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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, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-12591
CARDINAL HEALTH, INC.
(Exact name of Registrant as specified in its charter)
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OHIO 31-0958666
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5555 GLENDON COURT, DUBLIN, OHIO 43016
(Address of principal executive offices) (Zip Code)
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(614) 717-5000
Registrant's telephone number, including area code
Securities Registered Pursuant to Section 12(b) of the Act:
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COMMON SHARES (WITHOUT PAR VALUE) NEW YORK STOCK EXCHANGE
(Title of Class) (Name of each exchange on which registered)
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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.
[ X ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of August 21, 1998 was approximately $12,545,020,015.
The number of Registrant's Common Shares outstanding as of August 21, 1998,
was as follows:
Common shares, without par value: 133,591,258
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Definitive Proxy Statement to be filed for its
1998 Annual Meeting of Shareholders are incorporated by reference into Part III
of this Annual Report on Form 10-K.
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TABLE OF CONTENTS
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ITEM PAGE
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Information Regarding Forward-looking Statements............................................ 3
PART I
1. Business.................................................................................... 3
2. Properties.................................................................................. 6
3. Legal Proceedings........................................................................... 7
4. Submission of Matters to a Vote of Security Holders......................................... 7
Executive Officers of the Company........................................................... 7
PART II
5. Market for the Registrant's Common Shares and Related Shareholder Matters................... 9
6. Selected Financial Data..................................................................... 10
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................................. 11
7a. Quantitative and Qualitative Disclosures About Market Risk.................................. 17
8. Financial Statements and Supplementary Data................................................. 17
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................................ 41
PART III
10. Directors and Executive Officers of the Registrant.......................................... 41
11. Executive Compensation...................................................................... 41
12. Security Ownership of Certain Beneficial Owners and Management.............................. 41
13. Certain Relationships and Related Transactions.............................................. 41
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 42
Signatures.................................................................................. 47
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Portions of this Annual Report on Form 10-K (including information
incorporated by reference) include "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The words
"believe", "expect", "anticipate", "project", and similar expressions, among
others, identify "forward looking statements", which speak only as of the date
the statement was made. Such forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to materially
differ from those made, projected or implied. The most significant of such
risks, uncertainties and other factors are described in this report and in
Exhibit 99.01 to this Form 10-K. 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.
PART I
ITEM 1: BUSINESS
GENERAL
Cardinal Health, Inc., an Ohio corporation formed in 1979, is structured as
a holding company conducting business 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. Except as otherwise specified, information in
this report is provided as of June 30, 1998. Subsequent to the end of the 1998
fiscal year, the Company completed a merger transaction with R.P. Scherer
Corporation ("Scherer") and terminated its merger agreement with Bergen Brunswig
Corporation ("Bergen"). See "Acquisitions" below for further discussion relating
to such subsequent matters.
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. The Company also provides innovative
cost-effective pharmaceutical services that improve the medication use process
to a broad base of customers nationwide. 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. The Company serves as a developer and provider of
clinical information management systems through its subsidiary, MediQual
Systems, Inc. ("MediQual"), which functions as part of the Cardinal Information
Corporation subsidiary ("CIC"). The Company's newest operating subsidiary,
Scherer, which was acquired on August 7, 1998, is an international developer and
manufacturer of drug delivery systems, including soft gelatin capsules, and is
further discussed under "Acquisitions" below.
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, 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. The Company also provides reimbursement consulting services to
pharmaceutical, biotechnology and medical products companies. These specialty
distribution activities are part of the Company's strategy to develop
diversified products and services to enhance the profitability of its business
and that of its customers and suppliers.
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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 completed a
merger transaction 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. On July 1,
1994, the Company purchased Humiston-Keeling, Inc., a Calumet City,
Illinois-based pharmaceutical wholesaler serving customers located primarily in
the upper Midwest region of the United States 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
completed a merger transaction 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 completed a merger transaction
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 completed a merger
transaction 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 completed a merger transaction with Owen,
a Houston, Texas-based provider of pharmacy management and information services
to hospitals. On February 18, 1998, the Company completed a merger transaction
with MediQual Systems, Inc., a supplier of clinical information management
systems and services to the healthcare industry. On May 15, 1998, the Company
purchased Comprehensive Reimbursement Consultants, Inc., a provider of
reimbursement consulting services to pharmaceutical, biotechnology and medical
products companies.
On August 7, 1998, the Company completed a merger transaction with Scherer
(the "Scherer Merger"), an international developer and manufacturer of drug
delivery systems, including soft gelatin capsules, with headquarters located in
Troy, Michigan. Scherer is currently developing and commercializing a variety of
advanced drug delivery systems. Scherer's drug delivery systems improve the
efficacy of drugs by regulating the dosage so as to ease administration,
increase absorption, enhance bioavailability and control the time and place of
release. Scherer's products and manufacturing processes and services are subject
to applicable laws and regulations of governmental agencies or departments in
each of the countries in which it operates, including the U.S. Federal Food,
Drug and Cosmetic Act. Scherer has a number of active patents on its specialized
machinery, processes, products and drug delivery systems. Scherer operates a
global network of 19 facilities in 12 countries, of which 15 are owned and 4 are
leased. Scherer's revenue consists of approximately 34% domestic and 66% foreign
sales. Scherer employs approximately 3,600 individuals worldwide.
On August 24, 1997, the Company and Bergen announced that they had entered
into a definitive merger agreement (as subsequently amended by the parties on
March 16, 1998), pursuant to which a wholly owned subsidiary of the Company
would be merged with and into Bergen (the "Bergen Merger Agreement"), which was
subsequently approved by both companies' shareholders on February 20, 1998. On
March 9, 1998, the U.S. Federal Trade Commission ("FTC") filed a complaint in
the United States District Court for the District of Columbia seeking a
preliminary injunction to halt the proposed merger and on July 31, 1998, the
District Court granted the FTC's request for the injunction. On August 7, 1998,
the Company and Bergen jointly terminated the Bergen Merger Agreement.
The Company continually evaluates possible candidates for merger or
acquisition and intends to continue to seek opportunities to expand its
healthcare operations and services. For additional information concerning the
transactions described above, see Notes 2, 16 and 17 of "Notes to Consolidated
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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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 United
States. In addition, the Company markets Pyxis' automated dispensing systems to
hospitals and alternate care centers in the United States, Canada and Australia.
Through Medicine Shoppe, the Company franchises retail pharmacies in the United
States 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 1998, approximately 91% of the Company's operating
revenues were derived from distribution activities. The Company's largest
customer, Kmart Corporation ("Kmart"), accounted for approximately 12% of
operating revenues (by dollar volume) in fiscal 1998. The Company's business
could be adversely affected if Kmart was lost as a customer.
The Company obtains its products from many different suppliers, the largest
of which accounted for approximately 5% (by dollar volume) of its operating
revenue in fiscal 1998. The Company's five largest suppliers accounted for
approximately 22% (by dollar volume) of its operating revenue during fiscal 1998
and the Company's relationships with its suppliers are generally very good. The
Company's arrangements with its pharmaceutical suppliers typically may be
canceled by either the Company or the supplier upon 30 to 90 days prior notice,
although many of these arrangements are not governed by formal agreements. The
loss of certain suppliers could adversely affect the Company's business if
alternative sources of supply were unavailable.
While the Company's operations may show quarterly fluctuations, the Company
does not consider its business to be seasonal in nature on a consolidated basis.
COMPETITION
The Company's markets are highly competitive. As a pharmaceutical
wholesaler, the Company competes directly with numerous other national and
regional wholesalers, direct selling manufacturers, self-warehousing chains,
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 price, 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. Actual and 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 price, 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; Medicine Shoppe also needs to be competitive with
the option a pharmacist always has to remain self-employed at his or her current
position rather than becoming a franchisee. 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 August 1, 1998, the Company had approximately 11,200 employees, of which
approximately 900 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.
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The Company holds patents relating to certain aspects of its automated
pharmaceutical dispensing systems, 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.
For information with respect to Scherer, see "Acquisitions", above.
No assurances can be given that any intellectual property rights of the
Company (including Scherer) 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 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. See
"Acquisitions" above for information relating to certain regulatory matters of
Scherer.
ITEM 2: PROPERTIES
At August 1, 1998, the Company had 25 principal pharmaceutical distribution
facilities; 3 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 20 states, Puerto Rico, the United
Kingdom and Germany. Twelve of these facilities are owned by the Company and the
balance are leased. See "Acquisitions" above for information relating to certain
properties of Scherer. 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, scheduled to be completed by the end of the first calendar quarter of
1999. 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."
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ITEM 3: LEGAL PROCEEDINGS
In November 1993, the Company and Whitmire, one of the Company's wholly
owned subsidiaries, as well as other pharmaceutical wholesalers, were named as
defendants in a series of purported class action 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.
Subsequent to the consolidation, a new consolidated complaint was filed which
included allegations that the wholesalers defendants, including the Company and
Whitmire, conspired with manufacturers to inflate prices 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. The wholesaler defendants, including the
Company and Whitmire, entered into a Judgment Sharing Agreement whereby the
total exposure for the Company and its subsidiaries is limited to $1,000,000 or
1% of any judgment against the wholesalers and the manufacturers, whichever is
less, and provides for the reimbursement mechanism of legal fees and expenses.
The Judgment Sharing Agreement covers the federal court litigation as well as
the cases which have been filed in various state courts. On April 10, 1995, the
Court ruled that the Judgment Sharing Agreement was valid. On April 4, 1996,
summary judgment was granted in favor of the wholesaler defendants. The
plaintiffs appealed this decision and 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. The wholesaler
defendants subsequently filed a petition seeking review of the Court of Appeals
decision by the United States Supreme Court, which petition was denied. Trial
has been set for the prescription drug litigation to begin on September 14,
1998. In recent months, the wholesaler defendants also have been added as
defendants in a series of related antitrust lawsuits brought by independent
pharmacies who have opted out of the class action cases and by certain chain
drug and grocery stores. Although the ultimate resolution of the litigation
referenced herein cannot be forecast with certainty, the Company and Whitmire
believe that the allegations are without merit, and they intend to contest such
allegations vigorously.
On January 17, 1995, Burlington Drug Company ("Burlington Drug") filed
a Complaint in the United States District Court for the District of Vermont
alleging that certain supply agreements between VHA, Inc. ("VHA") and the
Company violated federal antitrust statutes and that the Company had tortiously
interfered with Burlington Drug's contractual relations. The Company filed an
answer denying the allegations contained in the Complaint. The District Court
granted Burlington Drug leave to file an Amended and Supplemental Complaint on
July 10, 1997. On July 23, 1997, the Company and VHA each filed Motions to
Dismiss Burlington Drug's Amended and Supplemental Complaint. In October 1997,
the District Court denied these Motions. On March 28, 1998, the Company and VHA
each filed Motions for Summary Judgment, and the parties are awaiting the
District Court's decision on these Motions. Burlington Drug is seeking damages
in an unspecified amount, as well as injunctive relief. Trial has been set to
begin on November 2, 1998. The Company continues to believe that the allegations
made against it in this litigation are without merit, and it intends to contest
such allegations vigorously.
The Company also becomes involved from time-to-time in other litigation
incidental to its business. Although the ultimate resolution of the litigation
referenced in this Item 3 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 consolidated financial position or results of
operations.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fiscal quarter ended June 30, 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows (information provided as of
August 21, 1998):
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Robert D. Walter 53 Chairman and Chief Executive Officer
John C. Kane 58 President and Chief Operating Officer
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David A. Abrahamson 58 Executive Vice President; President - Medicine Shoppe
International, Inc.
David Bearman 52 Executive Vice President and Chief Financial Officer (see
below)
George H. Bennett, Jr. 45 Executive Vice President, General Counsel and Secretary
George L. Fotiades 44 Executive Vice President; Group President - R.P. Scherer
Corporation
James F. Millar 50 Executive Vice President; Group President - Cardinal
Distribution
Carl A. Spalding 53 Executive Vice President; Group President - Healthcare Product
Services
Robert J. Zollars 41 Executive Vice President; Group President - Pharmacy
Automation and Management
Richard J. Miller 41 Vice President, Controller and Principal Accounting Officer
(see below)
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Unless indicated to the contrary, the business experience summaries
provided below for the Company's executive officers describe positions held by
the named individuals during the last five years but may exclude other positions
held with subsidiaries of the Company.
ROBERT D. WALTER has been a Director, Chairman of the Board and Chief
Executive Officer of the Company since its formation in 1979 and has served as a
director and officer of certain of the Company's subsidiaries since their
formation or acquisition by the Company. Mr. Walter also serves as a director of
Banc One Corporation, CBS, Inc. 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. Mr. Kane also serves as a director of Connetics
Corporation and LXR Biotechnology Inc.
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. Mr. Abrahamson also serves as a director of Angelica Corporation.
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 also served as the Company's Chief Financial Officer since joining
the Company in October 1989. Mr. Bearman recently announced that he has accepted
a position with another company, and will resign from the Company, effective
early September. Richard J. Miller, the Company's Vice President, Controller and
Principal Accounting Officer, has been named as acting Chief Financial Officer
until a permanent replacement for Mr. Bearman is named.
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.
GEORGE L. FOTIADES has been an Executive Vice President of the Company
since August 1998 and President of R.P. Scherer Corporation since January 1998.
Previously, Mr. Fotiades served as President and Chief Operating Officer of
Scherer since January 1998, and Group President, Americas and Asia Pacific of
Scherer from June 1996 to January 1998. Prior to that, Mr. Fotiades was employed
by Warner-Lambert Company (a pharmaceutical and consumer health products
manufacturer), where he served most recently as President, Warner Wellcome
Consumer Healthcare division.
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JAMES F. MILLAR has been an Executive Vice President of the Company since
February 1994, and was named as Group 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.
CARL A. SPALDING joined the Company in June 1998, as an Executive Vice
President and Group President-Healthcare Product Services. Prior to that, Mr.
Spalding served as a corporate officer of Abbott Laboratories (a pharmaceutical
and health care manufacturer), where he served most recently as Vice President
of Pediatric Products of the Ross Laboratories Division.
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 Group Vice President of Allegiance Corporation since
October 1996 and was a corporate officer of Baxter Healthcare, Inc., most
recently as President, U.S. Distribution. Mr. Zollars also serves as a director
of Epitope, Inc.
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). In connection with Mr. Bearman's
resignation (see discussion above), Mr. Miller has been named as acting Chief
Financial Officer of the Company until a permanent replacement for Mr. Bearman
has been named.
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, 1998 and 1997. The information in the table has been
adjusted to reflect retroactively all applicable stock splits through June 30,
1998.
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Fiscal 1997:
Quarter Ended
September 30, 1996 $ 55.08 $ 44.67 $ 0.0200
December 31, 1996 58.38 51.92 0.0250
March 31, 1997 64.13 54.38 0.0250
June 30, 1997 62.00 51.63 0.0250
Fiscal 1998:
Quarter Ended
September 30, 1997 $ 71.06 $ 54.63 $ 0.0250
December 31, 1997 77.81 68.63 0.0250
March 31, 1998 88.19 70.00 0.0300
June 30, 1998 96.25 85.63 0.0300
Fiscal 1999:
Through August 21, 1998 $ 101.88 $ 92.63 $ 0.0375
</TABLE>
As of August 21, 1998, there were approximately 2,560 shareholders of
record of the Company's Common Shares.
On August 12, 1998, the Company's Board of Directors authorized a
three-for-two stock split of the Company's common shares payable on October 30,
1998, to shareholders of record at the close of business on October 9, 1998.
The Company anticipates that it will continue to pay quarterly cash
dividends in the future. However, the payment
9
<PAGE> 10
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.
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 on
February 7, 1994, Medicine Shoppe on November 13, 1995, Pyxis on May 7, 1996,
PCI on October 11, 1996, and 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--Acquisition" for additional information regarding such
combinations. The information does not reflect the Company's August 7, 1998,
acquisition of Scherer, which will be accounted for as a pooling-of-interests.
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 PCI for the fiscal years ended
September 30, 1996, 1995 and 1994, respectively, and Owen for the fiscal years
ended 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 PCI's financial results for the nine months ended June 30, 1997 and
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 impact of the merger transaction
with MediQual Systems, Inc. (the "MediQual Merger"), on a historical basis, was
not significant. Accordingly, prior period financial statements have not been
restated for the MediQual Merger, although they will be restated in the first
quarter of fiscal 1999 as a result of the acquisition of Scherer.
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, (1)
----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------- ---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Earnings Statement Data:
Revenue (2):
Operating revenue $ 12,926,778 $ 10,968,042 $ 9,407,591 $ 8,472,302 $ 6,374,734
Bulk deliveries to customer
warehouses 2,991,360 2,469,138 2,178,532 1,779,512 561,827
------------- ------------- ------------- ----------- ------------
Total revenue $ 15,918,138 $ 13,437,180 $ 11,586,123 $ 10,251,814 $ 6,936,561
Net earnings $ 247,081 $ 184,599 $ 127,240 $ 146,587 $ 88,884
Basic earnings per Common
Share (3) (4) (5) $ 2.25 $ 1.72 $ 1.22 $ 1.46 $ 0.97
Diluted earnings per Common
Share (3) (4) (5) $ 2.22 $ 1.69 $ 1.19 $ 1.40 $ 0.89
Balance Sheet Data:
Total assets $ 3,961,077 $ 3,091,750 $ 2,959,401 $ 2,363,752 $ 1,789,455
Long-term obligations 272,575 277,766 320,327 267,677 247,715
Shareholders' equity 1,625,198 1,334,730 1,095,225 866,474 617,464
Cash dividends declared per
Common Share (4) (5) $ 0.11 $ 0.095 $ 0.08 $ 0.08 $ 0.07
</TABLE>
10
<PAGE> 11
(1) Amounts reflect business combinations in all periods presented. Fiscal
1998, 1997, 1996 and 1994 amounts reflect the impact of mergers-related
costs. See Note 2 of "Notes to Consolidated Financial Statements" for a
further discussion of mergers-related costs affecting fiscal 1998, 1997 and
1996.
(2) The Company, beginning in fiscal 1998, is reporting bulk deliveries to
customer warehouses as part of total revenue. Previously, only the gross
margin from such sales had been classified in revenue. Such sales have been
reclassified into revenue and cost of product sold for all periods
presented. See Note 1 of "Notes to Consolidated Financial Statements" for a
further discussion.
(3) Effective for the fiscal year ended June 30, 1998, the Company adopted SFAS
No. 128, "Earnings per Share." In accordance with SFAS No. 128, the basic
and diluted EPS have been restated for all periods presented.
(4) Net earnings and cash dividends per Common Share have been adjusted to
retroactively reflect all stock dividends and stock splits through June 30,
1998.
(5) On August 12, 1998, the Company declared a three-for-two stock split which
will be effected as a stock dividend and distributed on October 30, 1998,
to shareholders of record at the close of business on October 9, 1998.
Giving retroactive effect to the stock split, the earnings per Common Share
and cash dividends declared will be restated as follows upon distribution
on October 30, 1998:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Basic earnings per Common Share $ 1.50 $ 1.15 $ 0.82 $ 0.97 $ 0.65
Diluted earnings per Common Share $ 1.48 $ 1.13 $ 0.80 $ 0.94 $ 0.59
Cash dividends declared per
Common Share $ 0.07 $ 0.06 $ 0.05 $ 0.05 $ 0.05
</TABLE>
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, PCI on October 11, 1996 and Owen on
March 18, 1997. On February 18, 1998, the Company completed a merger with
MediQual, which was accounted for as a pooling-of-interests. The impact of the
MediQual Merger, on a historical basis, is not significant. Accordingly, prior
period financial statements have not been restated for the MediQual Merger (see
Note 2 of "Notes to Consolidated Financial Statements,") although they will be
restated in the first quarter of fiscal 1999 as a result of the Company's August
7, 1998, acquisition of Scherer.
The discussion and analysis presented below should be read in conjunction
with the consolidated financial statements and related notes appearing elsewhere
in this Form 10-K.
RESULTS OF OPERATIONS
- ---------------------
OPERATING REVENUE. Operating revenue for fiscal 1998 increased 18% as
compared to the prior year. Distribution businesses' (those whose primary
operations involve the wholesale distribution of pharmaceuticals, representing
91% of total operating revenue) operating revenue (including approximately $196
million sold to Owen, eliminated in consolidation) grew at a rate of 19% during
the fiscal year ended June 30, 1998, while Service businesses' (those that
provide services to the healthcare industry, primarily through pharmacy
franchising, pharmacy automation equipment, pharmacy management and
pharmaceutical packaging) operating revenue grew at a rate of 22% during the
fiscal year ended June 30, 1998, primarily on the strength of the Company's
pharmacy automation and pharmacy management businesses. The majority of the
operating revenue increase (approximately 80% for the year ended June 30, 1998)
came from existing customers in the form of increased volume and pharmaceutical
price increases. The remainder of the growth came from the addition of new
customers.
11
<PAGE> 12
Operating revenue for fiscal 1997 increased 17%, as compared to the prior
year. Distribution businesses' operating revenue (including approximately $22
million sold to Owen, eliminated in consolidation) grew at a rate of 17% during
the fiscal year ended June 30, 1997, while Service businesses grew at a rate of
13%, primarily on the strength of the Company's pharmacy management business.
The increase resulted 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.
BULK DELIVERIES TO CUSTOMER WAREHOUSES. Along with other companies in its
industry, the Company has begun reporting as revenue bulk deliveries made to
customers' warehouses, whereby the Company acts as an intermediary in the
ordering and subsequent delivery of pharmaceutical products. All years presented
have been restated to include these bulk deliveries as revenue (previously, only
the service fees related to such bulk deliveries were reported as revenue,
although service fees were not significant in any period presented).
Fluctuations in bulk deliveries result largely from circumstances that are
beyond the control of the Company, including consolidation within the chain
drugstore industry, decisions by chains to either begin or discontinue
warehousing activities, and changes in policy by manufacturers related to
selling directly to chain drugstore customers. Due to the insignificant margins
generated through bulk deliveries, fluctuations in their amount have no
significant impact on operating earnings.
GROSS MARGIN. For fiscal 1998 and 1997, gross margin as a percentage of
operating revenue was 8.06% and 8.20%, respectively. The fiscal 1998 decrease in
the gross margin as a percentage of operating revenue is due to declines in the
Distribution businesses' gross margin, and to a lesser extent, declines in the
Service businesses' gross margin. The Distribution businesses' gross margin as a
percentage of operating revenue decreased from 5.82% in fiscal 1997 to 5.57% in
fiscal 1998. The decrease is primarily due to the impact of lower selling
margins, as a result of a highly competitive market and a greater mix of high
volume customers, where a lower cost of distribution and better asset management
enable the Company to offer lower selling margins to its customers. The Service
businesses' gross margin as a percentage of operating revenue was 31.47% and
32.52% in fiscal 1998 and 1997, respectively. The slight decline in gross margin
rates experienced by the Service businesses is primarily a function of the mix
of the various businesses. Revenue growth has been greater in the relatively
lower margin pharmacy management and pharmaceutical packaging businesses than it
has been in the higher margin pharmacy franchising business.
For fiscal 1997 and 1996, gross margin as a percentage of operating revenue
was 8.20% and 8.61%, respectively. The change in gross margin for the year was
primarily due to the shift in 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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of operating revenue improved to 4.39%
in fiscal 1998 compared to 4.70% in fiscal 1997. The improvements reflect
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. The 10% growth
in selling, general and administrative expenses experienced during fiscal 1998
was due primarily to increases in personnel costs and depreciation expense, and
compares favorably to the 18% growth in operating revenue for the same period.
Selling, general and administrative expenses as a percentage of operating
revenue improved to 4.70% in fiscal 1997 compared to 5.47% 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. Additionally, certain expenses such as employee severance,
asset impairments and lease exit costs, recorded in fiscal 1996 did not recur in
fiscal 1997.
SPECIAL CHARGES. During fiscal 1998, the Company recorded mergers-related
charges associated with transaction costs incurred in connection with the
MediQual Merger ($2.3 million) and transaction costs incurred in connection with
the proposed merger transaction with Bergen ($33.4 million) which was terminated
subsequent to year-end (see Note 17 of "Notes to the Consolidated Financial
Statements"). Additional costs related to asset impairments ($3.8 million) and
integrating the operations of companies that previously merged with the Company
($9.6 million) were incurred and recorded during fiscal 1998. During fiscal
1997, the Company recorded mergers-related charges
12
<PAGE> 13
associated with the PCI and Owen mergers ($46.2 million) and additional
integration costs related to the Pyxis and Medicine Shoppe mergers ($4.7
million). During fiscal 1996, the Company recorded charges ($49.2 million) to
reflect the estimated Medicine Shoppe and Pyxis mergers-related costs. See
further discussion in Note 2 of "Notes to Consolidated Financial Statements."
The Company classifies costs associated with a merger transaction as
"mergers-related costs." It should be noted that the amounts presented may not
be comparable to similarly titled amounts reported by other companies.
During fiscal 1998, the Company recorded a special charge of $8.6 million
related to the rationalization of its distribution operations. Approximately
$6.1 million related to asset impairments and lease exit costs resulting
primarily from the Company's decision to accelerate the consolidation of a
number of distribution facilities and the relocation to more modern facilities
for certain others. The remaining amount related to employee severance costs,
including approximately $2.0 million incurred in connection with the settlement
of a labor dispute with former employees of the Company's Boston distribution
facility, resulting in termination of the union relationship.
The following is a summary of the special charges incurred by the Company in the
last three fiscal years:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
------------------------------------------------
1998 1997 1996
----------- ------------ -------------
(In thousands, except per share amounts)
MERGERS-RELATED COSTS:
- ----------------------
<S> <C> <C> <C>
Transaction and employee-related costs:
Transaction costs $ (35,696) $ (14,500) $ (21,315)
PCI vested retirement benefits and incentive fees - (7,600) -
Pyxis stay bonuses - - (7,600)
Employee severance/termination - (4,400) (2,540)
Other - (600) (300)
----------- ------------ -------------
Total transaction and employee-related costs (35,696) (27,100) (31,755)
----------- ------------ -------------
Other mergers-related costs:
Asset impairments (3,800) (13,200) (400)
Exit and restructuring costs - (2,250) (15,600)
Duplicate facilities elimination - (1,700) -
Integration and efficiency implementation (9,648) (6,679) (1,445)
----------- ------------ -------------
Total other mergers-related costs (13,448) (23,829) (17,445)
----------- ------------ -------------
Total mergers-related costs $ (49,144) $ (50,929) $ (49,200)
----------- ------------ -------------
OTHER SPECIAL CHARGES:
- ----------------------
Facilities closures $ (6,112) $ - $ -
Employee severance (2,522) - -
----------- ------------ -------------
Total other special charges (8,634) - -
----------- ------------ -------------
TOTAL SPECIAL CHARGES (57,778) (50,929) (49,200)
Tax effect of special charges 21,931 14,372 12,280
----------- ------------ -------------
Effect on net earnings $ (35,847) $ (36,557) $ (36,920)
=========== ============ =============
Effect on diluted earnings per share $ (0.32) $ (0.34) $ (0.34)
=========== ============ =============
</TABLE>
13
<PAGE> 14
The effects of the mergers-related costs and other special charges are
included in the reported net earnings of $247.1 million in fiscal 1998, $184.6
million in fiscal 1997 and $127.2 million in fiscal 1996 and in the reported
diluted earnings per common share of $2.22 in fiscal 1998, $1.69 in fiscal 1997
and $1.19 in fiscal 1996.
The Company estimates that it will incur additional mergers-related costs
associated with the various mergers it has completed to date totaling
approximately $3.7 million in future periods (excluding the Scherer Merger-see
Note 16 of "Notes to the Consolidated Financial Statements") in order to
properly integrate operations and implement efficiencies with regard to, among
other things, information systems, customer systems, marketing programs and
administrative functions. Such amounts will be charged to expense when incurred.
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, Inc. ("MediTROL", a subsidiary acquired by the Company in the Owen
merger transaction) 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 $15.6 million related
to cancellation of a long-term contract with a financing company related to the
servicing and financing of the accounts receivable from Pyxis customers at the
time of the Pyxis Merger (see Note 3 of "Notes to Consolidated Financial
Statements").
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 operating revenue than
pharmaceutical distribution. As the healthcare industry continues to change, the
Company is constantly evaluating merger or 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 pursued. If additional transactions are
entered into or consummated, additional mergers-related costs would be incurred
by the Company.
INTEREST EXPENSE. The decrease in interest expense of $5 million in fiscal
1998 compared to fiscal 1997 is primarily due to extinguishment of the Company's
$100 million 8% Notes on March 1, 1997. The increase in other income for fiscal
1998 compared to fiscal 1997 of $3.6 million is primarily due to higher
investment income. This is in part due to better asset management. During fiscal
1998, $61.9 million of cash was generated (including $143.1 million from
operations) compared to use of $69.0 million of cash during fiscal 1997.
Interest expense for fiscal 1997 decreased by $2.6 million compared to the
prior year. This decrease is attributable to the extinguishment of the Company's
$100 million 8% Notes on March 1, 1997 and lower interest rates during fiscal
1997 compared to fiscal 1996. In addition, various outstanding debt instruments
utilized by PCI prior to the merger were extinguished after the merger was
consummated. Partially offsetting this decrease in fiscal 1997 is the impact of
the issuance of $150 million 6% Notes due 2006, in a public offering in January
1996.
As discussed below under "Liquidity and Capital Resources," the Company
issued $150 million of 6.25% Notes in July 1998 and assumed additional debt as
part of its acquisition of Scherer on August 7, 1998.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
relative to pretax earnings was 39%, 41% and 44% for fiscal years 1998, 1997 and
1996, respectively. The fluctuation in the tax rate is primarily due to the
impact of recording certain non-deductible mergers-related costs during various
periods. In addition, the reduction in the state effective tax rate as a result
of the change in the Company's business mix impacted the tax rate for fiscal
year 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital increased to $1,384.5 million at June 30, 1998 from
$1,097.7 million at June 30, 1997. This increase included $61.9 million of cash
generated in fiscal 1998, as well as additional investments in merchandise
inventories and trade receivables of $459.3 million and $154.0 million,
respectively. Offsetting the increases in working capital was an increase in
accounts payable of $486.4 million. Increases in merchandise inventories reflect
the higher level of business volume in pharmaceutical distribution activities,
especially in the fourth quarter of fiscal 1998 when distribution revenue grew
31% over the same period in the prior year. The increase in trade receivables is
14
<PAGE> 15
consistent with the Company's revenue growth (see "Operating Revenue" above).
The change in accounts payable is due to the timing of inventory purchases and
related payments.
On July 13, 1998, the Company issued $150 million of 6.25% Notes due 2008,
the proceeds of which will be used for working capital needs due to growth in
the Company's business. As part of its acquisition of Scherer on August 7, 1998,
the Company has assumed approximately $212 million in long-term debt. The
Company currently has the capacity to issue $250 million of additional long-term
debt pursuant to a shelf debt registration statement filed with the Securities
and Exchange Commission (see Note 5 of "Notes to Consolidated Financial
Statements"). The Company extinguished $100 million of long-term debt during
fiscal 1997.
Property and equipment, at cost, increased by $71 million in fiscal 1998.
The increase in property and equipment included additional investments in
management information systems and customer support systems. 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 $1,625.2 million at June 30, 1998 from
$1,334.7 million at June 30, 1997, primarily due to net earnings of $247.1
million and the investment of $50.0 million by employees of the Company through
various stock incentive plans.
The Company has line-of-credit agreements with various bank sources
aggregating $503 million, of which $95 million is represented by committed
line-of-credit agreements and the balance is uncommitted. The Company had $23.9
million outstanding under these lines at June 30, 1998.
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, including those
related to business combinations. See "Other" below.
OTHER
- -----
SUBSEQUENT BUSINESS COMBINATIONS. On May 17, 1998, the Company announced
that it had entered into a definitive merger agreement with Scherer. The Scherer
merger transaction was completed on August 7, 1998, and will be accounted for as
a pooling-of-interests for financial reporting purposes. In the merger, the
Company issued approximately 22.8 million Common Shares to Scherer stockholders
and Scherer's outstanding stock options were converted into options to purchase
approximately 2.4 million Common Shares. The Company has assumed approximately
$212 million in long-term debt as part of its acquisition of Scherer. The
Company expects to record a merger-related charge to reflect transaction and
other costs incurred as a result of the Scherer merger in the first quarter of
fiscal 1999. Additional merger-related costs associated with integrating the
separate companies and instituting efficiencies will be charged to expense in
subsequent periods when incurred. The total amount of the merger-related charges
to be recognized in connection with the Scherer merger is estimated to be
between $35 and $40 million, after tax (see Note 16 of "Notes to Consolidated
Financial Statements").
TERMINATED MERGER. On August 24, 1997, the Company and Bergen announced
that they had entered into a definitive merger agreement (as subsequently
amended by the parties on March 16, 1998), pursuant to which a wholly owned
subsidiary of the Company would be merged with and into Bergen (the "Bergen
Merger Agreement"), which was subsequently approved by both companies'
shareholders on February 20, 1998. On March 9, 1998, the FTC filed a complaint
in the United States District Court for the District of Columbia seeking a
preliminary injunction to halt the proposed merger. On July 31, 1998, the
District Court granted the FTC's request for an injunction to halt the proposed
merger. On August 7, 1998, the Company and Bergen jointly terminated the Bergen
Merger Agreement. In accordance with the terms of the Bergen Merger Agreement,
its termination gave rise to an obligation for the Company to reimburse Bergen
for $7 million of transaction costs. Additionally, the termination of the Bergen
Merger Agreement will cause the costs incurred by the Company (that would not
have been deductible had the proposed merger been consummated) to become tax
deductible, resulting in a tax benefit of $12.2 million. The obligation to
reimburse Bergen and the additional tax benefit have been reflected in the
consolidated financial statements in the fourth quarter of the fiscal year ended
June 30, 1998 (see Notes 2 and 17 of "Notes to the Consolidated Financial
Statements").
YEAR 2000 PROJECT. The Company utilizes computer technologies throughout
its business to effectively carry out its day-to-day operations. Computer
technologies include both information technology in the form of hardware and
software, as well as embedded technology in the Company's facilities and
equipment. Similar to most companies, the Company must determine whether its
systems are capable of recognizing and processing date sensitive information
15
<PAGE> 16
properly as the year 2000 approaches. The Company is utilizing a multi-phased
concurrent approach to address this issue. The phases included in the Company's
approach are the awareness, assessment, remediation, validation and
implementation phases. The Company has completed the awareness phase of its
project. Furthermore, the Company has nearly completed the assessment phase and
is well into the remediation phase. The Company is actively correcting and
replacing those systems which are not year 2000 ready in order to ensure the
Company's ability to continue to meet its internal needs and those of its
suppliers and customers. The Company currently intends to substantially complete
the remediation, validation and implementation phases of the year 2000 project
prior to June 30, 1999. This process includes the testing of critical systems to
ensure that year 2000 readiness has been accomplished. The Company currently
believes it will be able to modify, replace, or mitigate its affected systems in
time to avoid any material detrimental impact on its operations. If the Company
determines that it may be unable to remediate and properly test affected systems
on a timely basis, the Company intends to develop appropriate contingency plans
for any such mission-critical systems at the time such determination is made.
While the Company is not presently aware of any significant exposure that its
systems will not be properly remediated on a timely basis, there can be no
assurances that all year 2000 remediation processes will be completed and
properly tested before the year 2000, or that contingency plans will
sufficiently mitigate the risk of a year 2000 readiness problem. An interruption
of the Company's ability to conduct its business due to a year 2000 readiness
problem could have a material adverse effect on the Company.
The Company estimates that the aggregate costs of its year 2000 project
will be approximately $20 million, including costs already incurred. A
significant portion of these costs are not likely to be incremental costs, but
rather will represent the redeployment of existing resources. This reallocation
of resources is not expected to have a significant impact on the day-to-day
operations of the Company. Total costs of approximately $5 million were incurred
by the Company for this project during fiscal 1998, of which approximately $1.4
million represented incremental expense. The anticipated impact and costs of the
project, as well as the date on which the Company expects to complete the
project, are based on management's best estimates using information currently
available and numerous assumptions about future events. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those plans. Based on its current estimates and information
currently available, the Company does not anticipate that the costs associated
with this project will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows in future
periods.
The Company has initiated formal communications with its significant
suppliers, customers, and critical business partners to determine the extent to
which the Company may be vulnerable in the event that those parties fail to
properly remediate their own year 2000 issues. The Company has taken steps to
monitor the progress made by those parties, and intends to test critical system
interfaces, as the year 2000 approaches. The Company will develop appropriate
contingency plans in the event that a significant exposure is identified
relative to the dependencies on third-party systems. While the Company is not
presently aware of any such significant exposure, there can be no guarantee that
the systems of third-parties on which the Company relies will be converted in a
timely manner, or that a failure to properly convert by another company would
not have a material adverse effect on the Company. The Company is currently
evaluating the year 2000 readiness of Scherer, the Company's newest subsidiary
acquired as of August 7, 1998. As such, the above discussion does not reflect
the impact of Scherer.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS. In June 1997, the Financial
Accounting Standards Board ("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, the 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.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," which will require adoption no later than the Company's fiscal
quarter ending September 30, 1999. This new statement requires companies to
recognize all derivatives as either assets or liabilities in the balance sheet
and measure such instruments at fair value.
16
<PAGE> 17
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," which will
require adoption no later than the beginning of the Company's fiscal year ending
June 30, 1999. This new statement provides guidance on accounting for costs of
computer software developed or obtained for internal use.
Adoption of these statements is not expected to have a material impact on
the Company's consolidated financial statements.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Reports
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1998, 1997 and 1996
Consolidated Balance Sheets at June 30, 1998 and 1997
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Fiscal Years Ended June
30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
17
<PAGE> 18
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, 1998 and 1997, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 1998. 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 year ended June
30, 1996. The combined financial statement amounts of Owen and Pyxis represent
combined revenue and net income of approximately 5% and 34%, respectively, of
the consolidated amounts for the year 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 reports of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports 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, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1998
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.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 12, 1998
18
<PAGE> 19
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Cardinal Health, Inc.
We have audited the consolidated statements of income, shareholder's equity, and
cash flows of Pyxis Corporation for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
Pyxis Corporation for the year ended June 30,1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
August 2, 1996
19
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of
Owen Healthcare, Inc.
In our opinion, the 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 results of
their operations and their cash flows for the year ended November 30, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Owen Healthcare, Inc. management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
January 30, 1997
20
<PAGE> 21
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
----------------------------------------------------
1998 1997 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue:
Operating revenue $ 12,926,778 $ 10,968,042 $ 9,407,591
Bulk deliveries to customer warehouses 2,991,360 2,469,138 2,178,532
---------------- ----------------- -----------------
Total revenue 15,918,138 13,437,180 11,586,123
Cost of products sold:
Operating cost of products sold 11,885,228 10,068,436 8,598,333
Cost of products sold - bulk deliveries 2,991,360 2,469,086 2,178,077
---------------- ----------------- -----------------
Total cost of products sold 14,876,588 12,537,522 10,776,410
Gross margin 1,041,550 899,658 809,713
Selling, general and administrative expenses 567,756 515,551 514,879
Special charges:
Mergers-related costs:
Transaction and employee-related costs (35,696) (27,100) (31,755)
Other (13,448) (23,829) (17,445)
-------------- ----------------- -----------------
Total mergers-related costs (49,144) (50,929) (49,200)
Facilities closures and employee severance (8,634) - -
-------------- ----------------- ---------------
Operating earnings 416,016 333,178 245,634
Other income (expense):
Interest expense (23,022) (27,974) (30,611)
Other, net - primarily interest income 9,519 5,876 12,479
---------------- ----------------- -----------------
Earnings before income taxes 402,513 311,080 227,502
Provision for income taxes 155,432 126,481 100,262
---------------- ----------------- -----------------
Net earnings $ 247,081 $ 184,599 $ 127,240
================ ================= =================
Earnings per Common Share:
Basic $ 2.25 $ 1.72 $ 1.22
Diluted $ 2.22 $ 1.69 $ 1.19
Weighted average number of Common Shares outstanding:
Basic 109,757 107,152 103,872
Diluted 111,447 109,118 106,808
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 22
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 304,951 $ 243,061
Trade receivables, net 826,199 672,164
Current portion of net investment in sales-type leases 75,450 40,997
Merchandise inventories 1,895,525 1,436,220
Prepaid expenses and other 126,526 94,668
---------------- ----------------
Total current assets 3,228,651 2,487,110
---------------- ----------------
Property and equipment, at cost:
Land, buildings and improvements 115,248 110,552
Machinery and equipment 349,848 305,822
Furniture and fixtures 83,339 61,046
---------------- ----------------
Total 548,435 477,420
Accumulated depreciation and amortization (217,032) (199,949)
---------------- ----------------
Property and equipment, net 331,403 277,471
Other assets:
Net investment in sales-type leases, less current portion 195,013 118,563
Goodwill and other intangibles 125,095 122,104
Other 80,915 86,502
---------------- ----------------
Total $ 3,961,077 $ 3,091,750
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 23,850 $ 22,159
Current portion of long-term obligations 6,803 6,158
Accounts payable 1,622,392 1,135,951
Other accrued liabilities 191,074 225,165
---------------- ----------------
Total current liabilities 1,844,119 1,389,433
---------------- ----------------
Long-term obligations, less current portion 272,575 277,766
Deferred income taxes and other liabilities 219,185 89,821
Shareholders' equity:
Common Shares, without par value 713,006 645,051
Retained earnings 928,196 701,896
Common Shares in treasury, at cost (9,469) (6,373)
Other (6,535) (5,844)
---------------- ----------------
Total shareholders' equity 1,625,198 1,334,730
---------------- ----------------
Total $ 3,961,077 $ 3,091,750
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE> 23
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON SHARES
--------------------------
SHARES
ISSUED AMOUNT
----------- -------------
<S> <C> <C>
BALANCE, JUNE 30, 1995 70,839 $ 504,943
Net earnings
Employee stock plans activity, including tax benefits of $11,168 1,015 29,754
Treasury shares acquired and shares retired (240) (5,662)
Change in unrealized loss on marketable securities available-for-sale, net of tax
Dividends paid
Foreign currency translation and other adjustments
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 74,754 589,476
Net earnings
Employee stock plans activity, including tax benefits of $18,459 1,655 62,483
Treasury shares acquired and shares retired (748) (7,051)
Dividends paid
Foreign currency translation and other adjustments
3-for-2 stock split effected as a stock dividend and cash paid in lieu of fractional shares 33,411
Adjustment for change in fiscal year of an acquired subsidiary (see Note 1) 143
----------- -------------
BALANCE, JUNE 30, 1997 109,072 645,051
Net earnings
Employee stock plans activity, including tax benefits of $18,638 1,286 53,438
Dividends paid
Foreign currency translation and other adjustments
Acquisition of subsidiary (see Note 2) 565 14,517
=========== =============
BALANCE, JUNE 30, 1998 110,923 $ 713,006
=========== =============
</TABLE>
<TABLE>
<CAPTION>
RETAINED TREASURY SHARES
------------------------
EARNINGS SHARES AMOUNT
---------------- ---------- ------------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1995 $ 401,042 (1,356) $ (15,966)
Net earnings 127,240
Employee stock plans activity, including tax benefits of $11,168 134 922
Treasury shares acquired and shares retired 170 3,522
Change in unrealized loss on marketable securities available-for-sale, net of tax
Dividends paid (7,616)
Foreign currency translation and other adjustments
Adjustment for ESOP
Shares issued in connection with stock offering
Conversion of subordinated debt, net
---------------- ---------- ------------
BALANCE, JUNE 30, 1996 520,666 (1,052) (11,522)
Net earnings 184,599
Employee stock plans activity, including tax benefits of $18,459
Treasury shares acquired and shares retired 728 5,076
Dividends paid (9,045)
Foreign currency translation and other adjustments
3-for-2 stock split effected as a stock dividend and cash paid in lieu of fractional shares (30)
Adjustment for change in fiscal year of an acquired subsidiary (see Note 1) 5,706 84 73
---------------- ---------- ------------
BALANCE, JUNE 30, 1997 701,896 (240) (6,373)
Net earnings 247,081
Employee stock plans activity, including tax benefits of $18,638 (39) (3,077)
Dividends paid (11,507)
Foreign currency translation and other adjustments
Acquisition of subsidiary (see Note 2) (9,274) (19)
================ ========== ============
BALANCE, JUNE 30, 1998 $ 928,196 (279) $ (9,469)
================ ========== ============
</TABLE>
<TABLE>
<CAPTION>
ADJUSTMENT
FOR ESOP OTHER
-------------- ------------
<S> <C> <C>
BALANCE, JUNE 30, 1995 $ (21,296) $ (2,249)
Net earnings
Employee stock plans activity, including tax benefits of $11,168 (1,173)
Treasury shares acquired and shares retired 307
Change in unrealized loss on marketable securities available-for-sale, net of tax 446
Dividends paid
Foreign currency translation and other adjustments (726)
Adjustment for ESOP 21,296
Shares issued in connection with stock offering
Conversion of subordinated debt, net
---------------- ------------
BALANCE, JUNE 30, 1996 - (3,395)
Net earnings
Employee stock plans activity, including tax benefits of $18,459 (1,098)
Treasury shares acquired and shares retired
Dividends paid
Foreign currency translation and other adjustments (1,351)
3-for-2 stock split effected as a stock dividend and cash paid in lieu of fractional shares
Adjustment for change in fiscal year of an acquired subsidiary (see Note 1)
---------------- ------------
BALANCE, JUNE 30, 1997 - (5,844)
Net earnings
Employee stock plans activity, including tax benefits of $18,638 (407)
Dividends paid
Foreign currency translation and other adjustments (778)
Acquisition of subsidiary (see Note 2) 494
================ ============
BALANCE, JUNE 30, 1998 $ - $ (6,535)
================ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
----------------
<S> <C>
BALANCE, JUNE 30, 1995 $ 866,474
Net earnings 127,240
Employee stock plans activity, including tax benefits of $11,168 29,503
Treasury shares acquired and shares retired (1,833)
Change in unrealized loss on marketable securities available-for-sale, net of tax 446
Dividends paid (7,616)
Foreign currency translation and other adjustments (726)
Adjustment for ESOP 21,296
Shares issued in connection with stock offering 50,654
Conversion of subordinated debt, net 9,787
----------------
BALANCE, JUNE 30, 1996 1,095,225
Net earnings 184,599
Employee stock plans activity, including tax benefits of $18,459 61,385
Treasury shares acquired and shares retired (1,975)
Dividends paid (9,045)
Foreign currency translation and other adjustments (1,351)
3-for-2 stock split effected as a stock dividend and cash paid in lieu of fractional shares (30)
Adjustment for change in fiscal year of an acquired subsidiary (see Note 1) 5,922
----------------
BALANCE, JUNE 30, 1997 1,334,730
Net earnings 247,081
Employee stock plans activity, including tax benefits of $18,638 49,954
Dividends paid (11,507)
Foreign currency translation and other adjustments (778)
Acquisition of subsidiary (see Note 2) 5,718
================
BALANCE, JUNE 30, 1998 $ 1,625,198
================
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE> 24
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
---------------------------------------------
1998 1997 1996
-------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 247,081 $ 184,599 $ 127,240
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 64,275 51,368 48,566
Provision for deferred income taxes 95,483 11,217 23,602
Provision for bad debts 14,499 8,073 12,496
Change in operating assets and liabilities, net of effects from acquisitions:
Increase in trade receivables (167,447) (46,971) (64,880)
Increase in merchandise inventories (459,305) (164,108) (156,224)
Increase in net investment in sales-type leases (110,903) (11,803) (34,125)
Increase (decrease) in accounts payable 486,184 (10,778) 161,611
Increase in accrued other 66,958 20,039 34,077
Other operating items, net (93,750) (9,358) (23,736)
-------------- -------------- -------------
Net cash provided by operating activities 143,075 32,278 128,627
-------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired (4,000) - (53,722)
Proceeds from sale of property and equipment 2,547 2,986 1,833
Additions to property and equipment (110,709) (76,089) (107,843)
Purchase of marketable securities available-for-sale - (3,400) (163,719)
Proceeds from sale of marketable securities available-for-sale - 57,735 218,019
-------------- -------------- -------------
Net cash used in investing activities (112,162) (18,768) (105,432)
-------------- -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowing activity 1,691 3,347 (4,139)
Reduction of long-term obligations (7,881) (134,479) (40,888)
Proceeds from long-term obligations, net of issuance costs 852 - 187,873
Proceeds from issuance of Common Shares 32,261 41,244 69,991
Tax benefit of stock options 18,638 18,459 11,168
Dividends on Common Shares and cash paid
in lieu of fractional shares (11,507) (9,075) (7,616)
Purchase of treasury shares (3,077) (1,975) (1,833)
-------------- -------------- -------------
Net cash provided by (used in) financing activities 30,977 (82,479) 214,556
-------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 61,890 (68,969) 237,751
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 243,061 312,030 74,279
-------------- -------------- -------------
CASH AND EQUIVALENTS AT END OF YEAR $ 304,951 $ 243,061 $ 312,030
============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE> 25
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); Owen Healthcare, Inc. ("Owen") (a provider of pharmacy
management and information services to hospitals); and MediQual Systems, Inc.
("MediQual") (a developer and provider of clinical information systems). 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, PCI on October 11, 1996 and Owen on
March 18, 1997 (see Note 2). Such business combinations were accounted for under
the pooling-of-interests method.
The Company's fiscal year end is June 30 and Owen's fiscal year end was
November 30. For the fiscal year ended June 30, 1996, the consolidated financial
statements combine the Company's fiscal year ended June 30, 1996 with the
financial results for Owen's fiscal year ended November 30, 1995. For the fiscal
year ended June 30, 1997, the consolidated financial statements combine the
Company'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 the
Company'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.
