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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, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-12591
CARDINAL HEALTH, INC.
(Exact name of Registrant as specified in its charter)
OHIO 31-0958666
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 CARDINAL PLACE, DUBLIN, OHIO 43017
(Address of principal executive offices) (Zip Code)
(614) 757-5000
Registrant's telephone number, including area code
Securities Registered Pursuant to Section 12(b) of the Act:
COMMON SHARES (WITHOUT PAR VALUE) NEW YORK STOCK EXCHANGE
(Title of Class) (Name of each exchange on which registered)
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of August 23, 1999 was approximately $16,623,130,558.
The number of Registrant's Common Shares outstanding as of August 23, 1999,
was as follows: Common shares, without par value: 274,190,381.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Definitive Proxy Statement to be filed for its
1999 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.................................................................................................... 7
3. Legal Proceedings............................................................................................. 7
4. Submission of Matters to a Vote of Security Holders........................................................... 8
Executive Officers of the Company............................................................................. 8
PART II
5. Market for the Registrant's Common Shares and Related Shareholder Matters..................................... 10
6. Selected Financial Data....................................................................................... 10
7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 12
7a. Quantitative and Qualitative Disclosures About Market Risk.................................................... 18
8. Financial Statements and Supplementary Data................................................................... 19
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 48
PART III
10. Directors and Executive Officers of the Registrant............................................................ 48
11. Executive Compensation........................................................................................ 48
12. Security Ownership of Certain Beneficial Owners and Management................................................ 48
13. Certain Relationships and Related Transactions................................................................ 48
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................................. 49
Signatures.................................................................................................... 53
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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 projected, anticipated or implied. The most significant of
such risks, uncertainties and other factors are described in this Form 10-K and
in Exhibit 99.01 to this Form 10-K. The Company undertakes no obligation to
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, 1999. The Company is a leading
health-care service provider which offers a broad array of complementary
products and health-care services to health-care providers and manufacturers to
help them improve the efficiency and quality of health-care. These services and
products include pharmaceutical distribution, pharmaceutical services, and
medical-surgical products.
BUSINESS SEGMENTS
A description of the Company's three reporting industry segments is as
follows(1):
1. PHARMACEUTICAL DISTRIBUTION
Cardinal Distribution, the Company's pharmaceutical distribution business,
is one of the country's leading wholesale distributors of pharmaceutical and
related health-care products to independent and chain drugstores, hospitals,
alternate care centers and the pharmacy departments of supermarkets and mass
merchandisers located throughout the continental United States. As a
full-service wholesale distributor, Cardinal Distribution 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.
The Company also operates several specialty health-care distribution
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 and distribution program for both independent and chain drugstore
customers and serves as a distributor of therapeutic plasma products, oncology
products and other specialty pharmaceuticals to hospitals, clinics and other
managed care facilities on a nationwide basis through the utilization of
telemarketing and direct mail programs. These specialty distribution activities
are part of the Company's strategy to develop diversified products and services
to enhance the profitability of its business and that of its customers and
suppliers.
2. PHARMACEUTICAL SERVICES
The Company, within the Pharmaceutical Services segment, operates a variety
of related health-care 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 health-care facilities); Medicine Shoppe
International, Inc. ("Medicine Shoppe") (a franchisor of apothecary-style retail
pharmacies); PCI
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1 For additional information concerning the Company's industry segments, see
Note 13 of "Notes to Consolidated Financial Statements."
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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); the
Cardinal Information group of companies ("CIC") (which develop and provide
clinical information systems and customer transaction systems); R.P. Scherer
Corporation ("Scherer") (an international developer and manufacturer of drug
delivery systems); and Cardinal OneSource(SM) (a group established to market
Cardinal businesses together to assist pharmaceutical companies manufacture,
develop, package, launch and market products). The Company also provides
reimbursement-consulting services to pharmaceutical, biotechnology and medical
products companies through its Comprehensive Reimbursement Consultants, Inc.
("CRC") subsidiary.
3. MEDICAL-SURGICAL PRODUCTS
The Company's subsidiary, Allegiance Corporation ("Allegiance"), is a
provider of non-pharmaceutical health-care products and cost-saving services for
hospitals and other health-care providers. Allegiance offers a broad range of
medical and laboratory products, representing more than 2,800 suppliers in
addition to its own line of surgical and respiratory therapy products. It also
manufactures sterile and non-sterile procedure kits, single-use surgical drapes,
gowns and apparel, medical and surgical gloves, fluid suction and collection
systems, respiratory therapy products, surgical instruments, instrument
reprocessing products, special procedure products and other products. Allegiance
assists its customers in reducing costs while improving the quality of patient
care in a variety of ways, including supply-chain management, instrument repair
and other professional consulting services.
ACQUISITIONS
Over the last five years, the Company has completed the following business
combinations. On July 1, 1994, the Company purchased Humiston-Keeling, Inc., a
Calumet City, Illinois-based pharmaceutical wholesaler serving customers located
primarily in the upper Midwest region of the United States. On July 18, 1994,
the Company completed 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 health-care 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 abroad. 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 Westborough, Massachusetts-based supplier of clinical
information management systems and services to the health-care industry. On
August 7, 1998, the Company completed a merger transaction with Scherer, a
Basking Ridge, New Jersey-based international developer and manufacturer of drug
delivery systems. On February 3, 1999, the Company completed a merger
transaction with Allegiance, a McGaw Park, Illinois-based distributor and
manufacturer of medical and laboratory products and a provider of cost-saving
services. On August 5, 1999, the Company announced that it signed a definitive
merger agreement with privately-owned Automatic Liquid Packaging, Inc., a
Woodstock, Illinois-based custom manufacturer of sterile liquid pharmaceuticals
and other health-care products. The Company has also completed a number of
smaller acquisition transactions during the last five years, including the
acquisition of Comprehensive Reimbursement Consultants, Inc., Pharmacists: prn,
Inc., The Enright Group, Inc., Pharmaceutical Packaging Specialties, Inc., and
Pacific Surgical Innovations, Inc.
The Company continually evaluates possible candidates for merger or
acquisition and intends to continue to seek opportunities to expand its
health-care operations and services in all three reporting industry segments.
For additional information concerning the transactions described above, see
Notes 1, 2, and 18 of "Notes to Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CUSTOMERS AND SUPPLIERS
The Company distributes pharmaceuticals, 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 and abroad. 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 and abroad. Scherer develops drug
delivery systems for pharmaceutical manufacturers located in the United States
and abroad. Allegiance distributes non-pharmaceutical health-care products and
provides cost-saving services to hospitals and other health-care providers in
the United States and abroad. The Company's largest retail distribution customer
in its Pharmaceutical Distribution segment accounted for approximately 8.3% of
the Company's operating revenues (by dollar volume) for fiscal year 1999, and
its largest retail bulk distribution customer accounted for approximately 57% of
all bulk orders in the
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Pharmaceutical Distribution segment. The Pharmaceutical Distribution segment
could be adversely affected if the business of either of such customers were
lost. The members of the two largest group purchasing organizations (each, a
"GPO") having business arrangements with the Company, VHA, Inc. and Premier,
Inc., accounted for approximately 11.4%, and 12.8%, respectively, of the
Company's operating revenues (by dollar volume) in fiscal 1999 through the
Company's Pharmaceutical Distribution and Medical-Surgical Products segments.
Each of these two segments could be adversely affected if the business
arrangements with either of such GPO customers were lost, although the loss of
the business arrangement with either such GPO would not necessarily mean the
loss of sales from all members of the GPO.
The Company obtains its products from many different suppliers, the largest
of which accounted for approximately 3.3% (by dollar volume) of its operating
revenue in fiscal 1999. The Company's five largest suppliers accounted for
approximately 15.9% (by dollar volume) of its operating revenue during fiscal
1999 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, 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, with
competition being based primarily upon price, benefits offered to both the
pharmacist and the customer, access to third party programs, and the reputation
of the franchise; Medicine Shoppe also needs to be competitive with a
pharmacist's ongoing option 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. Through Scherer, the Company's drug delivery technologies compete with a
growing number of new drug delivery technologies and with continued refinements
to existing delivery technologies of both pharmaceutical companies and companies
formed to develop new technologies. Through Allegiance, the Company has
substantial competition in all of its non-pharmaceutical health-care product and
service markets, with competition focusing primarily on price, service and
product performance.
EMPLOYEES
As of August 23, 1999, the Company had approximately 36,000 employees, of
which approximately 1,400 are subject to collective bargaining agreements.
Overall, the Company considers its employee relations to be good.
INTELLECTUAL PROPERTY
The Company has applied in the United States and certain foreign countries
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. There can be no assurance that the Company will obtain the
registrations for trademarks and service marks for which it has applied.
The Company holds patents relating to certain aspects of its automated
pharmaceutical dispensing systems, automated medication management systems,
medication packaging, medical devices, processes, products and drug delivery
systems.
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The Company has a number of pending patent applications in the United States and
certain foreign countries, and intends to pursue additional patents as
appropriate.
The Company also owns certain software, including software used for
pharmaceutical purchasing and inventory control, which is copyrighted and
subject to the protection of applicable copyright laws.
No assurances can be given that any intellectual property rights of the
Company will provide meaningful protection against competitive products or
otherwise be commercially valuable or that the Company will be successful in
obtaining additional patents or enforcing its proprietary rights against others.
REGULATORY MATTERS
The Company, as a distributor of prescription pharmaceuticals (including
certain controlled substances), an operator of pharmacy operations, a
pharmaceutical packager and a manufacturer of drug delivery systems and surgical
and respiratory care products, is required to register for permits and/or
licenses with, and comply with 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, 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
pre-market 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. In its capacity as a distributor of prescription pharmaceuticals,
the Company is also subject to Medicare, Medicaid and state health care fraud
and abuse and anti-kickback laws and regulations.
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 health-care
providers also subject it to certain provisions of the federal Social Security
Act which (a) prohibit financial arrangements between providers of health-care
services to government health-care 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 a number of
restrictions upon referring physicians and providers of designated health
services under Medicare and Medicaid programs.
Services and products provided by the Company's information businesses
include health-care data and other drug-related information gathered and
assessed for the benefit of health-care clients. Greater scrutiny is being
placed on a federal and state level regarding how such information should be
handled and identifying the appropriate parties to do so. Future changes in
regulations and/or legislation may affect how some of these information services
or products are provided.
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. Products
manufactured or sold by the Company's Allegiance and Scherer operations are
subject to regulation by the FDA, as well as by other federal and state
agencies, including those governing Medicare and Medicaid issues. The FDA
regulates the introduction and advertising of new medical products and related
manufacturing procedures, labeling, and record keeping. Product regulatory laws
also exist in most other countries where PCI, Allegiance and Scherer conduct
business.
The Company is also subject to various federal, state and local laws,
regulations and recommendations, both in the United States and abroad, relating
to safe working conditions, laboratory and manufacturing practices, and the use
and disposal of hazardous or potentially hazardous substances. The Company's
environmental policies mandate compliance with all applicable regulatory
requirements concerning environmental quality and contemplate, among other
things, appropriate capital expenditures for environmental protection for each
of its businesses.
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ITEM 2: PROPERTIES
In the United States, the Company has 23 principal pharmaceutical
distribution facilities and three specialty distribution facilities utilized by
the Pharmaceutical Distribution segment. In the U.S., the Company also has one
Pyxis assembly operation, two PCI packaging facilities, two PCI printing
facilities, one Scherer pharmaceutical manufacturing facility, one Scherer
health and nutritional products manufacturing facility, and one paintball
manufacturing facility in the Pharmaceutical Services segment. Domestically, the
Company also has 48 medical-surgical distribution facilities and 11
medical-surgical manufacturing facilities utilized by the Medical-Surgical
Products segment. The Company's domestic facilities are located in a total of 33
states.
Internationally, the Company owns, leases or operates through its
Pharmaceutical Services segment, 14 Scherer manufacturing facilities which are
located in the United Kingdom, France, Germany, Italy, Australia, Japan,
Argentina, Brazil and Canada. The Company also has three PCI packaging
facilities which are located in the United Kingdom and Germany, and two PCI
printing facilities which are located in Puerto Rico. The Company owns, leases
or operates through its Medical-Surgical Products segment, 13 medical-surgical
distribution facilities located in Canada and the Netherlands, and 16
medical-surgical manufacturing facilities located in the Netherlands, Malaysia,
Mexico, the Dominican Republic, Germany and France. The Company's international
facilities are located in a total of 14 countries.
The Company owns 77 of the domestic and international facilities described
above, and the balance are leased. The Company's principal executive offices are
located in a leased four-story building located at 7000 Cardinal Place in
Dublin, Ohio.
The Company considers its operating properties to be in satisfactory
condition and adequate to meet its present needs. However, the Company expects
to make further additions, improvements and consolidations of its properties as
the Company's business continues to expand.
For certain financial information regarding the Company's facilities, see
Notes 5 and 9 of "Notes to Consolidated Financial Statements".
ITEM 3: LEGAL PROCEEDINGS
In November 1993, the Company and Whitmire Distribution Corporation
("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 wholesaler
defendants, including the Company and Whitmire, conspired with manufacturers to
inflate prices using a chargeback pricing system. 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 provided for a reimbursement mechanism for legal fees and
expenses. The trial of the class action lawsuit began on September 23, 1998. On
November 19, 1998, after the close of plaintiffs' case-in-chief, both the
wholesaler defendants and the manufacturer defendants moved for judgment as a
matter of law in their favor. On November 30, 1998, the Court granted both of
these motions and ordered judgment as a matter of law in favor of both the
wholesaler defendants and the manufacturer defendants. On January 25, 1999, the
class plaintiffs filed a notice of appeal of the District Court's decision with
the Court of Appeals for the Seventh Circuit. On July 13, 1999, the Court of
Appeals for the Seventh Circuit issued its decision, which, in part, affirmed
the dismissal of the wholesaler defendants, including the Company and Whitmire.
On July 27, 1999, the class plaintiffs filed a Petition for Rehearing with the
Court of Appeals for the Seventh Circuit. In addition to the federal court cases
described above, the Company and Whitmire have also been named as defendants in
a series of related antitrust lawsuits brought by chain drug stores and
independent pharmacies who opted out of the federal class action lawsuits, and
in a series of state court cases alleging similar claims under various state
laws regarding the sale of brand name prescription drugs. The Judgment Sharing
Agreement mentioned above also covers these litigation matters.
On September 30, 1996, Baxter International, Inc. ("Baxter") and its
subsidiaries transferred to Allegiance and its subsidiaries their U.S.
health-care distribution business, surgical and respiratory therapy business and
health-care cost-saving business, as well as certain foreign operations (the
"Allegiance Business") in connection with a spin-off of the Allegiance Business
by Baxter. In connection with this spin-off, Allegiance, which was acquired by
the Company on February 3, 1999, assumed the defense of litigation involving
claims related to the Allegiance Business from Baxter Healthcare Corporation
("BHC"), including certain claims of alleged personal injuries as a result of
exposure to natural rubber latex gloves described below. Allegiance will be
defending and indemnifying BHC, as contemplated by the agreements between Baxter
and Allegiance, for all expenses and potential liabilities associated with
claims pertaining to the litigation assumed by Allegiance. As of June 30, 1999,
there were approximately 430 lawsuits involving BHC and/or Allegiance containing
allegations of sensitization to natural rubber latex products. Since none of
these cases has proceeded to a hearing on the merits, the Company is unable to
evaluate the extent of any potential liability, and unable to estimate any
potential loss. Because of the increase in claims filed and the ongoing defense
costs that will be incurred, the Company believes it is probable that it will
continue to incur significant expenses related to the defense of cases involving
natural rubber latex gloves.
The Company also becomes involved from time-to-time in other litigation
(including environmental matters) incidental to its business. Although the
ultimate resolution of the litigation referenced in this Item 3 cannot be
forecast with certainty,
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the Company does not believe that the outcome of these lawsuits will have a
material adverse effect on the Company's consolidated financial statements.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fiscal quarter ended June 30, 1999.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows (information provided as of
August 23, 1999):
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NAME AGE POSITION
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Robert D. Walter 54 Chairman and Chief Executive Officer
John C. Kane 59 President and Chief Operating Officer
Joseph F. Damico 45 Executive Vice President; Group President -
Allegiance Corporation
George L. Fotiades 45 Executive Vice President; Group President -
R.P. Scherer Corporation
James F. Millar 51 Executive Vice President; Group President -
Cardinal Distribution
Carl A. Spalding 54 Executive Vice President; Group President -
Healthcare Product Services
Stephen S. Thomas 44 Executive Vice President; Group President -
Pharmacy Automation and Information
Systems and International Operations
Steven Alan Bennett 46 Executive Vice President, General Counsel and
Secretary
Richard J. Miller 42 Corporate Vice President and Chief Financial
Officer
Michael E. Beaulieu 41 Corporate Vice President, Controller and
Principal Accounting Officer
</TABLE>
Unless indicated to the contrary, the business experience summaries
provided below for the Company's executive officers describe positions held by
the named individuals during the last five years but 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. Mr. Walter also
serves as a director of Bank One Corporation, CBS, Inc. and Infinity
Broadcasting Corporation.
JOHN C. KANE has been a Director of the Company since August 1993 and has
been the Company's President and Chief Operating Officer since joining the
Company in February 1993. Mr. Kane also serves as a director of Connetics
Corporation.
JOSEPH F. DAMICO has been an Executive Vice President and Group
President-Allegiance Corporation, of the Company since February 1999, and
President of Allegiance since June 1996. From 1992 to September 1996, he was a
Corporate Vice President of Baxter.
GEORGE L. FOTIADES has been an Executive Vice President and Group
President-R.P. Scherer Corporation, of the Company since August 1998, and
President of Scherer since January 1998. Previously, Mr. Fotiades served as
Group President, Americas and Asia Pacific, of
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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.
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.
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.
STEPHEN S. THOMAS was named Executive Vice President and Group President -
Pharmacy Automation and Information Systems and International Operations of the
Company on July 1, 1999. Mr. Thomas joined the Company in October 1997, as an
Executive Vice President and President of Pyxis. Prior to that, Mr. Thomas
served as President of Datapro Information Services Group, a division of
McGraw-Hill Companies.
STEVEN ALAN BENNETT joined the Company in January 1999, as Executive Vice
President, General Counsel and Secretary. Previously, Mr. Bennett served as
Senior Vice President and General Counsel of Bank One Corporation, since August
1994.
RICHARD J. MILLER has been the Company's Corporate Vice President and Chief
Financial Officer since March 1999 and served as the Company's Acting Chief
Financial Officer since August 1998. From August 1995 through March 1999, Mr.
Miller served as the Company's Controller. Upon joining the Company in July
1994, and until August 1995, he served as Vice President, Auditing.
MICHAEL E. BEAULIEU has been the Company's Corporate Vice President and
Controller since April 1999. From August 1996 through April 1999 Mr. Beaulieu
served as Senior Vice President - Finance of Cardinal Distribution. Prior to
that, Mr. Beaulieu served as Vice President - Accounting of Cardinal
Distribution, since August 1994.
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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, 1999 and 1998. The information in the table has been
adjusted to reflect retroactively all prior stock splits.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
<S> <C> <C> <C>
Fiscal 1998:
Quarter Ended
September 30, 1997 $47.38 $36.42 $0.0167
December 31, 1997 51.88 45.75 0.0167
March 31, 1998 58.80 46.67 0.0200
June 30, 1998 64.17 57.08 0.0200
Fiscal 1999:
Quarter Ended
September 30, 1998 $71.00 $55.67 $0.0250
December 31, 1998 75.88 54.83 0.0250
March 31, 1999 80.50 66.00 0.0250
June 30, 1999 71.88 56.88 0.0250
Through August 23, 1999 $69.94 $60.88 $0.0250
</TABLE>
As of August 23, 1999, there were approximately 26,000 shareholders of
record of the Company's Common Shares.
The Company anticipates that it will continue to pay quarterly cash
dividends in the future. However, the payment and amount of future dividends
remain within the discretion of the Company's Board of Directors and will depend
upon the Company's future earnings, financial condition, capital requirements
and other factors.
ITEM 6: SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company was
prepared giving retroactive effect to the business combinations with Medicine
Shoppe on November 13, 1995; Pyxis on May 7, 1996; PCI on October 11, 1996; Owen
on March 18, 1997; MediQual on February 18, 1998; Scherer on August 7, 1998; and
Allegiance on February 3, 1999, all of which were accounted for as
pooling-of-interests transactions (see Note 2 of "Notes to Consolidated
Financial Statements"). On May 21, 1999 the Company completed a merger
transaction with Pacific Surgical Innovations, Inc. ("PSI"). The impact of the
merger transaction with PSI, on a historical basis, was not significant.
Accordingly, prior period financial statements have not been restated. The
consolidated financial data includes all purchase transactions that occurred
during these periods.
For the fiscal years ended June 30, 1996 and 1995, the information
presented is derived from consolidated financial statements which combine data
from Cardinal for the fiscal years ended June 30, 1996 and 1995 with data from
PCI for the fiscal years ended September 30, 1996 and 1995, respectively, Owen
for the fiscal years ended November 30, 1995 and 1994, respectively, MediQual
for the fiscal years ended December 31, 1995 and 1994, respectively, Scherer for
the fiscal years ended March 31, 1996 and 1995, respectively, and Allegiance for
the fiscal years ended December 31, 1996 and 1995, 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, 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), MediQual's
financial results for the fiscal year ended December 31, 1996, Scherer's
financial results for the fiscal year ended March 31, 1997, and Allegiance's
financial results for the fiscal year ended December 31, 1997.
10
<PAGE> 11
For the fiscal year ended June 30, 1998, the information presented is
derived from the consolidated financial statements which combine Cardinal for
the fiscal year ended June 30, 1998 with Scherer's financial results for the
fiscal year ended March 31, 1998.
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."
<TABLE>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
At or for the Fiscal Year Ended June 30, (1)
----------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
EARNINGS DATA:
Revenue:
Operating revenue $21,480.6 $18,004.0 $15,924.8 $14,383.9 $13,943.0
Bulk deliveries to
customer warehouses 3,553.0 2,991.4 2,469.1 2,178.5 1,779.5
--------- --------- --------- --------- ---------
Total revenue $25,033.6 $20,995.4 $18,393.9 $16,562.4 $15,722.5
Net earnings (loss) $ 456.3 $ 425.1 $ 334.8 $ (321.2) $ 464.3
Earnings (loss) per
Common Share: (2)
Basic $ 1.68 $ 1.57 $ 1.26 $ (1.24) $ 1.84
Diluted $ 1.64 $ 1.53 $ 1.23 $ (1.24) $ 1.78
Cash dividends declared
per Common Share (2) $ 0.10 $ 0.07 $ 0.06 $ 0.05 $ 0.05
BALANCE SHEET DATA:
Total assets $ 8,289.0 $ 7,478.0 $ 6,521.8 $ 6,469.8 $ 6,517.3
Long-term obligations,
less current portion $ 1,223.9 $ 1,330.0 $ 1,320.9 $ 1,592.8 $ 451.5
Shareholders' equity $ 3,463.0 $ 2,954.9 $ 2,627.0 $ 2,222.5 $ 3,718.1
</TABLE>
(1) Amounts reflect business combinations in all periods presented. Fiscal
1999, 1998, 1997 and 1996 amounts reflect the impact of merger-related
costs and other special charges. Fiscal 1996 amounts reflect the impact of
the write-down of goodwill of $550.0 million ($550.0 million, net of tax)
due to the change by Allegiance in its method of assessing goodwill. In
addition, fiscal 1996 amounts reflect the impact of merger-related charges
and facility rationalizations of $178.5 million ($122.8 million, net of
tax). See Note 2 of "Notes to Consolidated Financial Statements" for a
further discussion of merger-related costs and other special charges
affecting fiscal 1999, 1998 and 1997.
(2) Net earnings and cash dividends per Common Share have been adjusted to
retroactively reflect all stock dividends and stock splits through June 30,
1999.
11
<PAGE> 12
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 PCI Services, Inc.
("PCI") on October 11, 1996, Owen Healthcare, Inc. ("Owen") on March 18, 1997,
MediQual Systems, Inc. ("MediQual") on February 18, 1998, R.P. Scherer
Corporation ("Scherer") on August 7, 1998 and Allegiance Corporation
("Allegiance") on February 3, 1999. On May 21, 1999 the Company completed a
merger transaction with Pacific Surgical Innovations, Inc. ("PSI"). The impact
of the merger transaction with PSI, on a historical basis, was not significant.
Accordingly, prior period financial statements have not been restated for the
merger transaction with PSI.
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. See "Information Regarding Forward-Looking Statements".
GENERAL
- -------
The Company operates within three operating business segments:
Pharmaceutical Distribution, Pharmaceutical Services, and Medical-Surgical
Products. See Note 13 of "Notes to Consolidated Financial Statements" for
a description of these segments.
RESULTS OF OPERATIONS
- ---------------------
OPERATING REVENUE. Operating revenue for fiscal 1999 increased 19% as compared
to the prior year due to strong operating revenue growth in all three of the
Company's business segments. The majority of the overall operating revenue
increase (approximately 82% for the year ended June 30, 1999) 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.
The Pharmaceutical Distribution segment's operating revenue (representing
69% of total 1999 operating revenue, including approximately $297.4 million sold
to Owen, eliminated in consolidation) grew at a rate of 25% during the fiscal
year ended June 30, 1999 primarily due to strong sales to pharmacy chain stores
and through the Company's specialty distribution businesses.
The Pharmaceutical Services segment's operating revenue (representing 10%
of total 1999 operating revenue) grew at a rate of 15% during fiscal 1999,
primarily on the strength of the Company's pharmacy automation and
pharmaceutical-packaging businesses. The Company's pharmacy automation business
continued to see solid growth in the U.S. hospital sector and increased demand
from non-acute care customers. The pharmaceutical-packaging business' growth in
fiscal 1999 was attributable to a mix of new customers and an increase in volume
from existing customers.
The Medical-Surgical Products segment's operating revenue (representing 21%
of total 1999 operating revenue) for fiscal year 1999 grew 6% over the prior
year primarily due to strong sales of self-manufactured surgical products and
"best value" distributed supplies.
Operating revenue for fiscal 1998 increased 13% as compared to the prior
year primarily due to the strength of the Pharmaceutical Distribution and
Services segments. Pharmaceutical Distribution segment's (representing 66% of
total 1998 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. Pharmaceutical Services segment's
(representing 10% of total 1998 operating revenue) operating revenue grew at
a rate of 16% during the fiscal year ended June 30, 1998, primarily on the
strength of the Company's pharmacy automation and pharmacy management
businesses. The Medical-Surgical Products segment's operating revenue
(representing 24% of total 1998 operating revenue) for fiscal year 1998 grew
2% over the prior year. The majority of the overall operating revenue increase
(approximately 80% for the year ended June 30, 1998) came from existing
customers in the form of increased volume and pharmaceutical prices. The
remainder of the growth came from the addition of new customers.
BULK DELIVERIES TO CUSTOMER WAREHOUSES. The Company reports as revenue bulk
deliveries made to customers' warehouses, whereby the Company acts as an
intermediary in the ordering and subsequent delivery of pharmaceutical products.
Fluctuations in bulk deliveries result largely from circumstances that are
beyond the control of the Company, including consolidation within the customers'
industries, decisions by customers to either begin or discontinue warehousing
activities, and changes in policies by manufacturers related to selling directly
to customers. Due to the lack of margin generated through bulk deliveries,
fluctuations in their amount have no significant impact on the Company's
earnings.
12
<PAGE> 13
GROSS MARGIN. For fiscal 1999 and 1998, overall gross margin as a percentage of
operating revenue was 12.03% and 12.33%, respectively.
The Pharmaceutical Distribution segment's gross margin as a percentage of
operating revenue decreased from 5.58% in fiscal 1998 to 5.29% in fiscal 1999.
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 Pharmaceutical Services segment's gross margin as a percentage of
operating revenue was 33.50% and 32.70% in fiscal 1999 and 1998, respectively.
Operating revenue growth in the Pharmaceutical Services segment has been greater
in the relatively higher margin pharmacy automation and pharmaceutical-packaging
businesses than it has been in the lower margin pharmacy management business.
The Medical-Surgical Products segment's gross margin as a percentage of
operating revenue was 23.29% in fiscal 1999 compared to 21.62% in fiscal 1998.
The increase is primarily the result of improvements in the Company's product
mix, including the growth of self-manufactured product sales in both domestic
and international markets as well as the impact of manufacturing and other
cost efficiencies.
For fiscal 1998 and 1997, gross margin as a percentage of operating revenue
was 12.33% and 12.68%, respectively.
The Pharmaceutical Distribution segment's gross margin as a percentage of
operating revenue decreased from 5.82% in fiscal 1997 to 5.58% in fiscal 1998.
The decrease was 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
enabled the Company to offer lower selling margins to its customers.
The Pharmaceutical Services segment's gross margin as a percentage of
operating revenue was 32.70% and 32.88% in fiscal 1998 and 1997, respectively.
Operating revenue growth was greater in the relatively lower margin pharmacy
management and pharmaceutical-packaging businesses than it was in the higher
margin pharmacy franchising business.
The Medical-Surgical Products segment's gross margin as a percentage of
operating revenue was 21.62% in fiscal 1998 compared to 20.99% in fiscal 1997.
The increase was primarily the result of improvements in the Company's product
mix, including the growth of manufactured product sales in both domestic and
international markets as well as the impact of manufacturing and other cost
efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of operating revenue declined to 7.28%
for fiscal 1999 compared to 7.72% in fiscal 1998. The improvements during fiscal
1999 reflect economies associated with the Company's revenue growth, in addition
to significant productivity gains resulting from continued cost control efforts
in all three segments and the continuation of consolidation and selective
automation of operating facilities in the Pharmaceutical Distribution and
Pharmaceutical Services segments. Pharmaceutical Distribution and Pharmaceutical
Services segments' selling, general and administrative expenses as a percentage
of operating revenue were 2.63% and 16.80% in fiscal 1999, respectively,
compared to 2.94% and 16.90% in fiscal 1998, respectively. Offsetting these
improvements was an increase in the selling, general and administrative expenses
as a percentage of operating revenue in the Medical-Surgical Products segment
which increased from 16.07% in fiscal 1998 to 16.86% in fiscal 1999. This
increase is primarily due to the acquisitions of businesses having a higher
selling, general and administrative rate than the Medical-Surgical Products
segment's normal rate during fiscal 1999. These acquisitions were accounted for
under the purchase method of accounting. As such, historical financial
statements have not been restated. The 13% growth in selling, general and
administrative expenses experienced in fiscal year 1999, compared to fiscal 1998
was due primarily to increases in personnel costs and depreciation expense, and
compares favorably to the 19% growth in operating revenue during fiscal 1999.
Selling, general and administrative expenses as a percentage of operating
revenue improved to 7.72% in fiscal 1998 compared to 8.19% in fiscal 1997. The
improvements in fiscal 1998 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. The 7% growth in selling, general and administrative
expenses experienced in the fiscal year 1998, compared to fiscal 1997 was due
primarily to increases in personnel costs and depreciation expense, and compares
favorably to the 13% growth in operating revenues during fiscal 1998.
13
<PAGE> 14
SPECIAL CHARGES
Merger-Related Charges. Costs of effecting mergers and subsequently integrating
the operations of the various merged companies are recorded as merger-related
costs when incurred. During fiscal 1999, merger-related costs totaling $146.6
million ($117.6 million, net of tax) were recorded. Of this amount,
approximately $95.4 million related to transaction and employee-related costs,
and $36.1 million related to business restructuring and asset impairment costs
associated with the Company's merger transactions with Scherer and Allegiance.
As part of the business restructuring, the Company is currently closing certain
facilities. As such, the Company has incurred employee-related and asset
impairment costs, as well as, exit costs, related to the termination of
contracts and lease agreements. In addition, the Company recorded costs of $4.0
million related to the write down of impaired inventory related to a previous
merger and of $1.1 million related to severance costs for restructuring
associated with the change in management that resulted from the merger
transaction with Owen. The Company also recorded costs of $13.7 million related
to integrating the operations of companies that previously engaged in merger
transactions with the Company. Partially offsetting the charge recorded was a
$3.7 million credit, to adjust the estimated transaction and termination costs
previously recorded in connection with the canceled merger transaction with
Bergen Brunswig Corporation ("Bergen") (see Note 17 of "Notes to Consolidated
Financial Statements"). This adjustment relates primarily to services provided
by third parties engaged by the Company in connection with the terminated Bergen
transaction. The cost of such services was estimated and recorded in the prior
periods when the services were performed. Actual billings were less than the
estimate originally recorded, resulting in a reduction of the current period
merger-related costs.
During fiscal 1998, the Company recorded merger-related charges associated
with transaction costs incurred in connection with the MediQual merger
transaction ($2.3 million) and 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 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 merger-related charges associated with the PCI and Owen merger
transactions ($46.2 million) and additional integration costs related to the
Pyxis and Medicine Shoppe mergers ($4.7 million). See further discussion in Note
2 of "Notes to Consolidated Financial Statements." The Company classifies costs
associated with a merger transaction as "merger-related costs." It should be
noted that the amounts presented may not be comparable to similarly titled
amounts reported by other companies.
Other Special Charges. During fiscal 1998, the Company recorded a special charge
of $8.6 million related to the rationalization of its pharmaceutical
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 pharmaceutical distribution facility,
resulting in termination of the union relationship.
During fiscal 1998, Scherer, along with its joint venture partner,
converted the legal ownership structure of Scherer's 51% owned subsidiary in
Germany from a corporation to a partnership. As a result of this change in tax
status, the Company's tax basis in the German subsidiary was adjusted, resulting
in a one-time tax refund of approximately $4.6 million, as well as a reduction
in the cash taxes to be paid in the current and future years. Combined, these
factors reduced fiscal 1998 income tax expense by $11.7 million.
