Improvement Costs, exclusive of the cost of Equipment constituting
personal property (with pending disbursement provisions, where
applicable) and to be reasonably satisfactory to the Required Lenders
and the Lessor with, to the extent available in the applicable
jurisdiction and at a reasonable cost, revolving credit, variable rate,
usury, comprehensive, fraudulent conveyances, doing business, mechanics
liens and zoning endorsements and such other customary endorsements
issued by the title company as a routine matter, if requested by the
Administrative Agent and available at reasonable
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cost.
(m) OPINION OF LOCAL COUNSEL. If the applicable Property is
located in a state in which there exists no other Property already
covered by any Lease Supplement, then on or prior to such Acquisition
Date, the Administrative Agent, the Lessor and each Lender shall have
received an opinion, reasonably satisfactory to them, of counsel
qualified with respect to the laws of the jurisdiction in which the
applicable Property is located as to the matters set forth in EXHIBIT
F.
(n) EVIDENCE OF PROPERTY INSURANCE. The Administrative Agent
and the Lessor shall have received evidence that the insurance
maintained by the applicable Lessee with respect to such Property
satisfies requirements set forth in Article XIII of the Master Lease,
setting forth the respective coverage, limits of liability, carrier,
policy number and period of coverage.
(o) GOVERNMENTAL APPROVALS. All necessary Governmental Actions
required by any Requirement of Law or any Property Legal Requirements
for the purpose of authorizing the Lessor to acquire the applicable
Property shall have been obtained or made and be in full force and
effect.
(p) TAXES. All taxes, fees and other charges in connection
with the execution, delivery, recording, filing and registration of the
Operative Documents with respect to such Property shall have been paid
or provisions for such payment shall have been made by the Lessees to
the reasonable satisfaction of the Administrative Agent, the Lessor and
Required Lenders.
(q) LITIGATION. No action or proceeding with respect to such
Property shall have been instituted, nor shall any action or proceeding
be threatened, before any Governmental Authority, nor shall any order,
judgment or decree with respect to such Property have been issued or
proposed to be issued by any Governmental Authority which is reasonably
likely to have a Material Adverse Effect or materially adversely affect
such Property.
(r) REQUIREMENTS OF LAW. In the reasonable opinion of the
Administrative Agent, the Lessor, Required Lenders and their respective
counsel, the transactions contemplated by the Operative Documents with
respect to such Property do not and will not violate any Requirement of
Law and do not and will not subject the Administrative Agent, the
Lessor or the Lenders to any material adverse regulatory prohibitions
or constraints.
(s) NO MATERIAL ADVERSE CHANGE. As of the Acquisition Date,
there shall not have occurred any material adverse change in the
properties, businesses operations, or financial condition of the
Company and its Subsidiaries, taken as a whole, from that set forth in
the Submitted Financial Statements.
(t) CERTAIN TRANSACTION EXPENSES. Counsel for each of the
Administrative Agent, the Lessor and the Lenders shall have received,
to the extent then invoiced, payment in full in cash of all Transaction
Expenses payable to such counsel pursuant to SECTION 10.1.
(u) NO DEFAULT. There shall not have occurred and be
continuing any Default or Event of Default under any of the Operative
Documents, and no Default or Event of Default under any of the
Operative Documents will have occurred after giving effect to the
transactions contemplated to occur
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on such Acquisition Date.
All documents and instruments required to be delivered shall be delivered at the
offices of Mayer, Brown & Platt, 1675 Broadway, New York, New York, or at such
other location as may be determined by the Administrative Agent, the Lessor, the
Lenders and the Company.
SECTION VI.4. CONDITIONS TO COMPLETION DATE. The Completion Date with
respect to any Property shall be deemed to have occurred for purposes of the
Operative Documents on the earliest date on which each of the following events
shall have occurred:
(a) the Construction relating to such Property shall have been
completed in accordance with the applicable Plans and Specifications,
all Applicable Law and all Insurance Requirements;
(b) such Property shall be ready for occupancy and operation
as a facility of the type described in the Appraisal delivered with
respect to such Property on the Acquisition Date therefor or any
subsequent Appraisal delivered with respect to such Property, as
evidenced by the issuance by the appropriate Governmental Authority of
a permanent certificate of occupancy for all of the Improvements
contemplated by the Plans and Specifications for such Property;
(c) the Administrative Agent and the Lessor shall have
received an architect's certificate or engineer's certificate with
respect to the Construction of the Improvements on such Property, in
form and substance reasonably satisfactory to the Administrative Agent
and the Lessor;
(d) the Administrative Agent and the Lessor shall have
received an endorsement to the title policy delivered with respect to
such Property pursuant to SECTION 6.3(l), which endorsement shall (i)
indicate that since the date of the Acquisition Date Advance for such
Property there has been no change in the state of title and (ii) update
the title policy to the Completion Date;
(e) if the aggregate Property Cost for such Property exceeds
$16,000,000, the Administrative Agent and the Lessor shall have
received copies of the as-built plans and survey of the Property
reflecting such Property as constructed; and
(f) the Administrative Agent and the Lessor shall have
received a Completion Certificate from the Construction Agent
substantially in the form of EXHIBIT G (a "COMPLETION CERTIFICATE").
ARTICLE VII
REPRESENTATIONS
SECTION VII.1. REPRESENTATIONS OF THE PARTICIPANTS. Each Participant
represents and warrants to the Administrative Agent, the other Participants, the
Company and the Lessees that:
(a) ERISA. Such Participant is not and will not be making its
Loans or funding its Equity Amounts 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
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of ERISA, or "plan" (as defined in Section 4975(e)(1) of the Code).
(b) STATUS. Such Participant is a commercial bank, savings and
loan association, savings bank, pension plan, depository institution,
insurance company, branch or agency of a foreign bank or other similar
financial institution, or an Affiliate thereof.
(c) POWER AND AUTHORITY. Such Participant has the requisite
power and authority to enter into and perform under the Operative
Documents to which it is a party.
The making of any Loan or the advancing of any Equity Amount on any Acquisition
Date or Funding Date, as the case may be, shall constitute an affirmation by the
subject Participant of the preceding representations and warranties.
SECTION VII.2. REPRESENTATIONS OF THE COMPANY. The Company hereby
represents and warrants to the Lessor, each Lender and the Administrative Agent
that:
(a) CORPORATE STATUS. The Company (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 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.
(b) CORPORATE POWER AND AUTHORITY, ENFORCEABILITY. The Company
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, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights generally or by equitable principles generally.
(c) NO VIOLATION. Neither the execution, delivery and
performance by the Company or any Lessee 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 that could
have a Material Adverse Effect, (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.
(d) LITIGATION. There are no actions, suits or proceedings
pending or, to its knowledge, threatened that could have a Material
Adverse Effect.
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(e) 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 (other than
Governmental Actions by Governmental Authorities in connection with the
construction and operation of the Improvements) 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.
(f) 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.
(g) 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.
(h) TRUE AND COMPLETE DISCLOSURE. All factual information
heretofore or contemporaneously furnished by it or on its behalf in
writing to the Administrative Agent or any Participant (including
without limitation all information contained in the Operative
Documents) for purposes of or in connection with any transaction
contemplated by the Operative Documents is, and all other such factual
information hereafter furnished by it or on its behalf in writing to
the Administrative Agent or any Participant 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.
(i) 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 the Company and its Subsidiaries (or will be
filed after taking into effect any available extensions) and all taxes
due with respect to the Company and its Subsidiaries pursuant to such
returns or pursuant to any assessment received by the Company 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 the Company and its Subsidiaries in respect of
taxes or other governmental charges are adequate.
(j) COMPLIANCE WITH ERISA. The Company 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. The Company 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).
(k) FINANCIAL STATEMENTS. The consolidated statement of
financial position of the Company as of June 30, 1996 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
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financial position of the Company as of September 30, 1996 and December
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 case, a copy of
which has been delivered to each of the Participants, present fairly in
all material respects, in conformity with GAAP, the consolidated
financial position of the Company and its Subsidiaries as of such date
and the results of operations and cash flows of the Company and its
Subsidiaries for such fiscal year.
(l) FUNDED DEBT. The Company's Funded Debt as of the date of
this Participation Agreement is listed in ITEM 7.2(e) of SCHEDULE II.
(m) ENVIRONMENTAL LAWS. Except as disclosed in ITEM 7.2(g) of
SCHEDULE II:
(i) to the knowledge of the Company, none of the
Company, the Lessees or any of their respective Subsidiaries,
nor any of their respective operations, is in violation of any
applicable Environmental Law or any restrictive covenant or
deed restriction relating to environmental matters (recorded
or otherwise), the violation of which would reasonably be
expected to have Material Adverse Effect;
(ii) without limitation of CLAUSE (i) above, to the
knowledge of the Company, none of the Company, the Lessees or
any of their respective Subsidiaries or their respective
operations, nor any current or prior owner, lessor or operator
(other than the Lessees) is in violation of any Environmental
Law or subject to any existing, pending or threatened
investigation, inquiry or proceeding by any governmental
Authority or subject to any remedial obligations under any
Environmental Law, where any such matter would reasonably be
expected to have a Material Adverse Effect;
(iii) all permits and licenses required of the
Company, the Lessees or any of their respective Subsidiaries
with respect to Hazardous Materials, including past or present
treatment, storage, disposal or release of any Hazardous
Materials or solid waste into the environment, have been
obtained or filed, except where the failure to possess such
permit or licenses would not reasonably be expected to have a
Material Adverse Effect;
(iv) all Hazardous Materials or solid waste generated
by the Company, any Lessee or any of their respective
Subsidiaries, to the knowledge of the Company and the Lessees,
have in the past been, and will continue to be, transported,
treated and disposed of only by carriers maintaining valid
permits under all applicable Environmental Laws and only at
treatment, storage and disposal facilities maintaining valid
permits under applicable Hazardous Materials Laws, which
carriers and facilities have been and are, to the knowledge of
the Company and the Lessees, operating in compliance with such
permits, except where the failure to comply with the foregoing
would not reasonably be expected to have a Material Adverse
Effect; and
(v) to the knowledge of the Company and the Lessees,
neither the Company nor any Lessee nor any of their respective
Subsidiaries has a material contingent liability in connection
with any release of any Hazardous Materials or solid waste
into the environment.
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(n) PROPERTIES. The Properties as improved in accordance with
the Plans and Specifications and the contemplated use thereof by the
Lessees and their respective agents, assignees, employees, lessees,
licensees and tenants will comply with all Property Legal Requirements
(including, without limitation, all zoning and land use laws and
Hazardous Materials Laws) and Insurance Requirements, except for
non-compliance which would not reasonably be expected to have (x) a
Material Adverse Effect or (y) unless such non-compliance is then being
diligently contested by the applicable Lessee in good faith by
appropriate proceedings, a material adverse effect on the title to, or
the use, operation or value of, any Property which is the subject of a
current Advance.
(o) PLANS AND SPECIFICATIONS. To the best knowledge of the
Company, upon Completion of the Construction of each Subject Property,
all water, sewer, electric, gas, telephone and drainage facilities and
all other utilities required to adequately service such Improvements
for its intended use will be available pursuant to adequate permits
(including any that may be required under applicable Hazardous
Materials Laws). Upon Completion of the Construction with respect to
each Subject Property, such Subject Property will have available all
services of public facilities and other utilities necessary for use and
operation of such Subject Property and the other applicable
Improvements thereon for their primary 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 such Improvements and public
highways for pedestrians and motor vehicles. Upon Completion of the
Construction of each Subject Property, all utilities serving such
Subject Property, or proposed to serve any such Subject Property in
accordance with the related Plans and Specifications therefor, will be
located in, and vehicular access to the Improvements on such Property
will be provided by, either public rights-of-way abutting such Property
or Appurtenant Rights.
(p) DEEDS. Each Deed is in form and substance sufficient to
convey to the Lessor good and marketable title to the applicable
Property in fee simple and is subject only to Permitted Exceptions.
(q) INSURANCE. Each Subject Property is covered by insurance
coverage which meets the requirements of Article XIII of the Master
Lease, and such coverage is in full force and effect. The Company
carries insurance with reputable insurers in respect of the Properties
and the assets of the Company, the Lessees and their respective
Subsidiaries in such manner, in such amounts and against such risks as
is customarily maintained by other Persons of similar size engaged in
similar business.
(r) FLOOD HAZARD AREAS. Except as otherwise identified on the
survey delivered pursuant to SECTION 6.3(K), no portion of any Subject
Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable
agency. If any Subject Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or
other applicable agency, then flood insurance has been obtained for
such Subject Property in accordance with Section 13.2 of the Master
Lease and in accordance with the National Flood Insurance Act of 1968,
as amended.
(s) LEASE. With respect to each Subject Property, upon the
execution and delivery of the applicable Lease Supplement, (i) the
applicable Lessee will have unconditionally accepted such Property
(PROVIDED that nothing contained herein shall be deemed a waiver by
such Lessee of any right of action against Persons with respect to
title to and condition of the Property on the applicable Acquisition
Date other than the Lessor, the Administrative Agent and the Lenders)
and will have
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good and marketable title to a valid and subsisting leasehold interest
in such Property, subject only to Permitted Property Liens and (ii) no
right of offset will then exist with respect to any Rent or other sums
payable under the Master Lease.
(t) LICENSES, ETC. WITH RESPECT TO CONSTRUCTION OF SUBJECT
PROPERTY. With respect to each Subject Property, all licenses,
approvals, authorizations, consents, permits (including, without
limitation, building, demolition and environmental permits, licenses,
approvals, authorizations and consents), easements and rights-of-way,
including proof and dedication, required for (x) the use, treatment,
storage, transport, disposal or disposition of any Hazardous Material
on, at, under or from such Subject Property during the construction of
the applicable Improvements thereon, and (y) construction of
Improvements on such Subject Property in accordance with the Plans and
Specifications therefor and the Construction Agency Agreement have, in
each case, either been obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case
may be, or will be obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case
may be, prior to commencing any such construction or use and operation,
as applicable, except for those which if not so obtained would not
reasonably be expected to (i) have a Material Adverse Effect or (ii)
materially adversely affect the title to, or the use, operation or
value of, such Subject Property.
(u) NO CASUALTY, CONDEMNATION OR DEFAULT. No Casualty or
Condemnation has occurred with respect to any Subject Property. No
default or Event of Default has occurred and is continuing.
(v) NO OTHER DEFAULTS. Neither the Company, any Lessee nor any
of their respective Subsidiaries is in default under (and no event has
occurred which with the lapse of time or notice or action by a third
party could result in a default under) any instrument under which any
Material Commitment is made or any Debt of the Company, any Lessee or
any Subsidiary or under any agreement relating thereto or any
indenture, mortgage, deed of trust, security agreement, lease,
franchise or other agreement or other instrument to which such Person
is a party or by which such Person or any of its property is subject to
or bound in an aggregate amount of $25,000,000 or more if such default
or event shall continue for a period of time sufficient to permit the
acceleration of the maturity of such Debt of the Company, the Lessee or
any Subsidiary outstanding thereunder or to permit termination of such
Material Commitment.
(w) LESSEES; SUBSIDIARIES. Each Lessee is a direct,
wholly-owned Subsidiary of the Company.
(x) REGULATIONS G, U AND X. No proceeds of any of the Advances
will be used for a purpose which violates, or would be inconsistent
with, F.R.S. Board Regulation G, U or X. Terms for which meanings are
provided in F.R.S. Board Regulation G, U or X or any regulations
substituted therefor, as from time to time in effect, are used in this
Section with such meanings.
SECTION VII.3. REPRESENTATIONS OF EACH LESSEE. Each Lessee shall be
deemed by the execution and delivery of its signature page to this Participation
Agreement or the execution and delivery of an Adoption Agreement, as the case
may be, to have represented and warranted that:
(a) ORGANIZATION; CORPORATE POWERS. Such Lessee (i) is a
corporation duly organized,
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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
Property leased by it under the Master Lease 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. 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. 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) DUE EXECUTION. 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.
(d) ENFORCEABILITY. This Participation Agreement, the Master
Lease and each other Operative Document to which it is or will be a
party constitutes, or, when executed and delivered by such Lessee, will
constitute, its legal, valid and binding obligation, enforceable
against it in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or limiting creditors' rights
generally or by equitable principles generally.
(e) 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 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.
(f) 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, other than
governmental consents and approvals required to construct and operate
the Improvements.
(g) 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.
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(h) 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
(i) RIGHTS IN RESPECT OF THE PROPERTY LEASED BY SUCH LESSEE.
Such Lessee is not a party to any contract or agreement to sell any
interest in any Property leased by it under the Master Lease or any
part of such Property, other than pursuant to this Participation
Agreement, the Master Lease and the related Lease Supplement.
(j) ENVIRONMENTAL LAWS, ETC. WITH RESPECT TO LEASED PROPERTY.
With respect to each Property to be leased by such Lessee under the
Master Lease and related Lease Supplement,
(i) To the knowledge of such Lessee, on the
Acquisition Date for such Property, no Governmental Actions
have been taken or are in process or have been threatened,
which could reasonably be expected to subject such Property,
the Lessor, any Lender or the Administrative Agent to any
Claims or Liens under any Environmental Law.
(ii) Such Lessee has, or will obtain on or before the
date required by Applicable Law, all Environmental Permits
necessary to operate such 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.
(iii) 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 such Property with respect to any alleged violation or
liability of such Lessee under any Environmental Law where any
such matter would reasonably be expected to have a Material
Adverse Effect. To the knowledge of such Lessee, no 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 penalty has been assessed
on any other Person and no investigation or review is pending
or, to its knowledge, threatened by any Governmental Authority
or other Person relating to such Property with respect to any
alleged violation or liability under any Environmental Law by
any other Person where any such matter would reasonably be
expected to have a Material Adverse Effect.
(iv) Such Property and each portion thereof are
presently in compliance 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 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 Property, any Participant or
such Lessee, (B) cause such 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
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Materials in the real estate records in the county or other
appropriate municipality in which such Property is located, or
(D) prevent or interfere with the continued operation and
maintenance of such Property as contemplated by the Operative
Documents.
(k) COMPLIANCE OF PROPERTY WITH APPLICABLE LAW, ETC. The
present condition and use of such Property conforms with all conditions
or requirements of all existing permits and approvals issued with
respect to such Property, and the present use of such Property and such
Lessee's future intended use of such Property under the Master Lease
and related Lease Supplement shall comply with Applicable Law in all
material respects. To the knowledge of such Lessee, no notices,
complaints of orders or violation or non-compliance have been issued,
threatened or contemplated by any Governmental Authority with respect
to such 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 Property as
such Lessee intends to use such Property under the Master Lease and
related Lease Supplement 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 VII.4. REPRESENTATIONS OF THE COMPANY AND LESSEES WITH RESPECT
TO EACH ADVANCE. The Company and each Lessee shall be deemed by accepting each
Advance to have represented and warranted that:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and such Lessee set forth in the Operative
Documents (including the representations and warranties set forth in
SECTIONS 7.2 and 7.3) are true and correct in all material respects 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. Each of the Company
and such Lessee is in compliance in all material respects with its
obligations under the Operative Documents to which it is a party and
there exists no Default or Event of Default under the Master Lease, the
Guaranty, the Construction Agency Agreement or, to the knowledge of the
Company, the Loan Agreement or any other Operative Document. No Default
or Event of Default under the Master Lease, the Guaranty, the
Construction Agency Agreement or, to the knowledge of the Company, the
Loan Agreement or any other Operative Document will occur as a result
of, or after giving effect to, the Advance requested by the Funding
Request on such date.
(b) IMPROVEMENTS. The Construction of the Improvements on each
Subject Property to date has, to the best knowledge of the Company and
such Lessee, been performed in a good and workmanlike manner,
substantially in accordance with the applicable Plans and
Specifications and in compliance in all material respects with all
Insurance Requirements and Property Legal Requirements.
(c) LIENS. Neither the Company nor such Lessee has permitted
Liens to be placed against the Properties other than Permitted Property
Liens.
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(d) ADVANCE. The amount of the Advance requested represents
amounts owed by the Lessee requesting such Advance in respect of Land
Acquisition Costs, Existing Improvement Costs or Property Improvement
Costs, as the case may be, incurred on or prior to the date of such
Advance and for which such Lessee has not previously been reimbursed by
an Advance or represent amounts with respect to Equity Yield Advances
or Interest Payment Loans. The conditions precedent to such Advance and
the related Equity Amount and Loans set forth in ARTICLE VI have been
satisfied.
SECTION VII.5. REPRESENTATIONS OF THE LESSOR. The Lessor represents
and warrants to each of the other parties hereto as follows:
(a) DUE ORGANIZATION, ETC. It is a corporation duly organized
and validly existing and in good standing under the laws of the State
of its organization and has the corporate power and authority to enter
into and perform its obligations under this Participation Agreement and
to enter into and perform the obligations under each of the other
Operative Documents to which it is or will be a party and each other
agreement, instrument and document to be executed and delivered by it
in connection with or as contemplated by each such Operative Document
to which it is or will be a party.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of each Operative Document to which it is or will be a
party have been duly authorized by all necessary action on its part and
neither the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will contravene any current
United States law, governmental rule or regulation relating to its
banking powers, or (ii) does or will contravene or result in any breach
of or constitute any default under its articles of association or
by-laws.
(c) ENFORCEABILITY, ETC. This Participation Agreement and each
other Operative Document to which it is or will be a party have been,
or on or before any Funding Date on which such Operative Agreement is
to be signed will be, duly executed and delivered by it, and this
Participation Agreement and each such other Operative Document to which
it is a party constitutes, or upon execution and delivery will
constitute, a legal, valid and binding obligation enforceable against
it in accordance with its terms subject, in each case, as to
enforceability, to bankruptcy, insolvency, reorganization and other
similar laws affecting enforcement of creditor rights generally
(insofar as any such law relates to the bankruptcy, insolvency,
reorganization or similar event of the Lessor), principles of good
faith and fair dealing, and, as to the availability of specific
performance or other injunctive relief, the discretionary power of a
court to deny such relief.
(d) NO PLAN ASSETS. It is not acquiring its interests in any
Property being acquired on such Acquisition Date with the assets of any
Plan (or its related trust).
ARTICLE VIII
OTHER COVENANTS AND AGREEMENTS
SECTION VIII.1. COVENANTS OF THE COMPANY. So long as this Participation
Agreement is in effect,
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Participation Agreement
unless the Required Participants shall otherwise consent in writing:
(a) INFORMATION. The Company will deliver to the
Administrative Agent and the Lessor:
(i) as soon as available and in any event within
sixty (60) days after the end of the first, second and third
quarterly accounting periods in each fiscal year of the
Company, copies of a consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of the end of such
accounting period and of the related consolidated income and
retained earnings statements of the Company 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 the Company;
(ii) as soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of
the Company, copies of consolidated balance sheets of the
Company and its Consolidated Subsidiaries as of the end of
such fiscal year and consolidated statements of income and
retained earnings of the Company 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 the Company;
(iii) concurrently with each of the financial
statements furnished pursuant to the foregoing SUBSECTIONS (a)
and (b), a certificate of a Responsible Financial Officer,
showing a calculation of the financial covenants contained in
SECTION 8.1(b) in reasonable detail and stating that in the
opinion of the signer, based upon a review made under his or
her supervision, the Company has performed and observed all
of, and the Company is not in default in the performance or
observance of any of, the terms and covenants hereof or, if
the Company shall be in default, specifying all such defaults,
and the nature thereof, of which the signer of such
certificate may have knowledge;
(iv) if requested by the Administrative Agent or the
Lessor, concurrently with the financial statements furnished
pursuant to the foregoing SUBSECTION (ii), a certificate of a
Responsible Financial Officer setting forth a description of
the insurance policies carried by the Lessees as required by
the Master Lease, in reasonable detail;
(v) concurrently with their being filed, mailed or
delivered, as applicable, copies of all proxy statements,
financial statements and reports which the Company 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 Participant which
the Company or any Subsidiary may be required to file with the
SEC 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
(vi) such other information relating to the business,
affairs and financial condition
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Participation Agreement
of the Company and its Subsidiaries as any Participant may
from time to time reasonably request.
(b) FINANCIAL CONDITION.
(i) FUNDED DEBT TO TOTAL CAPITAL. The Company will
not permit the ratio of Funded Debt of the Company and its
Consolidated Subsidiaries to Total Capital to exceed 0.60 to
1.
(ii) INTEREST COVERAGE RATIO. The Company 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.
(c) NOTICE OF LITIGATION OR DEFAULT. The Company will notify
the Administrative Agent and the Lessor in writing promptly (but in any
event within thirty (30) days), upon the occurrence of (i) the
institution of any litigation, the commencement of any administrative
proceedings, the happening of any event or the assertion of any claim
which could have a Material Adverse Effect or (ii) the occurrence of
any Lease Event of Default or Lease Default, and, with respect to
CLAUSE (ii), the Company will include in such notice a description of
the actions the Company or the applicable Lessee, as the case may be,
proposes to take with respect thereto.
(d) USE OF PROCEEDS. The Company will, and will cause each of
the Lessees to, use the proceeds of the Advances to finance, on behalf
of the Lessor, the acquisition of Land and the Construction of
Improvements thereon, and to pay (or reimburse itself for) Transaction
Expenses related thereto, and the Company will not, and will not permit
any Lessee to, use the proceeds of the Advances for any other purpose.
The Company will not, nor will it permit any Subsidiary to, use the
proceeds of any Advance in violation of Regulations G, T, U or X of the
F.R.S. Board.
(e) BOOKS AND RECORDS; INSPECTION. The Company 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 Participants or
their agents or nominees at any reasonable time upon reasonable notice
for inspection and to make extracts thereof.
(f) CORPORATE EXISTENCE, ETC. Except as otherwise permitted
under SECTION 8.1(m), the Company will maintain its existence and the
existence of each of its Subsidiaries in good standing as a business
corporation under the laws of the jurisdiction of its incorporation,
and remain qualified and cause each of its Subsidiaries 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.