On February 18, 1998, the Company completed a merger with MediQual (the
"MediQual Merger"). The MediQual Merger was accounted for as a
pooling-of-interests. Because the impact of the MediQual Merger was not
significant on a historical basis, prior period financial statements have not
been restated. MediQual's financial information for all periods beginning with
March 1, 1998, has been included in the Company's consolidated financial results
for fiscal 1998.
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.
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.
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 $34.2 million and $35.0 million at June 30,
1998 and 1997, respectively.
25
<PAGE> 26
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
$66.6 million and $52.5 million at June 30, 1998 and 1997, respectively (the
current portion was $29.4 million and $12.1 million, respectively), and are
included in other assets. These amounts are reported net of an allowance for
doubtful accounts of $6.4 million and $8.2 million at June 30, 1998 and 1997,
respectively.
MERCHANDISE INVENTORIES
Substantially all merchandise inventories (81% in 1998 and 87% in 1997) 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, 1998, by $54.6 million and at
June 30, 1997, by $69.6 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 1998 and 1997, the Company had partial inventory liquidations
in certain LIFO pools which reduced the LIFO provision by approximately $2.3
million and $2.0 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. At
each balance sheet date, the Company assesses the recoverability of its
long-lived property, based on a review of projected undiscounted cash flows
associated with these assets.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles primarily represent intangible assets
related to the excess of cost over net assets of subsidiaries acquired.
Intangible assets are being amortized using the straight-line method over lives
which range from ten to forty years. Accumulated amortization was $23.7 million
and $20.3 million at June 30, 1998 and 1997, 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 for each subsidiary.
REVENUE RECOGNITION
The Company records distribution revenue when merchandise is shipped to its
customers and the Company has no further obligation to provide services related
to such merchandise. Along with other companies in its industry, the Company has
begun reporting as revenue bulk deliveries made to customers' warehouses,
whereby the Company acts as an intermediary in the ordering and subsequent
delivery of pharmaceutical products. All years presented have been reclassified
to include these bulk deliveries as revenue (previously only the service fees
related to such bulk deliveries were reported as revenues; such service fees
were not significant in any period presented). Fluctuations in bulk deliveries
result largely from circumstances that are beyond the control of the Company,
including consolidation within the chain drugstore industry, decisions by chains
to either begin or discontinue warehousing activities, and changes in policy by
manufacturers related to selling directly to chain drugstore customers. Due to
the insignificant margins generated through bulk deliveries, fluctuations in
their amount have no significant impact on operating earnings.
26
<PAGE> 27
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue is recognized from sales-type leases of point-of-use pharmacy
systems when the systems are delivered, 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. Revenue for systems installed under
operating lease arrangements is recognized over the lease term as such amounts
become receivable according to the provisions of the lease.
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 revenue when they are earned.
Origination fees from signing new franchise agreements are recognized as revenue
when the new franchise store is opened. Master franchise origination fees are
recognized as revenue when all significant conditions relating to the master
franchise agreement have been satisfied by the Company.
Pharmacy management revenues are recognized as the related services are
rendered according to the contracts established. A fee is charged under such
contracts through either 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 are
adjusted to reflect the estimated effects of such contractual guarantees and
risk-sharing provisions.
Packaging revenues are recognized from services provided upon the
completion of such services.
System license revenues are recognized upon shipment of the system to the
customer. The portion of the license fee related to system maintenance is
deferred and recognized over the annual maintenance period.
EARNINGS PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS No. 128"), "Earnings per Share," in the quarter ended December 31, 1997.
In accordance with the provisions of the Standard, all prior periods presented
have been restated to comply with SFAS No. 128. Basic earnings per Common Share
("Basic") is computed by dividing net earnings (the numerator) by the weighted
average number of Common Shares outstanding during each period (the
denominator). Diluted earnings per Common Share is similar to the computation
for Basic, except that the denominator is increased by the dilutive effect of
stock options outstanding, computed using the treasury stock method, and in
fiscal 1996 by the dilutive effect of convertible debentures ($270,000 impact on
diluted net earnings and an increase of 717,000 diluted shares).
Excluding dividends paid by all entities with which the Company has merged,
the Company paid cash dividends per Common Share of $0.105, $0.09, $0.08 for the
fiscal years ended June 30, 1998, 1997 and 1996, respectively.
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.
On August 12, 1998, the Company declared a three-for-two stock split which
will be effected as a stock dividend and distributed on October 30, 1998 to
shareholders of record at the end of business on October 9, 1998. Giving effect
retroactive to the stock split, the diluted earnings per Common Share for the
fiscal years ended June 30, 1998, 1997 and 1996 will be $1.48, $1.13 and $0.80
per Common Share, respectively.
27
<PAGE> 28
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS COMBINATIONS, MERGERS-RELATED COSTS AND OTHER SPECIAL CHARGES
In the merger transaction with MediQual, which was completed on February
18, 1998, the Company issued approximately 576,000 Common Shares to MediQual
shareholders and MediQual's outstanding stock options were converted into
options to purchase approximately 24,000 Common Shares of the Company. The
historical cost of MediQual's assets combined was approximately $7.3 million and
the total liabilities assumed were approximately $1.6 million. The impact of the
MediQual Merger, on a historical basis, is not significant. Accordingly, prior
period historical financial statements have not been restated for the MediQual
Merger. MediQual's financial results have been included in the consolidated
financial results of the Company since March 1, 1998.
On May 15, 1998, the Company completed a business combination with
Comprehensive Reimbursement Consultants, Inc. ("CRC"), which was accounted for
as a purchase. The aggregate purchase price, which was paid primarily in cash,
was approximately $6 million, which included the issuance of Common Shares
valued at approximately $1.3 million. The financial results of CRC are included
in the consolidated financial results of the Company since the date of the
acquisition. Had the purchase occurred at the beginning of fiscal 1997,
operating results on a pro forma basis would not have been significantly
different.
During fiscal 1998, the Company recorded mergers-related charges associated
with transaction costs incurred in connection with the MediQual Merger ($2.3
million) and transaction costs incurred in connection with the proposed merger
transaction with Bergen Brunswig Corporation ("Bergen") ($33.4 million) which
was terminated subsequent to year-end (see Note 17). In accordance with the
terms of the Bergen Merger Agreement, its termination gave rise to an obligation
for the Company to reimburse Bergen for $7 million of transaction costs.
Additional mergers-related costs, related to asset impairments ($3.8 million)
and integrating the operations of companies that previously merged with the
Company ($9.6 million), were incurred and recorded during fiscal 1998.
During fiscal 1998, the Company recorded a special charge of $8.6 million
($5.2 million, net of tax) related to the rationalization of its distribution
operations. Approximately $6.1 million related to asset impairments and lease
exit costs resulting primarily from the Company's decision to accelerate the
consolidation of a number of distribution facilities and the relocation to more
modern facilities for certain others. The remaining amount related to employee
severance costs, including approximately $2.0 million incurred in connection
with the final settlement of a labor dispute with former employees of the
Company's Boston distribution facility, resulting in termination of the union
relationship.
On March 18, 1997, the Company completed a merger transaction with Owen
(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. During fiscal
1997, the Company recorded costs of approximately $31.1 million ($22.4 million,
net of tax) related to the Owen Merger. These costs include $13.1 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 discussed
below), and $4.8 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 a merger transaction with PCI
(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. During fiscal
1997, the Company recorded costs totaling approximately $15.1 million ($11.4
million, net of tax) related to the PCI Merger. These costs include $13.8
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 $1.3 million related to other integration activities, including exit
costs.
28
<PAGE> 29
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to the mergers-related costs recorded in fiscal 1997 for the
Owen and PCI Mergers (as discussed above), the Company recorded $4.7 million
($2.8 million, net of tax) related to integrating the operations of companies
that previously merged with the Company.
On May 7, 1996, the Company completed a merger transaction 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 Common Shares.
During fiscal 1996, the Company recorded costs totaling approximately $42.0
million ($30.6 million, net of tax) related to the Pyxis Merger. These costs
include $25.4 million for transaction and employee-related costs associated with
the merger (including $7.6 million for vested stay bonuses covering
substantially all Pyxis employees), $15.6 million related to certain exit and
lease-termination costs (pertaining to cancellation of a long-term contract with
a financing company in connection with the servicing of the accounts receivable
from Pyxis customers at the time of the Pyxis Merger, see Note 3), and $1.0
million related to asset impairments and other integration activities.
On November 13, 1995, the Company completed a merger transaction 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. During fiscal 1996,
the Company recorded costs totaling approximately $7.2 million ($6.4 million,
net of tax) related to the Medicine Shoppe Merger. These costs include $6.3
million for transaction and employee-related costs associated with the Medicine
Shoppe Merger and $0.9 million related to other integration activities.
The effect of the various mergers-related costs and other special charges
recorded in fiscal 1998 was to reduce reported net earnings by $35.8 million to
$247.1 million and to reduce reported diluted earnings per Common Share by $0.32
per share to $2.22 per share. The effect of the various mergers-related costs
recorded in fiscal 1997 was to reduce reported net earnings by $36.6 million to
$184.6 million and to reduce reported diluted earnings per Common Share by $0.34
per share to $1.69 per share. The effect of the various mergers-related costs
recorded in fiscal 1996 was to reduce reported net earnings by $36.9 million to
$127.2 million and to reduce reported diluted earnings per Common Share by $0.34
per share to $1.19 per share.
Certain mergers-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 as incurred.
During fiscal 1996, the Company completed three 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 $58.8 million.
Liabilities of the operations assumed were approximately $41.7 million,
consisting primarily of debt of $29.7 million. Had the purchases occurred at the
beginning of fiscal 1996, operating results for fiscal 1996 on a pro forma basis
would not have been significantly different.
29
<PAGE> 30
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,
1998 1997
--------------- --------------
<S> <C> <C>
Future minimum lease payments receivable $ 320,064 $ 190,918
Unguaranteed residual values 1,267 1,333
Unearned income (46,296) (27,817)
Allowance for uncollectible minimum lease payments
receivable (4,572) (4,874)
--------------- --------------
Net investment in sales-type leases 270,463 159,560
Less: current portion 75,450 40,997
--------------- --------------
Net investment in sales-type leases, less current portion $ 195,013 $ 118,563
=============== ==============
</TABLE>
Future minimum lease payments to be received pursuant to sales-type leases
are as follows at June 30, 1998 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 79,800
2000 75,758
2001 65,208
2002 55,729
2003 37,577
Thereafter 5,992
--------------
Total $ 320,064
==============
</TABLE>
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, 1998, $198 million of lease receivables
were owned by the financing company. The aggregate lease receivables sold under
this arrangement totaled approximately $382 million and $312 million at June 30,
1998 and 1997, 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. In June 1998, the agreement with the financing company was further
amended to terminate Pyxis' obligation to sell lease receivables to 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 (see Note
2).
30
<PAGE> 31
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES PAYABLE, BANKS
The Company has entered into various unsecured, uncommitted line-of-credit
arrangements which allow for borrowings up to $408 million at June 30, 1998, at
various money market rates. At June 30, 1998, $23.9 million, at a weighted
average interest rate of 7.2%, was outstanding under such arrangements and $22.2
million, at a weighted average interest rate of 6.26% was outstanding at June
30, 1997. 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, 1998). The Company is required to pay a
commitment fee at the annual rate of 0.125% 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, 1998 was $479 million.
5. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
--------------- --------------
<S> <C> <C>
6.0% Notes due 2006 $ 150,000 $ 150,000
6.5% Notes due 2004 100,000 100,000
Other obligations; interest averaging 6.39% in 1998 and
6.38% in 1997, due in varying installments
through 2010 29,378 33,924
--------------- --------------
Total 279,378 283,924
Less: current portion 6,803 6,158
--------------- --------------
Long-term obligations, less current portion $ 272,575 $ 277,766
=============== ==============
</TABLE>
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. 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.
During fiscal 1996, holders of $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 diluted earnings per share
would not have been material.
Certain long-term obligations are collateralized by property and equipment
of the Company with an aggregate book value of approximately $31.8 million at
June 30, 1998.
31
<PAGE> 32
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of long-term obligations for future fiscal years are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 6,803
2000 5,418
2001 3,478
2002 2,288
2003 1,654
Thereafter 259,737
--------------
Total $ 279,378
==============
</TABLE>
On July 13, 1998, the Company issued $150 million of 6.25% Notes due 2008 ,
the proceeds of which will be used for working capital needs due to growth in
the Company's business. The 6.25% Notes represent unsecured obligations of the
Company, are not redeemable prior to maturity and are not subject to a sinking
fund. Subsequent to issuing the 6.25% Notes, the Company has the capacity to
issue $250 million of additional long-term debt pursuant to a shelf debt
registration statement filed with the Securities and Exchange Commission. In
addition, as part of its merger transaction with R.P. Scherer Corporation
("Scherer") on August 7, 1998, the Company has assumed approximately $212
million in long-term debt.
6. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and equivalents, trade receivables, accounts
payables, notes payable-banks and other accrued liabilities at June 30, 1998 and
1997, 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 $280.2
million and $270.1 million as compared to the carrying amounts of $279.4 million
and $283.9 million at June 30, 1998 and 1997, 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,
------------------------------------------------
1998 1997 1996
--------------- -------------- ---------------
<S> <C> <C> <C>
Current:
Federal $ 50,001 $ 101,877 $ 67,397
State 9,948 13,387 9,263
--------------- -------------- ---------------
Total 59,949 115,264 76,660
Deferred 95,483 11,217 23,602
--------------- -------------- ---------------
Total provision $ 155,432 $ 126,481 $ 100,262
=============== ============== ===============
</TABLE>
32
<PAGE> 33
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the provision based on the Federal statutory income tax
rate to the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Provision at Federal
statutory rate 35.0 % 35.0 % 35.0 %
State income taxes, net of
Federal benefit 4.7 4.3 4.7
Nondeductible expenses 0.9 2.4 3.9
Other (2.0) (1.0) 0.5
--------------- --------------- ---------------
Effective income tax rate 38.6 % 40.7 % 44.1 %
=============== =============== ===============
</TABLE>
Deferred income taxes arise from temporary differences between financial
reporting and tax reporting bases of assets and liabilities, and operating loss
and tax credit carryforwards for tax purposes. The components of the deferred
income tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
-------------- --------------
<S> <C> <C>
Deferred income tax assets:
Receivable basis difference $ 10,330 $ 18,669
Accrued liabilities 23,672 35,179
Net operating loss carryforwards 42,455 30,978
Other 3,976 38,285
-------------- --------------
Total deferred income tax assets 80,433 123,111
Valuation allowance for deferred income tax assets (6,413) (2,696)
-------------- --------------
Net deferred income tax assets 74,020 120,415
-------------- --------------
Deferred income tax liabilities:
Inventory basis differences (90,027) (58,077)
Property-related (72,399) (63,171)
Revenues on lease contracts (110,986) (89,101)
Other 847 (13,128)
-------------- --------------
Total deferred income tax liabilities (272,565) (223,477)
-------------- --------------
Net deferred income tax liabilities $ (198,545) $ (103,062)
============== ==============
</TABLE>
The above amounts are classified in the consolidated balance sheets as follows
(in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
-------------- --------------
<S> <C> <C>
Other current liabilities $ 13,831 (27,696)
Deferred income taxes and other liabilities (212,376) (75,366)
-------------- --------------
Net deferred income tax liabilities $ (198,545) $ (103,062)
============== ==============
</TABLE>
The Company had Federal net operating loss carryforwards of $95.4 million
and $91.0 million and state net operating loss carryforwards of $95.1 million
and $56 million as of June 30, 1998 and 1997, respectively. A valuation
allowance of $6.4 million and $2.7 million at June 30, 1998 and 1997,
respectively, has been provided for the state net operating loss carryforwards,
as utilization of such carryforwards within the applicable statutory periods is
uncertain. The Company's Federal tax operating loss carryforwards and a portion
of the state net operating loss carryforwards are subject to a change in
ownership limitation calculation under Internal Revenue Code Section 382.
33
<PAGE> 34
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
After application of the valuation allowance described above, the Company
anticipates no limitations will apply with respect to utilization of these
assets. The Federal net operating loss carryforward begins expiring in 2001 and
the state net operating loss carryforward began expiring in 1994. Expiring state
net operating loss carryforwards and the required valuation allowances have been
adjusted annually.
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.
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.
Prior to the Owen Merger, Owen established an Employee Stock Ownership Plan
(the "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.
The total expense for employee retirement benefit plans was as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
-----------------------------------------------
1998 1997 1996
-------------- --------------- --------------
<S> <C> <C> <C>
Defined contribution plans $ 15,363 $ 10,765 $ 9,132
Multiemployer plans 531 947 1,216
ESOP - - 257
------------
-- --------------- --------------
Total $ 15,894 $ 11,712 $ 10,605
============== =============== ==============
</TABLE>
9. COMMITMENTS AND CONTINGENT LIABILITIES
The future minimum rental payments for operating leases having initial or
remaining noncancellable lease terms in excess of one year at June 30, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 15,011
2000 8,118
2001 6,189
2002 4,668
2003 3,773
Thereafter 11,813
--------------
Total $ 49,572
==============
</TABLE>
Rental expense relating to operating leases was approximately $24.1
million, $23.0 million and $23.4 million in fiscal 1998, 1997, and 1996,
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 $181.2 million, which is the total estimated cost of the
construction projects. As of June 30, 1998, the
34
<PAGE> 35
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amount expended was $108.2 million. Currently, the Company's minimum annual
lease payments under the agreements are approximately $7.0 million.
As of June 30, 1998, amounts outstanding on customer notes receivable sold
with full recourse to a commercial bank totaled approximately $13.4 million. The
Company also has outstanding guarantees of indebtedness and financial assistance
commitments which totaled approximately $4.2 million at June 30, 1998. Upon
consummation of the Scherer Merger on August 7, 1998 (see Note 16), the Company
guaranteed an additional $292 million, representing the outstanding long-term
debt and available credit facilities of Scherer.
The Company becomes involved from time-to-time in litigation incidental to
its business. 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. Trial has been set for the prescription drug litigation to begin
September 14, 1998. The Company believes that the allegations set forth against
Cardinal and Whitmire in these lawsuits are without merit.
In January 1995, the Company was named as a defendant in a lawsuit alleging
violations of various antitrust statutes and that the Company had tortiously
interfered with another pharmaceutical wholesaler's contractual realtions. The
trial date for this action has been set for November 2, 1998. The Company
believes that allegations made against it in this litigation 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 consolidated
financial statements.
10. SHAREHOLDERS' EQUITY
At June 30, 1998, the Company's authorized capital shares consisted of (a)
300,000,000 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, 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. 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, 1998 and 1997.
11. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
The Company invests cash in deposits with major banks throughout the world
and in high quality short-term liquid instruments. Such investments are made
only in instruments issued or enhanced by high quality institutions. These
investments mature within three months and the Company has not incurred any
related losses.
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, such 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 1998, the Company's two largest customers individually
accounted for 12% of operating revenue and 62% of bulk deliveries, respectively.
During fiscal 1997, the Company's two largest customers individually accounted
for 13% of operating revenue and 62% of bulk deliveries, respectively. During
fiscal 1996, the Company's
35
<PAGE> 36
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
two largest customers individually accounted for 11% of operating revenue and
70% of bulk deliveries, respectively. Trade receivables due from these two
customers aggregated approximately 16% and 23% of total trade receivables at
June 30, 1998 and 1997, respectively.
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 diluted earnings per Common Share would have been
reduced by $4.5 million and $0.04 per share, respectively, for fiscal 1998, $2.3
million and $0.02 per share, respectively, for fiscal 1997 and $6.4 million and
$0.07 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, 1995 through June
30, 1998, giving retroactive effect to conversions of options in connection with
merger transactions and stock splits (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997 Fiscal 1996
--------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
average average average
Options exercise price Options exercise price Options exercise price
---------- ---------------- ----------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of
year 4,748 $31.49 6,432 $24.15 5,737 $20.98
Granted 802 79.35 840 54.88 1,382 36.82
Exercised (1,255) 24.34 (2,284) 19.87 (527) 21.10
Canceled (138) 47.67 (240) 27.27 (160) 29.93
---------- ---------------- ----------- ---------------- ------------ ----------------
Outstanding,
end of year 4,157 $42.32 4,748 $ 31.49 6,432 $24.15
========== ================ =========== ================ ============ ================
Exercisable, end
of year 2,074 $24.58 2,718 $23.15 4,076 $20.89
---------- ---------------- ----------- ---------------- ------------ ----------------
</TABLE>
The weighted average fair value of options granted during fiscal 1998, 1997
and 1996 was $19.92, $14.48 and $14.50, respectively. The fair values 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 fiscal 1998:
risk-free interest rate of 5.53%, expected life of 3 years, expected volatility
of 0.27% and dividend yield of 0.16%. The fair values 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 0.25% and dividend yield of 0.17%.
36
<PAGE> 37
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information relative to stock options outstanding as of June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- ------------------------------
Weighted
average
remaining Weighted Weighted
Range of Options contractual average Options average
exercise prices (000s) life in years exercise price (000s) exercise price
- ------------------ ----------------- ----------------- ----------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
$ .08-$23.07 1,076 4.27 $16.51 1,034 $16.46
$23.27-$33.00 848 6.45 29.32 781 29.50
$33.51-$54.33 832 7.21 41.06 247 40.54
$54.38-$81.69 1,385 9.12 70.57 11 74.45
$88.19-$94.13 16 9.66 88.58 1 94.13
----------------- ----------------- ----------------- ----------- ------------------
4,157 6.94 $42.32 2,074 $24.58
================= ================= ================= =========== ==================
</TABLE>
As of June 30, 1998, there remained approximately 650,000 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 Common Shares, with an average option
price of $1.37 were exercised in fiscal 1996. 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 consolidated
balance sheets. The compensation awards are amortized to expense over the period
in which participants perform services, generally one to seven years. As of June
30, 1998 approximately 0.2 million shares remained restricted and subject to
forfeiture.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following selected quarterly financial data (in thousands, except per
share amounts) for fiscal 1998 and 1997 has been restated to reflect the
pooling-of-interests business combinations as discussed in Note 2. Earnings per
Common Share have been restated in accordance with SFAS 128 (see Note 1).
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1998
Revenue:
Operating revenue $ 2,869,971 $ 3,130,505 $ 3,381,479 $ 3,544,823
Bulk deliveries to customer
warehouses 681,155 750,590 720,101 839,514
----------- ----------- ----------- -----------
Total revenue $ 3,551,126 $ 3,881,095 $ 4,101,580 $ 4,384,337
Gross margin 225,865 248,898 279,376 287,411
Selling, general and administrative
expenses 135,054 135,211 142,205 155,286
Operating earnings 88,628 110,498 107,380 109,510
Net earnings $ 54,040 $ 66,179 $ 56,312 $ 70,550
Net earnings per Common Share:
Basic $ .50 $ .60 $ .51 $ .64
Diluted $ .49 $ .60 $ .50 $ .63
- -----------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1997
Revenue:
Operating revenue $ 2,535,476 $ 2,816,406 $ 2,825,500 $ 2,790,660
Bulk deliveries to customer
warehouses 571,704 623,883 624,368 649,183
----------- ----------- ----------- -----------
Total revenue $ 3,107,180 $ 3,440,289 $ 3,449,868 $ 3,439,843
Gross margin 193,828 223,858 246,658 235,314
Selling, general and administrative
expenses 124,156 127,413 131,502 132,480
Operating earnings 69,514 78,429 84,274 100,961
Net earnings $ 39,326 $ 41,326 $ 42,181 $ 61,766
Net earnings per Common Share:
Basic $ .38 $ .38 $ .39 $ .57
Diluted $ .37 $ .38 $ .38 $ .56
</TABLE>
On August 12, 1998, the Company declared a three-for-two stock split which
will be effected as a stock dividend and distributed on October 30, 1998 to
shareholders of record at the close of business on October 9, 1998 (see Note 1).
Giving retroactive effect to the stock split, the earnings per Common Share for
the selected quarterly financial data in fiscal 1998 and 1997 will be restated
as follows upon distribution on October 30, 1998:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net earnings per Common Share:
Fiscal 1998:
Basic $ 0.33 $ 0.40 $ 0.34 $ 0.43
Diluted $ 0.32 $ 0.40 $ 0.34 $ 0.42
- -----------------------------------------------------------------------------------------------------
Fiscal 1997:
Basic $ 0.25 $ 0.26 $ 0.26 $ 0.38
Diluted $ 0.25 $ 0.25 $ 0.26 $ 0.37
</TABLE>
As more fully discussed in Note 2, mergers-related costs and special
charges were recorded in various quarters in fiscal 1998 and 1997. The following
table summarizes the impact of such costs on net earnings and 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 1998:
Net earnings $ (1,332) $ (1,945) $ (23,729) $ (8,841)
Diluted net
earnings per Common Share $ (0.01) $ (0.01) $ (0.22) $ (0.08)
- -----------------------------------------------------------------------------------------------------
Fiscal 1997:
Net earnings $ (95) $ (13,053) $ (22,285) $ (1,124)
Diluted net
earnings per Common Share $ - $ (0.12) $ (0.20) $ (0.02)
</TABLE>
Giving retroactive effect to the stock split declared on August 12, 1998,
(see above and Note 1), the impact on diluted net earnings per Common Share of
mergers-related costs and special charges recorded in various quarters in fiscal
1998 and 1997 will be restated as follows upon distribution on October 30, 1998:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1998 $ (0.01) $ (0.01) $ (0.14) $ (0.05)
Fiscal 1997 $ - $ (0.08) $ (0.13) $ (0.01)
</TABLE>
38
<PAGE> 39
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SUPPLEMENTAL CASH FLOW INFORMATION
Income tax and interest payments for the fiscal years ended June 30, 1998,
1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
------------------------------------------------
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Interest paid $ 22,857 $ 30,487 $ 25,263
Income taxes paid $ 87,295 $ 83,639 $ 67,831
</TABLE>
See Notes 2 and 5 for additional information regarding non cash investing
and financing activities.
15. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standard Board ("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 reporting and display of comprehensive income and its components
in the financial statements.
In June 1997, the FASB 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.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," which will require adoption no later than the Company's fiscal
quarter ending September 30, 1999. This new statement requires companies to
recognize all derivatives as either assets or liabilities in the balance sheet
and measure such instruments at fair value.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," which will
require adoption no later than the beginning of the Company's fiscal year ending
June 30, 1999. This new statement provides guidance on accounting for costs of
computer software developed or obtained for internal use.
Adoption of these statements is not expected to have a material impact on
the Company's consolidated financial statements.
16. SUBSEQUENT BUSINESS COMBINATION
On May 17, 1998, the Company announced that it had entered into a
definitive merger agreement with Scherer (the "Scherer Merger"). This merger
transaction was completed on August 7, 1998, and will be accounted for as a
pooling-of-interests for financial reporting purposes. In the Scherer Merger,
the Company issued approximately 22.8 million Common Shares to Scherer
stockholders and Scherer's outstanding stock options were converted into options
to purchase approximately 2.4 million Common Shares. The Company has assumed
approximately $212 million in long-term debt as part of the Scherer Merger. The
Company expects to record a merger-related charge to reflect transaction and
other costs incurred as a result of the Scherer Merger in the first quarter of
fiscal 1999. The Company is currently assessing the appropriate reporting
periods to be combined and the potential
39
<PAGE> 40
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
financial implications of conforming the accounting policies of the Company and
Scherer, in connection with the restatement of the historical financial
statements, as a result of the Scherer Merger.
17. TERMINATED MERGER AGREEMENT
On August 24, 1997, the Company and Bergen announced that they had entered
into a definitive merger agreement (as subsequently amended by the parties on
March 16, 1998), pursuant to which a wholly owned subsidiary of the Company
would be merged with and into Bergen (the "Bergen Merger Agreement"), which was
subsequently approved by both companies' shareholders on February 20, 1998. On
March 9, 1998, the FTC filed a complaint in the United States District Court for
the District of Columbia seeking a preliminary injunction to halt the proposed
merger. On July 31, 1998, the District Court granted the FTC's request for an
injunction to halt the proposed merger. On August 7, 1998, the Company and
Bergen jointly terminated the Bergen Merger Agreement. In accordance with the
terms of the Bergen Merger Agreement, its termination gave rise to an obligation
for the Company to reimburse Bergen for $7 million of transaction costs.
Additionally, the termination of the Bergen Merger Agreement will cause the
costs incurred by the Company (that would not have been deductible had the
merger been consummated) to become tax deductible, resulting in a tax benefit of
$12.2 million. The obligation to reimburse Bergen and the additional tax benefit
are reflected in the consolidated financial statements in the fourth quarter of
the fiscal year ended June 30, 1998.
40
<PAGE> 41
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, as
amended (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, 8 and 9 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 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 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 Exchange Act, relating to the Company's Annual Meeting under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
41
<PAGE> 42
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' reports.................................................................... 18
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1998, 1997 and 1996................................................................... 21
Consolidated Balance Sheets at June 30, 1998 and 1997............................................ 22
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1998, 1997 and 1996....................................................... 23
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 30, 1998, 1997 and 1996................................................................... 24
Notes to Consolidated Financial Statements....................................................... 25
</TABLE>
(a)(2) The following Supplemental Schedule is included in this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II - Valuation and Qualifying Accounts.................................................. 48
</TABLE>
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:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
<S> <C>
2.01 Agreement and Plan of Merger dated as of May 17, 1998, among the Registrant, GEL
Acquisition Corp. and R.P. Scherer Corporation. (1)
3.01 Amended and Restated Articles of Incorporation of the Registrant, as amended. (3)
3.02 Restated Code of Regulations of the Registrant, as amended. (5)
4.01 Specimen Certificate for the Registrant's Class A Common Shares (4)
4.02 Indenture between the Registrant and Bank One, Indianapolis, NA
relating to the Registrant's 6 1/2% Notes Due 2004 and 6% Notes Due
2006 (5)
4.03 Indenture between the Registrant and Bank One, Columbus, NA,
Trustee, relating to the Registrant's 6 1/4 Notes Due 2008 (6)
4.04 Form of Warrant Certificate to Purchase Company Common Shares (7)
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
<S> <C>
4.05 Indenture dated January 1, 1994 (the "Indenture") between R.P. Scherer International
Corporation and Comerica Bank (the "Trustee"); First Supplemental Indenture by and
among R.P. Scherer International Corporation, R.P. Scherer Corporation and Trustee dated
February 28, 1995; and Second Supplemental Indenture by and among R.P. Scherer
Corporation, the Registrant and Trustee dated as of August 7, 1998.
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. (8)*
10.02 Directors' Stock Option Plan of the Registrant, as amended and restated. (8)*
10.03 Equity Incentive Plan of the Registrant, as amended ((9), except for amendment to Section
9(d), which is included in this Annual Report on Form 10-K.)*
10.04 1990 Stock Option Plan of Medicine Shoppe International, Inc. (10)*
10.05 Employee Incentive Stock Option Plan of Medicine Shoppe International, Inc. (10)*
10.06 Executive Choice Plan of Medicine Shoppe International, Inc. (10)*
10.07 1997 Stock Option Plan of R.P. Scherer Corporation (18)*
10.08 1992 Stock Option Plan of R.P. Scherer Corporation, as amended and restated. (18)*
10.09 1990 Nonqualified Performance Stock Option Plans of R.P. Scherer Corporation (18)*
10.10 Employment Agreement dated October 11, 1993, among Whitmire, Melburn G. Whitmire and
the Registrant, as amended. (18)*
10.11 Employment Agreement dated August 26, 1995, among Medicine Shoppe, David A. Abrahamson
and the Registrant. (11)*
10.12 Employment Agreement dated February 10, 1998 between the Registrant and Robert J.
Zollars. (3)*
10.13 Employment Agreement dated May 12, 1998, between the Registrant and James F. Millar.
10.14 Amended and Restated Employment Agreement dated May 17, 1998, among Scherer, George L.
Fotiades and the Registrant.*
10.15 Amendment to Employment Agreement dated as of May 17, 1998 among Scherer,
Aleksander Erdeljan and the Registrant; Employment Agreement between Scherer and
Aleksander Erdeljan dated June 1, 1994. *
10.16 Form of Indemnification Agreement between the Registrant and individual directors.
(13)
10.17 Form of Indemnification Agreement between the Registrant and individual officers. (14)
10.18 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. (8)*
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
<S> <C>
10.19 Lease for portions of the Registrant's Columbus Investment Property dated July 7, 1958,
as amended. (16)
10.20 Cardinal Health, Inc. Incentive Deferred Compensation Plan, Amended and Restated
Effective July 1, 1997. (20)*
10.21 Cardinal Health, Inc. Performance-Based Incentive Compensation Plan. (19)*
10.22 Shareholders Agreement dated July 13, 1984, as amended. (17)
10.23 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. (12)
10.24 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, June 23, 1997, and June 1, 1998.((12) and (4), except for Rider 6,
which is included in this Annual Report on Form 10-K.)
10.25 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. (4)
10.26 Pharmaceutical Services Agreement, dated as of August 1, 1996,
between Kmart Corporation and Cardinal Health. (13)
10.27 Partnership Agreement of R.P. Scherer GMBH & Co. KG.
21.01 List of subsidiaries of the Registrant.
23.01 Consent of Deloitte & Touche LLP.
23.02 Consent of Ernst & Young LLP.
23.03 Consent of PricewaterhouseCoopers LLP.
27.01 Financial Data Table
99.01 Statement Regarding Forward-Looking Information
</TABLE>
44
<PAGE> 45
--------------
(1) Included as an exhibit to the Registrant's Registration Statement on
Form S-4 (No. 333-56655) and incorporated herein by reference.
(2) Included as an exhibit to the Registrant's Current Report on Form 8-K
(No. 0-12591) filed with the Commission on March 17, 1998, 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, 1998 (No. 0-12591) and
incorporated herein by reference.
(4) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 (No. 0-12591) and incorporated
herein by reference.
(5) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994 (No. 0-12591) and
incorporated herein by reference.
(6) Included as an exhibit to the Registrant's Current Report on Form 8-K
filed with the SEC on April 21, 1997, and incorporated herein by
reference.
(7) Included as an exhibit to the Registrant's Amendment No. 2 to Form S-4
Registration Statement (No. 333-30889), and incorporated herein by
reference.
(8) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 (No. 0-12591) and incorporated
herein by reference.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
(13) 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.
(14) 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.
(15) Included as an exhibit to the Registrant's Registration Statement on
Form S-1 (No. 2-84444) and incorporated herein by reference.
(16) 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.
(17) Included as an exhibit to the Registrant's Post-Effective Amendment No.
1 on Form S-8 to Form S-4 Registration Statement (No. 333-56655-01) and
as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995 (No. 0-12591) and incorporated herein
by reference.
(18) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1993 (No. 0-12591) and
incorporated herein by reference.
(19) 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.
(20) Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 (No. 0-12591) and
incorporated herein by reference.
45
<PAGE> 46
* Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K:
On May 20, 1998, the Registrant filed a Current Report on Form 8-K under Item 5,
which reported that it had entered into an Agreement and Plan of Merger by and
among the Registrant, GEL Acquisition Corp., and R.P. Scherer Corporation.
On June 29, 1998, the Registrant filed a Current Report on Form 8-K under Item
7, under which it filed Exhibit 12, Computation of Ratio of Earnings to Fixed
Charges.
46
<PAGE> 47
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 1, 1998 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 1, 1998
Robert D. Walter Director (principal executive officer)
/s/ David Bearman
- ------------------------------------- Executive Vice President and Chief Financial September 1, 1998
David Bearman Officer (principal financial officer)
/s/ Richard J. Miller
- ------------------------------------- Vice President, Controller and Principal September 1, 1998
Richard J. Miller Accounting Officer
/s/ John C. Kane
- ------------------------------------- President, Chief Operating Officer September 1, 1998
John C. Kane and Director
/s/ Aleksander Erdeljan
- ------------------------------------- Director September 1, 1998
Aleksander Erdeljan
/s/ John F. Finn
- ------------------------------------- Director September 1, 1998
John F. Finn
/s/ Robert L. Gerbig
- ------------------------------------- Director September 1, 1998
Robert L. Gerbig
/s/ John F. Havens
- ------------------------------------- Director September 1, 1998
John F. Havens
/s/ Regina E. Herzlinger
- ------------------------------------- Director September 1, 1998
Regina E. Herzlinger
/s/ J. Michael Losh
- ------------------------------------- Director September 1, 1998
J. Michael Losh
/s/ George R. Manser
- ------------------------------------- Director September 1, 1998
George R. Manser
/s/ John B. McCoy
- ------------------------------------- Director September 1, 1998
John B. McCoy
/s/ Jerry E. Robertson
- ------------------------------------- Director September 1, 1998
Jerry E. Robertson
/s/ L. Jack Van Fossen
- ------------------------------------- Director September 1, 1998
L. Jack Van Fossen
/s/ Melburn G. Whitmire
- ------------------------------------- Director September 1, 1998
Melburn G. Whitmire
</TABLE>
47
<PAGE> 48
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
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 1998:
Accounts receivable $ 34,952 $ 14,395 $ 3,587 $ (18,738) $ 34,196
Finance notes receivable 8,179 104 111 (1,965) 6,429
Net investment in sales-type leases 4,874 -- -- (302) 4,572
---------------- ---------------- ---------------- ---------------- ----------------
$ 48,005 $ 14,499 $ 3,698 $ (21,005) $ 45,197
================ ================ ================ ================ ================
Fiscal Year 1997:
Accounts receivable $ 36,803 $ 8,073 $ 410 $ (10,334) $ 34,952
Finance notes receivable 9,081 -- -- (902) 8,179
Net investment in sales-type leases 5,026 -- -- (152) 4,874
---------------- ---------------- ---------------- ---------------- ----------------
$ 50,910 $ 8,073 $ 410 $ (11,388) $ 48,005
================ ================ ================ ================ ================
Fiscal Year 1996:
Accounts receivable $ 34,606 $ 9,720 $ 1,452 $ (8,975) $ 36,803
Finance notes receivable 9,274 650 -- (843) 9,081
Net investment in sales-type leases 2,900 2,126 -- -- 5,026
---------------- ---------------- ---------------- ---------------- ----------------
$ 46,780 $ 12,496 $ 1,452 $ (9,818) $ 50,910
================ ================ ================ ================ ================
</TABLE>
(1) During fiscal 1998, 1997 and 1996 recoveries of amounts provided for or
written off in prior years were $3,444,000, $410,000 and $332,000,
respectively. Increases in the reserves as a result of acquisitions
accounted for as purchases were $254,000 and $1,120,000 in fiscal 1998 and
1996.
(2) Write-off of uncollectible accounts.
48
<PAGE> 1
Exhibit 4.05
===================================================================
R.P. SCHERER INTERNATIONAL CORPORATION,
ISSUER
AND
COMERICA BANK
TRUSTEE
----------------------
INDENTURE
DATED AS OF JANUARY 1, 1994
----------------------
DEBT SECURITIES
===================================================================
<PAGE> 2
TABLE OF CONTENTS
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RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NOW THEREFORE, THIS INDENTURE WITNESSETH: . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION . . . . . . . . . . . . 1
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . 11
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . 12
SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . 13
SECTION 105. Notices, Etc. to Trustee or Company . . . . . . . . . 15
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . 15
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . 16
SECTION 108. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . 17
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . 17
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . 17
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . 17
SECTION 113. Non-Business Day . . . . . . . . . . . . . . . . . . . 17
SECTION 114. Immunity of Incorporators, Stockholders,
Officers and Directors . . . . . . . . . . . . . . . . 17
SECTION 115. Certain Matters Relating to Currencies . . . . . . . . 18
SECTION 116. Language of Notices, Etc . . . . . . . . . . . . . . . 18
ARTICLE TWO
SECURITY FORMS . . . . . . . . . . . . . 18
SECTION 201. Forms of Securities . . . . . . . . . . . . . . . . . 18
SECTION 202. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . . . . . 20
SECTION 203. Securities in Global Form . . . . . . . . . . . . . . 20
ARTICLE THREE
THE SECURITIES . . . . . . . . . . . . . 20
SECTION 301. Title: Payment and Terms . . . . . . . . . . . . . . . 20
SECTION 302. Denominations and Currencies . . . . . . . . . . . . . 24
SECTION 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 304. Temporary Securities and Exchange of
Securities . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . . . . . . . . 30
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities and Coupons . . . . . . . . . . . . . . . . 34
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . . . . . . . 35
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SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . 37
SECTION 309. Cancellation . . . . . .. . . . . . . . . . . . . . . . 38
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . 39
SECTION 311. Currency and Manner of Payments in
Respect of Securities . .. . . . . . . . . . . . . . . 39
SECTION 312. Appointment and Resignation of Successor
Currency Determination Agent . . . . . . . . . . . . . . 43
ARTICLE FOUR
SATISFACTION AND DISCHARGE . . . . . . . . . 44
SECTION 401. Satisfaction and Discharge of Securities
of any Series . . . . . . . . . . . . . . . . . . . . 44
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . 47
SECTION 403. Satisfaction and Discharge of Indenture . . . . . . . 48
SECTION 404. Reinstatement . . . . . . . . . . . . . . . . . . . . 48
ARTICLE FIVE
REMEDIES . . . . . . . . . . . . . . . 49
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . 49
SECTION 502. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . . . . 53
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . 54
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities or Coupons . . . . . . . . . 55
SECTION 506. Application of Money Collected . . . . . . . . . . . . 55
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . 56
SECTION 508. Unconditional Right of Holders to
Receive Principal (and Premium, if any) and
Interest, if any . . . . . . . . . . . . . . . . . . . 57
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . 57
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . 57
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . 57
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . 58
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . 58
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SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . 58
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . 59
SECTION 516. Judgment Currency . . . . . . . . . . . . . . . . . . 59
ARTICLE SIX
THE TRUSTEE . . . . . . . . . . . . . . 60
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . 60
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . 61
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . 62
SECTION 604. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . . . . . . . 63
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . 63
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . 63
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . 64
SECTION 608. Disqualification; Conflicting Interests . . . . . . . 64
SECTION 609. Corporate Trustee Required; Different
Trustees for Different Series;
Eligibility . . . . . . . . . . . . . . . . . . . . . 65
SECTION 610. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . . . . . . . . 66
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . 67
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . . . . 68
SECTION 613. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . 69
SECTION 614. Authenticating Agents . . . . . . . . . . . . . . . . 73
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY. . . . . . 76
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders . . . . . . . . . . . . . . . . . 76
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . . . . . . . . . . 76
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . 78
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . 80
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER . . . . . . 80
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . . . . . . . . . . . . 80
SECTION 802. Successor Corporation Substituted . . . . . . . . . . 81
ARTICLE NINE
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . 81
SECTION 901. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 902. Supplemental Indentures With Consent of
Holders . . . . . . . . . . . . . . . . . . . . . . . 83
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SECTION 903. Execution of Supplemental Indentures . . . . . . . . . 85
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . 85
SECTION 905. Conformity With Trust Indenture Act . . . . . . . . . 85
SECTION 906. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE TEN
COVENANTS . . . . . . . . . . . . . . . 85
SECTION 1001. Payment of Principal (and Premium, if
any) and Interest, if any . . . . . . . . . . . . . . 85
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . 86
SECTION 1003. Money, for Securities Payments to Be
Held in Trust . . . . . . . . . . . . . . . . . . . . 88
SECTION 1004. Statements as to Compliance . . . . . . . . . . . . . 89
SECTION 1005. Corporate Existence . . . . . . . . . . . . . . . . . 90
SECTION 1006. Waiver of Certain Covenants . . . . . . . . . . . . . 90
SECTION 1007. Defeasance of Certain Obligations . . . . . . . . . . 90
SECTION 1008. Payment of Additional Amounts . . . . . . . . . . . . 92
SECTION 1009. Limitation on Liens . . . . . . . . . . . . . . . . . 95
SECTION 1010. Limitation on Sale and Lease-Back . . . . . . . . . . 96
ARTICLE ELEVEN
REDEMPTION OF SECURITIES . . . . . . . . . . . 97
SECTION 1101. Applicability of This Article . . . . . . . . . . . . 97
SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . 97
SECTION 1103. Selection by Trustee of Securities to
Be Redeemed . . . . . . . . . . . . . . . . . . . . . 98
SECTION 1104. Notice of Redemption . . . . . . . . . . . . . . . . . 98
SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . 99
SECTION 1106. Securities Payable on Redemption Date . . . . . . . . 99
SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . 101
ARTICLE TWELVE
SINKING FUNDS . . . . . . . . . . . . . . 101
SECTION 1201. Applicability of This Article . . . . . . . . . . . . 101
SECTION 1202. Satisfaction of Sinking Fund Payments
With Securities . . . . . . . . . . . . . . . . . . . 101
SECTION 1203. Redemption of Securities for Sinking
Fund . . . . . . . . . . . . . . . . . . . . . . . . . 102
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF SECURITIES . . . . . . . . 102
SECTION 1301. Purposes for Which Meetings May Be
Called . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 1302. Call, Notice and Place of Meetings . . . . . . . . . . 102
SECTION 1303. Persons Entitled to Vote at
Meetings . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 1304. Quorum; Action . . . . . . . . . . . . . . . . . . . . 103
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SECTION 1305. Determination of Voting Rights;
Conduct and Adjournment of Meetings . . . . . . . . . . 104
SECTION 1306. Counting Votes and Recording Action of
Meetings . . . . . . . . . . . . . . . . . . . . . . . 105
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This is an INDENTURE dated as of January 1, 1994, between R.P.
Scherer International Corporation, a corporation duly organized and existing
under the laws of the State of Delaware and having its principal office at 2075
W. Big Beaver Road, P.O. Box 7060, Troy, Michigan 48007-7060 (hereinafter
called the "Company"), and Comerica Bank, a state bank organized and existing
under the laws of the State of Michigan and having its principal Corporate
Trust Office at 411 West Lafayette, MC 3461, Detroit, Michigan 48226, as Trustee
(hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for its
lawful purposes securities (hereinafter called the "Securities") evidencing its
unsecured indebtedness and has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of the Securities,
unlimited as to principal amount, to have such titles, to bear such rates of
interest to mature at such time or times and to have such other provisions as
shall be fixed as hereinafter provided.
All things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done, and the Company
proposes to do all things necessary to make the Securities, when executed by
the Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, the valid obligations of the Company as hereinafter
provided.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or series
thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture and
all Securities issued hereunder, except as otherwise expressly provided or
unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
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(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States, and the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted in the United States at the date or time of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Three and Article Six,
are defined in those Articles.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any individual authorized to
authenticate and deliver Securities in the name of the Trustee for the
Securities of any series pursuant to Section 614.
"Authorized Newspaper" means a newspaper customarily published at
least once a day for at least five days in each calendar week and of general
circulation in New York City and in London and, so long as the Securities are
listed on the Stock Exchange and the Stock Exchange shall so require, in
Luxembourg or, if it shall be impracticable in the opinion of the Trustee for
the Securities of the appropriate series to make such publication, in another
capital city in Western Europe. Such publication (which may be in different
newspapers) may be made in the Eastern edition of The Wall Street Journal, in
the London edition of the Financial Times and in the Luxemburger Wort.
"bankruptcy law" means, any United States Federal or State
bankruptcy, insolvency, reorganization or other similar law.
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"Bearer Security" means any Security established pursuant to
Section 201 which is payable to bearer.
"Board of Directors" means the board of directors of the Company or
any duly authorized committee of that board or any director or directors and/or
officer or officers of the Company to whom that board or committee shall have
duly delegated its authority.
"Board Resolution" means (1) a copy of a resolution certified by
the Secretary or a Deputy or Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and effect on
the date of such certification, or (2) a certificate signed by the director or
directors and/or officer or officers to whom the board of directors of the
Company shall have duly delegated its authority, and delivered to the Trustee
for the Securities of any series.
"Business Day", when used with respect to any particular Place of
Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in that Place of Payment are authorized
or obligated by law to close, and shall otherwise mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions, at the place where any specified act pursuant to this Indenture
is to occur, are authorized or obligated by law to close.
"CEDEL, SA." means Centrale de Livraison de Valeurs Mobilieres, S.A.
"Certificate of a Firm of Independent Public Accountants" means a
certificate signed by any firm of independent public accountants of recognized
standing selected by the Company. The term "independent" when used with respect
to any specified firm of public accountants means such a firm which ( 1) is in
fact independent, (2) does not have any direct financial interest or any
material indirect financial interest in the Company or in any other obligor
upon the Securities of any series or in any affiliate of the Company or of such
other obligor, and (3) is not connected with the Company or such other obligor
or any affiliate of the Company or of such other obligor, as an officer,
employee, promoter, underwriter, trustee, partner, director or person
performing similar functions, but such firm may be the regular auditors
employed by the Company. Whenever it is herein provided that any Certificate of
a Firm of Independent Public Accountants shall be furnished to the Trustee for
Securities of any series, such Certificate shall state that the signer has read
this definition and that the signer is independent within the meaning hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
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"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by (1) the Chairman of the
Board, the President or a Vice President and by the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or a Deputy
or Assistant Secretary of the Company or (2) by any two Persons designated in a
Company Order previously delivered to the Trustee for Securities of any series
by any two of the foregoing officers and delivered to the Trustee for
Securities of any series.
"Component Currency" has the meaning specified in Section 311(h).
"Consolidated Net Tangible Assets" means the aggregate amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities and (b) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles, all as set forth on the most recent consolidated balance
sheet of the Company and its consolidated Subsidiaries and computed in
accordance with generally accepted accounting principles.
"Conversion Date" has the meaning specified in Section 311(d).
"Conversion Event" means the unavailability of any Foreign Currency
or currency unit, due to the imposition of exchange controls or other
circumstances beyond the control of the Company.
"Corporate Trust Office" means the office of the Trustee for
Securities of any series at which at any particular time its corporate trust
business shall be principally administered, which office of Comerica Bank, at
the date of the execution of this Indenture, is located at 411 West Lafayette,
MC 3461, Detroit, Michigan 48226.
"corporation" includes corporations, associations, companies and
business trusts.
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"coupon" means any interest coupon appertaining to a Bearer
Security.