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,
----------------------------
1999 1998 1997
------ ------ ------
(in millions, except per share amounts)
<S> <C> <C> <C>
MERGER-RELATED COSTS:
- ---------------------
Transaction and employee-related costs:
Transaction costs $(52.9) $(35.7) $(14.5)
PCI vested retirement benefits and
incentive fee -- -- (7.6)
Employee severance/termination (39.5) -- (4.4)
Other (0.4) -- (0.6)
------ ------ ------
Total transaction and employee-related costs (92.8) (35.7) (27.1)
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30,
-------------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Other merger-related costs:
Asset impairments (16.8) (3.8) (13.2)
Exit and restructuring costs (23.3) -- (2.2)
Duplicate facilities elimination -- -- (1.7)
Integration and efficiency implementation (13.7) (9.7) (6.7)
------- ------ ------
Total other merger-related costs (53.8) (13.5) (23.8)
------- ------ ------
Total merger-related costs $(146.6) $(49.2) $(50.9)
------- ------ ------
OTHER SPECIAL CHARGES:
- ----------------------
Facilities closures $ -- $ (6.1) $ --
Employee severance -- (2.5) --
------- ------ ------
Total other special charges -- (8.6) --
------- ------ ------
TOTAL SPECIAL CHARGES (146.6) (57.8) (50.9)
- ---------------------
Tax effect of special charges 29.0 22.0 14.3
Tax benefit for change in tax status -- 11.7 --
------- ------ ------
Effect on net earnings $(117.6) $(24.1) $(36.6)
======= ====== ======
Effect on diluted earnings per share $ (0.42) $(0.09) $(0.13)
======= ====== ======
</TABLE>
The effects of the merger-related costs and other special charges are
included in the reported net earnings of $456.3 million in fiscal 1999, $425.1
million in fiscal 1998 and $334.8 million in fiscal 1997 and in the reported
diluted earnings per Common Share of $1.64 in fiscal 1999, $1.53 in fiscal 1998
and $1.23 in fiscal 1997.
The Company estimates that it will incur additional merger-related costs
associated with the various merger transactions it has completed to date
totaling approximately $100.0 million ($61.2 million, net of tax) in future
periods in order to properly integrate operations, of which a portion represents
facility rationalizations, 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.
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 expansion into 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, the Company would incur additional merger-related
costs.
INTEREST EXPENSE. The increase in interest expense of $4.9 million during
fiscal 1999 compared to fiscal 1998 is primarily due to the Company's issuance
of $150 million of 6.25% Notes due 2008, in a public offering in July 1998 (see
"Liquidity and Capital Resources"). The effect of the issuance of the 6.25%
Notes during fiscal 1999 has been partially offset by a decrease in other debt
instruments with higher interest rates.
The $12.7 million decrease in interest expense in fiscal 1998 compared to
fiscal 1997 is primarily due to the paydown of the Company's $100 million of 8%
Notes on March 1, 1997 and a reduction in the overall interest rate on total
debt outstanding during fiscal 1998 compared to fiscal 1997.
15
<PAGE> 16
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
relative to pretax earnings was 39.9%, 35.6% and 38.0% for fiscal years 1999,
1998 and 1997, respectively. The fluctuation in the tax rate is primarily due to
the impact of recording certain non-deductible merger-related costs during
various periods as well as fluctuating state and foreign effective tax rates as
a result of the Company's business mix for all three fiscal years. Also, a
change in tax status of a 51% owned German subsidiary resulted in a lower tax
provision during fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital increased to $2.2 billion at June 30, 1999 from $2.1
billion at June 30, 1998. This increase resulted from additional investments in
inventories and trade receivables of $323.3 million and $154.0 million,
respectively. Offsetting the increases in working capital was an increase in
accounts payable of $218.1 million and a decrease in cash of $208.1 million.
Increases in inventories reflect the higher level of business volume in
pharmaceutical distribution activities, especially in the fourth quarter of
fiscal 1999 when distribution revenue grew 21% over the same period in the prior
year. The increase in trade receivables is consistent with the Company's revenue
growth (see "Operating Revenue" above). The change in accounts payable and cash
is due primarily 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 were used for working capital needs due to growth in the
Company's business. The Company currently has the capacity to issue $250 million
of additional debt securities pursuant to a shelf registration statement filed
with the Securities and Exchange Commission (see Note 5 of "Notes to
Consolidated Financial Statements").
Property and equipment, at cost, increased by $146.6 million at June 30,
1999 compared to June 30, 1998. The increase was primarily due to ongoing plant
expansion and manufacturing equipment purchases and additional investments made
for management information systems and upgrades to distribution facilities.
The Company has several operating lease agreements for the construction of
new facilities. See further discussion in Note 9 of "Notes to Consolidated
Financial Statements."
Shareholders' equity increased to $3.5 billion at June 30, 1999 from $3.0
billion at June 30, 1998, primarily due to net earnings of $456.3 million and
the investment of $131.6 million by employees of the Company through various
stock incentive plans, offset by the retirement of $40.1 million of Allegiance
treasury shares.
The Company has line-of-credit agreements with various bank sources
aggregating $175.8 million. The Company had $28.6 million outstanding under
these lines at June 30, 1999. In addition, the Company has a commercial paper
program, providing for the issuance of up to $750 million in aggregate maturity
value of commercial paper. The Company had $49.2 million outstanding under this
program at June 30, 1999. The Company has an unsecured bank credit facility,
which provides for up to an aggregate of $1.0 billion in borrowings of which
$150.0 million is part of a multi-currency allocation and $250.0 million
represents a 364-day facility. As of June 30, 1999, $80.7 million of borrowings
were outstanding under the multi-currency allocation portion of the facility.
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 Notes 1 and 6 to the consolidated financial statements for information
regarding the use of financial instruments and derivatives thereof, including
foreign currency hedging instruments. As a matter of policy, the Company does
not engage in "speculative" transactions involving derivative financial
instruments.
OTHER
- -----
PENDING BUSINESS COMBINATIONS. On August 5, 1999, the Company announced
that it had entered into a definitive merger agreement with Automatic Liquid
Packaging, Inc. ("ALP"), pursuant to which ALP will become a wholly owned
subsidiary of the Company in a stock-for-stock merger expected to be accounted
for as a pooling-of-interests for financial reporting purposes. The merger is
expected to be completed in the first quarter of fiscal 2000, subject to
satisfaction of certain conditions, including regulatory clearances.
On July 12, 1999, the Company completed the purchase of MedSurg Industries,
Inc., for $31.8 million. The acquisition was accounted for as a purchase.
TERMINATION AGREEMENT. On August 24, 1997, the Company and Bergen announced
that they had entered into a definitive merger agreement, as amended, pursuant
to which a wholly owned subsidiary of the Company would be merged with and into
Bergen (the "Bergen Merger Agreement"). On July 31, 1998, the United States
District Court for the
16
<PAGE> 17
District of Columbia granted the Federal Trade Commission's request for a
preliminary injunction to halt the proposed merger. On August 7, 1998, the
Company and Bergen jointly terminated the Bergen Merger Agreement and, in
accordance with the terms of the Bergen Merger Agreement, the Company reimbursed
Bergen for $7.0 million of transaction costs. Additionally, the termination of
the Bergen Merger Agreement caused the costs incurred by the Company (that would
not have been deductible had the merger been consummated) to become tax
deductible for federal income tax purposes, resulting in a tax benefit of $12.2
million. The obligation to reimburse Bergen and the additional tax benefit were
recorded in the fourth quarter of the fiscal year ended June 30, 1998. (See Note
17 of "Notes to Consolidated Financial Statements").
YEAR 2000 PROJECT. The Company utilizes computer technologies in each of
its businesses 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
properly in the year 2000. The Company is utilizing a multi-phased concurrent
approach to address this issue.
The first of two project segments, "Mitigation and Validation", included
specific awareness, assessment, remediation, validation and implementation
phases. The Company has substantially completed all of these phases of this
project segment. The Company has corrected, replaced, mitigated, or retired the
vast majority of those business critical systems which were 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 expects that all-remaining
Mitigation and Validation issues will be fully completed on or before September
30, 1999. This process includes the multiple testing of critical systems to
ensure that year 2000 readiness has been accomplished.
The second project segment, "Business Protection", also includes several
phases - business dependency and risk assessment, contingency planning, and
situation management planning. The Company has made significant and substantial
progress with this segment and expects to substantially complete the business
dependency and risk assessment phase by August 31, 1999 and the remaining two
phases by September 30, 1999.
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 is 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 probability 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.
The Company estimates that the aggregate costs of its year 2000 project
will be approximately $27.0 million, including costs incurred to date.
Significant portions of these costs were not incremental costs, but rather
represented 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. Since the initiation of the year 2000 project, the
Company estimates that it has incurred costs of approximately $20.0 million of
which approximately $6.2 million represented incremental costs. 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 statements.
The Company has formally communicated 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 is in the process of developing
appropriate contingency plans in the event that a significant exposure is
identified relative to the dependencies on third-party systems. Although 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 or with
which the Company interfaces will be converted in a timely manner, or that a
failure to properly convert by a third party would not have a material adverse
effect on the Company.
The potential risks associated with the year 2000 issues include, but are
not limited to: temporary disruption of the Company's operations, loss of
communication services and loss of other utility services. The Company believes
that the most reasonably likely worst-case year 2000 scenario would be a loss of
communication services which could result in
17
<PAGE> 18
problems with receiving, processing, tracking and billing customer orders;
problems receiving, processing and tracking orders placed with suppliers; and
problems with banks and other financial institutions. Currently, as part of the
Company's normal business contingency planning, a plan has been developed for
business disruptions due to natural disasters and power failures. The Company is
in the process of enhancing these contingency plans to include provisions for
year 2000 issues, although it will not be possible to develop contingency plans
for all potential disruption. Although the Company anticipates that minimal
business disruption will occur as a result of the year 2000 issues, based upon
currently available information, incomplete or untimely resolution of year 2000
issues by either the Company or significant suppliers, customers and critical
business partners could have a material adverse impact on the Company's
consolidated financial statements.
THE EURO CONVERSION. On January 1, 1999, certain member countries of the
European Union irrevocably fixed the conversion rates between their national
currencies and a common currency, the "Euro", which became their legal currency
on that date. The participating countries' former national currencies will
continue to exist as denominations of the Euro until January 1, 2002. The
Company has addressed the business implications of conversion to the Euro,
including the need to adapt internal systems to accommodate Euro-denominated
transactions, the competitive implications of cross-border price transparency,
and other strategic implications. The Company does not expect the conversion to
the Euro to have a material impact on its consolidated financial statements.
RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS. As of September 30, 1998,
the Company adopted, on a retroactive basis, Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires the presentation of comprehensive income and its components in a full
set of general-purpose financial statements. The Company's comprehensive income
consists of net earnings and foreign currency translation adjustments.
As of June 30, 1999, the Company adopted Statement of Financial Accounting
Standards No. 131 ("SFAS 131") "Disclosures about Segments of an Enterprise and
Related Information." 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 (See Note 13 of "Notes to Consolidated Financial
Statements").
As of June 30, 1999, the Company adopted Statement of Financial Accounting
Standards No. 132 ("SFAS 132"), "Employers' Disclosures about Pensions and Other
Postretirement Benefits." SFAS 132 revises employers' disclosures about pension
and other postretirement benefit plans. The new statement does not change the
existing method of expense recognition. There was no effect on financial
position or net income as a result of adopting SFAS 132. (See Note 8 of "Notes
to Consolidated Financial Statements").
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS. In June 1998, the FASB
issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities." 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. As
amended by Statement of Financial Accounting Standards No. 137 ("SFAS 137"),
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," the provisions of SFAS 133 will
require adoption no later than the beginning of the Company's fiscal year ending
June 30, 2001.
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, 2000. 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
The Company is exposed to market risks, which include changes in U.S.
interest rates, changes in foreign currency exchange rates as measured against
the U.S. dollar and changes in commodity prices.
Interest Rates. The Company utilizes a mix of debt maturities along with
both fixed-rate and variable-rate debt to manage its exposures to changes in
interest rates. The Company does not expect changes in interest rates to have a
material effect on income or cash flows in fiscal 2000, although there can be no
assurances that interest rates will not significantly change.
18
<PAGE> 19
As of June 30, 1999, the Company had total long-term obligations outstanding of
$1,235.5 million of which $1,008.0 million represented Notes and Debentures with
fixed interest rates and maturity dates beginning in fiscal 2004. As of June 30,
1998, the Company had total long-term obligations outstanding of $1,337.3
million of which $898.9 million represented Notes and Debentures with fixed
interest rates and maturity dates beginning in fiscal 2004. The average interest
rate related to these obligations was 6.8% and 7.0% as of June 30, 1999 and
1998, respectively. The majority of the remaining outstanding long-term
obligations and credit facilities have variable interest rates that fluctuate
with the LIBOR or prime rates. As of June 30, 1999 and 1998, the fair value of
the total long-term obligations was $1,233.3 million and $1,365.3 million,
respectively. Maturities of long-term obligations for future fiscal years are:
2000 - $11.6 million; 2001 - $117.6 million; 2002 - $3.1 million; 2003 - $ 2.1
million; 2004 - $273.9 million and 2005 and thereafter - $827.2 million.
The Company periodically enters into interest rate swap agreements when
existing conditions and market situations dictate. The Company does not
enter into interest rate swap agreements for trading or speculative purposes.
The impact of interest rate swaps is not significant. See Note 6 of "Notes to
Consolidated Financial Statements".
Foreign Exchange. The Company conducts business in several major
international currencies. The Company periodically uses financial instruments,
principally foreign currency options to attempt to manage the impact of foreign
exchange rate changes on earnings. In addition, the Company periodically enters
into forward foreign currency exchange contracts to hedge certain exposures
related to selected transactions that are relatively certain as to both timing
and amount and to hedge a portion of the production costs expected to be
denominated in foreign currency. The purpose of entering into these hedge
transactions is to minimize the impact of foreign currency fluctuations on the
results of operations and cash flows. Gains and losses on the hedging activities
are recognized concurrently with the gains and losses from the underlying
transactions. The Company does not enter into forward exchange contracts or
foreign currency options for trading purposes.
In addition, the Company uses commodity contracts to hedge raw material
costs expected to be denominated in foreign currency. These contracts generally
cover a one-year period and all gains and losses are deferred and recognized in
cost of goods sold with the underlying product costs.
As of June 30, 1999, the Company did not have any material foreign currency
options or forward exchange contracts outstanding. As of June 30, 1998, the
Company's foreign currency options consisted of the option to exchange German
marks at a fixed exchange rate of 1.722 German marks per U.S. dollar and British
pound sterling at a fixed exchanged rate of $1.6242 per pound sterling. The
notional principal amount under these foreign currency option contracts was
approximately $3 million and its related fair value was $0.1 million at June 30,
1998. In addition, as of June 30, 1998, the Company's forward exchange contracts
consisted of forward contracts to sell German marks and U.S. dollars for British
pound sterling at a fixed exchange rate of 3.05679 German mark per British pound
sterling and $1.67 per pound sterling. The notional principal amount under these
foreign exchange contracts was approximately $35.6 million and its related fair
value was $(0.4) million at June 30, 1998. As of June 30, 1998, the notional
amount of the commodity hedge contracts was $14.2 million and the related fair
market value of these contracts was $(1.7) million. As of June 30, 1999, the
notional amount of the commodity hedge contracts was $9.6 million and the
related fair market value of these contracts was $(0.3) million. The unrealized
gains or losses on these options or contracts represent hedges of foreign
exchange gains and losses on a portion of the Company's foreign earnings, cash
flows and selected transactions. As a result, the Company does not expect future
gains and losses on these contracts to have a material impact on the Company's
consolidated financial statements.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Reports
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1999, 1998 and 1997
Consolidated Balance Sheets at June 30, 1999 and 1998
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Fiscal Years Ended June
30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
19
<PAGE> 20
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, 1999 and 1998, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 1999. 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 Allegiance Corporation ("Allegiance"), a wholly owned subsidiary
of Cardinal Health, Inc., as of June 30, 1999 and 1998, and for the years ended
June 30, 1999 and 1998 and December 31, 1997. We also did not audit the
financial statements of R.P. Scherer Corporation ("Scherer"), a wholly owned
subsidiary of Cardinal Health, Inc., as of June 30, 1999 and March 31, 1998, and
for the years ended June 30, 1999 and March 31, 1998 and 1997. The combined
financial statements of Allegiance and Scherer represent approximately 45% and
47% of consolidated total assets at June 30, 1999 and 1998, respectively, and
represent combined revenues and net income of approximately 25%, 28%, and 31%
and 37%, 42% and 44%, respectively, of consolidated amounts for each of the
three years in the period ended June 30, 1999. 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 Allegiance and Scherer, 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, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1999
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 10, 1999
20
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------
To R.P. Scherer Corporation:
We have audited the accompanying consolidated statements of financial position
of R.P. SCHERER CORPORATION (a Delaware corporation and a wholly-owned
subsidiary of Cardinal Health, Inc.) and subsidiaries as of June 30, 1999 and
March 31, 1998 and the related consolidated statements of income, comprehensive
income, cash flows and shareholders' equity for the year ended June 30, 1999 and
the years ended March 31, 1998 and 1997 (not presented separately herein). These
financial statements and the schedule referred to below are the responsibility
of the company's management. Our responsibility is to express an opinion on
these financial statements and this schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R.P. Scherer Corporation and
subsidiaries as of June 30, 1999 and March 31, 1998, and the results of their
operations and their cash flows for the year ended June 30, 1999 and for the
years ended March 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of valuation allowances is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements
(not presented separately herein). This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Detroit, Michigan,
August 9, 1999
21
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders of Allegiance Corporation
In our opinion, the consolidated balance sheets and the related consolidated
statements of operations, of cash flows and of equity of Allegiance Corporation,
a wholly-owned subsidiary of Cardinal Health Inc., and its subsidiaries (not
presented separately herein) present fairly, in all material respects, the
financial position of Allegiance Corporation and its subsidiaries at June 30,
1999 and 1998, and the results of their operations and their cash flows for the
years ended June 30, 1999 and 1998 and for the year ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Allegiance Corporation's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
July 29, 1999
22
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
-----------------------------------------------------------------
To the Stockholders of Allegiance Corporation
Our audits of the consolidated financial statements of Allegiance Corporation
and its subsidiaries referred to in our report dated July 29, 1999 appearing on
page 22 of the Cardinal Health, Inc. 1999 Annual Report on Form 10-K also
included an audit of the Financial Statement Schedule II - Valuation and
Qualifying Accounts ("Financial Statement Schedule") of Allegiance Corporation
and its subsidiaries (not presented separately herein). In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
July 29, 1999
23
<PAGE> 24
<TABLE>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Revenue:
Operating revenue $21,480.6 $18,004.0 $15,924.8
Bulk deliveries to customer warehouses 3,553.0 2,991.4 2,469.1
--------- --------- ---------
Total revenue 25,033.6 20,995.4 18,393.9
Cost of products sold:
Operating cost of products sold 18,892.2 15,783.4 13,904.8
Cost of products sold - bulk deliveries 3,553.0 2,991.4 2,469.1
Merger-related costs 4.0 -- --
--------- --------- ---------
Total cost of products sold 22,449.2 18,774.8 16,373.9
Gross margin 2,584.4 2,220.6 2,020.0
Selling, general and administrative expenses 1,564.8 1,390.3 1,304.3
Special charges:
Merger-related costs (142.6) (49.2) (50.9)
Other special charges -- (8.6) --
--------- --------- ---------
Total special charges (142.6) (57.8) (50.9)
Operating earnings 877.0 772.5 664.8
Other income (expense):
Interest expense (99.4) (94.5) (107.2)
Other, net (includes minority interests) (18.4) (18.3) (17.9)
--------- --------- ---------
Earnings before income taxes 759.2 659.7 539.7
Provision for income taxes 302.9 234.6 204.9
--------- --------- ---------
Net earnings $ 456.3 $ 425.1 $ 334.8
========= ========= =========
Net earnings per Common Share:
Basic $ 1.68 $ 1.57 $ 1.26
Diluted $ 1.64 $ 1.53 $ 1.23
Weighted average number of
Common Shares outstanding:
Basic 271.6 271.2 265.8
Diluted 279.0 277.9 272.0
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE> 25
<TABLE>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 165.2 $ 373.3
Trade receivables, net 1,590.3 1,436.3
Current portion of net investment in sales-type leases 152.5 91.4
Inventories 2,931.4 2,608.1
Prepaid expenses and other 307.2 277.0
-------- --------
Total current assets 5,146.6 4,786.1
-------- --------
Property and equipment, at cost:
Land, buildings and improvements 700.3 761.6
Machinery and equipment 1,970.3 1,735.7
Furniture and fixtures 77.7 104.4
-------- --------
Total 2,748.3 2,601.7
Accumulated depreciation and amortization (1,207.8) (1,134.0)
-------- --------
Property and equipment, net 1,540.5 1,467.7
Other assets:
Net investment in sales-type leases, less current portion 454.3 233.1
Goodwill and other intangibles, net 942.1 850.5
Other 205.5 140.6
-------- --------
Total $8,289.0 $7,478.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 28.6 $ 24.7
Current portion of long-term obligations 11.6 7.3
Accounts payable 2,360.8 2,142.7
Other accrued liabilities 558.0 550.7
-------- --------
Total current liabilities 2,959.0 2,725.4
-------- --------
Long-term obligations, less current portion 1,223.9 1,330.0
Deferred income taxes and other liabilities 643.1 467.7
Shareholders' equity:
Common Shares, without par value 1,090.0 1,063.6
Retained earnings 2,439.1 2,006.9
Common Shares in treasury, at cost (17.2) (82.3)
Cumulative foreign currency adjustment (44.0) (27.9)
Other (4.9) (5.4)
-------- --------
Total shareholders' equity 3,463.0 2,954.9
-------- --------
Total $8,289.0 $7,478.0
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE> 26
<TABLE>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN MILLIONS)
<CAPTION>
COMMON SHARES CUMULATIVE
------------------ TREASURY SHARES FOREIGN TOTAL
SHARES RETAINED ------------------ CURRENCY SHAREHOLDERS'
ISSUED AMOUNT EARNINGS SHARES AMOUNT ADJUSTMENT OTHER EQUITY
------ -------- -------- ------ -------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1996 132.1 $ 897.8 $1,343.1 (1.1) $ (11.6) $ (3.8) $(3.0) $2,222.5
Comprehensive income:
Net earnings 334.8 334.8
Foreign currency translation adjustments (8.7) (8.7)
--------
Total comprehensive income 326.1
Employee stock plans activity,
including tax benefits of $21.0 3.5 123.4 (0.6) 10.6 (1.1) 132.9
Treasury shares acquired and shares retired (0.7) (7.1) 0.9 (30.7) (37.8)
Dividends paid (32.0) (32.0)
Stock split effected as a stock dividend
and cash paid in lieu of fractional shares 33.4
Adjustment for change in fiscal year
of an acquired subidiary (see Note 1) 0.2 5.7 0.1 0.1 6.0
Stock issued for acquisitions and other 0.1 10.5 (1.2) 9.3
----- -------- -------- ---- ------- ------ ----- --------
BALANCE, JUNE 30, 1997 168.4 $1,024.8 $1,651.6 (0.7) $ (31.6) $(12.5) $(5.3) $2,627.0
Comprehensive income:
Net earnings 425.1 425.1
Foreign currency translation adjustments (16.0) (16.0)
--------
Total comprehensive income 409.1
Employee stock plans activity,
including tax benefits of $35.2 2.0 65.0 (0.3) 29.0 (0.4) 93.6
Treasury shares acquired and shares retired (0.4) (25.4) (0.8) (104.9) (130.3)
Dividends paid (34.8) (34.8)
Other adjustments (0.5) (0.5)
Adjustment for change in fiscal year
of an acquired subidiary (see Note 1) (0.1) (0.8) (35.0) 0.4 25.2 0.6 0.8 (9.2)
----- -------- -------- ---- ------- ------ ----- --------
BALANCE, JUNE 30, 1998 169.9 $1,063.6 $2,006.9 (1.4) $ (82.3) $(27.9) $(5.4) $2,954.9
Comprehensive income:
Net earnings 456.3 456.3
Foreign currency translation adjustments (17.0) (17.0)
--------
Total comprehensive income 439.3
Employee stock plans activity,
including tax benefits of $55.8 2.7 99.7 (0.7) 34.8 (2.9) 131.6
Treasury shares acquired and shares retired (1.7) (73.8) 1.7 30.3 3.4 (40.1)
Dividends paid (31.9) (31.9)
Stock split effected as a stock dividend and
cash paid in lieu of fractional shares 103.1 (0.3) (0.3)
Adjustment for change in fiscal year
of an acquired subidiary (see Note 1) 0.1 0.5 8.6 0.9 10.0
Stock issued for acquisitions and other 0.2 (0.5) (0.5)
----- -------- -------- ---- ------- ------ ----- --------
BALANCE, JUNE 30, 1999 274.3 $1,090.0 $2,439.1 (0.4) $ (17.2) $(44.0) $(4.9) $3,463.0
===== ======== ======== ==== ======= ====== ===== ========
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 27
<TABLE>
CARDINAL HEALTH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 456.3 $ 425.1 $ 334.8
Adjustments to reconcile net earnings to net cash from
operating activities:
Depreciation and amortization 233.5 214.5 209.1
Provision for deferred income taxes 132.4 90.1 32.9
Provision for bad debts 29.5 15.5 8.6
Change in operating assets and liabilities,
net of effects from acquisitions:
Increase in trade receivables (214.1) (204.9) (15.3)
Increase in inventories (318.5) (473.7) (106.6)
Increase in net investment in sales-type leases (282.3) (103.3) (5.1)
Increase (decrease) in accounts payable 230.5 523.3 (33.2)
Other operating items, net 78.4 65.5 63.8
------- ------- -------
Net cash provided by operating activities 345.7 552.1 489.0
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired (147.5) (45.8) (43.7)
Proceeds from asset dispositions 57.8 10.7 21.0
Additions to property and equipment (319.9) (278.8) (227.9)
Purchase of marketable securities available for sale -- -- (3.4)
Proceeds from sale of marketable securities available for sale -- -- 57.7
Other -- (4.7) 2.5
------- ------- -------
Net cash used in investing activities (409.6) (318.6) (193.8)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowing activity (207.4) (89.2) (185.4)
Reduction of long-term obligations (118.5) (49.1) (277.8)
Proceeds from long-term obligations, net of issuance costs 223.7 111.4 94.7
Proceeds from issuance of Common Shares 62.0 59.1 108.2
Dividends on common shares, minority interests and
cash paid in lieu of fractional shares (56.7) (51.4) (40.0)
Purchase of treasury shares (40.1) (130.7) (37.7)
Other (4.8) (10.8) (10.8)
------- ------- -------
Net cash used in financing activities (141.8) (160.7) (348.8)
------- ------- -------
EFFECT OF CURRENCY TRANSLATION
ON CASH AND EQUIVALENTS (2.4) (1.6) (1.2)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (208.1) 71.2 (54.8)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 373.3 302.1 356.9
------- ------- -------
CASH AND EQUIVALENTS AT END OF YEAR $ 165.2 $ 373.3 $ 302.1
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE> 28
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Health, Inc., together with its subsidiaries (collectively the
"Company"), is a provider of services to the healthcare industry offering an
array of value-added pharmaceutical and other healthcare products distribution
services and pharmaceutical-related products and services to a broad base of
customers. The Company currently conducts its business within three business
segments; Pharmaceutical Distribution, Pharmaceutical Services and
Medical-Surgical Products.
The Pharmaceutical Distribution segment distributes a broad line of
pharmaceuticals, 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, within the Pharmaceutical Services segment, operates a variety of
related healthcare service and manufacturing 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); the Cardinal Information group of companies ("CIC") (a developer and
provider of clinical information systems); and R.P. Scherer Corporation
("Scherer") (an international developer and manufacturer of drug delivery
systems).
The Medical-Surgical Products segment primarily encompasses Allegiance
Corporation ("Allegiance"). Allegiance is a distributor and manufacturer of
medical, surgical and respiratory therapy products, and a provider of
distribution and cost-saving services. See "Basis of Presentation" below.
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
PCI on October 11, 1996; Owen on March 18, 1997; MediQual Systems, Inc.
("MediQual") on February 18, 1998; Scherer on August 7, 1998; and Allegiance on
February 3, 1999 (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, MediQual's, Scherer's
and Allegiance's fiscal year ends were November 30, December 31, March 31, and
December 31, respectively. 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) and with the financial
results for MediQual's fiscal year ended December 31, 1996, Scherer's fiscal
year ended March 31, 1997, and Allegiance's fiscal year ended December 31, 1997.
For the fiscal year ended June 30, 1998, the consolidated financial statements
combine the Company's fiscal year ended June 30, 1998 with Scherer's fiscal year
ended March 31, 1998.
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
month of December 1996 are not included in the combined results of operations
but are reflected as an adjustment in the Consolidated Statements of
Shareholders' Equity. As a result of changing MediQual's fiscal year end from
December 31 to June 30, the results of operations for the six months ended June
30, 1997 are not included in the combined results of operations but are
reflected as an adjustment in the Consolidated Statements of Shareholders'
Equity. MediQual's total revenue and net earnings for this period were $6.0
million and $1.7 million, respectively. MediQual's cash flows from operating
activities for this period were $1.2 million, while cash flows used in investing
and financing activities were $0.3 million and $0.1 million, respectively. Due
to the change in Scherer's fiscal year end from March 31 to conform with the
Company's June 30 fiscal year end, Scherer's results of operations for the three
months ended June 30, 1998 are not included in the combined results of
operations but are reflected as an adjustment in the Consolidated Statements of
Shareholders' Equity. Scherer's net revenue and net earnings for this period
were $161.6 million and $8.6 million, respectively. Scherer's cash flows from
operating and financing activities for this period were $12.6 million and $32.6
million, respectively, while cash flows used in investing activities were $12.2
million. As a result of changing Allegiance's fiscal year end from December 31
to June 30, the results of operations for the six months ended December 31, 1997
are included in the combined results of operations for both the fiscal years
ended June 30, 1997 and 1998 and are reflected as an adjustment in the
Consolidated Statements of Shareholders' Equity. Allegiance's total revenue and
net earnings for this period were $2.2 billion and $47.9 million, respectively.
Allegiance's cash flows from operating
28
<PAGE> 29
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
activities for this period were $147.2 million, while cash flows used in
investing and financing activities were $63.7 million and $83.8 million,
respectively.
On May 21, 1999, the Company completed a merger with Pacific Surgical
Innovations, Inc. ("PSI"). The merger transaction with PSI was accounted for as
a pooling-of-interests. Because the impact of the merger transaction with PSI
was not significant on a historical basis, prior period financial statements
have not been restated. PSI's financial information for all periods, beginning
with May 21, 1999, has been included in the Company's consolidated financial
results for fiscal 1999.
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. Cash payments for interest were
$105.5 million, $97.4 million and $111.4 million and cash payments for income
taxes were $79.5 million, $146.9 million and $116.8 million for fiscal 1999,
1998 and 1997, respectively. See Notes 2 and 5 for additional information
regarding non-cash investing and financing activities.
RECEIVABLES. Trade receivables are primarily comprised of amounts owed to the
Company through its pharmaceutical and other healthcare distribution activities
and are presented net of an allowance for doubtful accounts of $53.6 million and
$64.6 million at June 30, 1999 and 1998, respectively.
The Company provides financing to various customers. Such financing
arrangements range from one year to ten years, at interest rates, which
generally fluctuate with the prime rate. The financings may be collateralized,
guaranteed by third parties or unsecured. Finance notes and accrued interest
receivable are $19.8 million and $66.6 million at June 30, 1999 and 1998,
respectively (the current portions are $9.2 million and $29.4 million,
respectively), and are included in other assets. These amounts are reported net
of an allowance for doubtful accounts of $4.9 million and $6.4 million at June
30, 1999 and 1998, respectively.
During fiscal 1999, the Company formed Medicine Shoppe Capital Corporation
("MSCC") and Pyxis Capital Corporation ("PCC"), as wholly owned subsidiaries of
Medicine Shoppe and Pyxis, respectively. MSCC and PCC were incorporated for the
sole purpose of buying receivables and selling those receivables to certain
financial institutions or to other investors. They are designed to be special
purpose, bankruptcy remote entities. Although consolidated to the extent
required by generally accepted accounting principles, MSCC and PCC are separate
corporations from the Company, Medicine Shoppe and Pyxis, they each maintain
separate financial statements, and their assets will be available first and
foremost to satisfy the claims of their creditors.
INVENTORIES. A majority of inventories (approximately 60% in 1999 and 1998) are
stated at lower of cost, using the last-in, first-out ("LIFO") method, or market
and are primarily merchandise inventories. The remaining inventory is primarily
stated at the lower of cost using the first-in, first-out ("FIFO") method or
market. If the Company had used the FIFO method of inventory valuation, which
approximates current replacement cost, inventories would have been higher than
the LIFO method reported at June 30, 1999 and 1998 by $50.4 million and $54.4
million, respectively.
The Company continues to consolidate locations, automate selected
distribution facilities and invest in management information systems to achieve
efficiencies in inventory management processes. As a result of the facility and
related inventory consolidations, and the operational efficiencies achieved in
fiscal 1999 and 1998, the Company had partial inventory liquidations in certain
LIFO pools which reduced the LIFO provision by approximately $0.1 million and
$2.3 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 one to fifty 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. 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.
29
<PAGE> 30
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 that range from ten to forty years. Accumulated
amortization was $599.9 million and $529.8 million at June 30, 1999 and 1998,
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 a review of projected undiscounted operating cash flows
for each subsidiary, except Allegiance. Allegiance assesses goodwill impairment
based upon a fair value approach.
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 the drug
distribution industry, the Company reports as revenue bulk deliveries made to
customers' warehouses, whereby the Company acts as an intermediary in the
ordering and subsequent delivery of pharmaceutical products. Fluctuations in
bulk deliveries result largely from circumstances that are beyond the control of
the Company, including consolidation within the customers' industry, decisions
by customers to either begin or discontinue warehousing activities, and changes
in policy by manufacturers related to selling directly to the customers. Due to
the insignificant margins generated through bulk deliveries, fluctuations in
their amount do not have a significant impact on earnings.
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.
Pharmacy management and other service revenue are recognized as the related
services are rendered according to the contracts established. A fee is charged
under such contracts through a monthly management fee arrangement, a capitated
fee arrangement or a portion of the hospital charges to patients. Under certain
contracts, fees for management services are guaranteed by the Company not to
exceed stipulated amounts or have other risk-sharing provisions. Revenue is
adjusted to reflect the estimated effects of such contractual guarantees and
risk-sharing provisions.
Packaging revenue is recognized from services provided upon the completion
of such services.
Clinical information system license revenue is 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.
Drug delivery system revenue is recognized upon shipment of products to the
customer. Non-product revenue related to option, milestone and exclusivity fees
are recognized when earned and all obligations of performance have been
completed.