(g) INSURANCE. The Company 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 the
Company 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 the Company
reasonably believes prudent, based on
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Participation Agreement
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 the Company.
(h) EMPLOYEE BENEFIT PLANS. The Company will (i) comply in all
material respects with the provisions of ERISA to the extent applicable
to any Plan maintained by it and cause all Employee Benefit Plans
maintained by it to satisfy the conditions under the Code for tax
qualification of all such plans intended to be tax qualified; and (ii)
avoid (1) any material 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
the Company, but only to the extent that the liability arising form a
failure to comply with any covenant set forth in CLAUSE (i) or (ii)
could reasonably be expected to result in a liability to the Company
for any one such event in excess of $5,000,000.
(i) TAXES. The Company 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.
(j) COMPLIANCE WITH LAWS. The Company 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. The Company shall notify the
Administrative Agent and the Lessor 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 the Company 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.
(k) MAINTENANCE, ETC. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep,
its properties which are used in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order
and from time to time will make all necessary repairs, replacements,
renewals and additions so that at all times (in the Company's
reasonable judgment) the efficiency thereof shall be maintained, except
where the failure to do so would not reasonably be expected to have a
Material Adverse Effect.
(l) SALE OF ASSETS. The Company will not, and will not permit
any Consolidated Subsidiary
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Participation Agreement
to, sell, lease or transfer all or substantially all of its assets
unless (i) immediately after giving effect thereto the Company is in
compliance with the covenants and provisions of the this Participation
Agreement 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 the Company, and any
Lessee may sell, lease or transfer all or substantially all of its
assets to the Company.
(m) MERGERS AND ACQUISITIONS. The Company will not merge or
consolidate with, or otherwise acquire control of the assets of, any
other corporation, unless (i) either the Company or any Consolidated
Subsidiary is the surviving or parent corporation of any merger or
other acquisition or, in the event the Company or any Consolidated
Subsidiary is not the surviving or parent corporation, the
Administrative 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 the Company immediately prior to the merger
or acquisition and (ii) the Company, 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.
(n) LIMITATION ON LIENS. The Company 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 the
Company or any such Consolidated Subsidiary without equally and ratably
securing the Obligations by a Lien ranking ratably with and equal to
(or at the Company's option prior to) such secured Indebtedness. The
foregoing restriction, however, will not apply to:
(i) Liens existing on the date of this Participation
Agreement;
(ii) Liens on any assets of any corporation existing
at the time such corporation becomes a Consolidated
Subsidiary;
(iii) Liens on any assets existing at the time of
acquisition of such assets by the Company 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 the Company or a Consolidated Subsidiary or to
secure any indebtedness incurred or guaranteed by the Company
or a Consolidated Subsidiary prior to, at the time of, or
within three hundred sixty (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 the Company
or a Consolidated Subsidiary, other than, in the case of any
such construction or improvement, any real property on which
the property so
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Participation Agreement
constructed, or the improvement, is located;
(iv) Liens on any assets to secure indebtedness of a
Consolidated Subsidiary to the Company or to another
wholly-owned domestic Subsidiary;
(v) Liens on any assets of a corporation existing at
the time such corporation is merged into or consolidated with
the Company 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 the
Company or a Subsidiary;
(vi) Liens on any assets of the Company 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 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);
(vii) 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 (i)
to (vi), 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, in the case of real property, improvements
and construction on such real property);
(viii) 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 the Company or any Consolidated
Subsidiary, or deposits or pledges to obtain the release of
any of the foregoing Liens;
(ix) 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 the Company or any
Consolidated Subsidiary is a party, or to secure public or
statutory obligations of the Company 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
the Company 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;
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Participation Agreement
(x) 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 the Company or any Consolidated
Subsidiary with respect to which the Company or such
Consolidated Subsidiary is in good faith prosecuting an 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 fifteen (15) days of the date
of judgment; or Liens incurred by the Company or any
Consolidated Subsidiary for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding
to which the Company or such Consolidated Subsidiary is a
party; or
(xi) 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 the
Company 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 the Company,
materially impair the use of such assets in the operation of
the business of the Company or such Consolidated Subsidiary or
the value of such assets for the purposes of such business.
Notwithstanding the restrictions set forth in this SECTION
8.1(n), the Company or any Consolidated Subsidiary will be permitted to
create or assume any Indebtedness which is secured by a Lien without
equally and ratably securing the Obligations, PROVIDED that at the time
of such creation or assumption, and after giving effect thereto,
Exempted Debt does not exceed 20% of Consolidated Net Tangible Assets.
(o) LIMITATION ON SALE AND LEASE-BACK. The Company 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
(3) years, unless either (a) the Company 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 Obligations, pursuant to
CLAUSES (i) through (xi) inclusive of SECTION 8.1(n) 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 the Company) 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 the Company or
any Consolidated Subsidiary enters into such sale and lease-back
transaction, and after giving effect thereto, Exempted Debt does not
exceed 20% of Consolidated Net Tangible Assets.
(p) AS-BUILT APPRAISALS. An As-Built Appraisal for each
Property delivered pursuant to SECTION 6.2(c) shall in no event be
delivered later than the date occurring one hundred-eighty (180) days
after the Acquisition Date for such Property.
(q) FURTHER ASSURANCES. The Company shall, and shall cause
each Lessee to, take from time to time all action necessary to assure
that the intent of the parties pursuant to the Operative
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Participation Agreement
Documents is given effect as contemplated by Section 25.1 of the Master
Lease, that the Lessor holds perfected Liens on the Properties securing
the Lease Balance as contemplated by Section 25.1 of the Master Lease,
and that the Lessor hold a perfected Lien on the Lease Assets securing
the Equity Amounts and Equity Yield thereon. The Company shall, and
shall cause the Lessees to, execute and deliver to the Administrative
Agent, the Lessor and the Lenders from time to time, promptly upon
request therefor, any and all other and further instruments (including
correction instruments and supplemental mortgages and security
agreements, as appropriate) that may be reasonably requested by the
Administrative Agent, the Lessor or the Lenders to cure any deficiency
in the execution and delivery of this Participation Agreement or any
other Operative Document to which it is a party.
SECTION VIII.2. COVENANT OF THE LESSOR. The Lessor hereby agrees that
so long as this Participation Agreement is in effect, it will not create, incur,
assume or suffer to exist any Lessor Lien attributable to it upon the Master
Lease, the Lease Supplements or any of the Properties.
SECTION VIII.3. RELEASE OF PROPERTIES. If any Lessee shall at any time
purchase any Property pursuant to Section 15.1 of the Lease or exercise its
Purchase Option with respect to any Property, or if all of the Properties shall
be purchased by the Lessees (or their designees) in accordance with the Lease,
and the Lessees satisfy each of the obligations and conditions set forth in the
Lease for the release of a Property therefrom, then, upon application of the
proceeds of any such sale pursuant to ARTICLE XII and all accrued interest and
any other payments due and owing from the Lessees to the Administrative Agent,
the Lenders and the Lessor on such date, including without limitation pursuant
to ARTICLE XI of this Participation Agreement, such Property shall be released
from the Liens created by the Lease Supplement covering such Property, the
Assignment of Leases and Rents, the Construction Agency Agreement Assignment,
the Lessor Mortgage and the Lessor Financing Statements, and the Administrative
Agent and the Lessor shall, at the expense of the Company, execute and deliver
such instruments as are legally required in order to effectuate such release. In
addition, upon the termination of the Commitments of the Lenders and the payment
in full of all other amounts owing to the Lenders by the Company and the other
Lessees hereunder or under any other Operative Document, the Properties shall be
released from the Liens created by the Lease Supplement, the Lessor Mortgage,
the Lessor Financing Statements, the Assignment of Leases and Rents and the
Construction Agency Agreement Assignment. Upon request of the Company or the
Lessor following any such release, the Administrative Agent shall, at the sole
cost and expense of the Company, execute and deliver to the Company or the
Lessor, as applicable, such documents as the Company or the Lessor shall
reasonably request to evidence such releases.
ARTICLE IX
LESSEE DIRECTIONS; CERTAIN RIGHTS OF LESSEE
SECTION IX.1. LESSEE DIRECTIONS. The Administrative Agent, the Lessor,
the Lenders, the Company and each Lessee hereby agree that, so long as no Lease
Default or Lease Event of Default exists:
(a) the Company shall have the exclusive right to exercise any
right of the Lessor under SECTION 9.2 upon not less than three (3)
Business Days' prior written notice from the Company to the Lessor,
unless the Lessor objects to such exercise within two (2) Business Days
of receipt of such
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Participation Agreement
notice; and
(b) without limiting the foregoing CLAUSE (a) and in addition
thereto, the Company shall have the exclusive right to exercise any
other right of the Lessor under the Loan Agreement upon not less than
two (2) Business Days' prior written notice from the Company to the
Lessor, unless the Lessor objects to such exercise within two (2)
Business Days of receipt of such notice.
SECTION IX.2. EXTENSION TERMS. The Company may from time to time direct
a written request to the Administrative Agent and the Lessor (with a copy to
each Lender) that the Expiration Date be extended for an Extension Term under
the Master Lease and concurrently therewith request (with a copy to each
Participant) that the Lessor direct a written request to the Lenders that the
applicable Maturity Date be extended to the last day of such Extension Term.
Each Participant may grant or deny its consent to either or both extensions in
its sole discretion by notifying the Lessor in writing (with a copy to the
Company and each other Participant) and may condition its consent on adjustment
of the Interest Rate or Equity Yield Rate, as appropriate, and receipt of such
financial information or other documentation as may be reasonably requested by
such Participant, including, without limitation, satisfactory appraisals of the
Properties; PROVIDED, HOWEVER, that any Participant that fails to respond to
such request within thirty (30) days after its receipt thereof shall be deemed
to have denied such request.
ARTICLE X
PAYMENT OF CERTAIN EXPENSES
SECTION X.1. TRANSACTION EXPENSES. (a) The Company shall pay, or cause
to be paid, from time to time all Transaction Expenses in respect of the
transactions on the Documentation Date, each Acquisition Date and each Funding
Date.
(b) The Company shall pay or cause to be paid when due (i) all
reasonable out-of-pocket expenses of the Lessor (including reasonable counsel
fees and expenses) or any successor Lessor, for acting as Lessor under this
Participation Agreement and the other Operative Documents, (ii) all Transaction
Expenses incurred by the Lessor, the Administrative Agent, the Lessor or any
Lender in entering into any future amendments or supplements with respect to any
of the Operative Documents, whether or not such amendments or supplements are
ultimately entered into, or giving or withholding of waivers of consents hereto
or thereto, in each case which have been requested by or approved by the
Company, (iii) all Transaction Expenses incurred by the Administrative Agent,
the Lessor, any Lessee, any Lender or the Lessor in connection with any purchase
of any Property or Properties by any Lessee or other Person pursuant to Articles
XVIII and XXI of the Master Lease and (iv) all Transaction Expenses incurred by
any of the other parties hereto in respect of enforcement of any of their rights
or remedies against the Company or any Lessee in respect of the Operative
Documents.
SECTION X.2. BROKERS' FEES AND STAMP TAXES. The Company shall pay or
cause to be paid any brokers' fees and any and all stamp, transfer and other
similar taxes, fees and excises, if any, including any interest and penalties,
which are payable in connection with the transactions contemplated by this
Participation Agreement and the other Operative Documents.
SECTION X.3. LOAN AGREEMENT AND RELATED OBLIGATIONS. The Company shall
pay, before the due
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Participation Agreement
date thereof, all costs, expenses and other amounts (other than principal and
interest on the Loans which are payable to the extent otherwise required by the
Operative Documents) required to be paid by the Lessor to the Lenders (or to the
Administrative Agent for the benefit of the Lenders) under the Loan Agreement,
the Assignment of Leases and Rents and the Construction Agency Agreement
Assignment.
ARTICLE XI
INDEMNIFICATION
SECTION XI.1. GENERAL INDEMNIFICATION. The Company agrees, whether or
not any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After Tax Basis, from and against, any and all Claims that may
be imposed on, incurred by or 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 the applicable
Acquisition Date or after the Expiration 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;
(b) the Properties 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 or substitution, storage, transfer of title, redelivery, use,
financing, refinancing, disposition, operation, condition, sale
(including, without limitation, any sale pursuant to Section 16.2(c),
16.2(e) or 18.3 of the Master Lease or any sale pursuant to Article XV,
XVIII or XX of the Master Lease), return or other disposition of all or
any part or any interest in the Properties 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, without limitation: (1)
Claims or penalties arising from any 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 the Properties, (4) the
making of any Modifications in violation of any standards imposed by
any insurance policies required to be maintained by any Lessee pursuant
to the Master Lease which are in effect at any time with respect to the
Properties or any part thereof, (5) any Claim for patent, trademark or
copyright infringement, and (6) Claims arising from any public
improvements with respect to the Properties resulting in any change or
special assessments being levied against any Property or Properties or
any plans to widen, modify or realign any street or highway adjacent to
any of the Properties, or any Claim for utility "tap-in" fees;
(d) the breach by the Company or any other Lessee of any
covenant, 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;
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(e) the retaining or employment of any broker, finder or
financial advisor by the Company or any other Lessee to act on its
behalf in connection with this Participation Agreement;
(f) the existence of any Lien on or with respect to the
Properties, the Improvements, 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 the Properties 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
Modifications constructed by any Lessee, except Lessor Liens and Liens
in favor of the Lenders or the Lessor; or
(g) subject to the accuracy of any Participant's
representation set forth in SECTION 7.1(a), as to such Participant, the
transactions contemplated by the Master Lease 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;
PROVIDED, HOWEVER, that the Company shall not be required to indemnify any
Indemnitee under this SECTION 11.1 for any of the following: (1) any Claim to
the extent resulting from the willful misconduct or gross negligence of such
Indemnitee or any Affiliate of such Indemnitee (IT BEING UNDERSTOOD that the
Company shall be required to indemnify an Indemnitee even if the ordinary (but
not gross) negligence of such Indemnitee caused or contributed to such Claim) or
from the breach of any representation, warranty or covenant of such Indemnitee
set forth in any Operative Document, (2) any Claim resulting from Lessor Liens
which the Administrative Agent, the Lessor, any Lender or the Lessor is
responsible for discharging under the Operative Documents, (3) any Claim to the
extent attributable to acts or events occurring after the Expiration Date or the
return or remarketing of the Properties so long as the Administrative Agent, the
Lessor, the Lenders and the Lessor are not exercising remedies against the
Company or any Lessee in respect of the Operative Documents which they are then
entitled to exercise, and (4) any Claim arising or breach by any Lender or the
Lessor of its Commitments under any Operative Document from a breach or alleged
breach by the Lenders or the Lessor of any agreement entered into in connection
with the assignment or participation of any Loan or Equity Amount. 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 remedy under the Master Lease or any other Operative Document. Without
limiting the express rights of any Indemnitee under this SECTION 11.1, this
SECTION 11.1 shall be construed as an indemnity only and not a guaranty of
residual value of the Properties or as a guaranty of the Notes.
SECTION XI.2. END OF TERM INDEMNITY. (a) If any Lessee elects the
Remarketing Option and, after giving effect to the proposed remarketing
transactions, there would be a Shortfall Amount, then prior to the Expiration
Date and as a condition to such Lessee's right to complete the remarketing of
the Properties pursuant to Section 20.1 of the Master Lease, such Lessee shall
cause to be delivered to the Lessor at least two (2) months prior to the
Expiration Date, at such Lessee's sole cost and expense, a report from the
Appraiser in form and substance satisfactory to the Participants (the "END OF
THE TERM REPORT") which shall state the appraiser's conclusions as to the reason
for any decline in the Fair Market Sales Value of any of the Properties from
that anticipated for such date in the As-Built Appraisal delivered pursuant to
SECTION 6.2(c). If an End of the Term Report is not required pursuant to the
preceding sentence but all of the proposed sales of Properties are not
consummated on or prior to the Expiration Date, then such Lessee shall, within
forty-five (45) days after the Expiration Date, cause an End of the Term Report
to be delivered to the Lessor.
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(b) If any Lessee is obligated to deliver an End of the Term Report
pursuant to CLAUSE (a), then on or prior to the Expiration Date or, in the case
of an End of the Term Report delivered pursuant to the last sentence of CLAUSE
(a), on or prior to the date occurring two (2) months after the Expiration Date,
such Lessee shall pay to the Administrative Agent for the account of the Lessor
an amount (not to exceed the Shortfall Amount) equal to the portion of the
Shortfall Amount that the End of the Term Report demonstrates was the result of
a decline in the Fair Market Sales Value of the applicable Properties occuring
while such Lessee leased the Property due to
(i) 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 (excepting
in each case ordinary wear and tear), or
(ii) any material change to the Plans and Specifications, or
any Modification made to, or any rebuilding of, the applicable
Properties or any part thereof by the Construction Agent or any Lessee,
or
(iii) the existence of any Hazardous Activity, Hazardous
Materials or Environmental Violations, the indemnity for which shall
not exceed the cost of the remediation thereof, or
(iv) any restoration or rebuilding carried out by the
Construction Agent or any Lessee, or
(v) any condemnation of any portion of any of the applicable
Properties, or
(vi) any use of any of the applicable Properties or any part
thereof by the applicable Lessee or any sublessee other than as
permitted by the Master Lease, or
(vii) any grant, release, dedication, transfer, annexation or
amendment made pursuant to Section 11.2 of the Master Lease, or
(viii) the failure of the Lessor to have good and marketable
title to any of the applicable Properties free and clear of all Liens
(excluding Permitted Property Liens) except to the extent failure
results from acts or omissions of the Lessor, or
(ix) the existence of any sublease relating to any of the
applicable Properties that shall survive the Expiration Date.
SECTION XI.3. ENVIRONMENTAL INDEMNITY. Without limitation of the other
provisions of this ARTICLE XI, the Company hereby agrees 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, to the extent
the Lease Balance has not been fully paid, any loss of value of the Properties
related thereto), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings) and
orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including but not limited to reasonable and documented
attorneys' and/or paralegals' fees and expenses), including, but not limited to,
all costs incurred in connection with any
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investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any federal, state or local government agency,
arising in whole or in part, out of
(a) the presence on or under any of the Properties of any
Hazardous Materials, or any releases or discharges of any Hazardous
Materials on, under, from or onto any of the Properties,
(b) any activity, including, without limitation, construction,
carried on or undertaken on or off any of the Properties, and whether
by the Lessees or any predecessor in title or any employees, agents,
contractors or subcontractors of the Lessees or any predecessor in
title, or any other Persons (except for such Indemnitee, unless such
Indemnitee has removed Lessee from the Property or otherwise taken
possession of the Property), 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 of the Properties,
(c) 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,
(d) 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 Authority to
record a Lien on the land records, or
(e) any residual contamination on or under any of the 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, and irrespective of whether any of such activities
were or will be undertaken in accordance with applicable laws,
regulations, codes and ordinances;
PROVIDED, HOWEVER, the Company shall not be required to indemnify any Indemnitee
under this SECTION 11.3 for (1) any Claim to the extent resulting from the
willful misconduct or gross negligence of such Indemnitee or (2) with respect to
any Property, any Claim to the extent attributable to acts or events occurring
after the earlier of the date on which the applicable Lessee pays all amounts
owed with respect to the purchase of the Property or relinquishes possession of
such Property in accordance with applicable return conditions. 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
remedy under the Master Lease or any other Operative Document.
SECTION XI.4. PROCEEDINGS IN RESPECT OF CLAIMS. With respect to any
amount that the Company is requested by an Indemnitee to pay by reason of
SECTION 11.1 or 11.3, such Indemnitee shall, if so requested by the Company and
prior to any payment, submit such additional information to the Company as the
Company may reasonably request and which is in the possession of such Indemnitee
to substantiate properly the requested payment.
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In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Company of the commencement
thereof, and the Company shall be entitled, at its expense, to participate in,
and, to the extent that the Company desires to, assume and control the defense
thereof; PROVIDED, HOWEVER, that the Company shall keep such Indemnitee fully
apprised of the status of such action, suit or proceeding and shall provide such
Indemnitee with all information with respect to such action, suit or proceeding
as such Indemnitee shall reasonably request, and PROVIDED, FURTHER, that the
Company 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
risk of imposition of criminal liability or will involve a risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted
Property Lien) on any Property or any part thereof unless, in the case of civil
liability, the Company shall have posted a bond or other security satisfactory
to the relevant Indemnitees in respect to such risk or (y) 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 the
Company which the Company and the Indemnitee have been unable to sever from the
indemnified claim(s), or (C) an Event of Default under the Master Lease has
occurred and is continuing. The Indemnitee will join in the Company's efforts to
sever such action. The Indemnitee may participate in a reasonable manner at its
own expense and with its own counsel in any proceeding conducted by the Company
in accordance with the foregoing. The Company shall not enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under SECTION 11.1 or 11.3 without the prior written consent of the
Indemnitee, which consent shall not be unreasonably withheld in the case of a
money settlement not involving an admission of liability of such Indemnitee.
Each Indemnitee shall at the expense of the Company supply the Company
with such information and documents reasonably requested by the Company as are
necessary or advisable for the Company to participate in any action, suit or
proceeding to the extent permitted by SECTION 11.1 or 11.3. Unless an Event of
Default under the Master Lease 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 11.1 or 11.3 without
the prior written consent of the Company, which consent shall not be
unreasonably withheld, unless such Indemnitee waives its right to be indemnified
under SECTION 11.1 or 11.3 with respect to such Claim.
Upon payment in full of any Claim by the Company pursuant to SECTION
11.1 or 11.3 to or on behalf of an Indemnitee, the Company, 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 necessary to preserve
any such claims and otherwise cooperate with the Company and give such further
assurances as are necessary or advisable to enable the Company vigorously to
pursue such claims.
Any amount payable to an Indemnitee pursuant to SECTION 11.1 or 11.3
shall be paid to such Indemnitee promptly upon, but in no event later than
thirty (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.
SECTION XI.5. GENERAL TAX INDEMNITY.
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(a) INDEMNIFICATION. Each Lessee shall pay and assume liability for,
and does hereby agree to indemnify, protect and defend the applicable Property
and all Tax Indemnitees, and hold them harmless against, all Impositions
relating to Properties leased to it or to payments made by it on an After Tax
Basis.
(b) 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 Imposition as to which the Lessees
may have an indemnity obligation pursuant to this SECTION 11.5, or if any Tax
Indemnitee shall receive notice that any Imposition to which the Lessees may
have an indemnity obligation pursuant to this SECTION 11.5 may be payable, such
Tax Indemnitee shall promptly (and, in any event, within thirty (30) days)
notify the Company, as agent for the Lessees, in writing (PROVIDED that failure
to so promptly notify the Company within thirty (30) days shall not alter such
Tax Indemnitee's rights under this SECTION 11.5 except to the extent such
failure precludes or materially adversely affects the ability to conduct a
contest of any indemnified Taxes) and shall not take any action with respect to
such claim, proceeding or Imposition without the written consent of the Company,
as agent for the Lessees, (such consent not to be unreasonably withheld or
unreasonably delayed) for thirty (30) days after the receipt of such notice by
the Company or thereafter if the applicable Lessee has commenced to take
appropriate action; PROVIDED, HOWEVER, that in the case of any such claim or
proceeding, if such Tax Indemnitee shall be required by law or regulation to
take action prior to the end of such 30-day period, such Tax Indemnitee shall in
such notice to the applicable Lessee, so inform the Company, as agent for the
Lessees, and such Tax Indemnitee shall not take any action with respect to such
claim, proceeding or Imposition without the consent of the Company, as agent for
the Lessees, (such consent not to be unreasonably withheld or unreasonably
delayed) for ten (10) days after the receipt of such notice by the Company, or
thereafter if the applicable Lessee has commenced to take appropriate action,
unless such Tax Indemnitee shall be required by law or regulation to take action
prior to the end of such 10-day period.