"Currency Determination Agent", with respect to Securities of any
series, means a New York Clearing House bank designated pursuant to Section 301
or Section 312.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities of any series
issuable or issued in the form of a global Security, the Person designated as
Depositary by the Company pursuant to Section 301 until a successor Depositary
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and if at any time there is more than one such Person,
"Depositary" as used with respect to the Securities of any such series shall
mean the Depositary with respect to the Securities of that series.
"Dollar Equivalent of the Currency Unit" has the meaning specified
in Section 311(g).
"Dollar Equivalent of the Foreign Currency" has the meaning
specified in Section 311(f).
"Dollars" and the sign "$" mean the currency of the United States
of America as at the time of payment is legal tender for the payment of public
and private debts.
"ECU" means the European Currency Unit as defined and revised from
time to time by the Council of the European Communities.
"Election Date" has the meaning specified in Section 311(h).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, or its successor, as operator of the Euroclear system.
"Event of Default" has the meaning specified in Section 501.
"Exchange Date" has the meaning specified in Section 304.
"Exchange Rate Officers' Certificate" means a certificate or
facsimile thereof setting forth (i) the applicable Market Exchange Rate and
(ii) the Dollar, Foreign Currency or currency unit amounts of principal (and
premium, if any) and interest, if any (on an aggregate basis and on the basis
of a Security having the lowest denomination principal amount
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determined in accordance with Section 302 in the relevant currency or currency
unit), payable with respect to a Security of any series on the basis of such
Market Exchange Rate, signed by the Treasurer, the Controller, any Vice
President, any Assistant Treasurer or any Assistant Controller of the Company.
"Floating Rate Security" means a Security which provides for the
payment of interest at a variable rate determined periodically by reference to
an interest rate index or any other index specified pursuant to Section 301.
"Foreign Currency" means a currency issued and actively maintained
as a country's or countries' recognized unit of domestic exchange by the
government of any country other than the United States.
"Global Exchange Agent" has the meaning specified in Section 304.
"Government Obligations" means securities which are (i) direct
obligations of the government which issued the currency in which the Securities
of a particular series are payable or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the government
which issued the currency in which the Securities of such series are payable,
the payment of which is unconditionally guaranteed by such government, which,
in either case, are full faith and credit obligations of such government
payable in such currency and are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal
of the Government Obligation evidenced by such depository receipt.
"Holder", when used with respect to any Security, means in the case
of a Registered Security the Person in whose name a Security is registered in
the Security Register, and in the case of a Bearer Security the bearer thereof
and, when used with respect to any coupon, means any bearer thereof.
"Indenture" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof and shall include the terms
of a particular series of Securities established as contemplated by Section
301.
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"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security,
means the Stated Maturity of an installment of interest on such Security.
"Lien" means any mortgage, lien, pledge, security interest,
encumbrance or charge of any kind or any conditional sale or title retention
agreement, in each case securing indebtedness for borrowed money.
"Market Exchange Rate" means (i) for any conversion involving a
currency unit on the one hand and Dollars or any Foreign Currency on the other,
the exchange rate between the relevant currency unit and Dollars or such
Foreign Currency calculated by the method specified pursuant to Section 301 for
the Securities of the relevant series, (ii) for any conversion of Dollars into
any Foreign Currency, the noon (New York City time) buying rate for such
Foreign Currency for cable transfers quoted in New York City as certified for
customs purposes by the Federal Reserve Bank of New York and (iii) for any
conversion of one Foreign Currency into Dollars or another Foreign Currency,
the spot rate at noon local time in the relevant market at which, in accordance
with normal banking procedures, the Dollars or Foreign Currency into which
conversion is being made could be purchased with the Foreign Currency from
which conversion is being made from major banks located in either New York
City, London or any other principal market for Dollars or such purchased
Foreign Currency, in each case determined by the Currency Determination Agent.
In the event of the unavailability of any of the exchange rates provided for in
the foregoing clauses (i), (ii) and (iii) the Currency Determination Agent
shall use, in its sole discretion and without liability on its part, such
quotation of the Federal Reserve Bank of New York as of the most recent
available date, or quotations from one or more major banks in New York City,
London or other principal market for such currency or currency unit in
question, or such other quotations as the Currency Determination Agent shall
deem appropriate. Unless otherwise specified by the Currency Determination
Agent, if there is more than one market for dealing in any currency or currency
unit by reason of foreign exchange regulations or otherwise, the market to be
used in respect of such currency or currency unit shall be that upon which a
nonresident issuer of securities designated in such currency or currency unit
would purchase such currency or currency unit in order to make payments in
respect of such securities. For purposes of this definition, a "nonresident
issuer" shall mean an issuer that is not a resident of the country or countries
that issue such currency or whose currencies are included in such currency
unit.
"Maturity", when used with respect to any Security, means the date
on which the principal of that Security becomes
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due and payable as therein or herein provided, whether at the Stated Maturity
or by declaration of acceleration, call for redemption, request for redemption
or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, the President or a Vice President (any reference to a Vice
President of the Company herein shall be deemed to include any Vice President
of the Company whether or not designated by a number or a word or words added
before or after the title "Vice President"), and by the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or an
Assistant or Deputy Secretary of the Company and delivered to the Trustee for
the Securities of any series.
"Opinion of Counsel" means, for purposes of Sections 401 (a) and
1007, a written opinion of independent legal counsel of recognized standing
and, for all other purposes hereof, means a written opinion of counsel, who may
be an employee of or counsel to the Company or may be other counsel
satisfactory to the Trustee for the Securities of any series.
"Original Issue Discount Security" means any Security that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee for such
Securities or delivered to such Trustee for cancellation;
(2) Securities or portions thereof for whose payment or redemption
money in the necessary amount and in the required currency or currency
unit has been theretofore deposited with the Trustee for such Securities
or in a trust fund meeting the requirements of Section 1007 hereof or any
Paying Agent (other than the Company or any other obligor upon the
Securities) in trust or set aside and segregated in trust by the Company
or any other obligor upon the Securities (if the Company or any other
obligor upon the Securities shall act as its own Paying Agent) for the
Holders of such Securities; provided, however, that, if such Securities or
portions thereof are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture, or provision therefor satisfactory
to such Trustee has been made; and
(3) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to
<PAGE> 15
9
this Indenture, other than any such Securities in respect of which there
shall have been presented proof satisfactory to the Trustee for such
Securities that any such Securities are held by bona fide holders in due
course;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (a) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee for such
Securities shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which such
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of such Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor and (b) the principal amount of an Original Issue Discount
Security that shall be deemed to be Outstanding for such purposes shall be the
amount of the principal thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration pursuant to Section 502.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest, if any, on any Securities
on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
particular series, means the place or places where the principal of (and
premium, if any) and interest, if any, on the Securities of that series are
payable, as contemplated by Section 301.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by that particular Security, and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in lieu
of a mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains, as the case may be.
<PAGE> 16
10
"Redemption Date", when used with respect to any Security to be
redeemed in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed, means an amount, in the currency or currency unit in which such
Security is denominated or which is otherwise provided for pursuant hereto,
equal to the principal amount thereof (and premium, if any, thereon) together
with accrued interest, if any, to the Redemption Date.
"Registered Security" means any Security established pursuant to
Section 201 which is registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Registered Securities of any series, means the date, if
any, specified for that purpose as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee for
any series of Securities means the chairman or vice chairman of the board of
directors, the chairman or vice chairman of the executive committee of the
board of directors, the president, any vice president (whether or not
designated by a number or a word or words added before or after the title "vice
president"), the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller or any assistant controller or any
other officer of such Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the particular
subject.
"Securities" means securities evidencing unsecured indebtedness of
the Company authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
A "series" of Securities means all Securities denoted as part of
the same series authorized by or pursuant to a particular Board Resolution.
"Special Record Date" for the payment of any Defaulted Interest on
the Registered Securities of any series means a date fixed by the Trustee for
such series pursuant to Section 307.
"Specified Amount" has the meaning specified in Section 311(h).
<PAGE> 17
11
"Subsidiary" means a corporation or other entity 50% or more of the
outstanding voting stock or other voting interest of which is owned, directly
or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means stock which ordinarily has voting power for
the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such instalment of interest as the
fixed date on which the principal of such Security or such instalment of
principal or interest is due and payable.
"Stock Exchange", unless specified otherwise with respect to any
particular series of Securities, means the Luxembourg Stock Exchange.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument and, subject to the provisions of Article Six
hereof, shall also include its successors and assigns as Trustee hereunder. If
there shall be at one time more than one Trustee hereunder, "Trustee" shall
mean each such Trustee and shall apply to each such Trustee only with respect
to those series of Securities with respect to which it is serving as Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990, as in force at the date as
of which this instrument was executed, except as provided in Section 905.
"United States" means the United States of America (including the
States and the District of Columbia), and its "possessions", which include
Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.
"United States Alien" has the meaning specified in Section 1008.
"Valuation Date" has the meaning specified in Section 311(c).
"Yield to Maturity", when used with respect to any Original Issue
Discount Security, means the yield to maturity, if any, set forth on the face
thereof.
SECTION 102. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee for any series of
Securities to take any action under any provision
<PAGE> 18
12
of this Indenture, the Company shall furnish to such Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with, and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate (other than certificates provided pursuant to
Section 1004) or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such condition or
covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to matters upon which his certificate or opinion
is based are erroneous.
<PAGE> 19
13
Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such
Holders in person or by agent duly appointed in writing. If Securities of a
series are issuable as Bearer Securities, any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given by Holders of such series may, alternatively, be embodied in and
evidenced by the record of Holders of Securities of such series voting in favor
thereof, either in person or by proxies duly appointed in writing, at any
meeting of Holders of Securities of such series duly called and held in
accordance with the provisions of Article Thirteen, or a combination of such
instruments and any such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or
record or both are delivered to the Trustee for the appropriate series of
Securities and, where it is hereby expressly required, to the Company. Such
instrument or instruments and any such record (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments or so voting at any such
meeting. Proof of execution of any such instrument or of a writing appointing
any such agent, or of the holding by any Person of a Security, shall be
sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee for the appropriate series of Securities,
the Company and any agent of such Trustee or the Company, if made in the manner
provided in this Section. The record of any meeting of Holders of Securities
shall be proved in the manner provided in Section 1306.
The Company may set a record date for purposes of determining the
identity of Holders of Registered Securities entitled to vote or consent to any
action by vote or consent authorized or permitted under this Indenture, which
record date shall be the later of 30 days prior to the first solicitation of
such consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation. If a record date is fixed, those persons
who were Holders of Registered
<PAGE> 20
14
Securities at such record date (or their duly designated proxies), and only
those persons, shall be entitled with respect to such Securities to take such
action by vote or consent or to revoke any vote or consent previously given,
whether or not such persons continue to be Holders after such record date.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by an officer of a corporation or association
or a member of a partnership, or an official of a public or governmental body,
on behalf of such corporation, association, partnership or public or
governmental body or by a fiduciary, such certificate or affidavit shall also
constitute sufficient proof of this authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee for the appropriate series
of Securities deems sufficient.
(d) The principal amount and serial numbers of Registered
Securities held by any Person, and the date of holding the same, shall be
proved by the Security Register.
(e) The principal amount and serial numbers of Bearer Securities
held by any Person, and the date of holding the same, may be proved by the
production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee for such
Securities to be satisfactory, showing that at the date therein mentioned such
Person had on deposit with such depositary, or exhibited to it, the Bearer
Securities therein described; or such facts may be proved by the certificate of
the Person holding such Bearer Securities, if such certificate is deemed by
such Trustee to be satisfactory. The Trustee for such Securities and the
Company may assume that such ownership of any Bearer Security continues until
(1) another certificate bearing a later date issued in respect of the same
Bearer Security is produced, (2) such Bearer Security is produced to such
Trustee by some other Person, (3) such Bearer Security is surrendered in
exchange for a Registered Security, or (4) such Bearer Security is no longer
Outstanding. The principal amount and serial numbers of Bearer Securities held
by any Person, and the date of holding the same, may also be proved in any
other manner which the Company and the Trustee for such Securities deem
sufficient.
(f) In determining whether the Holders of the requisite principal
amount of Outstanding Securities have given
<PAGE> 21
15
any request, demand, authorization, direction, notice, consent or waiver under
this Indenture, the principal amount of an Original Issue Discount Security
that may be counted in making such determination and that shall be deemed to be
Outstanding for such purposes shall be equal to the amount of the principal
thereof that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502 at the time the taking of such action
by the Holders of such requisite principal amount is evidenced to the Trustee
for such Securities.
(g) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee for
such Securities, the Security Registrar, any Paying Agent, the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, Etc. to Trustee or Company. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other documents provided or permitted by this Indenture to be made upon, given
or furnished to, or filed with,
(1) the Trustee for a series of Securities by any Holder or by the
Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with such Trustee at its Corporate
Trust Office, Attention: Corporate Trust -- Trustee Administration, or
(2) the Company by such Trustee or by any Holder shall be
sufficient for every purpose hereunder (except as provided in paragraph
(3) of Section 501) if in writing and mailed, first class postage prepaid,
to the Company addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at any other
address previously furnished in writing to such Trustee by the Company.
SECTION 106. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, (1) such notice shall be
sufficiently given (unless otherwise herein expressly provided) to Holders of
Registered Securities if in writing and mailed, first class postage prepaid, to
each Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice; and (2) such notice
shall be sufficiently given (unless otherwise herein expressly provided) to
Holders of Bearer Securities who have filed their names and addresses with the
Trustee for such purpose within the previous two years if in
<PAGE> 22
16
writing and mailed, first class postage prepaid, to each such Holder at his
address as so filed not later than the latest date and not earlier than the
earliest date prescribed for the giving of such notice, or to all other Holders
of Bearer Securities if published in an Authorized Newspaper on a Business Day
at least twice, the first such publication to be not earlier than the earliest
date, and the second such publication to be not later than the latest date,
prescribed herein for the giving of such notice.
In any case where notice to Holders of Registered Securities is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder of a Registered Security shall
affect the sufficiency of such notice with respect to other Holders of
Registered Securities or the sufficiency of any notice to Holders of Bearer
Securities given as provided herein. Any notice mailed in the manner prescribed
by this Indenture shall be deemed to have been given whether or not received by
any particular Holder. In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable to give such
notice to Holders of Registered Securities by mail, then such notification as
shall be made with the approval of the Trustee for such Securities shall
constitute a sufficient notification for every purpose hereunder.
In case by reason of the suspension of any Authorized Newspaper or
Authorized Newspapers or by reason of any other cause it shall be impracticable
to publish any notice to Holders of Bearer Securities as provided above, then
such notification to Holders of Bearer Securities as shall be made with the
approval of the Trustee for such Securities shall constitute sufficient notice
to such Holders for every purpose hereunder. Neither the failure to give notice
by publication to Holders of Bearer Securities as provided above, nor any
defect in any notice so published, shall affect the sufficiency of any notice
to Holders of Registered Securities given as provided herein.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee for such
Securities, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
SECTION 107. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with the duties imposed by any of
Sections 310 through 317, inclusive, of the Trust Indenture Act through the
operation of Section 318(c) thereof, such imposed duties shall control.
SECTION 108. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents
<PAGE> 23
17
are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns. All covenants and agreements
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 110. Separability Clause. In any case any provision in
this Indenture or in the Securities or coupons shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture. Nothing in this Indenture or
in the Securities or in any coupons appertaining thereto, expressed or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Security Registrar and their successors hereunder and the Holders of Securities
or coupons, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. Governing Law. This Indenture shall be governed by
and construed in accordance with the laws of the State of Michigan.
SECTION 113. Non-Business Day. In any case where any Interest
Payment Date, Redemption Date or Stated Maturity of a Security of any
particular series shall not be a Business Day at any Place of Payment with
respect to Securities of that series, then (notwithstanding any other provision
of this Indenture or of the Securities or coupons) payment of principal of (and
premium, if any) and interest, if any, with respect to such Security need not
be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
SECTION 114. Immunity of Incorporators, Stockholders, Officers and
Directors. No recourse shall be had for the payment of the principal of (and
premium, if any), or the interest, if any, on any Security or coupon of any
series or for any claim based thereon, or upon any obligation, covenant or
agreement of this Indenture, against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, either directly or indirectly through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment of penalty or otherwise; it being
expressly agreed and understood that this Indenture and all the Securities and
coupons of each series are solely corporate obligations, and that no personal
liability whatever shall attach to or is incurred by,
<PAGE> 24
18
any incorporator, stockholder, officer or director, past, present or future, of
the Company or of any successor corporation, either directly or indirectly
through the Company or any successor corporation, because of the incurring of
the indebtedness hereby authorized or under or by reason of any of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or coupons of any series or to be implied herefrom or therefrom;
and that all such personal liability is hereby expressly released and waived as
a condition of, and as part of the consideration for, the execution of this
Indenture and the issuance of the Securities and coupons of each series.
SECTION 115. Certain Matters Relating to Currencies. Subject to
Section 311, each reference to any currency or currency unit in any Security,
or in the Board Resolution or supplemental indenture relating thereto, shall
mean only the referenced currency or currency unit and no other currency or
currency unit.
The Trustee shall segregate moneys, funds and accounts held by the
Trustee in one currency or currency unit from any moneys, funds or accounts
hold in any other currencies or currency units, notwithstanding any provision
herein which would otherwise permit the Trustee to commingle such amounts.
Whenever any action or Act is to be taken hereunder by the Holders
of Securities denominated in different currencies or currency units, then for
purposes of determining the principal amount of Securities held by such
Holders, the aggregate principal amount of the Securities denominated in a
foreign currency or currency unit shall be deemed to be that amount of Dollars
that could be obtained for such principal amount on the basis of a spot rate of
exchange specified to the Trustee for such series in an Officers' Certificate
for such foreign Currency or currency unit into Dollars as of the date the
taking of such action or Act by the Holders of the requisite percentage in
principal amount of the Securities is evidenced to such Trustee.
SECTION 116. Language of Notices, Etc. Any request, demand,
authorization, direction, notice, consent or waiver required or permitted under
this Indenture shall be in the English language, and any published notice may
also be in an official language of the country or province of publication.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms of Securities. The Registered Securities, if
any, of each series and the Bearer Securities, if any, of each series and
related coupons shall be in such form or forms (including global form) as shall
be established by or pursuant to a Board Resolution, in each case with such
<PAGE> 25
19
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with any
law, with any rule or regulation made pursuant thereto, with any rules of any
securities exchange or to conform to usage, as may, consistently herewith, be
determined by the officers executing such Securities or coupons, as evidenced
by their execution of such Securities or coupons. If temporary Securities of
any series are issued in global form as permitted by Section 304, the form
thereof shall be established as provided in the preceding sentence.
Unless otherwise specified as contemplated by Section 301, Bearer
Securities shall have interest coupons attached.
Prior to the delivery of a Security of any series in any such form
to the Trustee for the Securities of such series for authentication, the
Company shall deliver to such Trustee the following:
(1) a copy of the Board Resolution the Company, by or pursuant to
which such form of Security to be endorsed thereon have been approved;
(2) an Officers' Certificate of the Company dated the date such
Certificate is delivered to such Trustee stating that all conditions
precedent provided for in this Indenture relating to the authentication
and delivery of Securities in such form have been complied with; and
(3) an Opinion of Counsel stating that each of the Securities,
together with any coupons appertaining thereto, in such form, when (a)
completed by appropriate insertions and executed and delivered by the
Company to such Trustee for authentication in accordance with this
Indenture, (b) authenticated and delivered by such Trustee in accordance
with this Indenture within the authorization as to aggregate principal
amount established from time to time by the Board of Directors of the
Company, and (c) sold in the manner specified in such Opinion of Counsel,
will be the legal, valid and binding obligations of the Company, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
laws relating to or affecting creditors' rights generally, to general
equitable principles, to an implied covenant of good faith and fair
dealing, to such other qualifications as such counsel shall conclude do
not materially affect the rights of Holders of such Securities.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on a
steel engraved border or steel engraved
<PAGE> 26
20
borders or may be produced in any other manner, all as determined by the
officers executing such Securities or coupons, as evidenced by their execution
thereof.
SECTION 202. Form of Trustee's Certificate of Authentication. The
Certificate of Authentication on all Securities shall be in substantially the
following form:
"this is one of the Securities of the series designated in, and
issued under, the Indenture described herein.
Comerica Bank,
as Trustee
By
--------------------------
Authorized Signatory"
SECTION 203. Securities in Global Form. If any Security of a
series is issuable in global form, such Security may provide that it shall
represent the aggregate amount of Outstanding Securities from time to time
endorsed thereon and may also provide that the aggregate amount of Outstanding
Securities represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a Security in global form to reflect the amount,
or any increase or decrease in the amount, of Outstanding Securities
represented thereby shall be made by the Trustee and in such manner as shall be
specified in such Security. Any instructions by the Company with respect to a
Security in global form, after its initial issuance, shall be in writing but
need not comply with Section 102.
Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. Permanent global Securities will be
issued in definitive form.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title: Payment and Terms. The aggregate principal
amount of Securities which may be authenticated and delivered and Outstanding
under this Indenture is unlimited. The Securities may be issued up to the
aggregate principal amount of Securities from time to time authorized by or
pursuant to a Board Resolution of the Company.
The Securities may be issued in one or more series, each of which
shall be issued pursuant to Board Resolutions of the Company. With respect to
any particular series of Securities to be endorsed thereon, the Board
Resolutions of the Company relating thereto shall specify:
<PAGE> 27
21
(1) the title of the Securities of that series (which shall
distinguish the Securities of that series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the
Securities of that series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of that series pursuant to Section 304, 305, 306, 906 or 1107);
(3) whether Securities of that series are to be issuable as
Registered Securities, Bearer Securities or both;
(4) the date or dates (or manner of determining the same) on which
the principal of the Securities of that series is payable (which, if so
provided in such Board Resolution, may be determined by the Company from
time to time and set forth in the Securities of the series issued from
time to time);
(5) the rate or rates (or the manner of calculation thereof) at
which the Securities of that series shall bear interest (if any), the date
or dates from which such interest shall accrue (which, in either case or
both, if so provided in such Board Resolution, may be determined by the
Company from time to time and set forth in the Securities of the series
issued from time to time), the Interest Payment Dates on which such
interest shall be payable (or manner of determining the same) and the
Regular Record Date for the interest payable on any Registered Securities
on any Interest Payment Date and the extent to which, or the manner in
which, any interest payable on a temporary global Security on an Interest
Payment Date will be paid if other than in the manner provided in Section
307;
(6) the place or places where, subject to the provisions of
Section 1002, the principal of (and premium, if any) and interest, if any,
on Securities of that series shall be payable, any Registered Securities
of that series may be surrendered for registration of transfer, any
Securities of that series may be surrendered for exchange, and notices and
demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served;
(7) the period or periods within which, the price or prices at
which, the currency or currency unit in which, and the terms and
conditions upon which, Securities of that series may be redeemed, in whole
or in part, at the option of the Company;
<PAGE> 28
22
(8) the obligation, if any, of the Company to redeem or purchase
Securities of that series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof, and the period or periods
within which, the price or prices at which, the currency or currency unit
in which, and the terms and conditions upon which, Securities of that
series shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(9) if the currency in which the Securities of that series shall
be issuable is Dollars, the denominations in which any Registered
Securities of that series shall be issuable, if other than denominations
of $ 1,000 and any integral multiple thereof, and the denominations in
which any Bearer Securities of that series shall be issuable, if other
than the denomination of $ 5,000;
(10) if other than the principal amount thereof, the portion of the
principal amount of Securities of that series which shall be payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section
502;
(11) any Events of Default in addition to the Events of Default
described in Section 501 and any covenants of the Company with respect to
the Securities of that series, whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants set forth
herein;
(12) if a Person other than Comerica Bank is to act as Trustee for
the Securities of that series, the name and location of the Corporate
Trust Office of such Trustee;
(13) if other than Dollars, the currency or currency unit in which
payment of the principal of (and premium, if any) or interest, if any, on
the Securities of that series shall be made or in which the Securities of
that series shall be denominated and the particular provisions applicable
thereto in accordance with, in addition to or in lieu of the provisions of
Section 311;
(14) if the principal of (and premium, if any) and interest, if
any, on the Securities of that series are to be payable, at the election
of the Company or a Holder thereof, in a currency or currency unit other
than that in which such Securities are denominated or stated to be
payable, in accordance with provisions in addition to or in lieu of, or in
accordance with the provisions of, Section 311, the period or periods
within which (including the Election Date), and the terms and conditions
upon which, such election may be made, and the time and manner of
determining the exchange rate between the currency or currency unit in
which such Securities are denominated or stated to be
<PAGE> 29
23
payable and the currency or currency unit in which such Securities are to
be so payable;
(15) the designation of the original Currency Determination Agent,
if any;
(16) the index, if any, used to determine the amount of payments of
principal of (and premium, if any) or interest, if any, on the Securities
of that series;
(17) if the amount of payments of principal of (and premium, if
any) or interest, if any, on the Securities of that series may be
determined, at the election of the Company or a Holder thereof, with
reference to an index based on a currency or currency unit other than that
in which such Securities are denominated or stated to be payable or any
other index, the manner in which such amounts shall be determined;
(18) if the Securities of that series do not bear interest, the
applicable dates for purposes of Section 701;
(19) if other than as set forth in Section 401, provisions for the
satisfaction and discharge of this Indenture with respect to the
Securities of that series;
(20) the application, if any, of Section 1007 to the Securities of
that series;
(21) the date as of which any Bearer Securities of that series and
any global Security representing Outstanding Securities of that series
shall be dated if other than the date of original issuance of the first
Security of that series to be issued;
(22) the application, if any, of Section 1008;
(23) whether the Securities of the series shall be issued in whole
or in part in the form of a global Security or Securities and, in such
case, the Depositary and Global Exchange Agent, if any, for such global
Security or Securities, whether such global form shall be permanent or
temporary and, if applicable, the Exchange Date;
(24) if Securities of the series are to be issuable initially in
the form of a temporary global Security, the circumstances under which the
temporary global Security can be exchanged for definitive Securities and
whether the definitive Securities will be Registered Securities and/or
Bearer Securities and will be in global form and whether interest in
respect of any portion of such global Security payable in respect of an
Interest Payment Date prior to the Exchange Date shall be paid to any
clearing organization with respect to a portion of such global Security
held for
<PAGE> 30
24
its account and, in such event, the terms and conditions (including any
certification requirements) upon which any such interest payment received
by clearing organization will be credited to the Persons entitled to
interest payable on such Interest Payment Date if other than as provided
in this Article Three; and
(25) any other terms of that series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any particular series and the coupons
appertaining to any Bearer Securities of such series shall be substantially
identical except as to denomination, rate of interest, Stated Maturity and the
date from which interest, if any, shall accrue, and except as may otherwise be
provided in or pursuant to such Board Resolution relating thereto. The terms of
such Securities, as set forth above, may be determined by the Company from time
to time if so provided in or established pursuant to the authority granted in a
Board Resolution. All Securities of any one series need not be issued at the
same time, and unless otherwise provided, a series may be reopened for issuance
of additional Securities of such series.
SECTION 302. Denominations and Currencies. Unless otherwise
provided with respect to any series of Securities as contemplated by Section
301, any Registered Securities of a series shall be issuable in denominations
of $1,000 and any integral multiple thereof, and any Bearer Securities of a
series shall be issuable in the denomination of $5,000, and Registered and
Bearer Securities shall be payable in Dollars.
SECTION 303. Execution, Authentication, Delivery and Dating. The
Securities and any related coupons shall be executed on behalf of the Company
by its Chairman of the Board, or its President or one of its Vice Presidents.
The Securities shall be so executed under the corporate seal of the Company
reproduced thereon and attested to by its Secretary or any one of its Assistant
or Deputy Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities and coupons bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities of any series together
with any coupons appertaining thereto, executed by the Company to the Trustee
for the Securities of such series for authentication, together with a Company
Order for the authentication and delivery of such
<PAGE> 31
25
Securities, and such Trustee, in accordance with the Company Order, shall
authenticate and deliver such Securities; provided, however, that in connection
with its sale, during the "restricted period" (as defined in Section
1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations), no Bearer
Security shall be mailed or otherwise delivered to any location in the United
States; and provided, further, that such Bearer Security (other than a
temporary global Security in bearer form) may be delivered outside the United
States in connection with its original issuance only if the Person entitled to
receive such Bearer Security shall have furnished to Euroclear or CEDEL, S.A. a
certificate substantially in the form set forth in Exhibit A to this Indenture.
If any Security shall be represented by a permanent global Security, then, for
purposes of this Section and Section 304, the notation of a beneficial owner's
interest therein upon original issuance of such Security or upon exchange of a
portion of a temporary global Security shall be deemed to be delivery in
connection with the original issuance of such beneficial owner's interest in
such permanent global Security. Except as permitted by Section 306 or 307, the
Trustee for the Securities of a series shall not authenticate and deliver any
Bearer Security unless all appurtenant coupons for interest then matured other
than matured coupons in default have been detached and cancelled. If all the
Securities of any one series are not to be issued at one time and if a Board
Resolution relating to such Securities shall so permit, such Company Order may
set forth procedures acceptable to the Trustee for the issuance of such
Securities, including, without limitation, procedures with respect to interest
rate, Stated Maturity, date of issuance and date from which interest, if any,
shall accrue.
Notwithstanding any contrary provision herein, if all Securities of
a series are not to be originally issued at one time, it shall not be necessary
to deliver the Board Resolution, Officers' Certificate and Opinion of Counsel
otherwise required pursuant to Sections 102 and 201 at or prior to the time of
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Registered Security shall be dated the date of its
authentication, and, unless otherwise specified as contemplated by Section 301,
each Bearer Security shall be dated as of the date of original issuance of the
first Security of such series to be issued.
No Security or coupon appertaining thereto shall be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose unless
there appears on such Security a certificate of authentication substantially in
the form provided for herein manually executed by the Trustee for such Security
or in the name of such Trustee pursuant to Section 614, and such certificate
upon any Security shall be conclusive
<PAGE> 32
26
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder.
Each Depositary designated pursuant to Section 301 for a global
Security in registered form must, at the time of its designation and at all
times while it serves as Depositary, be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, and any other applicable statute
or regulation.
SECTION 304. Temporary Securities and Exchange of Securities.
Pending the preparation of definitive Securities of any particular series, the
Company may execute, and upon Company Order the Trustee for the Securities of
such series shall authenticate and deliver, in the manner specified in Section
303, temporary Securities which are printed, lithographed, typewritten,
photocopied or otherwise produced, in any denomination, with like terms and
conditions as the definitive Securities of the series in lieu of which they are
issued in registered form or, if authorized, in bearer form with one or more
coupons or without coupons, and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities
may determine, as evidenced by their execution of such Securities. Any such
temporary Securities may be in global form, representing such of the
Outstanding Securities of such series as shall be specified therein.
Except in the case of temporary Securities in global form (which
shall be exchanged only in accordance with the provisions of the following
paragraphs), if temporary Securities of any particular series are issued, the
Company will cause definitive Securities of that series to be prepared without
unreasonable delay. After the preparation of such definitive Securities, the
temporary Securities of such series shall be exchangeable for such definitive
Securities and of a like Stated Maturity and with like terms and provisions
upon surrender of the temporary Securities of such series, together with all
unmatured and matured coupons in default, if any, at the office or agency of
the Company in a Place of Payment for that series, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
of any particular series, the Company shall execute and (in accordance with a
Company Order delivered at or prior to the authentication of the first
definitive Security of such series) the Trustee for the Securities of such
series shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of authorized denominations of the same series
and of a like Stated Maturity and with like terms and provisions; provided,
however, unless otherwise specified pursuant to Section 301, no definitive
Bearer Security shall be delivered in exchange for a temporary Registered
Security, and provided, further, that a definitive Bearer Security (including a
permanent global Bearer Security) shall be delivered in exchange for a
temporary Bearer Security only in compliance with the conditions set forth in
Section 303. Until exchanged as hereinabove provided, the
<PAGE> 33
27
temporary Securities of any series shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of the same series
and with like terms and conditions, except as to payment of interest, if any,
authenticated and delivered hereunder.
Any temporary global Security and any permanent global Security
shall, unless otherwise provided therein, be delivered to a Depositary
designated pursuant to Section 301.
Without unnecessary delay but in any event not later than the date
specified in or determined pursuant to the terms of any such temporary global
Security which (subject to any applicable laws and regulations) shall be 40
days after the closing of the sale of the Securities or within a reasonable
period of time thereafter (the "Exchange Date"), the Securities represented by
any temporary global Security of a series of Securities issuable in bearer form
may be exchanged for definitive Securities (subject to the second succeeding
paragraph), including one or more permanent global Securities in definitive
form, without interest coupons. On or after the Exchange Date such temporary
global Security shall be surrendered by the Depositary to the Trustee for such
Security, as the Company's agent for such purpose, or the agent appointed by
the Company pursuant to Section 301 to effect the exchange of the temporary
global Security for definitive Securities (including any director or officer of
the Global Exchange Agent authorized by the Trustee as an Authenticating Agent
pursuant to Section 614) (the "Global Exchange Agent"), and following such
surrender, such Trustee or the Global Exchange Agent shall ( 1) endorse the
temporary global Security to reflect the reduction of its principal amount by
an equal aggregate principal amount of such Security, (2) endorse any
applicable permanent global Security to reflect the initial amount, or an
increase in the amount of Securities represented thereby, (3) manually
authenticate such definitive Securities (including any permanent global
Security), (4) subject to Section 303, either deliver such definitive
Securities to the Holder thereof or, if such definitive Security is a permanent
global Security, deliver such permanent global Security to the Depositary to be
held outside the United States for the accounts of Euroclear and CEDEL, S.A.,
for credit to the respective accounts at Euroclear and CEDEL, S.A., designated
by or on behalf of the beneficial owners of such Securities (or to such other
accounts as they may direct) and (5) redeliver such temporary global Security
to the Depositary, unless such temporary global Security shall have been
cancelled in accordance with Section 309 hereof; provided, however, that unless
otherwise specified in such temporary global Security, upon such presentation
by the Depositary, such temporary global Security shall be accompanied by a
certificate dated the Exchange Date or a subsequent date and signed by
Euroclear as to the portion of such temporary global Security held for its
account then to be exchanged for definitive Securities (including any permanent
global Security) and a certificate dated the Exchange Date or a
<PAGE> 34
28
subsequent date and signed by CEDEL, S.A., as to the portion of such temporary
global Security held for its account then to be exchanged for definitive
Securities (including any permanent global Security), each substantially in the
form set forth in Exhibit B to this Indenture. Each certificate substantially
in the form of Exhibit B hereto of Euroclear or CEDEL, S.A., as the case may
be, shall be based on certificates of the account holders listed in the records
of Euroclear or CEDEL, S.A., as the case may be, as being entitled to all or
any portion of the applicable temporary global Security. An account holder of
Euroclear or CEDEL, S.A., as the case may be, desiring to effect the exchange
of an interest in a temporary global Security for an interest in definitive
Securities (including any permanent global Security) shall instruct Euroclear
or CEDEL, S.A., as the case may be, to request such exchange on its behalf and
shall deliver to Euroclear or CEDEL, S.A., as the case may be, a certificate
substantially in the form of Exhibit A hereto and dated no earlier than 15 days
prior to the Exchange Date. Until so exchanged, temporary global Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities (including any permanent global Security) of the same
series authenticated and delivered hereunder, except as provided in the fourth
succeeding paragraph.
The delivery to the Trustee for the Securities of the appropriate
series or the Global Exchange Agent by Euroclear or CEDEL, S.A. of any
certificate substantially in the form of Exhibit B hereto may be relied upon by
the Company and such Trustee or the Global Exchange Agent as conclusive
evidence that a corresponding certificate or certificates has or have been
delivered to Euroclear or to CEDEL, S.A., as the case may be, pursuant to the
terms of this Indenture.
On or prior to the Exchange Date, the Company shall deliver to the
Trustee for the Securities of the appropriate series or the Global Exchange
Agent definitive Securities in aggregate principal amount equal to the
principal amount of such temporary global Security, executed by the Company. At
any time on or after the Exchange Date, upon 30 days' notice to the Trustee for
the Securities of the appropriate series or the Global Exchange Agent by
Euroclear or CEDEL, S.A., as the case may be, acting at the request of or on
behalf of the beneficial owner, a Security represented by a temporary global
Security or a permanent global Security, as the case may be, may be exchanged,
in whole or from time to time in part, for definitive Securities without charge
and such Trustee or the Global Exchange Agent shall authenticate and deliver,
in exchange for each portion of such temporary global Security or such
permanent global Security, an equal aggregate principal amount of definitive
Securities of the same series of authorized denominations and with like terms
and provisions as the portion of such temporary global Security or such
permanent global Security to be exchanged, which, unless the Securities of the
series are not issuable both as Bearer Securities and as Registered Securities,
as contemplated by
<PAGE> 35
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Section 301, shall be in the form of Bearer Securities or Registered
Securities, or any combination thereof, as shall be specified by the beneficial
owner thereof; provided, however, that definitive Bearer Securities shall be
delivered in exchange for a portion of the temporary global Security only in
compliance with the requirements of the second preceding paragraph. On or prior
to the thirtieth day following receipt by the Trustee for the Securities of the
appropriate series or the Global Exchange Agent of such notice with respect to
a Security, or, if such day is not a Business Day, the next succeeding Business
Day, the temporary global Security or the permanent global Security, as the
case may be, shall be surrendered by the Depositary to such Trustee, as the
Company's agent for such purpose, or the Global Exchange Agent to be exchanged
in whole, or from time to time in part, for definitive Securities or other
definitive Securities, as the case may be, without charge following such
surrender, upon the request of Euroclear or CEDEL, S.A., as the case may be,
and such Trustee or the Global Exchange Agent shall ( 1) endorse the applicable
temporary global Security or the permanent global Security to reflect the
reduction of its principal amount by the aggregate principal amount of such
Security, (2) in accordance with procedures acceptable to the Trustee cause the
terms of such Security and coupons, if any, to be entered on a definitive
Security, (3) manually authenticate such definitive Security and (4) if a
Bearer Security is to be delivered, deliver such definitive Security outside
the United States to Euroclear or CEDEL, S.A., as the case may be, for or on
behalf of the beneficial owner thereof, in exchange for a portion of such
permanent global Security.
Unless otherwise specified in such temporary global Security or
permanent global Security, any such exchange shall be made free of charge to
the beneficial owners of such temporary global Security or permanent global
Security, except that a Person receiving definitive Securities must bear the
cost of insurance, postage, transportation and the like in the event that such
Person does not take delivery of such definitive Securities in person at the
offices of Euroclear or CEDEL, S.A. Definitive Securities in bearer form to be
delivered in exchange for any portion of a temporary global Security shall be
delivered only outside the United States.
Until exchanged in full as hereinabove provided, any temporary
global Security or definitive permanent global Security shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of the same series and with like terms and conditions, except as to payment of
interest, if any, authenticated and delivered hereunder. Unless otherwise
specified as contemplated by Section 301, interest payable on a temporary
global Bearer Security on an Interest Payment Date for Securities of such
series shall be payable to Euroclear and CEDEL, S.A. on such Interest Payment
Date upon delivery by Euroclear and CEDEL, S.A. to the Trustee for the
Securities of the appropriate series or the Global Exchange Agent in the case
<PAGE> 36
30
of payment of interest on a temporary global Security with respect to an
Interest Payment Date occurring prior to the applicable Exchange Date of a
certificate or certificates substantially in the form set forth in Exhibit C to
this Indenture, for credit without further interest on or after such Interest
Payment Date to the respective accounts of the Persons who are the beneficial
owners of such global Security on such Interest Payment Date and who have, in
the case of payment of interest on a temporary global Security with respect to
an Interest Payment Date occurring prior to the applicable Exchange Date, each
delivered to Euroclear or CEDEL, S.A., as the case may be, a certificate
substantially in the form set forth in Exhibit D to this Indenture.
Any definitive Bearer Security authenticated and delivered by the
Trustee for the Securities of the appropriate series or the Global Exchange
Agent in exchange for a portion of a temporary global Security shall not bear a
coupon for any interest which shall theretofore have been duly paid by such
Trustee to Euroclear or CEDEL, S.A. or by the Company to such Trustee in
accordance with the provisions of this Section 304.
With respect to Exhibits A, B, C and D to this Indenture, the
Company may, in its discretion and if required or desirable under applicable
law, substitute one or more other forms of such exhibits for such exhibits,
eliminate the requirement that any or all certificates be provided, or change
the time that any certificate may be required, provided that such substitute
form or forms or notice of elimination or change of such certification
requirement have theretofore been delivered to the Trustee with a Company
Request and such form or forms, elimination or change is reasonably acceptable
to the Trustee.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
for the Securities of each series a security register (the security register
maintained in such office being herein sometimes referred to as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Registered
Securities and of transfers of Registered Securities. The Trustee for the
Securities of each series is hereby initially appointed "Security Registrar"
for the purpose of registering Registered Securities and transfers of
Registered Securities of such series as herein provided.
Upon surrender for registration of transfer of any Registered
Security of any particular series at the office or agency of the Company in a
Place of Payment for that series, the Company shall execute, and the Trustee
for the Securities of each series shall authenticate and deliver, in the name
of the designated transferee or transferees, one or more new Registered
Securities of any authorized denominations, and of a like Stated
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31
Maturity and of a like series and aggregate principal amount and with like
terms and conditions.
Except as set forth below, at the option of the Holder, Registered
Securities of any particular series may be exchanged for other Registered
Securities of any authorized denominations, and of a like Stated Maturity and
of a like series and aggregate principal amount and with like terms and
conditions, upon surrender of the Registered Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee for such Securities shall authenticate
and deliver, the Securities which the Holder making the exchange is entitled to
receive. Except as otherwise specified pursuant to Section 301, Registered
Securities may not be exchanged for Bearer Securities.
Notwithstanding any other provision of this Section or Section 304,
unless and until it is exchanged in whole or in part for Registered Securities
in definitive form, a global Security representing all or a portion of the
Registered Securities of a series may not be transferred except as a whole by
the Depositary for such series to a nominee of such Depositary or by a nominee
of such Depositary to such Depositary or another nominee of such Depositary or
by such Depositary or any such nominee to a successor Depositary for such
series or a nominee of such successor Depositary.
At the option of the Holder, Bearer Securities of any series may be
exchanged for Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and with like terms and
provisions upon surrender of the Bearer Securities to be exchanged at any
office or agency of the Company in a Place of Payment for that series, with all
unmatured coupons and all matured coupons in default thereto appertaining. If
the Holder of a Bearer Security is unable to produce any such unmatured coupon
or coupons or matured coupon or coupons in default, such exchange may be
effected if the Bearer Securities are accompanied by payment in funds
acceptable to the Company (or to the Trustee for the Security in case of
matured coupons in default) in an amount equal to the face amount of such
missing coupon or coupons, or the surrender of such missing coupon or coupons
may be waived by the Company and such Trustee if there is furnished to them
such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall
surrender to any Paying Agent any such missing coupon in respect of which such
a payment shall have been made, such Holder shall be entitled to receive the
amount of such payment, provided, however, that except as otherwise provided in
Section 1002, interest represented by coupons shall be payable only upon
presentation and surrender of those coupons at an office or agency of the
Company in a Place of Payment for that series located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any
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32
such office or agency in exchange for a Registered Security of the same series
and with like terms and conditions after the close of business at such office
or agency on or after (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or
(ii) any Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted Interest, such
Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be (or, if
such coupon is so surrendered with such Bearer Security, such coupon shall be
returned to the person so surrendering the Bearer Security), and interest or
Defaulted Interest, as the case may be, will not be payable on such Interest
Payment Date or proposed date for payment as the case may be, in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due upon presentment of such
coupon in accordance with the provisions of this Indenture.
Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee for such Securities shall authenticate
and deliver, the Securities which the Holder making the exchange is entitled to
receive.
If at any time the Depositary for Securities of a series in
registered form notifies the Company that it is unwilling or unable to continue
as Depositary for the Securities of such series or if at any time the
Depositary for the Securities for such series shall no longer be eligible under
Section 303, the Company shall appoint a successor Depositary with respect to
the Securities for such series. If a successor Depositary for the Securities of
such series is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company's
election pursuant to Section 301 shall no longer be effective with respect to
the Securities for such series and the Company will execute, and the Trustee,
upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver Securities
of such series in definitive form, in an aggregate principal amount equal to
the principal amount of the global Security or Securities representing such
series in exchange for such global Security or Securities.
The Company may at any time and in its sole discretion determine
that the Registered Securities of any series issued in the form of one or more
global Securities shall no longer be represented by such global Security or
Securities. In such event the Company will execute, and the Trustee, upon
receipt of a Company Order for the authentication and delivery of definitive
Registered Securities of such series, will authenticate and deliver Registered
Securities of such series in definitive form, and in an aggregate principal
amount equal to the principal
<PAGE> 39
33
amount of the global Security or Securities representing such series in
exchange for such global Security or Securities.
If specified by the Company pursuant to Section 301 with respect to
a series of Securities in registered form, the Depositary for such series of
Securities may surrender a global Security for such series of Securities in
exchange in whole or in part for Securities of such series of like tenor and
terms and in definitive form on such terms as are acceptable to the Company and
such Depositary. Thereupon the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge, (i) to each Person specified
by such Depositary a new Security or Securities of the same series, of like
tenor and terms, and of any authorized denomination as requested by such Person
in aggregate principal amount equal to and in exchange for such Person's
beneficial interest in the global Security, and (ii) to such Depositary a new
global Security of like tenor and terms and in a denomination equal to the
difference, if any, between the principal amount of the surrendered global
Security and the aggregate principal amount of Securities delivered to Holders
thereof.
Upon the exchange of a global Security for Securities in definitive
form, such global Security shall be cancelled by the Trustee. Registered
Securities issued in exchange for a global Security pursuant to this Section
shall be registered in such names and in such authorized denominations as the
Depositary for such global Security, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct the Trustee in writing.
The Trustee shall deliver such Registered Security to the persons in whose
names such Securities are so requested.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same debt and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee for
such Security) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar for
such series duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
<PAGE> 40
34
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any series during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption of Securities of that series selected for redemption under Section
1104 and ending at the close of business on (A) if Securities of the series are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (B) if Securities of the series are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if Securities of the series are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption as a whole or in part, except the
unredeemed portion of any Security being redeemed in part, or (iii) to exchange
any Bearer Security so selected for redemption except that such a Bearer
Security may be exchanged for a Registered Security of that series and like
tenor; provided, however, that such Registered Security shall be simultaneously
surrendered for redemption.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities and
Coupons. If (i) any mutilated Security or a Security with a mutilated coupon
appertaining thereto is surrendered to the Trustee for such Security or the
Company and the Trustee for a Security receive evidence to their satisfaction
of the destruction, loss or theft of any Security or coupon and (ii) there is
delivered to the Company and such Trustee such security or indemnity as may be
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or such Trustee that such
Security or coupon has been acquired by a bona fide purchaser, the Company
shall execute and upon its request such Trustee shall authenticate and deliver,
in lieu of any such destroyed, lost or stolen Security or in exchange for such
mutilated Security, or in exchange for the Security to which a mutilated,
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
mutilated, destroyed, lost or stolen) a new Security of the same series and in
a like principal amount and of a like Stated Maturity and with like terms and
conditions and bearing a number not contemporaneously outstanding with coupons
corresponding to the coupons, if any, appertaining to such mutilated,
destroyed, lost or stolen Security or to the Security to which such mutilated,
destroyed, lost or stolen coupon appertains.
In case any such mutilated, destroyed, lost or stolen Security or
coupon has become or is about to become due and payable, the Company in their
discretion may, instead of issuing a new Security, pay such Security or coupon
(without surrender thereof except in the case of a mutilated Security or
coupon) if the applicant for such payment shall furnish to the Company and the
Trustee for such Security such security or indemnity as may be required by them
to save each of them harmless, and in case of destruction, loss or theft,
evidence satisfactory to the Company
<PAGE> 41
35
and such Trustee and any agent of either of them of the destruction, loss or
theft of such Security and the ownership thereof; provided, however, that the
principal of (and premium, if any) and interest if any, on Bearer Securities
shall, except as otherwise provided in Section 1002, be payable only at an
office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 301, any interest on Bearer Securities
shall be payable only upon presentation and surrender of the coupons
appertaining thereto.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including all fees and expenses of the Trustee for such Security)
connected therewith.
Every new Security of any series, with its coupons, if any, issued
pursuant to this Section in lieu of any destroyed, lost or stolen Security or
in exchange for any mutilated Security, or in exchange for a Security to which
a mutilated, destroyed, lost or stolen coupon appertains shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security and its coupons, if any, or the destroyed,
lost or stolen coupon shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of the same series and their coupons, if any.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities or
coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Registered Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall, if so provided in such
Security, be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest payment provided, however, that interest if any,
that is payable at maturity will be payable to the person to whom principal
shall be payable.
Unless otherwise provided with respect to the Securities of any
series, payment of interest may be made at the option of the Company (i) in the
case of Registered Securities, by check mailed or delivered to the address of
the Person entitled thereto as such address shall appear in the Security
Register or by wire transfer to an account maintained by the payee with a bank
located inside the United States according to the written instructions of the
payee signed by two authorized officers of the payee, if any, or (ii) in the
case of Bearer
<PAGE> 42
36
Securities, except as otherwise provided in Section 1002, upon presentation and
surrender of the appropriate coupon appertaining thereto at an office or agency
of the Company in a Place of Payment located outside the United States or by
transfer to an account maintained by the payee with a bank located outside the
United States.
Unless otherwise provided or contemplated by Section 301, every
permanent global Security will provide that interest, if any, payable on any
Interest Payment Date will be paid to each of Euroclear and CEDEL, S.A. with
respect to that portion of such permanent global Security held for its account
by the Depositary. Each of Euroclear and CEDEL, S.A. will in such circumstances
credit the interest received by it in respect of such permanent global Security
to the accounts of the beneficial owners thereof.