TRANSLATION OF FOREIGN CURRENCIES. The financial position and the results of
operations of the Company's foreign operations, excluding the Company's
Malaysian and Mexican manufacturing operations which are denominated in U.S.
dollars, are measured using the local currencies of the countries in which they
operate and are translated into U.S. dollars. Although the effects of foreign
currency fluctuations are mitigated by the fact that expenses of foreign
subsidiaries are generally incurred in the same currencies in which sales are
generated, the reported results of operations of the Company's foreign
subsidiaries are affected by changes in foreign currency exchange rates and, as
compared to prior periods, will be higher or lower depending upon a weakening or
strengthening of the U.S. dollar. In addition, the net assets of foreign
subsidiaries are translated into U.S. dollars at the foreign currency exchange
rates in effect at the end of each period. Accordingly, the Company's
consolidated shareholders' equity will fluctuate depending upon the relative
strengthening or weakening of the U.S. dollar versus relevant foreign
currencies.
DERIVATIVE FINANCIAL INSTRUMENT RISK. The Company uses derivative financial
instruments to minimize the impact of foreign exchange rate changes on earnings
and cash flows. The Company also periodically enters into foreign currency
exchange contracts to hedge certain exposures related to selected transactions
that are relatively certain as to both timing and amount. The Company does not
use derivative financial instruments for trading or speculative purposes (see
Note 6 for further discussion).
30
<PAGE> 31
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESEARCH AND DEVELOPMENT COSTS. Costs incurred in connection with the
development of new products and manufacturing methods are charged to expense as
incurred. Research and development expenses, net of customer reimbursements,
were $49.7 million, $45.7 million and $35.4 million in fiscal 1999, 1998 and
1997, respectively. Customer reimbursements in the amount of $11.8 million,
$13.0 million and $8.0 million were received for the fiscal years ended June 30,
1999, 1998 and 1997, respectively.
INCOME TAXES. No provision is made for U.S. income taxes on earnings of foreign
subsidiary companies which the Company controls but does not include in the
consolidated federal income tax return since it is management's practice and
intent to permanently reinvest the earnings.
EARNINGS PER COMMON SHARE. 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.
Excluding dividends paid by all entities with which the Company has merged,
the Company paid cash dividends per Common Share of $0.095, $0.070 and $0.060
for the fiscal years ended June 30, 1999, 1998 and 1997, respectively.
STOCK SPLITS. On August 12, 1998, the Company declared a three-for-two stock
split which was effected as a stock dividend and distributed on October 30, 1998
to shareholders of record on October 9, 1998. 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
these stock splits.
ALLEGIANCE SPIN-OFF. On September 30, 1996 (the "Distribution Date"), Baxter
International Inc. ("Baxter") and its subsidiaries transferred to Allegiance and
its subsidiaries their U.S. healthcare distribution business, surgical and
respiratory therapy business and healthcare cost-saving business, as well as
certain foreign operations (the "Allegiance Business") in connection with a
spin-off of the Allegiance Business by Baxter. The spin-off occurred on the
Distribution Date through a distribution of Allegiance common stock to Baxter
stockholders (the "Distribution") based on a distribution ratio of one
Allegiance share for each five Baxter shares held. The Distribution of
approximately 68.4 million equivalent Company Common Shares of Allegiance common
stock was made to Baxter stockholders of record on September 26, 1996.
2. BUSINESS COMBINATIONS, MERGER-RELATED COSTS AND OTHER SPECIAL ITEMS
Business Combinations and Merger-Related Costs. On February 3, 1999, the Company
completed a merger transaction with Allegiance that was accounted for as a
pooling-of-interests transaction. The Company issued approximately 70.7 million
Common Shares to Allegiance stockholders and Allegiance's outstanding stock
options were converted into options to purchase approximately 10.3 million
Company Common Shares. In addition, on August 7, 1998, the Company completed a
merger transaction with Scherer that was accounted for as a
pooling-of-interests. The Company issued approximately 34.2 million Common
Shares to Scherer stockholders and Scherer's outstanding stock options were
converted into options to purchase approximately 3.5 million Common Shares. The
Company recorded a merger-related charge to reflect transaction and other costs
incurred as a result of these merger transactions in fiscal 1999. Additional
merger-related costs associated with integrating the separate companies and
instituting efficiencies are charged to expense in subsequent periods when
incurred.
On May 21, 1999, the Company completed a merger transaction with PSI. The
Company issued approximately 233,000 Common Shares to PSI shareholders. The
historical cost of PSI's assets combined was approximately $3.9 million and the
total liabilities assumed were approximately $3.0 million. The impact of the
merger transaction with PSI, on a historical basis, is not significant.
Accordingly, prior period historical financial statements have not been restated
for the PSI Merger. PSI's financial results have been included in the
consolidated financial results of the Company since May 21, 1999.
During the fiscal 1999, merger-related costs totaling $146.6 million
($117.6 million, net of tax) were recorded. Of this amount, approximately $95.4
million related to transaction and employee-related costs, and $36.1 million
related to business restructuring and asset impairment costs associated with the
Company's merger transactions with Scherer and Allegiance. As part of the
business restructuring, the Company is currently closing certain facilities. As
such, the Company has incurred employee-related costs associated with the
elimination of approximately 360 positions, asset impairment costs and exit
costs
31
<PAGE> 32
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
related to the termination of contracts and lease agreements. In addition, the
Company recorded costs of $4.0 million related to the write down of impaired
inventory related to a previous merger and of $1.1 million related to severance
costs for a restructuring associated with the change in management that resulted
from the merger with Owen. The Company recorded costs of $13.7 million related
to integrating the operations of companies that previously engaged in merger
transactions with the Company. Partially offsetting the charge recorded was a
$3.7 million credit to adjust the estimated transaction and termination costs
previously recorded in connection with the canceled merger transaction with
Bergen Brunswig Corporation ("Bergen") (see Note 17). This adjustment relates
primarily to services provided by third parties engaged by the Company in
connection with the terminated Bergen transaction. The cost of such services was
estimated and recorded in the prior periods when the services were performed.
Actual billings were less than the estimate originally recorded, resulting in a
reduction of the current period merger-related costs.
On February 18, 1998, the Company completed a merger transaction with
MediQual (the "MediQual Merger") which was accounted for as a
pooling-of-interests. The Company issued approximately 860,000 Common Shares to
MediQual shareholders and MediQual's outstanding stock options were converted
into options to purchase approximately 36,000 Common Shares of the Company.
The table below presents a reconciliation of total revenue and net earnings
available for Common Shares as reported in the accompanying consolidated
financial statements with those previously reported by the Company. The term
"Cardinal Health" as used herein refers to Cardinal Health, Inc. and
subsidiaries prior to the MediQual, Scherer and Allegiance mergers. See Note 1
for periods combined.
<TABLE>
<CAPTION>
(in millions) Cardinal
Health Scherer MediQual Allegiance Combined
--------- ------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Fiscal year ended June 30, 1997
Total revenue $13,437.2 $588.7 $11.0 $4,357.0 $18,393.9
Net earnings $ 184.6 $ 57.0 $ 2.3 $ 90.9 $ 334.8
Fiscal year ended June 30, 1998
Total revenue $15,918.1 $620.8 $ 7.9 $4,448.6 $20,995.4
Net earnings $ 247.1 $ 69.7 $ 1.4 $ 106.9 $ 425.1
</TABLE>
Adjustments affecting net earnings and shareholders' equity resulting from
the MediQual, Scherer and Allegiance mergers to adopt the same accounting
practices were not material for any periods presented herein. There were no
material intercompany transactions.
In addition to the merger transactions described above, during fiscal 1999,
the Company completed several individually immaterial acquisitions, which were
accounted for under the purchase method of accounting. These business
combinations were primarily related to the Company's med/surg distribution,
point-of-use pharmacy systems and pharmaceutical-packaging services. The
aggregate purchase price, which was paid primarily in cash, including fees and
expenses, was approximately $160.8 million. Liabilities of the operations
assumed were approximately $18.9 million, consisting of debt of $3.2 million.
Had the acquisitions taken place July 1, 1998, consolidated results would not
have been materially different from reported results.
During fiscal 1998, the Company made a number of individually immaterial
acquisitions for an aggregate purchase price of $47.8 million and exchanged
nonmonetary assets with a value of approximately $10.5 million to acquire an
interest in Source Medical Corporation, a new venture in Canada. All of these
acquisitions were accounted for as purchase transactions. Had the acquisitions
taken place July 1, 1997, consolidated results would not have been materially
different from reported results.
During fiscal 1998, the Company recorded merger-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 June
30, 1998 (see Note 17). In accordance with the terms of the Agreement and Plan
of Merger between the Company, a wholly owned subsidiary of the Company, and
Bergen, as amended, its termination required the Company to reimburse Bergen for
$7.0 million of transaction costs upon termination of such Agreement (See Note
17). Additional merger-related costs, related to asset impairments ($3.8
million)
32
<PAGE> 33
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and integrating the operations of companies that previously merged with the
Company ($9.6 million), were incurred and recorded during fiscal 1998.
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 11.6 million Common
Shares to Owen shareholders and Owen's outstanding stock options were converted
into options to purchase approximately 1.0 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 4.7 million Common
Shares to PCI shareholders and PCI's outstanding stock options were converted
into options to purchase approximately 0.3 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.
During fiscal 1997, the Company made individually immaterial acquisitions,
accounted for under the purchase method of accounting, totaling $71.4 million.
Had these acquisitions taken place July 1, 1996, consolidated results would not
have been materially different from reported results.
In addition to the merger-related costs recorded in fiscal 1997 for the
Owen Merger and the PCI Merger (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.
Other Special Items. 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
pharmaceutical 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 pharmaceutical distribution facility,
resulting in termination of the union relationship.
During fiscal 1998, Scherer finalized part of its long-term tax planning
strategy by converting, with its joint venture partner, the legal ownership
structure of Scherer's 51% owned subsidiary in Germany from a corporation to a
partnership. As a result of this change in tax status, the Company's tax basis
in the German subsidiary was adjusted, resulting in a one-time tax refund of
approximately $4.6 million, as well as a reduction in cash taxes to be paid in
the current and future years. Combined, these factors resulted in a one-time
reduction of fiscal 1998 income tax expense by approximately $11.7 million.
The net effect of the various merger-related costs and other special items
recorded during fiscal 1999 was to reduce reported net earnings by $117.6
million to $456.3 million and to reduce reported diluted earnings per Common
Share by $0.42 per share to $1.64 per share. The fiscal 1998 effect of various
merger-related charges and other special items was to reduce reported net
earnings by $24.1 million to $425.1 million and to reduce reported diluted
earnings per Common Share by $0.09 per share to $1.53 per share. The effect of
the various merger-related costs recorded in fiscal 1997 was to reduce reported
net earnings by $36.6 million to $334.8 million and to reduce reported diluted
earnings per Common Share by $0.13 per share to $1.23 per share.
Certain merger-related costs are based upon estimates, and actual amounts
paid may ultimately differ from these estimates. If additional costs are
incurred, such items will be expensed as incurred.
33
<PAGE> 34
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restructuring Program. In fiscal 1993, Baxter (see Note 1) announced a
restructuring plan designed in part to make Allegiance more efficient and
responsive in addressing the changes in the U.S. healthcare system. Charges
totaling $560.0 million were recorded to cover costs associated with these
restructuring initiatives. During fiscal 1999, 1998 and 1997, the Company had
cash outflows related to the restructuring program of $6.6 million, $15.8
million and $15.6 million, respectively, and noncash charges against the
restructuring program of $7.4 million, $9.1 million and $0.9 million,
respectively. Prior to fiscal 1997, the total cash outflows and noncash charges
related to the restructuring program were $242.4 million and $251.5 million,
respectively. During the fiscal year ended June 30, 1999, $7.9 million of
unnecessary restructuring reserves were reversed. The reversal of unnecessary
reserves was principally the result of facility closures and consolidations
being finalized at costs lower than originally anticipated.
The cash outflows pertain primarily to employee-related costs for
severance, outplacement assistance, relocation, implementation teams and
facility consolidations. Since the inception of the restructuring program,
approximately 2,500 positions have been eliminated. As of June 30, 1999 and
1998, the remaining restructuring reserve balance was $2.8 million and $24.7
million, respectively, both of which are classified as current liabilities. The
remaining expenditures to be charged against the restructuring program are
expected to occur in fiscal 2000, as implementation projects are completed as
planned.
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 millions):
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Future minimum lease payments receivable $ 717.7 $387.5
Unguaranteed residual values 1.0 1.3
Unearned income (100.1) (55.5)
Allowance for uncollectible minimum lease
payments receivable (11.8) (8.8)
------- ------
Net investment in sales-type leases 606.8 324.5
Less: current portion 152.5 91.4
------- ------
Net investment in sales-type leases, less
current portion $ 454.3 $233.1
======= ======
</TABLE>
Future minimum lease payments to be received pursuant to sales-type leases
during the next five years are: 2000 -$169.5 million, 2001 - $166.0 million,
2002 - $151.5 million, 2003 - $132.1 million, 2004 - $83.7 million and 2005 and
thereafter - $14.9 million.
Lease Related Financing Arrangements. Pyxis has previously financed its working
capital needs through the sale of certain lease receivables to a non-bank
financing company. As of June 30, 1999, $68.9 million of lease receivables were
owned by the financing company. In June 1998, the agreement with the financing
company was amended to terminate Pyxis' obligation to sell lease receivables to
the financing company. Due to Pyxis customers upgrading the Pyxis machines or
expanding the number of units being leased under the original lease agreements
that have been sold to the financing company, Pyxis has been converting the
original lease agreements with customers to an updated lease agreement. Pyxis
has been maintaining these revised leases and not selling them to the financing
company to replace the original lease receivables. As such, during fiscal 1999,
Pyxis has entered into an agreement with the financing company to pay the
financing company the remaining portion of the original lease receivables
outstanding at the time of revision over the original terms. The future minimum
payments for these notes at June 30, 1999 are 2000 - $39.5 million; 2001 - $26.9
million; 2002 - $14.0 million; and 2003 - $3.1 million.
4. NOTES PAYABLE, BANKS
The Company has entered into various unsecured, uncommitted line-of-credit
arrangements that allow for borrowings up to $177.8 million at June 30, 1999, at
various money market rates. At June 30, 1999, $28.6 million, at a weighted
average interest rate of 6.4%, was outstanding under such arrangements and $24.7
million, at a weighted average interest rate of 7.2% was outstanding at June 30,
1998. The total available but unused lines of credit at June 30, 1999 was $149.2
million.
34
<PAGE> 35
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM OBLIGATIONS AND CREDIT FACILITIES
Long-term obligations consist of the following (in millions):
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
6.0% Notes due 2006 $ 150.0 $ 150.0
6.25% Notes due 2008 150.0 --
6.5% Notes due 2004 100.0 100.0
6.75% Notes due 2004 99.7 100.0
7.3% Notes due 2006 183.2 199.6
7.8% Debentures due 2016 125.2 149.4
7.0% Debentures due 2026 (7 year put option in 2003) 199.9 199.9
Borrowings under credit facilities 132.2 248.8
Commercial paper 49.2 142.0
Other obligations; interest averaging 6.7% in
1999 and 6.1% in 1998, due in varying
installments through 2020 46.1 47.6
-------- --------
Total 1,235.5 1,337.3
Less: current portion 11.6 7.3
-------- --------
Long-term obligations, less current portion $1,223.9 $1,330.0
======== ========
</TABLE>
The 6%, 6.25% and 6.5% Notes represent unsecured obligations of the
Company, and the 6.75% Notes represent unsecured obligations of Scherer which
are guaranteed by the Company. The 7.3% Notes and the 7.8% and 7.0% Debentures
represent unsecured obligations of Allegiance which are guaranteed by the
Company. These obligations are not redeemable prior to maturity and are not
subject to a sinking fund.
During fiscal 1999, the Company established an unsecured bank credit
facility, which expires in March 2004. The credit facility provides for up to an
aggregate of $1.0 billion in borrowings of which $150.0 million is part of a
multi-currency allocation and $250.0 million represents a 364-day facility.
Interest rates on outstanding borrowings are at LIBOR plus 0.25%. As of June 30,
1999, $80.7 million of borrowings were outstanding under the multi-currency
allocation portion of the facility. The amounts outstanding under the short-term
portion of the credit facility will be classified as long-term debt, as amounts
are supported by a long-term credit facility, and will be refinanced. The
agreement requires the Company to maintain a minimum net worth of $2.55 billion.
The Company has a commercial paper program, providing for the issuance of
up to $750.0 million in aggregate maturity value of commercial paper. Commercial
paper with an aggregate maturity value of $49.2 million and $142.0 million was
outstanding as of June 30, 1999 and 1998, respectively with an effective
interest rate of 4.82%.
During fiscal 1999, the Company terminated its unsecured revolving credit
agreement (originally expiring 2001) and its unsecured bank credit facility
(originally expiring 2002) which provided up to an aggregate of $900.0 million
and $175.0 million in borrowings, respectively. As of June 30, 1998, $51.3
million was outstanding under the $175.0 million facility and no amounts were
outstanding under the $900.0 million facility.
The Company maintains other short-term credit facilities. At June 30, 1999
and 1998, $51.5 million and $197.5 million, respectively, was outstanding under
these uncommitted facilities. The effective interest rate as of June 30, 1999
was 6.00%. The amounts outstanding under the commercial paper program and
short-term credit facilities have been classified as long-term debt, as amounts
are supported by a long-term credit facility and will continue to be refinanced.
Certain long-term obligations are collateralized by property and equipment
of the Company with an aggregate book value of approximately $28.7 million at
June 30, 1999. Maturities of long-term obligations for future fiscal years are
2000 -$11.6 million; 2001 - $111.7 million; 2002 - $3.1 million; 2003- $2.2
million; 2004 - $278.8 million and 2005 and thereafter - $828.1 million.
At June 30, 1999, 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.
35
<PAGE> 36
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. FINANCIAL INSTRUMENTS
Interest Rate Management. The Company has entered into an interest rate
swap agreement that matures November 2002 to hedge against variable interest
rates. The Company exchanged its variable rate position related to a lease
agreement for a fixed rate of 7.08%. The Company recognizes in income the
periodic net cash settlements under the swap agreement as it accrues.
Foreign Exchange Risk Management. The Company in fiscal 1998 purchased
various foreign currency options which expired as of June 30, 1999 to partially
protect the Company from the risk that fluctuations in the foreign currency
rates that could have an adverse effect on foreign subsidiaries' earnings. In
addition during fiscal 1998, the Company had foreign currency forward and option
contracts that hedged a portion of anticipated production costs expected to be
denominated in foreign currency. When the dollar strengthens against foreign
currencies, the decline in the value of the foreign currency cash flows is
partially offset by the recognition of gains in value of purchased currency
options. Conversely, when the dollar weakens against foreign currencies, the
increase in the value of foreign currency cash flows is reduced only by the
recognition of the premium paid to acquire the options. Market value gains,
losses and premiums on these contracts are recognized as income upon occurrence.
The fair value is based upon the estimated amount the Company would receive to
terminate the options. Net expense during fiscal 1999 was not material. Net
expense during fiscal 1998 was $11.6 million related to these foreign currency
forward contracts and options.
In addition, the Company periodically enters into forward foreign currency
exchange contracts to hedge certain exposures related to identifiable foreign
currency transactions that are relatively certain as to both timing and amount.
Gains and losses on the forward contracts are recognized concurrently with the
gains and losses from the underlying transactions.
The Company also uses commodity contracts to hedge raw material costs
expected to be denominated in foreign currency. These contracts generally cover
a one-year period and all gains and losses are deferred and recognized in cost
of goods sold with the underlying product costs. The contracts qualify as hedges
for accounting purposes in accordance with the criteria established in SFAS No.
80 "Accounting for Futures Contracts." Cash flows resulting from these commodity
contracts are classified in the same category as the items being hedged.
The counterparties to these contracts are major financial institutions and
the Company does not have significant exposure to any one counterparty.
Management believes the risk of loss is remote and in any event would not be
material.
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, 1999 and 1998, 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
$1,240.0 million and $1,365.3 million as compared to the carrying amounts of
$1,235.5 million and $1,337.3 million at June 30, 1999 and 1998, respectively.
The fair value of long-term insurance receivables and long-term litigation
liabilities at June 30, 1999 were $52.2 million and $31.7 million compared to
the carrying amounts of $57.3 million and $34.1 million, respectively. At June
30, 1998, the Company did not have balances related to these long-term
receivables and long-term liabilities. The fair value of the Company's long-term
obligations and other items is estimated based on either the quoted market
prices for the same or similar issues and the current interest rates offered for
debt of the same remaining maturities or estimated discounted cash flows.
The following is a summary of the fair value of the Company's derivative
instruments, based upon the estimated amount that the Company would receive or
(pay) to terminate the contracts at the reporting date. The fair values are
based on quoted market prices for the same or similar instruments.
<TABLE>
<CAPTION>
(in millions) Fiscal Year ended June 30,
1999 1998
------------------------ -----------------------
Notional Fair Notional Fair
Amount Value (Loss) Amount Value (Loss)
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Foreign currency exchange contract $ -- $ -- $35.6 $(0.4)
Foreign currency options -- -- 3.0 0.1
Commodity contracts 9.6 (0.3) 14.2 (1.7)
Interest Rate Swaps 20.0 (0.7) 8.3 (1.0)
</TABLE>
36
<PAGE> 37
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
Consolidated income before taxes (in millions):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
----------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
U.S. Based Operations $684.8 $550.6 $437.4
Non-U.S. Based Operations 74.4 109.1 102.3
------ ------ ------
$759.2 $659.7 $539.7
====== ====== ======
</TABLE>
The provision for income taxes consists of the following (in millions):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
----------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $122.5 $106.1 $131.9
State 26.3 22.6 21.3
Foreign 21.7 15.8 18.8
------ ------ ------
Total 170.5 144.5 172.0
Deferred 132.4 90.1 32.9
------ ------ ------
Total provision $302.9 $234.6 $204.9
====== ====== ======
</TABLE>
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,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Provision at Federal
statutory rate 35.0% 35.0% 35.0%
State income taxes, net of
Federal benefit 3.9 4.1 3.9
Foreign tax rates (3.0) (4.8) (3.8)
Nondeductible expenses 4.5 1.5 2.5
Other (0.5) (0.2) 0.4
---- ---- ----
Effective income tax rate 39.9% 35.6% 38.0%
==== ==== ====
</TABLE>
Provision has not been made for U.S. or additional foreign taxes on $343.2
million of undistributed earnings of foreign subsidiaries because those earnings
are considered to be permanently reinvested in the operations of those
subsidiaries. It is not practical to estimate the amount of tax that might be
payable on the eventual remittance of such earnings.
37
<PAGE> 38
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes arise from temporary differences between financial
reporting and tax reporting bases of assets and liabilities, and operating loss
and tax credit carryforwards for tax purposes. The components of the deferred
income tax assets and liabilities are as follows (in millions):
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Deferred income tax assets:
Receivable basis difference $ 27.8 $ 21.6
Accrued liabilities 101.0 156.7
Net operating loss carryforwards 9.1 48.7
Foreign tax and other credit carryforwards 16.5 --
Other 35.0 26.5
------- -------
Total deferred income tax assets 189.4 253.5
Valuation allowance for deferred income tax assets (7.0) (21.7)
------- -------
Net deferred income tax assets 182.4 231.8
------- -------
Deferred income tax liabilities:
Inventory basis differences (138.9) (90.0)
Property-related (218.9) (237.0)
Revenues on lease contracts (165.9) (111.0)
Other 2.7 --
------- -------
Total deferred income tax liabilities (521.0) (438.0)
------- -------
Net deferred income tax liabilities $(338.6) $(206.2)
======= =======
</TABLE>
The above amounts are classified in the consolidated balance sheets as
follows (in millions):
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Other current assets $ 82.5 $ 133.3
Deferred income taxes and other liabilities (421.1) (339.5)
------- -------
Net deferred income tax liabilities $(338.6) $(206.2)
======= =======
</TABLE>
The Company had Federal net operating loss carryforwards of $3.3 million
and state net operating loss carryforwards of $186.3 million as of June 30,
1999. At June 30, 1999, the Company did not have any foreign tax credit and
capital loss carryforwards. A valuation allowance of $7.0 million at June 30,
1999 has been provided for the state net operating loss, foreign tax credit and
capital 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. 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 2000 and the state net operating loss carryforward expires through
2013. Expiring state net operating loss carryforwards and the required valuation
allowances have been adjusted annually.
Under a tax-sharing agreement with Baxter, Allegiance will pay for
increases and be reimbursed for decreases to the net deferred tax assets
transferred on the Distribution Date. Such increases or decreases may result
from audit adjustments to Baxter's prior period tax returns.
38
<PAGE> 39
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EMPLOYEE RETIREMENT BENEFIT PLANS
The Company sponsors various retirement and pension plans, including
defined benefit and defined contribution plans. Substantially all of the
Company's domestic 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 domestic union employees are covered by multi-employer 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. Certain Allegiance employees who
participated in Baxter-sponsored defined benefit plans prior to the Distribution
(see Note 1) are eligible to receive a contribution to their qualified 401(k)
account in an amount ranging from 2 to 8 percent of their annual compensation,
depending on years of service. This transitional benefit will be provided to
eligible employees through 2003.
The total expense for employee retirement benefit plans (excluding defined
benefit plans (see below)) was as follows (in millions):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
-------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Defined contribution plans $44.3 $37.9 $34.4
Multi-employer plans 0.5 0.5 0.9
----- ----- -----
Total $44.8 $38.4 $35.3
===== ===== =====
</TABLE>
Defined Benefit Plans. The Company has several defined benefit plans
covering substantially all salaried and hourly Scherer employees. The Company's
domestic defined benefit plans provide defined benefits based on years of
service and level of compensation. Foreign subsidiaries provide for pension
benefits in accordance with local customs or law. The Company funds its pension
plans at amounts required by the applicable regulations.
Effective July 1, 1998, the Company adopted SFAS No. 132, "Employers
Disclosures about Pensions and Other Postretirement Benefits". In accordance
with SFAS 132, the following tables provide a reconciliation of the change in
benefit obligation, the change in plan assets and the net amount recognized in
the consolidated balance sheets (based on measurement date of March 31, in
millions):
<TABLE>
<CAPTION>
Pension Benefits
-------------------
June 30,
1999 1998
----- -----
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year $86.7 $73.0
Service cost 6.5 4.9
Interest cost 6.7 5.4
Plan participant contributions 0.7 --
Amendments 0.2 --
Actuarial loss 4.6 7.7
Benefits paid (3.7) (2.1)
Translation adjustment (3.0) (2.2)
----- -----
Benefit obligation at end of year $98.7 $86.7
----- -----
</TABLE>
39
<PAGE> 40
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30,
1999 1998
------ ------
<S> <C> <C>
Change in plan assets:
Fair value of plan assets at
beginning of year $ 42.2 $ 34.5
Actual return on plan assets 12.2 4.4
Employer contributions 4.9 4.3
Plan participant contributions 0.7 --
Benefits paid (2.6) (1.3)
Translation adjustment (1.7) 0.3
------ ------
Fair value of plan assets
at end of year $ 55.7 $ 42.2
====== ======
Funded status $(43.0) $(44.5)
Unrecognized net actuarial loss 7.5 12.7
Unrecognized net transition
(asset) obligation (2.0) 0.3
Unrecognized prior service cost 0.2 (0.1)
------ ------
Net amount recognized $(37.3) $(31.6)
====== ======
Amounts recognized in the
Consolidated Balance Sheet:
Prepaid benefit cost $ 1.6 $ 1.8
Accrued benefit liability (38.9) (33.4)
------ ------
Net amount recognized $(37.3) $(31.6)
====== ======
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $89.4 million, $85.1 million and $47.8 million,
respectively, as of June 30, 1999 and $85.4 million, $75.8 million and $40.6
million, respectively, as of June 30, 1998.
Components of the Company's net periodic benefit costs are as follows (in
millions):
<TABLE>
<CAPTION>
Pension Benefits
----------------------------------
For the Fiscal Year Ended June 30,
----------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Components of net periodic
Benefit cost:
Service cost $ 6.5 $ 4.9 $ 4.5
Interest cost 6.7 5.4 5.2
Expected return on plan assets (6.9) (5.1) (4.1)
Amortization of actuarial loss 1.9 1.0 1.2
Amortization of transition
(asset)/obligation -- 0.1 (0.2)
Amortization of prior service cost 0.3 -- --
----- ----- -----
Net amount recognized $ 8.5 $ 6.3 $ 6.6
===== ===== =====
</TABLE>
For fiscal 1999 and 1998, the weighted - average actuarial assumptions used
in determining the funded status information and net periodic benefit cost
information were: discount rate of 6.4% and 7.5%, expected return on plan assets
of 6.2% and 10.1% and rate of compensation increase of 3.7% and 4.6%,
respectively.
40
<PAGE> 41
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENT LIABILITIES
The future minimum rental payments for operating leases having initial or
remaining non-cancelable lease terms in excess of one year at June 30, 1999 are:
2000 - $42.8 million; 2001 - $27.3 million; 2002 - $18.5 million; 2003 - $15.3
million; 2004 - $13.0 million and 2005 and thereafter - $32.8 million. Rental
expense relating to operating leases was approximately $69.6 million, $64.8
million and $68.2 million in fiscal 1999, 1998, and 1997, 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 May 2004, 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 $286.2 million, which is the total estimated cost of the
construction projects. As of June 30, 1999, the amount expended was $176.8
million. Currently, the Company's minimum annual lease payments under the
agreements are approximately $11.5 million.
As of June 30, 1999, the Company has capital expenditure commitments
related primarily to plant expansions and facility acquisitions of approximately
$119.3 million.
As of June 30, 1999, amounts outstanding on customer notes receivable sold
with full recourse to a commercial bank totaled approximately $9.6 million. The
Company also has outstanding guarantees of indebtedness and financial assistance
commitments that totaled approximately $3.0 million at June 30, 1999.
The Company becomes involved from time-to-time in litigation incidental to
its business. In November 1993, Cardinal, five other pharmaceutical wholesalers,
and twenty-four pharmaceutical manufacturers were named as defendants in a
series of purported class action antitrust lawsuits alleging violations of
various antitrust laws associated with the chargeback pricing system. The trial
of this matter began on September 23, 1998. On November 19, 1998, after the
close of plaintiffs' case-in-chief, both the wholesaler defendants and the
manufacturer defendants moved for a judgment as a matter of law in their favor.
On November 30, 1998, the Court granted both of these motions and ordered
judgment as a matter of law in favor of both the wholesaler and the manufacturer
defendants. On January 25, 1999, the class plaintiffs filed a notice of appeal
of the District Court's decision with the Court of Appeals for the Seventh
Circuit. On July 13, 1999, the Court of Appeals for the Seventh Circuit issued
its decision, which, in part, affirmed the dismissal of the wholesaler
defendants, including the Company. On July 27, 1999, the class plaintiffs filed
a Petition for Rehearing with the Court of Appeals for the Seventh Circuit. The
Company believes that the allegations set forth against Cardinal in these
lawsuits are without merit.
Allegiance assumed the defense of litigation involving claims related to
the Allegiance Business from Baxter (see Note 1), including certain claims of
alleged personal injuries as a result of exposure to natural rubber latex
gloves. Since none of the cases involving natural rubber latex gloves has
proceeded to a hearing on merits, the Company is unable to evaluate the extent
of any potential liability, and unable to estimate any potential loss. The
Company believes a substantial portion of any potential liability and defense
costs, excluding defense costs already reserved, related to natural latex gloves
cases and claims will be covered by insurance, subject to self-insurance
retentions, exclusions, conditions, coverage gaps, policy limits and insurer
solvency.
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, 1999, the Company's authorized capital shares consisted of (a)
500,000,000 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, 1998, the Company's authorized capital shares
consisted of (a) 300,000,000 Class A common shares, without par value; (b)
5,000,000 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
41
<PAGE> 42
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1999
and 1998.
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 1999, the Company's two largest customers individually
accounted for 11% and 13% of operating revenue, respectively. During fiscal
1998, the same two customers individually accounted for 14% and 11% of operating
revenue, respectively. During fiscal 1997, the same two customers individually
accounted for 13% and 10% of operating revenue, respectively. These two
customers are serviced primarily through the Pharmaceutical Distribution and
Medical-Surgical Products segments. During fiscal 1999, one customer accounted
for 57% of bulk deliveries. During fiscal years 1998 and 1997, one customer
accounted for 62% of bulk deliveries.
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 two or 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 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 $83.1 million and $0.30 per share, respectively, for fiscal 1999,
$33.6 million and $0.12 per share, respectively, for fiscal 1998, and $19.2
million and $0.07 per share, respectively, for fiscal 1997. During fiscal 1999,
stock option grants under the previous Allegiance and Scherer plans vested
immediately on the merger date. These accelerated grants increased the fiscal
1999 pro forma effect on net income and diluted earnings per Common Share by
$32.9 million and $0.12 per share, respectively. 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
under the plans from July 1, 1996 through June 30, 1999, giving retroactive
effect to conversions of options in connection with merger transactions and
stock splits (in millions, except per share amounts):
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
------------------------- ------------------------- -------------------------
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 21.1 $23.96 20.1 $19.25 21.7 $16.50
Granted 3.4 69.61 6.3 43.70 6.2 24.84
Exercised (3.6) 16.80 (3.7) 14.62 (6.7) 15.81
Canceled (0.6) 45.60 (0.9) 21.46 (1.1) 17.07
Change in fiscal year -- -- (0.7) 28.26 -- --
------------------- ------------------- -------------------
Outstanding, end of year 20.3 $34.51 21.1 $23.96 20.1 $19.25
=================== =================== ===================
Exercisable, end of year 14.3 $23.84 6.6 $15.45 8.7 $13.98
------------------- ------------------- -------------------
</TABLE>
42
<PAGE> 43
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Giving retroactive effect to conversion of stock options related to mergers
and stock splits, the weighted average fair value of options granted during
fiscal 1999, 1998 and 1997 was $22.55, $14.19 and $9.57, respectively.
The fair values of the options granted to Company employees and directors
were estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions for grants in the respective periods:
<TABLE>
<CAPTION>
As of June 30,
-----------------------------------------
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 5.72% 5.53% 6.23%
Expected Life 4 years 3 years 3 years
Expected Volatility 30% 27% 25%
Dividend Yield 0.18% 0.16% 0.17%
</TABLE>
Information relative to stock options outstanding as of June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- ------------------------------
Weighted
average
remaining Weighted Weighted
Range of Options contractual life average Options average
exercise prices (in millions) in years exercise price (in millions) exercise price
- --------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.05-$17.15 5.6 6.21 $14.20 5.5 $14.21
$17.22-$37.79 5.5 6.31 24.18 5.3 23.71
$38.06-$54.46 5.2 8.18 41.98 3.5 39.13
$55.67-$79.56 4.0 8.98 67.68 -- --
---------------------------------------------- ------------------------------
20.3 7.28 $34.51 14.3 $23.84
============================================== ==============================
</TABLE>
As of June 30, 1999, there remained approximately 0.8 million additional
shares available to be issued pursuant to the Plans.