The Company shall be entitled for a period of thirty (30) days from
receipt of such notice from such Tax Indemnitee (or such shorter period as such
Tax Indemnitee has notified the Lessees is required by law or regulation for
such Tax Indemnitee to commence such contest), to request in writing that such
Tax Indemnitee contest the imposition of such Tax, at the expense of the
applicable Lessee. If (x) such contest can be pursued in the name of the
applicable Lessee and independently from any other proceeding involving a Tax
liability of such Tax Indemnitee for which the applicable Lessee has not agreed
to indemnify such Tax Indemnitee, (y) such contest must be pursued in the name
of such Tax Indemnitee, but can be pursued independently from any other
proceeding involving a Tax liability of such Tax Indemnitee for which the
applicable Lessee has not agreed to indemnify such Tax Indemnitee or (z) such
Tax Indemnitee so requests, then the applicable Lessee shall be permitted to
control the contest of such claim, PROVIDED that in the case of a contest
described in CLAUSE (y), if such Tax Indemnitee determines reasonably and in
good faith that such contest by the applicable Lessee could have a material
adverse impact on the business or operations of such Tax Indemnitee and provides
a written explanation to such Lessee of such determination, such Tax Indemnitee
may elect to control or reassert control of the contest, and PROVIDED, that by
taking control of the contest, the applicable Lessee acknowledges that such
Lessee has an indemnification obligation under Section 11.5 for the Imposition
ultimately determined to be due by reason of such claim, and PROVIDED, FURTHER,
that in determining the application of CLAUSES (x) and (y) above, each Tax
Indemnitee shall take any and all reasonable steps to segregate claims
(including claims that are part of a single examination or investigation) for
any Taxes for which the applicable Lessee indemnifies hereunder from Taxes for
which the applicable Lessee is not obligated to indemnify hereunder, so that the
applicable Lessee can control the contest of the former. In all other claims
requested to be contested by the Company, as agent for the Lessees, such Tax
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Indemnitee shall control the contest of such claim, acting through counsel
reasonably acceptable to the Company, as agent for the Lessees. In no event
shall the applicable Lessee be permitted to contest (or such Tax Indemnitee
required to contest) any claim, (A) if such Tax Indemnitee provides the
applicable Lessee with a legal opinion of counsel reasonably acceptable to the
applicable Lessee that such action, suit or proceeding involves a material risk
of imposition of criminal liability or will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted
Property Lien) on any Property or any part of any thereof unless the applicable
Lessee shall have posted and maintained a bond or other security satisfactory to
the relevant Tax Indemnitee in respect to such risk, (B) if a Lease Event of
Default has occurred and is continuing unless the applicable Lessee shall have
posted and maintained a bond or other security satisfactory to the relevant Tax
Indemnitee in respect of the Taxes subject to such claim and any and all
expenses for which the applicable Lessee is responsible hereunder reasonably
foreseeable in connection with the contest of such claim, (C) unless the
applicable Lessee shall have agreed to pay and shall pay, to such Tax Indemnitee
within thirty (30) days of receiving an itemized list thereof, all reasonable
out-of-pocket costs, losses and expenses that such Tax Indemnitee may incur in
connection with contesting such Imposition including all reasonable legal,
accounting and investigatory fees and disbursements, or (D) if such contest
shall involve the payment of the Tax prior to the contest, unless the applicable
Lessee shall provide to such Tax Indemnitee an interest-free advance in an
amount equal to the Imposition that the Indemnitee is required to pay (with no
additional net after-tax costs to such Tax Indemnitee). In addition for Tax
Indemnitee controlled contests and claims contested in the name of such Tax
Indemnitee in a public forum, no contest shall be required: (A) unless the
amount of the potential indemnity (taking into account all similar or logically
related claims that have been or could be raised in any audit involving such Tax
Indemnitee with respect to any period for which the applicable Lessee may be
liable to pay an indemnity under this SECTION 11.5(B)) exceeds $10,000 and (B)
unless, if requested by such Tax Indemnitee, the applicable Lessee shall have
provided to such Tax Indemnitee an opinion of counsel selected by the Company
(which may be in-house counsel) that a reasonable basis exists to contest such
claim. In no event shall a Tax Indemnitee be required to appeal an adverse
judicial determination to the United States Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for Taxes
(or claim for refund) but the decisions regarding what actions to be taken shall
be made by the controlling party in its sole judgement, PROVIDED, HOWEVER, that
if such Tax Indemnitee is the controlling party and the applicable Lessee
recommends the acceptance of a settlement offer made by the relevant
Governmental Authority and such Tax Indemnitee rejects such settlement offer
then the amount for which the applicable Lessee will be required to indemnify
such Tax Indemnitee with respect to the Taxes subject to such offer shall not
exceed the amount which it would have owed if such settlement offer had been
accepted. In addition, the controlling party shall keep the noncontrolling party
reasonably informed as to the progress of the contest, and shall provide the
noncontrolling party with a copy of (or appropriate excerpts from) any reports
or claims issued by the relevant auditing agents or taxing authority to the
controlling party thereof, in connection with such claim or the contest thereof.
Each Tax Indemnitee shall at the applicable Lessee's expense supply the
applicable Lessee with such information and documents reasonably requested by
the Guarantor as are necessary or advisable for the applicable Lessee to
participate in any action, suit or proceeding to the extent permitted by this
SECTION 11.5(b). Notwithstanding anything in this SECTION 11.5(b) to the
contrary, no Tax Indemnitee shall enter into any settlement or other compromise
or fail to appeal an adverse ruling (which appeal has been requested in writing
by the applicable Lessee) with respect to any claim which may be entitled to be
indemnified under this SECTION 11.5 without the prior written consent of the
applicable Lessee, such entering into of a settlement or
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compromise, or such failure to appeal, without such consent, shall constitute a
waiver of all rights to indemnification under this SECTION 11.5 with respect to
such claim.
Notwithstanding anything contained herein to the contrary, a Tax
Indemnitee will not be required to contest (and the applicable Lessee shall not
be permitted to contest) a claim with respect to the imposition of any Tax if
such Tax Indemnitee shall waive in writing, in a form acceptable to the Lessees,
its right to indemnification under this SECTION 11.5 with respect to such claim
(and any claim with respect to such year or any other taxable year the contest
of which is materially adversely affected as a result of such waiver).
(c) REFUNDS, ETC. Should any Tax Indemnitee ever receive any refund,
credit or reduction from any taxing authority (whether before or after payment
in full of all amounts owed hereunder and under the Master Lease) to which such
Tax Indemnitee would not be entitled but for the payment by the Company of
additional amounts as required by this SECTION 11.5, such Tax Indemnitee
thereupon shall repay to the Company an amount with respect to such refund,
credit or reduction equal to any net reduction in Impositions actually obtained
by Tax Indemnitee and determined by Tax Indemnitee to be directly related to
such refund, credit or reduction (but not to exceed such additional amounts to
which such refund, credit or reduction relates). No such payment shall be
required, however, to the extent the Company is delinquent in any payments to
Tax Indemnitee under this Participation Agreement, the Master Lease or any other
Operative Document, but shall promptly be paid to the Company after such
delinquency no longer exists. Notwithstanding the provisions of this SECTION
11.5(c) to the contrary, the decision as to whether or not to claim any such
refund, credit or reduction (and if claimed, the determination of the amount of
the net reduction in Impositions attributable to the additional amounts paid by
the Company under this SECTION 11.5) shall be made by Tax Indemnitee (as
applicable) in its sole discretion, provided, however, each Tax Indemnitee
agrees to act in good faith to claim any such refund, credit or reduction and
take such other actions as may be reasonable to minimize any payment due from
any Lessee or the Company pursuant to Section 11.5.
(d) TAX OWNERSHIP. Each Participant represents, warrants and covenants
that it will not, prior to the termination of the Master Lease, claim ownership
of (or any tax benefits, including depreciation, with respect to) any Property
for any income tax purposes, it being understood that each Lessee is and will
remain the owner of each Property leased by it under the Master Lease for such
income tax purposes until the termination of the Master Lease. If,
notwithstanding the income tax intentions of the parties as set forth in this
SECTION 11.5(d) and in SECTION 5.1 hereof, any Participant actually receives any
income tax deductions, reductions in income tax or other income tax benefit as a
result of a recharacterization by a federal, state or local taxing authority
requiring such party to take any tax benefits attributable to ownership of the
Property for income tax purposes, such Participant shall pay to the applicable
Lessee, together with an amount equal to any reduced Taxes payable by such Tax
Indemnitee as a result of such payment, the amount of such income tax savings
actually realized by such Participant (less the amount of any anticipated
increase in income tax which the Participant determines is currently payable as
a result of such claim or recharacterization), PROVIDED that the applicable
Lessee shall reimburse such Participant for any subsequent increase in such
Participant's income taxes resulting from such recharacterization not taken into
account in the payment made to such Lessee, up to the amount paid to such Lessee
by such Participant. The parties agree that this SECTION 11.5(d) is intended to
require a payment to a Lessee if and only if a Participant shall have actually
received an unanticipated tax savings with respect to a Property that would not
have been received if the Lessor had advanced funds to such Lessee in the form
of a loan secured by the Property leased by such Lessee in an amount equal to
the applicable Property Cost. Nothing in this SECTION 11.5(d) shall be construed
to require a Participant to take any affirmative action to realize any tax
savings if in its good faith judgment such action
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may have a material adverse affect on such Participant.
(e) REPORTS. If any Lessee or the Company knows of any report, return
or statement required to be filed with respect to any Taxes that are subject to
indemnification under this Section 11.5, such Lessee or the Company shall, if
such Lessee or the Company is permitted by Applicable Law, timely file such
report, return or statement (and, to the extent permitted by law, show ownership
of the applicable Property in the related Lessee); PROVIDED, HOWEVER, that if
the related Lessee and the Company 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 Company 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 Company 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 requests, provide such Tax Indemnitee
with such information as is reasonably available to such Lessee and the Company.
(f) VERIFICATION. At a Lessee's or the Company's request, the amount of
any indemnity payment by such Lessee or the Company or any payment by a Tax
Indemnitee to the Company pursuant to this Section 11.5 shall be verified and
certified by an independent public accounting firm selected by the Company and
reasonably acceptable to the Tax Indemnitee. Unless such verification shall
disclose an error in the related Lessee's and the Company's favor of 5% or more,
the costs of such verification shall be borne by such Lessee and the Company. In
no event shall any Lessee or the Company 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
Participation Agreement and that matters of interpretation of this Participation
Agreement are not within the scope of the independent accounting firm's
responsibilities.
SECTION XI.6. INDEMNITY PAYMENTS IN ADDITION TO LEASE OBLIGATIONS. The
Company and each other Lessee acknowledge and agree that its obligations to make
indemnity payments under this ARTICLE XI are separate from, in addition to, and
do not reduce, its obligation to pay Basic Rent or any other payment required
hereunder or under its Lease in accordance with the provisions hereof and
thereof.
SECTION XI.7. LIBO RATE LENDING UNLAWFUL. If any Participant shall
determine (which determination shall, upon notice thereof to the Company and the
Participants, be conclusive and binding on the Company and the other Lessees)
that the introduction of or any change in or in the interpretation of any law
after the Documentation Date makes it unlawful, or any central bank or other
governmental authority asserts after the Documentation Date that it is unlawful,
for such Participant to make, continue or maintain any Loan or Equity Amount, as
the case may be, as a LIBO Rate Amount the obligation of such Participant to
make, continue or maintain any such Loan or Equity Amount, as the case may be,
as a LIBO Rate Amount shall, upon such determination, forthwith be suspended
until such Participant shall notify the Company and the Administrative Agent
that the circumstances causing such suspension no longer exist, and all Loans or
Equity Amounts, as the case may be, of such Participant shall automatically bear
interest or accrue Equity Yield at the Alternate Base Rate either (a) on the
last day of the then current Rent Period applicable to such Loan or Equity
Amount, then determined as a LIBO Rate Amount, as the case may be, if such
Participant
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may lawfully continue to maintain and fund such Loan or Equity Amount as a LIBO
Rate Amount or (b) immediately if such Participant shall determine that it may
not lawfully continue to maintain and fund such Loan or Equity Amount, as the
case may be, as a LIBO Rate Amount to such day thereto or sooner, if required by
such law or assertion. For so long as any Participant's obligations to make,
continue or maintain Loans or Equity Amounts, as the case may be, as a LIBO Rate
Amount shall be suspended pursuant to this SECTION 11.7, such Participant shall,
subject to the terms and conditions of the Operative Documents, advance Loans or
Equity Amounts as Base Rate Amounts; PROVIDED, HOWEVER, that, upon such
Participant's notification to the Company and the Administrative Agent that the
circumstances causing such suspension no longer exist, all such Base Rate
Amounts shall be converted into LIBO Rate Amount on the first day of the next
succeeding Rent Period.
SECTION XI.8. DEPOSITS UNAVAILABLE. If any of the Participants shall
have determined that
(i) Dollar deposits in the relevant amount and for the
relevant Rent Period are not available to the Participant in its
relevant market applicable to such Participant's LIBO Rate Amounts; or
(ii) by reason of circumstances affecting the Participant's
relevant market, adequate means do not exist for ascertaining the
Interest Rate or Equity Yield Rate, as the case may be, applicable to
such Participant's LIBO Rate Amounts,
then, upon notice from such Participant to the Lessee and the other
Participants, (i) the obligations of such Participant to make Loans or Equity
Amounts, as the case may be, as LIBO Rate Amounts shall be suspended and (ii)
each outstanding LIBO Rate Amount of such Participant shall begin to bear
interest or accrue Equity Yield at the Alternate Base Rate on the last day of
the then current Rent Period applicable thereto. For so long as any
Participant's obligations to make Loans or Equity Amounts, as the case may be,
as LIBO Rate Amounts shall be suspended pursuant to this SECTION 11.8, such
Participant shall, subject to the terms and conditions of the Operative
Documents, advance Loans or Equity Amounts as Base Rate Amounts; PROVIDED,
HOWEVER, that, upon such Participant's notification to the Company and the
Administrative Agent that the circumstances causing such suspension no longer
exist, all such Base Rate Amounts shall be converted into LIBO Rate Amounts on
the first day of the next succeeding Rent Period.
SECTION XI.9. INCREASED COSTS, ETC. If after the Documentation Date,
any change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority increases or would
increase the cost to any Participant of, or reduces or would reduce the amount
of any sum receivable by such Participant in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain) any Loans or
Equity Amounts, as the case may be as a LIBO Rate Amount, the Company agrees to
reimburse such Participant for each such increased cost or reduced amount when
applicable to such Participant. Such Participant shall promptly notify the
Administrative Agent and the Company in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Participant for such
increased cost or reduced amount. Such additional amounts shall be payable by
the Company directly to such Participant within thirty (30) days of its receipt
of such notice, and such notice shall be presumed correct and binding on the
Lessee absent manifest error. The Company shall not be required to make any
payment for such additional amounts arising prior to the date which is ninety
(90) days before the date of such notice. If any affected Participant shall
subsequently recoup costs for which such Participant has
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heretofore been compensated by the Company under this Section 11.9 such
Participant shall remit to the Company the amount of such recoupment.
SECTION XI.10. FUNDING LOSSES. In the event any Participant shall
incur any loss or out-of-pocket expense (including any loss or out-of-pocket
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Participant to make, continue or maintain any
portion of the principal amount of any Loan or Equity Amount, as the case may
be, as a LIBO Rate Amount), as a result of:
(i) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Amount on a date other than the scheduled last
day of the Rent Period applicable thereto, or
(ii) any LIBO Rate Amount not being made in accordance with
the Funding Request therefor (unless such failure to make Loans or
Equity Amounts is due to a default by such Participant)
then, upon the written notice of such Participant to the Company (with a copy to
the Administrative Agent), the Company shall, within thirty (30) days of its
receipt thereof, pay directly to such Participant such amount (determined on the
basis of such Participant's standard practices) as will reimburse such
Participant for such loss or out-of-pocket expense. Such written notice (which
shall include calculations in sufficiently reasonable detail to indicate the
incurrence and amount of such loss and out-of-pocket expense) shall be presumed
correct and binding on the Lessee absent manifest error.
SECTION XI.11. INCREASED CAPITAL COSTS. If after the Documentation
Date, any change in, or the introduction, adoption, effectiveness,
interpretation, reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of
law) of any court, central bank, regulator or other governmental authority
affects or would affect the amount of capital required or expected to be
maintained by any Participant or any Person controlling such Participant, and
such Participant reasonably determines that the rate of return on its or such
controlling Person's capital as a consequence of its Commitment or the Loans or
Equity Amounts, as the case may be, made by such Participant is reduced to a
level below that which such Participant or such controlling Person could have
achieved but for the occurrence of any such circumstance (taking into
consideration such Participant's policies with respect to capital adequacy
immediately before such compliance and assuming that such Participant's capital
was fully utilized prior to such compliance) by an amount deemed by such
Participant to be material, then, in any such case within thirty (30) days after
receipt of notice from time to time by such Participant to the Company, the
Lessee, on a pro rata basis, shall pay directly to such Participant additional
amounts sufficient to compensate such Participant or such controlling Person for
such reduction in rate of return. A statement of such Participant as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall be presumed correct and binding on the Company absent demonstrable
error. In determining such amount, such Participant shall use its standard
practice in determining such amount, and, in the absence of such standard
practice, may use any reasonable method of averaging and attribution that it
shall deem applicable. The Company shall not be required to make any payment for
such additional amounts arising prior to the date which is ninety (90) days
before the date of such notice. If any affected Participant shall subsequently
recoup costs for which such Participant has heretofore been compensated by the
Company under this Section 11.11 such Participant shall remit to the Company the
amount of such recoupment.
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Participation Agreement
ARTICLE XII
PAYMENTS AND DISTRIBUTIONS
SECTION XIII.1. AGREEMENT OF ADMINISTRATIVE AGENT AND PARTICIPANTS.
Pursuant to the Assignment of Leases and Rents, all of the payments (other than
Excepted Payments) under the Master Lease, the Lease Supplements and the
Participation Agreement have been assigned to the Administrative Agent for the
benefit of the Lenders. The Administrative Agent hereby agrees to deposit all
such payments, receipts and other consideration of any kind whatsoever (other
than Excepted Payments) received by the Administrative Agent pursuant to the
Assignment of Leases and Rents and the Construction Agency Agreement Assignment
into the Account. The Administrative Agent shall make distributions from the
Account pursuant to the requirements of this ARTICLE XII to each Participant or
other Person entitled thereto as promptly as possible (it being understood that
any such payment received on a timely basis in accordance with the provisions of
the Master Lease, this Participation Agreement and the other Operative Documents
shall be distributed by the Administrative Agent on the same Business Day as
received to the extent practicable).
SECTION XII.2. BASIC RENT. Each payment of Basic Rent (and any payment
of interest on overdue installments of Basic Rent) received by the
Administrative Agent shall be distributed by the Administrative Agent on behalf
of the Lessor to the Lenders and the Lessor PRO RATA in accordance with, and for
application to, the Lender Basic Rent and Lessor Basic Rent then due, as well as
any overdue interest or Equity Yield due to the Lenders or the Lessor (to the
extent permitted by applicable law).
SECTION XII.3. PURCHASE PAYMENTS BY A LESSEE. (a) Any payment received
by the Administrative Agent as a result of:
(i) the purchase of all of the Properties in connection with
any Lessee's exercise of its Purchase Option under Section 18.1 of the
Master Lease, or
(ii) the compliance of any Lessee with its obligation to
purchase (or cause its designee to purchase) all of the Properties in
accordance with Section 18.2 or 18.3 of the Master Lease, or
(iii) the compliance of any Lessee with its obligation to
purchase all unsold Properties in accordance with Section 16.2(e) of
the Master Lease, or
(iv) any Lessee failing to fulfill one or more of the
conditions to exercise of the Remarketing Option with respect to any
Property pursuant to Section 20.1 of the Master Lease and the
Administrative Agent's receipt of the Lease Balance from the Lessees
pursuant to the next-to-last paragraph of Section 20.1 of the Master
Lease,
shall be distributed by the Administrative Agent to pay in full the Participant
Balance of each Lender and the Lessor.
(b) Any payment received by the Administrative Agent as a result of:
(i) the payment of the Property Balance with respect to any
Property in accordance with
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Section 15.1 of the Master Lease, or
(ii) the purchase of one or more (but less than all) of the
Properties in connection with any Lessee's exercise of its Purchase
Option under Section 18.1 of the Master Lease,
shall be distributed by the Administrative Agent to the Lenders and the Lessor
PRO RATA without priority of one over the other, in the proportion that the
Participant Balance of each bears to the aggregate of all of the Participant
Balances.
SECTION XII.4. PAYMENT OF LOAN BALANCE BY LESSEE. The payment by any
Lessee of the Loan Balance and other amounts due thereunder to the
Administrative Agent in accordance with Section 20.1(k) of the Master Lease upon
the exercise by such Lessee of the Remarketing Option shall be distributed by
the Administrative Agent to the Lenders for application to pay in full the
Participant Balance of each Lender.
SECTION XII.5. SALES PROCEEDS OF REMARKETING OF PROPERTIES. Any
payments received by the Administrative Agent as proceeds from the sale of the
Properties sold pursuant to any Lessee's exercise of the Remarketing Option
pursuant to Article XX of the Master Lease, together with any payment made by
any Lessee as a result of an appraisal pursuant to SECTION 11.2, shall be
distributed by the Administrative Agent in the funds so received in the
following order of priority:
FIRST, to the Lessor for application to pay in full the
Participant Balance of the Lessor; and
SECOND, the balance, if any, shall be promptly distributed to,
or as directed by, the Company (PROVIDED that the Lessee has paid the
Loan Balance to the Administrative Agent in accordance with Section
20.1(k) of the Master Lease).
SECTION XII.6. SUPPLEMENTAL RENT. All payments of Supplemental Rent
received by the Administrative Agent (excluding any amounts payable pursuant to
the preceding provisions of this ARTICLE XII) shall be distributed promptly by
the Administrative Agent upon receipt thereof to the Persons entitled thereto
pursuant to the Operative Documents.
SECTION XII.7. EXCEPTED PAYMENTS. Notwithstanding any other provision
of this Participation Agreement or any other Operative Document, any Excepted
Payment received at any time by the Administrative Agent shall be distributed
promptly to the Person entitled to receive such Excepted Payment pursuant to the
Operative Documents.
SECTION XII.8. DISTRIBUTION OF PAYMENTS AFTER LEASE EVENT OF DEFAULT.
(a) All amounts received by the Administrative Agent after the occurrence of a
Lease Event of Default in connection with (i) any sale of all or any part of any
one or more Properties or (ii) any subleases affecting the Properties or any
rents, issues or profits accruing thereunder, shall be distributed by the
Administrative Agent in the following order of priority:
FIRST, so much of such payment or amount as shall be required
to reimburse the Administrative Agent and the Lessor for any tax,
expense or other loss incurred by the Lessor (to the extent not
previously reimbursed and to the extent incurred in connection with any
duties as the Lessor), shall be distributed to the Lessor for its own
account;
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Participation Agreement
SECOND, so much of such payments or amounts as shall be
required to pay the then existing or prior Administrative Agent and
Lessor the amounts payable to them pursuant to any expense
reimbursement or indemnification provisions of the Operative Documents;
THIRD, to the Lessor for application to pay in full the
Participant Balance of the Lessor; and
FOURTH, so much of such payments or amounts as shall be
required to pay the then existing or prior Lenders the amounts payable
to them pursuant to any expense reimbursement or indemnification
provisions of the Operative Documents shall be distributed to each such
Lender without priority of one over the other in accordance with the
amount of such payment or payments payable to each such Person;
FIFTH, to the Lenders for application to pay in full the
Participant Balance of each Lender and, in the case where the amounts
so distributed shall be insufficient to pay in full as aforesaid, then
PRO RATA among the Lenders without priority of one Lender over the
other in the proportion that the Participant Balance of each such
Lender bears to the aggregate Participant Balances of all Lenders; and
SIXTH, the balance, if any, of such payment or amounts
remaining thereafter shall be promptly distributed to, or as directed
by, the Company.
(b) All payments received and amounts realized by the Administrative
Agent in connection with any Casualty or Condemnation after the occurrence of a
Lease Event of Default shall be distributed by the Administrative Agent as
follows:
(i) in the event that the Lessor elects to pay all or a
portion of such amounts to the applicable Lessee for the repair of
damage caused by such Casualty or Condemnation in accordance with
Section 14.1(a) of the Master Lease, then such amounts shall be
distributed to the applicable Lessee, and
(ii) in the event that the Lessor elects to apply all or a
portion of such amounts to the purchase price of the related Property
in accordance with Section 14.1(a) of the Master Lease, then such
amounts shall be distributed in accordance with CLAUSE (A).
(c) All payments received and amounts realized (other than payments or
amounts described in CLAUSE (A) or (B) above) by the Administrative Agent after
the occurrence of a Lease Event of Default shall, if received by the
Administrative Agent, be distributed by the Administrative Agent in the
following order of priority:
FIRST, so much of such payment or amount as shall be required
to reimburse the Lessor for any tax, expense or other loss incurred by
the Lessor (to the extent not previously reimbursed and to the extent
incurred in connection with any duties as the Lessor) and any unpaid
ongoing fees of the Lessor shall be distributed to the Lessor for its
own account;
SECOND, so much of such payments or amounts as shall be
required to pay the then existing or prior Lenders and the Lessor the
amounts payable to them pursuant to any expense reimbursement
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Participation Agreement
or indemnification provisions of the Operative Documents shall be
distributed to each such Participant without priority of one over the
other in accordance with the amount of such payment or payments payable
to each such Person;
THIRD, to the Lenders and the Lessor PRO RATA in accordance
with, and for application to, the Participant Balance of each Lender
and the Lessor; and
FOURTH, after payment in full of the Participant Balance of
each Lender and the Lessor and all other amounts due and owing to any
Lender or the Lessor, the balance, if any, of such payment or amounts
remaining thereafter shall be promptly distributed to, or as directed
by, the Lessee.
(d) During the occurrence and continuance of a Lease Event of Default,
all amounts (other than Excepted Payments) received or realized by the
Administrative Agent and otherwise distributable pursuant to SECTIONS 12.2 and
12.3 shall be distributed as provided for in CLAUSES (a), (b) and (c) above.
SECTION XII.9. OTHER PAYMENTS. (a) Except as otherwise provided in
SECTIONS 12.2, 12.3, 12.8 and CLAUSE (B) below, any payment received by the
Administrative Agent for which no provision as to the application thereof is
made in the Operative Documents or elsewhere in this ARTICLE XII shall be
distributed PRO RATA among the Lenders and the Lessor without priority of one
over the other, in the proportion that the Participant Balance of each bears to
the aggregate of all the Participant Balances.
(b) Except as otherwise provided in SECTIONS 12.2, 12.3 and 12.8, all
payments received and amounts realized by the Administrative Agent under the
Master Lease or otherwise with respect to the Lease Assets to the extent
received or realized at any time after indefeasible payment in full of the
Participant Balances of all of the Lenders and the Lessor and any other amounts
due and owing to the Lenders, the Lessor or the Administrative Agent, shall be
distributed forthwith by the Administrative Agent in the order of priority set
forth in SECTION 12.8(c), except that such payment shall be distributed omitting
CLAUSE THIRD of such SECTION 12.8(c).
(c) Except as otherwise provided in SECTIONS 12.2 and 12.3, any payment
received by the Administrative Agent for which provision as to the application
thereof is made in an Operative Document but not elsewhere in this ARTICLE XII
shall be distributed forthwith by the Administrative Agent to the Person and for
the purpose for which such payment was made in accordance with the terms of such
Operative Document.