Any interest on any Registered Security of any particular series
which is payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall forthwith
cease to be payable to the registered Holder on the relevant Regular Record
Date by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of that
series (or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest which shall be fixed in the following manner. The
Company shall notify the Trustee for the Registered Securities of such
series in writing of the amount of Defaulted Interest proposed to be paid
on each Registered Security of that series and the date of the proposed
payment, and at the same time the Company shall deposit with such Trustee
an amount of money in the currency or currency unit in which the
Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series and except as
provided in Sections 311(b), 311(d) and 311(e)), equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to such Trustee for such deposit prior to
the date of the proposed payment such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon such Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall not be
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by such
Trustee of the notice of the proposed payment. Such Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the
<PAGE> 43
37
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder of Registered Securities of that series at
his address as it appears in the Security Register not less than 10 days
prior to such Special Record Date. Such Trustee may, in its discretion, in
the name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper published in the English language,
customarily on each Business Day and of general circulation in New York,
New York, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having
been mailed as aforesaid, such Defaulted interest shall be paid to the
Persons in whose names the Registered Securities of that series (or their
respective Predecessor Securities) are registered on such Special Record
Date and shall no longer be payable pursuant to the following clause(2).
(2) The Company may make payment of any Defaulted Interest on
Registered Securities of any particular series in any other lawful manner
not inconsistent with the requirements of any securities exchange on which
the Registered Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice is given by the Company to the
Trustee for the Securities of such series of the proposed manner of
payment pursuant to this clause, such manner of payment shall be deemed
practicable by such Trustee.
Subject to the foregoing provisions of this Section and Section
305, each Security delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Security shall carry the rights
to interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners. Prior to due presentment of a
Registered Security for registration of transfer, the Company, the Trustee for
such Security and any agent of the Company or such Trustee may treat the Person
in whose name any such Security is registered as the owner of such Security for
the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest, if any, on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, such Trustee nor any agent of the Company or such Trustee shall be
affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto
shall pass by delivery. The Company, the Trustee for such Security and any
agent of the Company or such Trustee may treat the bearer of any Bearer
Security and the bearer of any coupon as the absolute owner of such Bearer
<PAGE> 44
38
Security or coupon for the purpose of receiving payment thereof or on account
thereof and for all other purposes whatsoever, whether or not such Security or
coupon be overdue, and neither the Company, such Trustee nor any agent of the
Company or such Trustee shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 309. Cancellation. All Securities and coupons surrendered
for payment, redemption, registration of transfer or exchange, or delivered in
satisfaction of any sinking fund payment, shall, if surrendered to any Person
other than the Trustee for such Securities, be delivered to such Trustee and,
in the case of Registered Securities and matured coupons, shall be promptly
cancelled by it. All Bearer Securities and unmatured coupons so delivered to
the Trustee for such Securities shall be cancelled by such Trustee. The Company
may at any time deliver to the Trustee for Securities of a series for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly cancelled by such Trustee.
Notwithstanding any other provision of this Indenture to the contrary, in the
case of a series, all the Securities of which are not to be originally issued
at one time, a Security of such series shall not be deemed to have been
Outstanding at any time hereunder if and to the extent that subsequent to the
authentication and delivery thereof, such Security is delivered to the Trustee
for such Security for cancellation by the Company or any agent thereof upon the
failure of the original purchaser thereof to make payment therefor against
delivery thereof, and any Security so delivered to such Trustee shall be
promptly cancelled by it. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities and coupons
held by the Trustee for such Securities shall be disposed of by such Trustee in
accordance with its standard procedures and a certificate of disposition
evidencing such disposition of Securities and coupons shall be provided to the
Company by such Trustee. In the case of any temporary global Security, which
shall be disposed of if the entire aggregate principal amount of the Securities
represented thereby has been exchanged, the certificate of disposition shall
state that all certificates required pursuant to Section 304 hereof,
substantially in the form of Exhibit B hereto (or in the form of any substitute
exhibit as provided in the last paragraph of Section 304), to be given by
Euroclear or CEDEL, S.A., have been duly presented to the Trustee for such
Securities by Euroclear or CEDEL, S.A., as the case may be. Permanent global
<PAGE> 45
39
Securities shall not be disposed of until exchanged in full for definitive
Securities or until payment thereon is made in full.
SECTION 310. Computation of Interest. Except as otherwise specified
as contemplated by Section 301 for Securities of any particular series,
interest on the Securities of each series shall be computed on the basis of a
360-day year of twelve 30-day months and, in the case of an incomplete month,
the number of days elapsed, the amount of interest payable on the Securities of
any series for any period to be equal to the product of (i) the principal
amount of the Securities of such series Outstanding during such period, (ii)
the stated rate of interest per annum (expressed as a decimal fraction) payable
on the Securities of such series and (iii) a fraction, the numerator of which
is the total number of full months elapsed in such period multiplied by 30,
plus the number of days in any incomplete month during which such Securities
were Outstanding, and the denominator of which is 360.
SECTION 311. Currency and Manner of Payments in Respect of
Securities. (a) With respect to Registered Securities of any series not
permitting the election provided for in paragraph (b) below or the Holders of
which have not made the election provided for in paragraph (b) below, and with
respect to Bearer Securities of any series, except as provided in paragraph (d)
below, payment of the principal of (and premium, if any) and interest if any,
on any Registered or Bearer Security of such series will be made in the
currency or currency unit in which such Registered Security or Bearer Security,
as the case may be, is payable.
(b) It may be provided pursuant to Section 301 with respect to
Registered Securities of any series that Holders shall have the option, subject
to paragraphs (d) and (e) below, to receive payments of principal of (and
premium, if any) or interest if any, on such Registered Securities in any of
the currencies or currency units which may be designated for such election by
delivering to the Trustee for such series of Registered Securities a written
election with signature guarantees and in form and substance satisfactory to
such Trustee, not later than the close of business on the Election Date
immediately preceding the applicable payment date. If a Holder so elects to
receive such payments in any such currency or currency unit, such election will
remain in effect for such Holder until changed by such Holder by written notice
to the Trustee for such series of Registered Securities (but any such change
must be made not later than the close of business on the Election Date
immediately preceding the next payment date to be effective for the payment to
be made on such payment date and no such change of election may be made with
respect to payments to be made on any Registered Security of such series with
respect to which an Event of Default has occurred or notice of redemption has
been given by the Company pursuant to Article Eleven). In the event any Holder
makes any such election pursuant to the
<PAGE> 46
40
preceding sentence, such election will not be effective on any transferee of
such Holder and such transferee shall be paid in the currency or currency unit
indicated pursuant to paragraph (a) above unless such transferee makes an
election pursuant to the preceding sentence; provided, however, that such
election, if in effect while funds are on deposit with respect to the
Securities of such series as described in Section 401(a)(1)(B) or Section 1007,
will be effective on any transferee of such Holder unless otherwise specified
pursuant to Section 301 for the Securities of such series. Any Holder of any
such Registered Security who shall not have delivered any such election to the
Trustee of such series of Registered Securities not later than the close of
business on the applicable Election Date will be paid the amount due on the
applicable payment date in the relevant currency or currency unit as provided
in paragraph (a) of this Section 311. In no case may a Holder of Securities of
any series elect to receive payments in any currency or currency unit as
described in this Section 311(b) following a deposit of funds with respect to
the Securities of such series as described in Section 401(a)(1)(B) or Section
1007. The Trustee for each such series of Registered Securities shall notify
the Currency Determination Agent as soon as practicable after the Election Date
of the aggregate principal amount of Registered Securities for which Holders
have made such written election.
(c) If the election referred to in paragraph (b) above has been
provided for pursuant to Section 301, then not later than the fourth Business
Day after the Regular Record Date for each payment date for Registered
Securities of any series, the Currency Determination Agent will deliver to the
Company a written notice specifying, in the currency or currency unit in which
Registered Securities of such series are payable, the respective aggregate
amounts of principal of (and premium, if any) and interest, if any, on the
Registered Securities to be made on such payment date, specifying the amounts
in such currency or currency unit so payable in respect of the Registered
Securities of such series as to which the Holders thereof shall have elected to
be paid in a currency or currency unit other than that in which such series is
denominated as provided in paragraph (b) above. If the election referred to in
paragraph (b) above has been provided for pursuant to Section 301 and if at
least one Holder has made such election, then, on the second Business Day
preceding such payment date the Company will deliver to the Trustee for such
series of Registered Securities an Exchange Rate Officers' Certificate in
respect of the Dollar, Foreign Currency, ECU or currency unit payments to be
made on such payment date. The Dollar, Foreign Currency, ECU or currency unit
amount receivable by Holders of Registered Securities who have elected payment
in a currency or currency unit as provided in paragraph (b) above shall, unless
otherwise provided pursuant to Section 301, be determined by the Company on the
basis of the applicable Market Exchange Rate in effect on the third Business
Day (the "Valuation Date") immediately preceding each payment date.
<PAGE> 47
41
(d) If a Conversion Event occurs with respect to a Foreign Currency,
the ECU or any other currency unit in which any of the Securities are
denominated or payable other than pursuant to an election provided for pursuant
to paragraph (b) above, then with respect to each date for the payment of
principal of (and premium, if any) and interest, if any, on the applicable
Securities denominated or payable in such Foreign Currency, the ECU or such
other currency unit occurring after the last date on which such Foreign
Currency, the ECU or such other currency unit was available (the "Conversion
Date"), the Dollar shall be the currency of payment for use on each such
payment date. The Dollar amount to be paid by the Company to the Trustee of
each such series of Securities and by such Trustee or any Paying Agent to the
Holders of such Securities with respect to such payment date shall be the
Dollar Equivalent of the Foreign Currency or, in the case of a currency unit
the Dollar Equivalent of the Currency Unit, in each case as determined by the
Currency Determination Agent in the manner provided in paragraph (f) or (g)
below.
(e) If the Holder of a Registered Security denominated in any
currency or currency unit shall have elected to be paid in another currency or
currency unit as provided in paragraph (b) above, and a Conversion Event occurs
with respect to such elected currency or currency unit, such Holder shall
receive payment in the currency or currency unit in which payment would have
been made in the absence of such election. If a Conversion Event occurs with
respect to the currency or currency unit in which payment would have been made
in the absence of such election, such Holder shall receive payment in Dollars
as provided in paragraph (d) of this Section 311.
(f) The "Dollar Equivalent of the Foreign Currency" shall be
determined by the Currency Determination Agent and shall be obtained for each
subsequent payment after the Conversion Date by converting the specified
Foreign Currency into Dollars at the Market Exchange Rate on the Conversion
Date.
(g) The "Dollar Equivalent of the Currency Unit" shall be determined
by the Currency Determination Agent and subject to the provisions of paragraph
(h) below shall be the sum of each amount obtained by converting the Specified
Amount of each Component Currency into Dollars at the Market Exchange Rate for
such Component Currency on the Valuation Date with respect to each payment.
(h) For purposes of this Section 311 the following terms shall have
the following meanings:
A "Component Currency" shall mean any currency which, on the
Conversion Date, was a component of the relevant currency unit, including, but
not limited to, the ECU.
A "Specified Amount" of a Component Currency shall mean the number of
units of such Component Currency or fractions
<PAGE> 48
42
thereof which were represented in the relevant currency unit, including, but
not limited to, the ECU, on the Conversion Date. If after the Conversion Date
the official unit of any Component Currency is altered by way of combination or
subdivision, the Specified Amount of such Component Currency shall be divided
or multiplied in the same proportion. If after the Conversion Date two or more
Component Currencies are consolidated into a single currency, the respective
Specified Amounts of such Component Currencies shall be replaced by an amount
in such single currency equal to the sum of the respective Specified Amounts of
such consolidated Component Currencies expressed in such single currency, and
such amount shall thereafter be a Specified Amount and such single currency
shall thereafter be a Component Currency. If after the Conversion Date any
Component Currency shall be divided into two or more currencies, the Specified
Amount of such Component Currency shall be replaced by amounts of such two or
more currencies, each of whose Dollar Equivalent at the Market Exchange Rate on
the date of such replacement shall be equal to the Dollar Equivalent of the
Specified Amount of such former Component Currency at the Market Exchange Rate
on such date divided by the number of currencies into which such Component
Currency was divided, and such amounts shall thereafter be Specified Amounts
and such currencies shall thereafter be Component Currencies. If, after the
Conversion Date of the relevant currency unit, including, but not limited to,
the ECU, a Conversion Event (other than any event referred to above in this
definition of "Specified Amount") occurs with respect to any Component Currency
of such currency unit and is continuing on the applicable Valuation Date, the
Specified Amount of such Component Currency shall, for purposes of calculating
the Dollar Equivalent of the Currency Unit be converted into Dollars at the
Market Exchange Rate in effect on the Conversion Date of such Component
Currency.
"Election Date" shall mean any date for any series of Registered
Securities as specified pursuant to Section 301(17) by which the written
election referred to in Section 311 (b) may be made, such date to be not later
than the Regular Record Date for the earliest payment for which such election
may be effective.
All decisions and determinations of the Currency Determination Agent
regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent
of the Currency Unit, the Market Exchange Rate and changes in the Specified
Amounts as specified above shall be in its sole discretion and shall, in the
absence of manifest error, be conclusive for all purposes and irrevocably
binding upon the Company, the Trustee for the appropriate series of Securities
and all Holders of such Securities denominated or payable in the relevant
currency or currency units. The Currency Determination Agent shall promptly
give written notice to the Company and the Trustee for the appropriate series
of Securities of any such decision or determination.
<PAGE> 49
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In the event of a Conversion Event with respect to a Foreign
Currency, the Company, after learning thereof, will immediately give written
notice thereof to the Trustee of the appropriate series of Registered
Securities and Currency Determination Agent (and such Trustee will promptly
thereafter give notice in the manner provided in Section 106 to the Holders)
specifying the Conversion Date. In the event of a Conversion Event with respect
to the ECU or any other currency unit in which Registered Securities are
denominated or payable, the Company, after learning thereof, will immediately
give written notice thereof to the Trustee of the appropriate series of
Registered Securities and Currency Determination Agent (and such Trustee will
promptly thereafter give notice in the manner provided in Section 106 to the
Holders) specifying the Conversion Date and the Specified Amount of each
Component Currency on the Conversion Date. In the event of any subsequent
change in any Component Currency as set forth in the definition of Specified
Amount above, the Company, after learning thereof, will similarly give written
notice to the Trustee of the appropriate series of Registered Securities and
Currency Determination Agent.
The Trustee of the appropriate series of Registered Securities shall
be fully justified and protected in relying and acting upon information
received by it from the Company and the Currency Determination Agent and shall
not otherwise have any duty or obligation to determine such information
independently.
SECTION 312. Appointment and Resignation of Successor Currency
Determination Agent. (a) If and so long as the Securities of any series (i)
are denominated in a currency unit or a currency other than Dollars or (ii) may
be payable in a currency unit or a currency other than Dollars, or so long as
it is required under any other provision of this Indenture, then the Company
will maintain with respect to each such series of Securities, or as so
required, a Currency Determination Agent. The Company will cause the Currency
Determination Agent to make the necessary foreign exchange determinations at
the time and in the manner specified pursuant to Section 301 for the purpose of
determining the applicable rate of exchange and for the purpose of converting
the issued currency or currency unit into the applicable payment currency or
currency unit for the payment of principal (and premium, if any) and interest
if any, pursuant to Section 311.
(b) No resignation of the Currency Determination Agent and no
appointment of a successor Currency Determination Agent pursuant to this
Section shall become effective until the acceptance of appointment by the
successor Currency Determination Agent as evidenced by a written instrument
delivered to the Company and the Trustee of the appropriate series of
Securities accepting such appointment executed by the successor Currency
Determination Agent.
<PAGE> 50
44
(c) If the Currency Determination Agent shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Currency Determination Agent for any cause, with respect to the Securities of
one or more series, the Company, by a Board Resolution, shall promptly appoint
a successor Currency Determination Agent or Currency Determination Agents with
respect to the Securities of that or those series (it being understood that any
such successor Currency Determination Agent may be appointed with respect to
the Securities of one or more or all of such series and that at any time there
shall only be one Currency Determination Agent with respect to the Securities
of any particular series).
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Securities of any Series.
(a) The Company shall be deemed to have satisfied and discharged the entire
indebtedness on all the Securities of any particular series and, so long as no
Event of Default shall be continuing, the Trustee for the Securities of such
series, upon Company Request and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of such
indebtedness, when:
(1) either
(A) all Securities of such series theretofore authenticated and
delivered and all coupons, if any, appertaining thereto (other than (i)
coupons appertaining to Bearer Securities surrendered for exchange for
Registered Securities and maturing after such exchange, whose surrender is
not required or has been waived as provided in Section 305, (ii) any
Securities and coupons of such series which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 306,
(iii) coupons appertaining to Securities called for redemption and
maturing after the relevant Redemption Date, whose surrender is not
required as provided in Section 1107 and (iv) Securities and coupons of
such series for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid
to the Company or discharged from such trust as provided in the last
paragraph of Section 1003) have been delivered to such Trustee for
cancellation; or
(B) except as otherwise specified pursuant to Section 301 for
the Securities of such series, with respect to all Outstanding Securities
of such series described in (A) above (and, in the case of (i) or (ii)
below, any coupons appertaining thereto) not theretofore so delivered
<PAGE> 51
45
to the Trustee for the Securities of such series for cancellation:
(i) the Company has deposited or caused to be deposited
with such Trustee, or in a trust fund established pursuant to a trust
agreement in form and substance satisfactory to the Trustee, as trust
funds in trust an amount in the currency or currency unit in which
the Securities of such series are payable (except as otherwise
specified pursuant to Section 301 for the Securities of such series
and except as provided in Sections 311(b), 311(d) and 311(e), in
which case the deposit to be made with respect to Securities for
which an election has occurred pursuant to Section 311(b), or a
Conversion Event has occurred as provided in Sections 311(d) and
311(e), shall be made in the currency or currency unit in which such
Securities are payable as a result of such election or Conversion
Event), sufficient to pay and discharge the entire indebtedness on
all such Outstanding Securities of such series and any related
coupons for principal (and premium, if any) and interest if any, to
the Stated Maturity or any Redemption Date as contemplated by Section
402, as the case may be; or
(ii) the Company has deposited or caused to be deposited
with such Trustee, or in a trust fund established pursuant to a trust
agreement in form and substance satisfactory to the Trustee, as
obligations in trust such amount of Government Obligations as will,
as evidenced by a Certificate of a Firm of Independent Public
Accountants delivered to such Trustee, together with the
predetermined and certain income to accrue thereon (without
consideration of any reinvestment thereof), be sufficient to pay and
discharge when due the entire indebtedness on all such Outstanding
Securities of such series and any related coupons for unpaid
principal (and premium, if any) and interest if any, to the Stated
Maturity or any Redemption Date as contemplated by Section 402, as
the case may be; or
(iii) the Company has deposited or caused to be deposited
with such Trustee, or in a trust fund established pursuant to a trust
agreement in form and substance satisfactory to the Trustee, in trust
an amount equal to the amount referred to in clause (i) or (ii) in
any combination of currency or currency unit or Government
Obligations;
(2) the Company has paid or caused to be paid all other sums payable
with respect to the Securities of such series and any related coupons;
<PAGE> 52
46
(3) the Company has delivered to such Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of the entire indebtedness on all Securities of such series and any
related coupons have been complied with;
(4) if the Securities of such series and any related coupons are not
to become due and payable at their Stated Maturity within one year of the
date of such deposit or may not be called for redemption within one year
of the date of such deposit under arrangements satisfactory to such
Trustee as of the date of such deposit, then the Company shall have given,
not later than the date of such deposit, notice of such deposit to the
Holders of such Securities; and
(5) if the conditions set forth in Section 401 (a)(1)(A) have not
been satisfied, and unless otherwise specified pursuant to Section 301 for
the Securities of such series, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling, or
(B) since the date of this Indenture there has been a change in applicable
United States federal income tax law, in either case to the effect that,
and based upon which such Opinion of Counsel shall confirm that, the
beneficial owners of Securities of such series will not recognize income,
gain or loss for United States federal income tax purposes as a result of
such deposit, satisfaction and discharge and will be subject to United
States federal income tax on the same amount and in the same manner and at
the same time as would have been the case if such deposit, satisfaction
and discharge had not occurred.
(b) Upon the satisfaction of the conditions set forth in this
Section 401 with respect to all the Securities of any series, the terms and
conditions of the Securities of such series including the terms and conditions
with respect thereto set forth in this Indenture, shall no longer be binding
upon, or applicable to, the Company and the Holders of the Securities of such
series and any related coupons shall look for payment only to the funds or
obligations deposited with the Trustee pursuant to Section 401 (a)(1)(B) or in
a trust fund established pursuant to Section 401 (a)(1)(B) ; provided, however,
that in no event shall the Company be discharged from (i) any payment
obligations in respect of Securities of such series and any related coupons
which are deemed not to be Outstanding under clause (3) of the definition
thereof if such obligations continue to be valid obligations of the Company
under applicable law, (ii) from any obligations under Sections 402(b), 607, 610
and 1008 and (iii) from any obligations under Sections 304, 305 and 306 (except
that Securities of such series issued upon registration of transfer or exchange
or in lieu of mutilated, destroyed, lost or stolen Securities and any related
coupons shall not be obligations of the Company) and
<PAGE> 53
47
Sections 311, 516, 701 and 1002; and provided, further, that in the event a
petition seeking relief under any applicable bankruptcy law is filed and not
discharged with respect to the Company within 91 days after the deposit, the
entire indebtedness on all Securities of such series and any related coupons
shall not be discharged, and in such event the Trustee shall return such
deposited funds or obligations as it is then holding to the Company upon
Company Request. Notwithstanding the satisfaction of the conditions set forth
in this Section 401 with respect to all the Securities of any series not
denominated in Dollars, upon the happening of any Conversion Event the Company
shall be obligated to make the payments in Dollars required by Section 311 (d)
to the extent that the Currency Determination Agent is unable to convert any
Foreign Currency or currency unit in its possession pursuant to Section
401(a)(1)(B) into the Dollar Equivalent of the Foreign Currency or the Dollar
Equivalent of the Currency Unit as the case may be. If, after the deposit
referred to in Section 401 has been made, a Conversion Event occurs as
contemplated in Section 311(d) or 311(e), then the indebtedness represented by
such Security shall be fully discharged if the deposit made with respect to
such Security shall be converted into the currency or currency unit in which
such Security is payable at the Dollar Equivalent of the Foreign Currency or
the Dollar Equivalent of the Currency Unit. The Trustee for such series of
Securities shall return to the Company any non-converted funds or securities in
its possession after such payments have been made.
SECTION 402. Application of Trust Money. (a) All money and
obligations deposited in a trust fund or with the Trustee for any series of
Securities pursuant to Section 401 or Section 1007 shall be held irrevocably in
trust and shall be made under the terms of an escrow trust agreement in form
satisfactory to such Trustee. Such money and obligations shall be applied by
such Trustee, in accordance with the provisions of the Securities, any coupons,
this Indenture and such escrow trust agreement, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as such Trustee may determine, to the Persons entitled thereto, of the
principal of (and premium, if any) and interest if any, on the Securities for
the payment of which such money and obligations have been deposited with such
Trustee. If Securities of any series are to be redeemed prior to their Stated
Maturity, whether pursuant to any optional redemption provisions or in
accordance with any mandatory sinking fund requirement, the Company shall make
such arrangements as are satisfactory to the Trustee for any series of
Securities for the giving of notice of redemption by such Trustee in the name,
and at the expense, of the Company.
(b) The Company shall pay and shall indemnify the Trustee for any
series of Securities against any tax, fee or other charge imposed on or
assessed against Government Obligations deposited pursuant to Section 401 or
Section 1008 or
<PAGE> 54
48
the interest and principal received in respect of such Government Obligations
other than any such tax, fee or other charge which by law is payable by or on
behalf of Holders. The obligation of the Company under this Section 402(b)
shall be deemed to be an obligation of the Company under Section 607(2).
(c) Anything in this Article Four to the contrary notwithstanding,
the Trustee for any series of Securities shall deliver or pay to the Company
from time to time upon Company Request any money or Government Obligations held
by it as provided in Section 401 or Section 1007 which, as expressed in a
Certificate of a Firm of Independent Public Accountants delivered to such
Trustee, are in excess of the amount thereof which would then have been
required to be deposited for the purpose for which such money or Government
Obligations were deposited or received provided such delivery can be made
without liquidating any Government Obligations.
SECTION 403. Satisfaction and Discharge of Indenture.
Upon compliance by the Company with the provisions of Section 401 as to the
satisfaction and discharge of each series of Securities issued hereunder, and
if the Company has paid or caused to be paid all other sums payable under this
Indenture (including without limitation amounts owed to the Trustee under
Section 607), this Indenture shall cease to be of any further effect (except as
otherwise provided herein). Upon Company Request and receipt of an Opinion of
Counsel and an Officers' Certificate complying with the provisions of Section
102, the Trustees for all series of Securities (at the expense of the Company)
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture.
Notwithstanding the satisfaction and discharge of this Indenture, any
obligations of the Company under Sections 304, 305, 306, 311, 402(b), 516, 607,
610, 701, 1002 and 1008 and the obligations of the Trustee for any series of
Securities under Section 402 shall survive.
SECTION 404. Reinstatement. If the Trustee for any series of
Securities is unable to apply any of the amounts (for purposes of this Section
404, "Amounts") or Government Obligations, as the case may be, described in
Section 401(a)(1) (B) (i) or (ii), respectively, in accordance with the
provisions of Section 401 by reason of any legal proceeding or any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities of such series and the coupons, if any,
appertaining thereto shall be revived and reinstated as though no deposit had
occurred pursuant to Section 401 until such time as the Trustee for such series
is permitted to apply all such Amounts or Governmental Obligations, as the case
may be, in accordance with the provisions of Section 401; provided, however,
that if, due to the reinstatement of its rights or obligations hereunder, the
Company
<PAGE> 55
49
has made any payment of principal of (or premium, if any) or interest, if any,
on such Securities or coupons, the Company shall be subrogated to the rights of
the Holders of such Securities or coupons to receive payment from such Amounts
or Government Obligations, as the case may be, held by the Trustee for such
series.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default" wherever used
herein with respect to Securities of any series, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law, pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), unless such event is either inapplicable
to a particular series or it is specifically deleted or modified in the
supplemental indenture creating such series of Securities or in the form of
Security for such series:
(1) default in the payment of any interest upon any Security of such
series or a related coupon, if any, when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of such series when it becomes due and payable, whether
at Maturity or otherwise; or
(3) default in the deposit of any sinking fund payment or analogous
obligation when and as due by the terms of a Security of such series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company contained in this Indenture in respect of the
Securities of such series (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of Securities of a series other than such
series), all of such covenants and warranties in the Indenture which are
not expressly stated to be for the benefit of a particular series of
Securities being deemed in respect of the Securities of all series for
this purpose, and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company to the Trustee or to the Company and the Trustee by the Holders of
at least 25% in principal amount of the Outstanding Securities of
<PAGE> 56
50
such series, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder, or
(5) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed (other than the Securities) by the Company
or any Subsidiary of the Company or under any mortgage, indenture or
instrument (other than this Indenture or the Securities) under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company, whether such indebtedness
now exists or shall hereafter be created, which default shall constitute a
failure to pay any portion of the principal of such indebtedness in an
amount exceeding $20,000,000 (or, in the case of indebtedness denominated
in a currency other than U.S. dollars, an amount exceeding $20,000,000
based on the exchange rate in effect at the end of the Company's most
recently completed fiscal quarter) when due and payable after the
expiration of any applicable grace period with respect thereto or shall
have resulted in such indebtedness in an aggregate amount exceeding
$20,000,000 (or, in the case of indebtedness denominated in a currency
other than U.S. dollars, an amount exceeding $20,000,000 based on the
exchange rate in effect at the end of the Company's most recently
completed fiscal quarter) becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable,
without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 10 days after the
date on which payment is due or the date of such acceleration; or
(6) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable bankruptcy law or (B) a decree or
order adjudging the Company a bankrupt or insolvent or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under any applicable
bankruptcy law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of
substantially all of the property of the Company, or ordering the winding
up or liquidation of the affairs of the Company and the continuance of any
such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable bankruptcy law, or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
the Company to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
<PAGE> 57
51
bankruptcy law, or to the commencement of any bankruptcy or insolvency
case or proceeding against the Company or the filing by the Company of a
petition or answer or consent seeking reorganization or relief under any
applicable bankruptcy law, or the consent by the Company to the filing of
such petition or to the appointment of or the taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of substantially all of the property of
the Company or the making by the Company of an assignment for the benefit
of creditors, or the admission by the Company in writing of its inability
to pay its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(8) any other Event of Default provided with respect to Securities of
that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default described in paragraph (1), (2), (3), (4) or (8) (if the
Event of Default under paragraph (4) or (8) is with respect to less than all
series of Securities then Outstanding) of Section 501 occurs and is continuing
with respect to any series of Securities, then and in each and every such case,
unless the principal of all the Securities of such series shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding
hereunder (each such series acting as a separate class), by notice in writing
to the Company (and to the Trustee if given by Holders), may declare the
principal amount (or if the Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of that series) of all the Securities of such series to be due and
payable immediately, and upon any such
<PAGE> 58
52
declaration of acceleration the same, together with any accrued interest and
all other amounts owing thereunder and hereunder, shall become and shall be
immediately due and payable, anything in this Indenture or in the Securities of
such series contained to the contrary notwithstanding, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived. If an Event of Default described in paragraph (4) or (8) (if the Event
of Default under paragraph (4) or (8) is with respect to all series of
Securities then Outstanding), or (5) of Section 501 occurs and is continuing,
then and in each and every such case, unless the principal of all the
Securities shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of all the
Securities then Outstanding hereunder (treated as one class), by notice in
writing to the Company (and to the Trustee if given by Holders), may declare
the principal amount (or, if any Securities are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Securities then Outstanding to be due and payable
immediately, and upon any such declaration the same, together with any accrued
interest and all other amounts owing thereunder and hereunder, shall become and
shall be immediately due and payable, anything in this Indenture or in the
Securities contained to the contrary notwithstanding, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived. If an Event of Default described in paragraph (6) or (7) of Section
501 occurs and is continuing, then and in each and every such case, unless the
principal of all the Securities of such series then Outstanding shall have
already become due and payable, the principal amount (or, if any Securities are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms thereof) of all the Securities of such series,
together with any accrued interest and all other amounts owing thereunder and
hereunder, shall immediately become due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee for the Securities of
any series as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities of that series, by written
notice to the Company and such Trustee, may rescind and annul such declaration
and its consequences if
(1) the Company has paid or deposited with such Trustee a sum sufficient to pay
(A) in the currency or currency unit in which that series of
Securities is payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series and except as provided
in Sections 311(b), 311(d), and 311(e)), all overdue interest on all
Securities of that series and any related coupons,
(B) in the currency or currency unit in which that series of
Securities is payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series and except as provided
in Sections 311(b), 311 (d), and 311 (e)), the principal of (and
premium, if any, on) any Securities of that series which have become
due otherwise than by such declaration of acceleration and interest
thereon from the date such principal became due at a rate per annum
equal to the rate borne by the Securities of such series (or, in the
case of Original Issue Discount Securities, the Securities' Yield to
Maturity), to the extent that the payment of such interest shall be
legally enforceable,
(C) in the currency or currency unit in which that series of
Securities is payable (except as
<PAGE> 59
53
otherwise specified pursuant to Section 301 for the Securities of
such series and except as provided in Sections 311(b), 311(d), and
311(e)), to the extent that payment of such interest is lawful,
interest upon overdue interest at a rate per annum equal to the rate
borne by the Securities of such series (or, in the case of Original
Issue Discount Securities, the Securities' Yield to Maturity), and
(D) in Dollars all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of such Trustee, its agents and counsel;
and
(2) all Events of Default with respect to the Securities of such
series, other than the non-payment of the principal of Securities of that
series which have become due solely by such acceleration, have been cured
or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if:
(1) default is made in the payment of any interest upon any Security
of any series and any related coupons when such interest becomes due and
payable and such default continues for a period of 30 days; or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security of any series at its Maturity;
and any such default continues for any period of grace provided with respect to
the Securities of such series, the Company will, upon demand of the Trustee for
the Securities of such series, pay to the Trustee, for the benefit of the
Holders of such Securities and coupons, the whole amount then due and payable
on such Securities and coupons for principal (and premium, if any) and
interest, if any, with interest upon the overdue principal (and premium, if
any) and, to the extent that payment of such interest shall be legally
enforceable, upon any overdue installments of interest at a rate per annum
equal to the rate borne by such Securities (or, in the case of Original Issue
Discount Securities, the Securities' Yield to Maturity); and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of such Trustee, its agents and counsel.
<PAGE> 60
54
If the Company fails to pay such amounts forthwith upon such demand,
such Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceedings to judgment or final decree, and may enforce the
same against the Company or any other obligor upon the Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Company or any other obligor upon the Securities,
wherever situated.
If an Event of Default with respect to Securities of any particular
series occurs and is continuing, the Trustee for the Securities of such series
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders of Securities of that series by such appropriate judicial
proceedings as such Trustee shall deem most effectual to protect and enforce
any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relating to the Company or any other obligor upon the Securities of
any series or the property of the Company or of such other obligor or their
creditors, the Trustee for the Securities of such series (irrespective of
whether the principal (or lesser amount in the case of an Original Issue
Discount Security) of any Security of such series shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
such Trustee shall have made any demand on the Company for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise
(i) to file and prove a claim for the whole amount of principal
(or lesser amount in the case of an Original Issue Discount Security)
(and premium, if any) and interest, if any, owing and unpaid in
respect of the Securities of such series and any related coupons and
to file such other papers or documents as may be necessary or
advisable in order to have the claims of such Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of such Trustee, its agents and counsel and all other
amounts due to such Trustee under Section 607) and of the Holders of
the Securities of such series and any related coupons allowed in such
judicial proceeding;
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and
<PAGE> 61
55
(iii) unless prohibited by law or applicable regulations, to
vote on behalf of the Holders of the Securities of such series in any
election of a trustee in bankruptcy or other persons performing
similar functions;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each Holder
of Securities and coupons to make such payments to such Trustee, and in the
event that such Trustee shall consent to the making of such payments directly
to the Holders of Securities and coupons, to pay to such Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances of
such Trustee, its agents and counsel, and any other amounts due such Trustee
under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee for
the Securities of any series to authorize or consent to or accept or adopt on
behalf of any Holder of a Security or coupon any plan of reorganization,
arrangement, adjustment or composition affecting the Securities of such series
or the rights of any Holder thereof, or to authorize the Trustee for the
Securities or coupons of any series to vote in respect of the claim of any
Holder in any such proceeding, except as aforesaid, for the election of a
trustee in bankruptcy or other person performing similar functions.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons. All rights of action and claims under this Indenture or
the Securities or coupons of any series may be prosecuted and enforced by the
Trustee for the Securities of any series without the possession of any of the
Securities or coupons of such series or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by such Trustee
shall be brought in its own name as trustee of an express trust and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of such Trustee, its agents
and counsel and all other amounts due to such Trustee under Section 607, be for
the ratable benefit of the Holders of the Securities and coupons of such series
in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected. Any money collected by
the Trustee for the Securities of any series pursuant to this Article with
respect to the Securities or coupons of such series shall be applied in the
following order, at the date or dates fixed by such Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, if any, upon presentation of the Securities or coupons of such
series, or both, as the case may be, and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
<PAGE> 62
56
First: To the payment of all amounts due such Trustee under Section
607;
Second: To the payment of the amounts then due and unpaid upon the
Securities and coupons of such series for principal of (and premium, if
any) and interest, if any, on such Securities in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities and coupons for principal (and premium, if any)
and interest, if any, respectively; and
Third: The balance, if any, to the Person or Persons entitled thereto.
SECTION 507. Limitation on Suits. No Holder of any Security of any
particular series or any related coupons shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) an Event of Default with respect to that series shall have
occurred and be continuing and such Holder shall have previously given
written notice to the Trustee for the Securities of such series of such
default and the continuance thereof;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee for the Securities of such series to institute proceedings in
respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to such Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) such Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to such Trustee during such 60 day period by the Holders of a
majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more Holders of Securities of
that series shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or prejudice
the rights of any other Holders of Securities of that series, or to enforce any
right under this Indenture, except in the manner herein provided and
<PAGE> 63
57
for the equal and ratable benefit of all the Holders of Securities of that
series.
SECTION 508. Unconditional Right of Holders to Receive Principal
(and Premium, if any) and Interest, if any. Notwithstanding any other
provision in this Indenture, the Holder of any Security or coupon shall have
the right which is absolute and unconditional to receive payment of the
principal of (and premium, if any) and (subject to Section 307) interest, if
any, on such Security on the respective Stated Maturities expressed in such
Security or coupon (or, in the case of redemption, on the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the Trustee for
the Securities of any series or any Holder of a Security or coupon has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to such Trustee or to such Holder, then and in every
such case the Company, such Trustee and the Holders of Securities or coupons
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of such Trustee and such Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities or coupons in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee for the
Securities of any series or to the Holders of Securities or coupons is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or omission of
the Trustee for the Securities of any series or of any Holder of any Security
of such series to exercise any right or remedy accruing upon any Event of
Default with respect to the Securities of such series shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
such Trustee for the Securities or coupons of any series or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by
such Trustee or by the Holders, as the case may be.
<PAGE> 64
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SECTION 512. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities of any particular series shall
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee for the Securities of such
series with respect to the Securities of that series or exercising any trust or
power conferred on such Trustee with respect to such Securities, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture and could not involve the Trustee in personal
liability;
(2) subject to the provisions of Section 601, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee,
determine that the proceeding so directed would be unjustly prejudicial to
the Holders of Securities of such series not joining in any such
direction; and
(3) such Trustee may take any other action deemed proper by such
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults. The Holders of not less than
a majority in principal amount of the Outstanding Securities of any particular
series and any related coupons may on behalf of the Holders of all the
Securities of that series waive any past default hereunder with respect to that
series and its consequences, except a default not theretofore cured:
(1) in the payment of the principal of (or premium, if any) or
interest, if any, on any Security of that series; or
(2) with respect to a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of that series affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security or coupon by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee for the Securities or coupons of any series for
any action taken or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to
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pay the costs of such suit and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall (subject to applicable laws) not apply to any suit instituted by
the Trustee for the Securities of any series, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities of any particular series or to
any suit instituted by any Holder of any Security or coupon for the enforcement
of the payment of the principal of (or premium, if any) or interest if any, on
any Security of such series or the payment of any coupon on or after the
respective Stated Maturities expressed in such Security or coupon (or, in the
case of redemption, on or after the Redemption Date).
SECTION 515. Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee for any series of Securities, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 516. Judgment Currency. If, for the purpose of obtaining a
judgment in any court with respect to any obligation of the Company hereunder
or under any Security or any related coupon it shall become necessary to
convert into any other currency or currency unit any amount in the currency or
currency unit due hereunder or under such Security or coupon then such
conversion shall be made by the Currency Determination Agent at the Market
Exchange Rate as in effect on the date of entry of the judgment (the "Judgment
Date"). If pursuant to any such judgment conversion shall be made on a date
(the "Substitute Date") other than the Judgment Date and there shall occur a
change between the Market Exchange Rate as in effect on the Judgment Date and
the Market Exchange Rate as in effect on the Substitute Date, the Company
agrees to pay such additional amounts (if any) as may be necessary to ensure
that the amount paid is equal to the amount in such other currency or currency
unit which, when converted at the Market Exchange Rate as in effect on the
Judgment Date, is the amount due hereunder or under such Security or coupon.
Any amount due from the Company under this Section 516 shall be due as a
separate debt and is not to be affected by or merged into any judgment being
obtained for any other sums due hereunder or in respect of any Security or
coupon. In no event, however, shall the Company be required to pay more in the
currency or currency unit due hereunder or under such
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Security or coupon at the Market Exchange Rate as in effect on the Judgment Date
than the amount of currency or currency unit stated to be due hereunder or under
such Security or coupon so that in any event the Company's obligations hereunder
or under such Security or coupon will be effectively maintained as obligations
in such currency or currency unit and the Company shall be entitled to withhold
(or be reimbursed for, as the case may be) any excess of the amount actually
realized upon any such conversion on the Substitute Date over the amount due and
payable on the Judgment Date.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default with respect to the Securities of
any series for which the Trustee is serving as such,
(1) such Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against such
Trustee; and
(2) in the absence of bad faith on its part, such Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
such Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to such Trustee, such
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default with respect to a series of Securities
has occurred and is continuing, the Trustee for the Securities of such series
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee for Securities of any series from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
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(2) such Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) such Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a majority in principal amount of
the Outstanding Securities of any particular series, determined as provided
in Section 512, relating to the time, method and place of conducting any
proceeding for any remedy available to such Trustee, or exercising any
trust or power conferred upon such Trustee, under this Indenture with
respect to the Securities of that series; and
(4) no provision of this Indenture shall require the Trustee for any
series of Securities to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or in
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee for any series of Securities shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults. Within 90 days after the occurrence
of any default hereunder with respect to Securities of any particular series,
the Trustee for the Securities of such series shall give to Holders of
Securities of that series, in the manner set forth in Section 106, notice of
such default if known to such Trustee as provided in Section 603(h), unless such
default shall have been cured or waived; provided, however, that except in the
case of a default in the payment of the principal of (or premium, if any) or
interest if any, on any Security of that series, or in the deposit of any
sinking fund payment with respect to Securities of that series, such Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of such Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities of
that series and related coupons; and, provided, further, that in the case of any
default of the character specified in Section 501(4) with respect to Securities
of that series no such notice to Holders shall be given until at least 60 days
after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of
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time or both would become, an Event of Default with respect to Securities of
that series.
SECTION 603. Certain Rights of Trustee. Except as otherwise
provided in Section 601:
(a) the Trustee for any series of Security may rely and shall
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, discretion, consent,
order, bond, debenture, coupon or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture such Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, such Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) such Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) such Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities of any series pursuant to this Indenture for
which it is acting as Trustee, unless such Holders shall have offered to such
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) such Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument
opinion, report, notice, request, direction, consent order, bond, debenture,
coupon or other paper or document, but such Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters at it may see
fit, and, if such Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;
(g) such Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly
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or by or through agents or attorneys and such Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(h) the Trustee shall not be charged with knowledge of any Event of
Default with respect to the Securities of any series for which it is acting as
Trustee unless either (1) a Responsible Officer of the Trustee assigned to the
Corporate Trust Department of the Trustee (or any successor division or
department of the Trustee) shall have actual knowledge of the Event of Default
or (2) written notice of such Event of Default shall have been given to the
Trustee by the Company or any other obligor on such Securities or by any Holder
of such Securities; and
(i) such Trustee shall have no duties or responsibilities with respect
to and shall have no liability for the actions taken or the failures to act of
any other Trustees appointed hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein (except the description of the Trustee) and in the
Securities (except the Trustee's certificates of authentication thereof), and in
any coupons shall be taken as the statements of the Company, and the Trustee for
any series of Securities assumes no responsibility for their correctness. The
Trustee for any series of Securities makes no representations as to the validity
or sufficiency of this Indenture or of the Securities of any series or coupons.
The Trustee for any series of Securities shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof. The Trustee
shall have no duty or responsibility to examine or review and shall have no
liability for the contents of any document submitted to, or delivered to, any
Holder of Securities, in the nature of a preliminary or final placement
memorandum, official statement, offering circular, private placement memorandum,
or any similar disclosure document.
SECTION 605. May Hold Securities. The Trustee for any series of
Securities, any Paying Agent, Security Registrar or any other agent of the
Company or of such Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities and coupons and, subject to Sections 608 and
613, may otherwise deal with the Company with the same rights it would have if
it were not such Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust. Money held by the Trustee for any
series of Securities in trust hereunder need not be segregated from other funds
except as provided in Section 115 and except to the extent required by law. The
Trustee for any series of Securities shall be under no liability for interest on
any money received by it hereunder except as otherwise agreed with the Company.
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SECTION 607. Compensation and Reimbursement. The Company agrees
(1) to pay to the Trustee for any series of Securities from time to
time reasonable compensation for services rendered hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee for any series of Securities upon its request for all reasonable
expenses, disbursements and advances incurred or made by such Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith;
(3) when the Trustee incurs expenses or renders services after the
occurrence of a bankruptcy with respect to the Company, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any federal or state bankruptcy, insolvency,
arrangement, moratorium, reorganization or other debtor relief law; and
(4) to indemnify such Trustee and its agents, including any
Authenticating Agent, for, and to hold them harmless against, any loss,
liability or expense incurred without negligence or bad faith on their
part, arising out of or in connection with the acceptance or administration
of this trust including the fees, costs and expenses of defending
themselves against any claim or liability in connection with the exercise
or performance of any of their powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee for any series of Securities shall have a lien
prior to the Securities upon all property and funds held or collected by such
Trustee as such, except funds held in trust for the payment of principal of (and
premium, if any) or interest if any, on particular Securities.
SECTION 608. Disqualification; Conflicting Interests. The Trustee for
the Securities shall be subject to the provisions of Section 310(b) of the Trust
Indenture Act during the period of time required thereby. Nothing herein shall
prevent the Trustee from filing with the Commission the application referred to
in the penultimate paragraph of Section 310(b) of the Trust Indenture Act. In
determining whether the Trustee has a conflicting interest as defined in Section
310(b) of the Trust Indenture Act with respect to the Securities of any series,
there
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shall be excluded Securities of any particular series of Securities other than
that series.
The Trustee shall not be deemed to have a conflict of interest under
Section 310(b) of the Trust Indenture Act with respect to any other indenture
entered into with the Company; provided that the Securities issued by the
Company under this Indenture are wholly unsecured.
SECTION 609. Corporate Trustee Required; Different Trustees for
Different Series; Eligibility. There shall at all times be a Trustee hereunder
which shall be
(i) a corporation organized and doing business under the laws of
the United States of America, any state thereof, or the District of
Columbia, authorized under such laws to exercise corporate trust
powers, and subject to supervision or examination by Federal or State
authority, or
(ii) a corporation or other Person organized and doing business
under the laws of a foreign government that is permitted to act as
Trustee pursuant to a rule, regulation, or other order of the
Commission, authorized under such laws to exercise corporate trust
powers, and subject to supervision or examination by authority of such
foreign government or a political subdivision thereof substantially
equivalent to supervision or examination applicable to United States
institutional trustees,
having a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law or
to requirements of the aforesaid supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. Neither the Company nor any
Person directly or indirectly controlling, controlled by, or under common
control with the Company shall serve as Trustee for the Securities. A different
Trustee may be appointed by the Company for any series of Securities prior to
the issuance of such Securities. If the initial Trustee for any series of
Securities is to be other than Comerica Bank, the Company and such Trustee
shall, prior to the issuance of such Securities, execute and deliver an
indenture supplemental hereto, which shall provide for the appointment of such
Trustee as Trustee for the Securities of such series and shall add to or change
any of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee,
it being understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or
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trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereunder specified in this
Article.
SECTION 610. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee for the Securities of any series and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 611.
(b) The Trustee for the Securities of any series may resign at any
time with respect to the Securities of such series by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 611 shall not have been delivered to the Trustee for the
Securities of such series within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee for the Securities of any series may be removed at any
time with respect to the Securities of such series by Act of the Holders of a
majority in principal amount of the Outstanding Securities of such series,
delivered to such Trustee and to the Company.
(d) If at any time:
(1) the Trustee for the Securities of any series shall fail to comply
with Section 310(b) of the Trust Indenture Act pursuant to Section 608
hereof after written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security of such series for at least six
months, unless the Trustee's duty to resign is stayed in accordance with
the provisions of Section 310(b) of the Trust Indenture Act, or
(2) such Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) such Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of such Trustee or of its property
shall be appointed or any public officer shall take charge or control of
such Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case, (i)
the Company by a Board Resolution may remove such Trustee or (ii) subject
to Section 514, any Holder who has been a bona fide Holder of a Security of
such series for at least six months may, on behalf of himself and all
others
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similarly situated, petition any court of competent jurisdiction for the
removal of such Trustee and the appointment of a successor Trustee.
(e) If the Trustee for the Securities of any series shall resign, be
removed or become incapable of acting, or if a vacancy shall occur in the office
of Trustee for the Securities of any series for any cause, the Company, by a
Board Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of such series and shall comply with the applicable requirements of
Section 611. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of such series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forth with upon its acceptance of such appointment in
accordance with the applicable requirements of Section 611, become the successor
Trustee for the Securities of such series and supersede the successor Trustee
appointed by the Company. If no successor Trustee for the Securities of such
series shall have been so appointed by the Company or the Holders and shall have
accepted appointment in the manner required by Section 611, and if such Trustee
is still incapable of acting, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, subject to Section 514, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series in the
manner and to the extent provided in Section 106. Each notice shall include the
name of the successor Trustee with respect to the Securities of that series and
the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor. (a) Every
successor Trustee appointed hereunder with respect to the Securities of any
series shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee without any further act deed or conveyance, shall become vested with all
the rights, powers, trusts and duties of the retiring Trustee; but on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
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(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates, but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in Subsections (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee for the Securities of any series
shall be qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee for the Securities of any
series may be merged or converted or with which it may be consolidated, or any
corporation resulting
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from any merger, conversion or consolidation to which such Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of such Trustee, shall be the successor of such Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee or the Authenticating
Agent for such series then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee, or any successor Authenticating
Agent, as the case may be, may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor Trustee or
successor Authenticating Agent had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company. (a)
Subject to Subsection (b) of this Section, if the Trustee for the Securities of
any series shall be or shall become a creditor, directly or indirectly, secured
or unsecured, of the Company within three months prior to a default, as defined
in Subsection (c) of this Section, or subsequent to such a default, then, unless
and until such default shall be cured, such Trustee shall set apart and hold in
a special account for the benefit of such Trustee individually, the Holders of
the Securities of any such series and any coupons appertaining thereto and the
holders of other indenture securities (as defined in Subsection (c) of this
Section):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this Subsection, or from the exercise of any right of
set-off which such Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Company upon the date of such default; and
(2) all property received by such Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three
months' period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of such Trustee:
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(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
and (ii) the proceeds of the bona fide sale of any such claim by such
Trustee to a third person, and (iii) distributions made in cash, securities
or other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
any applicable bankruptcy law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three months' period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such three
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if such Trustee shall sustain
the burden of proving that at the time such property was so received such
Trustee had no reasonable cause to believe that a default as defined in
Subsection (c) of this Section would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in paragraph (B) or (C), as the case may be, to the extent of the
fair value of such property.