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, 1999, approximately 0.3 million shares remained restricted and subject to
forfeiture.
Prior to the Allegiance Merger, Allegiance had an employee stock purchase
plan under which the sale of 4.0 million of Allegiance's common stock had been
authorized. The purchase price was the lower of 85 percent of the closing market
price on the date of subscription or 85 percent of the closing market price on
the date of purchase. Under this plan, Allegiance sold to its employees 0.6
million shares at an average price per share of $23.33 in fiscal 1999 and 1.2
million shares at an average price per share of $10.88 in fiscal 1998. At June
30, 1998, subscriptions of 0.7 million were outstanding. The weighted average
fair value of the purchase rights was $3.32. Subsequent to the Allegiance
Merger, all outstanding subscriptions were canceled.
On May 2, 1997, Allegiance received $54.8 million in cash from 141 members
of its management who purchased approximately 3.0 million equivalent Cardinal
Common Shares. Allegiance granted one-day options for the shares, which were
immediately exercised. This Shared Investment Plan was designed to align
management and stockholders interests.
13. SEGMENT INFORMATION
As of June 30, 1999, the Company adopted Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and
Related Information". SFAS 131 requires companies to define and report financial
and descriptive information about its operating segments. The Company is
organized based on the products and services it offers. Under this
organizational structure, the Company operates in three business segments:
Pharmaceutical Distribution, Pharmaceutical Services and Medical-Surgical
Products.
43
<PAGE> 44
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Pharmaceutical Distribution segment involves the distribution of a
broad line of pharmaceuticals, health and beauty care products, therapeutic
plasma and other specialty pharmaceutical products and other items typically
sold by hospitals, retail drug stores and other healthcare providers.
The Pharmaceutical Services segment provides services to the healthcare
industry through the design of unique drug delivery systems, comprehensive
packaging services, integrated pharmacy management, reimbursement services,
clinical information system services and pharmacy automation equipment.
The Medical-Surgical Products segment involves the manufacture of medical,
surgical and laboratory products and the distribution of these products to
hospitals, physician offices, surgery centers and other healthcare providers.
The Company evaluates the performance of the segments based on operating
earnings after the corporate allocation of administrative expenses. Information
about interest income and expense, and income taxes is not provided on a segment
level. In addition, special charges are not allocated to the segments. The
accounting policies of the segments are the same as described in the summary of
significant accounting policies. The following table includes revenue, operating
earnings, capital expenditures, and depreciation and amortization expense for
the fiscal years ended June 30, 1999, 1998 and 1997 and assets as of June 30,
1999, 1998 and 1997 for each segment and reconciling items necessary to total to
amounts reported in the consolidated financial statements:
<TABLE>
<CAPTION>
(in millions) Net Revenue
---------------------------------------
1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
Operating revenue:
Pharmaceutical Distribution $14,977.0 $11,938.7 $10,019.2
Pharmaceutical Services 2,081.5 1,812.4 1,558.7
Medical-Surgical Products 4,719.5 4,448.7 4,357.1
Inter-segment (1) (297.4) (195.8) (10.2)
---------------------------------------
Total operating revenue $21,480.6 $18,004.0 $15,924.8
Bulk Deliveries to Customer Warehouses:
Pharmaceutical Distribution 3,553.0 2,991.4 2,469.1
---------------------------------------
Total Net Revenue $25,033.6 $20,995.4 $18,393.9
- -----------------------------------------------------------------------------------
<CAPTION>
Operating Earnings
---------------------------------------
1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
Pharmaceutical Distribution $ 398.4 $ 315.5 $ 252.5
Pharmaceutical Services 347.7 286.4 236.1
Medical-Surgical Products 303.4 246.8 224.5
Corporate (2) (172.5) (76.2) (48.3)
---------------------------------------
Total operating earnings $ 877.0 $ 772.5 $ 664.8
- -----------------------------------------------------------------------------------
<CAPTION>
Depreciation and Amortization
---------------------------------------
1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
Pharmaceutical Distribution $ 28.0 $ 23.2 $ 20.5
Pharmaceutical Services 71.9 55.4 56.3
Medical-Surgical Products 119.9 122.8 126.0
Corporate (2) 13.7 13.1 6.3
---------------------------------------
Total depreciation and amortization $ 233.5 $ 214.5 $ 209.1
- -----------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 45
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Capital Expenditures
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Pharmaceutical Distribution $ 61.9 $ 54.7 $ 44.8
Pharmaceutical Services 150.0 143.9 98.8
Medical-Surgical Products 108.0 80.2 84.3
----------------------------------
Total capital expenditures $ 319.9 $ 278.8 $ 227.9
- --------------------------------------------------------------------
<CAPTION>
Assets
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Pharmaceutical Distribution $3,223.6 $2,698.3 $2,172.5
Pharmaceutical Services 2,176.2 1,684.7 1,358.1
Medical-Surgical Products 2,823.7 2,694.9 2,696.6
Corporate (3) 65.5 400.1 294.6
----------------------------------
Total assets $8,289.0 $7,478.0 $6,521.8
- --------------------------------------------------------------------
</TABLE>
(1) Inter-segment - revenue consists primarily of the elimination of
inter-segment activity - primarily sales from Pharmaceutical Distribution
to Pharmaceutical Services. Sales from one segment to another are priced at
the equivalent external customer selling prices.
(2) Corporate - operating earnings primarily consists of special charges of
$146.6 million, $57.8 million and $50.9 million for fiscal 1999, 1998 and
1997 and unallocated corporate depreciation and amortization and
administrative expenses.
(3) Corporate - assets include primarily corporate cash and cash equivalents,
corporate property, plant and equipment, net, unallocated deferred taxes
and the elimination of investment in subsidiaries.
The following table presents revenue and long-lived assets by geographic area
(in millions):
<TABLE>
<CAPTION>
Revenue Long-Lived Assets
------------------------------------- ---------------------
For The Fiscal Year Ended June 30, As of June 30,
------------------------------------- ---------------------
1999 1998 1997 1999 1998
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
United States $24,121.6 $20,255.7 $17,646.1 $1,080.7 $1,010.3
International 912.0 739.7 747.8 459.8 457.4
--------- --------- --------- -------- --------
Total $25,033.6 $20,995.4 $18,393.9 $1,540.5 $1,467.7
========= ========= ========= ======== ========
</TABLE>
Long-lived assets include property, plant and equipment, net of accumulated
depreciation.
45
<PAGE> 46
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following selected quarterly financial data (in millions, except per
share amounts) for fiscal 1999 and 1998 has been restated to reflect the
pooling-of-interests business combinations as discussed in Note 2.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal 1999
Revenue:
Operating revenue $4,999.2 $5,269.4 $5,558.7 $5,653.3
Bulk deliveries to customer warehouses 781.7 999.8 874.7 896.8
-------- -------- -------- --------
Total revenue $5,780.9 $6,269.2 $6,433.4 $6,550.1
Gross margin $ 583.0 $ 644.1 $ 667.3 $ 690.0
Selling, general and administrative
expenses $ 368.6 $ 398.0 $ 393.2 $ 405.0
Net earnings $ 90.8 $ 134.1 $ 81.9 $ 149.5
Comprehensive income $ 89.0 $ 138.2 $ 62.1 $ 150.0
Net earnings per Common Share:
Basic $ 0.34 $ 0.50 $ 0.30 $ 0.54
Diluted $ 0.33 $ 0.48 $ 0.29 $ 0.53
- ---------------------------------------------------------------------------------------------------
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal 1998
Revenue:
Operating revenue $4,107.3 $4,416.0 $4,643.6 $4,837.1
Bulk deliveries to customer warehouses $ 681.2 750.6 720.1 839.5
-------- -------- -------- --------
Total revenue $4,788.5 $5,166.6 $5,363.7 $5,676.6
Gross margin $ 505.7 $ 539.2 $ 572.7 $ 603.0
Selling, general and administrative
expenses $ 331.4 $ 341.4 $ 348.2 $ 369.3
Net earnings $ 92.3 $ 105.3 $ 109.2 $ 118.3
Comprehensive income $ 90.7 $ 99.7 $ 102.7 $ 116.0
Net earnings per Common Share:
Basic $ 0.34 $ 0.39 $ 0.40 $ 0.44
Diluted $ 0.33 $ 0.38 $ 0.39 $ 0.43
- ---------------------------------------------------------------------------------------------------
</TABLE>
As more fully discussed in Note 2, merger-related costs and other special
charges were recorded in various quarters in fiscal 1999 and 1998. 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 (in millions, except per
share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal 1999:
Net earnings $(27.8) $ (1.9) $(74.2) $(13.7)
Diluted net
earnings per Common Share $(0.10) $(0.01) $(0.27) $(0.05)
- ------------------------------------------------------------------------------
Fiscal 1998:
Net earnings $ (1.3) $ (1.9) $(12.0) $ (8.9)
Diluted net
earnings per Common Share $(0.01) $(0.01) $(0.05) $(0.03)
- ------------------------------------------------------------------------------
</TABLE>
15. RELATED PARTY TRANSACTIONS
Certain foreign subsidiaries purchase gelatin materials and the Company's
German subsidiary leases plant facilities, purchases other services and receives
loans from time-to-time from a German company which is also the minority partner
of the Company's German and certain other European subsidiaries. Gelatin
purchases, at prices comparable to estimated market
46
<PAGE> 47
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
prices, amounted to $28.0 million, $25.0 million and $24.6 million for the
fiscal years ended June 30, 1999, 1998 and 1997, respectively. Rental payments
amounted to $8.4 million, $4.8 million and $5.4 million and purchased services
amounted to $9.4 million, $5.2 million and $5.5 million for each of the
respective fiscal years.
16. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities". 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. As amended by Statement of Financial Accounting
Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,"
the provisions of SFAS 133 will require adoption no later than the beginning of
the Company's fiscal year ending June 30, 2001.
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, 2000. 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.
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"). 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, the Company was required to reimburse
Bergen for $7.0 million of transaction costs upon termination of the Bergen
Merger Agreement. 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.
18. SUBSEQUENT EVENTS
On August 5, 1999, the Company announced that it had entered into a
definitive merger agreement with Automatic Liquid Packaging, Inc. ("ALP"),
pursuant to which ALP will become a wholly owned subsidiary of the Company in a
stock-for-stock merger expected to be accounted for as a pooling-of-interests
for financial reporting purposes. Upon consummation of the merger, the Company
will record a merger-related charge to reflect transaction and other costs
incurred as a result of the merger. The merger is expected to be completed in
the first quarter of fiscal 2000, subject to satisfaction of certain conditions,
including regulatory clearances.
On July 12, 1999, the Company completed the purchase of MedSurg Industries,
Inc., for $31.8 million. The acquisition was accounted for as a purchase.
47
<PAGE> 48
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Cardinal Health, Inc. ("Cardinal") and R. P. Scherer Corporation
("Scherer") completed a merger on August 7, 1998. Cardinal and Allegiance
Corporation ("Allegiance") completed a merger on February 3, 1999. Cardinal has
historically engaged Deloitte & Touche LLP ("D&T") as its certifying accountant
while Scherer has historically engaged Arthur Andersen LLP ("AA") and Allegiance
has historically engaged PricewaterhouseCoopers LLP ("PWC") as their certifying
accountants.
For Cardinal's fiscal year ended June 30, 1999, these certifying accountant
relationships were left intact, with D&T serving as the principal certifying
accountant, with reference in its audit opinion to work performed on Scherer by
AA and Allegiance by PWC. This was done to provide management with sufficient
time to conduct a diligent process to select one firm as the certifying
accountant for the merged entity.
Selection of AA as the certifying accountant was recommended to and
approved by the Cardinal Health, Inc. Audit Committee on August 30, 1999.
The reports of D&T on the financial statements of Cardinal and PWC on the
financial statements of Allegiance for the past two fiscal years contained no
adverse opinion or disclaimer of opinion, and were not qualified or modified as
to uncertainty, audit scope, or accounting principles.
In connection with their audits for the two most recent fiscal years and
through August 30, 1999, there have been no disagreements with D&T or PWC on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of D&T or PWC would have caused them to make reference thereto in
their reports on the financial statements for such years. In addition, there
were no reportable events (as defined in SEC Regulation S-K, Item 304(a)(1)(v))
during the two most recent fiscal years and through August 30, 1999.
Cardinal has requested that D&T and PWC each furnish it with a letter
addressed to the SEC stating whether or not they agree with the above
statements. A copy of D&T's letter dated September 2, 1999 is filed as Exhibit
16.01 to this Form 10-K. A copy of PWC's letter dated September 1, 1999 is filed
as Exhibit 16.02 to this Form 10-K.
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 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."
48
<PAGE> 49
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......................................... 20
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended
June 30, 1999, 1998 and 1997........................................ 24
Consolidated Balance Sheets at June 30, 1999 and 1998................. 25
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended June 30, 1999, 1998 and 1997............................ 26
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 30, 1999, 1998 and 1997........................................ 27
Notes to Consolidated Financial Statements............................ 28
</TABLE>
(a)(2) The following Supplemental Schedule is included in this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II - Valuation and Qualifying Accounts....................... 54
</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.
49
<PAGE> 50
(a)(3) Exhibits required by Item 601 of Regulation S-K:
Exhibit Exhibit Description
------- -------------------
Number
------
2.01 Agreement and Plan of Merger, dated as of August 4, 1999, among the
Registrant, Flower Merger Corp., Automatic Liquid Packaging, Inc.
("ALP") and the Stockholders of ALP (the "Stockholders"), including
form of Escrow Agreement by and among the Registrant, ALP, Gerhard
H. Weiler, Bank One Trust Company, NA, as escrow agent, and the
Stockholders.
3.01 Amended and Restated Articles of Incorporation of the Registrant,
as amended (1)
3.02 Restated Code of Regulations, as amended (1)
4.01 Specimen Certificate for the Registrant's Class A common shares (4)
4.02 Indenture dated as of May 1, 1993 between the Registrant and Bank
One, Indianapolis, NA, Trustee, relating to the Registrant's 6 1/2%
Notes Due 2004 and 6% Notes Due 2006 (2)
4.03 Indenture dated as of April 18, 1997 between the Registrant and Bank
One, Columbus, NA, Trustee, relating to the Registrant's 6 1/4 %
Notes due 2008 (3)
4.04 Indenture dated as of October 1, 1996 between Allegiance Corporation
and PNC Bank, Kentucky, Inc. ("PNC"), Trustee; and First
Supplemental Indenture dated as of February 3, 1999 by and among
Allegiance Corporation, the Company and Chase Manhattan Trust
Company National Association (as successor in interest to PNC),
Trustee (4)
4.05 Indenture dated January 1, 1994 between R.P. Scherer International
Corporation and Comerica Bank; First Supplemental Indenture by and
among R.P. Scherer International Corporation, R.P. Scherer
Corporation and Comerica Bank dated February 28, 1995; and Second
Supplemental Indenture by and among R.P. Scherer Corporation, the
Registrant and Comerica Bank dated as of August 7, 1998 (5)
4.06 Form of Warrant Certificate to Purchase Company Common Shares (6)
10.01 Stock Incentive Plan of the Registrant, as amended (7)*
10.02 Directors' Stock Option Plan of the Registrant, as amended and
restated (7)*
10.03 Amended and Restated Equity Incentive Plan of the Registrant*
10.04 Form of Nonqualified Stock Option Agreement, as amended*
10.05 Form of Restricted Shares Agreement, as amended*
10.06 Form of Directors' Stock Option Agreement, as amended*
10.07 Allegiance Corporation 1996 Incentive Compensation Program (8)*
10.08 Allegiance Corporation 1998 Incentive Compensation Program (8)*
10.09 Allegiance Corporation 1996 Outside Director Incentive Corporation
Plan (8)*
10.10 R.P. Scherer Corporation 1997 Stock Option Plan (9)*
10.11 R.P. Scherer Corporation 1990 Nonqualified Performance Stock
Option Plans (9)*
<PAGE> 51
10.12 Cardinal Health, Inc. Performance-Based Incentive Compensation
Plan (10)*
10.13 Cardinal Health, Inc. Incentive Deferred Compensation Plan,
Amended and Restated Effective July 1, 1997 (11)*
10.14 Employment Agreement dated October 11, 1993, among Whitmire, Melburn
G. Whitmire and the Registrant, as amended effective November 14,
1995 (16)*
10.15 Amendment to Change in Control Agreement, dated as of October 8,
1998, by and among the Company, Allegiance Corporation and Joseph F.
Damico (12)*
10.16 Employment Agreement dated May 12, 1998, between the Registrant
and James F. Millar (5)*
10.17 Amended and Restated Employment Agreement dated May 17, 1998, among
Scherer, George L. Fotiades and the Registrant (5)*
10.18 Resignation and Release Agreement, dated as of June 30, 1999, by and
between the Registrant, Allegiance and Lester B. Knight*
10.19 Form of Indemnification Agreement between the Registrant and
individual Directors (13)*
10.20 Form of Indemnification Agreement between the Registrant and
individual Officers (13)*
10.21 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 (7)*
10.22 364-Day Credit Agreement dated as of March 31, 1999 among the
Registrant, certain subsidiaries of the Registrant, certain lenders,
The First National Bank of Chicago, as Administrative Agent, Bank of
America NT & SA, as Syndication Agent, Citibank, N.A., as
Co-Documentation Agent, and Credit Suisse First Boston, as
Co-Documentation Agent
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, as amended (14, except
for the Omnibus Amendment which is included in this Annual Report on
Form 10-K)
10.24 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. (15, except for Amendments No.
1 and 2, which are included in this Annual Report on Form 10-K)
10.25 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 (5), (14) and (15)
10.26 Pharmaceutical Services Agreement, dated as of August 1, 1996, as
amended, between Kmart Corporation and Cardinal Distribution (17,
except for Amendment No. 1, which is included in this Annual Report
on Form 10-K)
10.27 Form of Commercial Paper Dealer Agreement 4(2) Program between The
Company, as Issuer, and certain entities, each as Dealer, concerning
notes to be issued pursuant to Issuing and Paying Agency Agreement
between the Issuer and The First National Bank of Chicago, as
Issuing and Paying Agent
10.28 Partnership Agreement of R.P. Scherer GMBH & Co. KG (5)
10.29 Five-year Credit Agreement dated as of March 31, 1999 among the
Registrant, certain
<PAGE> 52
subsidiaries of the Registrant, certain lenders, The First National
Bank of Chicago, as Administrative Agent, Bank of America NT &SA, as
Syndication Agent, Citibank, N.A., as Co-Documentation Agent, and
Credit Suisse First Boston, as Co-Documentation Agent
16.01 Letter of Deloitte & Touche LLP required by Item 304 of Regulation
S-K
16.02 Letter of PricewaterhouseCoopers LLP required by Item 304 of
Regulation S-K
21.01 List of subsidiaries of the Registrant
23.01 Consent of Deloitte & Touche LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of PricewaterhouseCoopers LLP
27.01 Financial Data Schedule
99.01 Statement Regarding Forward-Looking Information
- ------------------
(1) Included as an exhibit to the Registrant's Current Report on Form 8-K
filed November 24, 1998 (File No. 0-12591) and incorporated herein by
reference.
(2) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994 (File No. 0-12591) and incorporated
herein by reference.
(3) Included as an exhibit to the Registrant's Current Report on Form 8-K
filed April 21, 1997 (File No. 0-12591) and incorporated herein by
reference.
(4) Included as an exhibit to the Registrant's Registration Statement on
Form S-4 (No. 333-74761) and incorporated herein by reference.
(5) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998 (File No. 0-12591) and
incorporated herein by reference.
(6) Included as an exhibit to the Registrant's Registration Statement on
Form S-4 (No. 333-30889) and incorporated herein by reference.
(7) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 (File No. 0-12591) and
incorporated herein by reference.
(8) Included as an exhibit to the Registrant's Post-Effective Amendment No.
1 on Form S-8 to Form S-4 Registration Statement (No. 333-68819-01) and
incorporated herein by reference.
(9) 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) and
incorporated herein by reference.
(10) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 (File No. 0-12591) and incorporated
herein by reference.
<PAGE> 53
(11) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 (File No. 0-12591) and
incorporated herein by reference.
(12) Included as an exhibit to the Registrant's Registration Statement on
Form S-4 (No. 333-68819) and incorporated herein by reference.
(13) Included as an exhibit to the Company's Amendment No. 1 to Annual Report
on Form 10-K/A for the fiscal year ended June 30, 1997 (File 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 ended June 30, 1996 (File No. 0-12591) and incorporated
herein by reference.
(15) Included as an exhibit to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 (File No. 0-12591) and
incorporated herein by reference.
(16) Included as exhibits to the Registrant's Quarterly Reports on Form 10-Q
for the quarters ended December 31, 1993 and December 31, 1995 (File No.
0-12591) and incorporated herein by reference.
(17) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996 (File No. 0-124\591) and
incorporated herein by reference.
* Management contract or compensation plan or arrangement
(b) Reports on Form 8-K
None
<PAGE> 54
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 2, 1999 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 September 2, 1999
- --------------------------- Officer and Director (principal
Robert D. Walter executive officer)
/s/ Richard J. Miller Corporate Vice President and September 2, 1999
- --------------------------- Chief Financial Officer
Richard J. Miller (principal financial officer)
/s/ Michael E. Beaulieu Corporate Vice President, September 2, 1999
- --------------------------- Controller and Principal
Michael E. Beaulieu Accounting Officer
/s/ John C. Kane President, Chief Operating September 2, 1999
- --------------------------- Officer and Director
John C. Kane
/s/ Silas S. Cathcart Director September 2, 1999
- ---------------------------
Silas S. Cathcart
/s/ John F. Finn Director September 2, 1999
- ---------------------------
John F. Finn
/s/ Robert L. Gerbig Director September 2, 1999
- ---------------------------
Robert L. Gerbig
/s/ John F. Havens Director September 2, 1999
- ---------------------------
John F. Havens
/s/ Regina E. Herzlinger Director September 2, 1999
- ---------------------------
Regina E. Herzlinger
/s/ J. Michael Losh Director September 2, 1999
- ---------------------------
J. Michael Losh
/s/ George R. Manser Director September 2, 1999
- ---------------------------
George R. Manser
/s/ John B. McCoy Director September 2, 1999
- ---------------------------
John B. McCoy
/s/ Michael D. O'Halleran Director September 2, 1999
- ---------------------------
Michael D. O'Halleran
/s/ Jerry E. Robertson Director September 2, 1999
- ---------------------------
Jerry E. Robertson
/s/ Melburn G. Whitmire Director September 2, 1999
- ---------------------------
Melburn G. Whitmire
</TABLE>
52
<PAGE> 55
<TABLE>
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO CHANGE BALANCE AT
BEGINNING COSTS AND OTHER IN FISCAL END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (1) DEDUCTIONS (2) YEAR (3) OF YEAR
- ---------------------------------------- ---------- ---------- ------------ -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year 1999:
Accounts receivable $64.6 $29.0 $1.3 $(41.3) $ -- $53.6
Finance notes receivable 6.4 -- -- (1.5) -- 4.9
Net investment in sales-type leases 8.8 0.5 2.7 (0.2) -- 11.8
----- ----- ---- ------ ---- -----
$79.8 $29.5 $4.0 $(43.0) $ -- $70.3
===== ===== ==== ====== ==== =====
Fiscal Year 1998:
Accounts receivable $62.8 $19.0 $3.3 $(20.5) $ -- $64.6
Finance notes receivable 8.2 0.1 0.1 (2.0) -- 6.4
Net investment in sales-type leases 4.7 4.2 -- (3.7) 3.6 8.8
----- ----- ---- ------ ---- -----
$75.7 $23.3 $3.4 $(26.2) $3.6 $79.8
===== ===== ==== ====== ==== =====
Fiscal Year 1997:
Accounts receivable $68.2 $10.0 $0.4 $(15.8) -- $62.8
Finance notes receivable 9.1 -- -- (0.9) -- 8.2
Net investment in sales-type leases 8.7 -- -- (4.0) -- 4.7
----- ----- ---- ------ ---- -----
$86.0 $10.0 $0.4 $(20.7) $ -- $75.7
===== ===== ==== ====== ==== =====
</TABLE>
(1) During fiscal 1999, 1998 and 1997 recoveries of amounts provided for or
written off in prior years were $4.0 million, $3.4 million, and $0.4
million, respectively.
(2) Write-off of uncollectible accounts.
(3) Change in fiscal year of acquired subsidiary.
54
<PAGE> 1
Exhibit 2.01
AGREEMENT AND PLAN OF MERGER
AMONG
CARDINAL HEALTH, INC.
("Cardinal"),
FLOWER MERGER CORP.
a wholly owned direct subsidiary of Cardinal
("Subcorp"),
AUTOMATIC LIQUID PACKAGING, INC.
("ALP")
and the
STOCKHOLDERS OF ALP
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. THE MERGER............................................................................................2
SECTION 1.1 The Merger..................................................................................2
SECTION 1.2 Effective Time..............................................................................2
SECTION 1.3 Effects of the Merger.......................................................................2
SECTION 1.4 Articles of Incorporation and By-laws.......................................................2
SECTION 1.5 Directors and Officers......................................................................2
SECTION 1.6 Additional Actions..........................................................................2
ARTICLE II. CONVERSION OF SECURITIES.............................................................................3
SECTION 2.1 Conversion of Capital Stock.................................................................3
SECTION 2.2 Exchange Ratios; Fractional Shares..........................................................3
SECTION 2.3 Exchange of Certificates....................................................................4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF RED AND SUBCORP...................................................7
SECTION 3.1 Organization and Standing...................................................................7
SECTION 3.2 Corporate Power and Authority...............................................................7
SECTION 3.3 Capitalization of Cardinal and Subcorp......................................................7
SECTION 3.4 Conflicts, Consents and Approval............................................................8
SECTION 3.5 Brokerage and Finder's Fees.................................................................9
SECTION 3.6 Cardinal SEC Documents......................................................................9
SECTION 3.7 Absence of Certain Events...................................................................9
SECTION 3.8 Accounting Matters..........................................................................9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ALP...............................................................10
SECTION 4.1 Organization and Standing..................................................................10
SECTION 4.2 Subsidiaries...............................................................................10
SECTION 4.3 Corporate Power and Authority..............................................................10
SECTION 4.4 Capitalization of ALP......................................................................10
SECTION 4.5 Conflicts; Consents and Approvals..........................................................11
SECTION 4.6 Absence of Certain Changes.................................................................12
SECTION 4.7 Officers, Employees and Compensation.......................................................13
SECTION 4.8 Financial Statements.......................................................................13
SECTION 4.9 Taxes......................................................................................14
SECTION 4.10 Compliance with Law; FDA Matters..........................................................16
SECTION 4.11 Intellectual Property.....................................................................17
SECTION 4.12 Title to and Condition of Properties......................................................19
SECTION 4.13 Environmental Matters.....................................................................20
SECTION 4.14 Litigation................................................................................21
SECTION 4.15 Brokerage and Finder's Fees...............................................................21
SECTION 4.16 Accounting Matters........................................................................21
SECTION 4.17 Employee Benefit Plans....................................................................22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.18 Contracts.................................................................................24
SECTION 4.19 Accounts Receivable; Inventories..........................................................25
SECTION 4.20 Labor Matters.............................................................................25
SECTION 4.21 Undisclosed Liabilities...................................................................26
SECTION 4.22 Operation of ALP's Business; Relationships................................................26
SECTION 4.23 Product Warranties and Liabilities........................................................26
SECTION 4.24 Board Recommendation......................................................................27
SECTION 4.25 IBCA and State Takeover Laws..............................................................27
SECTION 4.26 Insurance.................................................................................27
SECTION 4.27 Books of Account; Records.................................................................27
SECTION 4.28 Investment Representation.................................................................27
SECTION 4.29 No Other Representations and Warranties...................................................28
ARTICLE V. COVENANTS OF THE PARTIES.............................................................................28
SECTION 5.1 Mutual Covenants...........................................................................28
SECTION 5.2 Covenants of Cardinal......................................................................29
SECTION 5.3 Covenants of ALP and the ALP Stockholders..................................................30
ARTICLE VI. CONDITIONS..........................................................................................35
SECTION 6.1 Mutual Conditions..........................................................................35
SECTION 6.2 Conditions to Obligations of ALP...........................................................36
SECTION 6.3 Conditions to Obligations of Cardinal and Subcorp..........................................36
ARTICLE VII. TERMINATION AND AMENDMENT..........................................................................39
SECTION 7.1 Termination................................................................................39
SECTION 7.2 Effect of Termination......................................................................39
SECTION 7.3 Amendment..................................................................................39
SECTION 7.4 Extension; Waiver..........................................................................40
ARTICLE VIII. INDEMNIFICATION...................................................................................40
SECTION 8.1 Survival of Representations, Warranties and Agreements.....................................40
SECTION 8.2 Indemnification............................................................................40
SECTION 8.3 Limitations on Indemnification.............................................................41
SECTION 8.4 Procedure for Indemnification with Respect to Third Party Claims...........................42
SECTION 8.5 Procedure For Indemnification with Respect to Non-Third Party Claims.......................43
SECTION 8.6 ALP Stockholders Representative............................................................44
SECTION 8.7 Valuation of Shares Released from Escrow...................................................44
SECTION 8.8 Termination of ALP's Warranties............................................................44
ARTICLE IX. MISCELLANEOUS.......................................................................................45
SECTION 9.1 Notices....................................................................................45
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9.2 Interpretation.............................................................................45
SECTION 9.3 Counterparts...............................................................................46
SECTION 9.4 Entire Agreement...........................................................................46
SECTION 9.5 Third Party Beneficiaries..................................................................46
SECTION 9.6 Governing Law..............................................................................46
SECTION 9.7 Consent to Jurisdiction; Venue.............................................................46
SECTION 9.8 Specific Performance.......................................................................46
SECTION 9.9 Assignment.................................................................................47
SECTION 9.10 Expenses..................................................................................47
</TABLE>
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Affiliate Letter
Exhibit C - Form of Consulting Agreement
Exhibit D - Form of Opinion of Baker & Hostetler LLP
Exhibit E - Form of Opinion of Schwartz & Freeman
Exhibit F - Form of Release
Exhibit G - Form of Agreement between ALP and
Weiler Engineering, Inc.
Exhibit H-1 through H-5 - Forms of Other Ancillary Agreements
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made
and entered into as of August 4, 1999, by and among Cardinal Health, Inc., an
Ohio corporation ("Cardinal"), Flower Merger Corp., an Illinois corporation and
a wholly owned subsidiary of Cardinal ("Subcorp"), Automatic Liquid Packaging,
Inc., an Illinois corporation ("ALP"), and all of the Stockholders of ALP (the
"ALP Stockholders").
PRELIMINARY STATEMENTS:
A. Cardinal desires to acquire the liquid packaging business
and other businesses operated by ALP through the merger of Subcorp with and into
ALP, with ALP as the surviving corporation (the "Merger"), pursuant to which
each share of ALP Common Stock (as defined in Section 4.4) outstanding at the
Effective Time (as defined in Section 1.2) will be converted into the right to
receive Cardinal Common Shares (as defined in Section 3.3) as more fully
provided herein.
B. ALP desires to combine its packaging business and personal
care product businesses with the healthcare service businesses operated by
Cardinal and for the ALP Stockholders to have a continuing equity interest in
the combined businesses.
C. The ALP Stockholders own all of the outstanding capital
stock of ALP, and Cardinal is unwilling to enter into this Agreement without the
agreements of the ALP Stockholders set forth herein.
D. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of Section 368(a)(2)(E)
thereof.
E. The parties intend that the Merger be accounted for as a
pooling-of-interests for financial reporting purposes.
F. The respective Boards of Directors of Cardinal, Subcorp and
ALP have determined the Merger, in the manner contemplated herein, to be
desirable and in the best interests of their respective shareholders and, by
resolutions duly adopted, have approved and adopted this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and the
mutual and dependent promises hereinafter set forth, the parties hereto,
intending to be legally bound, agree as follows:
<PAGE> 6
ARTICLE I. THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof and in accordance with the provisions of the Illinois Business
Corporation Act of 1983, as amended (the "IBCA"), Subcorp shall be merged with
and into ALP at the Effective Time (as defined in Section 1.2). As a result of
the Merger, the separate corporate existence of Subcorp shall cease and ALP
shall continue its existence under the laws of the State of Illinois. ALP, in
its capacity as the corporation surviving the Merger, is hereinafter sometimes
referred to as the "Surviving Corporation."
SECTION 1.2 EFFECTIVE TIME. The Merger shall be consummated by filing
with the Secretary of State of the State of Illinois (the "Illinois Secretary of
State") articles of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with the IBCA. The Merger shall become
effective (the "Effective Time") when the Certificate of Merger has been filed
with the Illinois Secretary of State or at such later time as shall be specified
in the Certificate of Merger. Prior to the filing referred to in this Section
1.2, a closing (the "Closing") shall be held at the offices of Cardinal, 7000
Cardinal Place, Dublin, Ohio 43017, or such other place as the parties may agree
on a date (the "Closing Date") specified by Cardinal, which date shall be within
ten business days following the date upon which all conditions set forth in
Article VI hereof have been satisfied or waived.
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 5/11.50 of the IBCA.
SECTION 1.4 ARTICLES OF INCORPORATION AND BY-LAWS. The Certificate of
Merger shall provide that at the Effective Time (i) the Articles of
Incorporation of the Surviving Corporation as in effect immediately prior to the
Effective Time shall be amended as of the Effective Time so as to contain the
provisions, and only the provisions, contained immediately prior thereto in the
Articles of Incorporation of Subcorp, except for Article FIRST thereof which
shall continue to read "The name of the corporation is Automatic Liquid
Packaging, Inc." and (ii) the By-laws of Subcorp in effect immediately prior to
the Effective Time shall be the By-laws of the Surviving Corporation; in each
case until amended in accordance with applicable law.
SECTION 1.5 DIRECTORS AND OFFICERS. From and after the Effective Time,
the officers of ALP shall be the officers of the Surviving Corporation and the
directors of Subcorp shall be the directors of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified. On
the Closing Date, ALP shall deliver to Cardinal evidence satisfactory to
Cardinal of the resignations of the directors of ALP, such resignations to be
effective as of the Effective Time.