SECTION XII.10. CASUALTY AND CONDEMNATION AMOUNTS. Subject to
SECTION 12.8(b), any amounts payable to the Administrative Agent as a result of
a Casualty or Condemnation pursuant to Section 14.1 of the Master Lease shall be
distributed as follows:
(a) all amounts payable to any Lessee for the repair of damage
caused by such Casualty or Condemnation in accordance with Section
14.1(a) of the Master Lease shall be distributed to such Lessee, and
(b) all amounts that are to be applied to the purchase price
of the related Property in accordance with Section 14.1(a) of the
Master Lease shall be distributed by the Administrative Agent to the
Lenders and the Lessor PRO RATA without priority of one over the other,
in the proportion that the Participant Balance of each bears to the
aggregate of all of the Participant Balances.
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SECTION XII.11. ORDER OF APPLICATION. To the extent any payment made
to any Lender or the Lessor pursuant to SECTION 12.3, 12.4, 12.5 or 12.8 is
insufficient to pay in full the Participant Balance of such Lender or the
Lessor, then each such payment shall first be applied to accrued interest or
Equity Yield and then to principal or the Equity Amounts, as applicable.
ARTICLE XIII
THE ADMINISTRATIVE AGENT
SECTION XIII.1. APPOINTMENT. Each Lender hereby irrevocably designates
and appoints the Administrative Agent as the agent of such Lender under this
Participation Agreement and the other Operative Documents, and each such Lender
irrevocably authorizes the Administrative Agent, in such capacity, to take such
action on its behalf under the provisions of this Participation Agreement and
the other Operative Documents and to exercise such powers and perform such
duties as are expressly delegated to the Administrative Agent by the terms of
this Participation Agreement and the other Operative Documents (including,
without limitation, receiving, for the account of the Participants, payments of
Basic Rent, Supplemental Rent and all other amounts to be paid by the Lessee
under the Operative Documents), together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Participation Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender, the Lessor or any other party to the
Operative Documents, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Participation
Agreement or any other Operative Document or otherwise exist against the
Administrative Agent.
SECTION XIII.2. DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Participation Agreement and the other
Operative Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
SECTION XIII.3. EXCULPATORY PROVISIONS. Neither the Administrative
Agent (in such capacity) nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates (in connection with the Administrative Agent's
capacity as such) shall be (a) liable for any action lawfully taken or omitted
to be taken by it or such Person under or in connection with this Participation
Agreement or any other Operative Document (except for its or such Person's own
gross negligence or willful misconduct) or (b) responsible in any manner to any
of the Lenders or any other party to the Operative Documents for any recitals,
statements, representations or warranties made by the Lessor or any Lessee or
any officer thereof contained in this Participation Agreement or any other
Operative Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Participation Agreement or any other Operative Document
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Participation Agreement or any other Operative Document or
for any failure of the Lessor or any Lessee to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to any
Lender, the Lessor or any other party to the Operative Documents to ascertain or
to inquire as to the observance or performance of any of the agreements
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contained in, or conditions of, this Participation Agreement or any other
Operative Document, or to inspect the properties, books or records of the Lessor
or any Lessee.
SECTION XIII.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
facsimile, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Lessor or the
Company), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Participation Agreement or any
other Operative Document unless it shall first receive the advice or concurrence
of Required Participants or it shall first be indemnified to its satisfaction by
the Participants against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Participation Agreement and the other
Operative Documents in accordance with a request of Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
SECTION XIII.5. NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default unless the Administrative Agent has received notice from a Lessee, a
Lender or the Lessor referring to this Participation Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall promptly give notice thereof to the Lessor, the
Lenders, the Lessor and the Company. Subject to Article VI of the Loan
Agreement, the Administrative Agent shall take such action with respect to any
Default or Event of Default that, in each case, arises from a Lease Default or
Lease Event of Default, as shall be directed by Required Participants; PROVIDED,
HOWEVER, that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Lenders
and the Lessor.
SECTION XIII.6. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER
PARTICIPANTS. Each Participant expressly acknowledges that neither the
Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to it
and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Lessor or the Lessee, shall be deemed to constitute
any representation or warranty by the Administrative Agent to any Participant.
Each Participant represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Participant, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Lessor and the Company and made its own decision to make its Loans or advance
its Equity Amounts, as the case may be, under the Loan Agreement or this
Participation Agreement and enter into the Operative Documents to which it is a
party. Each Participant also represents that it will, independently and without
reliance upon the Administrative Agent or any other Participant, and based on
such documents and information as it shall deem appropriate at the time,
continue
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to make its own credit analysis, appraisals and decisions in taking or not
taking action under this Participation Agreement and the other Operative
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Lessor and the Company. Except for notices, reports and
other documents expressly required to be furnished to the Participants by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Lessor or the Lessee which may
come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION XIII.7. INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Company and without limiting the obligation of the Company to do so),
ratably according to the percentage each such Lender's Commitment bears to the
total Commitments of all of the Lenders on the date on which indemnification is
sought under this SECTION 13.7 (or, if indemnification is sought after the date
upon which the Lenders' Commitments shall have terminated and the Loans shall
have been paid in full, ratably in accordance with the percentage that each such
Lender's Commitment bears to the Commitments of all of the Lenders immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever (including without limitation all
reasonable fees and disbursements of any law firm or other external counsel of
the Administrative Agent, the allocated cost of internal legal services and all
disbursements of internal counsel of the Administrative Agent) which may at any
time (including, without limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Administrative Agent
in any way relating to or arising out of, the Commitments, this Participation
Agreement, any of the other Operative Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent under or in
connection with any of the foregoing; PROVIDED, HOWEVER, that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Administrative Agent's gross negligence or willful
misconduct. The agreements in this SECTION 13.7 shall survive the payment of the
Notes and all other amounts payable hereunder.
SECTION XIII.8. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with the Lessor, the Lessees and their respective Affiliates
as though Bank of Montreal were not the Administrative Agent hereunder and under
the other Operative Documents and without notice to or consent of the Banks.
Each Lender acknowledges that, pursuant to such activities, Bank of Montreal or
its Affiliates may receive information regarding the Lessees, the Lessor or
their respective Affiliates (including information that may be subject to
confidentiality obligations in favor of the Lessees, the Lessor or their
respective Affiliates) and acknowledge that the Administrative Agent shall be
under no obligation to provide such information to them. With respect to any
Loans or Equity Amounts made or renewed by it and any Note issued to it, Bank of
Montreal shall have the same rights and powers under this Participation
Agreement and the other Operative Documents as any Lender and may exercise the
same as though it were not the Administrative Agent, and, in the event Bank of
Montreal becomes a Lender or Lessor, the term "Lenders" or "Lessor", as the case
may be, shall include Bank of Montreal in its individual capacity.
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Participation Agreement
SECTION XIII.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may resign as Administrative Agent upon twenty (20) days' notice to the
Lenders, the Lessor, the Lessor and the Company. If the Administrative Agent
shall resign as Administrative Agent under this Participation Agreement and the
other Operative Documents, then Required Participants shall appoint a successor
agent for the Participants, which successor agent shall be a commercial bank
organized under the laws of the United States of America or any State thereof or
under the laws of another country which is doing business in the United States
of America and having a combined capital, surplus and undivided profits of at
least $100,000,000 (and if no Lease Default or Lease Event of Default exists,
shall be approved by the Company (which consent shall not be unreasonably
withheld)), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term "Administrative Agent"
shall mean such successor agent effective upon such appointment and approval,
and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Participation Agreement or the Loan Agreement or any holders of the Notes.
If no successor Administrative Agent has accepted appointment as Administrative
Agent by the date which is twenty (20) days following a resigning Administrative
Agent's notice of resignation, the resigning Administrative Agent's resignation
shall nevertheless thereupon become effective and the Participants shall perform
all of the duties of the Administrative Agent hereunder until such time, if any,
as Lenders holding a majority of the outstanding Loans appoint a successor
Administrative Agent as provided above (subject to the Company's approval, as so
provided). After any retiring Administrative Agent's resignation as
Administrative Agent, all of the provisions of this ARTICLE XIII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Participation Agreement and the other Operative
Documents.
SECTION XIII.10. STATUS OF MONEYS RECEIVED. All moneys received by the
Administrative Agent under or pursuant to any provision of this Participation
Agreement or any other Operative Document (other than Excepted Payments) shall
constitute trust funds for the purpose for which they were paid or are held.
Except as otherwise provided herein or in any other Operative Document, such
moneys need not be segregated in any manner from any other moneys and may be
deposited by the Administrative Agent under such conditions as may be prescribed
or permitted by Requirements of Law for trust funds, or at the direction of
Required Participants.
ARTICLE XIV
TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION XIV.1. ASSIGNMENTS. All or any part of the interest of any
Participant in, to or under this Participation Agreement, the other Operative
Documents, the Properties, the Notes, the Loans, or the Equity Amounts may be
assigned or transferred by such Participant at any time; PROVIDED, HOWEVER, that
(a) each assignment or transfer shall comply with all applicable securities
laws, (b) any assignment or transfer of any Equity Amounts or any other interest
of the Lessor under the Operative Documents shall be subject to the consent of
the Company (which consent shall not unreasonably be withheld provided that such
assignment shall not adversely affect the nature of the transaction as provided
in Section 5.1), (c) any assignment or transfer of any interest of a Lender to a
Person that is not an Affiliate of the transferor thereof shall be subject to
the consent of the Company (which consent shall not unreasonably be withheld),
(d) in the case of an assignment made by a Lender, such assignment shall be in a
minimum aggregate amount of $10,000,000 and,
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Participation Agreement
after giving effect to such assignment, the principal amount of Loans held by
the assigning Lender shall be at least $10,000,000, or, if less, zero, (e) the
transferor Participant or transferee Participant shall pay to the Administrative
Agent a processing fee in the amount of $2,500, payable upon delivery of the
applicable Assignment Agreement and (f) any assignee or transferee (i)
acknowledges that the obligations to be performed from and after the date of
such transfer or assignment under this Participation Agreement and all other
Operative Documents are its obligations, including the obligations imposed by
this SECTION 14.1 (and the transferor and transferee Participant shall deliver
to the Company and the Lessor an Assignment Agreement, in substantially the form
of EXHIBIT H, executed by the assignee or transferee) and (ii) further
represents and warrants to the Lessor, each Participant and the Company that:
(A) it is a commercial bank, savings and loan association,
savings bank, pension plan, depository institution, insurance company,
branch or agency of a foreign bank or other similar financial
institution, in each case, having a minimum capital and surplus of: (A)
$500,000,000, in the case of an assignment of an interest of any
Lender; or (B) $50,000,000, in the case of an assignment of an interest
of the Lessor;
(B) it has the requisite power and authority to accept such
assignment or transfer; and
(C) (x) it will not transfer any Note or Equity Amount unless
the proposed transferee makes the representations and covenants set
forth in this SECTION 14.1(f)(ii), (y) it will not take any action with
respect to such Note or Equity Amount that would violate any applicable
securities laws and (z) it will not assign or transfer any interest in
its Note or Equity Amount except in compliance with this SECTION 14.1.
SECTION XIV.2. PARTICIPATIONS. Any Participant may at any time sell to
one or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "SUB-PARTICIPANT") participating interests
in all or a portion of its rights and obligations under this Participation
Agreement, the other Operative Documents, the Properties, its Notes or Equity
Amounts (including, without limitation, all or portion of the Rent owing to it);
PROVIDED, HOWEVER, that
(a) no participation contemplated in this SECTION 14.2 shall
relieve such Participant from its obligations hereunder or under any
other Operative Document;
(b) such Participant shall remain solely responsible for the
performance of its Commitment and such other obligations;
(c) the Company and the other Lessees shall continue to deal
solely and directly with such Participant in connection with such
Participant's rights and obligations under this Participation Agreement
and each of the other Operative documents;
(d) no Sub-Participant, unless such Sub-Participant is an
Affiliate of such Participant, or is itself a Participant, shall be
entitled to require such Participant to take or refrain from taking any
action hereunder or under any other Operative Document or have voting
rights on any matter; and
(e) such Participant shall promptly provide notice to the
Company of the identity of each Sub-Participant to which it sells a
participating interest hereunder and the amount of such
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Participation Agreement
participating interest.
SECTION XIV.3. WITHHOLDING TAXES. (a) If any Participant (or the
assignee of or Sub-Participant in any Note or Equity Amount of a Participant,
each a "TRANSFEREE") is organized under the laws of any jurisdiction other than
the United States or any State thereof, then such Participant or the Transferee
of such Participant, as applicable, shall (as a condition precedent to acquiring
or participating in such Loan and as a continuing obligation to the
Administrative Agent and the Company) (i) furnish to the Administrative Agent
and the Company in duplicate, for each taxable year of such Participant or
Transferee during the term of the Master Lease, a properly completed and
executed copy of either Internal Revenue Service Form 4224 or Internal Revenue
Service Form 1001 and Internal Revenue Service Form W-8 or Internal Revenue
Service Form W-9 and any additional form (or such other form) as is necessary to
claim complete exemption from United States withholding taxes (wherein such
Transferee claims entitlement to complete exemption from United States
withholding taxes on all payments hereunder), and (ii) provide to the
Administrative Agent and the Company a new Internal Revenue Service Form 4224 or
Internal Revenue Service Form 1001 and Internal Revenue Service Form W-8 or
Internal Revenue Service Form W-9 and any such additional form (or any successor
form or forms) upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable United States laws
and regulations and amendments duly executed and completed by such Participant
or Transferee, and to comply from time to time with all applicable United States
laws and regulations with regard to such withholding tax exemption. By its
acceptance of a participation or assignment of a Participant's Note or Equity
Amount, each Transferee shall be deemed bound by the provisions set forth in
this ARTICLE XIV.
SECTION XIV.4. DISCLOSURE OF INFORMATION. Any Participant may, in
connection with any assignment or participation to any Person or proposed
assignment or participation pursuant to this ARTICLE XIV, disclose to the
Transferee or proposed Transferee, any and all information in such Participant's
possession concerning the creditworthiness of the Company and its Subsidiaries.
SECTION XIV.5. PLEDGE UNDER REGULATION A. Anything in this ARTICLE XIV
to the contrary notwithstanding, any Participant may without the consent of the
Lessee assign and pledge all or any portion of the Notes or Equity Amounts, as
applicable, held by it to any Federal Reserve Bank or to the United States
Treasury as collateral security pursuant to Regulation A of the F.R.S. Board and
any operating circular issued by the Federal Reserve System and/or the Federal
Reserve Bank or otherwise.
ARTICLE XV
MISCELLANEOUS
SECTION XV.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 of this Participation Agreement, the
transfer of the Properties to the Lessor, the construction of any Improvements,
any disposition of any interest of the Lessor in any Property or any
Improvements or any interest of the Lessor in the Lease Assets and the payment
of the Notes and Equity Amounts and any disposition thereof and shall be and
continue in effect notwithstanding any investigation made by any party and the
fact that any party may waive compliance with any of the other terms, provisions
or conditions of any of the Operative Documents. Except as otherwise
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Participation Agreement
expressly set forth herein or in other Operative Documents, the indemnities of
the parties provided for in the Operative Documents shall survive the expiration
or termination of any thereof for a period not to exceed one year after the
later of (x) the Expiration Date and (y) the payment in full in cash of the
Lease Balance.
SECTION XV.2. NO BROKER, ETC. Each of the parties hereto represents to
the others that it has not retained or employed any broker, finder or financial
adviser to act on its behalf in connection with this Participation Agreement or
the transactions contemplated herein other than the Arranger, nor has it
authorized any broker, finder or financial adviser retained or employed by any
other Person so to act. Any party who is in breach of this representation shall
indemnify and hold the other parties harmless from and against any liability
arising out of such breach of this representation.
SECTION XV.3. NOTICES. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing (including by facsimile) and delivered by
United States mail, by nationally recognized courier service, by hand or by
facsimile, directed to the address or facsimile number of such Person as
indicated on SCHEDULE III. Any such notice shall become effective as follows:
(i) if delivered by United Sates mail, five (5) Business Days after being
deposited in the mails, certified or registered with appropriate postage
prepaid, (ii) if delivered by nationally recognized courier service, one (1)
Business Day after delivery to such courier service specifying overnight
delivery, (iii) if delivered by hand, when received, or (iv) if delivered by
facsimile, when transmitted (upon electronic confirmation thereof). From time to
time any party may designate a new address or facsimile number for purposes of
notice hereunder by written notice to each of the other parties hereto in
accordance with this Section.
SECTION XV.4. AMENDMENTS. (a) The provisions of this Participation
Agreement may from time to time be amended, modified or waived, PROVIDED,
HOWEVER, that such amendment, modification or waiver is in writing and consented
to by the Company, the Administrative Agent, the Lessor and the Required
Participants; PROVIDED, FURTHER, HOWEVER, that no amendment or waiver of any
provision relating to payment of an obligation owed to any Participant shall be
effective against such Participant unless it has been consented to in writing by
such Participant.
(b) Neither any Operative Document nor any of the terms thereof may be
terminated (except upon payment in full of the Lease Balance or effective
exercise and consummation of the Remarketing Option in accordance with Article
XX of the Master Lease and payment in full of all amounts due in accordance
therewith), amended, supplemented, waived or modified without the written
agreement or consent of each party thereto and, regardless of whether the
Lenders and the Lessor are parties thereto, the Required Participants; PROVIDED,
HOWEVER, that:
(x) no such termination, amendment, supplement, waiver or
modification shall without written agreement or consent of each
Participant:
(i) modify any of the provisions of this SECTION
15.4, change the definition of "REQUIRED PARTICIPANTS" or
modify or waive any provision of an Operative Agreement
requiring action by the foregoing;
(ii) amend, modify, waive or supplement any of the
provisions of Section 2.5, 2.6
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Participation Agreement
or 2.7 of the Loan Agreement or ARTICLE XII of this
Participation Agreement;
(iii) reduce, modify, amend or waive any fees or
indemnities in favor of any Participant, including without
limitation amounts payable pursuant to ARTICLE XI (except that
any Person may consent to any reduction, modification,
amendment or waiver of any indemnity payable to it);
(iv) modify, postpone, reduce or forgive, in whole or
in part, any payment of Rent (other than pursuant to the terms
of any Operative Document), any Loan or Equity Amount, the
Lease Balance, the Loan Balance, Commitment Fees, amounts due
pursuant to Section 20.2 of the Master Lease, interest or
Equity Yield (except that any Person may consent to any
modification, postponement, reduction or forgiveness of any
payment of any Commitment Fee payable to it) or, subject to
CLAUSE (iii) above, any other amount payable under the Master
Lease or this Participation Agreement, or modify the
definition or method of calculation of Rent (other than
pursuant to the terms of any Operative Document), Loans or
Equity Amounts, Lease Balance, Loan Balance, Commitment Fees,
Shortfall Amount, Property Improvement Costs, Existing
Improvement Costs, Estimated Improvement Costs, Participant
Balance, or any other definition which would affect the
amounts to be advanced or which are payable under the
Operative Documents; or
(v) consent to any assignment of any Lease by the
applicable Lessees, thereunder releasing such Lessees from
their obligations in respect of the payments of Rent, Loan
Balance or Lease Balance or changing the absolute and
unconditional character of such obligations, which is not
otherwise permitted by the Operative Documents;
(y) no other termination, amendment, supplement, waiver or
modification shall, without the written agreement or consent of the
Lessor and the Required Participants, be made to the Master Lease or
ARTICLE VI of this Participation Agreement or the definition of "LOAN
AGREEMENT DEFAULT"; and
(z) no such termination, amendment, supplement, waiver or
modification that would increase the obligations of any Lessee
thereunder or deprive any Lessee of any of its rights thereunder shall
be effective against such Lessee without the written agreement or
consent of such Lessee and the Company.
SECTION XV.5. NEW LESSEES. Any Consolidated Subsidiary of the Company
with respect to which the Company directly owns all of the capital stock thereof
may become a "Lessee" for all purposes of the Operative Documents by executing
and delivering an Adoption Agreement, substantially in the form of EXHIBIT I
hereto (an "ADOPTION AGREEMENT"), to the Administrative Agent and the Lessor.
Upon receipt by the Lessor and the Administrative Agent of an Adoption Agreement
duly executed by any such Subsidiary, and upon satisfaction of all conditions to
effectiveness thereof set forth in such Adoption Agreement, such Subsidiary
shall be deemed to be a party to this Participation Agreement and the Master
Lease as a "Lessee" as if such Subsidiary was originally a party hereto and
thereto.
SECTION XV.6. COUNTERPARTS. This Participation 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
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Participation Agreement
such counterparts shall together constitute but one and the same instrument.
SECTION XV.7. HEADINGS, ETC. The Table of Contents and headings of the
various Articles and Sections of this Participation Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
SECTION XV.8. PARTIES IN INTEREST. Except as expressly provided
herein, none of the provisions of this Participation Agreement is intended for
the benefit of any Person except the parties hereto. Neither the Company nor any
other Lessee shall assign or transfer any of its rights or obligations under the
Operative Documents without the prior written consent of the Administrative
Agent, the Lessor and the Required Lenders.
SECTION XV.9. SEVERABILITY. Any provision of this Participation
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 XV.10. FURTHER ASSURANCES. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the sole expense of
the Company, all such further acts, conveyances, documents and assurances as the
other parties may from time to time reasonably request in order to carry out and
preserve the security interests and liens (and the priority thereof) intended to
be created pursuant to this Participation Agreement, the other Operative
Documents, and the transactions thereunder (including, without limitation, the
preparation, execution and filing of any and all Uniform Commercial Code
financing statements and other filings or registrations which the parties hereto
may from time to time request to be filed or effected).
SECTION XV.11. SUBMISSION TO JURISDICTION. Each of the Company and
each Lessee hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and United States District
Court for the Southern District of Ohio for purposes of all legal proceedings
arising out of or relating to the Operative Documents or the transactions
contemplated hereby. Each of the Company and each Lessee irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION XV.12. ACKNOWLEDGMENT OF COMPANY AND LESSEES. The Company and
each Lessee acknowledge and agree that none of the Administrative Agent, the
Lessor or the Lenders has made any representations or warranties to the Company
or any Lessee concerning the tax, accounting or legal characteristics of the
Operative Documents, and that each of the Company and each Lessee has obtained
and relied upon such tax, accounting and legal advice concerning the Operative
Documents as it deems appropriate.
SECTION XV.13. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
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Participation Agreement
CONNECTION WITH, THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY
AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER
LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF
THIS SECTION 15.13 HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE
SUBJECT TO NO EXCEPTIONS. EACH OF THE COMPANY AND EACH LESSEE ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER OPERATIVE DOCUMENT TO WHICH IT IS A
PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTICIPANTS
ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVE
DOCUMENT.
SECTION XV.14. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
SECTION XV.15. LIMITATIONS ON RECOURSE, ETC. (a) The parties hereto
agree that the Lessor (in such capacity) shall have no personal liability
whatever to the Company, any Lessee or their respective successors and assigns
for any claim based on or in respect of this Participation Agreement or any of
the other Operative Documents or arising in any way from the transactions
contemplated hereby or thereby; PROVIDED, HOWEVER, that the Lessor shall be
personally liable (i) for its own willful misconduct or gross negligence, (ii)
for liabilities that may result from its breach of any of its covenants,
agreements or obligations set forth in, or from any misrepresentation of such
Lessor in, any of the Operative Documents, or (iii) for any Tax based on or
measured by any fees, commission or compensation received by it for acting as a
Lessor as contemplated by the Operative Documents. It is understood and agreed
that, except as provided in the preceding proviso: (x) the Lessor shall not have
any personal liability under any of the Operative Documents as a result of
acting pursuant to and consistent with any of the Operative Documents; (y) all
obligations of the Lessor to the Lenders (including without limitation all
obligations under the Loan Agreement and the Notes) are solely nonrecourse
obligations and shall be enforceable solely against the interest of the Lessor
in the Properties; and (z) all such personal liability of the Lessor is
expressly waived and released as a condition of, and as consideration for, the
execution and delivery of the Operative Documents by the Lessor.
(b) No Participant shall have any obligation to any other Participant,
to the Company, or to any Lessee with respect to transactions contemplated by
the Operative Documents, except those obligations of such Participant expressly
set forth in the Operative Documents or except as set forth in the instruments
delivered in connection therewith, and no Participant 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.
[THE REMAINDER OF THIS PAGE HAS BEEN
INTENTIONALLY LEFT BLANK]
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Participation Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
CARDINAL HEALTH, INC.,
as the Company, as the Construction Agent, as the
Guarantor and as a Lessee
By /s/ David Bearman
---------------------------------
David Bearman
Executive Vice President
Chief Financial Officer
and Acting Treasurer
S-1
<PAGE> 112
Participation Agreement
BANK OF MONTREAL, as Administrative Agent and as
a Lender
By /s/ Peter W. Steelman
---------------------------------
Peter W. Steelman
Director
S-2
<PAGE> 113
Participation Agreement
BMO LEASING (U.S.), INC., as Lessor
By /s/ Ernest C. Cechetto
---------------------------------
Ernest C. Cechetto
Managing
S-3
<PAGE> 114
SCHEDULE I
TO PARTICIPATION AGREEMENT
COMMITMENTS
===============================================================================
PARTICIPANT COMMITMENT COMMITMENT
PERCENTAGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LENDERS
-------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bank of Montreal $ 68,000,000 85.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Lender Commitments: $ 68,000,000 85.00%
- --------------------------------------------------------------------------------
LESSOR
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BMO Leasing (U.S.), Inc. $ 12,000,000 15.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL: $ 80,000,000 100.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 115
SCHEDULE II
TO PARTICIPATION AGREEMENT
DISCLOSURE OF CERTAIN INFORMATION
<PAGE> 116
SCHEDULE III
TO PARTICIPATION AGREEMENT
NOTICES INFORMATION, WIRE INSTRUCTIONS,
---------------------------------------
AND PAYMENT OFFICES
-------------------
THE COMPANY/GUARANTOR/CONSTRUCTION AGENT:
- -----------------------------------------
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention:
Facsimile No.:
Telephone No.:
LESSEES:
- --------
c/o Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention:
Facsimile No.:
Telephone No.:
LESSOR:
- -------
BMO LEASING (U.S.), INC.