For the purpose of paragraphs (B), (C) and (D), property substituted
after the beginning of such three months' period for property held as security
at the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any preexisting claim of such Trustee as such creditor, such claim shall have
the same status as such preexisting claim.
If such Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between such Trustee, the Holders of the Securities of such series and the
holders of other indenture securities in such manner that such Trustee, such
Holders and the holders of other indenture securities realize, as a result of
payments from such special account and payments of dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to any applicable bankruptcy law, the same percentage of
their respective claims figured before crediting to the claim of such Trustee
anything on account of the receipt by it from the Company of the funds and
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property in such special account and before crediting to the respective claims
of such Trustee and the Holders of the Securities of such series and the holders
of other indenture securities dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to any
applicable bankruptcy law, but after crediting thereon receipts on account of
the indebtedness represented by their respective claims from all sources other
than from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or proceedings for reorganization pursuant to any
applicable bankruptcy law, whether such distribution is made in cash,
securities, or other property, but shall not include any such distribution with
respect to the secured portion, if any, of such claim. The court in which such
bankruptcy, receivership or proceedings for reorganization is pending shall have
jurisdiction (i) to apportion between such Trustee and the Holders of the
Securities of such series and other indenture securities, in accordance with the
provisions of this paragraph, the funds and property held in such special
account and proceeds thereof, or (ii) in lieu of such apportionment, in whole or
in part, to give to the provisions of this paragraph due consideration in
determining the fairness of the distributions to be made to such Trustee and the
Holders of the Securities of such series and the holders of other indenture
securities with respect to their respective claims, in which event it shall not
be necessary to liquidate or to appraise the value of any securities or other
property held in such special account or as security for any such claim, or to
make a specific allocation of such distributions as between the secured and
unsecured portions of such claims, or otherwise to apply the provisions of this
paragraph as a mathematical formula.
Any Trustee which has resigned or been removed with respect to the
Securities of any series after the beginning of such three months' period shall
be subject to the provisions of this Subsection as though such resignation or
removal had not occurred. If any Trustee has so resigned or been removed prior
to the beginning of such three months' period, it shall be subject to the
provisions of this Subsection if and only if the following conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account if such Trustee had continued as
Trustee for the Securities of such series, occurred after the beginning of
such three months' period; and
(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
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(b) There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from
(1) the ownership or acquisition of securities issued under any
indenture or any security or securities having a maturity of one year or
more at the time of acquisition by such Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders of the Securities of the
applicable series at the time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, escrow agent, paying agent, fiscal agent or depositary, or other
similar capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in Subsection (c) of this
Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in Subsection (c) of
this Section.
(c) For the purposes of this Section only:
(1) The term "default" means any failure to make payment in full of
the principal of (or premium, if any) or interest, if any, on any of the
Securities of the applicable series or upon the other indenture securities
when and as such principal, premium or interest becomes due and payable.
(2) The term "other indenture securities" means securities upon which
the Company is an obliger outstanding under any other indenture or under
this Indenture with respect to the Securities of any other series (i) under
which such Trustee is also trustee, (ii) which contains
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provisions substantially similar to the provisions of this Section, and
(iii) under which a default exists at the time of the apportionment of the
funds and property held in such special account.
(3) The term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by such Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
(5) The term "Company" means any obliger upon the Securities.
SECTION 614. Authenticating Agents. From time to time the Trustee for
the Securities of any series may, subject to its sole discretion, appoint one or
more Authenticating Agents with respect to the Securities of such series, which
may include any director or officer of the Company or any Affiliate with power
to act in the name of the Trustee and subject to its discretion in the
authentication and delivery of Securities of such series in connection with
transfers and exchanges under Sections 304, 305, 306 and 1107 as fully to all
intents and purposes as though such Authenticating Agent had been expressly
authorized by those Sections of this Indenture to authenticate and deliver
Securities of such series. For all purposes of this Indenture the authentication
and delivery of such Securities of such series by an Authentication Agent for
such Securities pursuant to this Section shall be deemed to be authentication
and delivery of such Securities "by the Trustee" for the Securities of such
series. Any such Authenticating Agent shall at all times be a director or
officer of a corporation organized and doing business under the laws of the
United States or of any State thereof, or the District of Columbia, authorized
under such laws to exercise corporate trust powers, and, if other than an
Affiliate of the Trustee, having a combined capital and surplus of at least
$25,000,000, and subject to supervision or examination by Federal, State, or
District of Columbia authority. If such corporation publishes reports of
condition at least annually
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pursuant to law or the requirements of such supervising or examining authority,
then for the purposes of this Section the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an
Authenticating Agent for any series of Securities shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any Authenticating Agent for any series of Securities may resign at
any time by giving written notice of resignation to the Trustee for such series
and to the Company. The Trustee for any series of Securities may at any time
terminate the appointment of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company in the manner set
forth in Section 105. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent for any series of
Securities shall cease to be eligible under this Section, the Trustee for such
series may appoint a successor Authenticating Agent, shall give written notice
of such appointment to the Company and shall give written notice of such
appointment to all Holders of Securities of such series in the manner set forth
in Section 106. Any successor Authenticating Agent, upon acceptance of his
appointment hereunder, shall become vested with all the rights, powers and
duties of his predecessor hereunder, with like effect as if originally named as
an Authenticating Agent No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Trustee for the Securities of each series agrees to pay to any
corporation any director or officer of which has been appointed as
Authenticating Agent for such series from time to time reasonable compensation
for such services, and such Trustee shall be entitled to be reimbursed for such
payments, subject to Section 607.
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If an appointment with respect to one or more series of Securities is
made pursuant to this Section, the Securities or such series may have endorsed
thereon, in addition to the Trustee's certification of authentication, an
alternate certificate of authentication in the following form:
"This is one of the Securities of the series designated therein
described in the within-mentioned Indenture.
Comerica Bank,
as Trustee
By
--------------------------
As Authenticating Agent"
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders. With respect to each particular series of Securities, the Company
will furnish or cause to be furnished to the Trustee for the Securities of such
series,
(a) semiannually, not more than 15 days after each Regular Record Date
relating to that series (or, if there is no Regular Record Date relating to that
series, on June 30 and December 31), a list, in such form as such Trustee may
reasonably require, containing all the information in the possession or control
of the Company or any of its Paying Agents other than such Trustee as to the
names and addresses of the Holders of that series as of such dates,
(b) on semi-annual dates in each year to be determined pursuant to
Section 301 if the Securities of such series do not bear interest, a list of
similar form and content, and
(c) at such other times as such Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished,
excluding from any such list names and addresses received by such Trustee in its
capacity as Security Registrar for the Securities of such series, if so acting.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee for each series of Securities shall preserve, in as current a
form as is reasonably practicable, the names and addresses of Holders of the
Securities of such series contained in the most recent lists furnished to such
Trustee as provided in Section 701 and the names and addresses of Holders of the
Securities of such series received by such Trustee in its capacity as Security
Registrar for such series, if so acting. The Trustee for each series of
Securities may destroy any list relating to such series of Securities furnished
to it as provided in Section 701 upon receipt of a new list relating to such
series so furnished.
(b) If three or more Holders of Securities of any particular series
(hereinafter referred to as "applicants") apply in writing to the Trustee for
the Securities of any such series, and furnish to such Trustee reasonable proof
that each such applicant has owned a Security of that series for a period of at
least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of that series with respect to their rights under this Indenture or
under the Securities of that series and is accompanied by a copy of the form of
proxy or other
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communication which such applicants propose to transmit, then such Trustee
shall, within five Business Days after the receipt of such application, at its
election, either
(i) afford such applicants access to the information preserved at
the time by such Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of
Holders of Securities of that series whose names and addresses appear
in the information preserved at the time by such Trustee in accordance
with Section 702(a), and as to the approximate cost of mailing to such
Holders the form of proxy or other communication, if any, specified in
such application.
If any such Trustee shall elect not to afford such applicants access
to that information, such Trustee shall, upon the written request of such
applicants, mail to each Holder of Securities of that series whose name and
address appears in the information preserved at the time by such Trustee in
accordance with Section 702(a), a copy of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to such Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender, such Trustee shall mail to such applicants and file
with the Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of such Trustee, such
mailing would be contrary to the best interests of the Holders of Securities of
that series or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If the Commission, after opportunity
for a hearing upon the objections specified in the written statement so filed,
shall enter an order refusing to sustain any of such objections or if, after the
entry of an order sustaining one or more of such objections, the Commission
shall find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, such Trustee
shall mail copies of such material to all such Holders with reasonable
promptness after the entry of such order and the renewal of such tender;
otherwise such Trustee shall be relieved of any obligation or duty to such
applicants respecting their application.
(c) Every Holder of Securities of each series or coupons, by receiving
and holding the same, agrees with the Company and the Trustee for the Securities
of such series that neither the Company nor such Trustee, nor any agent of
either of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders of the Securities of
such series in accordance with Section 702(b), regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of
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mailing any material pursuant to a request made under Section 702(b).
SECTION 703. Reports by Trustee. (a) Within 60 days after May 31 of
each year commencing with the year following the first issuance of Securities,
the Trustee for the Securities of each series shall, to the extent required by
the Trust Indenture Act, transmit by mail to all Holders of the Securities of
such series, as provided in subsection (c) of this Section a brief report dated
as of such date with respect to any of the following events which may have
occurred within the prior 12 months (but if no such event has occurred within
such period no report need be transmitted):
(1) any change to its eligibility under Section 609 and its
qualifications under Section 608, or in lieu thereof, if to the best of its
knowledge it has continued to be eligible and qualified under said
Sections, a written statement to such effect;
(2) the creation of any material change to a relationship specified in
Section 310(b)(1) through Section 310(b)(10) of the Trust Indenture Act;
(3) the character and amount of any advances (and if such Trustee
elects so to state, the circumstances surrounding the making thereof) made
by such Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Securities of such series, on any property or funds
held or collected by it as Trustee, except that such Trustee shall not be
required (but may elect) to report such advances if such advances so
remaining unpaid aggregate not more than 1/2 of 1% of the principal amount
of the Securities of such series Outstanding on the date of such report;
(4) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor upon the
Securities of such series) to such Trustee in its individual capacity, on
the date of such report, with a brief description of any property held as
collateral security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 613 (b) (2), (3),
(4) or (6);
(5) the property and funds, if any, physically in the possession of
such Trustee as such on the date of such report;
(6) any additional issue of Securities of such series which such
Trustee has not previously reported; and
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(7) any action taken by such Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities of such series, except action in respect
of a default, notice of which has been or is to be withheld by such Trustee
in accordance with Section 602.
(b) The Trustee for each series of Securities shall transmit by mail
to all Holders of Securities of such series, as provided in subsection (c) of
this Section, a brief report with respect to the character and amount of any
advances (and if such Trustee elects so to state, the circumstances surrounding
the making thereof) made by such Trustee (as such) since the date of the last
report transmitted pursuant to subsection (a) of this Section (or if no such
report has yet been so transmitted, since the date of execution of this
instrument) for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Securities of such series, on property or funds
held or collected by it as Trustee, and which it has not previously reported
pursuant to this subsection, except that such Trustee shall not be required (but
may elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of the Securities of such series
Outstanding at such time, such report to be transmitted within 90 days after
such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(1) to all Holders of Registered Securities, as the names and
addresses of such Holders appear in the Security Register;
(2) to such Holders of Bearer Securities as have, within the two years
preceding such transmission, filed their names and addresses with the
Trustee for such series of Bearer Securities for that purpose; and
(3) except in the case of reports pursuant to Subsection (b) of this
Section, to each Holder of a Security whose name and address is preserved
at the time by such Trustee, as provided in Section 702(a).
(d) A copy of each such report shall, at the time of such transmission
to Holders of Securities of any series, be filed by the Trustee for the
Securities of such series with each securities exchange upon which the
Securities of such series are listed with the Commission and with the Company.
The Company will notify such Trustee when such series of Securities is listed on
any securities exchange.
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SECTION 704. Reports by Company. The Company will:
(1) file with the Trustee for the Securities of such series, within 15
days after the Company is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which
the Company may be required to file with the Commission pursuant to Section
13 or Section 15 (d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports pursuant
to either of said Sections, then it will file with such Trustee and the
Commission, in accordance with rules and regulations prescribed from time
to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
Section 13 of the Securities Exchange Act of 1934 in respect of a security
listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(2) file with the Trustee for the Securities of such series and the
Commission, in accordance with rules and regulations prescribed from time
to time by the Commission, such additional information, documents, and
reports with respect to compliance by the Company with the conditions and
covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(3) transmit by mail to all Holders of Securities of each series, as
provided in Section 703 (c), within 30 days after the filing thereof with
the Trustee for the Securities of such series, such summaries of any
information, documents and reports required to be filed by the Company
pursuant to paragraphs (1) and (2) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The
Company shall not consolidate with or merge into any other Person, and the
Company may not, directly or indirectly, sell, convey, transfer or lease all or
substantially all of its properties and assets to any Person unless:
(1) the Person formed by or surviving such consolidation or merger or
the Person which acquires by conveyance or transfer, or which leases, all
or substantially all of the properties and assets of the
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Company shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia,
and shall expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee for each series of Securities, in form
reasonably satisfactory to each such Trustee, in the case of the Company,
the due and punctual payment of the principal of (and premium, if any) and
interest, if any (including all additional amounts, if any, payable
pursuant to Sections 516 or 1008) on, and any sinking fund payment in
respect of, all the Securities and any related coupons and the performance
of every covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default with respect to any series of Securities, and no event which, after
notice or lapse of time, or both, would become an Event of Default with
respect to any series of Securities, shall have happened and be continuing,
and
(3) the Company has delivered to the Trustee for each series of
Securities an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger, conveyance, transfer or lease and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with;
SECTION 802. Successor Corporation Substituted. Upon any consolidation
or merger, or any conveyance, transfer or lease of the properties and assets of
the Company substantially as an entirety in accordance with Section 801, the
successor corporation formed by such consolidation or merger or the successor
Person to which such conveyance or transfer or with which such lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein and thereafter, except in the
case of a lease, the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture, the Securities and any related
coupons.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities or coupons, the Company, when
authorized by a Board Resolution and the Trustee for the Securities of any or
all series, at any time and from time to time, may enter into one or more
indentures
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82
supplemental hereto, in form satisfactory to such Trustee, for any of the
following purposes:
(1) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company
herein and in the Securities contained; or
(2) to add to the covenants of the Company, for the benefit of the
Holders of all or any particular series of Securities and any related
coupons (and, if such covenants are to be for the benefit of fewer than all
series of Securities, stating that such covenants are being included solely
for the benefit of such series), to convey, transfer, assign, mortgage or
pledge any property to or with the Trustee or otherwise secure any series
of the Securities or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default with respect to any or all
series of Securities (and, if any such Event of Default applies to fewer
than all series of Securities, stating each series to which such Event of
Default applies); or
(4) to add to or to change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of or any
premium or interest on Bearer Securities, to permit Bearer Securities to be
issued in exchange for Registered Securities, to permit Bearer Securities
to be issued in exchange for Bearer Securities of other authorized
denominations, to provide (subject to applicable laws) for the issuance of
uncertificated Securities of any series in addition to or in place of any
certificated Securities and to make all appropriate changes for such
purposes; provided, however, that any such action shall not adversely
affect the interests of the Holders of Securities of any series or any
related coupons in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture;
provided, however, that any such change or elimination shall become
effective only when there is no Security Outstanding of any series created
prior to the execution of such supplemental indenture which is entitled to
the benefit of such provision; or
(6) to evidence and provide for the acceptance of appointment
hereunder of a Trustee other than Comerica Bank as Trustee for a series of
Securities and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
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the trusts hereunder by more than one Trustee, pursuant to the
requirements of Section 609; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
(8) to add to the conditions, limitations and restrictions on the
authorized amount, form, terms or purposes of issue, authentication and
delivery of Securities, as herein set forth, other conditions, limitations
and restrictions thereafter to be observed; or
(9) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Section 401; provided,
however, that any such action shall not adversely affect the interests of
the Holders of Securities of such series and any related coupons or any
other series of Securities in any material respect; or
(10) to add to or change or eliminate any provisions of this Indenture
as shall be necessary or desirable in accordance with any amendments to the
Trust Indenture Act; or
(11) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, to
convey, transfer, assign, mortgage or pledge any property to or with the
Trustee for the Securities of any series or to surrender any right or power
herein conferred upon the Company, or to make any other provisions with
respect to matters or questions arising under this Indenture, provided such
action shall not adversely affect the interests of the Holders of
Securities of any particular series in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders. The
Company, when authorized by a Board Resolution, and the Trustee for the
Securities of any or all series may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of such Securities and any
related coupons under this Indenture, but only with the consent of the Holders
of more than 50% in aggregate principal amount of the Outstanding Securities of
each series of Securities then Outstanding affected thereby, in each case by Act
of said Holders of Securities of each such series delivered to
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the Company and the Trustee for Securities of each such series; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any instalment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon, if any, or any premium
payable upon the redemption thereof, or change any obligation of the
Company to pay additional amounts pursuant to Section 1008 (except as
contemplated by Section 801(1) and permitted by Section 901(1)) or reduce
the amount of the principal of an Original Issue Discount Security that
would be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 502, or change the Place of Payment, or the
currency or currency unit in which any Security or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date); or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any particular series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture; or
(3) modify any of the provisions of this Section or Section 513 or
1007, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Security affected thereby; provided, however,
that this clause shall not be deemed to require the consent of any Holder
of a Security or coupon with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 1006, or the
deletion of this proviso, in accordance with the requirements of Sections
609, 611(b), 901(6) and 901(7).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee for any series of Securities shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee for any series of
Securities may, but shall not (except to the extent required in the case of a
supplemental indenture entered into under Section 901(6) or (7)) be obligated
to, enter into any such supplemental indenture which affects such Trustee's own
rights, liabilities, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder and of any coupons appertaining
thereto shall be bound thereby.
SECTION 905. Conformity With Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any particular series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee for the Securities of such series, bear a notation in
form approved by such Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities of any series and
any related coupons so modified as to conform, in the opinion of the Trustee for
the Securities of such series and the Board of Directors of the Company, to any
such supplemental indenture may be prepared and executed by the Company and such
Securities may be authenticated and delivered by such Trustee in exchange for
Outstanding Securities of such series and any related coupons.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal (and Premium, if any) and Interest,
if any. The Company agrees, for the benefit of each particular series of
Securities, that it will duly and punctually pay in the currency or currency
unit in which the Securities of such series are payable (except as otherwise
specified pursuant to Section 301 for the Securities of such
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series and except as provided in Sections 311 (b), 311 (d) and 311 (e)) the
principal of (and premium, if any) and interest, if any, on that series of
Securities in accordance with the terms of the Securities of such series, any
coupons appertaining thereto and this Indenture, and will duly comply with all
the other terms, agreements and conditions contained in, or made for the benefit
of, the Securities of such series and any appurtenant coupons. Unless otherwise
specified as contemplated by Section 301 with respect to any series of
Securities, any interest due on Bearer Securities on or before Maturity shall be
payable only upon presentation and surrender of the several coupons for such
interest installments as are evidenced thereby as they severally mature. The
interest, if any, due in respect of any temporary or permanent global Security,
together with any additional amounts payable in respect thereof, as provided in
the terms and conditions of such Security, shall be payable only upon
presentation of such Security to the Trustee thereof for notation thereon of the
payment of such interest.
SECTION 1002. Maintenance of Office or Agency. If Securities of a
series are issuable only as Registered Securities, the Company will maintain in
each Place of Payment for that series an office or agency where Securities of
that series may be presented or surrendered for payment, and an office or agency
where Securities of that series may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company with respect to
the Securities of that series and this Indenture may be served. If Securities of
a series are issuable as Bearer Securities, the Company will maintain (A) an
office or agency in a Place of Payment for that series in the United States
where any Registered Securities of that series may be presented or surrendered
for payment, where any Registered Securities of that series may be surrendered
for registration of transfer, where Securities of that series may be surrendered
for exchange for Registered Securities, where notices and demands to or upon the
Company in respect of the Securities of that series and this Indenture may be
served and where Bearer Securities of that series and related coupons may be
presented or surrendered for payment in the circumstances described in the
following paragraph (and not otherwise), (B) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series which is located
outside the United States, an office or agency where Securities of that series
and related coupons may be presented and surrendered for payment; provided,
however, that if the Securities of that series are listed on the Stock Exchange
or any other stock exchange located outside the United States and such stock
exchange shall so require, the Company will maintain a Paying Agent for the
Securities of that series in Luxembourg or any other required city located
outside the United States, as the case may be, so long as the Securities of that
series are listed on such exchange, and (C) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series located outside the
United States, at an office or agency where any Registered Securities of that
series may be surrendered for
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registration of transfer, where Securities of that series may be surrendered for
exchange and where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. The Company will
give prompt written notice to the Trustee for the Securities of that series of
the location, and any change in the location, of any such office or agency. If
at any time the Company shall fail to maintain any such required office or
agency in respect of any series of Securities or shall fail to furnish the
Trustee for the Securities of that series with the address thereof, such
presentations (to the extent permitted by law) and surrenders of Securities of
that series may be made and notices and demands may be made or served at the
Corporate Trust Office of such Trustee, except that Bearer Securities of that
series and the related coupons may be presented and surrendered for payment at
the offices specified in the Security, and the Company hereby appoints the same
as its agent to receive such respective presentations, surrenders, notices and
demands.
No payment of principal (and premium, if any) or interest, if any, on
Bearer Securities shall be made at any office or agency of the Company in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
Payments will not be made in respect of Bearer Securities or coupons
appertaining thereto pursuant to presentation to the Company or their respective
designated Paying Agents within the United States. Notwithstanding the
foregoing, payment of principal of (and premium, if any) and interest, if any,
on any Bearer Security denominated and payable in Dollars will be made at the
office of the Company's Paying Agent in the United States, if, and only if,
payment in Dollars of the full amount of such principal, premium or interest, as
the case may be, at all offices or agencies outside the United States maintained
for that purpose by the Company in accordance with this Indenture is illegal or
effectively precluded by exchange controls or other similar restrictions.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Place of Payment) where the Securities of
one or more series may be presented or surrendered for any or all of the
purposes specified above in this Section and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for such purpose. The Company will give prompt written
notice to the Trustee for the Securities of each series so affected of any such
designation or rescission and of any change in the location of any such office
or agency.
If and so long as the Securities of any series (i) are denominated in
a currency other than Dollars or (ii) may be payable in a currency other than
Dollars, or so long as it is
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required under any other provision of the Indenture, then the Company will
maintain with respect to each such series of Securities, or as so required, a
Currency Determination Agent.
SECTION 1003. Money, for Securities Payments to Be Held in Trust. If
the Company shall at any time act as its own Paying Agent with respect to any
particular series of Securities and any related coupons, it will, on or before
each due date of the principal of (and premium, if any) or interest, if any, on
any of the Securities of that series, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum in the currency or currency unit
in which the Securities of such series are payable (except as otherwise
specified pursuant to Section 301 for the Securities of such series and except
as provided in Sections 311(b), 311(d) and 311(e)) sufficient to pay the
principal (and premium, if any) and interest, if any, so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided,
and will promptly notify the Trustee for the Securities of such series of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
particular series of Securities and any related coupons, the Company will, on or
prior to each due date of the principal of (and premium, if any) or interest, if
any, on any such Securities, deposit with a Paying Agent for the Securities of
such series a sum (in the currency or currency unit described in the preceding
paragraph) sufficient to pay the principal (and premium, if any) and interest,
if any, so becoming due, such sum to be held in trust for the benefit of the
Persons entitled thereto, and (unless such Paying Agent is the Trustee for the
Securities of such series) the Company will promptly notify such Trustee of its
action or failure so to act.
The Company will cause each Paying Agent for any particular series of
Securities other than the Trustee for the Securities of such series to execute
and deliver to such Trustee an instrument in which such Paying Agent shall agree
with such Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest, if any, on Securities of that series in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give such Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal of (or premium, if any) and interest, if any, on Securities of
that series; and
(3) at any time during the continuation of any such default, upon the
written request of such Trustee, forthwith
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pay to such Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee for the
Securities of any series all sums held in trust by the Company or such Paying
Agent, such sums to be held by such Trustee upon the same trusts as those upon
which sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to such Trustee, such Paying Agent shall be released from
all further liability with respect to such money.
Any money deposited with the Trustee for the Securities of any series
or any Paying Agent, or then held by the Company, in trust for the payment of
the principal of (and premium, if any) and interest, if any, on any Securities
of any particular series and remaining unclaimed for two years after such
principal (and premium, if any) and interest, if any, has become due and payable
shall, unless otherwise required by mandatory provisions of applicable escheat,
or abandoned or unclaimed property law, be paid to the Company on Company
Request or (if then held by the Company) shall be discharged from such trusts;
and the Holder of such Security shall, thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of
such Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that such Trustee or such Paying Agent, before being required to make
any such repayment may give written notice to the Holder of such Security in the
manner set forth in Section 106, or may, in its discretion, in the name and at
the expense of the Company, cause to be published at least once in a newspaper
published in the English language, customarily on each Business Day and of
general circulation in New York, New York notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will, unless otherwise required by mandatory provisions of
applicable escheat, or abandoned or unclaimed property law, be repaid to the
Company.
SECTION 1004. Statements as to Compliance. The Company will deliver to
the Trustee for each series of Securities, within 120 days after the end of each
fiscal year, a written statement signed by the principal executive officer,
principal financial officer or principal accounting officer of the Company
stating that:
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision; and
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(2) to the best of his knowledge, based on such review, the Company is
(or is not) in compliance with all conditions and covenants under this
Indenture, and if the signer has obtained knowledge of any default by the
Company in the performance, observance or fulfillment of any such condition
or covenant, specifying each such default and the nature thereof.
For purposes of this Section, such compliance shall be determined
without regard to any period of grace or requirement of notice provided under
this Indenture.
SECTION 1005. Corporate Existence. Subject to Article Eight, the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if the Board of Directors shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1006. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any covenant or condition set forth in
Section 1005 and any other covenant not set forth herein and specified pursuant
to Section 301 to be applicable to the Securities of any series, if before or
after the time for such compliance the Holders of more than 50% in principal
amount of the Outstanding Securities of each series of Securities affected by
the omission (which, in the case of a covenant not set forth herein and
specified pursuant to Section 301 to be applicable to the Securities of any
series, shall include only those series to which such covenant is so specified
to be applicable) shall, in each case by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
for the Securities of each series with respect to any such covenant or condition
shall remain in full force and effect.
SECTION 1007. Defeasance of Certain Obligations. If specified pursuant
to Section 301 to be applicable to the Securities of any series, the Company may
omit to comply with any term, provision or condition set forth in Section 801
and any other covenant not set forth herein and specified pursuant to Section
301 to be applicable to the Securities of such series and subject to this
Section 1007, and any such omission with respect to such Sections shall not be
an Event of Default, in each case with respect to the Securities of such series;
provided, however, that the following conditions have been satisfied:
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(1) with respect to all Outstanding Securities of such series and any
coupons appertaining thereto not theretofore delivered to the Trustee for
cancellation:
(i) the Company has deposited or caused to be deposited with such
Trustee, or in a trust fund established pursuant to a trust agreement
in form and substance satisfactory to the Trustee, as trust funds in
trust an amount in the currency or currency unit in which the
Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series and except
as provided in Sections 311(b), 311(d) and 311(e), in which case the
deposit to be made with respect to Securities for which an election
has occurred pursuant to Section 311(b), or a Conversion Event has
occurred as provided in Sections 311(d) and 311(e), shall be made in
the currency or currency unit in which such Securities are payable as
a result of such election or Conversion Event), sufficient to pay and
discharge the entire indebtedness on all such Outstanding Securities
of such series and any related coupons for principal (and premium, if
any) and interest, if any, to the Stated Maturity or any Redemption
Date as contemplated by Section 402, as the case may be; or
(ii) the Company has deposited or caused to be deposited with
such Trustee, or in a trust fund established pursuant to a trust
agreement in form and substance satisfactory to the Trustee, as
obligations in trust such amount of Government Obligations as will, as
evidenced by a Certificate of a Firm of Independent Public Accountants
delivered to such Trustee, together with the predetermined and certain
income to accrue thereon (without consideration of any reinvestment
thereof), be sufficient to pay and discharge when due the entire
indebtedness on all such Outstanding Securities of such series and any
related coupons for unpaid principal (and premium, if any) and
interest, if any, to the Stated Maturity or any Redemption Date as
contemplated by Section 402, as the case may be; or
(iii) the Company has deposited or caused to be deposited with
such Trustee, or in a trust fund established pursuant to a trust
agreement in form and substance satisfactory to the Trustee, in trust
an amount equal to the amount referred to in clause (i) or (ii) in any
combination of currency or currency unit or Government Obligations;
(2) no Event of Default or event which with the giving of notice or
lapse of time, or both, would become an Event of Default with respect to
the Securities of that series shall have occurred and be continuing on the
date of such
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deposit and no Event of Default under Section 501(6) or Section 501(7) or
event which with the giving of notice or lapse of time, or both, would
become an Event of Default under Section 501(6) or Section 501(7) shall
have occurred and be continuing on the 91st day after such date; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the defeasance contemplated in the Section
have been complied with.
All the obligations of the Company under this Indenture with respect
to the Securities of such series, other than with respect to Section 801, and
any other covenant not set forth herein and specified pursuant to Section 301 to
be applicable to the Securities of such series and subject to this Section 1007,
shall remain in full force and effect. Anything in this Section 1007 to the
contrary notwithstanding, the Trustee for any series of Securities shall deliver
or pay to the Company, from time to time upon Company Request, any money or
Government Obligations held by it as provided in this Section 1007 which, as
expressed in a Certificate of a Firm of Independent Public Accountants delivered
to such Trustee, are in excess of the amount thereof which would then have been
required to be deposited for the purpose for which such money or Government
Obligations were deposited or received, provided such delivery can be made
without liquidating any Government Obligations.
SECTION 1008. Payment of Additional Amounts. If specified pursuant
to Section 301, the provisions of this Section 1008 shall be applicable to
Securities of any series.
The Company will, subject to the exceptions and limitations set forth
below, pay to the Holder of any Security or coupon who is a United States Alien
such additional amounts as may be necessary so that every net payment on such
Security or coupon, after deduction or withholding by the Company or any of its
Paying Agents for or on account of any present or future tax, assessment or
other governmental charge imposed upon or as a result of such payment by the
United States (or any political subdivision or taxing authority thereof or
therein), will not be less than the amount provided in such Security or in such
coupon to be then due and payable. However, the Company will not be required to
make any payment of additional amounts for or on account:
(a) any tax, assessment or other governmental charge that would not
have been so imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor or beneficiary
of, or a person holding a power over, such Holder, if such Holder is an estate
or trust, or a member or shareholder of such Holder, if such Holder is a
partnership or corporation) and the United States, including,
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without limitation, such Holder (or such fiduciary, settlor, beneficiary, person
holding a power, member or shareholder) being or having been a citizen, resident
or treated as a resident thereof or being or having been engaged in trade or
business or present therein or having or having had a permanent establishment
therein, or (ii) such Holder's present or former status as a personal holding
company, foreign personal holding company, controlled foreign corporation or
passive foreign investment company with respect to the United States or as a
corporation that accumulates earnings to avoid United States federal income tax;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Holder of such Security or
coupon for payment on a date more than 10 days after the date on which such
payment became due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property
tax or any similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment in respect of any Security or
coupon, if such payment can be made without such withholding by at least one
other Paying Agent;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by withholding from payments in respect of such Security or
coupon;
(f) any tax, assessment or other governmental charge imposed on a
Holder of a Security or coupon that actually or constructively owns 10 percent
or more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of Section 871(h)(3) of the Code or
that is a controlled foreign corporation related to the Company through stock
ownership;
(g) any tax, assessment or other governmental charge imposed as a
result of the failure to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the Holder or
beneficial owner of a Security or coupon, if such compliance is required by
statute or by regulation of the United States as a precondition to relief or
exemption from such tax, assessment or other governmental charge;
(h) any tax, assessment or other governmental charge imposed with
respect to payments on any Registered Security by reason of the failure of the
Holder to fulfill the statement requirement of Sections 871(h) or 881(c) of the
Code; or
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(i) any combination of items (a), (b), (c), (d), (e), (f), (g) and
(h);
nor will additional amounts be paid with respect to any payment on any such
Security or coupon to a Holder who is a fiduciary or partnership or other than
the sole beneficial owner of such payment to the extent such payment would be
required by the laws of the United States (or any political subdivision thereof)
to be included in the income for federal income tax purposes of a beneficiary or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner who would not have been entitled to payment of the additional
amounts had such beneficiary, settlor, member or beneficial owner been the
Holder of such Security or coupon.
The term "United States Alien" means any corporation, partnership,
individual or fiduciary that is, for United States federal income tax purposes,
a foreign corporation, a nonresident alien individual, a nonresident fiduciary
of a foreign estate or trust, or a foreign partnership one or more of the
members of which is, for United States federal income tax purposes, a foreign
corporation, a nonresident alien individual or a nonresident fiduciary of a
foreign estate or trust.
Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of (and premium, if any) and interest, if any, on any
Security or payment with respect to any coupon of any series, such mention shall
be deemed to include mention of the payment of additional amounts provided for
in the terms of such Securities and this Section to the extent that, in such
context, additional amounts are, were or would be payable in respect thereof
pursuant to the provisions of this Section and express mention of the payment of
additional amounts (if applicable) in any provisions hereof shall not be
construed as excluding additional amounts in those provisions hereof where such
express mention is not made.
If the Securities of a series provide for the payment of additional
amounts as contemplated by Section 301(24), at least 10 days prior to the first
Interest Payment Date with respect to that series of Securities (or if the
Securities of that series will not bear interest prior to maturity, the first
day on which a payment of principal and any premium is made), and at least 10
days prior to each date of payment of principal (and premium, if any) and
interest, if any, if there has been any change with respect to the matters set
forth in the below- mentioned Officers' Certificate, the Company will furnish
the Trustee for that series of Securities and the Company's principal Paying
Agent or Paying Agents, if other than such Trustee, with an Officers'
Certificate instructing such Trustee and such Paying Agent or Paying Agents
whether such payment of principal of (and premium, if any) and interest, if any,
on the Securities of that series shall be made to Holders of Securities of that
series or any related coupons who are United States
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Aliens without withholding for or on account of any tax, assessment or other
governmental charge referred to above or described in the Securities of that
series. If any such withholding shall be required, then such Officers'
Certificate shall specify by country the amount, if any, required to be withheld
on such payments to such Holders of Securities or coupons and the Company will
pay to the Trustee for such series of Securities or such Paying Agent such
additional amounts as may be required pursuant to the terms applicable to such
series. The Company covenants to indemnify the Trustee for such series of
Securities and any Paying Agent for, and to hold them harmless against, any
loss, liability or expense reasonably incurred without gross negligence or bad
faith on their part arising out of or in connection with actions taken or
omitted by any of them in reliance on any Officers' Certificate furnished
pursuant to this Section 1008.
SECTION 1009. Limitation on Liens. The Company will not, and will not
permit any Subsidiary, directly or indirectly, to create, incur, assume or
permit to exist any Lien on or with respect to any property or assets of the
Company or any Subsidiary or any interest therein or any income or profits
therefrom, unless the Securities are secured equally and ratably with (or prior
to) any and all other indebtedness secured by such Lien, except for (i) any Lien
securing indebtedness incurred to finance the purchase price or cost of
construction of property (or additions, substantial repairs, alterations or
substantial improvements thereto), provided that such Lien and the indebtedness
secured thereby are incurred within twelve months of the later of acquisition or
completion of construction (or addition, repair, alteration or improvement) and
full operation thereof, and provided, further, that such Lien does not relate to
any property acquired or constructed by the Company or a Subsidiary pursuant to
clause (iii) (B) of Section 1010 hereof; (ii) any Lien arising in the ordinary
course of business, other than in connection with indebtedness for borrowed
money; (iii) any Lien on property or assets acquired by the Company or any
Subsidiary after the date of issuance of the Securities, provided that such Lien
existed on the date such property or assets were acquired, and provided, further
that, except as provided in clause (i) above, such Lien was incurred prior to,
and not in anticipation of, such acquisition; (iv) any Lien on the property or
assets of, or on the shares of stock of, any corporation or entity existing at
the time such corporation or entity first becomes a Subsidiary, provided that
such Lien was incurred prior to, and not in anticipation of, such corporation or
entity becoming a Subsidiary; (v) any Lien existing on the date of the
Indenture; (vi) any Lien arising out of judgments or awards against the Company
or any Subsidiary with respect to which the Company or such Subsidiary shall in
good faith be prosecuting an appeal or proceedings for review, or Liens which
are discharged within 60 days of entry of judgment or Liens (including, without
limitation, appellate bonds) incurred by the Company or a Subsidiary for the
purpose of obtaining a
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stay or discharge in the course of any ongoing legal proceeding to which the
Company or such Subsidiary is a party; (vii) any Lien for taxes not yet due and
payable by the Company or any Subsidiary or which the Company or such Subsidiary
is contesting in good faith; (viii) any Lien in favor of the Company or a
Subsidiary; (ix) any Lien (other than a Lien permitted under any of clauses (i)
through (viii) of this paragraph) securing indebtedness of the Company or any
Subsidiary, provided that the total outstanding indebtedness (including the fair
value of all Sale and Lease-Back Transactions permitted under clause (i) of
Section 1010 hereof but excluding any obligations associated with such Sale and
Lease-Back Transactions) that may be secured under this clause (viii) may not
exceed 15% of the Consolidated Net Tangible Assets of the Company and its
Subsidiaries at the end of the most recent fiscal quarter; (x) any Lien
extending, renewing or replacing any Lien permitted by clauses (i) through (ix)
above; and (xi) any Lien securing indebtedness the proceeds of which are
deposited, promptly upon receipt, with the Trustee solely for the purpose of
effecting a legal defeasance or covenant defeasance as set forth under Section
1007 hereof.
In the case of Liens permitted under clauses (i), (iii) and (iv), such
Liens may not relate to any property or assets of the Company or a Subsidiary
other than the property so acquired, constructed, added, repaired, altered or
improved, as the case may be. In the case of Liens permitted under clause (x),
such Liens (A) may not relate to any property or assets of the Company or a
Subsidiary other than the property or assets to which the Lien being extended,
renewed or replaced relates to, and (B) may not secure indebtedness in excess of
that secured by the Lien being extended, renewed or replaced. In addition, if
any Lien permitted under clause (ix) is extended, renewed or replaced pursuant
to clause (x), then the aggregate amount of indebtedness secured by all such
extended, renewed or replaced Liens (originally permitted under clause (ix))
shall be included thereafter in all calculations of Liens permitted under clause
(ix).
SECTION 1010. Limitation on Sale and Lease-Back. The Company covenants
and agrees that it will not, nor will it permit any Subsidiary, directly or
indirectly, to enter into, assume, guarantee, or otherwise become liable with
respect to any Sale and Lease-Back Transaction (as defined below); provided,
however, that the Company or any Subsidiary may enter into (i) a Sale and
Lease-Back Transaction that, had such Sale and Lease-Back Transaction been
structured as a mortgage rather than as a Sale and Lease-Back Transaction, the
Company or such Subsidiary would have been permitted to enter into such
transaction without equally and ratably securing (or granting priority to) the
Securities of all series pursuant to Section 1009 hereof, (ii) a Sale and
Lease-Back Transaction between or among the Company and any of its Subsidiaries
or between or among Subsidiaries and (iii) a Sale and Lease-Back Transaction,
provided that, the
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proceeds of the sale of the property or assets to be leased are at least equal
to the fair value (the fair value of such proceeds, if other than cash, to be
determined by the chief financial officer of the Company) and an amount equal to
such net proceeds is applied within 180 days of the effective date of such Sale
and Lease-Back Transaction to (A) the retirement (other than any mandatory
retirement and other than any prohibited retirement of securities) of
indebtedness for borrowed money (including the Securities) incurred or assumed
by the Company or any Subsidiary (other than indebtedness for borrowed money
owed to the Company or any Subsidiary) which by its terms matures on, or is
extendable or renewable at the option of the obligor to, a date more than 12
months after the date of the creation of such indebtedness and, in the case of
such indebtedness of the Company, which ranks on a parity with, or senior in
right of payment to, the Securities or (B) the purchase or construction of other
property, provided, that, upon the completion of such purchase or construction,
such property is owned by the Company or a Subsidiary free and clear of all
Liens. For the purposes of this Indenture, a Sale and Lease- Back Transaction
means any arrangement with any Person providing for the leasing to the Company
or a Subsidiary for a period of more than three years of any property which has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person to which funds have been or are to be advanced by
such Person on the security of the leased property.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of This Article. Redemption of Securities
of any series (whether by operation of a sinking fund or otherwise) as permitted
or required by any form of Security issued pursuant to this Indenture shall be
made in accordance with such form of Security and this Article; provided,
however,that if any provision of any such form of Security shall conflict with
any provision of this Article, the provision of such form of Security shall
govern.
SECTION 1102. Election to Redeem; Notice to Trustee. The election of
the Company to redeem any Securities of any series shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption at the election of the
Company of less than all of the Securities of any particular series, the Company
shall, at least 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee for the Securities
of such series) notify such Trustee by Company Request of such Redemption Date
and of the principal amount of Securities of that series to be redeemed and
shall deliver to such Trustee such documentation and records as shall enable
such Trustee to select the Securities to be redeemed pursuant to Section 1103.
In the case of any redemption of
<PAGE> 104
98
Securities of any series prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee for Securities of such series
with an Officers' Certificate evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If
less than all the Securities are to be redeemed, the Company may select the
series to be redeemed, and if less than all of the Securities of any series are
to be redeemed, the particular Securities of that series to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee for
the Securities of such series, from the Outstanding Securities of that series
not previously called for redemption, by such method as such Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to the minimum authorized denomination for Securities of that
series, or any integral multiple thereof) of the principal amount of Securities
of that series of a denomination larger than the minimum authorized denomination
for Securities of that series pursuant to Section 302 in the currency or
currency unit in which the Securities of such series are denominated.
The Trustee for the Securities of any series to be redeemed shall
promptly notify the Company in writing of the Securities of such series selected
for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption. Notice of redemption shall be
given in the manner provided in Section 106 not later than the thirtieth day and
not earlier than the sixtieth day prior to the Redemption Date, to each Holder
of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities of a particular series are
to be redeemed, the identification (and, in the case of partial redemption,
the respective principal amounts) of the particular Securities to be
redeemed,
<PAGE> 105
99
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after said date,
(5) the place or places where such Securities, together in the case of
Bearer Securities with all coupons appertaining thereto, if any, maturing
after the Redemption Date are to be surrendered for payment of the
Redemption Price,
(6) that the redemption is for a sinking fund, if such is the case,
(7) that, unless otherwise specified in such notice, Bearer Securities
of any series, if any, surrendered for redemption must be accompanied by
all coupons maturing subsequent to the date fixed for redemption or the
amount of any such missing coupon or coupons will be deducted from the
Redemption Price or security or indemnity satisfactory to the Company, the
Trustee for such series and any Paying Agent is furnished, and
(8) if Bearer Securities of any series are to be redeemed and any
Registered Securities of such series are not to be redeemed, and if such
Bearer Securities may be exchanged for Registered Securities not subject to
redemption on this Redemption Date pursuant to Section 305 or otherwise,
the last date, as determined by the Company, on which such exchanges may be
made.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee for such Securities in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price. Prior to the opening of
business on any Redemption Date, the Company shall deposit with the Trustee for
the Securities to be redeemed or with a Paying Agent for such Securities (or, if
the Company is acting as its own Paying Agent for such Securities, segregate and
hold in trust as provided in Section 1003) an amount of money in the currency or
currency unit in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 301 for the Securities of such series
and except as provided in Sections 311(b), 311(d) and 311(e)) sufficient to pay
the principal amount of (and premium, if any, thereon), and (except if the
Redemption Date shall be an Interest Payment Date) any accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date,
<PAGE> 106
100
become due and payable at the Redemption Price therein specified in the currency
or currency unit in which the Securities of such series are payable (except as
otherwise provided pursuant to Section 301 for the Securities of such series and
except as provided in Sections 311(b), 311(d) and 311(e)) and from and after
such date (unless the Company shall default in the payment of the Redemption
Price) such Securities shall cease to bear interest and the coupons for such
interest appertaining to any Bearer Securities so to be redeemed, except to the
extent provided below, shall be void. Upon surrender of such Security for
redemption in accordance with said notice together with all coupons, if any,
appertaining thereto maturing after the Redemption Date, such Security or
specified portions thereof shall be paid by the Company at the Redemption Price;
provided, however, that installments of interest on Bearer Securities whose
Stated Maturity is on or prior to the Redemption Date shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of coupons for such interest,
and provided, further, that unless otherwise specified as contemplated by
Section 301, installments of interest on Registered Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be
accompanied by all coupons appertaining thereto maturing after the Redemption
Date, such Security may be paid after deducting from the Redemption Price an
amount equal to the face amount of all such missing coupons or the surrender of
such missing coupon or coupons may be waived by the Company if there is
furnished to the Company, the Trustee for such Security and any Paying Agent
such security or indemnity as they may require to save the Company, such Trustee
and any Paying Agent harmless. If thereafter the Holder of such Security shall
surrender to such Trustee or any Paying Agent any such missing coupon in respect
of which a deduction shall have been made from the Redemption Price, such Holder
shall be entitled to receive the amount so deducted; provided, however, that
interest represented by coupons shall be payable only at an office or agency
located outside the United States (except as otherwise provided in Section 1002)
and, unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal thereof (and premium, if any,
thereon) shall, until paid, bear interest from the Redemption Date at a rate per
annum equal to the rate borne by the Security (or, in the case of Original Issue
Discount Securities, the Security's Yield to Maturity).
<PAGE> 107
101
SECTION 1107. Securities Redeemed in Part. Any Registered Security
which is to be redeemed only in part shall be surrendered at the Place of
Payment (with, if the Company or the Trustee for such Security so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Security Registrar for such Security duly executed by, the
Holder thereof or his attorney duly authorized in writing), and the Company
shall execute and such Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Registered Security or Securities,
of any authorized denomination as requested by such Holder, of the same series
and having the same terms and provisions and in an aggregate principal amount
equal to and in exchange for the unredeemed portion of the principal of the
Registered Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of This Article. Redemption of Securities
through operation of a sinking fund as permitted or required by any form of
Security issued pursuant to this Indenture shall be made in accordance with such
form of Security and this Article; provided, however, that if any provision of
any such form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any particular series is herein referred to as a
"mandatory sinking fund payment", and any payment in excess of such minimum
amount provided for by the terms of Securities of any particular series is
herein referred to as an "optional sinking fund payment". If provided for by the
terms of Securities of any particular series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 1202. Each
sinking fund payment shall be applied to the redemption of Securities of any
particular series as provided for by the terms of Securities of that series.
SECTION 1202. Satisfaction of Sinking Fund Payments With Securities.
The Company (1) may deliver Outstanding Securities of a series (other than any
previously called for redemption), together in the case of any Bearer Securities
of such series with all unmatured coupons appertaining thereto, and (2) may
apply as a credit Securities of a series which have been redeemed either at the
election of the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the terms of
such Securities, in each case in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of such series required to be made
pursuant to the terms of such
<PAGE> 108
102
Securities as provided for by the terms of such series; provided, however, that
such Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee for such Securities at the
principal amount thereof and the amount of such sinking fund payment shall be
reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund. Not less than
60 days prior to each sinking fund payment date for any particular series of
Securities, the Company will deliver to the Trustee for the Securities of such
series an Officers' Certificate specifying the amount of the next ensuing
mandatory sinking fund payment for that series pursuant to the terms of that
series, the portion thereof, if any, which is to be satisfied by payment of cash
in the currency or currency unit in which the Securities of that series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of that series and except as provided in Sections 311(b), 311(d) and
311(c)) and the portion thereof, if any, which is to be satisfied by delivering
and crediting Securities of that series pursuant to Section 1202 and shall state
the basis for such credit and that such Securities have not previously been so
credited and will also deliver to such Trustee any Securities to be so
delivered. Such Trustee shall select the Securities to be redeemed upon such
sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1301. Purposes for Which Meetings May Be Called. If Securities
of a series are issuable as Bearer Securities, a meeting of Holders of
Securities of such series may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.
SECTION 1302. Call, Notice and Place of Meetings. (a) The Trustee for
any series of Securities that includes Bearer Securities, may at any time call a
meeting of the Holders of Securities of such series for any purpose specified in
Section 1301, to be held at such time and at such place in the Borough of
Manhattan, The City of New York, or in London, as such Trustee shall determine.
Notice of every meeting of Holders of Securities of such series, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be given, in the manner provided in
<PAGE> 109
103
Section 106, not less than 20 nor more than 180 days prior to the date fixed for
the meeting.