SECTION 1.6 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are reasonably
necessary or desirable to (a) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of ALP, or (b) otherwise carry out the
provisions of this Agreement, ALP shall execute and deliver all such deeds,
assignments or assurances in law
-2-
<PAGE> 7
and to take all acts necessary, proper or desirable to vest, perfect or confirm
title to and possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the provisions of this Agreement, and the
officers and directors of the Surviving Corporation are authorized in the name
of ALP or otherwise to take any and all such action.
ARTICLE II. CONVERSION OF SECURITIES
SECTION 2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Cardinal, Subcorp or
ALP:
(a) Each share of common stock, $.01 par value, of Subcorp issued and
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock, $0.01 par value, of the Surviving Corporation. Such newly
issued shares shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Each share of ALP Common Stock issued and outstanding immediately prior
to the Effective Time shall be converted into and represent a number of Cardinal
Common Shares equal to the Exchange Ratio (as defined in Section 2.2).
(c) Each share of capital stock of ALP held in the treasury of ALP shall be
cancelled and retired and no payment shall be made in respect thereof.
(d) Notwithstanding anything in this Section 2.1 to the contrary, Cardinal
shall retain a number of Cardinal Common Shares otherwise issuable to the ALP
Stockholders in the Merger, from such ALP Stockholders on a proportionate basis
(based on the respective numbers of Cardinal Common Shares into which their ALP
Common Stock will be convertible upon the Effective Time), equal to 10% of the
aggregate number of Cardinal Common Shares which would be issuable to the ALP
Stockholders on the Closing Date if Cardinal Common Shares were not to be issued
into escrow pursuant to this Section 2.1(d) (the "Retained Shares"), by
withholding the Retained Shares from the Cardinal Common Shares issuable in the
Merger and depositing such Retained Shares in escrow pursuant to an escrow
agreement in substantially the form attached hereto as Exhibit A (the "Escrow
Agreement"). The escrow created by the Escrow Agreement shall be for the purpose
of providing for the payment of certain indemnification obligations pursuant to
Article VIII hereof, all in accordance with the terms and conditions contained
herein and in the Escrow Agreement.
SECTION 2.2 EXCHANGE RATIOS; FRACTIONAL SHARES.
(a) The "Exchange Ratio" (rounded to the nearest ten-thousandth of a share)
shall be equal to the quotient obtained by dividing (i) the quotient obtained by
dividing (A) the Aggregate Consideration (as defined below) by (B) the Average
Share Price (as defined below) by (ii) the number of shares of ALP Common Stock
issued and outstanding immediately prior to the Effective Time; provided,
however, that if the Average Share Price is less than $67.00, then the Average
Share Price shall be deemed to be equal to $67.00, and if the Average Share
Price is greater than $79.00, then the Average Share Price shall be deemed to be
equal to $79.00.
-3-
<PAGE> 8
For purposes of this Section 2.2(a), (x) "Average Share Price"
shall mean the average of the closing prices of Cardinal Common Shares as
reported on the New York Stock Exchange ("NYSE") Composite Tape on each of the
last ten (10) trading days ending on the third business day preceding the
Closing Date, and (y) "Aggregate Consideration" shall mean the sum of (I) $375
million and (II) the amount of cash and marketable securities in excess of $5
million on the balance sheet of ALP included in the July 31, 1999 Interim
Statements (net of unrealized gains or losses incurred as a result of the
liquidation of any security prior to the Closing or existing as of the Closing)
minus (III) the following amounts to be paid at or in connection with the
Closing: (1) the amount or amounts to be paid pursuant to the Feltes Agreement
(as defined in Section 6.3(q)); (2) all bonuses, severance payments, transaction
fees and other compensation payable pursuant to Section 5.3(b)(vii) of the ALP
Disclosure Schedule; (3) any amounts paid or payable to Weiler Engineering, Inc.
in connection with the settlement of deposit accounts; (4) any amounts paid by
ALP for any so-called "tail coverage" for its product liability insurance; and
(5) any other expenditures of cash between July 31, 1999 and the Closing that
are outside the usual and ordinary course of business; provided, however, that
if the Closing Date is after September 30, 1999, the date of the balance sheet
referred to in clause (II) and the date in clause (III)(5) shall be a date that
is the last day of the month that is two months prior to the month in which the
Closing Date occurs.
(b) No certificates for fractional Cardinal Common Shares shall be issued
as a result of the conversion provided for in Section 2.1. To the extent that an
outstanding share of ALP Common Stock would otherwise have become a fractional
Cardinal Common Share, the holder thereof, upon presentation of such fractional
interest represented by an appropriate certificate for ALP Common Stock to the
Exchange Agent pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the closing price of Cardinal Common Shares as reported on the NYSE Composite
Tape on the last full trading day immediately prior to the Effective Time) of
such fractional interest. Such payment with respect to fractional shares is
merely intended to provide a mechanical rounding off of, and is not a separately
bargained for, consideration. If more than one certificate representing shares
of ALP Common Stock shall be surrendered for the account of the same holder, the
number of Cardinal Common Shares for which certificates have been surrendered
shall be computed on the basis of the aggregate number of shares represented by
the certificates so surrendered. In the event that prior to the Effective Time,
Cardinal shall declare a stock dividend or other distribution payable in
Cardinal Common Shares or securities convertible into Cardinal Common Shares, or
effect a stock split, reclassification, combination or other change with respect
to Cardinal Common Shares, the exchange ratios set forth in this Section 2.2
shall be adjusted to reflect such dividend, distribution, stock split,
reclassification, combination or other change.
SECTION 2.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Promptly following the Effective Time, Cardinal shall
deposit with First Chicago Trust Company, a division of EquiServe, Limited
Partnership or such other exchange agent as may be designated by Cardinal (the
"Exchange Agent"), for the benefit of the ALP Stockholders, for exchange in
accordance with this Section 2.3, certificates representing Cardinal Common
Shares issuable pursuant to Section 2.1 in exchange for outstanding shares of
ALP Common Stock (other than Retained Shares) and shall from time to time
deposit cash in an amount reasonably expected to be paid pursuant to Section 2.2
(such Cardinal Common Shares
-4-
<PAGE> 9
and cash, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of ALP Common Stock whose shares were converted
into the right to receive Cardinal Common Shares pursuant to Section 2.1 a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Cardinal may reasonably specify and (ii) instructions for
effecting the surrender of the Certificates in exchange for certificates
representing Cardinal Common Shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of Cardinal Common
Shares which such holder has the right to receive pursuant to Section 2.1 and
(y) a check representing the amount of cash in lieu of fractional shares, if
any, and unpaid dividends and distributions with respect to such Cardinal Common
Shares, if any, which such holder has the right to receive pursuant to the
provisions of this Article II, after giving effect to any required withholding
tax, and the shares represented by the Certificate so surrendered shall
forthwith be cancelled. Cardinal will use its reasonable efforts to cause the
Exchange Agent to send such certificate and check within three business days of
its receipt of a Certificate and a duly executed letter of transmittal. No
interest will be paid or accrued on the cash in lieu of fractional shares, if
any, and unpaid dividends and distributions with respect to such Cardinal Common
Shares, if any, payable to holders of shares of ALP Common Stock. In the event
of a transfer of ownership of shares of ALP Common Stock which is not registered
on the transfer records of ALP, a certificate representing the proper number of
Cardinal Common Shares, together with a check for the cash to be paid in lieu of
fractional shares, if any, and unpaid dividends and distributions with respect
to such Cardinal Common Shares, if any, may be issued to such transferee if the
Certificate representing such shares of ALP Common Stock held by such transferee
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.3, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender a certificate representing
Cardinal Common Shares and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions with respect to such Cardinal Common Shares, if any,
as provided in this Article II. Notwithstanding the foregoing, Cardinal shall
make available at the Closing certificates for Cardinal Common Shares to be
issued in the Merger to any ALP Stockholder who delivers to Cardinal
certificates representing ALP Common Stock and a duly executed letter of
transmittal at least three business days before the Closing Date.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. Notwithstanding any
other provisions of this Agreement, no dividends or other distributions declared
or made after the Effective Time with respect to Cardinal Common Shares having a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate, and no cash payment in lieu of fractional shares
shall be paid to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Until such Certificate has been
surrendered as provided in this
-5-
<PAGE> 10
Section 2.3, Cardinal shall deposit the amount of any dividends or other
distributions with the Exchange Agent. Subject to the effect of Applicable Laws
(as defined in Section 4.10), following surrender of any such Certificate, the
Exchange Agent shall pay to the holder of the certificates representing whole
Cardinal Common Shares issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole Cardinal Common Shares and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole Cardinal Common
Shares, less the amount of any withholding taxes which may be required thereon.
(d) NO FURTHER OWNERSHIP RIGHTS IN ALP COMMON STOCK. All Cardinal Common
Shares issued upon surrender of Certificates in accordance with the terms hereof
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of ALP
Common Stock represented thereby, and there shall be no further registration of
transfers on the stock transfer books of ALP of shares of ALP Common Stock
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Section 2.3.
Certificates surrendered for exchange by any ALP Affiliate (as defined in
Section 5.3(e)) shall not be exchanged until Cardinal has received written
undertakings from such person in the form attached hereto as EXHIBIT B (an
"Affiliate Letter").
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the ALP Stockholders for one year after the Effective
Time shall be delivered to Cardinal, upon demand thereby, and holders of shares
of ALP Common Stock who have not theretofore complied with this Section 2.3
shall thereafter look only to Cardinal for payment of any claim to Cardinal
Common Shares, cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) NO LIABILITY. None of Cardinal, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of ALP
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any cash, any cash in lieu of
fractional shares or any dividends or distributions with respect to whole shares
of ALP Common Stock in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Authority (as defined in Section 3.4)),
any such cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by Applicable Laws, become the property of Cardinal,
free and clear of all claims or interest of any person previously entitled
thereto.
(g) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Cardinal, on a daily basis. Any
interest and other
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income resulting from such investments shall be paid to Cardinal upon
termination of the Exchange Fund pursuant to Section 2.3(e).
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF RED AND SUBCORP
In order to induce ALP to enter into this Agreement, Cardinal and
Subcorp hereby represent and warrant to ALP that the statements contained in
this Article III are true, correct and complete as of the date hereof and shall
be true, correct and complete as of the Closing Date.
SECTION 3.1 ORGANIZATION AND STANDING. Each of Cardinal and Subcorp is
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with full power and authority (corporate and
other) to own, lease, use and operate its properties and to conduct its business
as and where now owned, leased, used, operated and conducted. Each of Cardinal
and Subcorp is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates, makes such qualification necessary, except where
the failure to be so qualified or in good standing in such jurisdiction would
not have a Material Adverse Effect (as defined in Section 9.2) on Cardinal.
Cardinal is not in default in the performance, observance or fulfillment of any
provision of its Articles of Incorporation, as amended and restated (the
"Cardinal Articles"), or Code of Regulations, as amended and restated (the
"Cardinal Code of Regulations"), and Subcorp is not in default in the
performance, observance or fulfillment of any provisions of its Articles of
Incorporation or By-laws. Subcorp is a new corporation formed solely for the
purpose of effectuating this transaction.
SECTION 3.2 CORPORATE POWER AND AUTHORITY. Each of Cardinal and Subcorp
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of Cardinal and Subcorp. This Agreement has been duly executed and
delivered by each of Cardinal and Subcorp, and constitutes the legal, valid and
binding obligation of each of Subcorp and Cardinal enforceable against each of
them in accordance with its terms.
SECTION 3.3 CAPITALIZATION OF CARDINAL AND SUBCORP.
(a) As of June 30, 1999, Cardinal's authorized capital stock consisted
solely of (a) 500,000,000 common shares, without par value ("Cardinal Common
Shares"), of which (i) 273,925,971 shares were issued and outstanding, (ii)
332,863 shares were issued and held in treasury (which does not include the
shares reserved for issuance as set forth in clause (a)(iii) below) and (iii)
20,168,653 shares were reserved for issuance upon the exercise or conversion of
options, warrants or convertible securities granted or issuable by Cardinal, (b)
5,000,000 Class B common shares, without par value, none of which was issued and
outstanding or reserved for issuance, and (c) 500,000 Non-Voting Preferred
Shares, without par value, none of which was issued and outstanding or reserved
for issuance. Each outstanding Cardinal Common Share is, and all Cardinal Common
Shares to be issued in connection with the Merger will be, duly
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authorized and validly issued, fully paid and nonassessable, and each
outstanding share of Cardinal capital stock has not been, and all Cardinal
Common Shares to be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. As of June 30, 1999, other than
as set forth in the first sentence hereof or in Section 3.3, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements, claims or
other commitments or rights of any type relating to the issuance, sale or
transfer by Cardinal of any equity securities of Cardinal, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of Cardinal.
(b) Subcorp's authorized capital stock consists solely of 1,000 shares of
Common Stock, .01 par value ("Subcorp Common Stock"), of which, as of the date
hereof, 100 were issued and outstanding and none were reserved for issuance. As
of the date hereof, all of the outstanding shares of Subcorp Common Stock are
owned free and clear of any liens, claims or encumbrances by Cardinal.
SECTION 3.4 CONFLICTS, CONSENTS AND APPROVAL. Neither the execution and
delivery of this Agreement by Cardinal or Subcorp nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of, the Cardinal
Articles or Cardinal Code of Regulations or the Articles of Incorporation or
By-laws of Subcorp;
(b) violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of Cardinal or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which Cardinal or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Cardinal or any of its subsidiaries or their respective
properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Cardinal or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) authorization for inclusion of the Cardinal Common
Shares to be issued in the Merger and the transactions contemplated hereby on
the NYSE, subject to official notice of issuance, (ii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), or (iii) registrations
or other actions required under federal and state securities laws as are
contemplated by this Agreement;
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except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect on Cardinal or
upon the ability of Cardinal or Subcorp to consummate the transactions
contemplated hereby.
SECTION 3.5 BROKERAGE AND FINDER'S FEES. Neither Cardinal nor any of
its shareholders, directors, officers or employees has incurred, or will incur,
on behalf of Cardinal, any brokerage, finder's or similar fee in connection with
the transactions contemplated by this Agreement.
SECTION 3.6 CARDINAL SEC DOCUMENTS. Cardinal has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since July 1, 1998 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or the Securities Act of 1933, as
amended (the "Securities Act") (such documents, as supplemented and amended
since the time of filing, collectively, the "Cardinal SEC Documents"). The
Cardinal SEC Documents, including, without limitation, any financial statements
or schedules included therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (a) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (b) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. The financial statements of Cardinal
included in the Cardinal SEC Documents at the time filed (and, in the case of
registration statements and proxy statements on the dates of effectiveness and
the dates of mailing, respectively) complied as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q of the
Commission), and fairly present (subject in the case of unaudited statements to
normal, recurring audit adjustments) the consolidated financial position of
Cardinal and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
SECTION 3.7 ABSENCE OF CERTAIN EVENTS. Except as otherwise disclosed in
the Cardinal SEC Documents, since March 31, 1999 there has not been any event,
circumstance or condition that has had or is reasonably likely to have a
Material Adverse Effect on Cardinal and its Subsidiaries taken as one
enterprise.
SECTION 3.8 ACCOUNTING MATTERS. Neither Cardinal nor any of its
affiliates has taken or agreed to take any action that (without giving effect to
any actions taken or agreed to be taken by ALP or any of its affiliates) would
(a) prevent Cardinal from accounting for the business combination to be effected
by the Merger as a pooling-of-interests for financial reporting purposes or (b)
prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ALP
In order to induce Subcorp and Cardinal to enter into this Agreement,
ALP hereby represents and warrants to Cardinal and Subcorp that the statements
contained in this Article IV are true, correct and complete as of the date
hereof and shall be true, correct and complete as of the Closing Date.
SECTION 4.1 ORGANIZATION AND STANDING. ALP is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois with full power and authority (corporate and other) to own, lease, use
and operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. ALP is duly qualified to do business and
in good standing in each jurisdiction listed in Section 4.1 of the disclosure
schedule delivered by ALP to Cardinal and dated the date hereof (the "ALP
Disclosure Schedule"), is not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by it nor the property it owns,
leases or operates requires it to qualify to do business as a foreign
corporation in any other jurisdiction, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect on ALP. ALP is not in default in the performance, observance or
fulfillment of any provision of its Articles of Incorporation (the "ALP
Articles"), or its By-laws, as in effect on the date hereof (the "ALP By-laws").
ALP has heretofore furnished to Cardinal a complete and correct copy of the ALP
Articles and the ALP By-laws.
SECTION 4.2 SUBSIDIARIES. ALP does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise. ALP is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such entity.
SECTION 4.3 CORPORATE POWER AND AUTHORITY. ALP has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of ALP, including
the authorization and adoption of the Merger and the transactions contemplated
hereby by ALP's Board of Directors and the ALP Stockholders. This Agreement has
been duly executed and delivered by ALP and the ALP Stockholders and constitutes
the legal, valid and binding obligation of ALP and the ALP Stockholders,
enforceable against ALP and the ALP Stockholders in accordance with its terms.
The Employment Agreements (as defined in Section 6.3(j)) have been duly executed
and delivered by the parties thereto and constitute the legal, valid and binding
obligations of the parties thereto, enforceable against such parties in
accordance with their respective terms. The Ancillary Agreements (as defined in
Section 5.3(h)), when duly executed by the parties thereto, will constitute the
legal, valid and binding obligations of the parties thereto, enforceable against
such parties in accordance with their respective terms.
SECTION 4.4 CAPITALIZATION OF ALP. As of June 30, 1999, ALP's
authorized capital stock consisted solely of 5,000,000 shares of common stock,
no par value ("ALP Common Stock"), of which (i) 1,519,835 shares were issued and
outstanding and (ii) no shares were issued and held in treasury. Each
outstanding share of ALP Common Stock is duly
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authorized and validly issued, fully paid and nonassessable, and has not been
issued in violation of any preemptive or similar rights. Except as set forth in
Section 4.4 of the ALP Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer of any securities of ALP by ALP or, to the knowledge of ALP, any
other person or entity, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of ALP Common Stock, and ALP has
no obligation of any kind to issue any additional securities or to pay for
securities of ALP or any predecessor. The issuance and sale of all of the shares
of ALP Common Stock have been in compliance with federal and state securities
laws. Section 4.4 of the ALP Disclosure Schedule contains a correct and complete
list of the names and addresses of (x) the holders of all the outstanding ALP
Common Stock, (y) the spouses of each married ALP Stockholder and (z) any other
person having a beneficial or other interest in any ALP Common Stock. Such
Section 4.4 also states the number of shares of ALP Common stock owned
beneficially and of record by each ALP Stockholder. Except as set forth in
Section 4.4 of the ALP Disclosure Schedule, ALP has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any person or entity.
SECTION 4.5 CONFLICTS; CONSENTS AND APPROVALS. Neither the execution
and delivery of this Agreement by ALP nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of, the ALP
Articles or the ALP By-laws;
(b) violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the creation
of any material lien, security interest, charge or encumbrance upon any of the
properties or assets of ALP under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which ALP or
any ALP Stockholder is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ALP or any ALP Stockholder; or
(d) require any action or consent or approval of, or review by, or
registration or filing by ALP, any ALP Stockholder or any of their respective
affiliates with, any third party or any Governmental Authority, other than (i)
actions required by the HSR Act, (ii) registrations or other actions required
under federal and state securities laws, (iii) consents or approvals of any
Governmental Authority set forth in Section 4.5 of the ALP Disclosure Schedule,
and (iv) filing of the Certificate of Merger with the Illinois Secretary of
State;
except in the case of clause (b) or (d) for any of the foregoing that are set
forth in Section 4.5 of the ALP Disclosure Schedule, and in the case of clauses
(b) through (d) for any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect on ALP.
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SECTION 4.6 ABSENCE OF CERTAIN CHANGES. Except as expressly provided
for or permitted under Section 5.3(b) of this Agreement, except as provided in
any agreement to be executed in connection with the Closing, or as set forth in
Section 4.6 of the ALP Disclosure Schedule, since March 31, 1999 there has not
been:
(a) Any material adverse change in the business, operations, assets,
properties, customer base, prospects, rights or condition (financial or
otherwise) of ALP or any occurrence, circumstance, or combination thereof which
reasonably could be expected to result in any such material adverse change,
including, without limitation, any material adverse change relating to ALP's
relationship with any material customer.
(b) Any declaration, setting aside or payment of any dividend or any
distribution (in cash or in kind) to any stockholder of ALP, or any direct or
indirect redemption, purchase or other acquisition by ALP of any of its capital
stock or any options, warrants, rights or agreements to purchase or acquire such
stock;
(c) Any increase in amounts payable by ALP to or for the benefit of, or
committed to be paid by ALP to or for the benefit of, any stockholder, director,
officer or other consultant, agent or employee of ALP whose total annual
compensation exceeds $100,000 or any relatives of such person, or any increase
in any benefits granted under any bonus, stock option, profit-sharing, pension,
retirement, severance, deferred compensation, group health, insurance, or other
direct or indirect benefit plan, payment or arrangement made to, with or for the
benefit of any such person;
(d) Any material transaction entered into or carried out by ALP other than
in the ordinary and usual course of business consistent with past practices;
(e) Any material borrowing or agreement to borrow funds by ALP, any
incurring by ALP of any other obligation or liability (contingent or otherwise),
except liabilities incurred in the usual and ordinary course of ALP's business
(consistent with past practices), or any endorsement, assumption or guarantee of
payment or performance of any loan or obligation of any other person by ALP;
(f) Any material change in ALP's method of doing business or any change in
its accounting principles or practices or its method of application of such
principles or practices;
(g) Any material mortgage, pledge, lien, security interest, hypothecation,
charge or other encumbrance imposed or agreed to be imposed on or with respect
to the property or assets of ALP;
(h) Any sale, lease or other disposition of, or any agreement to sell,
lease or otherwise dispose of any of the properties or assets of ALP, other than
sales, leases or other dispositions in the usual and ordinary course of business
for fair equivalent value to persons other than directors, officers,
stockholders, or other affiliates of ALP;
(i) Any purchase of or any agreement to purchase assets (other than
purchases (including purchases of inventory) in the ordinary course of business
consistent with past practices) for an amount in excess of $150,000 for any one
purchase or $400,000 for all such
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purchases made by ALP or any lease or any agreement to lease, as lessee, any
capital assets with payments over the term thereof to be made by ALP exceeding
an aggregate of $400,000;
(j) Any loan or advance made by ALP to any person other than loans made to
ALP's customers in the ordinary course of business consistent with past
practices not exceeding $50,000, in the aggregate, to any customer;
(k) Any modification, waiver, change, amendment, release, rescission or
termination of, or accord and satisfaction with respect to, any material term,
condition or provision of any contract, agreement, license or other instrument
to which ALP is a party, other than any satisfaction by performance in
accordance with the terms thereof in the usual and ordinary course of business;
or
(l) Any labor dispute or disturbance adversely affecting the business
operations, prospects or condition (financial or otherwise) of ALP, including,
without limitation, the filing of any petition or charge of unfair labor
practice with any governmental or regulatory authority, efforts to effect a
union representation election, actual or threatened employee strike, work
stoppage or slow down.
SECTION 4.7 OFFICERS, EMPLOYEES AND COMPENSATION. Section 4.7 of the
ALP Disclosure Schedule sets forth the names of all directors and officers of
ALP, the total salary, bonus, fringe benefits and perquisites each received from
ALP in the year ended December 31, 1998, and any changes to the foregoing which
have occurred subsequent to December 31, 1998. Section 4.7 of the ALP Disclosure
Schedule also lists and describes the current compensation of the ten most
highly compensated managers of ALP and any other employee of ALP whose total
current salary and bonus exceeds $100,000. Except as disclosed in Section 4.7 of
the ALP Disclosure Schedule, there are no other forms of compensation paid to
any such director, officer or employee of ALP. Except as disclosed in Section
4.7 of the ALP Disclosure Schedule, the amounts accrued on the books and records
of ALP for vacation pay, sick pay, and all commissions and other fees payable to
agents, salesmen and representatives will be adequate to cover ALP's liabilities
for all such items. Except as set forth in Section 4.7 of the ALP Disclosure
Schedule, ALP has not become obligated, directly or indirectly, to any
stockholder, director or officer of ALP or any person related to such person by
blood or marriage, except for current liability for such compensation. Except as
set forth in Section 4.7 of the ALP Disclosure Schedule, to the Knowledge of
ALP, no stockholder, director, officer, agent or employee of ALP or any person
related to such person by blood or marriage holds any position or office with or
has any material financial interest, direct or indirect, in any supplier,
customer or account of, or other outside business which has material
transactions with, ALP. ALP has no agreement or understanding with any
stockholder, director, officer, employee or representative of ALP which would
influence any such person not to become associated with Cardinal from and after
the Closing or from serving ALP after the Closing in a capacity similar to the
capacity presently held.
SECTION 4.8 FINANCIAL STATEMENTS.
(a) ALP has furnished to Cardinal the balance sheet of ALP as of December
31, 1998, and the related statements of income, changes in stockholders' equity,
and cash flows for
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the nine-month period then ended, including, in each case, the related notes
(collectively, the "Compilation Statements"), which are accompanied by the
compilation report of Altschuler, Melvoin and Glasser LLP. ALP has also
furnished to Cardinal the balance sheet of ALP as of March 31, 1999 and the
related statements of income, changes in stockholders' equity, and cash flows
for the three-month period then ended (the "March 31 Statements"). The
Compilation Statements and the March 31 Statements, which have been initialed
for identification by the president of ALP, have been prepared from and are in
accordance with the books and records of ALP, and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis (except for the absence of footnotes and except for normal year-end
adjustments in the case of the March 31 Statements), and fairly present the
financial condition of ALP as of the date stated and the results of operations
of ALP for the period then ended in accordance with such practices except as
described in Section 4.8 of the ALP Disclosure Schedule.
(b) When delivered in accordance with Section 5.3(f), the balance sheet for
ALP as of the end of each calendar month after the date hereof, and the related
statements of income, changes in stockholders' equity, and cash flows for the
period beginning January 1, 1999 and then ended, including the related notes
(the "Interim Statements"), shall have been prepared from and in accordance with
the books and records of ALP and in accordance with generally accepted
accounting principles applied on a basis consistent with that used in the
Compilation Statements, and shall fairly present the financial condition of ALP
as of such date and the results of operations of ALP for such period in
accordance with such practices, subject to normal year-end adjustments.
SECTION 4.9 TAXES.
(a) ALP has duly filed all federal, state, local and foreign income,
franchise, excise, real and personal property and other Tax Returns (as defined
below in Section 4.9(f))and reports (including, but not limited to, those filed
on a consolidated, combined or unitary basis) required to have been filed by ALP
prior to the date hereof. All of the foregoing Tax Returns and reports are true
and correct, and ALP has paid or, prior to the Effective Time, will pay all
Taxes (as defined below in Section 4.9(f)), interest and penalties required to
be paid in respect of the periods covered by such returns or reports or
otherwise due to any federal, state, foreign, local or other taxing authority.
The unpaid Taxes of ALP do not, as of the date hereof and as of the Closing
Date, exceed the reserve for Tax liability (as distinguished from any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the balance sheet of ALP included in the
March 31 Statements (as distinguished from in any notes thereto). ALP will not
have any liability for any Taxes in excess of the amounts so paid or reserves so
established and ALP is not delinquent in the payment of any material Tax,
assessment or governmental charge and it has not requested or filed any document
having the effect of causing any extension of time within which to file any
returns in respect of any fiscal year which have not since been filed. Except as
disclosed in Section 4.9 of the ALP Disclosure Schedule, no deficiencies for any
Tax, assessment or governmental charge have been proposed in writing, asserted
or assessed (tentatively or definitely), in each case, by any taxing authority,
against ALP for which there are not adequate reserves. Except as set forth in
Section 4.9 of the ALP Disclosure Schedule, ALP is not the subject of any Tax
audit. As of the date of this Agreement, there are no pending requests for
waivers of the time to assess any such Tax, other
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than those made in the ordinary course and for which payment has been made or
there are adequate reserves. With respect to any taxable period ended prior to
March 31, 1996, all federal income Tax Returns including ALP have been audited
by the Internal Revenue Service or are closed by the applicable statute of
limitations. ALP has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency. There are no liens with respect to Taxes upon any of the properties
or assets, real or personal, tangible or intangible of ALP (other than liens for
Taxes not yet due). No claim has ever been made by an authority in a
jurisdiction where ALP does not file Tax Returns that ALP is or may be subject
to taxation by that jurisdiction. ALP has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation. As of the date of
this Agreement, ALP has not previously undergone an "Ownership Change" as
defined by Section 382(g) of the Code which would limit the amount of pre-change
losses, credits and recognition of built-in losses to offset post change income.
(b) ALP is not obligated by any contract, agreement or other arrangement to
indemnify any other person with respect to Taxes. ALP is not now and has not
during the last four years been a party to or bound by any agreement or
arrangement (whether or not written and including, without limitation, any
arrangement required or permitted by law) binding ALP which (i) requires ALP to
make any Tax payment to or for the account of any other person, (ii) affords any
other person the benefit of any net operating loss, net capital loss, investment
Tax credit, foreign Tax credit, charitable deduction or any other credit or Tax
attribute which could reduce Taxes (including, without limitation, deductions
and credits related to alternative minimum Taxes) of ALP, (iii) requires or
permits the transfer or assignment of income, revenues, receipts or gains to
ALP, from any other person, or (iv) otherwise requires ALP to indemnify any
other person in respect of Taxes.
(c) Section 4.9(c) of the ALP Disclosure Schedule sets forth (i) a list of
all jurisdictions (whether foreign or domestic) to which any material Tax is or
has been properly payable by ALP, (ii) all sales for which gain has been
reported under the installment method of accounting for Tax purposes and for
which gain has to be recognized for Tax purposes by ALP subsequent to the
Closing Date, (iii) all rulings or determinations obtained by ALP from any
Governmental Authority responsible for the imposition of any Tax that may affect
ALP subsequent to the Closing Date, (iv) all ALP returns with respect to which
the applicable period for assessment under Applicable Law, after giving effect
to extensions or waivers, has not expired, (v) any material intercompany items
(as described in Treasury Regulations Section 1.1502-13(b)(2) or in similar
state or local income Tax provisions) resulting from any intercompany
transaction to which ALP is a party, (vi) a list of all pending Tax audits or
inquiries, and (vii) any Tax reserves included in the "Deferred Taxes" or
similar line item in ALP's financial statements included in the ALP Disclosure
Schedule, separately identified and itemized by dollar amount.
(d) Except as disclosed in Section 4.9(d) of the ALP Disclosure Schedule,
ALP has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
(e) ALP is now and has been at all times since April 1, 1998 an S
Corporation for federal income tax purposes within the meaning of Section
1361(a) of the Code pursuant to a
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valid election to be an S Corporation filed by ALP prior to June 15, 1998.
Section 4.9(e) of the ALP Disclosure Schedule sets forth each jurisdiction in
which a valid S corporation election for ALP is in effect or ALP is otherwise
treated as an S corporation for state or local tax purposes and the date
beginning with such election or treatment has been continuously in effect.
(f) For purposes of this Agreement, the following terms have the
definitions given below:
"Tax Returns" means returns, reports and forms required to be filed
with any Governmental Authority of the United States or any other jurisdiction
responsible for the imposition or collection of Taxes.
"Tax" or "Taxes" means (i) all taxes (whether federal, state, local or
foreign) based upon or measured by income and any other tax whatsoever,
including, without limitation, gross receipts, profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, or property taxes, together with any interest or penalties imposed with
respect thereto and (ii) any obligations under any agreements or arrangements
with respect to any taxes described in clause (i) above.
SECTION 4.10 COMPLIANCE WITH LAW; FDA MATTERS.
(a) Except as set forth in Section 4.10 of the ALP Disclosure Schedule, ALP
is in compliance with, and at all times since January 1, 1995 has been in
compliance with, all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any Governmental Authority (collectively, "Applicable Laws") relating to ALP or
its business or properties, including, without limitation, the Food, Drug and
Cosmetic Act and similar state laws, any federal or state Pharmacy Practice
Acts, the Occupational Safety and Health Act and the regulations promulgated
thereunder ("OSHA"), the Securities Act, the Exchange Act, any state or federal
laws respecting rights of privacy and all rules of professional conduct
applicable to ALP or by which any of its properties are bound or subject. ALP
has heretofore made available to Cardinal copies of all material correspondence
from and to all Governmental Authority and inspectors.
(b) Except as set forth in Section 4.10 of the ALP Disclosure Schedule,
since January 1, 1998 ALP has not received any written communication (including,
any warning letter) or is otherwise aware of any action or proceeding pending
or, to ALP's Knowledge, threatened, including, without limitation, warning
letter, prosecution, injunction, seizure, civil fine or recall, alleging that it
is not in compliance with any and all applicable laws, regulations or orders
implemented by the Food and Drug Administration, or implemented by the relevant
state, local or international agency responsible for regulating the
pharmaceutical industry, including but not limited to, allegations related to
(i) drug development establishments operated by ALP or (ii) drug or product
license applications submitted directly by ALP or, to ALP's Knowledge, by a
customer of ALP that includes data generated by ALP. To ALP's Knowledge, no
employee of ALP is or has been the subject of any similar pending or threatened
action or proceeding.
(c) To ALP's Knowledge, all consultants utilized by ALP to generate
information to be submitted to the Food and Drug Administration, or any
equivalent state, local or international
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<PAGE> 21
agency, including, but not limited to, contract research organizations,
pre-clinical testing laboratories, clinical investigators and institutional
review boards, have complied with all applicable Food and Drug Administration
requirements, as well as the applicable requirements of relevant state, local
and international agencies with regard to the development of data to be utilized
by ALP as part of the relevant drug or product approval process.
(d) Neither ALP nor, to ALP's Knowledge, any employee of ALP, has received
any correspondence from the Food and Drug Administration or is aware of any
action or proceeding, pending or, to the best of ALP's knowledge, threatened,
against ALP or any such employee regarding any debarment action or investigation
undertaken pursuant to the Generic Drug Enforcement Act of 1992, 21 U.S.C.
Section 335a, or any other similar regulation of the Food and Drug
Administration.
(e) Neither ALP nor, to ALP's Knowledge, any employee of ALP, has been the
subject, officially or otherwise, of any investigation by the Food and Drug
Administration pursuant to its Fraud, Untrue, Statements of Material Facts,
Bribery, and Illegal Gratuities Final Policy (also known as the Application
Integrity Policy).