115 South LaSalle
Chicago, Illinois 60603
Attention: Terri Perez
Facsimile No.: (312) 750-3456
Telephone No.: (312) 750-3827
<PAGE> 117
Wire Transfer Instructions for Payments to Lessor:
Bank: Harris Trust & Savings Bank
115 South LaSalle
Chicago, Illinois 60603
Beneficiary Name: BMO Leasing (U.S.), Inc.
ABA Number: 071-000-288
Account Number: 181-418-5
Ref: Cardinal Health, Inc.
Entity #131602
ADMINISTRATIVE AGENT:
- ---------------------
Bank of Montreal
115 South LaSalle
Chicago, Illinois 60603
Attention:
Facsimile No.: (312) 750-3456
Telephone No.: (312) 750-3827
Wire Transfer Instructions for Participants:
Bank: Harris Trust & Savings Bank, Chicago
ABA Number: 071-000-288
Bank of Montreal, Chicago
Account Number: 1248566
Ref: Cardinal Health, Inc.
Funding Office:
115 South LaSalle
Chicago, Illinois 60603
LENDERS:
- --------
Bank of Montreal
115 South LaSalle
Chicago, Illinois 60603
Attention: Thomas Rawlinson
Facsimile No.: (312) 750-4304
Telephone No.: (312) 750-4330
Wire Transfer Instructions for Payments to Lender:
Bank: Harris Trust & Savings Bank, Chicago
ABA Number: 071-000-288
Bank of Montreal, Chicago
Account Number: 1248566
-2-
<PAGE> 118
Ref: Cardinal Health, Inc.
[OTHER LENDERS]
- -----------------
- -----------------
Attention:
Facsimile No.:
Telephone No.:
Wire Transfer Instructions for Payments to Lender:
Bank:
ABA Number:
Account Number:
Ref:
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<PAGE> 119
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
ARTICLE I DEFINITIONS; INTERPRETATION
ARTICLE II DOCUMENTATION DATE; ACQUISITION DATES
<S> <C>
SECTION 2.1. Documentation Date...........................................................................2
(a) Participation Agreement........................................................2
(b) Loan Agreement.................................................................2
(c) Guaranty.......................................................................2
(d) Fees...........................................................................2
(e) Certain Transaction Expenses...................................................2
SECTION 2.2. Acquisition Dates............................................................................2
ARTICLE III FUNDING OF ADVANCES
SECTION 3.1. Advances by Lessor...........................................................................3
SECTION 3.2. Lessor's Commitment..........................................................................3
SECTION 3.3. Lenders' Commitments.........................................................................4
SECTION 3.4. Procedures for Advances......................................................................4
SECTION 3.5. Interest Rate; Equity Yield Rate.............................................................5
ARTICLE IV EQUITY YIELD; INTEREST; COMMITMENT FEES
SECTION 4.1. Equity Yield.................................................................................5
SECTION 4.2. Interest on Loans............................................................................5
SECTION 4.3. Computation of Interest and Equity Yield.....................................................5
SECTION 4.4. Prepayments of Loans and Equity Amounts......................................................6
SECTION 4.5. Fees.........................................................................................6
(a) Commitment Fees.........................................................................6
(b) Arrangement Fees........................................................................6
ARTICLE V CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1. Nature of Transaction........................................................................6
SECTION 5.2. Amounts Due Under Lease......................................................................7
ARTICLE VI CONDITIONS PRECEDENT TO ADVANCES AND COMPLETION DATE
SECTION 6.1. Conditions Precedent to Initial Acquisition Date.............................................7
(a) The Company's Resolutions and Incumbency Certificate, etc......................7
(b) Lessees' Resolutions and Incumbency Certificate, etc...........................8
(c) Notes..........................................................................8
(d) Opinion of Counsel to the Company and the Lessees..............................8
(e) Master Lease...................................................................8
(f) Construction Agency Agreement..................................................8
(g) Construction Documents Assignment..............................................8
(h) Construction Agency Agreement Assignment.......................................8
(i) Assignment of Leases and Rents.................................................8
</TABLE>
<PAGE> 120
<TABLE>
<S> <C>
SECTION 6.2. Conditions Precedent to Each Advance.........................................................8
(a) Funding Request.........................................................................9
(b) Construction Certificate................................................................9
(c) As-Built Appraisal......................................................................9
(d) Value of Property.......................................................................9
(e) Fees....................................................................................9
(f) Representation and Warranties...........................................................9
(g) Litigation.............................................................................10
(h) Performance by Lessees.................................................................10
(i) Default or Event of Default............................................................10
(j) Available Commitments; Property Balance................................................10
(k) Construction Costs.....................................................................10
(l) Plans and Specifications; Construction Budget..........................................10
(m) Evidence of Property Insurance.........................................................10
(n) Governmental Approvals.................................................................10
SECTION 6.3. Conditions to Each Acquisition Date.........................................................10
(a) Deed or Ground Lease...................................................................11
(b) Bill of Sale...........................................................................11
(c) Lease Supplement.......................................................................11
(d) Construction Agency Agreement Supplement...............................................11
(e) Supplement to Assignment of Leases and Rents...........................................11
(f) Lessor Financing Statements............................................................11
(g) Recordation of Lessor Mortgage and Lessor Financing Statements.........................11
(h) Responsible Officer's Certificate......................................................12
(i) Acquisition Date Appraisal.............................................................12
(j) Environmental Audit....................................................................12
(k) Property Survey........................................................................12
(l) Title Commitment.......................................................................12
(m) Opinion of Local Counsel...............................................................13
(n) Evidence of Property Insurance.........................................................13
(o) Governmental Approvals.................................................................13
(p) Taxes..................................................................................13
(q) Litigation.............................................................................13
(r) Requirements of Law....................................................................13
(s) No Material Adverse Change.............................................................13
(t) Certain Transaction Expenses...........................................................13
(u) No Default.............................................................................13
SECTION 6.4. Conditions to Completion Date...............................................................14
ARTICLE VII REPRESENTATIONS
SECTION 7.1. Representations of the Participants.........................................................14
(a) ERISA..................................................................................14
(b) Status.................................................................................15
(c) Power and Authority....................................................................15
SECTION 7.2. Representations of the Company..............................................................15
(a) Corporate Status.......................................................................15
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(b) Corporate Power and Authority, Enforceability..........................................15
(c) No Violation...........................................................................15
(d) Litigation.............................................................................15
(e) Governmental Approvals.................................................................16
(f) Investment Company Act.................................................................16
(g) Public Utility Holding Company Act.....................................................16
(h) True and Complete Disclosure...........................................................16
(i) Taxes..................................................................................16
(j) Compliance with ERISA..................................................................16
(k) Financial Statements...................................................................16
(l) Funded Debt............................................................................17
(m) Environmental Laws.....................................................................17
(n) Properties.............................................................................18
(o) Plans and Specifications...............................................................18
(p) Deeds..................................................................................18
(q) Insurance..............................................................................18
(r) Flood Hazard Areas.....................................................................18
(s) Lease..................................................................................18
(t) Licenses, etc. with Respect to Construction of Subject Property........................19
(u) No Casualty, Condemnation or Default...................................................19
(v) No Other Defaults......................................................................19
(w) Lessees; Subsidiaries..................................................................19
(x) Regulations G, U and X.................................................................19
SECTION 7.3. Representations of Each Lessee..............................................................19
(a) Organization; Corporate Powers.........................................................19
(b) Authority..............................................................................20
(c) Due Execution..........................................................................20
(d) Enforceability.........................................................................20
(e) No Conflict............................................................................20
(f) Governmental Consents..................................................................20
(g) Governmental Regulation................................................................20
(h) Requirements of Law....................................................................21
(i) Rights in Respect of the Property Leased by Such Lessee................................21
(j) Environmental Laws, etc. with Respect to Leased Property...............................21
(k) Compliance of Property with Applicable Law, etc........................................22
SECTION 7.4. Representations of the Company and Lessees with Respect to Each Advance.....................22
(a) Representations and Warranties.........................................................22
(b) Improvements...........................................................................22
(c) Liens..................................................................................22
(d) Advance................................................................................23
SECTION 7.5. Representations of the Lessor...............................................................23
(a) Due Organization, etc..................................................................23
(b) Authorization; No Conflict.............................................................23
(c) Enforceability, etc....................................................................23
(d) No Plan Assets.........................................................................23
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ARTICLE VIII OTHER COVENANTS AND AGREEMENTS
SECTION 8.1. Covenants of the Company....................................................................23
(a) Information............................................................................24
(b) Financial Condition....................................................................25
(c) Notice of Litigation or Default........................................................25
(d) Use of Proceeds........................................................................25
(e) Books and Records; Inspection..........................................................25
(f) Corporate Existence, etc...............................................................25
(g) Insurance..............................................................................25
(h) Employee Benefit Plans.................................................................26
(i) Taxes..................................................................................26
(j) Compliance with Laws...................................................................26
(k) Maintenance, etc.......................................................................26
(l) Sale of Assets.........................................................................26
(m) Mergers and Acquisitions...............................................................27
(n) Limitation on Liens....................................................................27
(o) Limitation on Sale and Lease-Back......................................................29
(p) As-Built Appraisals....................................................................29
(q) Further Assurances.....................................................................29
SECTION 8.2. Covenant of the Lessor......................................................................30
SECTION 8.3. Release of Properties.......................................................................30
ARTICLE IX LESSEE DIRECTIONS; CERTAIN RIGHTS OF LESSEE
SECTION 9.1. Lessee Directions...........................................................................30
SECTION 9.2. Extension Terms.............................................................................31
ARTICLE X PAYMENT OF CERTAIN EXPENSES
SECTION 10.1. Transaction Expenses........................................................................31
SECTION 10.2. Brokers' Fees and Stamp Taxes...............................................................31
SECTION 10.3. Loan Agreement and Related Obligations......................................................31
ARTICLE XI INDEMNIFICATION
SECTION 11.1. General Indemnification.....................................................................32
SECTION 11.2. End of Term Indemnity.......................................................................33
SECTION 11.3. Environmental Indemnity.....................................................................34
SECTION 11.4. Proceedings in Respect of Claims............................................................35
SECTION 11.5. General Tax Indemnity.......................................................................36
(a) Indemnification........................................................................37
(b) Contests...............................................................................37
(c) Refunds, etc...........................................................................39
(d) Tax Ownership..........................................................................39
(e) Reports................................................................................40
(f) Verification...........................................................................40
SECTION 11.6. Indemnity Payments in Addition to Lease Obligations.........................................40
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SECTION 11.7. LIBO Rate Lending Unlawful..................................................................40
SECTION 11.8. Deposits Unavailable........................................................................41
SECTION 11.9. Increased Costs, etc........................................................................41
SECTION 11.10. Funding Losses..............................................................................42
SECTION 11.11. Increased Capital Costs.....................................................................42
ARTICLE XII PAYMENTS AND DISTRIBUTIONS
SECTION 12.1. Agreement of Administrative Agent and Participants..........................................43
SECTION 12.2. Basic Rent..................................................................................43
SECTION 12.3. Purchase Payments by a Lessee...............................................................43
SECTION 12.4. Payment of Loan Balance by Lessee...........................................................44
SECTION 12.5. Sales Proceeds of Remarketing of Properties.................................................44
SECTION 12.6. Supplemental Rent...........................................................................44
SECTION 12.7. Excepted Payments...........................................................................44
SECTION 12.8. Distribution of Payments after Lease Event of Default.......................................44
SECTION 12.9. Other Payments..............................................................................46
SECTION 12.10. Casualty and Condemnation Amounts...........................................................46
SECTION 12.11. Order of Application........................................................................47
ARTICLE XIII THE ADMINISTRATIVE AGENT
SECTION 13.1. Appointment.................................................................................47
SECTION 13.2. Delegation of Duties........................................................................47
SECTION 13.3. Exculpatory Provisions......................................................................47
SECTION 13.4. Reliance by Administrative Agent............................................................48
SECTION 13.5. Notice of Default...........................................................................48
SECTION 13.6. Non-Reliance on Administrative Agent and Other Participants.................................48
SECTION 13.7. Indemnification.............................................................................49
SECTION 13.8. Administrative Agent in Its Individual Capacity.............................................49
SECTION 13.9. Successor Administrative Agent..............................................................50
SECTION 13.10. Status of Moneys Received...................................................................50
ARTICLE XIV TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 14.1. Assignments.................................................................................50
SECTION 14.2. Participations..............................................................................51
SECTION 14.3. Withholding Taxes...........................................................................52
SECTION 14.4. Disclosure of Information...................................................................52
SECTION 14.5. Pledge Under Regulation A...................................................................52
ARTICLE XV MISCELLANEOUS
SECTION 15.1. Survival of Agreements......................................................................52
SECTION 15.2. No Broker, etc..............................................................................53
SECTION 15.3. Notices.....................................................................................53
SECTION 15.4. Amendments..................................................................................53
SECTION 15.5. New Lessees.................................................................................54
SECTION 15.6. Counterparts................................................................................54
SECTION 15.7. Headings, etc...............................................................................55
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SECTION 15.8. Parties in Interest.........................................................................55
SECTION 15.9. Severability................................................................................55
SECTION 15.10. Further Assurances..........................................................................55
SECTION 15.11. Submission to Jurisdiction..................................................................55
SECTION 15.12. Acknowledgment of Company and Lessees.......................................................55
SECTION 15.13. WAIVER OF JURY TRIAL........................................................................55
SECTION 15.14. GOVERNING LAW...............................................................................56
SECTION 15.15. Limitations on Recourse, etc................................................................56
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SCHEDULES
SCHEDULE I Commitments
SCHEDULE II Disclosure of Certain Information
SCHEDULE III Notice Information, Wire Instructions, and Payment Offices
EXHIBITS
EXHIBIT A Form of Funding Request
EXHIBIT B Form of Construction Certificate
EXHIBIT C Form of Ground Lease
EXHIBIT D Form of Bill of Sale
EXHIBIT E Form of Responsible Officer's Certificate
EXHIBIT F Form of Opinion of Local Counsel
EXHIBIT G Form of Completion Certificate
EXHIBIT H Form of Assignment Agreement
EXHIBIT I Form of Adoption Agreement
EXHIBIT J Form of Master Lease
EXHIBIT K Form of Construction Agency Agreement
EXHIBIT L Form of Construction Documents Assignment
EXHIBIT M Form of Construction Agency Agreement Assignment
EXHIBIT N Form of Assignment of Leases and Rents
<PAGE> 126
GUARANTY
dated as of June 23, 1997
made by
CARDINAL HEALTH, INC.
in favor of
BANK OF MONTREAL
and each of the other
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders
BMO LEASING (U.S.), INC.
as the Lessor
and
BANK OF MONTREAL,
as Administrative Agent for the Lenders.
<PAGE> 127
GUARANTY
--------
THIS GUARANTY (this "GUARANTY"), dated as of June 23, 1997, is made by
CARDINAL HEALTH, INC., a corporation organized under the laws of the State of
Ohio (the "COMPANY" or the "GUARANTOR"), in favor of BANK OF MONTREAL and each
of the other various financial institutions as are or may from time to time
become Lenders under the Loan Agreement pursuant to the terms thereof and of the
Participation Agreement (as hereinafter defined) (together with their respective
successors and assigns, the "LENDERS"), BMO LEASING (U.S.), INC., as Lessor (the
"LESSOR"), and BANK OF MONTREAL, as the Administrative Agent under the Loan
Agreement (in such capacity, the "ADMINISTRATIVE AGENT") (the Lenders, the
Lessor, the Administrative Agent and their respective successors and assigns,
being referred to herein collectively as the "GUARANTEED PARTIES").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, as a condition to the occurrence of the Documentation Date
under the Participation Agreement dated as of the date hereof (together with all
amendments, supplements, amendments and restatements and other modifications, if
any, from time to time thereafter made thereto, the "PARTICIPATION AGREEMENT"),
among the Guarantor, the Lessees identified therein, the Lessor, the Lenders and
the Administrative Agent, the Guarantor is required to execute and deliver this
Guaranty in favor of the Guaranteed Parties;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial benefits from the
transactions contemplated by the Participation Agreement and the other Operative
Documents;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Guaranteed Parties to
enter into the Participation Agreement, the Guarantor agrees, for the benefit of
the Guaranteed Parties, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. DEFINITIONS. Capitalized terms used but not otherwise
defined in this Guaranty have the respective meanings specified in APPENDIX A to
the Participation Agreement (as such APPENDIX A may be amended, supplemented,
amended and restated or otherwise modified from time to time, "APPENDIX A TO THE
PARTICIPATION AGREEMENT"); and the rules of interpretation set forth therein
shall apply to this Guaranty.
SECTION I.2. U.C.C. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the Uniform
Commercial Code as in affect in the State
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GUARANTY
of Ohio are used in this Guaranty, including its preamble and recitals, with
such meanings.
ARTICLE II
GUARANTY PROVISIONS
SECTION II.1. GUARANTY. The Guarantor, as primary obligor and not as
surety, hereby absolutely, unconditionally and irrevocably guarantees to each of
the Guaranteed Parties the following obligations (collectively, the "GUARANTEED
OBLIGATIONS"):
(a) the due, punctual and full payment by the Lessees, whether
on the Lease Termination Date, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations and amounts to be
paid by the Lessees pursuant to the Lease and/or any other Operative
Document to which any Lessee is or is to be a party, whether for Equity
Amounts, principal, Equity Yield, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. Section 502(b) and Section 506(b)); and
(b) the due, prompt and faithful performance of, and
compliance with, all other obligations, covenants, terms, conditions
and undertakings of the Lessees contained in the Lease and in each
other Operative Document to which any Lessee is or is to be a party in
accordance with the terms thereof.
Notwithstanding the foregoing, the Guarantor shall not be obligated to
pay under this Guaranty any amounts other than as the Lessees, in the aggregate,
would be obligated to pay under the Lease 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).
The Guarantor further agrees that it shall indemnify and hold harmless
each Guaranteed Party for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Guaranteed Party in successfully
enforcing any rights under this Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of
collection, and the Guarantor specifically agrees that it shall not be necessary
or required that any Guaranteed Party exercise any right, assert any claim or
demand or enforce any remedy whatsoever against any Lessee (or any other Person)
before or as a condition to the obligations of the Guarantor hereunder.
SECTION II.2. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Guaranteed
Obligations have been paid in full and all obligations of the Guarantor
hereunder shall have been paid in full. The Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Lease and each other Operative Document under which they arise, in each case
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting
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<PAGE> 129
GUARANTY
any of such terms or the rights of any Guaranteed Party. The liability of the
Guarantor under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of any
Operative Document;
(b) the failure of any Guaranteed Party
(i) to assert any claim or demand or to enforce any
right or remedy against any Lessee or any other Person
(including any other guarantor) under the provisions any
Operative Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Guaranteed
Obligations;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
other extension, compromise or renewal of any of the Guaranteed
Obligations;
(d) any reduction, limitation, impairment or termination of
the Guaranteed Obligations for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or claim of)
any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, the Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
any Operative Document;
(f) any addition, exchange, release, surrender or
nonperfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Guaranteed Party securing any of the Guaranteed
Obligations; or
(g) any other circumstance (other than indefeasible payment in
full of all Guaranteed Obligations) which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any Lessee,
any surety or any guarantor.
SECTION II.3. REINSTATEMENT, ETC. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Guaranteed
Obligations is rescinded or must otherwise be restored by any Guaranteed Party,
upon the insolvency, bankruptcy or reorganization of any Lessee or otherwise, as
though such payment had not been made.
SECTION II.4. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice (other than those provided
for in the Operative Documents) with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that any Guaranteed Party
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust
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<PAGE> 130
GUARANTY
any right or take any action against any Lessee or any other Person (including
any other guarantor) or entity or any collateral securing the Guaranteed
Obligations.
SECTION II.5. WAIVER OF SUBROGATION. Until all Guaranteed Obligations
have been indefeasibly satisfied in full, the Guarantor hereby waives any claim
or other rights which it may now or hereafter acquire against any Lessee that
arise from the existence, payment, performance or enforcement of the Guarantor's
obligations under this Guaranty or any other Operative Document, including any
right of subrogation, reimbursement, exoneration, or indemnification, any right
to participate in the claim or remedy of the Guaranteed Parties against any
Lessee or any collateral which the Administrative Agent or the Lessor now has or
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including the right to take or receive
from any Lessee, directly or indirectly, in cash or other property or by set-off
or in any manner, payment or security on account of such claim or other rights
until all Guaranteed Obligations are satisfied. If any amount shall be paid to
the Guarantor in violation of the preceding sentence and the Guaranteed
Obligations shall not have been paid in cash in full, such amount shall be
deemed to have been paid to the Guarantor for the benefit of, and held in trust
for, the Guaranteed Parties, and shall forthwith be paid to the Guaranteed
Parties to be credited and applied upon the Guaranteed Obligations, whether
matured or unmatured. The Guarantor acknowledges that it will receive benefits
from the financing and other arrangements contemplated by the Operative
Documents and that the waiver set forth in this Section is knowingly made in
contemplation of such benefits.
SECTION II.6. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES. The
Guarantor hereby acknowledges and agrees that:
(a) It irrevocably submits to the jurisdiction of any federal
court sitting in the Southern District of New York and the Southern
District of Ohio in any action or proceeding arising out of or relating
to this Guaranty, and the Guarantor hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and
determined in such federal court. The Guarantor hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of
an inconvenient forum to the maintenance of such action or proceeding.
The Guarantor agrees that a final, unappealable judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law.
(b) Nothing in this Section shall affect the right of any
Guaranteed Party to serve legal process in any manner permitted by law
or affect the right of any Guaranteed Party to bring any action or
proceeding against the Guarantor or its property in the courts of any
other jurisdictions.
ARTICLE III
ACCELERATION OF GUARANTY; BANKRUPTCY
SECTION III.1. ACCELERATION OF GUARANTY. Guarantor agrees that, in the
event of the dissolution (other than a dissolution pursuant to or in connection
with a merger, consolidation, liquidation or other transaction permitted under
clause (i) or (ii) of Section 8.1(o) of the Participation Agreement) or
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GUARANTY
insolvency of any Lessee or the Guarantor, or the inability or failure of any
Lessee or the Guarantor to pay debts as they become due, or an assignment by any
Lessee or the Guarantor for the benefit of creditors, or the commencement of any
case or proceeding in respect of any Lessee or the Guarantor under any
bankruptcy, insolvency or similar laws which case or proceeding is not dismissed
within sixty (60) days from the date of its commencement, and if such event
shall occur at a time when any of the Guaranteed Obligations may not then be due
and payable, the Guarantor will pay to the Guaranteed Parties forthwith (a) the
full amount (in the case of the occurrence of an event described in this SECTION
3.1 with respect to the Guarantor) which would be payable hereunder by the
Guarantor as if all such Guaranteed Obligations of the Guarantor were then due
and payable, and (b) the Lease Balance relating to the Property leased by a
Lessee subject to an event described in this Section 3.1 (in the case of the
occurrence of an event described in this Section 3.1 with respect to a Lessee).
SECTION III.2. BANKRUPTCY. In the event of a rejection of the Master
Lease or any Lease Supplement in a bankruptcy or insolvency proceeding of any
Lessee, the Guarantor agrees that it will pay forthwith all payments required to
be made by such Lessee under the Master Lease and applicable Lease Supplements
as though the rejection had not occurred.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES; COVENANTS
SECTION IV.1. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants unto each Guaranteed Party its representations and
warranties set forth in Section 7.2 of the Participation Agreement, which
representations and warranties are hereby incorporated by reference.
SECTION IV.2. COVENANTS. The Guarantor covenants and agrees that, so
long as any portion of the Guaranteed Obligations shall remain unpaid, the
Guarantor will, unless the Required Participants shall otherwise consent in
writing, perform the obligations set forth in Section 8.1 of the Participation
Agreement applicable to it, which covenants are hereby incorporated by
reference.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION V.1. OPERATIVE DOCUMENT. This Guaranty is an Operative Document
executed pursuant to the Participation Agreement and shall (unless expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Participation Agreement, including, without
limitation, Article XV thereof.
SECTION V.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT
OF GUARANTY. This Guaranty shall be binding upon the Guarantor and its
successors, transferees and assigns and shall inure to the benefit of and be
enforceable by each Guaranteed Party and their respective, permitted successors
and assigns; PROVIDED, HOWEVER, that the Guarantor may not assign any of its
obligations hereunder without the prior written consent of the Required
Participants.
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GUARANTY
SECTION V.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent and the Lessor, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION V.4. ADDRESSES FOR NOTICES TO THE GUARANTOR. All notices,
demands, requests, consents, approvals and other communications hereunder shall
be in writing and directed to the address described in, and deemed received in
accordance with the provisions of, Section 15.3 of the Participation Agreement.
SECTION V.5. NO WAIVER; REMEDIES. In addition to, and not in limitation
of, SECTION 2.2 and SECTION 2.4, no failure on the part of any Guaranteed Party
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION V.6. SECTION CAPTIONS. Section captions used in this Guaranty
are for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION V.7. SEVERABILITY. 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 under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION V.8. TERMINATION OF GUARANTY. The Guarantor's obligations under
this Guaranty shall terminate on the date upon which all Guaranteed Obligations
have been paid in full.
SECTION V.9. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION V.10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS, THE LESSOR AND THE
ADMINISTRATIVE AGENT ENTERING INTO THE PARTICIPATION AGREEMENT.