(b) In case at any time the Company pursuant to a Board Resolution, or
the Holders of at least 10% in principal amount of the Outstanding Securities of
any such series, shall have requested the Trustee for any such series to call a
meeting of the Holders of Securities of such series for any purpose specified in
Section 1301, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and such Trustee shall not have made the
first publication of the notice of such meeting within 30 days after receipt of
such request or shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company or the Holders of Securities of such series in
the amount above specified, as the case may be, may determine the time and the
place in the Borough of Manhattan, The City of New York, or in London, for such
meeting and may call such meeting for such purposes by giving notice thereof as
provided in subsection (a) of this Section.
SECTION 1303. Persons Entitled to Vote at Meetings. To be entitled to
vote at any meeting of Holders of Securities of any series, a Person shall be
(1) a Holder of one or more Outstanding Securities of such series, or (2) a
Person appointed by an instrument in writing as proxy for a Holder or Holders of
one or more Outstanding Securities of such series by such Holder or Holders. The
only Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any series shall be the Persons entitled to vote at
such meeting and their counsel, any representatives of the Trustee for such
series and its counsel and any representatives of the Company and its counsel.
SECTION 1304. Quorum; Action. The Persons entitled to vote a majority
in principal amount of the Outstanding Securities of a series shall constitute a
quorum for a meeting of Holders of Securities of such series. In the absence of
a quorum within 30 minutes of the time appointed for any such meeting, the
meeting shall, if convened at the request of Holders of Securities of such
series, be dissolved. In any other case the meeting may be adjourned for a
period of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period
of not less than 10 days as determined by the chairman of the meeting prior to
the adjournment of such adjourned meeting. Subject to Section 1305(d), notice of
the reconvening of any adjourned meeting shall be given as provided in Section
1302(a), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly that Persons
entitled to vote a majority in principal amount of the Outstanding Securities of
such series shall constitute a quorum.
<PAGE> 110
104
Except as limited by the proviso to Section 902, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Securities of that series;
provided, however, that except as limited by the proviso to Section 902, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which this Indenture expressly provides
may be made, given or taken by the Holders of a specified percentage which is
less than a majority in principal amount of the Outstanding Securities of a
series may be adopted at a meeting or an adjourned meeting duly reconvened and
at which a quorum is present as aforesaid by the affirmative vote of the Holders
of such specified percentage in principal amount of the Outstanding Securities
of that series.
Except as limited by the proviso to Section 902, any resolution passed
or decision taken at any meeting of Holders of Securities of any series duly
held in accordance with this Section shall be binding on all the Holders of
Securities of such series and the related coupons, whether or not present or
represented at the meeting.
SECTION 1305. Determination of Voting Rights; Conduct and Adjournment
of Meetings. (a) Notwithstanding any other provision of this Indenture, the
Trustee for any series of Securities that includes Bearer Securities may make
such reasonable regulations as it may deem advisable for any meeting of Holders
of Securities of such series in regard to proof of the holding of Securities of
such series and of the appointment of proxies and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified in Section 104
or by having the signature of the person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 104 to
certify to the holding of Bearer Securities. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee for any series of Securities that includes Bearer
Securities shall, by an instrument in writing, appoint a temporary chairman of
the meeting, unless the meeting shall have been called by the Company or by
Holders of Securities as provided in Section 1302(b), in which case the Company
or the Holders of Securities of the series calling the meeting, as the case may
be, shall in like manner appoint a temporary chairman. A permanent chairman and
a permanent secretary of the meeting
<PAGE> 111
105
shall be elected by vote of the Persons entitled to vote a majority in principal
amount of the Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of Securities of
such series held or represented by him as determined in accordance with Section
115; provided, however, that no vote shall be cast or counted at any meeting in
respect of any Security challenged as not Outstanding and ruled by the chairman
of the meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1302 at which a quorum is present may be adjourned from time
to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting; and the
meeting may be held as so adjourned without further notice.
SECTION 1306. Counting Votes and Recording Action of Meetings. The
vote upon any resolution submitted to any meeting of Holders of Securities of
any series shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities of such series or of their
representatives by proxy and the principal amounts and serial numbers of the
Outstanding Securities of such series held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record, at least in duplicate, of
the proceedings of each meeting of Holders of Securities of any series shall be
prepared by the secretary of the meeting and then shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 1302 and, if applicable, Section 1304.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company and another to the Trustee for such series of Securities to be
preserved by such Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
* * *
<PAGE> 112
106
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
R.P. SCHERER INTERNATIONAL CORPORATION
[SEAL]
By /s/ John P. Cashman
[Chairman of the Board]
Attest: /s/ Nicole S. Williams
[Secretary]
COMERICA BANK
[SEAL]
By /s/ M. Karam
[Vice President]
Attest: /s/ N. Packard
Title: Trust Officer
<PAGE> 113
107
STATE OF MICHIGAN
COUNTY OF OAKLAND ss:
On the 17th day of January, 1994, before me personally came John P.
Cashman and Nicole S. Williams, to me known, who, being by me duly sworn, did
depose and say that they reside in Province of Ontario, Canada, and Oakland
County, Michigan, respectively, that they are the Chairman of the Board and the
Secretary, respectively, of R.P. SCHERER INTERNATIONAL CORPORATION, one of the
corporations described in and which executed the above instrument; that they
know the corporate seal of said corporation; that one of the seals affixed to
the said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation and that they signed their names
thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ JoAnn Ray Schmidt
Notary Public
[SEAL]
<PAGE> 114
108
STATE OF MICHIGAN
COUNTY OF WAYNE ss:
On the 27th day of January, 1994, before me personally came Marilyn A.
Karam, to me known, who, being by me duly sworn, did depose and say that she
resides in Wayne County, Michigan, and that she is a [Vice President] of
Comerica Bank one of the corporations described in and which executed the above
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[SEAL]
/s/ James Kowalski
Notary Public
<PAGE> 115
EXHIBIT A
[FORM OF CERTIFICATE TO BE DELIVERED TO EUROCLEAR OR CEDEL, S.A. BY OR ON BEHALF
OF A BENEFICIAL OWNER OF SECURITIES, IN ORDER TO RECEIVE A DEFINITIVE BEARER
SECURITY IN EXCHANGE FOR AN INTEREST IN A TEMPORARY GLOBAL SECURITY OR TO
EXCHANGE AN INTEREST IN A TEMPORARY GLOBAL SECURITY FOR AN INTEREST IN A
PERMANENT GLOBAL SECURITY IN DEFINITIVE FORM]
R. P. SCHERER INTERNATIONAL CORPORATION
[INSERT TITLE OR DESCRIPTION OF SECURITIES]
Reference is hereby made to the Indenture dated as of _________ __,
199- (the "Indenture") between R.P. Scherer International Corporation (the
"Issuer") and Comerica Bank as Trustee. Unless otherwise herein defined, terms
used herein have the same meaning as in the Indenture.
This is to certify that as of the date hereof and except as set forth
below
principal amount of the above captioned Securities held by you for our
account (i) is owned by person(s) that are not United States person(s) (as
defined below), (ii) is owned by United States person(s) that are (a) foreign
branches of United States financial institutions (as defined in Section
1.16512(c)(1)(v) of the United States Treasury regulations) ("financial
institutions") purchasing for their own account or for resale, or (b) United
States person(s) who acquired the Securities through foreign branches of United
States financial institutions and who hold the Securities through such United
States financial institutions on the date hereof (and in either case (a) or (b),
each such United States financial institution hereby agrees, on its own behalf
or through its agent, that you may advise the Issuer or the Issuer's agent that
it will comply with the requirements of Section 165(j))(3)(A), (B) or (C) of the
United States Internal Revenue Code of 1986, as amended, and the Treasury
Regulations thereunder), or (iii) is owned by United States or foreign financial
institution(s) for the purpose of resale during the restricted period (as
defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury
Regulations), and in addition if the owner of the Securities is a United States
or foreign financial institution described in clause (iii) above (whether or not
also described in clause (i) or (ii)) this is to further certify that such
financial institution has not acquired the Securities for the purpose of resale
directly or indirectly to a United States person or to a person within the
United States or its possessions.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the beneficial
interest in the temporary global Security held by you for our account in
accordance with your operating procedures if any applicable statement herein is
not correct on such date, and in the absence
<PAGE> 116
A-3
of any such notification it may be assumed that this certification applies as
of such date.
This certificate excepts and does not relate to principal amount of
Securities held by you for our account as to which we are not able to provide a
certificate in this form. We understand that exchange of such portion of the
temporary global Security for definitive Bearer Securities or interests in a
permanent global Security cannot be made until we are able to provide a
certificate in this form.
We understand that this certificate is required in connection with
certain tax laws and regulations of the United States. If administrative or
legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
"United States person" means any citizen or resident of the United States, any
corporation, partnership or other entity created or organized in or under the
laws of the United States and any estate or trust the income of which is subject
to United States federal income taxation regardless of its source. "United
States" means the United States of America (including the States and the
District of Columbia); and its "possessions" include Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
By:
----------------------------------------------
As, or as agent for, the beneficial owner(s)
of the portion of the temporary global
Security to which this certificate relates.
<PAGE> 117
EXHIBIT B
[FORM OF CERTIFICATE TO BE GIVEN TO THE APPROPRIATE TRUSTEE BY EUROCLEAR OR
CEDEL, S.A. REGARDING THE EXCHANGE OF A TEMPORARY GLOBAL SECURITY FOR
DEFINITIVE SECURITIES OR FOR A PORTION OF A PERMANENT GLOBAL SECURITY IN
DEFINITIVE FORM]
R.P. SCHERER INTERNATIONAL CORPORATION
[INSERT TITLE OR DESCRIPTION OF SECURITIES]
Reference is hereby made to the Indenture dated as of __________ __,
199- (the "Indenture") between R.P. Scherer International Corporation (the
"Issuer") and Comerica Bank as Trustee. Unless otherwise herein defined, terms
used herein shall have the same meaning as in the Indenture.
The undersigned certifies that, based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
to the effect set forth in the Indenture as of the date hereof, principal amount
of the above-captioned Securities (i) is owned by person(s) that are not United
States person(s) (as defined below), (ii) is owned by United States person(s)
that are (a) foreign branches of United States financial institutions (as
defined in Section 1.165-12(c)(1)(v) of the United States Treasury regulations)
("financial institutions") purchasing for their own account or for resale, or
(b) United States person(s) who acquired the Securities through foreign branches
of United States financial institutions and who hold the Securities through such
United States financial institutions on the date hereof (and in either case (a)
or (b), each such United States financial institution has agreed, on its own
behalf or through its agent, that we may advise the Issuer or the Issuer's agent
that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the United States Internal Revenue Code of 1986, as amended, and the Treasury
regulations thereunder), or (iii) is owned by United States or foreign financial
institution(s) for the purpose of resale during the restricted period (as
defined in Section 1.163- 5(c)(2)(i)(D)(7) of the United States Treasury
regulations), and in addition United States or foreign financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Securities for the purpose
of resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
We further certify (i) that we are not making available for exchange
or collection of any interest any portion of the temporary Global Security
excepted in such certifications and (ii) that as of the date hereof we have not
received any notification from any of our Member Organizations to the effect
<PAGE> 118
B-3
that the statements made by such Member Organizations with respect to any
portion of the part submitted herewith for exchange or collection of any
interest are no longer true and cannot be relied upon as of the date hereof.
We understand that this certificate is required in connection with
certain tax laws and regulations of the United States. If administrative or
legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
"United States person" means any citizen or resident of the United States, any
corporation, partnership or other entity created or organized in or under the
laws of the United States and any estate or trust the income of which is subject
to United States federal income taxation regardless of its source. "United
States" means the United States of America (including the States and the
District of Columbia); and its "possessions" include Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
Dated: By:
--------------------------------------
[Centre de Livraisons de Valeurs
Mobilieres, S.A.] [Morgan Guaranty
Trust Company of New York, Brussels
office, as operator of the Euroclear
System]
<PAGE> 119
EXHIBIT C
[FORM OF CERTIFICATE TO BE GIVEN TO THE APPROPRIATE TRUSTEE BY EUROCLEAR OR
CEDEL, S.A. REGARDING PAYMENTS ON A TEMPORARY GLOBAL SECURITY PRIOR TO AN
EXCHANGE DATE]
R.P. SCHERER INTERNATIONAL CORPORATION
[INSERT TITLE OR DESCRIPTION OF SECURITIES]
Reference is hereby made to the Indenture dated as of -------- --,
199- (the "Indenture") between R.P. Scherer International Corporation (the
"Issuer") and Comerica Bank as Trustee. Unless otherwise herein defined, terms
used herein shall have the same meaning as in the Indenture.
The undersigned certifies that based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
to the effect set forth in the Indenture as of the date hereof, principal amount
of the above-captioned Securities (i) is owned by person(s) that are not United
States person(s) (as defined below), (ii) is owned by United States person(s)
that are (a) foreign branches of United States financial institutions (as
defined in Section 1.165-12(c)(1)(v) of the United States Treasury regulations)
("financial institutions") purchasing for their own account or for resale, or
(b) United States person(s) who acquired the Securities through foreign branches
of United States financial institutions and who hold the Securities through such
United States financial institutions on the date hereof (and in either case (a)
or (b), each such United States financial institution has agreed, on its own
behalf or through its agent, that we may advise the Issuer or the Issuer's agent
that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the United States Internal Revenue Code of 1986, as amended, and the Treasury
regulations thereunder), or (iii) is owned by United States or foreign financial
institution(s) for the purpose of resale during the restricted period (as
defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury
regulations), and in addition United States or foreign financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Securities for the purpose
of resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
We further certify (i) that we are not making available for exchange
or collection of any interest any portion of the temporary Global Security
excepted in such certifications and (ii) that as of the date hereof we have not
received any notification from any of our Member Organizations to the effect
that the statements made by such Member Organizations with
<PAGE> 120
respect to any portion of the part submitted herewith for exchange or collection
of any interest are no longer true and cannot be relied upon as of the date
hereof.
We understand that this certificate is required in connection with
certain tax laws and regulations of the United States. If administrative or
legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
"United States person" means any citizen or resident of the United States, any
corporation, partnership or other entity created or organized in or under the
laws of the United States and any estate or trust the income of which is subject
to the United States federal income taxation regardless of its source. "United
States" means the United States of America (including the States and the
District of Columbia); and its "possessions" include Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
Dated: By:
--------------------------------------
[Centrale de Livraisons de Valeurs
Mobilieres, S.A. ] [Morgan Guaranty
Trust Company of New York, Brussels
office, as operator of the Euroclear
System]
<PAGE> 121
EXHIBIT D
[FORM OF CERTIFICATE TO BE DELIVERED TO EUROCLEAR OR CEDEL, S.A. BY OR ON
BEHALF OF A BENEFICIAL OWNER OF SECURITIES, IN ORDER TO RECEIVE PAYMENT ON A
TEMPORARY GLOBAL SECURITY PRIOR TO AN EXCHANGE DATE]
R.P. SCHERER INTERNATIONAL CORPORATION
[INSERT DATE OR DESCRIPTION OF SECURITIES]
Reference is hereby made to the Indenture dated as of _________ __,
199- (the "Indenture") between R.P. Scherer International Corporation (the
"Issuer") and Comerica Bank as Trustee. Unless otherwise herein defined, terms
used herein have the same meaning as in the Indenture.
This is to certify that as of the date hereof and except as set forth
below, - principal amount of the above-captioned Securities (i) is owned by
person(s) that are not United States person(s) (as defined below), (ii) is owned
by United States person(s) that are (a) foreign branches of United States
financial institutions (as defined in Section 1.165-12(c) (1)(v) of the United
States Treasury regulations) ("financial institutions") purchasing for their own
account or for resale, or (b) United States person(s) who acquired the
Securities through foreign branches of United States financial institutions and
who hold the Securities through such United States financial institutions on the
date hereof (and in either case (a) or (b), each such United States financial
institution hereby agrees, on its own behalf or through its agent, that you may
advise the Issuer or the Issuer's agent that it will comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal
Revenue Code of 1986, as amended, and the Treasury regulations thereunder), or
(iii) is owned by financial institution(s) for the purpose of resale during the
restricted period (as defined in Section 1.163- 5(c)(2)(i)(D)(7) of the United
States Treasury regulations), and in addition if the owner of the Securities is
a United States or foreign financial institution described in clause (iii) above
(whether or not also described in clause (i) or (ii)) this is to further certify
that such financial institution has not acquired the beneficial interest in the
Securities for the purpose of resale directly or indirectly to a United States
person or to a person within the United States or its possessions.
We undertake to advise you promptly by tested telex if the foregoing
statement as to beneficial ownership is not correct on the [insert relevant
payment date], and in the absence of any such notification it may be assumed
that this certification applies as of such date.
This certificate excepts and does not relate to principal amount of
Securities held by you for our account as to
<PAGE> 122
which we are not able to provide a certificate in this form. We understand that
payments, if any, due prior to the Exchange Date with respect to such portion of
the temporary global Security cannot be made until we are able to provide a
certificate in this form.
We understand that this certificate is required in connection with
certain tax laws and regulations of the United States. If administrative or
legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
"United States person" means any citizen or resident of the United States, any
corporation, partnership or other entity created or organized in or under the
laws of the United States and any estate or trust the income of which is subject
to United States federal income taxation regardless of its source. "United
States" means the United States of America (including the States and the
District of Columbia); and its "possessions" include Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
Dated: By:
----------------------------------------
As, or as agent for, the beneficial
owner(s) of the portion of the temporary
global Security to which this
certificate relates.
<PAGE> 123
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (the "First Supplemental Indenture"),
dated as of February 28, 1995, by and among R. P. Scherer International
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware and having its principal office at 2075 W. Big Beaver Road,
P.O. Box 7060, Troy, Michigan 48007-7060 (the "Company"); R. P. Scherer
Corporation, a corporation duly organized and existing under the law of the
State of Delaware, the parent corporation of the Company and having its
principal office at 2075 W. Big Beaver Road, P.O. Box 7060, Troy, Michigan
48007-7060 (the "Parent Corporation"); and Comerica Bank, a state bank organized
and existing under the laws of the State of Michigan and having its principal
Corporate Trust Office at 411 W. Lafayette, M.C. 3461, Detroit, Michigan 48226,
as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the Trustee an
Indenture dated as of January 1, 1994 (the "Original Indenture"), to provide for
the issuance from time to time of securities evidencing the Company's unsecured
indebtedness (the "Debt Securities");
WHEREAS, pursuant to Resolutions of the Pricing Committee of the Board of
Directors of the Company held January 12, 1994 and January 20, 1994, the Company
issued $100,000,000 principal amount of Debt Securities under the Original
Indenture in the form of 6 3/4% Senior Notes due 2004 (the "Senior Notes");
WHEREAS, the Company has merged with and into the Parent Corporation
pursuant to Section 253 of the General Corporation Law of Delaware (the
"Merger");
WHEREAS, Section 901 of the Original Indenture authorizes the execution of
the First Supplement Indenture, without the consent of any Holders of Debt
Securities or coupons, to evidence the succession of the Parent Corporation to
the Company, and the assumption by the Parent Corporation of the covenants of
the Company in the Original Indenture and in the Debt Securities issued
thereunder; and
WHEREAS, the execution and delivery of this First Supplemental Indenture has
been in all respects authorized, and all acts, conditions and requirements
necessary to constitute this First Supplement Indenture, when duly executed and
delivered, a valid, legal and binding instrument in accordance with the terms
and for the purposes herein expressed, have been satisfied and completed.
NOW, THEREFORE, the Company, the Parent Corporation and the Trustee hereby
agree as following:
1. The Parent Corporation hereby expressly assumes the due and punctual payment
of the principal of (and premium, if any) and interest, if any (including all
additional amounts, if any payable pursuant to Sections 516 or 1008 of the
Original Indenture) on, and any sinking fund payment in respect of, all the
Senior Notes and of any Debt Securities to be issued hereafter pursuant to the
Original Indenture, and any related coupons, and the performance of every
covenant of the Original Indenture on the part of the Company to be performed or
observed.
2. The Trustee hereby acknowledges receipt of an Officers' Certificate and
Opinion of Counsel, copies of which are attached hereto, each stating that the
Merger and this First Supplement Indenture comply with all the terms and
conditions of Article VIII of the Original Indenture and that the Merger
complies with all conditions precedent of the Original Indenture relating to a
merger of the Company into another Person.
3. All terms used herein not specifically defined in this First Supplement
Indenture which are defined in the Original Indenture shall have the meanings
ascribed to them in the Original Indenture.
4. From and after the execution and delivery of this First Supplement Indenture,
the Original Indenture shall been deemed to be amended as herein provided.
Except as modified and amended by this First Supplemental Indenture, the
Original Indenture shall continue in full force and effect, and none of the
obligations or covenants existing or to exist thereunder shall be released,
diminished or impaired, except as set forth herein.
5. This instrument may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
<PAGE> 124
2
IN WITNESS WHEREOF, the undersigned have caused this First Supplemental
Indenture to be executed in their respective corporate names by their duly
authorized officers, all as of the date first written above.
R. P. SCHERER INTERNATIONAL CORPORATION
By: /s/ Nicole S. Williams
----------------------
Its: Secretary
---------
R. P. SCHERER CORPORATION
By: /s/ Nicole S. Williams
----------------------
Its: Secretary
---------
COMERICA BANK, as Trustee
By: /s/ James Kowalski
------------------
Its: Authorized Signatory
Trust Administrator
<PAGE> 125
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture"),
dated as of August 7, 1998 by and among R.P. Scherer Corporation (the
"Company"), Cardinal Health, Inc. (the "Guarantor"), and NBD Bank, as trustee
(the "Trustee") under that certain Indenture dated as of January 1, 1994,
between the Company and Comerica Bank, as trustee, as previously supplemented by
that certain First Supplemental Indenture dated as of February 28, 1995, between
the Company and Comerica Bank, and by that certain Instrument of Resignation,
Appointment and Acceptance, dated as of May 24, 1997, among the Company,
Comerica Bank and the Trustee (the "Instrument of Resignation", and, as so
supplemented, the "Indenture").
W I T N E S S E T H
WHEREAS, pursuant to the Indenture, the Company issued its 6-3/4%
Notes Due 2004 (the "Notes");
WHEREAS, pursuant to the Instrument of Resignation, NBD Bank replaced
Comerica Bank as trustee under the Indenture;
WHEREAS, the Company intends, pursuant to an Agreement and Plan of
Merger, dated as of May 17, 1998, among the Guarantor, GEL Acquisition Corp., a
wholly owned subsidiary of the Guarantor ("Merger Sub") and the Company, for
Merger Sub to merge with and into the Company, with the Company as the
continuing corporation becoming a wholly-owned subsidiary of the Guarantor (the
"Surviving Company");
WHEREAS, Section 801 of the Indenture provides that, under certain
circumstances involving a merger of the Company, the Surviving Company is
required to execute and deliver to the Trustee a supplemental indenture pursuant
to which the Surviving Company shall assume all of the Company's obligations
under the Notes and the Indenture; and
WHEREAS, the Guarantor desires to unconditionally and irrevocably
guarantee the full and punctual payment of principal of and interest on the
Notes when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under the Indenture
(including obligations to the Trustee) with respect to the Notes, and the full
and punctual performance within applicable grace periods of all other
obligations of the Company under the Notes and under the Indenture with respect
to the Notes; and
WHEREAS, pursuant to Section 901 of the Indenture, the Trustee is
authorized to execute and deliver this Second Supplemental Indenture.
<PAGE> 126
2
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Surviving Company and the Trustee mutually covenant and agree
for the equal and ratable benefit of the holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO ASSUME OBLIGATIONS. The Surviving Company hereby
assumes all of the Company's responsibilities, liabilities and any other
obligations under the Notes and the Indenture including, but not limited to, the
obligation to (i) duly and punctually pay the principal of (and premium, if any)
and interest, if any (including all additional amounts, if any, payable pursuant
to Sections 516 and 1008 of the Indenture) on, and any sinking fund payment in
respect of, all the Notes and any related coupons and (ii) perform every
covenant in the Indenture on the part of the Company to be performed or
observed, as and to the extent such responsibilities, liabilities or obligations
exist on the date hereof, and to be bound by all other applicable provisions of
the Indenture.
3. AGREEMENT AS TO RIGHTS OF SURVIVING COMPANY. The Trustee hereby
agrees that, in accordance with Section 802 of the Indenture, the Surviving
Company shall succeed to, and may exercise every right and power of, the Company
under the Indenture with the same effect as if the Surviving Company had been
named as the Company herein.
4. THE GUARANTEE. (a) The Guarantor irrevocably and unconditionally
guarantees (the "Guarantee") to each Holder of Notes and to the Trustee and its
successors and assigns, (i) the full and punctual payment of principal of an
interest on the Notes when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
the Indenture (including obligations to the Trustee) with respect to the Notes
and (ii) the full and punctual performance within applicable grace periods of
all other obligations of the Company under the Notes and under the Indenture
with respect to the Notes.
(b) The Guarantor further agrees that the Guarantee constitutes a
guarantee of payment, performance and compliance and not merely of collection.
(c) The obligation of the Guarantor to make any payment under the
Guarantee may be satisfied by causing the Company to make such payment.
(d) The Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by
<PAGE> 127
3
the Trustee or any Holder of the Notes in enforcing any of their respective
rights under the Guarantee.
5. MICHIGAN LAW TO GOVERN. The laws of the State of Michigan
applicable to contracts entered into and to be performed wholly within such
state shall govern and be used to construe this Second Supplemental Indenture.
6. COUNTERPARTS. The parties may sign any number of copies of this
Second Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, all as of the date first above
written.
R.P. SCHERER CORPORATION CARDINAL HEALTH, INC.
By: /s/ ALEKSANDER ERDELJAN By: /s/ DAVID BEARMAN
---------------------------- -----------------------------
Name: Aleksander Erdeljan Name: David Bearman
Title: Chairman and CEO Title: Executive Vice President
NBD BANK (as Trustee)
By: /s/ ERNEST J. PECK
----------------------------
Name: Ernest J. Peck
Title: Vice President
<PAGE> 1
Exhibit 10.03
Cardinal Health, Inc. Equity Incentive Plan Amendment to Section 9(d)
(d) Number of Shares. Each individual first elected or appointed to serve as a
director of the Company at or after adjournment of the Company's annual
meeting of shareholders (an "Annual Meeting") in 1997 who is an Outside
Director shall, upon such election or appointment, automatically be granted
options for that number of Shares having a fair market value of $150,000
(each an "Initial Grant"). In addition, commencing immediately after the
adjournment of the Annual Meeting in 1997 and continuing on an annual
basis, immediately following the adjournment of each succeeding Annual
Meeting thereafter during the term of this Plan each Outside Director whose
term did not expire at that Annual Meeting and who has then served as a
director of the Company for a consecutive period of time which includes
each of the last three Annual Meetings (i.e., including the Annual Meeting
then just adjourned) shall automatically be granted additional Outside
Director Options for that number of Shares having a fair market value of
$100,000 (each an "Annual Grant"). Beginning on July 1, 2000 and on every
third July 1 thereafter, the dollar value of the Initial Grants and Annual
Grants shall automatically be increased under this Plan by a percentage
equal to that percentage by which the fair market value per Share has
increased in the immediately preceding three-year period, not to exceed a
45% aggregate increase over any such three-year period. For purposes of
this Section 9, fair market value means the last sale price of the Shares
on the applicable date (or, if no sale of Shares occurs on such date, on
the next preceding date on which a sale occurred) as reported on the New
York Stock Exchange Composite Tape.
<PAGE> 1
Exhibit 10.13
EMPLOYMENT AGREEMENT
--------------------
This is an agreement between Cardinal Health, Inc., an Ohio
corporation (the "Company" ) and James F. Millar (the "Executive"), dated as of
the 12th day of May, 1998.
1. Employment Period. The Company shall employ the Executive,
and the Executive hereby accepts such employment, on the terms and conditions
set forth in this Agreement, for the period commencing on May 12, 1998 (the
"Effective Date") and ending on the third anniversary of the Effective Date (the
"Employment Period").
2. Position and Duties. (a) During the Employment Period, the
Executive shall be employed by the Company, and shall perform such duties and
responsibilities of an executive nature as may be determined from time to time
by the Company's Board of Directors (the "Board") or its lawfully designated
representative.
(b) During the Employment Period, the Executive shall devote
his full time and attention to the business and affairs of the Company, and
shall use his best efforts to promote and establish the business of the Company
and to carry out faithfully and efficiently the responsibilities assigned to him
under this Agreement. It shall not be considered a violation of the foregoing
for the Executive to (i) serve on corporate boards with the approval of
Cardinal, (ii) serve on civic or charitable boards or committees, and (iii)
manage personal investments, so long as such activities do not interfere with
the performance of the Executive's responsibilities under this Agreement.
3. Compensation. (a) Base Salary. During the Employment
Period, the Company shall pay the Executive a base salary (the "Base Salary") at
an annual rate of $314,449, payable in accordance with the Company's payroll
practices for management personnel, as in effect from time to time (but not less
frequently than monthly). During the Employment Period, the Base Salary shall be
reviewed for possible increase annually in accordance with the Company's normal
payroll practices for management personnel. Any increase in the Base Salary
shall not limit, expand or reduce any other obligation of the Company under this
Agreement.
(b) Annual Bonus. In addition to the Base Salary, during the
Employment Period the Executive shall be eligible to receive annual bonuses
(each, regardless of whether for a 12-month period or a different period, an
"Annual Bonus") pursuant to this Section 3(b). The Annual Bonus shall be
determined and paid at the sole discretion of the Company pursuant to the terms
and conditions of the Company's standard Management Incentive Plan as in effect
from time to time, or any successor thereto (the "MIP"), with an MIP potential
equal to 75 percent of the Base Salary.
(c) Other Benefits. During the Employment Period, the
Executive shall be entitled to participate in the group health, life, disability
insurance, retirement savings and other employee benefit plans (collectively,
"Group Plans") generally offered to the Company's employees in accordance with
the standard terms and conditions of such plans as in effect from time to time.
In addition, the Executive shall be eligible to participate in the Company's
Equity Incentive Plan or any successor thereto (the "Cardinal Stock Plan"),
although the actual awards and benefits, if any,
<PAGE> 2
to be granted to the Executive thereunder shall be in the sole discretion of the
Compensation and Personnel Committee of the Company's Board of Directors. The
Employee shall at all times comply with the Company's policies on option
exercises and the selling and buying of Company stock.
(d) Expenses. The Company shall reimburse the Executive for
all reasonable business expenses incurred by the Executive in the performance of
his services hereunder for the Company, which expenses shall be substantiated to
the reasonable satisfaction of the Company, in a manner similar to that
applicable to other management personnel of the Company, and the Executive shall
provide all necessary records to reflect the reasonable business expenses
incurred.
(e) Vacation. During the Employment Period, the Executive
shall be entitled to annual paid vacations as provided in the Company's vacation
policy as in effect as of the Effective Date, as it may be revised thereafter
from time to time.
4. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means the illness or disability of the Executive
which prevents or hampers the performance of his obligations hereunder, and
which continues for a consecutive period of one hundred and twenty (120) days or
longer or an aggregate period of one hundred and eighty (180) days or longer, in
either instance during the Employment Period. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective upon receipt of such notice by the
Executive (the "Disability Effective Date").
(b) By the Company. The Company may terminate the Executive's
employment during the Employment Period for Cause or without Cause. "Cause"
shall mean (A) fraud, misappropriation, embezzlement or material misconduct on
the part of the Executive, (B) the Executive's (x) failure to substantially
perform his duties for the Company when and to the extent requested by the Board
or its lawfully designated representative to do so and (y) failure to correct
same within five (5) business days after notice from the Board or its lawfully
designated representative requesting the Executive to do so, or (C) the
Executive's breach of any material provision of this Agreement, the Certificate
of Compliance with Company Policies then applicable to management personnel of
the Company, or other agreements between the Executive and the Company and such
breach continues for a period of five (5) business days after notice from the
Board or its lawfully designated representative of such breach. A termination of
the Executive's employment by the Company without Cause shall be effected by
giving the Executive five (5) business days written notice of the termination.
(c) Good Reason. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of duties
inconsistent in any material respect with Section 2(a) of this
Agreement, other than any such action
<PAGE> 3
that is remedied by the Company within five (5) business days
after receipt of notice thereof from the Executive; or
(B) any failure by the Company to comply with any
provision of Section 3 of this Agreement other than any such
failure that is remedied by the Company within five (5)
business days after receipt of notice thereof from the
Executive.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date (which date
shall in no event be later than 30 days after the notice is given); provided,
that such a termination of employment shall not become effective if the Company
shall have substantially corrected the circumstance giving rise to the Notice of
Termination within such period.
(d) Date of Termination. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason is effective, the date on which the Company gives the
Executive notice of a termination of employment without Cause, or the date on
which the Executive gives the Company notice of a termination of employment
without Good Reason, as the case may be.
5. Obligations of the Company upon Termination. (a) Death,
Disability, Cause; Without Good Reason. If, during the Employment Period, the
Executive's employment is terminated because of death, Disability, for Cause, or
by the Executive without Good Reason, then the Executive shall not be entitled
to any compensation provided for under this Agreement, other than Base Salary
through the Termination Date, benefits under any long-term disability insurance
coverage in the case of termination because of Disability, and (without limiting
the provisions of Section 6 hereof) vested benefits, if any, required to be paid
or provided by law.
(b) Without Cause; Good Reason. If, during the Employment
Period, the Executive's employment is terminated by the Company without Cause or
by the Executive for Good Reason (collectively, an "Eligible Termination"), the
Executive shall not be entitled to any compensation provided for under this
Agreement except as set forth in the following three sentences. If the Eligible
Termination occurs prior to the second anniversary of the Effective Date, then
the Company (i) shall continue to pay the Executive his Base Salary, at the rate
then in effect, for and with respect to the period beginning on the date of such
termination of employment and ending on the last day of the Employment Period
(hereinafter, the "Continuation Period") in the same manner as specified in
Section 3(a) hereof; and (ii) shall pay the Executive, in lieu of annual bonuses
pursuant to Section 3(b), an annual amount equal to the Executive's most recent
previous annual bonus actually paid at the same time and in the same manner as
such annual
<PAGE> 4
bonuses would have been paid during the Continuation Period pursuant to Section
3(b). If the Eligible Termination occurs on or after the second anniversary of
the Effective Date, then the Company (i) shall continue to pay the Executive his
Base Salary, at the rate then in effect, for and with respect to the period
beginning on the date of such termination of employment and ending on the first
anniversary of such date; and (ii) shall pay the Executive, in lieu of an annual
bonus pursuant to Section 3(b), an amount equal to the Executive's most recent
previous annual bonus actually paid at the same time and in the same manner as
such annual bonus would have been paid had the Executive continued to be
employed by the Company during such one year period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company for which the Executive may
qualify, nor, subject to Section 9(f), shall anything in this Agreement limit or
otherwise affect such rights as the Executive may have under any agreement with
the Company. Vested benefits and other amounts that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of, or any
contract or agreement with, the Company on or after the Date of Termination
shall be payable in accordance with such plan, policy, practice, program,
contract or agreement, as the case may be, except as explicitly modified by this
Agreement.
7. Confidential Information; Business Interference; Noncompetition;
Inventions. (a) Both during his association with the Company or the Affiliated
Companies (as defined below) and at all times thereafter, Executive shall not
disclose to anyone else, directly or indirectly, any confidential, proprietary
or business-sensitive information or trade secrets concerning or relating to the
business of the Company or the Affiliated Companies (collectively, "Confidential
Information") or use, or permit or assist, by acquiescence or otherwise, anyone
else to use, directly or indirectly, any such Confidential Information.
"Confidential Information" is information not generally known to the public and
which, if released to unauthorized persons, could be detrimental to the
reputation or business interests of the Company or the Affiliated Companies or
parties with which the Company or the Affiliated Companies contract, or which
could permit such unauthorized persons to benefit improperly. Examples of
Confidential Information include, but are not limited to, the following:
strategic business plans; computer materials such as software programs or
documentation; information concerning the Company's and the Affiliated
Companies' customers and potential customers, including their identities,
contact persons, requirements, preferences, pricing or contract terms; marketing
and sales information; research and development plans or data; budgets and
unpublished financial statements; pricing information and cost data; information
concerning the skills and compensation of other employees of the Company or the
Affiliated Companies; and information concerning the suppliers of the Company
and the Affiliated Companies. The foregoing restrictions shall not apply to
disclosure of information by the Executive as may be required in the proper
conduct of his duties on behalf of the Company or the Affiliated Companies or as
may be specifically authorized in writing by the Company's chief executive
officer, president, or chief financial officer. Upon termination of employment
with the Company for any reason, Executive shall promptly deliver to the Company
all property belonging to the Company and the Affiliated Companies and shall not
retain any copies or reproductions of correspondence, reports, proposals, lists,
computer
<PAGE> 5
programs or files, or other information relating in any way to the affairs of
the Company or the Affiliated Companies.
(b) Both during his association with the Company and at all
times thereafter, Executive shall not take any action which is intended to or
would disparage or diminish the reputation of the Company or the Affiliated
Companies. In addition, while associated with the Company and for a period of
two (2) years after expiration or termination of employment or other association
with the Company, Executive shall not directly or indirectly, employ, contact
concerning employment, or participate in any way in the recruitment for
employment (whether as an employee, officer, director, agent, consultant or
independent contractor) of any person who was or is at any time during the
previous 12 months an employee, representative, officer, or director of the
Company or any of the Affiliated Companies.
(c) During the Noncompetition Period (as defined below), the
Executive shall not, without the prior written consent of the Board, engage in
or become associated with a Competitive Activity. For purposes of this Section
7(c): (i) the "Noncompetition Period" means (A) the period during which the
Executive is employed by the Company, plus (B) one year; (ii) a "Competitive
Activity" means any business or other endeavor, in the United States or Canada
or any other country, of a kind then being conducted by the Company or any of
the Affiliated Companies in such country; and (v) the Executive shall be
considered to have become "associated with a Competitive Activity" if he becomes
directly or indirectly involved as an owner, principal, employee, officer,
director, independent contractor, representative, stockholder, financial backer,
agent, partner, advisor, lender, or in any other individual or representative
capacity with any individual, partnership, corporation, other organization or
entity that is engaged in a Competitive Activity. Notwithstanding the foregoing,
the Executive may make and retain investments during the Employment Period in
not more than five percent of the equity of any entity engaged in a Competitive
Activity, if such equity is listed on a national securities exchange or
regularly traded in an over-the-counter market. Should this provision be
unenforceable in any jurisdiction because it is deemed too broad, as to time,
area, subject matter, or otherwise, this provision shall be deemed modified to
the extent necessary to be enforceable in such jurisdiction.
(d) As special consideration for the Executive's agreement to
be bound by the provisions of Section 7(c), the receipt and adequacy of which is
hereby confirmed and acknowledged, he is receiving, as of the Effective Date, a
special grant of restricted shares pursuant to the Cardinal Stock Plan.
(e) All plans, discoveries and improvements, whether
patentable or unpatentable, made or devised by the Executive, whether by himself
or jointly with others, from the date of the Executive's initial employment by
the Company and continuing until the end of the Employment Period and any
subsequent period when the Executive is employed by the Company or any of the
Affiliated Companies, relating or pertaining in any way to his employment with
or the business of the Company or any of the Affiliated Companies, shall be
promptly disclosed in writing to the Board and are hereby transferred to and
shall redound to the benefit of the Company, and shall become and remain its
sole and exclusive property. The Executive agrees to execute any assignments to
the Company or its nominee, of his entire right, title and interest in and to
any such
<PAGE> 6
discoveries and improvements and to execute any other instruments and documents
requisite or desirable in applying for and obtaining patents or copyrights, at
the expense of the Company, with respect thereto in the United States and in all
foreign countries. The Executive further agrees, during and after the Employment
Period, to cooperate to the extent and in the manner required by the Company, in
the prosecution or defense of any patent or copyright claims or any litigation,
or other proceeding involving any trade secrets, processes, discoveries or
improvements covered by this Agreement, but all necessary expenses thereof shall
be paid by the Company.
(f) The Executive acknowledges and agrees that the Company's
remedy at law for any breach of the Executive's obligations under this Section 7
would be inadequate and agrees and consents that temporary and permanent
injunctive relief may be granted in any proceeding which may be brought to
enforce any provision of such Section without the necessity of proof of actual
damage. With respect to any provision of this Section 7 finally determined by a
court of competent jurisdiction to be unenforceable, the Executive and the
Company hereby agree that such court shall have jurisdiction to reform this
Agreement or any provision hereof so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's
determination.
8. Successors. (a) This Agreement is personal to the
Executive, and he may not assign any interest herein in any manner whatsoever.
Any purported assignment by the Executive shall be void.
(b) In addition to assignments by operation of law, the
Company shall have the right to assign this Agreement to any person, firm or
corporation, controlling, controlled by or under common control with the Company
(including without limitation any of the Affiliated Companies), or acquiring
substantially all of its assets, but such assignment shall not release the
Company from its obligations under this Agreement.
9. Miscellaneous. (a) The provisions of Sections 5, 6, 7, 8,
and 9 of this Agreement shall survive any expiration or termination of this
Agreement.
(b) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified except by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
(c) All notices, requests, consents and other communications
required or provided under this Agreement shall be in writing and shall be
deemed sufficient if delivered by facsimile, overnight courier, or certified or
registered mail, return receipt requested, postage prepaid, and shall be
effective upon delivery as follows:
<PAGE> 7
If to the Executive:
--------------------
James F. Millar
5555 Glendon Court
Dublin, Ohio 43016
Facsimile: (614) 717-8676
If to the Company:
------------------
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention: General Counsel
Facsimile: (614) 717-8919
Either party may change the address and/or facsimile number to which notices are
to be sent to that party by giving written notice of such change of address to
the other party in the same manner above provided for giving notice.
(d) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective, but only to the extent of such prohibition or unenforceability,
without invalidating the other provisions hereof or without affecting the
validity or unforceability of such provision in any other jurisdiction.
(e) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(f) As of the Effective Date, this Agreement shall constitute
the entire agreement between the parties relative to the subject matter
contained herein, superseding, canceling and replacing all prior agreements. No
promises, covenants or representations of any character or nature other than
those expressly stated herein have been made to induce either party to enter
into this Agreement. This Agreement shall not be modified, waived or discharged
except in writing duly signed by each of the parties or their authorized
assignees.
(g) The Executive's or the Company's failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement except to the extent any
other party hereto is materially prejudiced by such failure.
<PAGE> 8
(h) The term "Affiliated Companies" means all companies
controlled by, controlling or under common control with the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and the Company has caused this Agreement to be executed in its
name on its behalf, all as of the day and year first above written.
/s/ JAMES F. MILLAR
------------------------------------
James F. Millar
CARDINAL HEALTH, INC.
By /s/ JOHN C. KANE
----------------------------------
Title President
-------------------------------
<PAGE> 1
Exhibit 10.14
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT among GEORGE L.
FOTIADES (the "Employee"), R.P. SCHERER CORPORATION, a Delaware corporation (the
"Company"), and Cardinal Health, Inc., an Ohio corporation ("Parent"), dated as
of May 17, 1998, amends and restates the EMPLOYMENT AGREEMENT between the
Employee and the Company dated as of January 15, 1998 (the "Prior Agreement").
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
(as the same may be amended from time to time, the "Merger Agreement"), dated as
of the date hereof, with Parent and GEL Acquisition Corp., a Delaware
corporation and a direct wholly owned subsidiary of Parent ("Merger Sub"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time following the Merger,
and the Employee is willing to enter into an agreement to that end upon the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the
term of employment of the Employee under this Agreement shall be for the period
beginning at the Effective Time (as defined in the Merger Agreement) and ending
on the first anniversary of the Effective Time. Thereafter, so long as Employee
is capable of performing his duties hereunder and provided this Agreement is not
terminated pursuant to Section 4, this Agreement shall be
<PAGE> 2
automatically renewed for successive periods of one year, unless, prior to 30
days before the termination date of any one-year period, either party notifies
the other of an intention to terminate this Agreement on such termination date,
in which event the Agreement shall be terminated on such date. Such term of
employment, as renewed, is hereinafter referred to as the "Employment Period."
2. Services to be Rendered.
(a) During the term of employment of the Employee under this
Agreement (and any renewals thereof) the Employee shall serve the Company as
President - R.P. Scherer and Executive Vice President - Cardinal Health, Inc.
(b) The Employee agrees that he will, during the term of
employment under this Agreement (and any renewals thereof) devote his time,
attention and ability to the business of the Company and its subsidiaries as
President - R.P. Scherer and Executive Vice President - Cardinal Health, Inc.
and shall well and faithfully serve the Company and its subsidiaries and shall
exercise the powers and authorities and fulfill the responsibilities hereby
conferred upon him honestly, diligently, in good faith and in the best interest
of the Company and its subsidiaries and use his best efforts to promote their
interests. The Employee may, however, serve as an outside director of any other
corporation provided Employee obtains the consent of the Company, which shall
not be unreasonably withheld.
3. Compensation.
(a) In full payment for services rendered to the Company under
this Agreement, the Company shall pay the Employee a salary of Four Hundred
Thousand and
-2-
<PAGE> 3
00/100 Dollars ($400,000) per year during the first year of the Employment
Period ("Base Salary"). The Board of Directors of the Company (the "Board")
shall determine the salary to be paid to the Employee during subsequent years of
the Employment Period.
(b) In addition to the compensation otherwise provided for in
this Section 3, during the term of his employment hereunder, the Employee also
shall be entitled to: (i) participate in the Company's stock option plans, in
accordance with the terms thereof, as from time to time may be in effect; (ii)
by resolution of the Board, participate in the Company's annual incentive
compensation plan, in accordance with the terms thereof, as from time to time
may be in effect, with a target annual bonus of 85% of his Base Salary
(provided, that the bonus for the 1999 fiscal year shall not be less than 50% of
his target annual bonus); (iii) participate in the Company's retirement plans,
in accordance with the terms thereof, as from time to time may be in effect; and
(iv) participate in such group life, disability, accident, hospital and medical
insurance plans ("Welfare Plans") in accordance with the terms thereof, as from
time to time may be in effect; provided, that any such participation is
generally appropriate to Employee's responsibilities hereunder; and provided,
further, that benefits and terms of participation under the Welfare Plans may be
changed by the Company from time to time in its sole discretion.
(c) The Employee shall be entitled, during the Employment Period,
to vacations and fringe benefits consistent with the practices of the Company.
(d) The Company shall provide the Employee, during the Employment
Period, with the use of a Company-owned or leased automobile, and will pay all
taxes and insurance on said vehicle.
-3-
<PAGE> 4
(e) The Company will reimburse the Employee for the costs
associated with relocation, pursuant to the standard relocation program in
effect at the time of relocation.
(f) In consideration of the Employee's agreement to continue to
serve the Company pursuant to the terms of this Agreement following the
Effective Time, including without limitation the waiver of the provision of the
Prior Agreement whereby a termination by the Employee of his employment within
six months after the Merger would have been deemed a termination for "Good
Reason," the Company shall pay the Employee the sum of $500,000, in the
following installments: (i) one-sixth upon the Effective Time; (ii) one-sixth
upon the first anniversary of the Effective Time; (ii) one-third upon the second
anniversary of the Effective Time; and (iii) one-third upon the third
anniversary of the Effective Time; provided, in each case, that the Employee
remains employed hereunder on the date the installment is to be paid.
4. Disability, Death and Termination.
(a) In the event of the Employee's inability to perform the
principal duties of his job at the Company due to physical or mental condition,
as determined by a physician ("Permanent Incapacitating Disability") for any
consecutive period of at least one year with or without accommodation, the
Company may, at its election, terminate the Employee's employment hereunder. The
date of Permanent Incapacitating Disability shall be on the last day of such
period. In the event of any such termination, the Company shall be obligated (i)
for compensation earned by the Employee hereunder, but not yet paid, prior to
such termination, and (ii) to pay the Employee each month, for twenty-four
consecutive months, an amount equal to the monthly Termination Benefit (the
"Disability Benefit"); provided, however, that the amount of the Disability
Benefit shall be reduced by any amounts received by the Employee in respect of
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<PAGE> 5
the Employee's disability from any employee benefit or disability plans
maintained by the Company.
(b) The obligations of the Company under this Agreement shall
terminate upon the death of the Employee.
(c) If any of the following events should occur:
(1) the Employee voluntarily terminates employment with the
Company without Good Reason before retirement (which for purposes of
this Agreement shall be determined at or over the age of 55 or at any
earlier date approved by the Company), or
(2) the Company terminates the Employee's employment for
Cause, the Company's obligations hereunder shall terminate and no
further payments of any kind (other than in respect of compensation
earned by the Employee as determined hereunder prior to such
termination) shall thereafter be made by the Company to the Employee
hereunder.
For purposes of the foregoing, "Cause" means:
(i) any act or acts of the Employee constituting a felony
(or its equivalent) under the laws of the United States, any state
thereof or any foreign jurisdiction;
(ii) any material breach by the Employee of any employment
agreement with the Company or the policies of the Company or any of
its subsidiaries or the willful and persistent (after written notice
to the Employee) failure or refusal of the Employee to perform his
duties of employment or comply with any lawful directives of the Board
of Directors of the Company;
(iii) a course of conduct amounting to gross neglect,
willful misconduct or dishonesty; or
(iv) any misappropriation of material
property of the Company by the Employee or any
misappropriation of a corporate or business opportunity of
the
Company by the Employee.
-5-
<PAGE> 6
For purposes of the foregoing, "Good Reason" means:
(i) any material reduction by the Company of such Employee's
duties, responsibilities or titles;
(ii) any involuntary removal of such Employee from any
position previously held (except in connection with a promotion or a
termination for Cause, death or disability, or the voluntary
termination by the Employee other than for Good Reason);
(ii) such other reasons (including nonemployment-related
reasons) as may be approved by the Company, in its sole discretion,
from time to time.