(f) To ALP's Knowledge, no data generated by ALP that has been provided to
customers of ALP is the subject, either pending or threatened, of any regulatory
or other action by the Food and Drug Administration or by any state, local or
international regulatory entity relating to the truthfulness or scientific
adequacy of such data.
(g) Except as set forth on Section 4.10(g) of the ALP Disclosure Schedule,
ALP has not made any drug or product license applications or related filings
with the Food and Drug Administration during the past five years.
SECTION 4.11 INTELLECTUAL PROPERTY.
(a) Set forth in Section 4.11 of the ALP Disclosure Schedule is a true and
complete list of (i) all of ALP's foreign and domestic patents, patent
applications, invention disclosures, trademarks, service marks, tradenames,
copyrights (and any registrations or applications for registration for any of
the foregoing) and all material design rights, and (ii) all material agreements
to which ALP is a party which concern any of the Intellectual Property
("Intellectual Property" shall mean all intellectual property or other
proprietary rights of every kind, including, without limitation, all domestic or
foreign patents, patent applications, inventions (whether or not patentable),
processes, products, technologies, discoveries, copyrightable and copyrighted
works, apparatus, trade secrets, trademarks and trademark applications and
registrations, service marks and service mark applications and registrations,
trade names, trade dress, copyright applications and registrations, design
rights, customer lists, marketing and customer information, mask works rights,
know-how, licenses, technical information (whether confidential or otherwise),
software, hardware, systems, databases, models, methodologies and all
documentation thereof owned, licensed or used by ALP). Other than the
Intellectual Property set forth in Section
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<PAGE> 22
4.11 of the ALP Disclosure Schedule, no name, patent, invention, trade secret,
proprietary right, computer software, trademark, trade name, service mark, logo,
copyright, franchise, license, sublicense, or other such right is necessary for
the operation of the business of ALP in substantially the same manner as such
business is presently or proposed to be conducted. Except as set forth in
Section 4.11 of the ALP Disclosure Schedule, (A) ALP owns, free and clear of any
liens, claims or encumbrances, or has the right to use under valid licenses as
it is currently being used by ALP, the Intellectual Property and has the
exclusive right to bring actions for the infringement thereof; (B) all of the
patents, trademark registrations, service mark registrations, tradename
registrations, design right registrations, and copyright registrations included
in the Intellectual Property are valid; (C) the Intellectual Property does not
infringe and has not infringed any now existing or subsequently issued domestic
or foreign patent, trademark, service mark, tradename, copyright, design right
or other intellectual property or proprietary right; (D) no person or entity has
asserted in writing to ALP that, with respect to the Intellectual Property, ALP
or a licensee of ALP is infringing or has infringed any domestic or foreign
patent, trademark, service mark, tradename, copyright or design right, or has
misappropriated or improperly used or disclosed any trade secret, confidential
information or know-how; (E) the Intellectual Property, and its use or
operation, do not infringe, and have not infringed, any foreign or domestic
patent, trademark, service mark, tradename, copyright or contractual right of
any entity, and have not involved the misappropriation or improper use or
disclosure of any trade secrets, confidential information or know-how of any
entity; (F) all working requirements and all fees, annuities, and other payments
which are due from ALP on or before the Effective Time for any of the
Intellectual Property, including, without limitation, all foreign or domestic
patents, patent applications, trademark registrations, service mark
registrations, tradename registrations, copyright registrations and any
applications for any of the preceding, have been met or paid; (G) the claims
made in the foreign or domestic patents and patent applications that are a part
of the Intellectual Property are not dominated by claims of patents owned by
other persons or entities; (H) to ALP's Knowledge, the making, using, selling,
manufacturing, marketing, licensing, reproduction, distribution, or publishing
of any process, service, machine, manufacture, composition of matter, or
material pursuant to any part of the Intellectual Property, does not and will
not infringe any domestic or foreign patent, trademark, service mark, tradename,
copyright or other intellectual property right; (I) to ALP's Knowledge, no
unexpired foreign or domestic patents or patent applications exist that are
adverse to the material interests of ALP; (J) the Intellectual Property is not
the subject of any pending Action (as defined in Section 4.14); (K) no part of
the Intellectual Property was obtained through inequitable conduct or fraud in
the United States Patent and Trademark Office or any foreign governmental
entity; (L) to ALP's Knowledge, there has occurred no (1) prior act that would
adversely affect, void or invalidate any of the Intellectual Property or (2)
conduct or use by ALP or any third party that would adversely affect, void or
invalidate any of the Intellectual Property; (M) the execution, delivery and
performance of this Agreement by ALP, and the consummation of the transactions
contemplated thereby, will not breach, violate or conflict with any instrument
or agreement governing or contained within any of the Intellectual Property,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any of the Intellectual Property or in any way
impair the right of Cardinal or Subcorp to use, sell, offer to sell, license or
dispose of, or to bring any action for the infringement of, any Intellectual
Property; (N) there are no royalties, honoraria, fees or other payments payable
to any third party by reason of the ownership, use, license, sale or disposition
of the Intellectual Property; (O) no part of the source or object code,
algorithms or structure included in any of the Intellectual Property is copied
from, based upon or derived from any source or object code, algorithm or
structure included in any computer software product owned by any third party nor
does any substantial similarity of any of such source or object code, algorithms
or structure to any computer software product owned by any third party result
from
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<PAGE> 23
such source or object code, algorithms or structure being copied from, based
upon or derived from any computer software product owned by any third party; and
(P) to ALP's Knowledge, no software included in the Intellectual Property
contains any "Self-Help Code," i.e., any back door, time bomb, drop dead device,
or other software routine designed to disable a computer program automatically
with the passage of time or under the positive control of any unauthorized
person, or, to ALP's Knowledge, any "Unauthorized Code," i.e., any virus, Trojan
horse, worm, or other software routines or hardware components designed to
permit unauthorized access, disable, erase, or otherwise harm software,
hardware, or data or to perform any other such actions.
(b) ALP has taken all steps that are reasonably necessary and appropriate
to safeguard and maintain the secrecy and confidentiality of all trade secrets
contained in the Intellectual Property (including, without limitation, entering
into appropriate confidentiality, nondisclosure and non-competition agreements
with all officers, directors, employees and third-party consultants of ALP).
(c) ALP has taken all steps that are reasonably necessary and appropriate
to safeguard and maintain all copyrights and patents contained in the
Intellectual Property, including, without limitation, entering into appropriate
assignments with all current and former officers, directors, employees and third
party consultants of ALP.
SECTION 4.12 TITLE TO AND CONDITION OF PROPERTIES.
(a) Except as set forth in Section 4.12(a) of the ALP Disclosure Schedule,
ALP has good, valid and indefeasible title to all of its material assets and
properties of every kind, nature and description, tangible or intangible,
wherever located, which constitute all of the property now used in and necessary
for the conduct of its business as presently conducted (including, without
limitation, all material property and assets shown or reflected on the
Compilation Statements or the Interim Statements, when delivered, except assets
sold in the ordinary course of business). Except as set forth in Section 4.12(a)
of the ALP Disclosure Schedule, all such properties are owned free and clear of
all mortgages, pledges, liens, security interests, encumbrances and restrictions
of any nature whatsoever, including, without limitation, (a) rights or claims of
parties in possession; (b) easements or claims of easements; (c) encroachments,
overlaps, boundary line or water drainage disputes or any other matters; (d) any
lien or right to a lien for services, labor or material furnished; (e) special
tax or other assessments; (f) options to purchase, leases, tenancies, or land
contracts; (g) contracts, covenants, or reservations which restrict the use of
such properties and (h) violations of any Applicable Laws applicable to such
properties. All such properties are usable for their current uses without
violating any Applicable Laws, or any applicable private restriction, and such
uses are legal conforming uses. Except as set forth in Section 4.12(a) of the
ALP Disclosure Schedule, no financing statement under the Uniform Commercial
Code or similar law naming ALP or any of its predecessors is on file in any
jurisdiction in which ALP owns property or does business, and ALP is not a party
to or bound under any material agreement or legal obligation authorizing any
party to file any such financing statement. Section 4.12(a) of the ALP
Disclosure Schedule contains a complete and accurate list of the location of all
real property which is or has been owned, leased or operated by ALP during the
last five (5) years and describes the nature of ALP's interest or prior interest
in that real property. With respect to any real property leased by ALP, ALP has
an insurable leasehold interest in that real property.
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<PAGE> 24
(b) Except as set forth in Section 4.12(b) of the ALP Disclosure Schedule,
all real property, plants and structures and all machinery and equipment and
tangible personal property owned, leased or used by ALP and material to the
operation of its business are suitable for the purpose or purposes for which
they are being used (including substantial compliance with all Applicable Laws)
and are in good condition and repair, ordinary wear and tear excepted. Section
4.12(b) of the ALP Disclosure Schedule lists, and ALP has furnished or made
available to Cardinal, copies of all engineering, geologic and environmental
reports prepared by or for ALP or with respect to the real property owned,
leased or used by ALP within the past five (5) years.
SECTION 4.13 ENVIRONMENTAL MATTERS.
(a) As used herein, the term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, petroleum, pollutants, contaminants, or industrial, toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(b) There are, with respect to ALP or its predecessor, no past or present
violations of Environmental Laws, releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or any other Environmental Law and ALP
has not received any written notice with respect to any of the foregoing, nor is
any Action pending or, to ALP's Knowledge, threatened in writing in connection
with any of the foregoing.
(c) No Hazardous Materials were or are contained on or about any real
property currently or previously owned or leased by ALP or predecessors and no
Hazardous Materials were released on or about any real property previously owned
or leased by ALP or its predecessors during the period the property was owned or
leased by ALP or its predecessors, except in the normal course of ALP's
business. To the extent ALP or its predecessors currently uses or previously
used real property which ALP or predecessors never owned or leased, no Hazardous
Materials were or are contained on or about the portion of such property
currently or previously used by ALP or its predecessors and no Hazardous
Materials were released on or about any such portion of property previously used
by ALP or its predecessors during the period the property was used by ALP or its
predecessors, except in the normal course of ALP's business which is otherwise
in compliance with all applicable Environmental Laws.
(d) Except as set forth in Section 4.13(d) of the ALP Disclosure Schedule,
there are no underground storage tanks on or under any real property currently
or previously owned, leased or used by ALP.
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<PAGE> 25
(e) ALP has obtained all permits, licenses and other authorizations
("Environmental Permits") required under the Environmental Laws relating to the
real property owned, leased or used by ALP and ALP's use thereof. The
Environmental Permits are in full force and effect and ALP is and has been in
compliance with them since the dates of their issuance. Section 4.13 of the ALP
Disclosure Schedule lists, and ALP has furnished or made available to Cardinal,
copies of all Environmental Permits.
(f) Except as set forth in Section 4.13(f), no asbestos-containing
materials are located on the real property owned, leased or used by ALP.
(g) ALP has not received any written notice from any Governmental Authority
or private entity advising or asserting that (i) any real property owned, leased
or used by ALP, (ii) any real property previously owned, leased or used by ALP,
or (iii) ALP are the subject of any Action relating to the environmental
condition of such property or ALP. No such property is listed in CERCLAS, the
federal National Priorities List or any similar state or federal lists of
suspected contaminated property and no off-site disposal location currently or
formerly used by ALP or its predecessors is so listed.
SECTION 4.14 LITIGATION. Except as set forth in Section 4.14 of the ALP
Disclosure Schedule, there is no suit, claim, action, or proceeding (an
"Action") pending or, to ALP's Knowledge, threatened against ALP or any officer
or director of ALP alleging damages in excess of $100,000. ALP is not subject to
any outstanding order, writ, injunction or decree which, individually or in the
aggregate, insofar as can be reasonably foreseen, could have a Material Adverse
Effect on ALP or a Material Adverse Effect on the ability of ALP to consummate
the transactions contemplated hereby. Except as set forth in Section 4.14 of the
ALP Disclosure Schedule, since December 31, 1996, (i) there has not been any
Action asserted, or to ALP's Knowledge, threatened against ALP relating to ALP's
method of doing business or its relationship with past, existing or future users
or purchasers of any goods or services of ALP and (ii) ALP has not been subject
to any outstanding order, writ, injunction or decree relating to ALP's method of
doing business or its relationship with past, existing or future customers,
lessees, users, purchasers or licensees of any Intellectual Property, goods or
services of ALP.
SECTION 4.15 BROKERAGE AND FINDER'S FEES. Neither ALP nor, to ALP's
Knowledge, any stockholder, director, officer or employee thereof, has incurred
or will incur on behalf of ALP, any brokerage, finder's or similar fee in
connection with the transactions contemplated by this Agreement.
SECTION 4.16 ACCOUNTING MATTERS. Neither ALP nor any of its affiliates
has taken or agreed to take any action that (without giving effect to any
actions taken or agreed to be taken by Cardinal or any of its affiliates) would
(a) prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code or (b) to ALP's Knowledge, prevent
Cardinal from accounting for the business combination to be effected by the
Merger as a pooling-of-interests for financial reporting purposes.
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<PAGE> 26
SECTION 4.17 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Section 4.17, the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of section 601 et seq. of
ERISA and Section 4980B of the Code and the portability and nondiscrimination
requirements of Section 701 ET SEQ. of ERISA and Section 9801 ET SEQ. of the
Code, (v) Section 4975 of the Code and (vi) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is or was a member of a group described
in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA
that includes the first entity, trade or business, or that is or was a member of
the same "controlled group" as the first entity, trade or business pursuant to
Section 4001(a)(14) of ERISA.
"Plans" means all employee benefit plans, programs, policies,
practices, and other arrangements providing benefits to any employee or former
employee or beneficiary or dependent thereof, whether or not written, and
whether covering one person or more than one person, sponsored or maintained by
ALP or any ERISA Affiliate or to which ALP or any ERISA Affiliate contributes or
is obligated to contribute. Without limiting the generality of the foregoing,
the term "Plans" includes all employee welfare benefit plans within the meaning
of Section 3(1) of ERISA and all employee pension benefit plans within the
meaning of Section 3(2) of ERISA.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
those terms are defined in Part I of Subtitle E of Title IV of ERISA.
(b) Section 4.17(b) of the ALP Disclosure Schedule lists all Plans
sponsored, maintained or contributed to, or required to be contributed to, by
ALP or by any ERISA Affiliate within the last six (6) years. With respect to
each Plan, ALP has made available to Cardinal a true, correct and complete copy
of: (i) each writing constituting a part of such Plan, including, without
limitation, all plan documents and amendments thereto, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii) the three
(3) most recent Annual Reports (Form 5500 Series) and accompanying schedules, if
any; (iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; (v) the most recent determination letter from
the Internal Revenue Service, if any; and (vi) the most recent
actuarial/valuation, if any. Neither ALP nor any ERISA Affiliate has any plan or
commitment to create any additional Plan or to modify or change any existing
Plan that would affect any employee or terminated employee of ALP or any ERISA
Affiliate.
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<PAGE> 27
(c) The Internal Revenue Service has issued a favorable determination
letter with respect to each Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code (a "Qualified Plan"), and, to
ALP's Knowledge, except as set forth in Section 4.17(c) of the ALP Disclosure
Schedule, there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Qualified Plan or the
related trust.
(d) Except as set forth in Section 4.17(d) of the ALP Disclosure Schedule,
all contributions required to be made to any Plan by Applicable Laws or by any
plan document or other contractual undertaking, and all premiums due or payable
with respect to insurance policies funding any Plan, for any period through the
date hereof have been timely made or paid in full and through the Closing Date
will be timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof or the Closing Date, as applicable, have been
or will be fully reflected in the Compilation Statements and the Interim
Statements.
(e) Except as set forth in Section 4.17(e) of the ALP Disclosure Schedule,
ALP and all ERISA Affiliates have complied and are in compliance with all
provisions of ERISA, the Code and all laws and regulations applicable to the
Plans. Each Plan has been operated in compliance with its terms and in
accordance with all Applicable Laws. There is not now, and there are no
existing, circumstances that could give rise to, any requirement for the posting
of security with respect to a Plan or the imposition of any lien on the assets
of ALP or any ERISA Affiliate under ERISA or the Code. Each Plan includes
provisions which effectively reserve the rights of the sponsor of the Plan to
amend or terminate the Plan.
(f) No Plan is subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code. No Plan is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor
has ALP or any of its respective ERISA Affiliates, at any time within five years
before the date hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) Except as set forth in Section 4.17(g) of the ALP Disclosure Schedule,
there does not now exist, and there are no existing, circumstances that could
result in, any Controlled Group Liability that would be a liability of ALP
following the Closing. Without limiting the generality of the foregoing, neither
ALP nor any of its ERISA Affiliates has engaged in any transaction described in
Section 4069 of ERISA or any transaction that constitutes a withdrawal under
Section 4201 ET SEQ. of ERISA.
(h) Except as set forth in Section 4.17(h) of the ALP Disclosure Schedule
and except for health continuation coverage as required by Section 4980B of the
Code or Part 6 of Title I of ERISA, ALP has no liability for life, health,
medical or other welfare benefits to former employees or beneficiaries or
dependents thereof.
(i) Except as set forth in Section 4.17(i) of the ALP Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in, cause the accelerated vesting
or delivery of, or increase the
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<PAGE> 28
amount or value of, any payment or benefit to any employee, officer, director or
consultant of ALP, and Section 4.17(i) of the ALP Disclosure Schedule specifies
the amount of any such payment or benefit. Without limiting the generality of
the foregoing and except as set forth in Section 4.17(i) of the ALP Disclosure
Schedule, no amount paid or payable by ALP in connection with the transactions
contemplated hereby either solely as a result thereof or as a result of such
transactions in conjunction with any other events will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(j) There are no pending or, to ALP's Knowledge, threatened claims (other
than claims for benefits in the ordinary course), lawsuits or arbitrations which
have been asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts under
any of the Plans which could reasonably be expected to result in any material
liability of ALP.
SECTION 4.18 CONTRACTS.
(a) Section 4.18(a) of the ALP Disclosure Schedule lists all written or
oral contracts, agreements, guarantees, leases and executory commitments (each a
"Contract") to which ALP is a party and which fall within any of the following
categories: (i) Contracts not entered into in the ordinary course of ALP's
business, (ii) joint venture, partnership and similar agreements, (iii)
Contracts which are service contracts or equipment leases involving payments by
ALP of more than $100,000 per year, (iv) Contracts containing covenants
purporting to limit the freedom of ALP to compete in any line of business in any
geographic area or to hire any individual or group of individuals, including,
without limitation, Contracts with any customers granting the customer any
exclusive rights, (v) Contracts which after the Effective Time would have the
effect of limiting the freedom of Cardinal or its subsidiaries (other than ALP)
to compete in any line of business in any geographic area or to hire any
individual or group of individuals, including any Contracts with distributors
granting any exclusive rights, (vi) Contracts which contain minimum purchase
conditions or requirements or other terms that restrict or limit the purchasing
relationships of ALP or its affiliates, or any customer, licensee or lessee
thereof, (vii) Contracts relating to any outstanding commitment for capital
expenditures in excess of $100,000, (viii) Contracts relating to the lease or
sublease of or sale or purchase of real or personal property involving any
annual expense or price in excess of $100,000 and not cancelable by ALP (without
premium or penalty) within ninety days, (ix) Contracts with any labor
organization, (x) indentures, mortgages, promissory notes, loan agreements,
guarantees of amounts in excess of $100,000, letters of credit or other
agreements or instruments of ALP or commitments for the borrowing or the lending
of amounts in excess of $100,000 by ALP or providing for the creation of any
charge, security interest, encumbrance or lien upon any of the assets of ALP,
(xi) Contracts which are fixed price, capitation or other risk sharing
agreements with customers not cancelable by ALP (without premium or penalty)
within one month; (xii) Contracts involving annual revenues or expenditures to
the business of ALP in excess of 3.0% of ALP's annual revenues, (xiii) Contracts
providing for "earn-outs" or other contingent payments involving more than
$100,000 over the term of the Contract and (xiv) Contracts with or for the
benefit of any affiliate (as such term is defined in Rule 12b-2 promulgated
under the Exchange Act) of ALP or immediate family member thereof. All such
Contracts are valid and binding obligations of ALP and, to ALP's Knowledge, the
valid and binding obligation of each other party thereto. Except as set forth in
Section 4.18(a) of the ALP Disclosure Schedule, neither ALP nor, to ALP's
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<PAGE> 29
Knowledge, any other party thereto is in violation of or in default in respect
of, nor has there occurred an event or condition which with the passage of time
or giving of notice (or both) would constitute a default under or permit the
termination of, any Contract.
(b) Except as set forth in Section 4.18 of the ALP Disclosure Schedule or
as contemplated by the transactions contemplated hereby, there are no Contracts
or other transactions between ALP, on the one hand, and any (i) officer or
director of ALP, (ii) record or beneficial owner of any securities of ALP or
(iii) affiliate of any such officer, director or beneficial owner, on the other
hand.
(c) Except as set forth in Section 4.18 of the ALP Disclosure Schedule, no
consent, permission, waiver or approval is required to be obtained, and no
penalty, assessment or special payment is required to paid to, any third party
or governmental authority in order to preserve for ALP after the Merger the
benefits of the Contracts.
SECTION 4.19 ACCOUNTS RECEIVABLE; INVENTORIES.
(a) All accounts and notes receivable (including lease and finance notes
receivable) and accrued interest receivable of ALP have arisen in the ordinary
course of business and the accounts receivable reserves reflected on the balance
sheet included in the Compilation Statements and the Interim Statements (which
reserves shall not exceed $50,000) will be as of the date thereof established in
accordance with generally accepted accounting principles consistently applied.
All such accounts and notes receivable outstanding as of the Closing will be
collected in full (subject only to the aforementioned reserves) within 180 days
of the Closing.
(b) The inventories reflected on the balance sheet included in the
Compilation Statements and the Interim Statement have been (or will be) valued
in accordance with generally accepted accounting principles consistently
applied. Physical adjustments since the date of the Compilation Statements have
been correctly recorded in the ordinary course of business. Such inventories (i)
are carried at an amount not in excess of the lower of cost or net realizable
value, and (ii) do not include any inventory which is obsolete, surplus or not
usable or saleable in the lawful and ordinary course of business of ALP as
heretofore conducted, in each case net of reserves provided therefor. Such
inventories consist of items of quality and quantity that are adequate for the
conduct of the business of ALP and inventory levels are not in excess of normal
operating requirements of ALP.
SECTION 4.20 LABOR MATTERS. Except as set forth in Section 4.20 of the
ALP Disclosure Schedule, ALP does not have any labor contracts, collective
bargaining agreements or employment or consulting agreements (except for
employment or consulting agreements that provide for annual payments of not more
than $50,000) with any persons employed by ALP or any persons otherwise
performing services primarily for ALP (the "ALP Business Personnel"). ALP has
not engaged in any unfair labor practice with respect to ALP Business Personnel,
and there is no unfair labor practice complaint pending or, to the knowledge of
ALP, threatened, against ALP with respect to ALP Business Personnel. There is no
labor strike, dispute, slowdown or stoppage pending or, to ALP's Knowledge,
threatened against ALP, and ALP has not experienced any labor strike, dispute,
slowdown or stoppage or other labor difficulty involving its employees since
December 31, 1996.
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SECTION 4.21 UNDISCLOSED LIABILITIES. Except (i) as and to the extent
disclosed or reserved against on the balance sheet of ALP as of March 31, 1999
included in the Interim Statements, (ii) as incurred after the date thereof in
the ordinary course of business consistent with prior practice and not
prohibited by this Agreement and which in any event are not material, (iii) as
set forth in Section 4.21 of the ALP Disclosure Schedule, or (iv) as provided in
any Contract disclosed in Section 4.18(a) of the ALP Disclosure Schedule
(excluding any liability for a breach of any such Contract), ALP does not have
any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, could have a Material Adverse Effect on
ALP.
SECTION 4.22 OPERATION OF ALP'S BUSINESS; RELATIONSHIPS.
(a) Since January 1, 1999 through the date of this Agreement, ALP has not
engaged in any transaction which, if done after execution of this Agreement,
would violate Section 5.3(b) hereof except as set forth in Section 4.22 of the
ALP Disclosure Schedule. Section 4.22 of the ALP Disclosure Schedule describes
each termination or non-renewal that has occurred with respect to any Contract
with any customer or supplier from January 1, 1999 to the date of this
Agreement.
(b) The relationships of ALP with its customers and suppliers are
satisfactory, and, to ALP's Knowledge, the execution of this Agreement, the
consummation of the Merger and the other transactions contemplated hereby will
not materially adversely affect the relationships of ALP with such customers or
suppliers.
(c) No product produced by ALP or produced for ALP by a third party has
been recalled voluntarily or involuntarily since January 1, 1996, no such recall
is being considered by ALP, and, to ALP's Knowledge, no such recall is being
considered by or has been requested or ordered by any ALP customer, Governmental
Authority or consumer group.
(d) ALP is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "ALP Permits"), and there is no Action pending or, to ALP's
Knowledge, threatened regarding any of the ALP Permits. ALP is not in conflict
with, or in default or violation of any of the ALP Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on ALP. Except as
set forth in Section 4.22(d) of the ALP Disclosure Schedule, during the period
commencing on January 1, 1997 and ending on the date hereof, ALP has not
received any written notification with respect to possible conflicts, defaults
or violations of Applicable Laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations could
not have a Material Adverse Effect on ALP. Except as set forth in Section
4.22(d) of the ALP Disclosure Schedule, no consent, approval, registration or
filing with any third party or Governmental Authority pursuant to any ALP
Permits is required as a result of the transactions contemplated by this
Agreement.
SECTION 4.23 PRODUCT WARRANTIES AND LIABILITIES. Section 4.23 of the
ALP Disclosure Schedule lists all forms of warranties, guarantees or assurances
of its products and
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services that are in effect or proposed to be used by it. Section 4.23 of the
ALP Disclosure Schedule sets forth a description of each pending or, to ALP's
Knowledge, threatened Action under any warranty or guaranty against ALP. ALP has
not incurred, nor, to ALP's Knowledge, is there any basis for alleging, any
liability, damage, loss, cost or expense as a result of any defect or other
deficiency (whether of design, materials, workmanship, labeling instructions or
otherwise) ("Product Liability") with respect to any product sold or services
rendered by or on behalf of ALP (including any licensee thereof) after December
31, 1995 and prior to the Effective Time which would have a Material Adverse
Effect on ALP, whether such Product Liability is incurred by reason of any
express or implied warranty (including, without limitation, any warranty of
merchantability or fitness), any doctrine of common law (tort, contract or
other), any statutory provision or otherwise and irrespective of whether such
Product Liability is covered by insurance.
SECTION 4.24 BOARD RECOMMENDATION. The Board of Directors of ALP, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
fair to and in the best interests of the stockholders of ALP, and (ii)
recommended that the holders of the shares of ALP Common Stock approve this
Agreement and the transactions contemplated herein, including the Merger (the
"ALP Board Recommendation").
SECTION 4.25 IBCA AND STATE TAKEOVER LAWS. Prior to the date hereof,
the Board of Directors of ALP has taken all action necessary to exempt under or
make the following not subject to any state takeover law or other state law that
purports to limit or restrict business combinations or the ability to acquire or
vote shares: (i) the execution of this Agreement, (ii) the Merger and (iii) the
other transactions contemplated hereby.
SECTION 4.26 INSURANCE. ALP is presently insured, and during each of
the past five calendar years has been insured, against such risks as companies
engaged in a similar business would, in accordance with good business practice,
customarily be insured. Except as set forth in Section 4.26 of the ALP
Disclosure Schedule, the policies of fire, theft, liability, professional
practice and other insurance currently maintained with respect to the assets or
businesses of the Company may be continued by ALP without modification or
premium increase after the Effective Time and for the duration of their current
terms which terms expire as set forth in Section 4.26 of the ALP Disclosure
Schedule.
SECTION 4.27 BOOKS OF ACCOUNT; RECORDS. ALP's general ledgers, stock
record books, minute books and other material records relating to the assets,
properties, contracts and outstanding legal obligations of ALP are, in all
material respects, complete and correct, and have been maintained in accordance
with good business practices and the matters contained therein are appropriate
and accurately reflected in the Compilation Statements and the Interim
Statements.
SECTION 4.28 INVESTMENT REPRESENTATION. Each ALP Stockholder (a) is
either an "accredited investor" (as such term is defined in Regulation D of the
Securities Act) or, alone or with his or her purchaser representative(s), has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of an investment in
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Cardinal Common Shares and (b) received from ALP a copy of the Prospectus (as
defined in Section 5.2(a)) and each of the documents incorporated by reference
therein.
SECTION 4.29 NO OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in this Article IV, ALP makes no representations and
warranties, express or implied, at law or in equity, in respect of ALP or any of
its assets, liabilities or operations.
ARTICLE V. COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period from and
after the execution of this Agreement:
SECTION 5.1 MUTUAL COVENANTS.
(a) GENERAL. Each of the parties shall use its reasonable efforts to take
all action and to do all things necessary, proper or advisable to consummate the
Merger and the transactions contemplated by this Agreement (including, without
limitation, using its reasonable efforts to cause the conditions set forth in
Article VI for which they are responsible to be satisfied as soon as reasonably
practicable and to prepare, execute and deliver such further instruments and
take or cause to be taken such other and further action as any other party
hereto shall reasonably request).
(b) HSR ACT. As soon as practicable, and in any event no later than fifteen
business days after the date hereof, each of the parties hereto will file any
Notification and Report Forms and related material required to be filed by it
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act with respect to the Merger, will
use its reasonable efforts to obtain an early termination of the applicable
waiting period, and shall promptly make any further filings pursuant thereto
that may be necessary, proper or advisable. Cardinal and ALP agree to cooperate
with respect to, and shall cause each of their respective subsidiaries to
cooperate with respect to, and agree to use all reasonable efforts to contest
and resist, any Action, including legislative, administrative or judicial
Action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") of any Governmental Authority that is in effect and that
restricts, prevents or prohibits the consummation of the Merger or any other
transactions contemplated by this Agreement, including, without limitation, by
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. Upon the terms and subject to the conditions set
forth in this Agreement, in connection with the HSR Act, each of ALP and
Cardinal agrees to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including the obtaining of all necessary actions
or nonactions, waivers, consents and approvals from Governmental Authorities and
the making of all necessary registrations and filings (including filings with
Governmental Authorities, if any) and the taking of all reasonable steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authority; provided, however, that a party shall
not be
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obligated to take any action pursuant to the foregoing if the taking of such
action or the obtaining of any waiver, consent, approval or exemption is
reasonably likely (x) to impact in a materially adverse manner the economic or
business benefits of the transactions contemplated by this Agreement so as to
render inadvisable the consummation of the Merger or (y) to result in an Order
(i) prohibiting or limiting the ownership or operation by Cardinal of any
material portion of the business or assets of ALP or compelling Cardinal to
dispose of or hold separate any of the business or assets of Cardinal or any
material portion of the business or assets of ALP as a result of the Merger or
any of the other transactions contemplated by this Agreement, (ii) imposing
limitations on the ability of Cardinal to acquire or hold, or exercise full
rights of ownership of, any shares of capital stock of ALP, including, without
limitation, the right to vote such capital stock on all matters properly
presented to the ALP Stockholders, or (iii) prohibiting Cardinal from
effectively controlling in any material respect the business or operations of
ALP.
(c) OTHER GOVERNMENTAL MATTERS. Each of the parties shall use its
reasonable efforts to take any additional action that may be necessary, proper
or advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(d) POOLING-OF-INTERESTS. Each of the parties agrees that it shall not, and
shall not permit any of its subsidiaries to, take any actions (regardless of
whether such action would otherwise be permitted or not prohibited hereunder)
that would, or would be reasonably likely to, prevent Cardinal from accounting,
and shall use its reasonable best efforts (including, without limitation,
providing appropriate representation letters to Cardinal's accountants in
addition to the representation letter provided by ALP to Cardinal's accountants
on the date hereof) to allow Cardinal to account, for the Merger in accordance
with the pooling-of-interests method of accounting under the requirements of
Opinion No. 16 "Business Combinations" of the Accounting Principles Board of the
American Institute of Certified Public Accountants, as amended by applicable
pronouncements by the Financial Accounting Standards Board, and all related
published rules, regulations and policies of the Commission ("APB No. 16"), and
to obtain a letter, in form and substance reasonably satisfactory to Cardinal,
from Deloitte & Touche LLP dated the Closing Date stating that they concur with
management's conclusion that the Merger will qualify as a transaction to be
accounted for by Cardinal in accordance with the pooling-of-interests method of
accounting under the requirements of APB No. 16.
(e) TAX-FREE TREATMENT. Each of the parties shall use all reasonable
efforts to cause the Merger to constitute a tax-free "reorganization" under
Section 368(a) of the Code.
(f) PUBLIC ANNOUNCEMENTS. Unless otherwise required by Applicable Laws or
requirements of the NYSE (and in that event only if time does not permit), at
all times prior to the earlier of the Effective Time or termination of this
Agreement pursuant to Section 7.1, Cardinal and ALP shall consult with each
other before issuing any press release with respect to the Merger and shall not
issue any such press release prior to such consultation.
SECTION 5.2 COVENANTS OF CARDINAL.
(a) SECURITIES LAWS. Assuming the accuracy of the statements made in
Sections 4.28 and 5.3(a), (i) the issuance of Cardinal Common Shares to the ALP
Stockholders in the Merger
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shall be registered under the Securities Act pursuant to Cardinal's Registration
Statement on Form S-4 (Commission File No. 333-74761) and the Prospectus
included therein dated April 7, 1999 (the "Prospectus") and (ii) the Cardinal
Common Shares issued in the Merger will be freely transferable under the
Securities Act of 1933 by the ALP Stockholders to whom they are issued, subject
to the provisions of Rule 145 thereunder. Cardinal shall use all reasonable
efforts to keep the Registration Statement effective until the Closing.
(b) NOTIFICATION OF CERTAIN MATTERS. Cardinal shall give prompt notice to
ALP of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any Cardinal or Subcorp representation or
warranty contained in this Agreement to be untrue or inaccurate at or prior to
the Effective Time and (ii) any material failure of Cardinal to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.2(b) shall not limit or otherwise affect the remedies available
hereunder to ALP.
(c) NYSE LISTING. Cardinal shall use its reasonable efforts to cause the
Cardinal Common Shares issuable pursuant to the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time.
(d) CONTINUITY OF BUSINESS ENTERPRISE; CONTINUITY OF INTERESTS. It is the
present intention of Cardinal and Subcorp to continue at least one significant
historic business of ALP, or to use at least a significant portion of ALP's
historic business assets in a business, in each case within the meaning of Reg.