SECTION V.11. SETOFF. In addition to, and not in limitation of, any
rights of any Guaranteed Party under applicable law, each Guaranteed Party
shall, upon the occurrence of any Lease Event of Default or any Construction
Agency Agreement Event of Default, have the right to appropriate and apply to
the payment of the obligations of the Guarantor owing to it hereunder, to the
extent then due, and the
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GUARANTY
Guarantor hereby grants to each Guaranteed Party a continuing security interest
in, any and all balances, credits, deposits, accounts or moneys of the Guarantor
then or thereafter maintained with such Guaranteed Party; PROVIDED, HOWEVER,
that any such appropriation and application shall be subject to the provisions
of the Participation Agreement.
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INTENTIONALLY LEFT BLANK]
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GUARANTY
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
CARDINAL HEALTH, INC.
By /s/ David Bearman
------------------------------
David Bearman
Executive Vice President
Chief Financial Officer
and Acting Treasurer
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TABLE OF CONTENTS
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PAGE
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<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C>
SECTION 1.1. Definitions............................................................................1
SECTION 1.2. U.C.C. Definitions.....................................................................1
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty.............................................................................. 2
SECTION 2.2. Guaranty Absolute, etc.................................................................2
SECTION 2.3. Reinstatement, etc.....................................................................3
SECTION 2.4. Waiver, etc............................................................................3
SECTION 2.5. Waiver of Subrogation..................................................................4
SECTION 2.6. Consent to Jurisdiction; Waiver of Immunities..........................................4
ARTICLE III
ACCELERATION OF GUARANTY; BANKRUPTCY
SECTION 3.1. Acceleration of Guaranty...............................................................4
SECTION 3.2. Bankruptcy.............................................................................5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES; COVENANTS
SECTION 4.1. Representations and Warranties.........................................................5
SECTION 4.2. Covenants..............................................................................5
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Operative Document.....................................................................5
SECTION 5.2. Binding on Successors, Transferees
and Assigns; Assignment of Guaranty........................................5
SECTION 5.3. Amendments, etc........................................................................6
</TABLE>
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<TABLE>
<S> <C>
SECTION 5.4. Addresses for Notices to the Guarantor.................................................6
SECTION 5.5. No Waiver; Remedies....................................................................6
SECTION 5.6. Section Captions.......................................................................6
SECTION 5.7. Severability...........................................................................6
SECTION 5.8. Termination of Guaranty................................................................6
SECTION 5.9. Governing Law..........................................................................6
SECTION 5.10. Waiver of Jury Trial...................................................................6
SECTION 5.11. Setoff.................................................................................6
</TABLE>
<PAGE> 137
APPENDIX A
to
Participation Agreement,
Master Lease,
Lease Supplements,
Loan Agreement,
Construction Agency Agreement,
and Mortgages
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 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;
(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 thereof;
(viii) "including" (and with correlative meaning "include")
means including without limiting
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Appendix A
the generality of any description preceding such term;
(ix) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding";
and
(x) "now", "currently", "existing", other words to that effect
mean the Documentation Date.
B. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified
herein, all accounting terms used therein shall be interpreted, all accounting
determinations thereunder shall be made, and all financial statements required
to be delivered thereunder shall be prepared in accordance with GAAP, applied on
a basis consistent (except for changes concurred in by the Company's independent
public accountants) with the most recent audited consolidated financial
statements of the Company and its Consolidated Subsidiaries delivered to the
Participants; PROVIDED that, if the Company notifies the Administrative Agent
that the Company wishes to amend any covenant in Article VIII of the
Participation Agreement to eliminate the fact of any change in GAAP on the
operation of such covenant (or if the Administrative Agent notifies the Company
that the Required Participants wish to amend Article VIII of the Participation
Agreement for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Company and the
Required Participants.
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 Participation 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.
"ACCELERATION" is defined in SECTION 6.2(a) of the Loan Agreement.
"ACCOUNT" means the account of the Administrative Agent specified on
SCHEDULE III to the Participation Agreement under the heading "Wire Transfer
Instructions for Obligors".
"ACQUISITION DATE" means any Funding Date on which the Lessor acquires
any Land or a ground lease of any Land and existing Improvements, if any,
located on such Land.
"ACQUISITION DATE ADVANCE" is defined in SECTION 6.3 of the
Participation Agreement.
"ACQUISITION DATE APPRAISAL" means, with respect to any Property (other
than the Headquarters Building), the Appraisal described in SECTION 6.3(i) of
the Participation Agreement.
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Appendix A
"ACQUISITION PERIOD" means the period commencing on the earlier of (a)
July 15, 1997 or (b) the Initial Acquisition Date, and ending on the Acquisition
Period Termination Date.
"ACQUISITION PERIOD TERMINATION DATE" means the date occurring (a)
thirty-six months after the commencement of the Acquisition Period with respect
to the acquisition of Land and Existing Improvements, which Land requires no
Construction thereon and (b) thirty months after the commencement of the
Acquisition Period with respect to the acquisition of Land which requires
Construction thereon.
"ADMINISTRATIVE AGENT" means Bank of Montreal, in its capacity as
Administrative Agent for the Lenders, or such successor Administrative Agent as
may be appointed by the Lenders pursuant to SECTION 13.9 of the Participation
Agreement.
"ADOPTION AGREEMENT" is defined in SECTION 15.5 of the Participation
Agreement.
"ADVANCE" means an advance of funds by the Lessor pursuant to ARTICLE
III of the Participation Agreement.
"AFFILIATE" means, with respect to any Person (the "Reference Person"),
any other Person which directly or indirectly controls, or is controlled by, or
is under common control with, the Reference 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, means 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, with respect to any payment to be received,
the amount of such payment increased so that, after deduction of the amount of
all taxes required to be paid by the recipient (less any tax savings realized
and the present value of any tax savings projected to be realized by the
recipient as a result of the payment of the indemnified amount) with respect to
the receipt by the recipient of such amounts, such increased payment (as so
reduced) is equal to the payment otherwise required to be made.
"ALLOCATION PERCENTAGE" means, with respect to any Lessee as of any
date of determination, the quotient (expressed as a percentage) of (a) the
aggregate outstanding principal amount of the Loans and Equity Amounts made with
respect to Properties leased by such Lessee pursuant to the Master Lease DIVIDED
by (b) the sum of the Loan Balance PLUS the Equity Balance.
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Appendix A
"ALTERNATE BASE RATE" means, for any period, with respect to any Loan
or Equity Amount, a fluctuating rate of interest per annum equal to the sum of
the Federal Funds Rate most recently determined by the Administrative Agent,
plus 0.50%, plus the Applicable Loan Margin or Applicable Lessor Margin, as
applicable. The Alternate Base Rate is not necessarily intended to be the lowest
rate of interest determined by the Administrative Agent in connection with
extensions of credit.
"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 Property) and any restrictive covenant or deed restriction or
easement of record, in each case affecting the Company, any Lessee, any Property
or any material interests in any other kind of property or asset, whether real,
personal or mixed, or tangible or intangible, of the Company or any Lessee.
"APPLICABLE LESSOR MARGIN" means, at any date, the Applicable Loan
Margin for such day plus 0.50%.
"APPLICABLE LOAN MARGIN" means, at any date, the percentage amount set
forth in the table below based on the Pricing Level at such date:
===============================================================
APPLICABLE LOAN MARGIN
===============================================================
===============================================================
Level I 0.225%
---------------------------------------------------------------
Level II 0.325%
---------------------------------------------------------------
Level III 0.425%
"APPRAISAL" means an appraisal prepared by an Appraiser, which
Appraisal complies in all material respects (as determined by counsel to the
Lenders and the Lessor) with all of the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended, the rules and
regulations adopted pursuant thereto, and all other applicable Requirements of
Law.
"APPRAISER" means any reputable MAI appraiser selected by the Lessor
with the consent of the Company (which consent shall not be unreasonably
withheld).
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Appendix A
"APPURTENANT RIGHTS" means, with respect to any Land, (i) all
agreements, easements, rights of way or use, rights of ingress or egress,
privileges, appurtenances, tenements, hereditaments and other rights and
benefits at any time belonging or pertaining to such Land or the Improvements
thereon, including, without limitation, the use of any streets, ways, alleys,
vaults or strips of land adjoining, abutting, adjacent or contiguous to such
Land and (ii) all permits, licenses and rights, whether or not of record,
appurtenant to such Land.
"ARRANGER" means Banc One Capital Corporation, as Arranger.
"ARCHITECT'S AGREEMENT" means, with respect to any Property, the
architectural services agreement, if any, between the related Lessee or the
Construction Agent and the related architect.
"AS-BUILT APPRAISAL" means, with respect to any Property, an Appraisal
of such Property appraising the Fair Market Sales Value of such Property as
built in accordance with the Plans and Specifications therefor.
"ASSIGNMENT OF LEASES AND RENTS" means a duly executed and delivered
Assignment of Leases and Rents from the Lessor, as assignor, to the
Administrative Agent for the benefit of the Lenders, as assignee, substantially
in the form of Exhibit N to the Participation 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 the Company
and the Administrative Agent)) of the obligations of the Company 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.
"AVAILABLE COMMITMENTS" means the Available Loan Commitments and the
Available Lessor Commitments.
"AVAILABLE LESSOR COMMITMENT" means at any time, an amount equal to the
excess, if any, of (x) the aggregate amount of the Lessor Commitments MINUS (y)
the aggregate outstanding amounts of the Equity Amounts.
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Appendix A
"AVAILABLE LOAN COMMITMENT" means at any time, an amount equal to the
excess, if any, of (x) the aggregate amount of the Loan Commitments MINUS (y)
the aggregate outstanding principal amounts of all Loans.
"BANKRUPTCY CODE" is defined in SECTION 6.1(e) of the Loan Agreement.
"BASE RATE AMOUNT" means any Loan or Equity Amount accruing interest or
Equity Yield, as the case may be, by reference to the Alternate Base Rate.
"BASIC RENT" means, the sum of (i) the Lender Basic Rent and (ii) the
Lessor Basic Rent, in each case calculated as of the applicable date on which
Basic Rent is due.
"BASIC TERM" is defined in SECTION 2.3 of the Master 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.
"BILL OF SALE" is defined in SECTION 6.3(b) of the Participation
Agreement.
"BREAK COSTS" means an amount equal to the amount, if any, required to
compensate any Participant for any additional losses (including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or funds acquired by such Participant to fund its
obligations under the Operative Documents) it may reasonably incur as a result
of (x) any Lessee's payment of Rent other than on a Payment Date, (y) any
Advance not being made on the date specified therefor in the applicable Funding
Request or (z) as a result of any conversion of the LIBO Rate in accordance with
SECTION 11.7 or 11.8 of the Participation Agreement. A statement as to the
amount of such loss, cost or expense, prepared in good faith and in reasonable
detail and submitted by such Participant to the Company, shall be final,
conclusive and binding in the absence of manifest error.
"BUSINESS DAY" means (i) each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banks in New York, New York, or Chicago,
Illinois, are generally authorized or obligated, by law or executive order, to
close and (ii) relative to the payment of Rent determined by reference to the
LIBO Rate, any day which is a Business Day under CLAUSE (i) and is also a day on
which dealings in Dollars are carried on in the London interbank eurodollar
market.
"CASUALTY" means any damage or destruction of all or any portion of a
Property as a result of a fire or other casualty.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Sections 9601-9657.
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Appendix A
"CERTIFYING PARTY" is defined in SECTION 22.1 of the Master Lease.
"CHANGE OF CONTROL" means a majority of the Board of Directors of the
Company shall cease for any reason to consist of (A) individuals who on July 15,
1996 were serving as directors of the Company 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 the Company.
"CLAIMS" means any and all obligations, liabilities, damages, losses,
actions, suits, judgments, proceedings, penalties, fines, claims, demands,
settlements, utility charges, costs, expenses and disbursements (including,
without limitation, reasonable legal fees and expenses) of any kind and nature
whatsoever.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
"COMMITMENT" means (i) as to any Lender, the obligation of such Lender
to make Loans to the Lessor at the request of the Construction Agent in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender's name on SCHEDULE I to the Participation
Agreement, as such Schedule may be amended from time to time, and (ii) as to the
Lessor, the obligation of the Lessor to make available Equity Amounts to a
Lessee or the Construction Agent, at the request of the Construction Agent, in
an aggregate principal amount at any one time outstanding not to exceed the
amount set forth opposite the Lessor's name on SCHEDULE I to the Participation
Agreement, as such Schedule may be amended from time to time.
"COMMITMENT AMOUNT" means an amount equal to $80,000,000.
"COMMITMENT FEE RATE" means, at any date, the percentage amount set
forth in the table below based on the Pricing Level at such date:
=========================================
COMMITMENT FEES
=========================================
Level I 0.100%
-----------------------------------------
Level II 0.125%
-----------------------------------------
Level III 0.150%
-----------------------------------------
"COMMITMENT FEES" is defined in SECTION 4.5(A) of the Participation
Agreement.
"COMMITMENT PERCENTAGE" means, as to any Participant, the percentage
set forth opposite such Participant's name under the heading "Commitment
Percentage" on SCHEDULE I to the Participation Agreement, as such Schedule may
be amended from time to time.
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Appendix A
"COMMITMENT PERIOD" means the period from and including the earlier of
the Initial Acquisition Date or July 15, 1997, to but not including the
Commitment Termination Date or such earlier date on which the Commitments shall
terminate as provided in the Operative Documents.
"COMMITMENT TERMINATION DATE" means the earliest of (a) the date
occurring forty-two (42) months after the earlier of the Initial Acquisition
Date or July 15, 1997, (b) the date specified in a written notice from the
Company to the Lessor and the Administrative Agent as the Commitment Termination
Date and (c) the date on which any Commitment Termination Event occurs.
"COMMITMENT TERMINATION EVENT" means
(a) the occurrence of any Lease Default described in SECTION
16.1(g) or 16.1(h) of the Master Lease; or
(b) the occurrence and continuance of any other Lease Event of
Default and either (i) the Lessor or the Administrative Agent shall
have commenced its exercise of remedies pursuant to SECTION 16.2 of the
Master Lease or (ii) the Administrative Agent, acting at the direction
of Required Participants, shall have given notice to the Company that
the Commitments have been terminated.
"COMPANY" means Cardinal Health, Inc., an Ohio corporation.
"COMPLETION" means, with respect to any Property, such time as the
conditions set forth in SECTION 6.4 of the Participation Agreement are satisfied
with respect thereto.
"COMPLETION CERTIFICATE" is defined in SECTION 6.4(c) of the
Participation Agreement.
"COMPLETION DATE" means, with respect to any Property, the date on
which Completion for such Property has occurred.
"CONDEMNATION" means, with respect to any Property, any condemnation,
requisition, confiscation, seizure or other taking or sale of the use, access,
occupancy, easement rights or title to such Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including an action by a Governmental
Authority to change the grade of, or widen the streets adjacent to, such
Property or alter the pedestrian or vehicular traffic flow to such Property so
as to result in change in access to such Property, or by or on account of an
eviction by paramount title or any transfer made in lieu of any such proceeding
or action. A "CONDEMNATION" shall be deemed to have occurred on the earliest of
the dates that use, occupancy or title vests in the condemning authority.
"CONSOLIDATED EBITR" means, for any fiscal period of the
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Appendix A
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 the Company and its Consolidated Subsidiaries and computed in
accordance with GAAP.
"CONSOLIDATED SUBSIDIARIES" means all Subsidiaries of the Company.
"CONSTRUCTION" means, with respect to any Property, the construction
and installation of all Improvements thereon contemplated by the Plans and
Specifications applicable to such Property.
"CONSTRUCTION ADVANCE" means each Advance made for the purpose of
paying Property Improvement Costs.
"CONSTRUCTION AGENCY AGREEMENT" means a duly executed and delivered
Construction Agency Agreement between the Lessor and the Company, as
Construction Agent, substantially in the form of Exhibit K to the Participation
Agreement.
"CONSTRUCTION AGENCY AGREEMENT ASSIGNMENT" means a duly executed and
delivered Construction Agency Agreement Assignment made by the Lessor, as
assignor, in favor of the Administrative Agent, for the benefit of the Lenders,
as assignees substantially in the form of Exhibit M to the Participation
Agreement.
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Appendix A
"CONSTRUCTION AGENCY AGREEMENT DEFAULT" means any event or condition
which, with the lapse of time or the giving of notice, or both, would constitute
a Construction Agency Agreement Event of Default.
"CONSTRUCTION AGENCY AGREEMENT EVENT OF DEFAULT" means a "Construction
Agency Agreement Event of Default" as defined in SECTION 5.1 of the Construction
Agency Agreement.
"CONSTRUCTION AGENCY AGREEMENT SUPPLEMENT" means any duly executed and
delivered Supplement to the Construction Agency Agreement executed by the Lessor
and the Construction Agent, substantially in the form attached to the
Construction Agency Agreement as EXHIBIT A thereto.
"CONSTRUCTION AGENT" means with respect to each Property, the Company,
as construction agent under the Construction Agency Agreement Supplement for
such Property.
"CONSTRUCTION CERTIFICATE" is defined in SECTION 6.2(B) of the
Participation Agreement.
"CONSTRUCTION COMMENCEMENT DATE" is defined in SECTION 2.3 of the
Construction Agency Agreement.
"CONSTRUCTION DOCUMENTS" is defined in SECTION 2.7 of the Construction
Agency Agreement.
"CONSTRUCTION DOCUMENTS ASSIGNMENT" means a duly executed and delivered
Construction Documents Assignment made by the Construction Agent in favor of the
Lessor, substantially in the form of Exhibit L to the Participation Agreement
and delivered pursuant to the Construction Agency Agreement.
"CONSTRUCTION PERIOD" means, with respect to any Property, the period
commencing on the commencement of construction on such Property and ending on
the earlier of (a) the Completion Date and (b) the Outside Completion Date for
such Property.
"CONSTRUCTION PERIOD PROPERTY" means, at any date of determination, any
Property as to which the Construction Period has commenced but not ended on or
prior to such 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).
"DEBT" of any Person means, at any date, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable or
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Appendix A
accrued expenses arising in the ordinary course of business, (d) all obligations
of such Person as lessee which are capitalized in accordance with GAAP, (e) all
obligations (absolute or contingent) of such Person to reimburse any bank or
other Person issuing a letter of credit or similar instrument, (f) any preferred
stock issued by such Person which is redeemable otherwise than at the sole
option of such Person for consideration other than Equity Interests in such
Person, in the Company or in the Parent, (g) all Debt secured by a Lien on any
asset of such Person, whether or not such Debt is otherwise an obligation of
such Person, and (h) all Guarantee Agreements by such Person of Debt of others.
"DEBT RATING" means, at any date, the better of the credit ratings, if
any, publicly announced by S&P and Moody's for the Company's senior unsecured
debt without third-party credit enhancement (or if only one of S&P or Moody's
shall have assigned a credit rating, then such rating). If the ratings assigned
by S&P and Moody's differ by more than one increment, the Debt Rating will be
the median rating (or the higher of two intermediate ratings if there is no
median rating).
"DEED" means a special warranty deed with respect to the real property
comprising the Properties, in conformity with Applicable Law and appropriate for
recording with the applicable Governmental Authorities, conveying fee simple
title to such real property to the Lessor, subject only to Permitted Exceptions.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DOCUMENTATION DATE" is defined in SECTION 2.1 of the Participation
Agreement.
"DOLLARS" and "$" mean dollars in lawful currency of the United States
of America.
"END OF THE TERM REPORT" is defined in SECTION 11.2(a) of the
Participation Agreement.
"ENVIRONMENTAL AUDIT" means, with respect to each Property, a Phase One
environmental site assessment (the scope and performance of which meets or
exceeds the then most current ASTM Standard Practice E1527 for Environmental
Site Assessments: Phase One Environmental Site Assessment Process) of such
Property.
"ENVIRONMENTAL LAWS" means and includes RCRA, CERCLA, the Hazardous
Materials Transportation Act of 1975, 49 U.S.C. ss.ss. 1801-1812, the Toxic
Substances Control Act, 15 U.S.C. Sections 2601-2671, the Clean Air Act, 42
U.S.C. ss.ss. 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. ss.ss. 136 et seq., and all similar federal, state and local
environmental laws, ordinances, rules, orders, statutes, decrees, judgments,
injunctions, codes and regulations, and any other
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Appendix A
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 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.
"ENVIRONMENTAL VIOLATION" means any activity, occurrence or condition
that violates or results in non-compliance with any Environmental Law.
"EQUIPMENT" means equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired by the Lessor pursuant to the Operative Documents and now or
subsequently attached to, contained in or used or usable in any way in
connection with any operation or letting of a Property, including but without
limiting the generality of the foregoing:
(a) the equipment described on Schedule C to any Funding
Request; and
(b) all screens, awnings, shades, blinds, curtains, draperies,
artwork, carpets, rugs, storm doors and windows, shelving, display
cases, counters, furniture and furnishings, heating, electrical, and
mechanical equipment, lighting, switchboards, plumbing, ventilation,
air conditioning and air-cooling apparatus, refrigerating, and
incinerating equipment, escalators, elevators, loading and unloading
equipment and systems, material handling equipment, stoves, ranges,
laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite
dishes and antennae), televisions, computers, sprinkler systems and
other fire prevention and extinguishing apparatus and materials,
security systems, motors, engines, machinery, pipes, pumps, tanks,
conduits, appliances, fittings and fixtures of every kind and
description.
"EQUITY AMOUNT" is defined at SECTION 3.2 of the Participation
Agreement.
"EQUITY BALANCE" means as of any date of determination an amount equal
to the sum of the outstanding Equity Amounts together with all accrued and
unpaid Equity Yield thereon.
"EQUITY INTEREST" means, in the case of a corporation, stock of any
class, and in the case of a partnership or a limited partnership, a General
Partnership Interest or Limited Partnership Interest, but
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excluding preferred stock which constitutes Debt.
"EQUITY YIELD" is defined in SECTION 4.1(a) of the Participation
Agreement.
"EQUITY YIELD RATE" means (a) with respect to Equity Amounts that are
LIBO Rate Amounts, for any day in any Rent Period, a rate per annum equal to the
sum of the LIBO Rate (Reserve Adjusted) for such Rent Period PLUS the Applicable
Lessor Margin for such day and (b) with respect to Equity Amounts that, pursuant
to the Operative Documents, accrue Equity Yield by reference to the Alternate
Base Rate, for any day in any Rent Period, a rate per annum equal to the
Alternate Base Rate determined for such day.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any successor Federal statute), and the
regulations promulgated and rulings issued thereunder.
"ERISA AFFILIATE" means each entity required to be aggregated with the
Company within the meaning of Section 414(b) or (c) of the Code.
"ERISA GROUP" means the Company and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
the control of the Company which, together with the Company, are treated as a
single employer under Section 414 of the Code.
"ESTIMATED IMPROVEMENT COSTS" means, with respect to any Property as of
the date of the first Construction Advance therefor, an amount equal to the
aggregate amount which the Construction Agent for such Property in good faith
expects to be expended in order to achieve Completion with respect to
Improvements for such Property; PROVIDED, HOWEVER, that in no event shall the
Estimated Improvement Costs for any Property exceed 117.6% of (a) the Fair
Market Sales Value of such Property indicated on the As-Built Appraisal of such
Property delivered pursuant to SECTION 6.2(c) of the Participation Agreement
MINUS (b) the Land Acquisition Cost and Existing Improvement Cost of such
Property MINUS (c) the Transaction Expenses funded by the Lessor with respect to
such Property.
"EVENT OF DEFAULT" means a Lease Event of Default, a Construction
Agency Agreement Event of Default or a Loan Agreement Event of Default.
"EXCEPTED PAYMENTS" means:
(a) all indemnity payments (including indemnity payments made
pursuant to ARTICLE XI of the Participation Agreement) to which the
Administrative Agent, the Lessor, any Lender or any of their respective
Affiliates, agents, officers, directors or employees is entitled;
(b) any amounts (other than Basic Rent or amounts payable by
any Lessee pursuant to SECTION 15.2 of the Master Lease or
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ARTICLES XVI, XVIII or XX of the Master Lease) payable under any
Operative Document to reimburse the Administrative Agent, the Lessor,
any Lender or any of their respective Affiliates (including the
reasonable expenses of the Administrative Agent, the Lessor, any Lender
or such Affiliates incurred in connection with any such payment) for
performing or complying with any of the obligations of any Lessee under
and as permitted by any Operative Document;
(c) any amount payable to the Lessor by any transferee
permitted under the Operative Documents as the purchase price of the
Lessor's interest in the Properties (or a portion thereof);
(d) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies other than
such proceeds or payments payable to a Lessee or to the Administrative
Agent;
(e) any insurance proceeds under policies maintained by the
Lessor;
(f) Transaction Expenses or other amounts or expenses paid or
payable to or for the benefit of the Administrative Agent, the Lessor
or any Lender;
(g) all right, title and interest of the Lessor to any
Property or any portion thereof or any other property to the extent any
of the foregoing has not been purchased by a Lessee or a third party
pursuant to the terms of the Lease; and
(h) any payments in respect of interest to the extent
attributable to payments referred to in CLAUSES (a) through (g) above.
"EXCESS CASUALTY/CONDEMNATION PROCEEDS" means the excess, if any, of
(x) the aggregate of all awards, compensation or insurance proceeds payable in
connection with a Casualty or Condemnation MINUS (y) the Property Balance paid
by a Lessee in connection with a purchase of the affected Property pursuant to
Section 18.1 of the Master Lease.
"EXCESS SALES PROCEEDS" means the excess, if any, of (x) the aggregate
of all proceeds received by the Lessor or the Administrative Agent, as
applicable, in connection with any sale of the Properties pursuant to the
Lessor's (or Administrative Agent's) exercise of remedies under SECTION 16.2 of
the Master Lease or any Lessee's exercise of the Remarketing Option under
ARTICLE XX of the Master Lease MINUS (y) the Lease Balance.