(d) If the Company terminates the Employee's employment without
Cause, if the Employee voluntarily terminates employment with the Company for
Good Reason, or if the Company notifies the Employee of its intention to
terminate this Employment Agreement pursuant to Section 1 hereof, the Company
shall:
(1) pay the Employee a monthly amount, for twenty-four
consecutive months after termination (the "Termination Benefit"),
equal to one twelfth of the Employee's annual average Base Salary as
computed by the Company for the prior twenty-four consecutive months,
or if the Employee has not been employed for twenty-four consecutive
months, for the number of consecutive months employed, preceding the
date of termination (such prior period, the "Prior Period") until the
Termination Benefit is paid in full;
(2) pay the Employee, on each of the first two anniversaries
of the date of termination, an amount equal to the average of the
annual bonuses paid to the Employee during the Prior Period;
(3) pay the Employee the amounts provided for in Section
3(f), to the extent not previously paid, as and when they are required
to be paid thereunder; and
(4) provide Employee with benefits in accordance with
Section 3(b)(iv) and Section 3(d) for a period of twenty-four
consecutive months after termination.
-6-
<PAGE> 7
5. Confidentiality. For purposes of this Agreement, "proprietary
information" shall mean any information relating to the business of the Company
or any of its subsidiaries that has not previously been publicly released by
duly authorized representatives of the Company and shall include (but shall not
be limited to) Company information encompassed in all research, product
development, designs, plans, formulations and formulating techniques, proposals,
marketing and sales plans, financial information, costs, pricing information,
strategic business plans, customer information, and all methods, concepts, or
ideas in or reasonably related to the business of the Company.
The Employee agrees to regard and preserve as confidential all
proprietary information pertaining to the Company's business that has been or
may be obtained by the Employee in the course of his employment with the
Company, whether he has such information in his memory or in writing or other
physical form. The Employee will not, without prior written authority from the
Company to do so, use for his benefit or purposes, or disclose to any other
person, firm, partnership, corporation or other entity, either during the term
of his employment hereunder or thereafter, any proprietary information connected
with the business or developments of the Company, except as required in
connection with the performance by the Employee of his duties and
responsibilities as an employee of the Company. This provision shall not apply
after the proprietary information has been voluntarily disclosed to the public,
independently developed and disclosed by others, or otherwise enters the public
domain through lawful means.
6. Removal of Documents or Objects. The Employee agrees not to remove
from the premises of the Company, except as an employee of the Company in
pursuit of the
-7-
<PAGE> 8
business of the Company or any of its subsidiaries, or except as specifically
permitted in writing by the Company, any document (regardless of the medium on
which it is recorded), object, computer program, computer source code, object
code or data (the "Documents") containing or reflecting any proprietary
information of the Company. The Employee recognizes that all such Documents,
whether developed by him or by someone else, are the exclusive property of the
Company.
7. Non-Competition. The Employee agrees that during the term of his
employment hereunder and for a period of two years after such term of employment
terminates or is terminated, he will not in any way, directly or indirectly,
manage, operate, control, solicit officers or employees of the Company, accept
employment, a directorship or a consulting position with or otherwise advise or
assist or be connected with or own or have any other interest in or right with
respect to (other than through ownership of not more than one percent of the
outstanding shares of a corporation's stock which is listed on a national
securities exchange) any enterprise which competes or shall compete with the
Company, by engaging in or otherwise carrying on the research, development,
manufacture or sale of any product of any type developed, manufactured or said
by the Company or any subsidiary thereof, whether now or hereafter (to the
extent that any such product is under consideration by the Board of Directors of
the Company at the time the Employee's employment terminates or is terminated).
8. Corporate Opportunities. The Employee agrees that during the
Employment Period he will not take any action which might divert from the
Company or any subsidiary of the Company any opportunity which would be within
the scope of any of the present or future businesses of the Company or any of
its subsidiaries (which future businesses
-8-
<PAGE> 9
are then under consideration by the Board of Directors of the Company), the loss
of which has or would have had, in the reasonable judgment of the Board of
Directors of the Company, an adverse effect upon the Company, unless the Board
of Directors of the Company has given prior written approval.
9. Relief. It is understood and agreed by and between the parties
hereto that the service to be rendered by the Employee hereunder, and the rights
and privileges granted to the Company by the Employee hereunder, are of a
special, unique, extraordinary and intellectual character, which gives them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in any action at law, and that a breach by the Employee of any of the
provisions contained in this Agreement will cause the Company great irreparable
injury and damage.
The Employee hereby expressly agrees that the Company shall be
entitled to the remedies of injunction, specific performance and other equitable
relief to prevent a breach of this Agreement by the Employee. The Employee
further expressly agrees that in the event the Employee breaches the
non-competition provisions of Section 7 of this Agreement or the confidentiality
provisions of Section 5 of this Agreement, the balance of any payments due under
this Agreement shall be forfeited by the Employee.
The provisions of this Section 9 shall not, however, be construed as a
waiver of any of the rights which the Company may have for damages or otherwise.
10. Warranty. The Employee hereby warrants that he is free to enter
into this Agreement and to render his services pursuant hereto.
-9-
<PAGE> 10
11. Non-Assignability. Except as otherwise provided herein, this
Agreement may not be assigned by either the Company or the Employee.
12. Withholding. The Company shall have the right to withhold the
amount of taxes, which in the determination of the Company, are required to be
withheld under law with respect to any amount due or paid under this Agreement.
13. Notices. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
(a) If to the Company, to it at:
R.P. Scherer Corporation
2301 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
With a copy to:
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention: General Counsel
(b) If to the Employee, to him at such address as set forth in
the signature page hereof or as he shall otherwise have specified by notice in
writing to the Company.
-10-
<PAGE> 11
14. Governmental Regulation. Nothing contained in this Agreement shall
be construed so as to require the commission of any act contrary to law and
wherever there is any conflict between any provision of this Agreement and any
statute, law, ordinance, order or regulation, the latter shall prevail, but in
such event any such provision of this Agreement shall be curtailed and limited
only to the extent necessary to bring it within the legal requirements.
15. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Michigan. Any suit,
action or proceeding against the Employee with respect to this Agreement, or any
judgment entered by any court in respect of any thereof, may be brought in any
court of competent jurisdiction in the State of Michigan and the Employee hereby
submits to the exclusive jurisdiction of such courts for the purpose of any such
suit, action, proceeding or judgment. The Employee hereby irrevocably waives any
objections which he may now or hereafter have to the laying of the venue of any
suit, action or proceeding arising out of or relating to this Agreement brought
in any court of competent jurisdiction in the State of Michigan, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in any inconvenient forum. No suit,
action or proceeding against the Company with respect to this Agreement may be
brought in any court, domestic or foreign, or before any similar domestic or
foreign authority other than in a court of competent jurisdiction in the State
of Michigan, and the Employee hereby irrevocably waives any right which he may
otherwise have had to bring such an action in any other court, domestic or
foreign, or before any similar domestic or foreign authority. The Company hereby
submits to the jurisdiction of such courts for the purpose of any such suit,
action or proceeding. The Employee irrevocably waives his right to trial by jury
with
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<PAGE> 12
regard to any suit, action, or proceeding with respect to this Agreement;
provided, however, that if such waiver of the right to jury trial shall be held
unenforceable, the invalidity or unenforceability of this provision shall not
impair the validity or enforceability of any other provision of this Agreement.
16. Entire Agreement; Amendment; Termination. From and after the
Effective Time, this Agreement shall set forth the entire understanding of the
parties in respect of the subject matter contained herein and shall supersede
all prior agreement, arrangements and understandings relating to the subject
matter (including without limitation the Prior Agreement). This Agreement may
only be amended by a written agreement signed by both parties hereto or their
duly authorized representatives. If the Merger Agreement is terminated without
the Effective Time having occurred, then this Agreement shall be null and void
and of no effect ab initio.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
R.P. SCHERER CORPORATION
By:/s/ ALEKSANDER ERDELJAN
Title:Chairman, President & CEO
/s/George L. Fotiades
George L. Fotiades
281 Summit Avenue
Summit, New Jersey 07901
CARDINAL HEALTH, INC.
By:/s/ GEORGE H. BENNETT, JR.
Title: Executive Vice President
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<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1994, between ALEKSANDAR ERDELJAN
(the "Employee") and R.P. SCHERER CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Company desires to assure itself of the benefit of the Employee's
services and experience for a period of time and the Employee is willing to
enter into an agreement to that end upon the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions
hereof, the term of employment of the Employee under this Agreement shall be
for the period of one year commencing from the date set forth above.
Thereafter, so long as Employee is capable of performing his duties hereunder
and provided this Agreement is not terminated pursuant to Section 4, this
Agreement shall be automatically renewed for successive periods of one year,
unless, prior to 30 days before the termination date of any one-year period,
either party notifies the other of an intention to terminate this Agreement on
such termination date in which event the Agreement shall be terminated on such
date. Such term of employment, as renewed, is hereinafter referred to as the
"Employment Period."
2. Services to be Rendered.
(a) During the term of employment of the Employee under
this Agreement (and any renewals thereof) the Employee shall serve the Company
as its President and Co-Chief Executive Officer.
(b) The Employee agrees that he will, during the term of
employment under this Agreement (and any renewals thereof) devote his time,
attention and ability to the business of the Company and its subsidiaries as
the Company's President and Co-Chief Executive Officer and shall well and
faithfully serve the Company and its subsidiaries and shall exercise the powers
and authorities and fulfill the responsibilities hereby conferred upon him
honestly, diligently, in good faith and in the best interest of the Company and
its subsidiaries and use his best efforts to promote their interests. The
Employee may, however, serve as an outside director of any other corporation
provided Employee obtains the consent of the Company, which shall not be
unreasonably withheld.
3. Compensation.
(a) In full payment for services rendered to the Company
under this Agreement, the Company shall pay the Employee a salary of Six
Hundred Thirty-Two Thousand Two Hundred Eighty Six and 00/100 Dollars
($632,286) per year during the first year of the Employment Period ("Base
Salary"). The Compensation Committee of the Board of Directors of the Company
shall determine the salary to be paid to the Employee during subsequent years
of the Employment Period.
(b) In addition to the compensation otherwise provided
for in this Section 3, during the term of his employment hereunder, the
Employee also shall be entitled to: (i) participate in the Company's stock
option plans, in accordance with the terms thereof, as from time to time may be
in effect; (ii) by resolution of the Compensation Committee, participate in the
Company's incentive compensation plans, in accordance with the terms
thereof, as from time to time may be in effect; (iii) participate in the
Company's retirement plans, in accordance with the terms thereof, as from time
to time may be in effect; and (iv) participate in such group life, disability,
accident, hospital and medical insurance plans ("Welfare Plans") in accordance
with the terms thereof, as from time to time may be in effect; provided, that
any such participation is generally appropriate to Employee's responsibilities
hereunder; and provided, further, that benefits and terms of participation
under the Welfare Plans may be changed by the Company from time to time in its
sole discretion. To the extent stock options are to be granted in accordance
with a Company stock option plan for the Company fiscal year ending within the
year Employee's employment agreement terminates, Employee is entitled to such
options in accordance with the plan's terms. (c) The Employee shall be
entitled, during the Employment Period, to vacations and fringe benefits
consistent with the practices of the Company.
<PAGE> 2
(d) The Company shall provide the Employee, during the
Employment Period, with the use of a Company-owned or leased automobile, and
will pay all taxes and insurance on said vehicle.
4. Disability, Death and Termination.
(a) In the event of the Employee's inability to perform
the principal duties of his job at the Company due to physical or mental
condition, as determined by a physician ("Permanent Incapacitating Disability")
for any consecutive period of at least one year with or without accommodation,
the Company may, at its election, terminate the Employee's employment
hereunder. The date of Permanent Incapacitating Disability shall be on the
last day of such period. In the event of any such termination, the Company
shall be obligated (i) for compensation earned by the Employee hereunder, but
not yet paid, prior to such termination, and (ii) to pay the Employee each
month, for twenty-four consecutive months, an amount equal to the monthly
Termination Benefit (the "Disability Benefit"); provided, however, that the
amount of the Disability Benefit shall be reduced by any amounts received by
the Employee in respect of the Employee's disability from any employee benefit
or disability plans maintained by the Company.
(b) The obligations of the Company under this Agreement
shall terminate upon the death of the Employee.
(c) If any of the following events should occur:
(1) the Employee voluntarily terminates
employment with the Company without Good Reason before retirement (which for
purposes of this Agreement shall be determined at or over the age of 55 or at
any earlier date approved by the Company), or
(2) the Company terminates the Employee's
employment for Cause, the Company's obligations hereunder shall terminate and
no further payments of any kind (other than in respect of compensation earned
by the Employee as determined hereunder prior to such termination) shall
thereafter be made by the Company to the Employee hereunder.
For purposes of the foregoing, "Cause" means:
(i) any act or acts of the Employee constituting
a felony (or its equivalent) under the laws of the United States, any state
thereof or any foreign jurisdiction;
(ii) any material breach by the Employee of any
employment agreement with the Company or the policies of the Company or any of
its subsidiaries or the willful and persistent (after written notice to the
Employee) failure or refusal of the Employee to perform his duties of
employment or comply with any lawful directives of the Board of Directors of
the Company;
(iii) a course of conduct amounting to gross neglect,
willful misconduct or dishonesty; or
(iv) any misappropriation of material property of
the Company by the Employee or any misappropriation of a corporate or business
opportunity of the Company by the Employee.
For purposes of the foregoing, "Good Reason" means:
(i) any material reduction by the Company of such
Employee's duties, responsibilities or titles;
(ii) any involuntary removal of such Employee from
any position previously held (except in connection with a promotion or a
termination for Cause, death or disability, or the voluntary termination by the
Employee other than for Good Reason);
(iii) within six months after a Change in Control; or
<PAGE> 3
(iv) such other reasons (including
nonemployment-related reasons) as may be approved by the Company, in its sole
discretion, from time to time.
(d) If the Company terminates the Employee's employment
without Cause, if the Employee voluntarily terminates employment with the
Company for Good Reason, or if the Company notifies the Employee of its
intention to terminate this Employment Agreement pursuant to Section 1 hereof,
the Company shall:
(1) pay the Employee a monthly amount, for
twenty-four consecutive months after termination, equal to one twelfth of the
Employee's annual average salary as computed by the Company for the prior
twenty-four consecutive months, or if the Employee has not been employed for
twenty-four consecutive months, for the number of consecutive months employed,
preceding the date of termination (the "Termination Benefit") until the
Termination Benefit is paid in full; and
(2) provide Employee with benefits in accordance
with Section 3(b)(iv) and Section 3(d) for a period of twenty- four consecutive
months after termination.
5. Confidentiality. For purposes of this Agreement, "proprietary
information" shall mean any information relating to the business of the Company
or any of its subsidiaries that has not previously been publicly released by
duly authorized representatives of the Company and shall include (but shall not
be limited to) Company information encompassed in all research, product
development, designs, plans, formulations and formulating techniques,
proposals, marketing and sales plans, financial information, costs, pricing
information, strategic business plans, customer information, and all methods,
concepts, or ideas in or reasonably related to the business of the Company.
The Employee agrees to regard and preserve as confidential all
proprietary information pertaining to the Company's business that has been or
may be obtained by the Employee in the course of his employment with the
Company, whether he has such information in his memory or in writing or other
physical form. The Employee will not, without prior written authority from the
Company to do so, use for his benefit or purposes, or disclose to any other
person, firm, partnership, corporation or other entity, either during the term
of his employment hereunder or thereafter, any proprietary information
connected with the business or developments of the Company, except as required
in connection with the performance by the Employee of his duties and
responsibilities as an employee of the Company. This provision shall not apply
after the proprietary information has been voluntarily disclosed to the public,
independently developed and disclosed by others, or otherwise enters the public
domain through lawful means.
6. Removal of Documents or Objects. The Employee agrees not to
remove from the premises of the Company, except as an employee of the Company
in pursuit of the business of the Company or any of its subsidiaries, or except
as specifically permitted in writing by the Company, any document (regardless
of the medium on which it is recorded), object, computer program, computer
source code, object code or data (the "Documents") containing or reflecting any
proprietary information of the Company. The Employee recognizes that all such
Documents, whether developed by him or by someone else, are the exclusive
property of the Company.
7. Non-Competition. The Employee agrees that during the term of
his employment hereunder and for a period of two years after such term of
employment terminates or is terminated, he will not in any way, directly or
indirectly, manage, operate, control, solicit officers or employees of the
Company, accept employment, a directorship or a consulting position with or
otherwise advise or assist or be connected with or own or have any other
interest in or right with respect to (other than through ownership of not more
than one percent of the outstanding shares of a corporation's stock which is
listed on a national securities exchange) any enterprise which competes or
shall compete with the Company, by engaging in or otherwise carrying on the
research, development, manufacture or sale of any product of any type
developed, manufactured or sold by the Company or any subsidiary thereof,
whether now or hereafter (to the extent that any such product is under
consideration by the Board of Directors of the Company at the time the
Employee's employment terminates or is terminated).
8. Corporate Opportunities. The Employee agrees that during the
Employment Period he will not take any action which might divert from the
Company or any subsidiary of the Company any opportunity which would be within
the scope of any of the present or future businesses of the Company or any of
its subsidiaries (which future businesses are then under consideration by the
Board of Directors of
<PAGE> 4
the Company), the loss of which has or would have had, in
the reasonable judgment of the Board of Directors of the Company, an adverse
effect upon the Company, unless the Board of Directors of the Company has given
prior written approval.
9. Relief. It is understood and agreed by and between the
parties hereto that the service to be rendered by the Employee hereunder, and
the rights and privileges granted to the Company by the Employee hereunder, are
of a special, unique, extraordinary and intellectual character, which gives
them a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in any action at law, and that a breach by the Employee
of any of the provisions contained in this Agreement will cause the Company
great irreparable injury and damage.
The Employee hereby expressly agrees that the Company shall be
entitled to the remedies of injunction, specific performance and other
equitable relief to prevent a breach of this Agreement by the Employee. The
Employee further expressly agrees that in the event the Employee breaches the
non-competition provisions of Section 7 of this Agreement or the
confidentiality provisions of Section 5 of this Agreement, the balance of any
payments due under this Agreement shall be forfeited by the Employee.
The provisions of this Section 9 shall not, however, be
construed as a waiver of any of the rights which the Company may have for
damages or otherwise.
10. Warranty. The Employee hereby warrants that he is free to
enter into this Agreement and to render his services pursuant hereto.
11. Non-Assignability. Except as otherwise provided herein, this
Agreement may not be assigned by either the Company or the Employee.
12. Merger or Consolidation. In the event (a) the Company merges
with or into, or consolidates with, another entity; (b) the Company sells,
exchanges or otherwise disposes of all or substantially all of the assets of
the Company; (c) 50% or more of the Company's then outstanding shares of voting
stock is acquired by another corporation, person or entity; (d) the Company
liquidates or dissolves; or (e) the Company recapitalizes or enters into any
similar transaction, and as a result of which the Common Stock either (i) is no
longer a voting equity security of the Company or (ii) is no longer listed on a
national securities exchange or authorized for quotation on an inter-dealer
quotation system of a national securities association (referred to collectively
as a "Change in Control"), this Agreement may be assigned and transferred to
such successor in interest as an asset of the Company upon such assignee
assuming the Company's obligations hereunder, in which event the Employee
agrees to continue to perform his duties and obligations according to the terms
and conditions hereof for such assignee or transferee of this Agreement subject
to Employee's right to terminate for Good Reason in accordance with Section
4(c)(iii).
13. Withholding. The Company shall have the right to withhold the
amount of taxes, which in the determination of the Company, are required to be
withheld under law with respect to any amount due or paid under this Agreement.
14. Notices. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid:
(a) If to the Company, to it at:
R.P. Scherer International Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
With a copy to:
R.P. Scherer Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
<PAGE> 5
(b) If to the Employee, to him at such address as set
forth in the signature page hereof or as he shall otherwise have specified by
notice in writing to the Company.
15. Governmental Regulation. Nothing contained in this Agreement
shall be construed so as to require the commission of any act contrary to law
and wherever there is any conflict between any provision of this Agreement and
any statute, law, ordinance, order or regulation, the latter shall prevail, but
in such event any such provision of this Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal requirements.
16. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Michigan. Any
suit, action or proceeding against the Employee with respect to this Agreement,
or any judgment entered by any court in respect of any thereof, may be brought
in any court of competent jurisdiction in the State of Michigan and the
Employee hereby submits to the exclusive jurisdiction of such courts for the
purpose of any such suit, action, proceeding or judgment. The Employee hereby
irrevocably waives any objections which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any court of competent jurisdiction in
the State of Michigan, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against the Company with
respect to this Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a court of
competent jurisdiction in the State of Michigan, and the Employee hereby
irrevocably waives any right which he may otherwise have had to bring such an
action in any other court, domestic or foreign, or before any similar domestic
or foreign authority. The Company hereby submits to the jurisdiction of such
courts for the purpose of any such suit, action or proceeding. The Employee
irrevocably waives his right to trial by jury with regard to any suit, action,
or proceeding with respect to this Agreement; provided, however, that if such
waiver of the right to jury trial shall be held unenforceable, the invalidity
or unenforceability of this provision shall not impair the validity or
enforceability of any other provision of this Agreement.
17. Entire Agreement; Amendment. This Agreement sets forth the
entire understanding of the parties in respect of the subject matter contained
herein and supersedes all prior agreement, arrangements and understandings
relating to the subject matter and may only be amended by a written agreement
signed by both parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
R.P. SCHERER CORPORATION
By: /s/ Nicole S. Williams
Title:Executive Vice President
/s/ Aleksandar Erdeljan
Aleksandar Erdeljan
<PAGE> 6
AMENDMENT TO
EMPLOYMENT AGREEMENT
This AMENDMENT dated as of May 17, 1998 to the EMPLOYMENT
AGREEMENT among ALEKSANDAR ERDELJAN (the "Employee"), R.P. SCHERER CORPORATION,
a Delaware corporation (the "Company"), and Cardinal Health, Inc., an Ohio
corporation ("Parent"), dated as of June 1, 1994 (the "Employment Agreement").
WHEREAS, the Company has entered into an Agreement and Plan of
Merger (as the same may be amended from time to time, the "Merger Agreement"),
dated as of the date hereof, with Parent and GEL Acquisition Corp., a Delaware
corporation and a direct wholly owned subsidiary of Parent ("Merger Sub"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Company desires to assure itself of the benefit
of the Employee's services and experience for a period of time following the
Merger, and the Employee is willing to enter into an agreement to that end upon
the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, the parties hereto agree as follows:
1. Continued Employment; Noncompetition. In consideration of
the provisions of Section 2 of this Amendment, the Employee hereby agrees that:
(a) notwithstanding Section 4(d) of the Employment Agreement and clause (iii) of
the definition of "Good Reason" in Section 4(c) of the Employment Agreement, a
termination of his employment by the Employee before the 90th day following the
Effective Time shall not be treated as a termination for "Good Reason," and if
the Employee does terminate his employment before the
<PAGE> 7
90th day following the Effective Time, he shall not be entitled to any further
payments or benefits pursuant to the Employment Agreement or this Amendment; and
(b) Section 7 of the Employment Agreement is hereby amended to provide that the
covenant contained therein shall apply for five years, rather than two years,
following termination of his employment.
2. Severance. In consideration of the provisions of Section 1,
Section 4(d) of the Employment Agreement is hereby amended by adding the
following at the end hereof:
In addition, if the date of termination is after the 90th day
following the Effective Time: (A) after the Termination
Benefit provided for in clause (1) above is paid in full, the
Company shall continue to (x) pay the Employee the monthly
amount described in said clause (1), and provide benefits in
accordance with Section 3(d), for an additional 12 months, and
(y) provide benefits in accordance with Section 3(c)(iv) for
an additional 36 months; and (B) the Company shall pay the
Employee, on each of the first three anniversaries of the date
of termination, an amount equal to the last annual bonus paid
to the Employee by the Company before the date of termination.
3. Effect of this Amendment; Amendment; Termination. Except as
specifically set forth in this Amendment, the Employment Agreement shall
continue in effect without amendment. This Amendment may only be amended by a
written agreement signed by both parties hereto or their duly authorized
representatives. Notwithstanding anything else contained herein, if the Merger
Agreement is terminated without the Effective Time having occurred, then this
Amendment shall be null and void and of no effect ab initio, and the Employment
Agreement shall remain in effect without amendment hereby.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
R.P. SCHERER CORPORATION
By:/s/ ROBERT H. ROCK
Title: Chairman, Comp. Committee
/s/Aleksandar Erdeljan
Aleksandar Erdeljan
Address:
CARDINAL HEALTH, INC.
By:/s/ GEORGE H. BENNETT, JR.
Title: Executive Vice President
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<PAGE> 1
Exhibit 10.24
RIDER NO. 6
TO
VENDOR PROGRAM AGREEMENT
DATED AS OF OCTOBER 10, 1991, AS AMENDED
AMONG
GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL"),
PYXIS CORPORATION ("PYXIS")
AND
CARDINAL HEALTH, INC. ("CARDINAL")
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 and CARDINAL have requested that in lieu of PYXIS
offering to sell and assign to GE CAPITAL any Rental Agreements for the period
April 1, 1998 through March 10, 1999 or at any time thereafter, PYXIS be
permitted to pay GE CAPITAL upon the execution of this Rider No. 6 an amount to
be mutually agreed upon by the parties hereto (the "Quarterly New Portfolio
Aggregate Buyout Amount").
WHEREAS, PYXIS has requested that in the event that any Rental
Agreement, including any New Portfolio Rental Agreement, is terminated as a
result of an upgrading of Equipment or any other event which PYXIS and the
applicable Customer mutually agree upon, the sole responsibility of PYXIS shall
be to replace the terminated Rental Agreement with a new obligation of
comparable value to be issued by CARDINAL and to be secured by inventory
consisting of all pharmaceutical products owned by CARDINAL or its wholly owned
subsidiary, Cardinal Florida, Inc. ("Cardinal Florida"), and which is now or
hereafter located in the warehouse facility located at 2700 Interstate Drive,
Lakeland, Florida 33805 which is owned by SunTrust Banks, Inc. and leased to
Cardinal Florida pursuant to that certain Lease Agreement between SunTrust
Banks, Inc., as lessor, and Cardinal Florida, as lessee, dated as of August 14,
1996 (the " Lakeland Facility").
WHEREAS, the parties further wish to modify the Agreement to amend the
Uniform Commercial Code financing statement filed by GE CAPITAL to reflect its
security interest in the Rental Agreements which it has financed and the
Equipment which is subject thereto, and to amend the provision of the Agreement
which deals with GE CAPITAL's commitment to consult with PYXIS prior to entering
into a Vendor Program Agreement, Operating Agreement or similar agreement with a
competing company.
NOW THEREFORE, for the consideration set forth herein and in the
Agreement, GE CAPITAL, PYXIS and CARDINAL hereby agree as follows:
A. QUARTERLY NEW PORTFOLIO AGGREGATE BUYOUT AMOUNT.
-1-
<PAGE> 2
(1) Upon ten (10) business days following the execution of this Rider
No. 6, PYXIS shall pay to GE CAPITAL via wire transfer to an account designated
by GE CAPITAL the amount of Four Million One Hundred Fourteen Thousand Six
Hundred Forty Nine Dollars ($4,114,649.00) in payment of the Quarterly New
Portfolio Aggregate Buyout Amount.
(2) Payment by PYXIS of the Quarterly New Portfolio Aggregate Buyout
Amount shall relieve PYXIS of any obligation to offer to GE CAPITAL any Rental
Agreements under the Agreement for the period April 1, 1998 through March 10,
1999 or at any time thereafter, including without limitation, the obligations
under Sections A and M(2) of Rider No. 5 to the Agreement, but shall not
otherwise affect the rights or obligations of the parties pursuant to Rider No.
5 to the Agreement, except as provided in Sections A(3), A(4) and B(1) hereof.
(3) The fifth sentence of Section K of Rider No. 5 to the Agreement is
hereby amended to read as follows:
"Should GE CAPITAL elect this option, PYXIS shall remit to GE CAPITAL
on the termination date a termination fee (the "Termination Fee") equal
to the Aggregate Portfolio Net Book Value (as hereinafter defined)."
(4) Payment by PYXIS of the Quarterly New Portfolio Aggregate Buyout
Amount shall also relieve PYXIS of any further obligation to (i) pay GE CAPITAL
any late charge receivables which were transferred by GE CAPITAL to PYXIS
pursuant to the transition in account administration implemented pursuant to
Rider No. 5 to the Agreement, and (ii) notify GE CAPITAL if PYXIS elects to
outsource the account administration of any Serviced Accounts and offer GE
CAPITAL the right of first refusal to administer the Serviced Accounts for which
PYXIS proposes to outsource the account administration as provided in Section
M(1) of Rider No. 5 to the Agreement.
B. OBLIGATION TO REPLACE A TERMINATED RENTAL AGREEMENT WITH A NEW
OBLIGATION.
(1) In the event that any Rental Agreement, including any New Portfolio
Rental Agreement, is terminated as a result of an upgrading of Equipment or any
other event which PYXIS and the applicable Customer mutually agree upon, the
sole responsibility and obligation of PYXIS shall be to replace the terminated
Rental Agreement with a new obligation of comparable value to be issued by
CARDINAL which shall be in the form of Exhibit A annexed hereto and incorporated
herein by reference (the "New Note"). One New Note shall be issued by CARDINAL
on or before the fifteenth day of each month to cover the aggregate obligations
of CARDINAL with respect to all Rental Agreements (if any) which were terminated
pursuant to this Section B(1) during the preceding calendar month provided that
such termination was reflected in PYXIS' books and records. Each New Note shall
(A) have an original principal amount equal to the sum of (1) the net present
value of the remaining payments to be made under the Rental Agreements which
were terminated during the preceding month (the "Terminated Rental Agreements")
as of their respective dates of termination discounted to present value at the
applicable Standard Rate of each Terminated Rental Agreement, and (2) the
accrued and unpaid amounts (if any) due under the Terminated Rental Agreements,
(B) have a rate of interest equal to the weighted average of the Standard Rates
of the Terminated Rental Agreements, and (C) be payable in monthly installments,
with each monthly installment representing the scheduled payments which were due
to be made under the Terminated Rental Agreements during such month. Each New
Note shall be secured by
-2-
<PAGE> 3
inventory consisting of all pharmaceutical products now or hereafter owned by
CARDINAL or Cardinal Florida and which is now or hereafter located in the
Lakeland Facility pursuant to the terms of the Security Agreement among
CARDINAL, Cardinal Florida and GE CAPITAL which is annexed hereto as Exhibit B
and incorporated herein by reference.
C. UNIFORM COMMERCIAL CODE FINANCING STATEMENT CHANGE. GE CAPITAL
hereby agrees to prepare and file within three (3) business days following the
execution by all parties hereto of this Rider No. 6 Form UCC-2s in the State of
California which amend the original Uniform Commercial Code financing statement
filed by GE CAPITAL under the Program. The Form UCC-2s to be prepared and filed
by GE CAPITAL shall be substantially in the form annexed hereto as Exhibit C,
and shall be submitted to PYXIS for its execution. Upon return of the executed
Form UCC-2s from PYXIS, GE CAPITAL shall file the Form UCC-2s in the office in
which the original Uniform Commercial Code financing statement was first filed.
D. COMMITMENT TO CONSULT. Section C of Rider No. 3 to the Agreement is
hereby amended in its entirety to read as follows:
"COMMITMENT TO CONSULT. PYXIS shall provide the Vendor Financial
Services division of GE CAPITAL ("VFS") with a list (each such list
being referred to as the "Competing Companies List") of those companies
or those divisions of companies which compete directly with PYXIS in
the sale of drug supply dispensing products (each such company or
division being hereinafter referred to as a "Competing Company"). Where
a Competing Company consists of a division or a subsidiary, nothing
herein shall prohibit or restrict VFS' ability to enter into a Vendor
Program Agreement, an Operating Agreement or a similar agreement with
the parent corporation or any other affiliate of such Competing
Company, provided that VFS shall not enter into a Vendor Program
Agreement, an Operating Agreement or a similar agreement with such
Competing Company except in accordance with the terms of this Section
C. PYXIS may revise the Competing Companies List at any time by
providing GE CAPITAL with a list of additional Competing Companies.
Each Competing Companies List shall be subject to GE CAPITAL's review
and approval which shall not be unreasonably withheld or delayed. The
first approved Competing Companies List is annexed hereto as Exhibit D.
Once a Competing Companies List is approved by GE CAPITAL, GE CAPITAL
shall be obligated to give PYXIS prior written notice ("Consultation
Notice") of the intention of VFS or of any new division or affiliate
established by GE CAPITAL on or after the date hereof that offers a
domestic vendor financing program which is similar to the vendor
financing programs offered by VFS ("Newco") to enter into a Vendor
Program Agreement, Operating Agreement or similar agreement with a
Competing Company whose name appears on an approved Competing Companies
List (other than Baxter International, Inc. or any division thereof).
If PYXIS opposes the entry by VFS or Newco into a Vendor Program
Agreement or an Operating Agreement or a similar agreement with such
Competing Company, then the issue shall be referred to VFS' General
Manager and PYXIS' Chief Financial Officer. If such officers cannot
resolve the issue within thirty (30) days after submission of the issue
to such officers, and VFS or Newco nevertheless elects to enter into a
Vendor Program Agreement or an Operating Agreement or a similar
agreement with such Competing Company, then PYXIS may terminate the
Agreement upon thirty (30) days notice to GE CAPITAL and shall be
entitled to exercise the rights afforded to PYXIS under Section J of
Rider No. 3 to the Agreement in the event of a
-3-
<PAGE> 4
default by GE CAPITAL of its obligations under the Agreement. GE
CAPITAL agrees that VFS and Newco will not enter into a Vendor Program
Agreement or an Operating Agreement or a similar agreement with any
Competing Company (other than Baxter International, Inc. or any
division thereof) whose name appears on an approved Competing Companies
List for a period of one hundred and twenty (120) days following the
giving of the applicable Consultation Notice to PYXIS. The obligation
of GE CAPITAL to provide a Consultation Notice to PYXIS shall
automatically terminate upon the expiration of the last Owned Account."
E. CONFIDENTIALITY. The following sentence is hereby added to the end
of Section K of Rider No. 3 to the Agreement:
"If prior to the expiration of the last Owned Account, either GE
CAPITAL or PYXIS utilizes any such confidential information other than
in connection with the transactions contemplated by the Agreement, or
divulges any such confidential information to a third party, then the
disclosing party shall have breached the Agreement. If the disclosing
party is GE CAPITAL, then PYXIS shall be entitled to exercise the
rights afforded to PYXIS under Section J of Rider No. 3 to the
Agreement in the event of default by GE CAPITAL."
F. PARTIES TO THIS AGREEMENT. PYXIS, CARDINAL and GE CAPITAL agree that
the obligations of PYXIS described in this Rider No. 6 are joint and several
obligations of PYXIS and CARDINAL. In the event that PYXIS fails to perform any
of its obligations under this Rider No. 6, 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 this Rider No. 6.
G. 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.
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<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Rider No. 6 to be executed by
their duly authorized representatives as of the dates set forth below.
PYXIS CORPORATION GENERAL ELECTRIC CAPITAL
CORPORATION
By:/s/ SCOTT R. PETERSON By:/s/ STEPHEN M. BENNETT
------------------------------ --------------------------------
Title: V.P. Finance, CFO Title: Vice President
--------------------------- ----------------------------
Date: June 1, 1998 Date: June 1, 1998
--------------------------- ----------------------------
CARDINAL HEALTH, INC.
By:/s/ DAVID BEARMAN
------------------------------
Title: Chief Financial Officer
---------------------------
Date: June 1, 1998
---------------------------
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<PAGE> 6
EXHIBIT A
PROMISSORY NOTE
Date: ________, ____
FOR VALUE RECEIVED, CARDINAL HEALTH, INC., an Ohio corporation whose
principal executive offices are located at 5555 Glendon Court, Dublin, Ohio
43016 ("Debtor"), promises to pay to the order of GENERAL ELECTRIC CAPITAL
CORPORATION or any subsequent holder hereof (each, a "Payee") at its office
located at 55 Federal Road, P.O. Box 3199, Danbury, Connecticut 06813-3199 or at
such other place as Payee may designate, the principal sum of _____________
Dollars ($______), with interest on the unpaid principal balance from and
including the date hereof at the rate of ___ percent ( %) per annum, to be paid
in arrears in lawful money of the United States, in _________(_______)
consecutive monthly installments of principal and interest. The amount of each
monthly installment may vary and shall be equal to the aggregate amount of
principal and interest set forth opposite the applicable Payment Date (as
hereinafter defined) on Exhibit A annexed hereto and made a part hereof, and a
final monthly installment shall be in the amount of the total outstanding
principal and interest. The first monthly installment shall be due and payable
on ________, ____ and the following monthly installments shall be due and
payable on the same day of each succeeding month (each a "Payment Date"). The
final monthly installment shall be due and payable on __________, _________.
All payments shall be applied first to interest and then to principal. The
acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time. Interest shall be calculated on the basis of a 360 day year and will be
charged for each calendar day on which any principal is outstanding.
Time is of the essence hereof. If any installment of principal and interest
is not received within five (5) business days after the applicable Payment Date,
Debtor agrees to pay in addition to the amount of each such installment a late
payment charge of one percent (1%) of said installment, but not exceeding any
lawful maximum. In the event that (i) Debtor fails to make payment of any amount
due hereunder within ten (10) business days after the same becomes due and
payable; or (ii) Debtor defaults or fails to perform any term or condition
contained in the Security Agreement (hereafter defined), then the entire unpaid
principal sum of this Promissory Note, together with all interest accrued
thereon, and all other sums due under the Security Agreement dated May __, 1998
among Debtor and its wholly-owned subsidiary, Cardinal Florida, Inc., as
debtors, and General Electric Capital Corporation, as secured party (the
"Security Agreement"), shall, at the option of Payee, immediately become due and
payable, and Payee shall be entitled to exercise one or more of the remedies
provided in Section 9 of the Security Agreement.
It is the intention of the parties hereto to comply with the applicable
usury laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Promissory Note or the Security Agreement, in no event shall
this Promissory Note or the Security Agreement require the payment or permit the
collection of interest in excess of the maximum amount permitted by applicable
law. If any such excess interest is contracted for, charged or received under
this Promissory Note or the Security Agreement, then (a) the provisions of this
paragraph shall govern and control, (b) neither Debtor nor any other person or
entity now or hereafter liable for the payment hereof shall be obligated to pay
the amount of such interest to the extent that it is in
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<PAGE> 7
excess of the maximum amount of interest permitted by applicable law, (c) any
such excess which may have been collected shall be either applied as a credit
against the then unpaid principal balance or refunded to Debtor, at the option
of the Payee, and (d) the effective rate of interest shall be automatically
reduced to the maximum lawful contract rate allowed under applicable law as now
or hereafter construed by the courts having jurisdiction thereof. It is further
agreed that without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received under this Promissory Note or the
Security Agreement which are made for the purpose of determining whether such
rate exceeds the maximum lawful contract rate, shall be made, to the extent
permitted by applicable law, by amortizing, prorating, allocating and spreading
in equal parts during the period of the full stated term of the indebtedness
evidenced hereby, all interest at any time contracted for, charged or received
from Debtor or otherwise by Payee in connection with such indebtedness;
provided, however, that if the interest rate is reduced pursuant to this
paragraph and any applicable state law is then amended or the law of the United
States of America preempts any applicable state law, so that it becomes lawful
for the Payee to receive a greater simple interest per annum rate than is
allowed at the time of the reduction, Debtor agrees that on the effective date
of such amendment or preemption, as the case may be, the lawful maximum
hereunder shall be increased to the lower of the original interest rate provided
under this Promissory Note or the maximum simple interest per annum rate allowed
by the higher of the amended state law or the law of the United States of
America.
Debtor and all sureties, endorsers, guarantors or any others (each such
person, other than Debtor, an "Obligor") who may at any time become liable for
the payment hereof jointly and severally consent hereby to any and all
extensions of time, renewals, waivers or modifications of, and all substitutions
or releases of, security or of any party primarily or secondarily liable on this
Promissory Note or the Security Agreement or any term and provision of either,
which may be made, granted or consented to by Payee, and agree that suit may be
brought and maintained against any one or more of them, at the election of Payee
without joinder of any other as a party thereto, and that Payee shall not be
required first to foreclose, proceed against, or exhaust any security hereof in
order to enforce payment of this Promissory Note. Debtor and each Obligor hereby
waives presentment, demand for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, and all other notices in connection herewith, and
diligence in collecting this Promissory Note or enforcing any of the security
hereof, and agrees to pay (if permitted by law) all expenses incurred in
collection, including Payee's reasonable attorneys' fees.
CARDINAL HEATH, INC.
By:
- -------------------------------- --------------------------
(Witness)
- ------------------------------- -----------------------------
(Print or Type Name) (Print or Type Name)
- ------------------------------- -----------------------------
(Address) (Print or Type Title)
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<PAGE> 8
EXHIBIT A TO PROMISSORY NOTE
Payment Date Principal Interest Aggregate Payment
- ------------ --------- -------- ------------------
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<PAGE> 9
EXHIBIT B
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made as of the
___ day of May, 1998 by and among GENERAL ELECTRIC CAPITAL CORPORATION ("GE
CAPITAL"), as secured party, and CARDINAL HEALTH, INC. ("CARDINAL") and its
wholly-owned subsidiary CARDINAL FLORIDA, INC. ("CARDINAL FLORIDA"), as debtors.
1. Reference is made to the Vendor Program Agreement among GE CAPITAL,
PYXIS CORPORATION ("PYXIS"), and CARDINAL dated as of October 10, 1991, as
amended (the "Vendor Program Agreement"). Capitalized terms used herein without
definition shall have the meanings set forth in the Vendor Program Agreement.
2. In order to induce GE CAPITAL to: (a) agree to delete the
requirement set forth in the fourth sentence of Section A(1) of Rider No. 5 to
the Vendor Program Agreement that PYXIS offer GE CAPITAL the right to finance
new Rental Agreements of comparable value in the event that the Rental
Agreements originally financed by GE CAPITAL are terminated as a result of an
upgrading of Equipment or any other event which PYXIS and the applicable
Customers mutually agree upon, and (b) agree to accept in place of the
terminated Rental Agreements certain promissory notes of comparable value to be
issued by CARDINAL to GE CAPITAL (individually, a "Promissory Note", and
collectively, the "Promissory Notes"), and in consideration of GE CAPITAL doing
so, CARDINAL and CARDINAL FLORIDA hereby grant GE CAPITAL a security interest in
all present and future inventory (as such term is defined in the Uniform
Commercial Code in effect in the State of New York) of pharmaceutical products
("Inventory"), together with all accessions, replacements, exchanges or returns
thereto, and all cash and non-cash proceeds thereof, whether now owned or
hereafter acquired by CARDINAL or CARDINAL FLORIDA which are now or hereafter
located at the warehouse facility located at 2700 Interstate Drive, Lakeland,
Florida 33805 (the "Lakeland Facility") which is legally owned by SunTrust
Banks, Inc. ("SunTrust Banks") and leased by SunTrust Banks to CARDINAL FLORIDA
pursuant to that certain Lease Agreement dated as of August 14, 1996 (the
"Lakeland Lease") between SunTrust Banks, as lessor, and CARDINAL FLORIDA, as
lessee (collectively, the "Collateral").
3. The security interest granted to GE CAPITAL in the preceding
paragraph shall continue in effect for so long as any obligation of CARDINAL to
GE CAPITAL under any Promissory Note remains outstanding. CARDINAL and CARDINAL
FLORIDA agree to execute and deliver to GE CAPITAL for filing in the appropriate
filing office(s) Uniform Commercial Code financing statement(s) substantially in
the form of Exhibit A hereto, continuation statement(s) thereto and/or any other
document which is necessary to perfect and maintain the perfection of GE
CAPITAL's security interest in the Collateral. This Security Agreement or any
photographic or other copy of it may be filed in any appropriate public
office(s) as a financing statement.
4. This Security Agreement creates a valid and continuing lien (the
"Lien") upon the Collateral in favor of GE CAPITAL. CARDINAL and CARDINAL
FLORIDA each represents, warrants and covenants to GE CAPITAL that: (i) CARDINAL
and CARDINAL FLORIDA are each duly organized and validly existing corporations,
and have the power to enter into this Security Agreement and to carry out the
transactions contemplated hereby; (ii) the execution and delivery of this
Security Agreement and the performance by CARDINAL and CARDINAL FLORIDA of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action; (iii) this Security Agreement constitutes a legal, valid and
binding obligation of CARDINAL and CARDINAL FLORIDA enforceable in accordance
with its terms, except as may
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<PAGE> 10
be limited by bankruptcy, insolvency or similar laws affecting the rights and
remedies of creditors generally and the availability of equitable remedies; (iv)
upon the filing of the Uniform Commercial Code financing statement(s) referenced
in Section 3 above, the Lien will be a fully perfected lien on all Collateral,
and will be enforceable as a first priority lien against all other creditors of,
and purchasers from, CARDINAL or CARDINAL FLORIDA (other than purchasers of
Inventory in the ordinary course of business); (v) CARDINAL or CARDINAL FLORIDA
is the sole owner of each item of Collateral and has good and marketable title
to the Collateral free and clear of any other liens, claims or encumbrances;
(vi) no effective security agreement, financing statement or equivalent security
covering all or any part of the Collateral is or will be on file or of record in
any public office, except those filed in favor of GE CAPITAL pursuant to Section
3 hereof; (vii) CARDINAL and CARDINAL FLORIDA shall defend the right, title and
interest of GE CAPITAL in and to the Collateral against the claims and demands
of all persons (other than purchasers of Inventory in the ordinary course of
business), and shall take such actions, including the institution of litigation
against third parties as shall be prudent in order to protect and preserve GE
CAPITAL's first priority security interest in the Collateral; (viii) CARDINAL
and CARDINAL FLORIDA will at all times maintain Collateral at the Lakeland
Facility in an amount (valued at the original manufacturer's wholesale prices)
equal to or greater than CARDINAL's aggregate outstanding obligations to GE
CAPITAL under the Promissory Notes; (ix) CARDINAL and CARDINAL FLORIDA shall
mark their respective books and records pertaining to the Collateral to evidence
the Lien on the Collateral granted under this Security Agreement; (x) CARDINAL's
and CARDINAL FLORIDA's handling, storage, wholesale sale and/or distribution of
the Collateral conforms in all material respects to all federal and state rules,
regulations and standards which pertain to the handling, storage, wholesale sale
or distribution of similar pharmaceutical products; (xi) CARDINAL and CARDINAL
FLORIDA will obtain from SunTrust Banks a duly authorized and executed Lessor's
Consent and Waiver (the "SunTrust Banks Agreement") in which SunTrust Banks will
acknowledge the superiority of GE CAPITAL's liens and security interest in the
Collateral and shall authorize GE CAPITAL to enter the Lakeland Facility to
remove, inspect or otherwise deal with the Collateral and to conduct private or
public sales of the Collateral whenever GE CAPITAL deems it necessary to protect
its interest in the Collateral; and (xii) CARDINAL and CARDINAL FLORIDA will
advise GE CAPITAL promptly in writing of (a) any fact which causes any
representation, warranty or covenant of CARDINAL and/or CARDINAL FLORIDA
contained in this Security Agreement to become materially inaccurate during the
term of this Security Agreement or (b) the occurrence of any other event which
would have a material adverse effect on the value of the Collateral or the Lien
granted hereunder.
5. So long as CARDINAL and CARDINAL FLORIDA are not in default under
any of their respective obligations to GE CAPITAL under the Promissory Notes or
this Security Agreement, CARDINAL and CARDINAL FLORIDA may sell Collateral which
consists of Inventory in the normal course of their business; provided that
CARDINAL and CARDINAL FLORIDA shall not sell or otherwise transfer, voluntarily
or involuntarily, any Collateral which consists of Inventory outside of the
normal course of their business.
6. CARDINAL and CARDINAL FLORIDA hereby, transfer and assign to GE
CAPITAL all representations and warranties made by the manufacturers of the
Collateral which consists of Inventory, to the extent such representations and
warranties are assignable, including any representations and warranties that the
Inventory conforms in all material respects to all federal and state rules,
regulations and standards which pertain to similar pharmaceutical products, and
will cooperate with all reasonable requests made by GE CAPITAL to enforce such
representations or warranties against such manufacturers in the event that GE
CAPITAL sustains any losses, claims or liabilities in connection with its
repossession, disposal or sale of such Inventory as a result of such
representations or warranties being false or incorrect when made.
Notwithstanding anything herein to the contrary, CARDINAL and CARDINAL FLORIDA
each
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<PAGE> 11
reserve their rights under such manufacturers' representations and warranties
and the remedies available to them for any breach by the manufacturers of such
representations and warranties.
7. (a) CARDINAL and CARDINAL FLORIDA will at all times keep complete
and accurate records of the Collateral, its wholesale prices and its sales,
including warehouse receipts, bills of lading, certificates of title, sales and
accounts receivables, and other documents and will make such records and the
Collateral available for inspection by GE CAPITAL or its designee with at least
three business days advance written notice to CARDINAL and CARDINAL FLORIDA at a
reasonable time and at the location where such records and the Collateral are
maintained.
(b) CARDINAL and CARDINAL FLORIDA will provide GE CAPITAL with a
monthly report regarding the value of the Collateral, as reflected on CARDINAL's
and CARDINAL FLORIDA's books and records, which shall be prepared in accordance
with CARDINAL's and CARDINAL FLORIDA's standard accounting practices.