Section 1.368-1(d) promulgated pursuant to the Code. Neither Cardinal nor any
"related person" within the meaning of Reg. Section 1.368-1(e)(3) has any plan
or intent to redeem, in connection with the transactions contemplated by this
Agreement, any Cardinal Common Shares issued to the ALP Stockholders in the
Merger or take any other action which might violate the "continuity of interest"
provisions of Reg. Section 1.368-1(e), except any reacquisition of Cardinal
Common Shares pursuant to Article VIII of this Agreement or the Escrow
Agreement.
(e) DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. For a period of
six years from and after the Effective Time, Cardinal shall cause the Surviving
Corporation to indemnify and hold harmless the former officers and directors of
ALP in respect of acts or omissions occurring prior to the Effective Time (so
long as such acts or omissions do not constitute Indemnifiable Claims of
Cardinal under Article VIII) to the fullest extent permitted or provided under
the ALP Articles and ALP By-laws. Cardinal shall, for a period of six years,
cause ALP to maintain the current policies of directors, and officers' liability
insurance and fiduciary liability insurance maintained by ALP (provided that
Cardinal may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less
advantageous to the insured and provided that ALP shall not be required to spend
each year more than 125% of the current annual premium for such current
policies) with respect to claims arising from facts or events that occurred at
or before the Effective Time.
SECTION 5.3 COVENANTS OF ALP AND THE ALP STOCKHOLDERS.
(a) PROSPECTUS DELIVERY. ALP acknowledges receipt from Cardinal of 15
copies of the Prospectus and all of the documents incorporated by reference
therein. ALP sent or delivered
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the Prospectus and such incorporated documents to each of the ALP Stockholders
at least 20 business days prior to the date hereof.
(b) CONDUCT OF ALP'S OPERATIONS. During the period from the date of this
Agreement to the Effective Time, ALP shall, and the ALP Stockholders shall take
all actions as may be necessary to cause ALP to, conduct its operations only in
the ordinary course, except as expressly contemplated by this Agreement and the
transactions contemplated hereby, and to use all reasonable efforts to maintain
and preserve its business organization and its material rights and franchises
and to retain the services of its officers and key employees and maintain
relationships with customers, suppliers, lessees, licensees and other third
parties, and to maintain all of its operating assets in their current condition
(normal wear and tear excepted), to the end that their goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, ALP shall not, except as otherwise expressly contemplated
by this Agreement or as set forth in Section 5.3(b) of the ALP Disclosure
Schedule, without the prior written consent of Cardinal:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock, (B)
make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of ALP Common
Stock or any securities or obligations convertible into or exchangeable for
any shares of ALP Common Stock, (C) grant any person any right or option to
acquire any shares of ALP Common Stock, (D) issue, deliver or sell or agree
to issue, deliver or sell any additional shares of ALP Common Stock or any
securities or obligations convertible into or exchangeable or exercisable
for any shares of ALP Common Stock or such securities, or (E) enter into
any agreement, understanding or arrangement with respect to the sale or
voting of ALP Common Stock;
(ii) directly or indirectly sell, transfer, lease, pledge, mortgage,
encumber or otherwise dispose of any of its material property or assets,
other than in the ordinary course of business;
(iii) make or propose any changes in the ALP Articles or the ALP
By-laws;
(iv) merge or consolidate with any other person or acquire the assets
(other than the acquisition of inventory, supplies and equipment in the
ordinary course of business) or capital stock of any other person, or enter
into any confidentiality agreement with any person in contemplation of any
of the foregoing;
(v) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an accommodation become responsible or liable for the obligations of any
other individual, corporation or other entity, other than in the ordinary
course of business consistent with past practice not in excess of $100,000
in the aggregate;
(vi) create any subsidiaries;
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(vii) enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee or otherwise increase the compensation or benefits
provided to any officer, director, consultant or employee other than salary
increases granted in the ordinary course of business consistent with past
practice to employees who are not officers or directors of ALP, and except
as may be required by Applicable Law or a binding written contract in
effect on the date of this Agreement;
(viii) enter into, adopt or amend any employee benefit or similar
plan;
(ix) change its method of doing business or change any method or
principle of accounting in a manner that is inconsistent with past
practice;
(x) settle any Actions, whether now pending or hereafter made or
brought involving an amount in excess of $100,000, or settle the Action
entitled Vital Pharma, Inc. v. Automatic Liquid Packaging, Inc., case no.
99-8163-CIV-HURLEY (S.D. Flor. - West Palm Beach Division) without the
prior written consent of Cardinal, which will not be unreasonably withheld;
(xi) write up, write down or write off the book value of any assets,
individually or in the aggregate, in excess of $100,000, except for
depreciation and amortization in accordance with generally accepted
accounting principles consistently applied;
(xii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any Contract set forth in
Section 4.18(a) of the ALP Disclosure Schedule, any other material Contract
to which ALP is a party or any confidentiality agreement to which ALP is a
party;
(xiii) incur or commit to any capital expenditures, obligations or
liabilities in respect thereof which in the aggregate exceed or would
exceed $100,000;
(xiv) make any material changes or modifications to any pricing policy
or investment policy or enter into any new management agreements or leases
on terms different from those in effect in the ordinary and usual course of
business, consistent with past practice;
(xv) pay (or agree to become obligated to pay) any professional fees
and expenses in excess of the amount set forth in Section 4.21 of the ALP
Disclosure Schedule;
(xvi) take any action to exempt or make not subject to any other state
takeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares, any person or entity
(other than Cardinal or its subsidiaries) or any action taken thereby,
which person, entity or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
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(xvii) take any action that could result in the representations and
warranties set forth in Article IV becoming false or inaccurate in any
material respect;
(xviii) enter into or carry out any other material transaction other
than in the ordinary and usual course of business;
(xix) agree in writing or otherwise to take any of the foregoing
actions.
(c) INTELLECTUAL PROPERTY MATTERS. Except as provided in Section 5.3(c) of
the ALP Disclosure Schedule, ALP shall use all reasonable efforts to preserve
its ownership rights to the Intellectual Property free and clear of any liens,
claims or encumbrances and shall use its best efforts to assert, contest and
prosecute any infringement of any issued foreign or domestic patent, trademark,
service mark, tradename or copyright that forms a part of the Intellectual
Property or any misappropriation or disclosure of any trade secret, confidential
information or know-how that forms a part of the Intellectual Property.
(d) NO SOLICITATION. ALP and each of the ALP Stockholders agree that,
during the term of this Agreement, ALP and each ALP Stockholder shall not, and
shall not authorize or permit any of ALP's directors, officers, employees,
agents or representatives to, directly or indirectly, solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
ALP, or acquisition of any capital stock of ALP or any material portion of the
assets of ALP, or any combination of the foregoing (a "Competing Transaction"),
or negotiate, explore or otherwise engage in discussions with any person (other
than Cardinal, Subcorp or their respective directors, officers, employees,
agents and representatives) with respect to any Competing Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement. Neither the Board of Directors of ALP nor any
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Cardinal, the ALP Board Recommendation, (ii)
approve or recommend, or propose publicly to approve or recommend, any Competing
Transaction or (iii) cause ALP to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Competing Transaction or proposal for a
Competing Transaction. From and after the execution of this Agreement, ALP and
each ALP Stockholder shall immediately advise Cardinal in writing of the
receipt, directly or indirectly, of any inquiries, discussions, negotiations or
proposals relating to a Competing Transaction (including the specific terms
thereof and the identity of the other party or parties involved) and promptly
furnish to Cardinal a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto.
(e) AFFILIATES OF ALP. ALP has obtained from each person who may be at the
Effective Time or was on the date hereof an "affiliate" of ALP for purposes of
Rule 145 under the Securities Act (each, an "ALP Affiliate") an Affiliate Letter
in the form of Exhibit B hereto. On the date hereof, ALP has (after consultation
with outside counsel for ALP) provided Cardinal with a letter specifying all of
the persons or entities who may be deemed to be "affiliates" of ALP under the
preceding sentence.
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(f) ACCESS; FINANCIAL STATEMENTS. ALP shall permit representatives of
Cardinal to have appropriate access at all reasonable times to ALP's premises,
properties, books, records, contracts, tax records, documents, customers and
suppliers. ALP shall deliver to Cardinal Interim Statements within 20 days
following the end of each calendar month, beginning with Interim Statements for
July 1999.
(g) NOTIFICATION OF CERTAIN MATTERS. ALP shall give prompt notice to
Cardinal of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any ALP representation or warranty contained
in this Agreement to be untrue or inaccurate at or prior to the Effective Time
and (ii) any material failure of ALP to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
5.3(g) shall not limit or otherwise affect the remedies available hereunder to
Cardinal.
(h) OTHER AGREEMENTS. ALP shall use all reasonable efforts to cause the
individual set forth in Section 5.3(h)(i) of the ALP Disclosure Schedule to
enter into a Consulting Agreement with ALP substantially in the form attached
hereto. The individuals set forth on Section 5.3(h)(ii) of the ALP Disclosure
Schedule shall enter into the agreements substantially in the form attached
hereto as Exhibits H-1 through H-5. (The agreements referred to in this Section
5.3(h) are hereinafter sometimes referred to collectively as the "Ancillary
Agreements.")
(i) TERMINATION OF AGREEMENTS. ALP shall cause prior to Closing the
termination of, and the waiver or satisfaction of all remaining obligations or
liabilities, contingent or otherwise, of ALP under, the agreements or plans
listed in Section 5.3(i) of the ALP Disclosure Schedule.
(j) CERTAIN TAX MATTERS.
(i) For each taxable period of ALP that ends before the Closing Date,
the ALP Stockholders shall cause to be timely prepared, submitted to
Cardinal for review and filed with the appropriate authorities (with copies
provided to Cardinal) all tax returns of ALP and shall cause to be paid by
the parties responsible therefor all taxes when due. Cardinal shall cause
to be prepared and filed all tax returns for ALP for tax periods not
described in the foregoing sentence of this Section 5.3(j)(i) and ALP shall
pay all taxes required to be paid for such periods.
(ii) The ALP Stockholders, ALP and Cardinal reasonably and in good
faith shall cooperate with each other in preparing and filing all tax
returns, including maintaining and making available to each other all
records necessary in connection with the preparation and filing of such tax
returns.
(iii) The ALP Stockholders shall be responsible for causing to be
filed any amended tax returns of ALP for taxable periods ending prior to
the Closing Date which are required as a result of an examination or
adjustments made by taxing authorities, and for causing to be paid by the
parties responsible therefor when due any taxes resulting therefrom. Any
such amended returns shall be furnished to Cardinal for approval (which
approval shall not be unreasonably withheld), signature and filing at least
ten (10) business days prior to the due date for the filing of such amended
returns.
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(iv) If a claim is made by any taxing authority:
(A) For any taxable period ending before the Closing Date, ALP
Stockholders shall control the proceedings taken in
connection with such claim; and
(B) For any taxable period ending on or after the Closing Date,
Cardinal shall control the proceedings taken in connection
with such claim.
Subject to the foregoing clauses (A) and (B), the parties
reasonably and in good faith shall cooperate with each other in the
contesting of any tax claim, and shall keep each other fully apprised
of the status of such claims. Notwithstanding any of the foregoing to
the contrary, Cardinal shall not without the prior written approval of
the ALP Stockholders Representative (as defined in Section 8.6) (1)
agree to an extension of the statute of limitations with respect to
any taxable period of ALP ending before the Closing Date or (2) amend
any tax return of ALP for any taxable period of ALP ending before the
Closing Date.
(v) Notwithstanding any other provision of this Agreement to the
contrary, as provided in Section 8.2(a), the ALP Stockholders shall
jointly and severally indemnify Cardinal and ALP, and hold them
harmless from and against, all liability of ALP for federal income
taxes and all interest, penalties and other costs and expenses related
thereto (including reasonable attorneys' fees) attributable to the
failure of ALP to be an "S" corporation within the meaning of Section
1361(a)(1) of the Code at all times during each taxable year included
in the period beginning April 1, 1998, and ending on the day before
the Closing Date, and for state, local and foreign income or franchise
taxes and all interest, penalties and other costs and expenses related
thereto (including reasonable attorneys' fees) attributable to any
such failure of ALP to be an S corporation under the comparable
provisions of the laws of such jurisdictions.
(k) INJUNCTIVE RELIEF. ALP acknowledges and agrees that Cardinal's and
Subcorp's remedies at law for any violation or attempted violation of any of
ALP's obligations under this Article V would be inadequate and incomplete, and
agree that in the event of any such violation or attempted violation, Cardinal
and Subcorp (or either of them) shall be entitled to a temporary restraining
order, temporary and permanent injunctions, and other equitable relief, without
the necessity of posting any bond or proving any actual damage, in addition to
all other rights and remedies which may be available to Cardinal and Subcorp
from time to time.
ARTICLE VI. CONDITIONS
SECTION 6.1 MUTUAL CONDITIONS. The obligations of the parties hereto to
consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) NO ADVERSE PROCEEDING. No temporary restraining order, preliminary or
permanent injunction or other order or decree which prevents the consummation of
the Merger
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shall have been issued and remain in effect, and no statute, rule or regulation
shall have been enacted by any Governmental Authority which prevents the
consummation of the Merger.
(b) HSR ACT. Any applicable waiting periods applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
(c) SECURITIES AND EXCHANGE COMMISSION. On the Closing Date and at the
Effective Time, no stop order or similar restraining order shall have been
threatened by the Commission or entered by the Commission or any state
securities administrator prohibiting the Merger.
(d) NO GOVERNMENT ACTION. No Action shall be instituted by any Governmental
Authority which seeks to prevent consummation of the Merger or seeking material
damages in connection with the transactions contemplated hereby which continues
to be outstanding.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF ALP. The obligations of ALP to
consummate the Merger and the transactions contemplated hereby shall be subject
to the fulfillment of the following conditions unless waived by ALP:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of each of Cardinal and Subcorp set forth in Article III shall be
true and correct in all material respects on the date hereof and on and as of
the Closing Date as though made on and as of the Closing Date, except that
representations and warranties made as of a specified date need be true and
correct only as of the specified date and, except that representations and
warranties that are qualified by concepts of materiality or Material Adverse
Effect shall be true and correct in all respects on the date hereof and on and
as of the Closing Date.
(b) PERFORMANCE OF AGREEMENT. Each of Cardinal and Subcorp shall have
performed in all material respects each obligation and agreement and shall have
complied in all material respects with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Time.
(c) CERTIFICATES. Each of Cardinal and Subcorp shall have furnished ALP
with a certificate dated the Closing Date signed on behalf of it by the
Chairman, President or any Vice President to the effect that the conditions set
forth in Sections 6.2(a) and (b) have been satisfied.
(d) OPINION OF COUNSEL. ALP shall have received the legal opinion, dated
the Closing Date, of Baker & Hostetler LLP substantially in the form attached
hereto as EXHIBIT D.
(e) NYSE AUTHORIZATION. The Cardinal Common Shares to be issued in the
Merger and the transactions contemplated hereby shall have been authorized for
inclusion on the NYSE, subject to official notice of issuance.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF CARDINAL AND SUBCORP. The
obligations of Cardinal and Subcorp to consummate the Merger and the other
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions unless waived by each of Cardinal and Subcorp:
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(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of ALP and the ALP Stockholders set forth in Article IV shall be true
and correct in all material respects on the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date, except that
representations and warranties made as of a specified date need be true and
correct only as of the specified date and except that representations and
warranties qualified by concepts of materiality or Material Adverse Effect shall
be true and correct in all respects on the date hereof and on and as of the
Closing Date.
(b) PERFORMANCE OF AGREEMENT. ALP and the ALP Stockholders shall have
performed in all material respects each obligation and agreement and shall have
complied in all material respects with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Time.
(c) CERTIFICATE. ALP shall have furnished Cardinal with a certificate dated
the Closing Date signed on its behalf by its Chairman, President or any Vice
President, and each ALP Stockholder shall have furnished Cardinal with a
certificate dated the Closing Date, to the effect that the conditions set forth
in Sections 6.3(a) and (b) have been satisfied.
(d) OPINION OF COUNSEL. Cardinal shall have received the legal opinion,
dated the Closing Date, of Schwartz & Freeman, substantially in the form
attached hereto as EXHIBIT E.
(e) POOLING LETTER. Cardinal shall have received a letter, in form and
substance reasonably satisfactory to Cardinal, from Deloitte & Touche LLP dated
the date of the Effective Time stating that they concur with management's
conclusion that the Merger will qualify as a transaction to be accounted for by
Cardinal in accordance with the pooling-of-interests method of accounting under
the requirements of APB No. 16.
(f) AFFILIATE LETTERS. Each ALP Affiliate shall have executed and delivered
to Cardinal an Affiliate Letter in accordance with Section 5.3(e).
(g) CONSENTS AND APPROVALS. ALP shall have received all customer, vendor,
lessee, licensee, licensor and other third party consents and approvals listed
on Section 6.3(g) of the ALP Disclosure Schedule.
(h) ESCROW AGREEMENT. ALP, Cardinal, the Escrow Agent and all of the ALP
Stockholders shall have executed and delivered the Escrow Agreement.
(i) STOCKHOLDERS RELEASE. Each of the ALP Stockholders shall have executed
and delivered to Buyer a Release, dated as of the Effective Time, in the form of
EXHIBIT F attached hereto.
(j) CERTAIN AGREEMENTS. The Ancillary Agreements referenced in Section
5.3(h) of the Agreement shall have been executed and delivered by all the
parties thereto, and the Employment Agreements dated the date hereof between ALP
and each of Frank N. Leo and Gregory J. Lapkoff (the "Employment Agreements")
shall remain in full force and effect according to their terms as of the
Closing.
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(k) TERMINATION OF CERTAIN AGREEMENTS. As of or prior to the Closing, the
agreements and plans listed in Section 5.3(i) of the ALP Disclosure Schedule
shall have been effectively terminated and all of ALP's obligations and
liabilities, contingent or otherwise, thereunder shall have been satisfied or
irrevocably waived by the other parties thereto or the participants therein.
(l) PROSPECTUS. The Prospectus, including the documents incorporated by
reference therein, shall not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(m) WEILER ENGINEERING AGREEMENT. The Agreement between ALP and Weiler
Engineering, Inc. ("Weiler Engineering") in the form attached hereto as EXHIBIT
G shall have been executed and delivered by the parties thereto on or prior to
the Effective Time.
(n) NO NOTICE FROM CUSTOMERS. Neither ALP nor any ALP Stockholder shall
have received notice from any of ALP's three largest customers (based on net
revenue for calendar year 1998) that it has terminated or intends to terminate
its relationship with ALP.
(o) NET WORTH. The shareholders' equity of ALP as reflected in the July 31,
1999 Interim Statements shall equal or exceed $110,000,000.
(p) REAL ESTATE MATTERS. With respect to each parcel of real property owned
by ALP, ALP shall have obtained and delivered to Cardinal (i) a title insurance
policy in an amount reasonably determined by Cardinal (the "Policy") based on a
title commitment for an ALTA Form B Owners Policy of Title Insurance issued by a
title insurance company selected by Cardinal, which Policy shall be in form and
content satisfactory to Cardinal and (ii) current surveys prepared by a surveyor
selected by Cardinal, which surveys (y) shall conform to Minimum Standard Detail
Requirements for ALTA/ACSM Title Surveys and (z) shall not disclose any survey
defect or encroachment from or onto any of such real property.
(q) TERMINATION AND RELEASE. The Termination and Release Agreement dated
August 3, 1999, among John Feltes, individually and as trustee, Barbara Feltes,
individually and as trustee (collectively, "Feltes"), and ALP (the "Feltes
Agreement") pursuant to which Feltes releases all claims against ALP, except as
provided in Section 5(b) thereof, shall be in full force and effect, and ALP
shall have paid all amounts required to be paid thereunder.
(r) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been any change in the assets, liabilities, business, prospects,
results of operations or financial condition of ALP which would constitute a
Material Adverse Effect or any event, occurrence or development which would have
a material adverse effect on the ability of ALP to consummate the transactions
contemplated hereby.
(s) PLAN AMENDMENT. ALP shall have amended the Automatic Liquid Packaging,
Inc. Employees 401(k) Savings Plan (the "ALP Plan") to adopt a non-standardized
prototype plan document as an amendment and restatement effective as of January
1, 1997, of the ALP Plan.
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ARTICLE VII. TERMINATION AND AMENDMENT
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by the ALP Stockholders:
(a) by mutual consent of Cardinal and ALP;
(b) by either Cardinal or ALP if any permanent injunction or other order of
a court or other competent Governmental Authority preventing the consummation of
the Merger shall have become final and nonappealable;
(c) by either Cardinal or ALP if the Merger shall not have been consummated
before December 31, 1999, unless extended by the Boards of Directors of both
Cardinal and ALP (provided that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party whose failure or whose
affiliate's failure to perform any material covenant or obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date);
(d) by Cardinal if the Board of Directors of ALP shall withdraw, modify or
change the ALP Board Recommendation in a manner adverse to Cardinal, or if the
Board of Directors of ALP shall have refused to affirm the ALP Board
Recommendation within two business days of any written request from Cardinal;
(e) by ALP if the Board of Directors of Cardinal shall withdraw, modify or
change its approval of this Agreement and the transactions contemplated hereby
in a manner adverse to ALP, or if the Board of Directors of Cardinal shall have
refused to affirm such approval within two business days of any written request
from ALP;
(f) by Cardinal if at any time the representations and warranties of ALP
set forth in Section 4.16 shall not be true and correct or Cardinal shall have
been advised that the condition set forth in Section 6.3(e) cannot be satisfied.
SECTION 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of this Section 7.2 and Section 9.10, shall become void and have no
effect, without any liability on the part of any party or its directors,
officers or stockholders. Notwithstanding the foregoing, nothing in this Section
7.2 shall relieve any party to this Agreement of liability for a material breach
of any provision of this Agreement.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors;
provided, however, that no amendment shall be made which by law requires further
approval or authorization by the ALP Stockholders without such further approval
or authorization. Notwithstanding the foregoing, this Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
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SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
Cardinal (with respect to ALP) and ALP (with respect to Cardinal and Subcorp) by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII. INDEMNIFICATION
SECTION 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Subject to the limitations set forth in Section 8.3, below, and
notwithstanding any investigation conducted at any time with regard thereto by
or on behalf of Cardinal or ALP, all representations, warranties, covenants and
agreements of ALP or Cardinal in this Agreement and in any other documents
executed or delivered by ALP or Cardinal pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement (the "Additional
Documents") shall survive the execution, delivery and performance of this
Agreement and the Additional Documents. All representations and warranties of
ALP or Cardinal set forth in this Agreement and in the Additional Documents
shall be deemed to have been made again by ALP or Cardinal, as the case may be,
at and as of the Effective Time (except for representations and warranties made
as of a specified date, which shall be deemed to have been made only as of the
specified date). This Section 8.1 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time or after the termination of this Agreement.
(b) As used in this Article VIII, any reference to a representation,
warranty or covenant contained in any section of this Agreement shall include
the section of the Disclosure Schedule relating to such section.
SECTION 8.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in Sections 8.3 and 8.8 below, the
ALP Stockholders, jointly and severally, shall indemnify and hold harmless
Cardinal from and against any and all losses, liabilities, damages, demands,
claims, suits, actions, judgments or causes of action, assessments, costs and
expenses, including, without limitation, interest, penalties, attorneys' fees,
any and all expenses incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation (collectively,
"Damages"), asserted against, resulting to, imposed upon, or incurred or
suffered by Cardinal, directly or indirectly, as a result of or arising from (i)
any inaccuracy in or breach or nonfulfillment of, or any alleged inaccuracy in
or breach or nonfulfillment of, any of the representations, warranties,
covenants or agreements made by ALP or any ALP Stockholder in this Agreement or
the Additional Documents, whether or not arising out of a third-party claim, or
any claim or other occurrence or circumstance that is or was inconsistent with
any such representations, warranties, covenants or agreements, (ii) any product
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shipped or manufactured by, or any services provided by, ALP prior to the
Effective Time, (iii) the installation or operation of any machinery or
equipment sold by Weiler Engineering to or through ALP (whether used and
operated by ALP or sold to third parties) or any engineering or technical
support services provided by Weiler Engineering to ALP or any customers of ALP,
(iv) any liabilities to any party under the Feltes Agreement (other than
liabilities for salary continuation payments expressly provided for therein), or
any other liability whatsoever to Feltes (including, without limitation, under
the Founding Officers Agreement (as defined in the ALP Disclosure Schedule
(collectively, "Feltes Liabilities"), (v) any inaccuracy in or breach of, or any
alleged inaccuracy in or breach of, the representation and warranty made by ALP
in Section 4.17(g), without regard to any disclosures regarding or limitations
on such representation or warranty in any Section of the ALP Disclosure Schedule
(collectively, "Controlled Group Liabilities"), and (vi) any liabilities of the
type described in Section 5.3(j)(v) (collectively, "Indemnifiable Claims" when
used in the context of Cardinal as the Indemnified Party as defined in Section
8.3(c)).
(b) Subject to the limitations set forth in Section 8.3 and 8.8, Cardinal
hereby covenants and agrees to indemnify and hold harmless the ALP Stockholders,
from and after the Effective Time, from and against any and all Damages,
asserted against, resulting to, imposed upon, or incurred or suffered by ALP or
the ALP Stockholders, directly or indirectly, as a result of or arising from any
inaccuracy in or breach or nonfulfillment of, or any alleged inaccuracy in or
breach or nonfulfillment of, any of the representations and warranties made by
Cardinal in this Agreement (collectively, "Indemnifiable Claims" when used in
the context of ALP or the ALP Stockholders as the Indemnified Party).
(c) For purposes of this Article VIII, all Damages shall be computed (i)
net of any insurance coverage which reduces the Damages that would otherwise be
sustained; provided that in all cases the timing of the receipt or realization
of insurance proceeds shall be taken into account in determining the amount of
reduction of Damages and (ii) net of the present value of the reasonably
expected tax savings to the Indemnified Party of the Damages paid or incurred
grossed-up by the reasonably expected tax cost of the amount that but for this
subparagraph would be received by the Indemnified Party in satisfaction of the
Indemnifiable Claim.
(d) Cardinal shall be deemed to have suffered Damages arising out of or
resulting from the matters referred to in Section 8.2(a) if the same shall be
suffered by any parent, subsidiary or affiliate of Cardinal, including, without
limitation, the Surviving Corporation after the Effective Time.
SECTION 8.3 LIMITATIONS ON INDEMNIFICATION. Rights to indemnification
under this Article VIII are subject to the following limitations:
(a) Neither Cardinal nor ALP nor the ALP Stockholders shall be entitled to
indemnification hereunder with respect to an Indemnifiable Claim (or, if more
than one such Indemnifiable Claim is asserted, with respect to all such
Indemnifiable Claims) unless the aggregate amount of Damages with respect to
such Indemnifiable Claim or Claims exceeds $750,000 (the "Threshold"), in which
event Cardinal shall be entitled to indemnification hereunder from the ALP
Stockholders and the ALP Stockholders shall be entitled to indemnification from
Cardinal for Damages with respect to all Indemnifiable Claims in excess of
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the Threshold up to the amount equal to fifteen percent (15%) of the Aggregate
Consideration (the "Cap"); provided, however, that any Damages with respect to
an Indemnifiable Claim arising from any Controlled Group Liability or any Feltes
Liability shall not be subject to or applied toward the Threshold and Cardinal
shall be entitled to indemnification for the entire amount of said Damages up to
the amount of the Cap. In addition, Cardinal's right to indemnification and the
ALP Stockholders' responsibility for any Damages relating to any Feltes
Liability shall not apply to the Cap until, and then only to the extent that,
the amount of Damages arising from the Feltes Liability for which the ALP
Stockholders have indemnified Cardinal exceeds an amount equal to five percent
(5%) of the Aggregate Consideration.
(b) The obligation of indemnity with respect to the representations and
warranties set forth in Article III and in Article IV shall terminate on the
earlier of (i) the date on which Cardinal's audited financial statements for the
first fiscal year ending after the Effective Time are issued and (ii) the first
anniversary of the Effective Time.
(c) The foregoing provisions of this Section 8.3 notwithstanding, if, prior
to the termination of any obligation to indemnify, written notice of a claimed
breach or other occurrence or matter giving rise to a claim of indemnification
is given by the Party seeking indemnification (the "Indemnified Party") to the
Party from whom indemnification is sought (the "Indemnifying Party"), or a suit
or action based upon a claimed breach is commenced against the Indemnifying
Party, the Indemnified Party shall not be precluded from pursuing such claimed
breach, occurrence, other matter, or suit or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim, suit
or action, by reason of the termination otherwise provided for above.
SECTION 8.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY
CLAIMS.
(a) If the Indemnified Party determines to seek indemnification under this
Article VIII with respect to Indemnifiable Claims resulting from the assertion
of liability by third parties, it shall give notice to the Indemnifying Party
within 60 days of the Indemnified Party's becoming aware of any such
Indemnifiable Claim, which notice shall set forth such material information with
respect to such Indemnifiable Claim as is then reasonably available to the
Indemnified Party. If any such liability is asserted against the Indemnified
Party and the Indemnified Party notifies the Indemnifying Party of such
liability, the Indemnifying Party shall be entitled, if it so elects by written
notice delivered to the Indemnified Party within 15 days after receiving the
Indemnified Party's notice, to assume the defense of such asserted liability
with counsel reasonably satisfactory to the Indemnified Party unless the
Indemnifying Party fails to provide reasonable assurance to the Indemnified
Party of its financial capacity to assume such defense. If the Indemnifying
Party elects to assume the defense of such asserted liability, the claims made
by such third party shall be conclusively established as being within the scope
of and subject to the indemnification provisions of this Agreement.
Notwithstanding the foregoing: (i) the Indemnified Party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be payable by the Indemnified Party; (ii) the Indemnified Party
shall not have any obligation to give any notice of any assertion of liability
by a third party unless such assertion is in writing; and (iii) the rights of
the Indemnified Party to be indemnified in respect of Indemnifiable Claims
resulting from the assertion of liability by third parties shall not be
adversely affected by its failure to give notice pursuant to the foregoing
provisions unless,
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and, if so, only to the extent that, the Indemnifying Party is materially
prejudiced by such failure. With respect to any assertion of liability by a
third party that results in an Indemnifiable Claim, the Parties shall make
available to each other all relevant information in their possession which is
material to any such assertion.
(b) In the event that the Indemnifying Party fails to assume the defense of
the Indemnified Party against any such Indemnifiable Claim, within 15 days after
receipt of the Indemnified Party's notice of such Indemnifiable Claim, the
Indemnified Party shall have the right to defend, compromise or settle such
Indemnifiable Claim on behalf, for the account, and at the risk of the
Indemnifying Party.
(c) Notwithstanding anything in this Section 8.4 to the contrary, (i) if
there is a reasonable probability that an Indemnifiable Claim may materially and
adversely affect the Indemnified Party, its corporate parent, if any, its
subsidiaries or affiliates, including, without limitation, the Surviving
Corporation after the Effective Time if Cardinal is the Indemnified Party, other
than as a result of money damages or other money payments, then the Indemnified
Party shall have the right, at the cost and expense of the Indemnifying Party,
to defend, compromise or settle such Indemnifiable Claim; and (ii) the
Indemnifying Party shall not, without the Indemnified Party's prior written
consent, settle or compromise any Indemnifiable Claim or consent to entry of any
judgment in respect of any Indemnifiable Claim unless such settlement,
compromise or consent (A) includes as an unconditional term the giving by the
claimant or the plaintiff to the Indemnified Party (and its corporate parent, if
any, its subsidiaries and affiliates including, without limitation, the
Surviving Corporation after the Effective Time if Cardinal is the Indemnified
Party) a release from all liability in respect of such Indemnifiable Claim and
(B) does not include a finding or admission by ALP or Cardinal of any violation
of Applicable Laws or any violation of the rights of any person.
SECTION 8.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD
PARTY CLAIMS. In the event that the Indemnified Party asserts the existence of
an Indemnifiable Claim giving rise to Damages (but excluding Indemnifiable
Claims resulting from the assertion of liability by third parties, but including
a dispute among the parties as to whether a third-party claim is subject to
indemnification under this Article VIII), it shall give written notice to the
Indemnifying Party specifying the nature and amount of the Indemnifiable Claim
asserted. If the Indemnifying Party, within 20 business days after the mailing
of such notice by the Indemnified Party, has not given written notice to the
Indemnified Party announcing its intent to contest such assertion by the
Indemnified Party, such assertion shall be deemed accepted and the amount of
Indemnifiable Claim shall be deemed a valid Indemnifiable Claim. In the event,
however, that the Indemnifying Party contests the assertion of an Indemnifiable
Claim by giving such written notice to the Indemnified Party within such 20-day
period, then if the Parties, acting in good faith, cannot reach agreement with
respect to such Indemnifiable Claim within 30 business days after receipt by the
Indemnified Party of such notice, the contested assertion of the claim shall be
referred to arbitration in Columbus, Ohio, in accordance with the then-current
rules of the American Arbitration Association. The determination made in
accordance with such rules shall be delivered in writing to the Parties and
shall be final and binding and conclusive on the Parties and the amount of the
Indemnifiable Claim, if any, determined to exist shall be a valid Indemnifiable
Claim. Each Party shall pay its own legal, accounting and other fees in
connection with such a contest; provided that if the contested claim is referred
to and ultimately
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determined by arbitration, the legal, auditing and other fees of the prevailing
Party and the fees and expenses of any arbitrator shall be borne by the
nonprevailing Party.
SECTION 8.6 ALP STOCKHOLDERS REPRESENTATIVE. The ALP Stockholders
hereby irrevocably appoint Gerhard H. Weiler (the "ALP Stockholders
Representative") to act on behalf of the ALP Stockholders with respect to all
matters relating to this Article VIII and the Escrow Agreement, including,
without limitation, in considering and certifying the amount of any
indemnification hereunder, in communicating with the ALP Stockholders, in
appointing a successor Escrow Agent under the Escrow Agreement, in considering
and acting with respect to any amendment or termination of this Agreement, and
generally in performing all acts expressly required or permitted to be performed
by the ALP Stockholders Representative pursuant hereto and pursuant to the
Escrow Agreement. Cardinal and the Escrow Agent shall have the right to deal
exclusively with the ALP Stockholders Representative with respect to all matters
under the Escrow Agreement and neither Cardinal nor the Escrow Agent shall have
any liability to any ALP Stockholder for any acts or omissions of the ALP
Stockholders Representative, or any acts or omissions taken or not taken by
Cardinal or the Escrow Agent at the direction of the ALP Stockholders
Representative, including, but not limited to (i) any acts or omissions relating
to the voting of any Retained Shares or (ii) the transferring or the failure to
transfer any shares or funds released from escrow. Upon any distribution of
Cardinal Common Shares or other funds to the ALP Stockholders Representative (or
to one or more of the ALP Stockholders upon written instruction of the ALP
Stockholders Representative) in accordance with the Agreement, the Escrow Agent
and Cardinal shall be deemed to have fully satisfied any and all obligations to
the ALP Stockholders under this Agreement and the Escrow Agreement with respect
to the amount of such distribution. The ALP Stockholders Representative will
have no liability to ALP or the ALP Stockholders with respect to actions taken
or omitted to be taken in his capacity as ALP Stockholders Representative,
except with respect to any liability resulting primarily from the ALP
Stockholders Representative's gross negligence or willful misconduct. The ALP
Stockholders Representative shall be entitled to rely upon any directions
received from holders (the "Majority Holders") of a majority of the ALP Common
Stock.