"EXEMPTED DEBT" means the sum of the following items outstanding as of
the date Exempted Debt is to be determined: (a) Indebtedness of the Company and
its Consolidated Subsidiaries incurred after the date of the Participation
Agreement and secured by Liens not permitted to be created or assumed pursuant
to SECTION 8.1(p) of the Participation Agreement, and (b) Attributable Debt of
the Company and its Consolidated
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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 8.1(q) of the Participation Agreement.
"EXISTING IMPROVEMENT COST" means, with respect to any Property, the
portion of the Acquisition Date Advance made with respect to such Property that
is allocable to the cost of purchasing any existing Improvements located on such
Property on the Acquisition Date therefor.
"EXPIRATION DATE" means, unless the Master Lease shall have been
earlier terminated in accordance with the provisions of the Master Lease or the
other Operative Documents, the sixth anniversary of the earlier of (a) July 15,
1997 or (b) the Initial Acquisition Date, or, if the Expiration Date is extended
pursuant to ARTICLE XIX of the Master Lease, the last day of the then current
Extension Term.
"EXPIRATION DATE PURCHASE OBLIGATION" means the obligation of the
Lessees, pursuant to SECTION 18.2 of the Master Lease, to purchase on the
Expiration Date all (but not less than all) of the Properties then subject to
the Master Lease.
"EXPIRATION OF THE TERM" means the last day of the Lease Term.
"EXTENSION TERM" is defined in SECTION 19.1(A) of the Master Lease.
"FAIR MARKET SALES VALUE" means, with respect to any Property, the
amount, which in any event shall not be less than zero, that would be paid in
cash in an arm's-length transaction between an informed and willing purchaser
and an informed and willing seller, neither of whom is under any compulsion to
purchase or sell, respectively, for the ownership of such Property. The Fair
Market Sales Value of any Property shall be determined based on the assumption
that, except for purposes of ARTICLE XVI of the Master Lease and SECTION 11.2 of
the Participation Agreement, such Property is in the condition and state of
repair required under SECTION 9.1 of the Master Lease and each Lessee is in
compliance with the other requirements of the Operative Documents relating to
the condition of the Property.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by Bank of Montreal from three federal funds
brokers of recognized standing selected by it.
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"FIXTURES" means all fixtures relating to the Improvements, including
all components thereof, located in or on the Improvements, together with all
replacements, modifications, alterations and additions thereto.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"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 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 DATE" means any Business Day on which Advances are made under
the Participation Agreement in accordance with SECTION 3.4 thereof.
"FUNDING OFFICE" means the office of the Administrative Agent
identified on SCHEDULE III to the Participation Agreement as its Funding Office.
"FUNDING REQUEST" is defined in SECTION 3.4(a) of the Participation
Agreement.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America.
"GENERAL PARTNERSHIP INTEREST" means the interest of a general partner
in a general partnership and the interest of a general partner in a limited
partnership.
"GOVERNMENTAL ACTION" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, written
interpretations, 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
environmental and operating permits and licenses that are required for the full
use, occupancy, zoning and operation of any Property.
"GOVERNMENTAL AUTHORITY" means any foreign or domestic federal,
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state, county, municipal or other governmental or regulatory authority, agency,
board, body, commission, instrumentality, court or any political subdivision
thereof.
"GROSS REMARKETING PROCEEDS" is defined in SECTION 20.1(m) of the
Master Lease.
"GROUND LEASE" means a ground lease substantially in the form of
Exhibit C to the Participation Agreement to be entered into by the Company and
the Lessor.
"GUARANTEE AGREEMENT" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly
or indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (a) to purchase such Debt
or any property or assets constituting security therefor, (b) to advance or
supply funds (x) for the purchase or payment of such Debt or (y) to maintain
income, working capital or other balance sheet condition or otherwise to advance
or make available funds for the purchase or payment of such Debt, (c) to lease
property or to purchase Securities or other property or services primarily for
the purpose of assuring the owner of such Debt of the ability of the primary
obligor to make payment of the Debt, or (d) otherwise to assure the owner of the
Debt of the primary obligor against loss in respect thereof. For the purposes of
all computations made under the Operative Documents, a Guarantee Agreement in
respect of any Debt shall be deemed to be Debt equal to the principal amount of
such Debt which has been guaranteed.
"GUARANTOR" means the Company, as guarantor under the Guaranty.
"GUARANTY" means the Guaranty dated as of June 23, 1997, made by the
Company, as guarantor, in favor of the Lenders, the Lessor and the
Administrative Agent.
"HAZARDOUS ACTIVITY" means any activity, process, procedure or
undertaking that directly or indirectly (i) produces, generates or creates any
Hazardous Material; (ii) causes or results in (or threatens to cause or result
in) the Release of any Hazardous Material into the environment (including air,
water vapor, surface water, groundwater, drinking water, land (including surface
or subsurface), plant, aquatic and animal life); (iii) involves the containment
or storage of any Hazardous Material; or (iv) would be regulated as hazardous
waste treatment, storage or disposal within the meaning of any Environmental
Law.
"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,
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board or instrumentality of the United States, any jurisdiction in which a
Property is located or any political subdivision thereof and also including,
without limitation, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs") and radon gas.
"HEADQUARTERS BUILDING" means the Property located in Dublin, Ohio to
be constructed as a headquarters building.
"IMPOSITIONS" means any and all liabilities, losses, expenses and costs
of any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever ("TAXES") (including,
without limitation, (i) real and personal property taxes, including personal
property taxes on any Property covered by any Lease Supplement that is
classified by Governmental Authorities as personal property, and real estate or
ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes
and other similar taxes (including rent taxes and intangibles taxes); (iii) any
excise taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes,
intangible taxes, stamp taxes and documentary recording taxes and fees; (v)
taxes that are or are in the nature of franchise, income, value added, gross
receipts, privilege and doing business taxes, license and registration fees; and
(vi) assessments on any Property, including all assessments for public
improvements or benefits, whether or not such improvements are commenced or
completed within the Lease Term), and in each case all interest, additions to
tax and penalties thereon, which at any time may be levied, assessed or imposed
by any Federal, state or local authority upon or with respect to (a) any Tax
Indemnitee, any Property or any part thereof or interest therein, or any Lessee
or any sublessee or user of any Property; (b) the financing, refinancing,
demolition, construction, substitution, subleasing, assignment, control,
condition, occupancy, servicing, maintenance, repair, ownership, possession,
purchase, rental, lease, activity conducted on, delivery, insuring, use,
operation, improvement, transfer, return or other disposition of such Property
or any part thereof or interest therein; (c) the Notes or other indebtedness
with respect to any Property or any part thereof or interest therein or transfer
thereof; (d) the rentals, receipts or earnings arising from any Property or any
part thereof or interest therein; (e) the Operative Documents or any payment
made or accrued pursuant thereto; (f) the income or other proceeds received with
respect to any Property or any part thereof or interest therein upon the sale or
disposition thereof; (g) any contract (including the Construction Agency
Agreement) relating to the construction, acquisition or delivery of the
Improvements or any part thereof or interest therein; (h) the issuance of the
Notes; or (i) otherwise in connection with the transactions contemplated by the
Operative Documents.
Notwithstanding anything in the first paragraph of this definition
(except as provided in the final paragraph of this definition) the term
"IMPOSITION" shall not mean or include:
(i) Taxes and impositions that are imposed by any Governmental
Authority and that are based upon or measured by or with respect to the
gross or net income, receipts, profits, gains,
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capital or net worth (including, without limitation, any minimum or
alternative minimum Taxes, income or capital gains Taxes, excess
profits Taxes, items of Tax preference, or capital stock, franchise,
business privilege or doing business Taxes), or accumulated earnings
Taxes or personal holding company Taxes, including Taxes collected by
withholding, but Taxes described in this clause (i) shall not include
Taxes that are, or are in the nature of, sales, use, rental, transfer
or property Taxes) and any interest, additions to tax, penalties or
other charges in respect thereof; PROVIDED that this CLAUSE (i) shall
not be interpreted to prevent a payment from being made on an After Tax
Basis if such payment is otherwise required to be so made; and,
PROVIDED, FURTHER, that this clause (i) shall not apply to (and thus
shall not exclude) any Tax or imposition which would not have been
imposed on the applicable Tax Indemnitee but for (x) such Tax
Indemnitee having executed or delivered, or performed its obligations,
received payment or enforced its rights under, an Operative Document,
or (y) any of the transactions contemplated by the Operative Documents;
(ii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs, or
relates to a period, prior to the commencement of the Master Lease
(other than with respect to Taxes described in clause (iii) of the
definition of Permitted Property Liens) or after the termination of the
Lease (but not any Tax or imposition that relates to any period during
the Term of the Master Lease but prior to the termination of the Master
Lease with respect to the Property to which such Imposition relates);
(iii) any Tax or imposition for so long as, but only for so
long as, it is being contested in accordance with the provisions of
SECTION 11.5(b) of the Participation Agreement, PROVIDED that the
foregoing shall not limit any obligation under SECTION 11.5(b) of the
Participation Agreement to advance to such Tax Indemnitee amounts with
respect to Taxes that are being contested in accordance with SECTION
11.5(b) of the Participation Agreement or any expenses incurred by such
Tax Indemnitee in connection with such contest;
(iv) any interest, additions to tax or penalties imposed as a
result of a breach by a Tax Indemnitee of its obligations under SECTION
11.5(c) of the Participation Agreement or as a result of a Tax
Indemnitee's failure to file any return or other documents timely and
as prescribed by applicable law; PROVIDED that this CLAUSE (iv) shall
not apply if such failure is attributable to a failure by any Lessee to
fulfill its obligations under the Lease with respect to any such
return;
(v) any Taxes or impositions imposed with respect to any
voluntary transfer, sale, financing or other voluntary disposition of
any interest in any Property or any part thereof, or any interest
therein or any interest or obligation under the Operative
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Documents or from any sale, assignment, transfer or other disposition
of any interest in a Tax Indemnitee or any Affiliate thereof, (other
than any transfer in connection with (1) the exercise by a Lessee of
its Purchase Option or any termination option or other purchase of any
Property by any Lessee, (2) the occurrence of a Lease Event of Default,
(3) a Casualty or Condemnation affecting any Property, or (4) any
sublease, modification or addition to any Property by any Lessee);
(vi) any Taxes or impositions imposed on a Tax Indemnitee, to
the extent such Tax Indemnitee actually receives a credit, deduction
or, allowance (or otherwise has a reduction in a liability for Taxes)
in respect thereof against Taxes (but only to the extent such credit is
not taken into account in calculating the indemnity payment on an After
Tax Basis);
(vii) Taxes imposed on or with respect to, based on, or
measured by any fees or other compensation (other than Rent or amounts
relating to the exercise of the Purchase Option) received by any Tax
Indemnitee;
(viii) Taxes resulting from, or that would not have been
imposed but for, the gross negligence or willful misconduct of such Tax
Indemnitee or Affiliate thereof;
(ix) Taxes resulting from, or that would not have been imposed
but for, a breach by the Tax Indemnitee or any Affiliate thereof of any
representations, warranties or covenants set forth in the Operative
Documents (unless such breach is caused by any Lessee's breach of its
representations, warranties or covenants set forth in the Operative
Documents);
(x) Taxes arising out of or resulting from a Tax Indemnitee's
failure to comply with the provisions of SECTION 11.5(b) of the
Participation Agreement, which failure precludes or materially
adversely affects the ability to conduct a contest pursuant to SECTION
11.5(a) of the Participation Agreement (unless such failure is caused
by any Lessee's breach of its obligations);
(xi) with respect to each Property, Taxes which are included
in applicable Property acquisition cost if and to the extent actually
paid;
(xii) Taxes that would have been imposed in the absence of the
transactions contemplated by the Operative Documents, and Taxes arising
out of, or imposed as a result of, activities of a Tax Indemnitee or
Affiliate thereof unrelated to the transactions contemplated by the
Operative Documents;
(xiii) Taxes arising out of or resulting from, or that would
not have been imposed but for the existence of, any Lessor Lien;
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(xiv) Any Tax imposed against or payable by a Tax Indemnitee
to the extent that the amount of such Tax exceeds the amount of such
Tax that would have been imposed against or payable by such Tax
Indemnitee (or, if less, that would have been subject to
indemnification under SECTION 11.5 of the Participation Agreement) if
such Tax Indemnitee were not a direct or indirect successor, transferee
or assign of one of the original Tax Indemnitees; PROVIDED, HOWEVER,
that this EXCLUSION (xiv) shall not apply if such direct or indirect
successor, transferee or assign acquired its interest as a result of a
transfer while an Event of Default shall have occurred and is
continuing;
(xv) Taxes that would not have been imposed but for an
amendment, supplement, modification, consent or waiver to any Operative
Document not initiated, requested or consented to by any Lessee unless
such amendment, supplement, modification, consent or waiver (A) arises
due to, or in connection with there having occurred, an Event of
Default or (B) is required by the terms of the Operative Documents or
is executed in connection with any amendment to the Operative Documents
required by law;
(xvi) Taxes in the nature of intangibles, stamp, documentary
or similar Taxes;
(xvii) Taxes imposed because any Tax Indemnitee or any
Affiliate thereof is not a United States person within the meaning of
Section 7701(a)(30) of the Code (whether paid by a Tax Indemnitee or an
Affiliate or collected by withholding or otherwise); and
(xviii) Any tax imposed in lieu of or in substitution for a
Tax not subject to indemnity pursuant to the provisions of SECTION 11.5
of the Participation Agreement.
Notwithstanding the foregoing, the exclusions from the definition of Impositions
set forth in CLAUSES (i), (ii), (v), (vii), (xii), (xvi) and (xviii) (to the
extent that any such tax is imposed in lieu of or in substitution for a Tax set
forth in CLAUSE (i), (ii), (v), (vii), (xii) or (xvi)) above shall not apply
(but the other exclusions shall apply) to any Taxes or any increase in Taxes
imposed on a Tax Indemnitee, to the extent that the imposition of such Taxes or
such increase in Taxes would not have occurred if on each Funding Date the
Lessor had advanced funds to the Company or any Lessee in the form of a loan
secured by the applicable Property in an amount equal to the portion of the
Property funded on such Funding Date, with debt service for such loans equal to
the Basic Rent payable on each Payment Date and an aggregate principal balance
at the maturity of such loans in an amount equal to the then outstanding amount
of the Loans and Lessor Amounts at the end of the term of the Master Lease.
"IMPROVEMENTS" means all buildings, structures, Fixtures, Equipment,
and other improvements of every kind existing at any time and from time to time
(including those constructed pursuant to the
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Construction Agency Agreement and those purchased with amounts advanced by the
Participants pursuant to the Participation Agreement) on or under any Land,
together with any and all appurtenances to such buildings, structures or
improvements, including sidewalks, utility pipes, conduits and lines, parking
areas and roadways, and including all Modifications and other additions to or
changes in the Improvements at any time.
"INDEBTEDNESS" means all items classified as indebtedness on the most
recently available balance sheet of the Company and its Consolidated
Subsidiaries, in accordance with GAAP.
"INDEMNITEE" means the Administrative Agent, the Lessor and each
Lender, together with the respective Affiliates, successors, assigns, directors,
shareholders, partners, officers, employees and agents of the foregoing.
"INITIAL ACQUISITION DATE" is defined in SECTION 6.1 of the
Participation Agreement.
"INSURANCE REQUIREMENTS" means all terms and conditions of any
insurance policy either required by the Master Lease to be maintained by the
Lessees or required by the Construction Agency Agreement to be maintained by the
Construction Agent, and all requirements of the issuer of any such policy.
"INTEREST RATE" means (a) with respect to Loans that are LIBO Rate
Amounts, for any day in any Rent Period, a rate per annum equal to the LIBO Rate
(Reserve Adjusted) for such Rent Period PLUS the Applicable Loan Margin for such
day and (b) with respect to Loans that are Base Rate Amounts, for any day in any
Rent Period, a rate per annum equal to the Alternate Base Rate determined for
such day.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"LAND" means each parcel of real property described on SCHEDULE I to
any Lease Supplement, and includes all Appurtenant Rights attached thereto.
"LAND ACQUISITION COST" means, with respect to any Property, the amount
of the Advance funded to the Construction Agent for such Property for the
purpose of acquiring the portion of such Property constituting Land and paying
the Transaction Expenses relating to such acquisition, as such amount is set
forth in the Funding Request relating to the acquisition of such Property.
"LEASE" means, collectively, the Master Lease and each Lease
Supplement.
"LEASE ASSETS" means, collectively, the Properties, the Operative
Documents, all amounts of Rent, all insurance proceeds and condemnation
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awards, and all proceeds of any of the foregoing.
"LEASE BALANCE" means, as of any date of determination, an amount equal
to the sum of the Loan Balance and the Equity Balance and all other amounts
owing by the Company and the Lessees under the Operative Documents (including
without limitation, accrued and unpaid Rent and Supplemental Rent, if any).
"LEASE DEFAULT" means any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute a Lease Event of
Default.
"LEASE EVENT OF DEFAULT" means a "Lease Event of Default" as defined in
SECTION 16.1 of the Master Lease.
"LEASE SUPPLEMENT" means each Lease Supplement substantially in the
form of EXHIBIT A to the Master Lease, executed by a Lessee, dated as of an
Acquisition Date and covering the Property located on the Land identified on
SCHEDULE I thereto.
"LEASE TERM" means the period commencing on the Initial Acquisition
Date and ending on the Expiration Date, and includes all Extension Terms, if
any.
"LENDER BASIC RENT" means, as determined as of any Payment Date, the
interest due on the Loans, determined in accordance with SECTION 2.4 of the Loan
Agreement and excluding any interest at the applicable Overdue Rate on any
installment of Basic Rent not paid when due and any fine, penalty, interest or
cost assessed or added under any agreement with a third party for nonpayment or
late payment of Basic Rent.
"LENDERS" means, collectively, the various financial institutions as
are or may from time to time become parties to the Loan Agreement as Lenders.
"LESSEES" means, collectively, the Company and each wholly-owned
Subsidiary of the Company that is, or that becomes by execution and delivery of
an Adoption Agreement, party to the Participation Agreement, the Master Lease,
the Construction Agency Agreement and the Construction Documents Assignment, and
their respective successors and assigns expressly permitted under the Operative
Documents.
"LESSOR" means BMO Leasing (U.S.), Inc., a Delaware corporation,
together with its successors and assigns permitted pursuant to the Operative
Documents.
"LESSOR BASIC RENT" means the amount of accrued Equity Yield due on the
Equity Amounts, determined in accordance with SECTION 4.1 of the Participation
Agreement as of any Payment Date and excluding any interest at the applicable
Overdue Rate on any installment of Lessor Basic Rent not paid when due and any
fine, penalty, interest or cost assessed or added under any agreement with a
third party for nonpayment or late payment of Lessor Basic Rent.
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"LESSOR COMMITMENT" means the Commitment of the Lessor in the amount
set forth on SCHEDULE I of the Participation Agreement, as such Schedule may be
amended from time to time.
"LESSOR FINANCING STATEMENTS" means UCC financing statements
appropriately completed and executed for filing in the applicable jurisdiction
in order to protect the Lessor's interest under the Master Lease and the Lease
Supplements to the extent the Master Lease and Lease Supplements are security
agreements.
"LESSOR LIEN" means any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against the Lessor or any Lender not
resulting from the transactions contemplated by the Operative Documents, (b) any
act or omission of the Lessor or any Lender which is not required or permitted
by the Operative Documents or is in violation of any of the terms of the
Operative Documents, (c) any claim against the Lessor or any Lender with respect
to Taxes or Transaction Expenses against which the Lessees are not required to
indemnify the Lessor or any Lender pursuant to ARTICLE X or ARTICLE XI of the
Participation Agreement or (d) any claim against the Lessor arising out of any
transfer by the Lessor of all or any portion of the interest of the Lessor in
the Properties, the Operative Documents or the other Lease Assets other than the
transfer of title to or possession of the Properties by the Lessor pursuant to
and in accordance with the Master Lease, the Loan Agreement or the Participation
Agreement or pursuant to the exercise of the remedies set forth in SECTION 16.2
of the Master Lease.
"LESSOR MORTGAGE" means, with respect to any Property, the Lease
Supplement for such Property and any and all other security instruments in
appropriate recordable form in each relevant jurisdiction sufficient to grant to
the Lessor, for its own benefit and the benefit of the Lenders, a first priority
Lien on the related Land and Improvements.
"LEVEL I PRICING PERIOD" means any period during which the Debt Rating
is AA- or better (as rated by S&P) or Aa3 or better (as rated by Moody's).
"LEVEL II PRICING PERIOD" means any period during which (a) the Debt
Rating is BBB or better (as rated by S&P) or Baa2 or better (as rated by
Moody's) and (b) no better Pricing Level applies.
"LEVEL III PRICING PERIOD" means any period during which no other
Pricing Level applies.
"LIBO RATE" means, relative to any Loan or Equity Amount for any Rent
Period, the rate of interest equal to the average (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar
deposits in immediately available funds are offered to the Administrative Agent
in the London interbank market as at or about 11:00 a.m. London time two
Business Days prior to the beginning of such Rent Period for delivery on the
first day of such Rent Period, and in an
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amount approximately equal to the amount of the Loans and Equity Amounts to be
advanced by the Participants and for a period approximately equal to such Rent
Period.
"LIBO RATE AMOUNT" means any Loan or Equity Amount which accrues
interest or Equity Yield, as the case may be, by reference to the LIBO Rate
(Reserve Adjusted).
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan or Equity
Amount for any Rent Period, a rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO RATE
------------------ -------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Rent Period will be determined
by the Administrative Agent, on the basis of the LIBOR Reserve Percentage in
effect on, and the applicable LIBO Rate obtained by the Administrative Agent,
two Business Days before the first day of such Rent Period.
"LIBOR RESERVE PERCENTAGE" means, relative to any Rent Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) specified under regulations issued
from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Rent Period.
"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 AGREEMENT" means the Loan Agreement, dated as of June 23, 1997,
among the Lessor, as a borrower thereunder, the Lenders and the Administrative
Agent.
"LOAN AGREEMENT DEFAULT" means any event, act or condition which with
notice or lapse of time, or both, would constitute a Loan Agreement
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Event of Default.
"LOAN AGREEMENT EVENT OF DEFAULT" is defined in SECTION 6.1 of the Loan
Agreement.
"LOAN BALANCE" means as of any date of determination an amount equal to
the sum of the outstanding Loans together with all accrued and unpaid interest
thereon.
"LOAN COMMITMENT" means the Commitment of each Lender in the amount set
forth on SCHEDULE I to the Participation Agreement.
"LOAN DOCUMENTS" means the Loan Agreement and the Notes.
"LOANS" is defined in SECTION 2.1(a) of the Loan Agreement.
"MARKETING PERIOD" means the period commencing on the date twelve (12)
months prior to the Expiration Date and ending on the Expiration Date.
"MASTER LEASE" means a duly executed and delivered Master Lease and
Open End Mortgage, among the Lessor, the Lessees and the Company, substantially
in the form of Exhibit J to the Participation Agreement, as supplemented from
time to time by Lease Supplements.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
financial condition, operations, performance or properties of the Company and
any Lessee taken as a whole, or (b) the ability of the Company or any Lessee to
perform in any material respect under the Operative Documents, or (c) the value,
utility or useful life of any Property, or (d) the validity, enforceability or
legality of any of the Operative Documents, or (e) the priority, perfection or
status of any Participant's interest in any Property.
"MATERIAL COMMITMENT" means a legally binding commitment by one or more
banks or other financial institutions to extend credit to the Company and/or any
Subsidiary of the Company in an aggregate amount of $25,000,000 or more pursuant
to a written agreement signed by the Company or any such Subsidiary.
"MATURITY DATE" means the sixth anniversary of the earlier of (a) July
15, 1997 or (b) the Initial Acquisition Date, unless such Maturity Date is
extended pursuant to SECTION 9.2(a) of the Participation Agreement.
"MODIFICATIONS" is defined in SECTION 10.1 of the Master Lease.
"MOODY'S" means Moody's Investors Service, Inc.
"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
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contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"NET PROCEEDS" means all amounts received by the Lessor in connection
with any Casualty or Condemnation or any sale of the Property pursuant to the
Lessor's or Administrative Agent's exercise of remedies under SECTION 16.2 of
the Master Lease or a Lessee's exercise of the Remarketing Option under ARTICLE
XX of the Master Lease and all interest earned thereon, less the expense of
claiming and collecting such amounts, including all costs and expenses in
connection therewith for which the Administrative Agent, the Lessor or any
Lender is entitled to be reimbursed pursuant to the Operative Documents.
"NOTES" is defined in SECTION 2.3 of the Loan Agreement.
"OBLIGATIONS" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured, direct or indirect, choate or
inchoate, sole, joint, several or joint and several, due or to become due,
heretofore or hereafter contracted or acquired) of the Company (whether as the
Company, as the Guarantor or as Construction Agent) or any Lessee arising under
or in connection with the Operative Documents, including (i) all obligations for
Basic Rent, Lease Balance, Loan Balance or Property Balance, whether incurred on
the Documentation Date or thereafter, (ii) all obligations for Supplemental Rent
and all other obligations and liabilities of the Lessees or the Company, whether
incurred on the Documentation Date or thereafter, whether for fees, costs,
indemnification or otherwise, arising under any Operative Document, (iii) all
out-of-pocket costs and expenses, including reasonable attorneys' fees and legal
expenses, incurred by the Administrative Agent, the Lessor or any Lender to the
extent set forth in the Operative Documents in connection with such
Indebtedness, obligations and liabilities, and (iv) following the occurrence and
during the continuance of a Lease Event of Default or a Construction Agency
Agreement Event of Default, all advances made by the Administrative Agent, the
Lessor or any Lender for the maintenance, protection, preservation or
enforcement of, or realization upon, the collateral in which the Administrative
Agent, the Lessor and/or any Lender have been granted a security interest
pursuant to an Operative Document (or any portion thereof) including advances
for storage, transportation charges, taxes, insurance, repairs and the like.