(c) In the event that the Lakeland Lease is not renewed upon its
expiration and the Lakeland Facility is not conveyed from SunTrust Banks to
CARDINAL or CARDINAL FLORIDA, CARDINAL and CARDINAL FLORIDA covenant to: (a)
grant to GE CAPITAL or secure the grant to GE CAPITAL by another wholly-owned
subsidiary of CARDINAL ("Newsub") of a first priority security interest in the
entire Inventory located at another facility which is owned or leased by
CARDINAL, CARDINAL FLORIDA or Newsub (the "Replacement Collateral") which has a
value which is at least equal to CARDINAL's aggregate outstanding obligations to
GE CAPITAL under the Promissory Notes, (b) duly execute and deliver to GE
CAPITAL, or secure the due execution and delivery by Newsub to GE CAPITAL, for
filing in the appropriate filing office(s) of, Uniform Commercial Code financing
statement(s) in the form of Exhibit A hereto and/or any other document which is
necessary to perfect GE CAPITAL's security interest in the Replacement
Collateral, (c) if the new facility is not owned by CARDINAL, CARDINAL FLORIDA
or Newco, secure the due execution and delivery by the lessor of the new
facility of an agreement substantially in the form of the SunTrust Banks
Agreement, and (d) secure the due authorization and delivery by Newsub of a
Security Agreement in the form of this Security Agreement if the Replacement
Collateral is pledged by Newsub.
8. CARDINAL and CARDINAL FLORIDA will pay promptly when due all taxes
and transportation, storage and warehousing charges on the Collateral and shall
keep the Collateral insured against all customary perils for at least the lesser
of its insurable value, less a deductible of no more than $150,000 per
occurrence, or the aggregate amount CARDINAL owes to GE CAPITAL under the
Promissory Notes, with GE CAPITAL named as a loss payee, and with such policies
subject to cancellation or modification only upon thirty days prior written
notice to GE CAPITAL. Upon GE CAPITAL's request, CARDINAL and CARDINAL FLORIDA
will furnish GE CAPITAL with evidence that the required insurance is in full
force and effect. In the event of the loss, damage or destruction of the
Collateral, if the insurance proceeds received by GE CAPITAL are insufficient to
cover the aggregate amount which CARDINAL owes to GE CAPITAL under the
Promissory Notes, then within ten days following receipt of written notice from
GE CAPITAL, CARDINAL, in its sole discretion, shall either pay to GE CAPITAL an
amount equal to such deficiency or replace the lost, damaged or destroyed
Collateral with new Collateral, which shall be pledged to GE CAPITAL pursuant to
the terms of this Security Agreement. If CARDINAL or CARDINAL FLORIDA fails to
pay any of such taxes or other charges, or to keep the Collateral properly
insured, GE CAPITAL may at its option, but is not required to, correct such
default and any amounts expended by GE CAPITAL in doing so will be deemed a
CARDINAL obligation or a CARDINAL FLORIDA obligation, as the case may be, and
will be evidenced by a new promissory note to be issued by CARDINAL or CARDINAL
FLORIDA, as the case may be, on behalf of GE CAPITAL and secured by the Lien
created hereunder.
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<PAGE> 12
9. If (i) CARDINAL fails to pay when due any amount payable under a
Promissory Note or CARDINAL or CARDINAL FLORIDA fails to observe or perform any
representation, warranty, covenant or agreement contained in this Security
Agreement and such failure continues uncured for longer than ten days after
receipt of written notice from GE CAPITAL identifying such failure; or (ii) any
representation, warranty or covenant contained herein proves to have been
materially false or incorrect when made; or (iii) any of the Collateral is
subject to, or threatened with, attachment, execution, levy or seizure in any
legal proceeding; or (iv) CARDINAL or CARDINAL FLORIDA makes an assignment for
the benefit of creditors, or ceases to do business as a going concern, or if a
petition under Title 11 of the United States Code or any successor or similar
law (the "Bankruptcy Code") or for a receiver is filed by CARDINAL or CARDINAL
FLORIDA or if any involuntary proceeding is filed against CARDINAL or CARDINAL
FLORIDA under the Bankruptcy Code and CARDINAL or CARDINAL FLORIDA fails to have
such involuntary proceeding dismissed within sixty days after it is filed; or
(v) the value of the Collateral maintained by CARDINAL and CARDINAL FLORIDA at
the Lakeland Facility at any time decreases to less than CARDINAL's aggregate
outstanding obligations to GE CAPITAL under the Promissory Notes and CARDINAL
and CARDINAL FLORIDA fail within ten days after receipt of written notice from
GE CAPITAL to: (a) grant to GE CAPITAL, or secure the grant to GE CAPITAL by
Newsub of, a first priority security interest in the entire Inventory of
pharmaceutical products located at another facility which is owned or leased by
CARDINAL, CARDINAL FLORIDA or Newsub ("Additional Collateral") with a value that
when added to the value of the Collateral will at least equal CARDINAL's
aggregate outstanding obligations to GE CAPITAL under the Promissory Notes, and
(b) duly execute and deliver to GE CAPITAL, or secure the due execution and
delivery by Newsub to GE CAPITAL, for filing in the appropriate filing office(s)
of, Uniform Commercial Code financing statement(s) in the form of Exhibit A
hereto and/or any other document which is necessary to perfect GE CAPITAL's
security interest in the Additional Collateral, and (c) secure the due execution
and delivery by the lessor of the new facility of an agreement substantially in
the form of the SunTrust Banks Agreement, if the new facility is not owned by
CARDINAL, CARDINAL FLORIDA or Newco, and (d) secure the due execution and
delivery by Newsub of a Security Agreement in the form of this Security
Agreement if the Additional Collateral is pledged by Newsub; or (vi) CARDINAL's
credit rating falls below BBB+, as defined by Standard and Poors, CARDINAL and
CARDINAL FLORIDA will be in default under this Security Agreement.
10. Upon the occurrence of any such default, GE CAPITAL may exercise
one or more of the following remedies: (i) effective as of the date of the
default, upon notice to CARDINAL, increase the rate of interest on the
Promissory Notes by the lower of one hundred (100) basis points or the maximum
amount permitted by applicable law for so long as any default shall be
continuing, (ii) declare all indebtedness then owed and secured hereby to be
immediately due and payable and proceed to enforce payment of said amount, and
(iii) exercise any other rights and remedies available to GE CAPITAL at law or
at equity, including all remedies available to it under the Uniform Commercial
Code. CARDINAL and CARDINAL FLORIDA expressly waive further notice of intention
to accelerate the indebtedness secured hereby and of acceleration. CARDINAL and
CARDINAL FLORIDA agree, at GE CAPITAL's request, to assemble the Collateral and
make it available to GE CAPITAL at the Lakeland Facility. GE CAPITAL, by itself
or its agent, may, without notice to CARDINAL or CARDINAL FLORIDA, enter into
any premises where the Collateral may be, and may repossess all or any portion
of the Collateral. GE CAPITAL shall have the right, but not the obligation, to
sell or otherwise dispose of the Collateral, either at public or private sale,
in lots or in bulk, for cash or for credit, to such parties and upon such
reasonable terms and conditions as GE CAPITAL, in its sole discretion, may deem
advisable. Any notice which GE CAPITAL is required to give to CARDINAL or
CARDINAL FLORIDA under the Uniform Commercial Code or other applicable law of
the time and place of any public sale or the time after which any private sale
or other intended disposition of the Collateral is to be made shall be deemed to
constitute reasonable notice if such notice is mailed to the last known address
of
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CARDINAL and CARDINAL FLORIDA at least ten (10) days prior to such action. Such
sales may be adjourned or continued, from time to time, with or without notice
to CARDINAL or CARDINAL FLORIDA. GE CAPITAL shall have the right to conduct such
sales at the Lakeland Facility or elsewhere and shall have the right to use the
Lakeland Facility for a reasonable amount of time without rent or charge for
such sales, provided that such sales do not unreasonably interfere with CARDINAL
FLORIDA's use of the Lakeland Facility. To the maximum extent permitted by
applicable law, CARDINAL and CARDINAL FLORIDA waive all claims, damages or
demands against GE CAPITAL or its agents arising out of the repossession,
retention or sale of any Collateral except such as are determined in a final
judgment by a court of competent jurisdiction to have arisen solely out of the
negligence or willful misconduct of GE CAPITAL or such agent. Any proceeds of
any sale of Collateral by GE CAPITAL shall be applied first to the payment of
the reasonable expenses incurred by GE CAPITAL in the repossession, storage and
sale of the Collateral, including attorneys', appraisers' and auctioneers' fees,
then to the payment of all the obligations of CARDINAL to GE CAPITAL then in
default under the Promissory Notes and then to the discharge of any remaining
obligations of CARDINAL and CARDINAL FLORIDA to GE CAPITAL under this Security
Agreement. CARDINAL and CARDINAL FLORIDA shall pay to GE CAPITAL on demand any
deficiency which may remain after such sale or other disposition, and GE CAPITAL
shall remit to CARDINAL and CARDINAL FLORIDA any surplus remaining after such
sale or other disposition and the distribution described herein.
11. In no event will CARDINAL or CARDINAL FLORIDA have to pay any
charge which would exceed that lawfully permitted. If any provision, practice,
document or agreement would, in the absence of this Section, require the
payment, or permit the receipt or charging, of any interest or other charge
which would exceed the amount permitted by applicable law on the principal from
time to time actually outstanding, then: (1) this Section will control, (2)
CARDINAL and CARDINAL FLORIDA will not be obligated to pay the amount of such
charges to the extent they exceed the maximum amount permitted by law for
written contracts, (3) any excess which is collected or received will either be
applied to the unpaid principal lawfully owed by CARDINAL and CARDINAL FLORIDA
or refunded to CARDINAL and CARDINAL FLORIDA, and (4) the effective rate of
interest and other charges will be automatically reduced to the maximum rate for
written contracts permitted by applicable law. As used in this Section, the term
"interest" includes all amounts, however denominated, which under applicable law
are considered to be interest.
12. CARDINAL and CARDINAL FLORIDA shall indemnify GE CAPITAL against
and hold GE CAPITAL harmless from any and all claims, actions, suits, damages,
and liabilities, and all costs and expenses, including reasonable attorneys
fees, incurred by GE CAPITAL which arise out of or in way relate to CARDINAL's
or CARDINAL FLORIDA's handling, storage, wholesale sale or distribution of the
Collateral.
13. This Security Agreement will continue in effect for so long as any
obligation of CARDINAL to GE CAPITAL under any Promissory Note remains
outstanding. Upon the expiration (or earlier termination) of the last remaining
obligation under the last Promissory Note, the terms of this Security Agreement
(other than Sections 6 and 12 hereof) shall automatically terminate and GE
CAPITAL shall, upon CARDINAL's and CARDINAL FLORIDA's request, execute and file
UCC-3 financing statement(s) terminating its Lien on the Collateral.
14. This Security Agreement constitutes the entire agreement among GE
CAPITAL and CARDINAL and CARDINAL FLORIDA with respect to the subject matter
hereof and supersedes all previous negotiations, proposals, commitments,
writings and understandings between the parties with respect to the subject
matter hereof.
15. Any modification of this Security Agreement, or waiver of any
provision herein contained, shall not be binding unless in writing and signed by
an authorized official of
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CARDINAL, CARDINAL FLORIDA and GE CAPITAL. Any waiver by GE CAPITAL of a default
by CARDINAL or CARDINAL FLORIDA will not be a waiver of any subsequent or other
default. No right or remedy is exclusive of any other right or remedy provided
under this Security Agreement or permitted by law or equity, and all such rights
and remedies shall be cumulative and may be exercised singularly or
concurrently, at GE CAPITAL's option. Time is of the essence with regard to each
and every provision of this Security Agreement.
16. The invalidity or unenforceability of any provision of this
Security Agreement shall not affect the validity or enforceability of any other
provision, and the remaining provisions of this Security Agreement shall remain
in full force and effect.
17. This Security Agreement and any amendment or addendum hereto may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same agreement.
18. Without GE CAPITAL's prior written consent, CARDINAL and CARDINAL
FLORIDA shall not assign or transfer any of their obligations hereunder, except
that Newsub may assume certain obligations in accordance with Section 9(v)
hereof and CARDINAL FLORIDA may assign or transfer its obligations to any other
wholly-owned subsidiary of CARDINAL into which CARDINAL FLORIDA may be merged or
consolidated ("Successor Sub"), provided that the Successor Sub shall execute
and deliver to GE CAPITAL for filing in the appropriate filing office(s) a UCC-3
financing statement(s) which reflects the change of the debtor's name from
CARDINAL FLORIDA to Successor Sub and that Successor Sub shall execute an
agreement acknowledging its assumption of the obligations of CARDINAL FLORIDA
under this Security Agreement. Any attempted transfer by CARDINAL or CARDINAL
FLORIDA (except as provided in the preceding sentence) without GE CAPITAL's
prior written consent shall be null and void. Subject to the provisions of this
Section 18, this Security Agreement will be binding on, and inure to the benefit
of, GE CAPITAL's, CARDINAL's and CARDINAL FLORIDA's respective successors and
assigns.
19. This Security Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed in accordance with, the
laws of the State of New York (without regard to the conflict of laws principles
of such State). CARDINAL, CARDINAL FLORIDA and GE CAPITAL hereby consent and
submit to the jurisdiction of any state or federal court located in the State of
New York, and waive all objections thereto based on improper venue or forum non
conveniens.
20. TO THE EXTENT PERMITTED BY APPLICABLE LAW, CARDINAL , CARDINAL
FLORIDA AND GE CAPITAL HEREBY UNCONDITIONALLY WAIVE THEIR RIGHT TO A JURY TRIAL
OF ANY CLAIM, COUNTERCLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
SECURITY AGREEMENT OR THE PROMISSORY NOTES. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS OR MODIFICATIONS TO THIS SECURITY AGREEMENT
OR TO THE PROMISSORY NOTES. IN THE EVENT OF LITIGATION, THIS SECURITY AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
21. CARDINAL, CARDINAL FLORIDA and GE CAPITAL agree that the
obligations of CARDINAL and CARDINAL FLORIDA described in this Security
Agreement are joint and several obligations of CARDINAL and CARDINAL FLORIDA. In
the event that either CARDINAL or CARDINAL FLORIDA fails to perform any of its
obligations under this Security Agreement, GE CAPITAL may demand performance by
the non-defaulting party who waives notice of default and of any requirement
that GE CAPITAL be required to first proceed against the
-14-
<PAGE> 15
defaulting party or to exhaust any Collateral or security of the defaulting
party before requiring the non-defaulting party to perform any of the
obligations of the defaulting party under this Security Agreement.
IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
executed by their duly authorized representatives as of the date set forth
above.
CARDINAL HEALTH, INC. GENERAL ELECTRIC CAPITAL
CORPORATION
By: By:
----------------------------- ---------------------------
Name: Name:
--------------------------- -------------------------
Title: Title:
------------------------- ------------------------
CARDINAL FLORIDA, INC.
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
-15-
<PAGE> 16
EXHIBIT A TO SECURITY AGREEMENT
DESCRIPTION OF COLLATERAL IN
UNIFORM COMMERCIAL CODE FINANCING STATEMENT
TO BE FILED BY CARDINAL
The Collateral shall include all right title and interest of Cardinal Health,
Inc., and its successors and assigns ("Debtor"), in and to all of the following:
All present and future inventory of pharmaceutical products now owned or
hereafter acquired by Debtor which are now or hereafter located at 2700
Interstate Drive, Lakeland, Florida 33805.
The Collateral shall include all present and future proceeds and products of,
replacements, exchanges and accessions to the Collateral and any right to
insurance covering the Collateral up to the amount Debtor owes Secured Party. In
addition, the term "proceeds" shall include, without limitation, all accounts,
chattel paper, instruments, goods, documents, general intangibles, money and
other proceeds which arise from the sale, lease, transfer or other use or
disposition of any Collateral or proceeds and all proceeds of any type described
above acquired with cash proceeds up to the amount Debtor owes Secured Party.
Debtor:
---------------------------------------------
CARDINAL HEALTH, INC.
Secured Party:
---------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
-16-
<PAGE> 17
EXHIBIT A TO SECURITY AGREEMENT
DESCRIPTION OF COLLATERAL IN
UNIFORM COMMERCIAL CODE FINANCING STATEMENT
TO BE FILED BY CARDINAL FLORIDA
The Collateral shall include all right title and interest of Cardinal Florida,
Inc., and its successors and assigns ("Debtor"), in and to all of the following:
All present and future inventory of pharmaceutical products now owned or
hereafter acquired by Debtor which are now or hereafter located at 2700
Interstate Drive, Lakeland, Florida 33805.
The Collateral shall include all present and future proceeds and products of,
replacements, exchanges and accessions to the Collateral and any right to
insurance covering the Collateral up to the amount Debtor owes Secured Party. In
addition, the term "proceeds" shall include, without limitation, all accounts,
chattel paper, instruments, goods, documents, general intangibles, money and
other proceeds which arise from the sale, lease, transfer or other use or
disposition of any Collateral or proceeds and all proceeds of any type described
above acquired with cash proceeds up to the amount Debtor owes Secured Party.
Debtor:
--------------------------------------------
CARDINAL FLORIDA, INC.
Secured Party:
--------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
-17-
<PAGE> 18
EXHIBIT C
EXHIBIT A TO FORM UCC-2
DESCRIPTION OF COLLATERAL
The Collateral shall include all right title and interest of Pyxis Corporation,
and its successors and assigns ("Debtor"), in and to all of the following:
All Chattel Paper assigned or sold to Secured Party under that certain Vendor
Program Agreement dated as of October 10, 1991, as the same may be from time to
time amended (the "Agreement"). The term "Chattel Paper" means: rental
agreements (or with respect to any master rental agreement, each equipment
schedule or similar document relating to particular equipment assigned or sold
to Secured Party), leases, guaranties, and all other writings evidencing any
obligation to pay for equipment or software rented, leased or sold thereunder
and all rights and claims to payments, security deposits and other revenues due
or to become due thereunder and all other rights or claims at any time existing
or arising thereunder.
All accounts, contract rights, and general intangibles arising out of or in
connection with the Chattel Paper, including without limitation, rights in any
loss pool account; all computer or other records of Debtor, in machine readable
or printed form applicable to the Chattel Paper or the Agreement.
All equipment and software, and related printed or machine readable materials,
and miscellaneous hardware parts and upgrades, including without limitation, all
attachments, replacements, accessions, exchanges and substitutions thereto,
which are the subject of the Chattel Paper assigned or sold to Secured Party
under the Agreement.
The Collateral shall include all present and future proceeds and products of,
replacements and accessions to the Collateral and any right to insurance
covering the Collateral up to the amount Debtor owes Secured Party. In addition,
the term "proceeds" shall include, without limitation, all accounts, chattel
paper, instruments, goods, documents, general intangibles, money and other
proceeds which arise from the sale, lease, transfer or other use or disposition
of any Collateral or proceeds and all proceeds of any type described above
acquired with cash proceeds up to the amount Debtor owes Secured Party.
Notwithstanding anything to the contrary contained herein, the term "software"
shall not include any rights to confidential, proprietary, copyrighted or
licensed material contained in, constituting or made part thereof.
Debtor:
---------------------------------------------
PYXIS CORPORATION
Secured Party:
---------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
-18-
<PAGE> 19
EXHIBIT D
1 Automated Healthcare, Inc. (Subsidiary of McKesson)
2 MedSelect Systems Inc. (Subsidiary of Diebold Inc.)
3 Omnicell Technologies Inc.
4 Baxter International Inc.
5 Allscripts
6 Auto Med Technologies Inc.
7 LifeServ Technology Systems, Inc.
8 Medication Management Systems, Inc.
9 Medical Technology Systems, Inc.
10 MedVantage International, Inc.
11 ApotheCare
12 HealthMate Robotics
13 Key Communications Service, Inc.
14 Securel, Inc.
15 Promedic Support Inc.
16 Medicart Enterprises
17 Artromick
18 Medi-Dose, Inc.
19 Mediserv
20 Baker APS
21 Summit Inventory Management Systems
22 Wyeth-Ayerst
23 Lionville Systems, Inc.
-19-
<PAGE> 1
Exhibit 10.27
Partnership Agreement
of
R.P. Scherer GmbH & Co. KG
<PAGE> 2
INDEX
Preamble 1
Sec. 1 Business Name, Seat, Legal Form........................... 1
Sec. 2 Object of the Limited Partnership......................... 1
Sec. 3 Partners, Capital Participation, Liability................ 1
Sec. 4 Partners' Accounts........................................ 2
Sec. 5 Management, Representation, Exercise of Control........... 2
Sec. 6 Remuneration of the General Partner....................... 2
Sec. 7 Partners' Meeting......................................... 3
Sec. 8 Partners' Resolutions..................................... 3
Sec. 9 Business Year............................................. 4
Sec. 10 Annual Financial Statements............................... 4
Sec. 11 Application of Profits.................................... 5
Sec. 12 Withdrawals............................................... 5
Sec. 13 Term of the Partnership, Termination...................... 5
Sec. 14 Assignment of Interest.................................... 6
Sec. 15 Exclusion of a Limited Partner............................ 7
Sec. 16 Miscellaneous............................................. 8
<PAGE> 3
Preamble
R.P. Scherer GmbH & Co. KG is formed by a change of the legal
form of R.P. Scherer GmbH with its statutory seat in Eberbach/Baden (registered
in the Commercial Register of the Lower Court Heidelberg under HRB No. 957),
pursuant to today's shareholders' resolution, with effect as from the
registration of the new form in the Commercial Register of the Lower Court
Heidelberg. Thereby R.P. Scherer GmbH with its statutory seat in Eberbach/Baden
continues to exist with the same legal and economic identity in the new legal
form of GmbH & Co. KG with the business name R.P. Scherer GmbH & Co. KG. The
former shareholders of R.P. Scherer GmbH with its statutory seat in
Eberbach/Baden are the F&F Holding GmbH with its statutory seat in
Eberbach/Baden (registered in the Commercial Register of the Lower Court
Heidelberg under HRB 5361), Deutsche Gelatine-Fabriken Stoess AG with statutory
seat in Eberbach/Baden (registered in the Commercial Register of the Lower Court
Heidelberg under HRB No. 3796) and R.P. Scherer Verwaltungs GmbH (presently
SOCORRO Vierundsechzigste Verwaltungsgesellschaft mbH, presently registered in
the Commercial Register of the Lower Court of Hamburg under HRB 63412).
SEC. 1 BUSINESS NAME, SEAT, LEGAL FORM
(1) The business name of the Limited Partnership is R.P. Scherer
GmbH & Co. KG.
(2) The Limited Partnership has its seat in Eberbach/Baden.
(3) The business is organized as a Limited Partnership.
SEC. 2 OBJECT OF THE LIMITED PARTNERSHIP
(1) The purpose of the Limited Partnership is to be the fabrication
and distribution of capsules of gelatin and other materials, employing R.P.
Scherer Corporation capsule machines and patents and such other equipment,
procedures and/or methods as may be approved of by the corporate meeting, as
well as filling the capsules fabricated in this manner with all substances
suitable therefore, as well as fabrication and commerce in such substances which
are suitable for being filled in capsules.
(2) The Company shall be entitled to engage in other activities,
both in Germany and abroad, to purchase other companies, to invest therein, to
represent such companies, and to establish branch offices.
SEC. 3 PARTNERS, CAPITAL PARTICIPATION, LIABILITY
(1) General Partner shall become R.P. Scherer Verwaltungs GmbH with
its statutory seat in Eberbach/Baden with the entry of the new legal entity into
the Commercial Register. It holds a fixed capital participation (Capital Account
1) in the amount of DM 10.000.--.
-1-
<PAGE> 4
(2) Upon registration of the new legal form in the Commercial
Register, Limited Partners will become F&F Holding GmbH holding a fixed capital
participation (Capital Account I) in the amount of DM 4,584,900.-- and Deutsche
Gelatine-Fabriken Stoess AG holding a fixed capital participation (Capital
Account I) in the amount of DM 4,405,100.--.
(3) The personal liability of the Limited Partners conforms to their
capital participation pursuant to sec. 3 subsec. 2 and shall be registered as
personal liability in the Commercial Register.
SEC. 4 PARTNERS' ACCOUNTS
(1) The following accounts shall be kept for each partner:
a fixed capital account
(Capital Account I)
a floating capital account as clearing
account (Capital Account II)
a Loss Carry Forward Account
(2) The Capital Account I shall record the fixed capital
contribution of the partners; this account does not bear interest.
(3) The Capital Account II shall record all capital transactions
between the Limited Partnership and the respective partner, and profits shall be
credited thereto in accordance with sec. 11 subsec. 3 (e.g., advance profits
pursuant to [section] 11 para. 2, withdrawals, remuneration for activities,
interest). The Capital Account II bears an interest at a rate of 2% p.a. above
the respective discount rate of Deutsche Bundesbank. Interest shall be expense
of the Company.
(4) Losses attributable to a partner shall be booked to the Loss
Carry Forward Account.
SEC. 5 MANAGEMENT, REPRESENTATION, EXERCISE OF CONTROL
(1) Only the general partner is entitled and obliged to manage and
represent the Limited Partnership. The General Partner itself and its managing
directors are released from the restrictions of sec.181 Civil Code for business
transactions with the Limited Partnership.
(2) The Limited Partners' right to objection according to sec. 164
Commercial Code is excluded.
SEC. 6 REMUNERATION OF THE GENERAL PARTNER
(1) As long as the General Partner acts on behalf of the Limited
Partnership, the Limited Partnership shall reimburse all costs and expenses for
the management, which includes also any salaries and other payments to a
Geschaftsfuhrer employed with the General Partner.
-2-
<PAGE> 5
(2) The General Partner shall receive in addition a yearly
remuneration to be paid before the allocation of profits to the partners at the
end of each business year amounting to 10% of its paid in capital as reflected
in its balance sheet at the beginning of the business year.
(3) Amounts payable to the General Partner pursuant to this Section
are expenses of the Company.
SEC. 7 PARTNERS' MEETING
(1) Each managing director of R.P. Scherer Verwaltungs GmbH and each
Limited Partner may convene a Shareholders' Meeting if this appears necessary in
the interest of the Limited Partnership.
(2) The ordinary Shareholders' Meeting shall take place annually at
the registered office of the Limited Partnership within eight months after the
end of the business year. In this Shareholders' Meeting, the R.P. Scherer
Verwaltungs GmbH shall report on the position of the Limited Partnership, and
the Limited Partners shall decide on the approval of the annual statement of
accounts, the exoneration of the services of R.P. Scherer Verwaltungs GmbH and
the appointment of the auditor.
(3) The Shareholders' Meeting shall be convened by a managing
director of R.P. Scherer Verwaltungs GmbH or by a Limited Partner in writing by
registered letter, by telegram, telex or telecopy. The invitation must give the
date, place (must be in Germany), and the agenda. The invitation must be sent in
time so that, taking into account existing communications situation, the
invitation will be received at least two weeks before the date of the meeting.
(4) The Shareholders' Meeting shall be chaired by the person elected
by the Limited Partners with a simple majority of the votes cast.
(5) Minutes shall be prepared of a Shareholders' Meeting, which must
be signed by the chairperson. These minutes shall state the place and date of
the meeting, the participants, the items on the agenda, all motions and the
results of the votes. A copy of the minutes shall be sent straight away to each
shareholder and to each member of the Beirat of R.P. Scherer Verwaltungs GmbH.
SEC. 8 PARTNERS' RESOLUTIONS
(1) The decisions to be made by the Partners in connection with the
affairs of the Limited Partnership shall be made by passing of a resolution.
Shareholders' resolutions shall be passed in Shareholders' Meetings. They may
also be passed outside Shareholders' Meetings by writing, by telex, by telegram,
by telefax or by telephone, if no Limited Partner objects to this procedure.
(2) Unless something different is expressly stipulated in mandatory
provisions of the law or in this Partnership Agreement, shareholders'
resolutions shall require a majority of the votes of all Shareholders entitled
to vote. Each Partner has as many votes as fixed capital
-3-
<PAGE> 6
contributions are credited in full DM 100.-- on the Capital Account I. R.P.
Scherer Verwaltungs GmbH shall not have a vote.
(3) The following Partners' resolutions shall require a majority of
75% of the votes of all partners entitled to vote:
a) Exoneration of the actions of the General Partner
and enforcement of damages claimed against it;
b) Conclusion, alteration and termination of contracts
between the Company and a shareholder or an
enterprise associated with a shareholder, unless
something to the contrary is provided in the
individual contracts, and transactions of the
Company which are directly or indirectly of
considerable importance for a shareholder;
c) Amendments of the Articles of Incorporation;
d) Dissolution of the Partnership.
(4) Resolutions of the Partners shall be recorded in the Minutes of
the Shareholders' Meeting or, if they are passed outside a Partners' Meeting, in
special minutes to be prepared and signed by a Geschaftsfuhrer of R.P. Scherer
Verwaltungs GmbH, showing how the individual Partners voted and the result of
the vote, unless mandatory provisions of law stipulate notarization. Each
Partner shall receive a copy of the Minutes without delay.
(5) The incorrectness of a Partners' resolution can only be asserted
by filing a complaint within a prescriptive period of three months after receipt
of the copy pursuant to para. (4) above. After expiry of this period, any defect
shall be deemed remedied.
SEC. 9 BUSINESS YEAR
The business year runs from April 1 to March 31 of the following
year.
SEC. 10 ANNUAL FINANCIAL STATEMENTS
(1) R. P. Scherer Verwaltungs GmbH has to establish the annual
accounts for the previous business year within six months after the termination
of such business year based on generally applicable provisions of the commercial
law, the provisions of this Partnership Agreement as well as the provisions
regarding the determination of the profits under applicable tax law as far as
those do not deviate from mandatory commercial laws, and has to present these
accounts immediately to the auditor determined by Partners' resolution for
review.
(2) R. P. Scherer Verwaltungs GmbH has to present the audited annual
accounts and the review report immediately to the Beirat of the General Partner
and to present this together with the comments of the Beirat at the latest with
the invitation to the ordinary Partners' Meeting to all Partners. The annual
accounts shall be determined by Partners' resolution.
-4-
<PAGE> 7
(3) If the income tax general and separate profit determination is
based on balance sheet items which deviate from the annual accounts within the
meaning of subpara. (2), in such a case the annual accounts which follow the
final decision by tax audit have to be adjusted accordingly as far as this is
permitted by commercial law.
SEC. 11 APPLICATION OF PROFITS
(1) After any allocations pursuant to Section 11 subsec. 2, the
Limited Partners shall participate in profits and losses in proportion to their
fixed capital accounts (sec. 4 subsec. 2). The rules regarding the limitation of
personal liability of limited partners remain unaffected. Amounts pursuant to
sec. 6 of this agreement shall be credited to the Capital Account II of the
General Partner prior to profit allocation and regardless of whether a profit in
this amount exists.
(2) In the process of distributing profit or loss, effects of trade
tax on income resulting from partner's supplementary balance sheet have to be
allocated to such shareholder as profit or loss first, who gave reason for these
effects of trade tax on income.
(3) The profit shall be credited to the partners' account pursuant
to the following provisions:
a) As far as the Loss Carry Forward Account shows a
loss carried forward, this loss shall first be
offset.
b) Any exceeding profits shall be credited to the
Capital Account II.
SEC. 12 WITHDRAWALS
(1) The general partner may withdraw the compensation pursuant to
sec. 6 subsec. 1 from its Capital Account II as soon as such costs or expenses
arise. The remuneration for the assumption of personal liability pursuant to
sec. 6 subsec. 2 can be withdrawn at the end of the respective business year.
(2) Withdrawals by the Limited Partners can only be made from the
Capital Accounts II, if as a balance in favor of the Limited Partner exists.
Withdrawals for the payment of taxes on income from the Partnership and its
assets as well as the interest on the capital account II are always possible.
Sec. 13 Term of the Partnership, Termination
(1) Upon registration of the new legal form in the Commercial
Register the Limited Partnership continues to exist as R.P. Scherer GmbH & Co.
KG for an unlimited term.
(2) It can be terminated effective at the end of a calendar year,
but the first time being only March 31, 2008.
-5-
<PAGE> 8
SEC. 14 ASSIGNMENT OF INTEREST
(1) Transfer of interests in the Limited Partnership or portions
thereof effective before the period ending March 31, 2008 shall require prior
consent by way of a Limited Partners' resolution passed with a majority of 75%
of the votes of the Limited Partners entitled to vote. With respect to the
interest of R.P. Scherer Verwaltungs GmbH in the Limited Partnership, such
consent is also required after March 31, 2008.
(2) The transfer is only enforceable if the transferor transfers at
the same time a corresponding equivalent share of the share capital of R.P.
Scherer Verwaltungs GmbH (Share) to the transferee. The corresponding transfer
of the Share is only and insofar necessary as such transfer is required to
achieve the corresponding equal interests of the transferee in the R.P. Scherer
Verwaltungs GmbH and in the Limited Partnership.
(3) With the transfer of such interest or a part thereof to a third
party according to subsections (1) and (2), the legal position of the transferor
shall pass to the transferee with respect to the capital account and the
loss-carry-forward account fully or to a respective part, disregarding any
further liability of the transferor for a debt, if any. The transferee shall
have declared his consent to such transfer as soon as this becomes effective.
(4) The consent set forth in para. (1) shall not be required for
transfers of interests or portions thereof:
a) from Deutsche Gelatine-Fabriken Stoess AG to wholly
owned subsidiaries and vice versa, and from one
wholly owned subsidiary to another;
b) from F+F Holding GmbH to wholly owned subsidiaries
of R.P. Scherer Corporation or of F+F Holding GmbH
and vice versa, and from one wholly owned
subsidiary to another;
c) in the cases described in paras. (5) and (6);
d) after March 31, 2008 F+F Holding GmbH or Deutsche
Gelatine-Fabriken Stoess AG or their legal
successors within the meaning of para. (4) a) and
b) may transfer their interests in the Limited
Partnership by sale or exchange to third parties
other than those listed in sec. 14 (4) a) and b)
subject, however, to a Vorkaufsrecht - preemptive
right - (as set forth in [section] [section] 504 et
seq. BGB - German Civil Code) of the other Limited
Partner subject to the modification that the price
to be paid by the other Limited Partner shall be
the price agreed to by the third party (ies) or the
fair market value of such shares as determined by
experts approved by both Limited Partners,
whichever is lower. If both Limited Partners cannot
agree on an expert to make the determination of
such fair market value, then such expert shall be
selected by the president of the Chamber
-6-
<PAGE> 9
of Industry and Commerce responsible for the
location of the registered office of the
Corporation.
(5) If more than fifty per cent of the shares of R.P. Scherer
Corporation or Deutsche Gelatine-Fabriken Stoess AG are acquired by a person or
legal entity not a member or affiliated with or related by blood or marriage to
a member of the Scherer, Koepff or Stoess families and such transaction has not
been approved by a majority of the governing body of the entity whose shares are
so transferred (the Board of Directors in the case of R.P. Scherer Corporation
and the Supervisory Board in the case of Deutsche Gelatine-Fabriken Stoess AG),
the Limited Partner confronted with this change shall be entitled to declare
within six months after the change of ownership has become known to it that it
either elects to sell its interest to the other Limited Partner or to acquire
the interest of the other Limited Partner. The price of acquisition of interests
from the other Limited Partner shall be the fair market value of such interest
as agreed between the Limited Partners, or, lacking such agreement, 112.5 % of
the fair market value fixed by the expert approved by both Limited Partners. If
both Limited Partners cannot agree on the expert to make the determination of
such fair market value, then such expert shall be selected by the president of
the Chamber of Industry and Commerce responsible for the location of the
registered office of the Corporation.
(6) Para. (5) shall apply accordingly if a subsidiary of R.P.
Scherer Corporation or of Deutsche Gelatine-Fabriken Stoess AG which holds the
interests in the Limited Partnership is no longer wholly owned by R.P. Scherer
Corporation or Deutsche Gelatine-Fabriken Stoess AG, and if this fact is not
altered immediately upon request of the other Limited Partner, at the latest
within three months; it shall not depend on the consent of the competent body of
R.P. Scherer Corporation or of Deutsche Gelatine-Fabriken Stoess AG.
SEC. 15 EXCLUSION OF A LIMITED PARTNER
(1) The Limited Partners can resolve to exclude a Limited Partner
without the consent of such Limited Partner, if:
a) execution measures are taken upon the share of the
Limited Partner and if these are not warded off
immediately by him upon written request by a
Limited Partner;
b) bankruptcy proceedings or court composition
proceedings are legally opened against the assets
of the Limited Partner or if the opening of such
proceedings if refused due to lack of assets;
c) another important cause lies in the person of the
Limited Partner which makes it impossible for the
remaining Limited Partners to continue the
Partnership with him.
(2) Instead of excluding a Limited Partner, the Limited Partners can
according to para. (1) resolve to transfer part or all of the Interest of the
Limited Partner concerned to a person
-7-
<PAGE> 10
to be named in the resolution who is prepared to accept the interest, provided
he acquires at the same time, a corresponding share of the General Partner.
(3) The resolutions according to paras. (1) and (2) shall require a
majority of the votes of all Limited Partners entitled to vote. The Limited
Partner concerned shall not be entitled to vote.
(4) Exclusion and assignment shall not depend upon a
counter-performance to be effected concurrently.
(5) In the event that a Limited Partner is excluded or that,
instead, his interest is transferred, the Limited Partner concerned shall be
entitled to payment of compensation. The party liable for payment of the
compensation shall be, in case of exclusion, the Limited Partnership, otherwise
the purchaser of the share.
(6) The compensation shall amount to 87.5 % of the fair market value
of the interest at the point in time when the exclusion or transfer was decided
by resolution (date of withdrawal). If no agreement is reached on the
compensation within three months after the date of withdrawal, it will be fixed
bindingly by an arbitrator, who will be appointed - upon application by the
Limited Partnership or the Limited Partner concerned - by the president of the
Chamber of Industry and Commerce competent for the location of the registered
office of the Limited Partnership if the parties cannot agree on the person of
the arbitrator either. The costs of the fixing of the compensation shall be
shared equally between the Limited Partnership and the Limited Partner
concerned.
(7) The compensation shall be paid in five equal yearly
installments. The first installment shall fall due at the end of the month
following that in which the amount of compensation is fixed. From the date of
withdrawal onwards, interest shall accrue on the compensation amount at a rate
2% above the discount rate of the German Federal Reserve Bank. The accumulated
interest shall be payable with each installment. It shall be possible to pay
part or all of the compensation at an earlier date.
SEC. 16 MISCELLANEOUS
(1) In the event that certain provisions or parts of provisions of
this agreement are or become unenforceable, invalid or void, the enforceability
or validity of the remaining provisions shall not be affected thereby. The
respective provision shall be replaced by a provision that comes as close as
possible to the partners' economic and legal intentions.
(2) Amendments of and additions to this Partnership Agreement
require written form for their validity unless a stricter form requirement is
provided by law. The written form requirement also applies to the amendment or
waiver of this written-form-clause.
(3) The determinative version of this agreement is the one written
in the German language. Therefore, in the case of different interpretation of
the German and the English text, the German version shall prevail.
-8-
<PAGE> 11
(4) All disputes or differences of opinion arising out of or
concerning these Articles or any breach hereof, shall, unless otherwise amicably
settled, be referred to and settled by arbitration. Arbitration shall take place
at the place of business or the domicile of the defendant, in accordance with
the provisions of the separate arbitration agreement made between the
shareholders, which is annexed to this Agreement.
Frankfurt am Main, den 29.11.1997
F&F Holding GmbH
durch
/s/ DR. THOMAS ARNTZ
-------------------------------------
(Dr. Thomas Arntz aufgrand Vollmacht)
Deutsche Gelatine-Fabriken Stoess AG
durch
/s/ MARTIN MAAB
-------------------------------------
(Martin Maab aufgrand Vollmacht)
R.P. Scherer Verwaltungs GmbH
durch
/s/ DR. THOMAS TROLITZSCH
-------------------------------------
(Dr. Thomas Trolitzsch aufgrand
Vollmacht und Untervollmacht)
-9-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
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
Comprehensive Reimbursement Consultants, Inc. Minnesota
James W. Daly, Inc. Massachusetts
Ellicott Drug Company New York
The Griffin Group, Inc. Nevada
Allied Healthcare Services, Inc. Nevada
Brighton Capital, Inc. Nevada
Cardinal Information Corporation Nevada
Cardinal West, Inc. Nevada
Cascade Development, Inc. Nevada
CDI Investments, Inc. Delaware
Griffin Capital Corporation Nevada
Pinnacle Intellectual Property Services, Inc. Nevada
Pinnacle Intellectual Property Services
International, Inc. Nevada
ScriptLINE, Inc. Nevada
Leader Drugstores, Inc. Delaware
Marmac Distributors, Inc. Connecticut
Medical Strategies, Inc. Massachusetts
Medicine Shoppe International, Inc. Delaware
Pharmacy Operations of New York, Inc. New York
Pharmacy Operations, Inc. Delaware
Medicine Shoppe Internet, Inc. Missouri
- ----------------------
<PAGE> 2
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
Managed Pharmacy Benefits, Inc. Missouri
Pharmacy Service Corporation Missouri
MediQual Systems, Inc. Delaware
National Pharmpak Services, Inc. Ohio
National Specialty Services, Inc. Tennessee
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
Cardinal Health International Ventures, Limited 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/Tri-Line (USA), Inc. Delaware
PCI/Allpack Holdings, Inc. Delaware
PCI allpack GmbH Germany
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
R.P. Scherer Corporation Delaware
F & F Holding GmbH Germany
R.P. Scherer GmbH(1) Germany
- ----------------------
(1) F & F Holding GmbH owns 51% of R.P. Scherer GmbH.
<PAGE> 3
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
Allcaps Weichgelatinekapseln GmbH Germany
Gelatin Products International Delaware
R.P. Scherer Argentina S.A.I.C. Argentina
Vivax Interamericana S.A. Argentina
R.P. Scherer Canada Inc. Canada
R.P. Scherer do Brasil Encapsulacoes, Ltda. Brazil
R.P. Scherer Egypt(2) Egypt
R.P. Scherer (Europe) AG Switzerland
R.P. Scherer Hardcapsule (West) Utah
R.P. Scherer Holdings Ltd. England
R.P. Scherer Limited England
Scherer DDS Limited England
R.P. Scherer Holdings Pty. Ltd. Australia
R.P. Scherer Pty. Limited Australia
R.P. Scherer K.K.(3) Japan
R.P. Scherer Korea Limited(4) Korea
R.P. Scherer Production S.A. France
R.P. Scherer S.A.(5) France
R.P. Scherer S.p.A. Italy
R.P. Scherer DDS BV Holland
R.P. Scherer DDS Holdings BV Holland
R.P. Scherer Pharmaceutical, Inc. New Jersey
RPS Technical Services, Inc. Delaware
R.P. Scherer Verwaltungs GmbH(6) Germany
Allcaps Wichgelatinkapseln Verwaltungs GmbH Germany
R.P. Scherer International (FSC), Ltd. Barbados
R.P. Scherer (Spain) SA Spain
The LVC Corporation Missouri
RedKey, Inc. Ohio
- ----------------------
(2) R.P. Scherer Corporation has a 10% ownership interest.
(3) R.P. Scherer Corporation has a 60% ownership interest.
(4) R.P. Scherer Corporation has a 50% ownership interest.
(5) R.P. Scherer Corporation has a 70% ownership interest.
(6) F&F Holidng GmbH has a 51% ownership interest.
<PAGE> 4
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
Solomons Company Georgia
Whitmire Distribution Corporation Delaware
Williams Drug Distributors, Inc. Delaware
<PAGE> 1
Exhibit 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-24483 of Cardinal Health, Inc. on Form S-3 and Registration Statement 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, No. 333-21631-02, No. 333-30889-01 and No. 333-56655-01 of
Cardinal Health Inc. on Form S-8 of our report dated August 12, 1998, appearing
in this Annual Report on Form 10-K of Cardinal Health, Inc., for the year ended
June 30, 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 28, 1998
<PAGE> 1
Exhibit 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement 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, No. 333-21631-02, No. 333-30889-01, and No. 333-56655-01 of
Cardinal Health, Inc. on Form S-8 of our report dated August 2, 1996, with
respect to the consolidated 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, 1998.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
August 28, 1998
<PAGE> 1
Exhibit 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement (No. 333-24483) of Cardinal
Health, Inc. on Form S-3 and in 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, No. 333-21631-02, No. 333-30889-01 and No. 333-56655-01 of
Cardinal Health, Inc. on Form S-8 of our report dated January 30, 1997,
appearing in this Annual Report on Form 10-K of Cardinal Health, Inc., for the
year ended June 30, 1998.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Houston, Texas
August 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL
HEALTH INC.'S FORM 10-K FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 304,951
<SECURITIES> 0
<RECEIVABLES> 860,395
<ALLOWANCES> (34,196)
<INVENTORY> 1,895,525
<CURRENT-ASSETS> 3,228,651
<PP&E> 548,435
<DEPRECIATION> (217,032)
<TOTAL-ASSETS> 3,961,077
<CURRENT-LIABILITIES> 1,844,119
<BONDS> 272,575
0
0
<COMMON> 713,006
<OTHER-SE> 912,192
<TOTAL-LIABILITY-AND-EQUITY> 3,961,077
<SALES> 15,918,138
<TOTAL-REVENUES> 15,918,138
<CGS> 14,876,588
<TOTAL-COSTS> 14,876,588
<OTHER-EXPENSES> 567,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (23,022)
<INCOME-PRETAX> 402,513
<INCOME-TAX> 155,432
<INCOME-CONTINUING> 247,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 247,081
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.22
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL
HEALTH INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER
30, 1997, DECEMBER 31, 1997 AND MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998 JUN-30-1998
<PERIOD-START> JUL-01-1997 JUL-01-1997 JUL-01-1997
<PERIOD-END> SEP-30-1997 DEC-31-1997 MAR-31-1998
<EXCHANGE-RATE> 1 1 1
<CASH> 180,515 111,654 90,151
<SECURITIES> 0 0 0
<RECEIVABLES> 728,409 790,748 850,937
<ALLOWANCES> (36,806) (38,417) (39,605)
<INVENTORY> 1,614,140 1,938,526 2,157,814
<CURRENT-ASSETS> 2,655,030 2,954,558 3,303,380
<PP&E> 492,539 514,221 537,672
<DEPRECIATION> (206,573) (210,075) (222,825)
<TOTAL-ASSETS> 3,259,489 3,602,491 3,973,029
<CURRENT-LIABILITIES> 1,494,534 1,769,328 2,003,075
<BONDS> 277,882 275,615 273,267
0 0 0
0 0 0
<COMMON> 656,596 667,858 700,603
<OTHER-SE> 740,897 803,702 846,799
<TOTAL-LIABILITY-AND-EQUITY> 3,259,489 3,602,491 3,973,029
<SALES> 3,551,126 7,432,221 11,533,801
<TOTAL-REVENUES> 3,551,126 7,432,221 11,533,801
<CGS> 3,325,261 6,957,458 10,779,662
<TOTAL-COSTS> 3,325,261 6,957,458 10,779,662
<OTHER-EXPENSES> 135,054 270,265 412,470
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (5,005) (10,165) (17,261)
<INCOME-PRETAX> 88,585 197,022 297,766
<INCOME-TAX> 34,545 76,804 121,234
<INCOME-CONTINUING> 54,040 120,218 176,532
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 54,040 120,218 176,532
<EPS-PRIMARY> 0.50 1.10 1.61
<EPS-DILUTED> 0.49 1.08 1.58
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL
HEALTH INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEARS ENDED
JUNE 30, 1996 AND JUNE 30, 1997 AND FOR THE PERIODS ENDED SEPTEMBER 30, 1996,
DECEMBER 31, 1996 AND MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1997 JUN-30-1997 JUN-30-1997 JUN-30-1997
<PERIOD-START> JUL-01-1995 JUL-01-1996 JUL-01-1996 JUL-01-1996 JUL-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1997 SEP-30-1996 DEC-31-1996 MAR-31-1997
<EXCHANGE-RATE> 1 1 1 1 1
<CASH> 312,030 243,061 125,119 87,460 12,521
<SECURITIES> 54,335 0 57,735 37,185 0
<RECEIVABLES> 668,669 707,116 693,771 775,122 797,088
<ALLOWANCES> (36,803) (34,952) (37,159) (38,351) (37,882)
<INVENTORY> 1,272,112 1,436,220 1,577,493 1,725,725 1,558,882
<CURRENT-ASSETS> 2,374,943 2,487,110 2,513,187 2,706,346 2,455,093
<PP&E> 411,781 477,420 289,892 456,393 467,652
<DEPRECIATION> (161,222) (199,949) (117,176) (192,213) (200,815)
<TOTAL-ASSETS> 2,959,401 3,091,750 2,979,124 3,299,147 3,039,959
<CURRENT-LIABILITIES> 1,432,903 1,389,433 1,494,828 1,666,946 1,407,265
<BONDS> 320,327 277,766 263,655 297,909 279,539
0 0 0 0 0
0 0 0 0 0
<COMMON> 589,476 645,051 582,840 623,580 629,879
<OTHER-SE> 505,749 689,679 518,464 585,490 631,563
<TOTAL-LIABILITY-AND-EQUITY> 2,959,401 3,091,750 2,979,124 3,299,147 3,039,959
<SALES> 11,586,123 13,437,180 3,107,180 6,547,469 9,997,337
<TOTAL-REVENUES> 11,586,123 13,437,180 3,107,180 6,547,460 9,997,337
<CGS> 10,776,410 12,537,522 2,913,352 6,129,783 9,332,993
<TOTAL-COSTS> 10,776,410 12,537,522 2,913,352 6,129,783 9,332,993
<OTHER-EXPENSES> 514,879 515,551 193,828 251,569 383,071
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> (30,611) (27,974) (6,606) (13,974) (22,388)
<INCOME-PRETAX> 227,502 311,080 65,745 138,490 215,137
<INCOME-TAX> 100,262 126,481 26,419 57,838 92,304
<INCOME-CONTINUING> 127,240 184,599 39,326 80,652 122,833
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 127,240 184,599 39,326 80,652 122,833
<EPS-PRIMARY> 1.22 1.72 0.38 0.76 1.15
<EPS-DILUTED> 1.19 1.69 0.37 0.75 1.13
</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
or incorporate by reference 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, including malfunctions or failures associated with
Year 2000 readiness problems;
- the costs and/or 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 and/or services, 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
packaging, repackaging, delivery system development and
manufacturing 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
<PAGE> 2
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, among others, 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.