"OBLIGORS" means, collectively, the Guarantor and each Lessee.
"OPERATIVE DOCUMENTS" means the following:
(a) the Participation Agreement;
(b) the Master Lease;
(c) each Lease Supplement;
(d) the Loan Agreement;
(e) the Notes;
(f) the Guaranty;
(g) each Deed;
(h) each Bill of Sale;
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(i) each Lessor Mortgage;
(j) the Lessor Financing Statements;
(k) the Construction Agency Agreement;
(l) each Construction Agency Agreement Supplement;
(m) the Construction Agency Agreement Assignment;
(n) the Construction Documents Assignment;
(o) the Assignment of Leases and Rents;
(p) each Supplement to the Assignment of Leases and Rents;
(q) each Adoption Agreement; and
(r) the Ground Lease.
"OUTSIDE COMPLETION DATE" means (a) with respect to the Headquarters
Building, the date occurring twenty-four (24) months after the Acquisition Date
of such Property and (b) with respect to any other Property, the date occurring
eighteen (18) months after the Acquisition Date of such Property.
"OVERDUE RATE" means, with respect to any Loan or Lessor Amount, the
lesser of (a) the highest interest rate permitted by Applicable Law or (b) the
Alternate Base Rate plus 2.0%.
"PARTICIPANTS" means, collectively, each Lender and the Lessor.
"PARTICIPANT BALANCE" means, with respect to any Participant as of any
date of determination: (a) with respect to any Lender, an amount equal to the
aggregate outstanding Loans of such Lender, together with all accrued and unpaid
interest thereon or (b) with respect to the Lessor, an amount equal to the
aggregate outstanding Equity Amounts, together with all amounts of accrued and
unpaid Equity Yield thereon.
"PARTICIPATION AGREEMENT" means the Participation Agreement dated as of
June 23, among the Company, the Lessees, the Lessor, the Lenders and the
Administrative Agent.
"PAYMENT DATE" means (a) any Scheduled Payment Date, and (b) any date
on which Equity Yield is payable pursuant to the last sentence of SECTION 4.1(a)
of the Participation Agreement in connection with any prepayment of Equity
Amounts.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED EXCEPTIONS" means Liens of the types described in CLAUSES
(i), (ii), (iii) and (v) of the definition of Permitted Property Liens.
"PERMITTED PROPERTY LIENS" means, with respect to any Property, any of
the following:
(i) the respective rights and interests of the parties under
the Operative Documents as provided in the Operative Documents;
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(ii) the rights of any sublessee under a sublease permitted by
the terms of the Master Lease;
(iii) Liens for Taxes that either are not yet due or payable
or are being contested in accordance with the provisions of SECTION
12.1 of the Master Lease.
(iv) Liens arising by operation of law, materialmen's,
mechanics', workers', repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of the
Improvements or in connection with any Modifications or arising in the
ordinary course of business for amounts that either are not more than
60 days past due or are being diligently contested in good faith by
appropriate proceedings, so long as such proceedings satisfy the
conditions for the continuation of proceedings to contest Taxes set
forth in SECTION 12.1 of the Master Lease;
(v) Liens of any of the types referred to in CLAUSE (iv) above
that have been bonded for not less than the full amount in dispute (or
as to which other security arrangements satisfactory to the Lessor have
been made), which bonding (or arrangements) shall comply with
applicable Requirements of Law, and has effectively stayed any
execution or enforcement of such Liens;
(vi) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for
the continuation of proceedings to contest set forth in SECTION 12.1 of
the Master Lease;
(vii) easements, rights of way and other encumbrances on title
to real property permitted under the Master Lease;
(viii) Lessor Liens;
(ix) Liens created by any Lessee with the consent of the
Lessor; and
(x) Liens described on the title insurance policy delivered
with respect to such Property pursuant to SECTION 6.3(l) of the
Participation Agreement other than Liens described in CLAUSE (iv) or
(vi) above that are not removed within sixty (60) days of their
origination.
"PERSON" means any corporation, limited liability company, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
enterprise, government or any department or agency of any government.
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"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 each Property, the
plans and specifications for the Construction thereof, as more particularly
described in SCHEDULE 2 to the Construction Agency Agreement Supplement
applicable to such Property.
"PRICING LEVEL" refers to the determination of which of the Level I
Pricing Period, Level II Pricing Period or Level III Pricing Period applies at
any date; any change to a Pricing Level based on the Debt Rating shall be
automatically effective as of the date such Debt Rating is publicly announced by
S&P or Moody's, as the case may be.
"PROPERTY" means (i) the Lessor's interest in any Land subject to the
Master Lease, whether in fee simple or as ground lessee, together with (ii) all
of the Improvements at any time located on or under such Land.
"PROPERTY BALANCE" means, with respect to any Property, an amount equal
to the outstanding principal amount of the Loans and Equity Amounts related to
such Property, and all accrued and unpaid interest and Equity Yield thereon, and
any Supplemental Rent related thereto.
"PROPERTY COST" means, with respect to any Property, the sum of the
Land Acquisition Cost, the Existing Improvement Cost, if any, and the Property
Improvement Costs for such Property.
"PROPERTY IMPROVEMENT COSTS" means, with respect to any Property, the
cost of constructing all Improvements on the Land in accordance with the Plans
and Specifications therefor.
"PROPERTY LEGAL REQUIREMENTS" means all Federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting any Property, the
Improvements or the demolition, Construction, use or alteration thereof, whether
now or hereafter enacted and in force, including any that require repairs,
modifications or alterations in or to any Property or in any way limit the use
and enjoyment thereof (including all building, zoning and fire codes and the
Americans with Disabilities Act of 1990, 42 U.S.C. ss. 1201 ET. SEQ. and any
other similar Federal, state or local laws or ordinances and the regulations
promulgated thereunder) and any that may relate to environmental requirements
(including all Environmental Laws), and all permits,
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certificates of occupancy, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments which are either of record or known to any Lessee affecting
any Property, the Appurtenant Rights and any easements, licenses or other
agreements entered into pursuant to SECTION 11.2 of the Master Lease.
"PURCHASE NOTICE" means an irrevocable written notice by a Lessee or
the Company delivered to the Lessor pursuant to SECTION 18.1 of the Master
Lease, notifying the Lessor of such Lessee's intention to exercise its option
pursuant to such Section, and identifying the proposed purchase date for the
Properties to be purchased pursuant thereto.
"PURCHASE OPTION" means the option of the Lessees to purchase any or
all of the Properties in accordance with the provisions of SECTION 18.1 of the
Master Lease.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901
ET SEQ.
"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, injection, spillage, leakage, seepage, leaching, dumping,
pumping, pouring, escaping, emptying, placement and the like.
"REMARKETING OPTION" is defined in SECTION 20.1 of the Master Lease.
"RENT" means, collectively, the Basic Rent and the Supplemental Rent,
in each case payable under the Master Lease.
"RENT PERIOD" means, with respect to Loans and Equity Amounts:
(a) prior to the Completion Date for the Property with respect
to which such Loan or Equity Amount was made:
(i) initially, the period commencing on (and
including) the Acquisition Date and ending on (but excluding)
(x) the next succeeding Scheduled Funding Date if the
Acquisition Date is three or more Business Days prior to the
next succeeding Scheduled Funding Date or (y) the second
succeeding Scheduled Funding Date if the Acquisition Date is
fewer than three Business Days prior to the next succeeding
Scheduled Funding Date, during which Rent Period interest on
the Loans and Equity Yield on the Equity Amounts shall accrue
by reference to the Alternate Base Rate;
(ii) thereafter, each period commencing on (and
including) the applicable Scheduled Funding Date described in
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CLAUSE (a)(i) above and ending on (but excluding) the next
succeeding Scheduled Funding Date, during which Rent Period
interest on the Loans and Equity Yield on the Equity Amounts
shall accrue by reference to the LIBO Rate (subject to
SECTIONS 11.7 and 11.8 of the Participation Agreement); and
(iii) PROVIDED, HOWEVER, that to the extent the
Completion Date for a Property occurs on a date other than a
Scheduled Payment Date, the Rent Period and applicable accrual
rate of interest on Loans and Equity Yield on the Equity
Amounts shall be determined by reference to CLAUSE (a)(ii)
above until the Scheduled Payment Date next succeeding the
Completion Date;
(b) on or after the Completion Date for the Property with
respect to which such Loan or Equity Amount was made:
(ii) initially, the period commencing on (and
including) the Scheduled Payment Date last described in CLAUSE
(a)(iii) above and ending on (but excluding) the next
succeeding Scheduled Payment Date during which Rent Period
interest on the Loans and Equity Yield on the Equity Amounts
shall accrue by reference to the LIBO Rate (subject to
SECTIONS 11.7 and 11.8 of the Participation Agreement); and
(iii) thereafter, the period commencing on (and
including) the Scheduled Payment Date last described in clause
(b)(i) above and ending on (but excluding), the next
succeeding Scheduled Payment Date during which Rent Period
interest on the Loans and Equity Yield on the Equity Amounts
shall accrue by reference to the LIBO Rate (subject to
SECTIONS 11.7 and 11.8 of the Participation Agreement);
PROVIDED, HOWEVER, that the foregoing provisions relating to Rent Periods are
subject to the following:
(x) if any Rent Period would otherwise end (or if payments are
otherwise due with respect to LIBO Rate Amounts) on a day that is not a
Business Day, such Rent Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such
Rent Period into another calendar month in which event such Rent Period
shall end on the immediately preceding Business Day; and
(y) any Rent Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date.
"REQUIRED LENDERS" means, at any time, Lenders holding at least 51% of
the then aggregate outstanding principal amount of Loans or, if no such
principal amount is then outstanding, Lenders having at least 51% of the
aggregate Loan Commitments.
"REQUIRED MODIFICATION" is defined in CLAUSE (i) of SECTION 10.1
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of the Master Lease.
"REQUIRED PARTICIPANTS" means, at any time, Required Lenders together
with the Lessor.
"REQUIREMENT OF LAW" means, as to any Person, (a) the partnership
agreement, charter, certificate of incorporation, bylaws or other organizational
or governing documents of such Person, (b) any law, treaty, ordinance, rule,
regulation, permit, approval, authorization, license or variance of any
Governmental Authority and (c) any order, decree or determination of a court,
arbitrator 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.
"RESPONSIBLE FINANCIAL OFFICER" means, with respect to the Company, its
Chairman of the Board, its President, its Chief Financial Officer, its
Treasurer, or a Vice President (whose duties are in the finance area) or
Assistant Treasurer of the Company.
"RESPONSIBLE OFFICER" means (a) with respect to the Company, any of its
chairman of the board, president, chief executive officer, senior vice
president, executive vice president, chief financial officer or treasurer whose
signature and incumbency shall have been certified to the Administrative Agent
and the Participants, (b) with respect to any Lessee, any of its officers that
are designated as such by a Responsible Officer of the Company in writing to the
Administrative Agent and whose signature and incumbency shall have been
certified to the Administrative Agent and the Participant and (c) with respect
to any other Person, its president, chief executive officer, chief financial
officer, treasurer or any Director, managing director or vice president.
"RESPONSIBLE OFFICER'S CERTIFICATE" means a certificate signed by any
Responsible Officer, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
"S&P" means Standard & Poor's Ratings Services.
"SCHEDULED FUNDING DATE" means the fifteenth (15th) day of each
calendar month, or the next succeeding Business Day if the fifteenth (15th) day
of any such month is not a Business Day.
"SCHEDULED PAYMENT DATE" means the fifteenth (15th) day of each April,
July, October and January of each calendar year;
(PROVIDED, that if any such day is not a Business Day, the "Scheduled Payment
Date" shall be the next succeeding Business Day (except as otherwise required by
CLAUSE (x) of the definition of "Rent Period" with respect to LIBO Rate
Amounts), and the Maturity Date.
"SEC" means the Securities and Exchange Commission or any successor
entity thereto.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"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.
"SENIOR FUNDED INDEBTEDNESS" means any Funded Indebtedness of the
Company that is not subordinated in right of payment to any other Indebtedness
of the Company.
"SHARED RIGHTS" is defined in SECTION 2(a) of the Assignment of Leases
and Rents.
"SHORTFALL AMOUNT" means, as of the Maturity Date, the excess, if any,
of (a) the Lease Balance OVER (b) the sum of the payment of the Loan Balance
received by the Administrative Agent pursuant to SECTION 20.1(k) of the Master
Lease PLUS the amount of the highest binding, written, unconditional,
irrevocable offer to purchase the Properties obtained by a Lessee in accordance
with SECTION 20.1(g) of the Master Lease; PROVIDED, HOWEVER, that if a sale of
the Properties to the Person submitting such offer is not consummated on or
prior to the Expiration Date, then the "Shortfall Amount" shall mean the excess,
if any, of (a) Lease Balance MINUS (b) the Loan Balance received by the
Administrative Agent from the Lessees pursuant to SECTION 20.1(k) of the Master
Lease.
"SIGNIFICANT CASUALTY" means damage or destruction to a Property as a
result of a fire or other casualty, which Property can not be fully restored
during the Lease Term utilizing insurance proceeds.
"SIGNIFICANT CONDEMNATION" means (a) a Condemnation that involves a
taking of Lessor's entire title to the Land, or (b) a Condemnation that in the
reasonable, good faith and judgment of the Lessor after consultation with the
applicable Lessee either (i) renders any Property unsuitable for continued use
as property of the type of such Property immediately prior to such Condemnation
or (ii) is such that restoration of any Property to substantially its condition
as existed immediately prior to such Condemnation would be impracticable or
impossible.
"SUBJECT PROPERTY" means, with respect to any Funding Date, any
Property proposed to be acquired on such date or any Property with respect to
which a Construction Advance is proposed to be made on such date.
"SUBMITTED FINANCIAL STATEMENTS" means the financial statements of the
Company and its Subsidiaries for the fiscal year ended June 30, 1996, copies of
which have been delivered to the Administrative Agent, the Lenders and the
Lessor prior to the Documentation Date.
"SUB-PARTICIPANT" is defined in SECTION 14.2 of the Participation
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Agreement.
"SUBSIDIARY" means, with respect to 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.
"SUPPLEMENTAL RENT" means all amounts, liabilities and obligations
(other than Basic Rent) which any Lessee assumes or agrees to pay to the Lessor
or any other Person under the Master Lease, or under any of the other Operative
Documents, including, without limitation, Commitment Fees, Break Costs, the Loan
Balance, the Shortfall Amount, amounts due pursuant to SECTION 11.2 of the
Participation Agreement and payments pursuant to SECTION 15.2 of the Master
Lease and ARTICLES XVIII and XX of the Master Lease.
"TAX INDEMNITEE" means the Administrative Agent, the Lessor and each
Lender.
"TAXES" is defined in the definition of Impositions.
"TERMINATION DATE" is defined in SECTION 16.2(e) of the Master Lease.
"TERMINATION NOTICE" is defined in SECTION 15.1 of the Master Lease.
"TOTAL CAPITAL" means the sum of Funded Debt, plus tangible
shareholders' equity (as determined in accordance with GAAP).
"TRANSACTION EXPENSES" means all costs and expenses incurred in
connection with the preparation, negotiation, execution and delivery of the
Operative Documents, the consummation of the transactions contemplated by the
Operative Documents, and the preparation, negotiation, execution and delivery of
any amendments, waivers, consents, supplements or other modifications to any
Operative Document as may from time to time be required, including without
limitation:
(a) the reasonable fees, expenses and disbursements of Mayer,
Brown & Platt, special counsel for the Administrative Agent, the
Lenders and the Lessor, in negotiating the terms of the Operative
Documents and the other transaction documents, preparing for the
closing under, and rendering opinions in connection with, such
transactions and in rendering other services customary for counsel
representing parties to transactions of the types involved in the
transactions contemplated by the Operative Documents;
(b) the reasonable fees, expenses and disbursements of one
special counsel of each of the Administrative Agent, the Lessor and
each Lender in connection with (1) the transactions contemplated to
occur on each Acquisition Date and each other Funding Date, (2) any
amendment, supplement, waiver or consent
-35-
<PAGE> 172
Appendix A
with respect to any Operative Documents requested or approved by the
Company or any Lessee and (3) any enforcement of any rights or remedies
against the Company or any Lessee in respect of the Operative
Documents;
(c) any other reasonable fees, expenses, disbursements or cost
of any party to the Operative Documents or any of the other transaction
documents;
(d) any and all Taxes and fees incurred in recording,
registering or filing any Operative Document or any other transaction
document, any deed, declaration, mortgage, security agreement, notice
or financing statement with any public office, registry or governmental
agency in connection with the transactions contemplated by the
Operative Documents, and any and all fees incurred in connection with
lien searches contemplated by the Operative Documents;
(e) all fees, expenses and disbursements of each local counsel
retained in connection with the transactions contemplated by the
Operative Documents;
(f) all title fees, premiums and escrow costs and other
expenses relating to title insurance and the closings contemplated by
the Operative Documents;
(g) all costs and expenses for surveys and Environmental
Audits with respect to any Property; and
(g) all fees and other expenses relating to Appraisals.
"UNIFORM COMMERCIAL CODE" and "UCC" means the Uniform Commercial Code
as in effect in any applicable jurisdiction.
-36-
<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,
1997 1996 1995
--------------- --------------- ----------------
<S> <C>
PRIMARY:
Net earnings $ 181,119 $ 117,634 $ 142,515
=============== =============== ================
Average shares outstanding 107,152 100,744 97,297
Dilutive effect of stock options 1,966 2,178 3,269
--------------- --------------- ----------------
Weighted average number of Common
Shares outstanding 109,118 102,922 100,566
=============== =============== ================
Primary earnings per Common Share $ 1.66 $ 1.14 $ 1.42
=============== =============== ================
FULLY DILUTED:
Net earnings $ 181,119 $ 117,634 $ 142,515
9.53% convertible debenture interest, net of
income tax effect -- 270 394
--------------- --------------- ----------------
Fully diluted net earnings available $ 181,119 $ 117,904 $ 142,909
=============== =============== ================
Average shares outstanding 107,152 100,744 97,297
Dilutive effect of stock options 2,020 2,371 3,388
Assumed converison of 9.53% convertible
debentures -- 717 1,071
--------------- --------------- ----------------
Weighted average number of Common
Shares outstanding 109,172 103,832 101,756
=============== =============== ================
Fully diluted earnings per Common Share $ 1.66 $ 1.14 $ 1.40
=============== =============== ================
</TABLE>
42
<PAGE> 1
EXHIBIT 21.01
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE REGISTRANT STATE OF INCORPORATION
- ------------------------------ ----------------------
<S> <C>
Behrens Inc. Texas
C. International, Inc. Ohio
Cardal, Inc. Ohio
Cardinal Florida, Inc. Florida
Cardinal Health Systems, Inc. Ohio
Cardinal Mississippi, Inc. Mississippi
Cardinal Syracuse, Inc. New York
CORD Logistics, Inc. Ohio
Chapman Drug Company Tennessee
Renlar Systems, Inc. Kentucky
James W. Daly, Inc. Massachusetts
Ellicott Drug Company New York
The Griffin Group, Inc. Nevada
Allied Healthcare Services, Inc. Nevada
Allied Pharmacy Service, Inc. Texas
American Medical Insurance Billing Georgia
Services, Inc.
Brighton Capital, Inc. Nevada
Cardinal West, Inc. Nevada
CDI Investments, Inc. Delaware
Griffin Capital Corporation Nevada
Pinnacle Intellectual Property Nevada
Services, Inc.
ScriptLINE, Inc. Nevada
Humiston-Keeling, Inc. Illinois
Leader Drugstores, Inc. Delaware
Marmac Distributors, Inc. Connecticut
Medical Strategies, Inc. Massachusetts
Medicine Shoppe International, Inc. Delaware
Pharmacy Operations, Inc. Delaware
Medicine Shoppe Internet, Inc. Missouri
Managed Pharmacy Benefits, Inc. Missouri
Pharmacy Service Corporation Missouri
National Pharmpak Services, Inc. Ohio
National Specialty Services, Inc. Tennessee
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
The Heron Corporation Ohio
Nexus Healthcare, Inc. Ohio
Ohio Valley-Clarksburg, Inc. Delaware
Owen Healthcare, Inc. Texas
MediTROL, Inc. Nevada
MediTROL Automation Systems, Inc. Texas
Owen International Venture, Ltd. Bermuda foreign sales corp.
Owen Healthcare Building, Inc. Texas
Owen Shared Services, Inc. Texas
PCI Services, Inc. Delaware
Packaging Coordinators, Inc. Pennsylvania
Packaging Coordinators Incorporated, Caribe Delaware
PCI/DELVCO, Inc. Delaware
The Tri-Line Co., Inc. Delaware
PCI/Allpack Holdings, Inc. Delaware
Allpack Industrielle Lohnverpackung Germany
GmbH Holdings, Inc.
PCI/Tri-Line (USA), Inc. Delaware
PCI Services Holdings, Inc. Delaware
PCI Acquisition I, Inc. Delaware
PCI Acquisition II, Inc. Delaware
PCI Holdings (UK) Co. England and Wales
Unipack Limited (UK) Co. England and Wales
Phillipi Holdings, Inc. Ohio
Pyxis Corporation Delaware
Pyxis Healthcare Systems, Inc. Canada
RedKey, Inc. Ohio
Solomons Company Georgia
Whitmire Distribution Corporation Delaware
Williams Drug Distributors, Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 23.01
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-57223 and No. 333-24483 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, No. 333-01927-01, No.
333-11803-01, No. 333-21631-01 and No. 333-21631-02 of Cardinal Health, Inc. on
Form S-8 of our report dated August 12, 1997, except for Note 16 as to which the
date is August 23, 1997, appearing in this Annual Report on Form 10-K of
Cardinal Health, Inc., for the year ended June 30, 1997.
DELOITTE & TOUCHE LLP
Columbus, Ohio
September 26, 1997
<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 and No. 333-24483 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, No.
333-01927-01, No. 333-11803-01, No. 333-21631-01, and No. 333-21631-02 of
Cardinal Health, Inc. on Form S-8 of our report dated August 2, 1996 with
respect to the financial statements of Pyxis Corporation (not presented),
appearing in the Annual Report on Form 10-K of Cardinal Health, Inc., for the
year ended June 30, 1997.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
San Diego, California
September 25, 1997
<PAGE> 1
Exhibit 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Numbers 33-20895, 33-38021, 33-38022, 33-42357,
33-52535, 33-52537, 33-52539, 33-63283-01, 33-64337, 333-01977-01,
333-11803-01, 333-21631-01 and 333-21631-02) and in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Numbers 33-57223
and 333-24483) of Cardinal Health, Inc. of our report dated January 30, 1997
related to the financial statements of Owen Healthcare, Inc. which appears on
page 16 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Houston, Texas
September 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 243,061
<SECURITIES> 0
<RECEIVABLES> 707,116
<ALLOWANCES> (34,952)
<INVENTORY> 1,453,120
<CURRENT-ASSETS> 2,503,733
<PP&E> 476,544
<DEPRECIATION> (199,869)
<TOTAL-ASSETS> 3,108,546
<CURRENT-LIABILITIES> 1,408,759
<BONDS> 277,766
0
0
<COMMON> 645,051
<OTHER-SE> 687,149
<TOTAL-LIABILITY-AND-EQUITY> 3,108,546
<SALES> 10,968,042
<TOTAL-REVENUES> 10,968,042
<CGS> 10,063,084
<TOTAL-COSTS> 10,063,084
<OTHER-EXPENSES> 513,617
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (27,974)
<INCOME-PRETAX> 312,280
<INCOME-TAX> 131,161
<INCOME-CONTINUING> 181,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181,119
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.66
</TABLE>
<PAGE> 1
Exhibit 99.01
CARDINAL HEALTH, INC.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for "forward-looking statements" (as defined in the Act). The Form
10-K to which this exhibit is attached, the Company's Annual Report to
Shareholders, any Form 10-Q or any Form 8-K of the Company, or any other written
or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current view (as of the
date such forward-looking statement is made) with respect to future events,
prospects, projections or financial performance. These forward-looking
statements are subject to certain uncertainties and other factors that could
cause actual results to differ materially from those made, implied or projected
in such statements. These uncertainties and other factors include, but are not
limited to, uncertainties relating to general economic conditions; the loss of
one or more key customer or supplier relationships, including pharmaceutical
manufacturers for which alternative supplies may not be available; the
malfunction or failure of the Company's information systems; the costs and
difficulties related to the integration of recently acquired businesses; changes
to the presentation of financial results and position resulting from adoption of
new accounting principles or upon the advice of the Company's independent
auditors, or the staff of the Securities and Exchange Commission; changes in the
distribution or outsourcing pattern for pharmaceutical products, including any
increase in direct distribution or decrease in contract packaging by
pharmaceutical manufacturers; changes in, or failure to comply with, government
regulations; the costs and other effects of legal and administrative
proceedings; injury to person or property resulting from the Company's
repackaging or pharmacy management services; competitive factors in the
Company's healthcare service businesses, including pricing pressures; the
continued financial viability and success of the Company's customers, suppliers,
and franchisees; technological developments and products offered by competitors;
failure to retain or continue to attract senior management or key personnel;
risks associated with international operations, including fluctuations in
currency exchange ratios; successful challenges to the validity of the Company's
patents, copyrights and/or trademarks; difficulties or delays in the
development, production and marketing of new products and services; strikes or
other labor disruptions; labor and employee benefit costs; pharmaceutical
manufacturers' pricing policies and overall drug price inflation; changes in
hospital buying groups or hospital buying practices; and other factors
referenced in the Form 10-K to which this exhibit is attached or other filings
or written or oral statements made by or on behalf of the Company. The words
"believe", "expect", "anticipate", "project", and similar expressions identify
"forward-looking statements", which speak only as of the date the statement was
made. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