SECTION 8.7 VALUATION OF SHARES RELEASED FROM ESCROW. For purposes of
determining the number of Retained Shares which shall be necessary to satisfy an
Indemnifiable Claim against the ALP Stockholders, each Escrowed Share (as
defined in the Escrow Agreement) shall be deemed to have a value equal to the
last reported sale price of Cardinal Common Shares on the New York Stock
Exchange on the trading day immediately preceding the Closing Date (subject to
equitable adjustment for stock splits, reclassifications, combinations,
reorganizations or other similar changes). Indemnifiable Claims against the ALP
Stockholders shall be made first against the Retained Shares. After all of the
Retained Shares have been used to satisfy such Indemnifiable Claims, Cardinal
shall be entitled to make additional Indemnifiable Claims directly against the
ALP Stockholders.
SECTION 8.8 TERMINATION OF ALP'S WARRANTIES. Notwithstanding any
provisions of this Agreement to the contrary: (a) all representations,
warranties and covenants made by ALP in this Agreement or the Additional
Documents shall terminate as to ALP (but only as to ALP, and not as to the ALP
Stockholders) as of the Closing; and (b) after the Closing, ALP shall not have
any obligation or liability to any ALP Stockholder as a direct or indirect
result of any
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misrepresentation, breach of covenant or other occurrence or circumstance for
which the ALP Stockholders have or may have liability to Cardinal under this
Agreement.
ARTICLE IX. MISCELLANEOUS
SECTION 9.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Cardinal or Subcorp:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: General Counsel
Telecopy No.: (614) 757-6948
with a copy to:
John M. Gherlein, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Telecopy No.: (216) 696-0740
(b) if to ALP:
Automatic Liquid Packaging, Inc.
2200 Lake Shore Drive
Woodstock, Illinois 60098
Attention: Gerhard H. Weiler
Telecopy No.: (815) 338-5504
with a copy to
Stuart Duhl, Esq.
Schwartz & Freeman
401 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Telecopy No.: (312) 222-0818
SECTION 9.2 INTERPRETATION. When a reference is made in this Agreement
to an Article or Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The headings and the table of
contents contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. For the
purposes of any provision of this Agreement, a "Material Adverse Effect" with
respect to any party shall mean a material adverse effect on the assets,
liabilities, results of operations, prospects or condition (financial or
otherwise) of such party and its subsidiaries taken
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as a whole. For purposes of this Agreement, a "subsidiary" of any person means
another person, an amount of the voting securities or other voting ownership or
voting partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting securities or interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person. For the purposes of this
Agreement, the "Knowledge" of ALP shall mean the actual knowledge of facts,
matters or circumstances of the officers and directors of ALP, or in the absence
of such knowledge, the actual knowledge that such individuals would have had if
they had undertaken a reasonable investigation of the fact, matter or
circumstance in question.
SECTION 9.3 COUNTERPARTS. This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
SECTION 9.4 ENTIRE AGREEMENT. This Agreement (including the documents
and the instruments referred to herein), constitutes the entire agreement among
the parties and supersede all prior agreements and understandings, agreements or
representations by or among the parties, written and oral, with respect to the
subject matter hereof and thereof.
SECTION 9.5 THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries.
SECTION 9.6 GOVERNING LAW. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of laws. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any Ohio state or federal court sitting in the City of
Columbus.
SECTION 9.7 CONSENT TO JURISDICTION; VENUE.
(a) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Ohio and to the jurisdiction of the United
States District Court for the Southern District of Ohio, for the purpose of any
action or proceeding arising out of or relating to this Agreement and each of
the parties hereto irrevocably agrees that all claims in respect to such action
or proceeding may be heard and determined exclusively in any Ohio state or
federal court sitting in the City of Columbus. Each of the parties hereto agrees
that a final judgment in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each of the parties hereto irrevocably consents to the service of any
summons and complaint and any other process in any other action or proceeding
relating to the Merger, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 9.7
shall affect the right of any party hereto to serve legal process in any other
manner permitted by law.
SECTION 9.8 SPECIFIC PERFORMANCE. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in
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addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided such party is
not in material default hereunder.
SECTION 9.9 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 9.10 EXPENSES. Subject to the provisions of Section 7.2,
Cardinal shall be responsible for all costs and expenses incurred by Cardinal
and Subcorp in connection with this Agreement and the transactions contemplated
hereby and ALP, both before and after the Effective Time, shall be responsible
for such reasonable costs and expenses incurred by the ALP Stockholders in
connection with this Agreement and the transactions contemplated hereby, subject
to Section 5.3(b)(xv).
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<PAGE> 52
[Signature page to Agreement and Plan of Merger.]
IN WITNESS WHEREOF, Cardinal, Subcorp, ALP and the ALP
Stockholders have signed this Agreement as of the date first written above.
CARDINAL HEALTH, INC.
By: /s/ John C. Kane
-----------------------------------
Name: John C. Kane
---------------------------
Title: President and COO
---------------------------
FLOWER MERGER CORP.
By: /s/ John C. Kane
-----------------------------------
Name: John C. Kane
---------------------------
Title: President
---------------------------
AUTOMATIC LIQUID PACKAGING, INC.
By: /s/ Gerhard H. Weiler
-----------------------------------
Name:
---------------------------
Title:
---------------------------
THE ALP STOCKHOLDERS
/s/ Gerhard H. Weiler
------------------------------------
Gerhard H. Weiler, as the ALP Stockholders
Representative and as Trustee of the Gerhard H.
Weiler Dec. of Trust dated 9/3/93
/s/ Patricia Weiler
------------------------------------
Patricia Weiler
/s/ Lisa Hoffman
------------------------------------
Lisa Hoffman
<PAGE> 53
[Signature page to Agreement and Plan of Merger.]
/s/ Amy Weiler
------------------------------------
Amy Weiler
/s/ Siegfried Weiler
------------------------------------
Siegfried Weiler
/s/ Ruth Weiler
------------------------------------
Ruth Weiler
/s/ Kurt A. Weiler
------------------------------------
Kurt A. Weiler, individually and as Trustee
of the Kurt A. Weiler Gift Trust
/s/ Anita W. Reiche
------------------------------------
Anita W. Reiche, individually and as
Trustee of the Anita W. Reiche Gift Trust
/s/ Carol J. Zolp
------------------------------------
Carol J. Zolp
/s/ Lori Brockrogge
------------------------------------
Lori Brockrogge
/s/ Frank N. Leo
------------------------------------
Frank N. Leo
/s/ Stanley Nowak
------------------------------------
Stanley Nowak
/s/ Arjun Ramrakhyani
------------------------------------
Arjun Ramrakhyani
<PAGE> 54
FINAL
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of
_____________ ___, 1999, by and among Cardinal Health, Inc., an Ohio corporation
("Cardinal"), Automatic Liquid Packaging, Inc., an Illinois corporation ("ALP"),
Gerhard H. Weiler (the "ALP Stockholders Representative"), Bank One Trust
Company, NA, a national banking association, as escrow agent (the "Escrow
Agent"), and the undersigned stockholders of ALP ("ALP Stockholders").
PRELIMINARY STATEMENTS:
A. Cardinal, ALP, Flower Merger Corp., an Illinois corporation
("Subcorp"), and the ALP Stockholders have entered into an Agreement and Plan of
Merger dated as of August ___, 1999 (the "Merger Agreement"), providing for,
among other things, Cardinal's acquisition of the businesses operated by ALP
through the merger of Subcorp with and into ALP, with ALP as the surviving
corporation, in accordance with the terms and conditions of the Merger
Agreement.
B. Capitalized terms used but not otherwise defined herein
shall have the respective meanings given them in the Merger Agreement.
C. Pursuant to the Merger Agreement, the ALP Stockholders are
obligated to indemnify Cardinal for certain damages.
D. To facilitate such indemnification, the Merger Agreement
provides for the deposit into escrow of a portion of the Cardinal Common Shares
otherwise to be issued to the ALP Stockholders in the Merger in order to secure
the indemnification obligations of the ALP Stockholders.
E. Cardinal and the ALP Stockholders desire to secure the
services of the Escrow Agent, and the Escrow Agent is willing to provide such
services, pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
SECTION I
APPOINTMENT OF ESCROW AGENT; RESIGNATION AND SUCCESSOR
1.1 Appointment of Escrow Agent. The Escrow Agent is hereby
appointed, and accepts its appointment and designation as, Escrow Agent pursuant
to the terms and conditions of this Agreement.
<PAGE> 55
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1.2 Resignation of Escrow Agent; Appointment of Successor. The
Escrow Agent acting at any time hereunder may resign at any time by giving at
least 30 days' prior written notice of resignation to Cardinal and the ALP
Stockholders Representative, such resignation to be effective on the date
specified in such notice. Upon receipt of such notice, Cardinal shall, unless
otherwise agreed between Cardinal and the ALP Stockholders Representative,
appoint a bank or trust company with a combined capital and surplus of at least
$100 million as successor Escrow Agent, by a written instrument delivered to
such Escrow Agent and the ALP Stockholders Representative, whereupon such
successor Escrow Agent shall succeed to all the rights and obligations of the
retiring Escrow Agent as of the effective date of resignation as if originally
named herein. Upon such assignment of this Escrow Agreement, the retiring Escrow
Agent shall duly transfer and deliver the Escrow Deposit at the time held by the
retiring Escrow Agent, provided that, if no successor Escrow Agent shall have
been appointed on the effective date of resignation of the resigning Escrow
Agent hereunder, the resigning Escrow Agent may pay the Escrow Deposit into a
court of competent jurisdiction.
SECTION II
ESCROW ARRANGEMENTS
2.1 Liability Secured by the Escrow Deposit. This Escrow
Agreement has been executed and delivered and the Escrow Account (as defined in
Section 2.2(d)) is hereby established to facilitate any indemnification which
may be owed to Cardinal pursuant to Article VIII of the Merger Agreement. The
Escrow Deposit (as defined below), including any Additional Property (as defined
below), deposited into the Escrow Account in respect of such shares (hereinafter
referred to collectively as the "Escrowed Amount"), will be available to satisfy
claims of Cardinal in accordance with Section 3.1 hereof.
2.2 Delivery of the Escrowed Shares; etc. (a) On the Closing
Date, Cardinal shall issue instructions to its transfer agent directing it to
issue and deliver to the Escrow Agent certificates bearing any appropriate
legends registered in the name of the "Escrow Agent under Escrow Agreement,
dated ____________ __, 1999, by and among Cardinal Health, Inc., an Ohio
corporation, Automatic Liquid Packaging, Inc., an Illinois corporation, ALP
Stockholders Representative, Bank One Trust Company, NA, a national banking
association, and the ALP Stockholders," for the applicable number of Cardinal
Common Shares determined in accordance with Section 2.1(d) of the Merger
Agreement (such Shares, together with any additional Cardinal Common Shares
distributed in an extraordinary dividend with respect thereof pursuant to any
stock split (or deposited with respect to any such stock split shares), and any
cash deposited into the Escrow Account pursuant to Section 2.2(b), collectively,
the "Escrowed Shares"). From time to time, Cardinal shall also deliver to the
Escrow Agent for deposit into the Escrow Account all Cardinal Common Shares
distributed pursuant to any stock dividend, reclassification of shares or other
transaction to which such shares may be subject, and any other securities, cash
or other property distributed in an extraordinary dividend with respect of the
Escrowed Shares (whether by way of liquidation, merger, exchange, spin-off or
otherwise), any investments or securities permitted by this Agreement and any
interest received thereon (collectively, the "Additional Property"). (The
Escrowed Shares, together with the Additional Property, shall constitute the
"Escrow Deposit.") From time to time, Cardinal shall also deliver to the Escrow
Agent for
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FINAL
prompt distribution to the ALP Stockholders all cash dividends on the Escrowed
Shares, such distributions to be made pro rata to the ALP Stockholders in
accordance with their respective ownership as reflected on the then current
ownership Certificate (as hereinafter defined). Notwithstanding any other
provision of this Agreement to the contrary, whenever Escrowed Shares are to be
distributed pursuant to this Agreement, except for distributions made pursuant
to Section 2.2(b), there shall be distributed to the party entitled to such
Escrowed Shares, concurrently with the delivery of such Escrowed Shares, the
Additional Property relating thereto. The parties agree that all such
distributions of Additional Property and cash dividends made to the ALP
Stockholders in respect of such Escrowed Shares, including, without limitation,
all such interest and all other income earned on such shares, shall be interest
and income of the ALP Stockholders and shall be reported for federal, state and
local tax purposes as for the accounts of the ALP Stockholders, pro rata in
accordance with their respective ownership as reflected on the then current
Ownership Certificate.
(b) Subject to applicable state and federal securities laws,
each ALP Stockholder, at any time and from time to time during the term of this
Agreement, shall have the right to require the ALP Stockholders Representative
to sell up to the number of Escrowed Shares owned by such ALP Stockholder as
reflected in the Ownership Certificate, and the proceeds of any such sale shall
be deposited in and become part of the Escrow Deposit. Upon any such sale, the
Escrow Agent shall open a separate subaccount for such ALP Stockholder and the
proceeds of such sale shall be reflected on the Ownership Certificate as owned
by and allocable to such ALP Stockholder and shall be treated as Escrowed Shares
for purposes of this Agreement. As provided in Section 8.7 of the Merger
Agreement, for purposes of determining the number of Escrowed Shares which shall
be necessary to satisfy an Indemnifiable Claim against the ALP Stockholders,
each Escrowed Share is deemed to have a value equal to the last reported sale
price of Cardinal Common Shares on the New York Stock Exchange on the trading
day immediately preceding the Closing Date. Accordingly, the proceeds from the
sale of an Escrowed Share sold pursuant to this Section 2.2(b) shall be deemed
to have a value equal to the last reported sale price of a Cardinal Common Share
on the New York Stock Exchange on the trading day immediately preceding the
Closing Date. For example, if such last reported sale price on the trading day
immediately preceding the Closing is $73.00 and an Escrowed Share is sold out of
escrow for $83.00, the $83.00 in cash proceeds shall be deemed to have a value
of $73.00 for purposes of satisfying an Indemnifiable Claim. Similarly, if
Escrowed Shares are sold for $63.00, the $63.00 proceeds shall be deemed to have
a value of $73.00 in satisfying any Indemnifiable Claim. Upon receipt of the
proceeds of the sale of Escrowed Shares as described above, together with a
certified Form W-9 and such other information as the Escrow Agent may reasonably
require, the Escrow Agent shall release such Substituted Shares to the ALP
Stockholders Representative on behalf of such ALP Stockholder.
(c) On the Closing Date, the ALP Stockholders Representative
shall deliver to the Escrow Agent a written certificate setting forth the
respective ownership interests of each ALP Stockholder with respect to the
Escrowed Shares (as the same may be amended from time to time in accordance with
the next sentence, the "Ownership Certificate"). The Ownership Certificate may
be amended from time to time by written certificate executed by the ALP
Stockholders Representative and delivered to the Escrow Agent.
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FINAL
(d) The Escrow Agent shall hold the Escrow Deposit in an
escrow account (the "Escrow Account") for the benefit of the ALP Stockholders
and Cardinal. The Escrow Deposit shall not be subject to any lien or attachment
of any creditor or any party thereto, and shall be used solely for the purposes
and subject to the conditions set forth in this Agreement and the Merger
Agreement.
2.3 Investment of the Escrow Deposit. Except for the sale of
the Escrowed Shares pursuant to Section 2.2(b) and the release of the Escrow
Deposit pursuant to Section 3 hereof, the Escrow Agent shall not sell or
transfer any of the Escrowed Shares. The Escrow Agent is hereby authorized and
directed to invest any cash contained in the Escrow Deposit in the following
obligations (collectively, the "Permitted Investments"):
(a) obligations of, or fully guaranteed as to timely payment
of principal and interest by, the United States of America;
(b) such money market funds as are agreed to from time to time
by Cardinal and the ALP Stockholders Representative; and
(c) certificates of deposit with any bank or trust company
organized under the laws of the United States of America or any agency or
instrumentality thereof or under the laws of any state thereof which has a
combined capital and surplus of at least $100,000,000.
Subject to the foregoing limitations, the Escrow Agent shall
invest any such cash in accordance with written instructions delivered to it by
the ALP Stockholders Representative from time to time. Except as provided above,
the Escrow Agent shall have no power or duty to invest the Escrow Deposit or to
make substitutions therefor or to sell, transfer or otherwise dispose of
investments acquired hereunder.
2.4 Right to Vote the Escrowed Shares. The ALP Stockholders
Representative, on behalf of and at the direction of the ALP Stockholders, shall
have the right to direct the Escrow Agent in a writing signed by the ALP
Stockholders Representative to exercise the voting rights pertaining to all or a
portion of the Escrowed Shares that remain in the Escrow Account. The Escrow
Agent shall comply with any such directions. In the absence of direction from an
ALP Stockholder, the Escrowed Shares allocable to such ALP Stockholder shall not
be voted.
SECTION III
RELEASE OF THE ESCROW DEPOSIT
3.1 Distributions for Indemnification. (a) At any time prior
to the earlier of (x) the date on which Cardinal's audited financial statements
for the first fiscal year ending after the Effective Time are issued and (y) the
first anniversary of the Effective Time (the "Escrow Date"), Cardinal may
deliver to the Escrow Agent (with a copy to the ALP Stockholders Representative)
a certificate (a "Notice of Claim") (i) stating that Cardinal believes that it
may be entitled to indemnification pursuant to Article VIII of the Merger
Agreement (an "Indemnification Obligation"), (ii) stating the aggregate amount
(the "Claim Amount") of such
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FINAL
Indemnification Obligation (or, in the case of an unliquidated or uncertain
Indemnification Obligation, a good faith and reasonable estimate thereof), and
(iii) specifying in reasonable detail the nature of such Indemnification
Obligation. Any Notice of Claim delivered pursuant to this Section 3.1 with
respect to any unliquidated Indemnification Obligation may be supplemented by a
later Notice of Claim specifying in greater detail the applicable Claim Amount
or any other items set forth therein. Upon delivery of any such Notice of Claim,
the Escrow Agent shall, within three business days of receipt thereof, deliver a
written notice together with a copy of such Notice of Claim to the ALP
Stockholders Representative.
(b) If the ALP Stockholders Representative shall object on
behalf of the ALP Stockholders to the Indemnification Obligation or the Claim
Amount specified in such Notice of Claim, the ALP Stockholders Representative
shall, within twenty business days after delivery of the written notice
containing a copy of any such Notice of Claim, deliver to the Escrow Agent a
certificate (a "Reply Certificate") (x) specifying each such objection, and (y)
specifying in reasonable detail the nature and basis for such objection. Within
three business days after delivery to the Escrow Agent of a Reply Certificate,
the Escrow Agent shall deliver a copy of such Reply Certificate to Cardinal.
Cardinal and the ALP Stockholders Representative shall negotiate in good faith
for a period of 30 business days after delivery of such Reply Certificate to
Cardinal to reach a written resolution of any objections raised in a Reply
Certificate.
(c) If no Reply Certificate is delivered with respect to any
Notice of Claim, then the ALP Stockholders Representative shall be deemed to
have delivered a Payment Authorization (as defined below) acknowledging
Cardinal's right to receive the Claim Amount specified in such Notice of Claim
with respect to the applicable Indemnification Obligation and the Escrow Agent
shall transfer to Cardinal a portion of the Escrowed Amount in an amount equal
to such Claim Amount, all in accordance with the procedures set forth in Section
3.1(e).
(d) If the Escrow Agent receives a Reply Certificate in a
timely manner with respect to any Notice of Claim, the Claim Amount referred to
in such Notice of Claim shall be held by the Escrow Agent and shall not be
released to Cardinal except upon Cardinal's delivery to the Escrow Agent of
either (i) joint written instructions signed by an authorized officer of
Cardinal and by the ALP Stockholders Representative directing the Escrow Agent
to release the Claim Amount (or any other amount mutually agreed upon by such
parties) or (ii) a final, non-appealable judgment of the arbitrators in the
arbitration proceeding referred to in Section 8.5 of the Merger Agreement
relating to the Indemnification Obligation referred to in such Notice of Claim
demonstrating that Cardinal is entitled to indemnification for such Claim Amount
from the ALP Stockholders pursuant to the Merger Agreement (either of (i) or
(ii) being a "Payment Authorization"), at which date the portion of the amount
due to Cardinal determined pursuant to (i) or (ii) above shall promptly be paid
to Cardinal in accordance with the procedures set forth herein.
(e) As soon as practicable following receipt by the Escrow
Agent of a Payment Authorization, the Escrow Agent shall pay from the Escrowed
Amount to Cardinal as follows, in the following order of priority, to the extent
required to make such payment:
First, the Escrow Agent shall transfer, deliver and assign to
Cardinal such number of Escrowed Shares (excluding cash
constituting Escrowed Shares
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FINAL
pursuant to Section 2.2(b)) (rounded up or down to the nearest
whole share in the case of the Escrowed Shares that are not
cash) as shall have a value equal to the amount required to
make or complete such payment, it being understood and agreed
that such non-cash Escrowed Shares shall be valued for such
purpose as set forth in Section 8.7 of the Merger Agreement,
together with the Additional Property related thereto;
Second, to the extent of any insufficiency, the Escrow Agent
shall utilize any cash not part of the Escrowed Shares
included in the Escrowed Amount then held in the Escrow
Deposit; and
Third, to the extent of any insufficiency, the Escrow Agent
shall sell securities or investments included in the Escrowed
Amount, other than the Escrowed Shares, then held in the
Escrow Deposit for cash and utilize such cash to make up such
insufficiency.
To the extent the Escrowed Shares allocable to any ALP Stockholder consist of
Cardinal Common Shares and cash pursuant to Section 2.2(b), any delivery of
Escrowed Shares pursuant to this Section 3.1(e) shall consist first of Cardinal
Common Shares and then, if necessary, cash valued as provided in Section 2.2(b).
To the extent the Escrow Agent is required to transfer, deliver and assign to
Cardinal any Escrowed Shares included in the Escrowed Amount, Cardinal shall
assist and cooperate in a reasonable manner with the Escrow Agent to facilitate
such transfer, delivery and assignment. In the event the Escrowed Amount shall
be insufficient to pay the amount expressly set forth in such Payment
Authorization, the Escrow Agent shall deliver to Cardinal the entire remaining
Escrowed Amount and then deliver to Cardinal and to the ALP Stockholders
Representative a written notification setting forth the amount by which such
Payment Authorization exceeds the amount of the Escrowed Amount so paid.
(f) To the extent that any payment pursuant to Section 3.1(e)
hereof shall be made in cash, the Escrow Agent shall pay all such amount to
Cardinal by wire transfer to the bank account or accounts designated by Cardinal
to the Escrow Agent in writing not less than one business day prior to the date
of such payment.
(g) Notwithstanding anything to the contrary in this
Agreement, in no event shall Cardinal be entitled to receive any amounts from
the Escrow Deposit in excess of the amount of the Escrowed Amount.
3.2 Release upon the Escrow Date. (a) On the Escrow Date, the
Escrow Agent shall distribute the Escrow Deposit to the ALP Stockholders and
shall terminate the Escrow Account, unless (i) the Escrow Agent shall have
received a Notice of Claim from Cardinal prior to the Escrow Date with respect
to an indemnification claim (an "Unresolved Claim") for which the Escrow Agent
has not received a subsequent Payment Authorization or written notification
signed by Cardinal and the ALP Stockholder's Representative, informing the
Escrow Agent of the termination or other resolution of such claim or claims
(each, a "Claim Termination Notice"). If on the Escrow Date there shall exist
any Unresolved Claim, then (i) the Escrow Agent shall retain the Escrow Deposit
in the Escrow Account in an amount sufficient for the payment of all Claim
Amounts with respect to all such Unresolved Claims (but not in excess of the
remainder of
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the Escrowed Amount), and (ii) the Escrow Agent shall release to the ALP
Stockholders the portion of the Escrow Deposit in the Escrow Account not
otherwise retained in accordance with clause (i). For all purposes of this
Section 3.2(a), the Escrowed Shares (other than the cash which may be a part
thereof) shall be valued as set forth in Section 8.7 of the Merger Agreement.
(b) Upon the resolution of any Unresolved Claim, the Escrow
Agent shall (A) release any portion of the Escrow Deposit retained in respect of
such Unresolved Claim (x) to Cardinal in accordance with any Payment
Authorization received by the Escrow Agent in respect of such Unresolved Claim
or (y) to the ALP Stockholders in accordance with any Claim Termination Notice
received by the Escrow Agent in respect of such Unresolved Claim and, if no
other Unresolved Claims remain outstanding, (B) release the remainder of the
Escrow Deposit to the ALP Stockholders. For purposes of this Section 3.2(b), the
Escrowed Shares shall be valued as set forth in Section 8.7 of the Merger
Agreement.
(c) Any distribution to the ALP Stockholders pursuant to this
Section 3.2 shall be made by the Escrow Agent to the ALP Stockholders based on
their respective interests in the Escrowed Shares and the cash and other
investments constituting the Escrow Deposit (as reflected in the then most
recent version of the Ownership Certificate), subject to any written
instructions of the ALP Stockholders Representative (including, without
limitation, any instructions as to the liquidation of the Escrow Account
(including instructions to sell a number of Escrowed Shares necessary to permit
the payment of cash in lieu of fractional Cardinal Common Shares) and/or the
transfer of the Escrowed Shares to the transfer agent of Cardinal). No
certificate for fractional Cardinal Common Shares shall be distributed to ALP
Stockholders. The Escrow Agent shall sign such stock powers or other documents
of transfer as are necessary to transfer any remaining Escrowed Shares included
within the Escrow Deposit in accordance with such instructions (the "Released
Shares").
SECTION IV
ESCROW AGENT
4.1 Fees. For its services hereunder, the Escrow Agent shall
receive (i) $1,250 upon its receipt of the Escrow Deposit at the Closing (which
shall constitute the fee for initiating the transaction and the fee for the
first year of the Agreement), (ii) commencing on the first anniversary of the
date hereof and then annually thereafter, $2,500 for each calendar year until it
has delivered all of the Escrow Deposit pursuant to Section III (prorated for
partial years), and (iii) the transaction fees set forth on Schedule 1 attached
hereto. The Escrow Agent shall be reimbursed for all reasonable out-of-pocket
expenses incurred by the Escrow Agent necessary to perform such services (other
than taxes imposed in respect of the receipt of the fees referred to in the
preceding sentence). The fees, expenses and reimbursements referred to in the
foregoing two sentences shall be paid by Cardinal.
4.2 Responsibilities of Escrow Agent. The Escrow Agent's
acceptance of its duties under this Agreement is subject to the following terms
and conditions, which the parties hereto agree shall govern and control with
respect to its rights, duties, liabilities and immunities:
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(a) Except as to its due execution and delivery of the
Agreement, it makes no representation and has no responsibility as to the
validity of this Agreement or of any other instrument referred to herein, or as
to the correctness of any statement contained herein, and it shall not be
required to inquire as to the performance of any obligation under the Merger
Agreement.
(b) The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper or document,
not only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth of any information therein contained, which
it in good faith believes to be genuine and what it purports to be.
(c) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or refrain from
doing in connection therewith, except its own gross negligence or misconduct.
(d) The Escrow Agent may consult with competent and
responsible legal counsel selected by it, and it shall not be liable for any
action taken or omitted by it in good faith in accordance with the advice of
such counsel.
(e) The Escrow Agent shall have no discretion whatsoever with
respect to the management, disposition or investment of the Escrow Account and
is not a trustee or fiduciary to Cardinal or the ALP Stockholders. Cardinal and
the ALP Stockholders Representative acknowledge and agree that all investments
made pursuant to this section shall be for the account and risk of Cardinal and
the ALP Stockholders and any losses associated with investments shall be borne
solely by Cardinal and the ALP Stockholders.
(f) Cardinal and the ALP Stockholders agree to jointly and
severally indemnify and hold the Escrow Agent and its directors, employees,
officers, agents, successors and assigns (collectively, the "Indemnified
Parties") harmless from and against any and all losses, claims, damages,
liabilities and expenses (collectively, "Damages"), including, without
limitation, reasonable costs of investigation and counsel fees and expenses
which may be imposed on the Escrow Agent or incurred by it in connection with
its acceptance of this appointment as the Escrow Agent hereunder or the
performance of its duties hereunder. Such indemnity includes, without
limitation, Damages incurred in connection with any litigation (whether at the
trial or appellate levels) arising from this Escrow Agreement or involving the
subject matter hereof. The indemnification provisions contained in this
paragraph are in addition to any other rights any of the Indemnified Parties may
have by law or otherwise and shall survive the termination of this Agreement or
the resignation or removal of the Escrow Agent. Notwithstanding any provision to
the contrary in this Escrow Agreement, Cardinal and the ALP Stockholders shall
have no liability to the Indemnified Parties with respect to any Damages that
result, directly or indirectly, from the gross negligence or misconduct of the
Escrow Agent. Any obligation of the ALP Stockholders pursuant to this Section
shall be satisfied only by the deduction from the Escrow Deposit by the ALP
Stockholders Representative of the amount of such obligations.
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<PAGE> 62
FINAL
(g) The Escrow Agent shall have no duties or responsibilities
except those expressly set forth herein, and it shall not be bound by any
modification of this Agreement unless in writing and signed by all parties
hereto or their respective successors in interest.
(h) The Escrow Agent shall have no responsibility in respect
of the validity or sufficiency of this Escrow Agreement or of the terms hereof.
The recitals of facts in this Escrow Agreement shall be taken as the statements
of Cardinal and the ALP Stockholders, and the Escrow Agent assumes no
responsibility for the correctness of the same.
(i) The Escrow Agent shall be protected in acting upon any
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other paper or document reasonably believed by it to be genuine and to have
been signed and presented by the proper party or parties. Whenever the Escrow
Agent shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action under this Escrow Agreement,
such matter may be deemed conclusively proved and established by a certificate
signed by Cardinal and the ALP Stockholders Representative (on behalf of the ALP
Stockholders), and such certificate shall be full warranty for any action taken
or suffered in good faith under the provisions of this Escrow Agreement.
(j) In the event of a dispute between the parties hereto
sufficient in the discretion of Escrow Agent to justify its doing so, Escrow
Agent shall be entitled at the expense of the Escrow Deposit to tender the
Escrow Deposit into the registry or custody of any court of competent
jurisdiction, to initiate such legal proceedings at the expense of the Escrow
Deposit as it deems appropriate, and thereupon to be discharged from all further
duties and liabilities under this Agreement. Any such legal action may be
brought in any such court as Escrow Agent shall determine to have jurisdiction
over the Escrow Deposit. The filing of any such legal proceedings shall not
deprive Escrow Agent of its compensation hereunder earned prior to such filing.
(k) Except as specifically set forth above, the Escrow Agent
does not have any interest in the Escrow Deposit but is serving as escrow agent
only and having only possession thereof. This Section 4.2(k) shall survive
notwithstanding any termination of this Agreement or the resignation of the
Escrow Agent.
SECTION V
CERTAIN TRANSACTIONS
5.1 Merger and Other Exchange Transactions. In the event of
any consolidation or merger of Cardinal with or into any other corporation or in
the event of any other transaction upon which the holders of Cardinal Common
Shares are entitled to receive cash, shares of stock, securities or other
property in exchange for their Cardinal Common Shares, the Escrow Agent, if and
to the extent directed to do so by Cardinal, shall present such Escrowed Shares
which are Cardinal Common Shares for such exchange, conversion or otherwise. Any
such cash, shares of stock, securities or other property received from such
exchange, conversion or otherwise shall be deposited in the Escrow Account and
shall be disbursed in accordance with the terms of this Escrow Agreement to
Cardinal and/or the ALP Stockholders entitled thereto.
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<PAGE> 63
FINAL
5.2 Merger, etc. of Cardinal. Nothing contained in this Escrow
Agreement shall prevent any merger, liquidation or consolidation of Cardinal
with or into another corporation or corporations, or successive consolidations
or mergers in which Cardinal or its successor or successors shall be a party or
parties, or any sale or other conveyance of all or substantially all of the
property of Cardinal to another corporation.
SECTION VI
MISCELLANEOUS
6.1 ALP Stockholders Representative. The ALP Stockholders, by
executing this Agreement, hereby irrevocably appoint the ALP Stockholders
Representative to act on behalf of the ALP Stockholders with respect to all
matters relating to this Agreement and Article VIII of the Merger Agreement,
including without limitation, in considering and certifying the amount of any
indemnification hereunder, in communicating with the ALP Stockholders, in
appointing a successor Escrow Agent hereunder, in considering and acting with
respect to any amendment or termination of this Agreement, and generally in
performing all acts expressly required or permitted to be performed by the ALP
Stockholders Representative pursuant hereto and pursuant to the Merger
Agreement. Cardinal and the Escrow Agent shall have the right to deal
exclusively with the ALP Stockholders Representative with respect to all matters
under this Agreement and neither Cardinal nor the Escrow Agent shall have any
liability to any ALP Stockholders for any acts or omissions of the ALP
Stockholders Representative, or any acts or omissions taken or not taken by
Cardinal or the Escrow Agent at the direction of the ALP Stockholders
Representative, including, but not limited to (i) any acts or omissions relating
to the voting of any Escrowed Shares or (ii) the transferring of or the failure
to transfer any shares or funds released from escrow. Upon any distribution of
Escrowed Shares or other funds to the ALP Stockholders Representative (or to one
or more of the ALP Stockholders upon written instruction of the ALP Stockholders
Representative) in accordance with this Agreement, the Escrow Agent and Cardinal
shall be deemed to have fully satisfied any and all obligations to the ALP
Stockholders under this Agreement and the Merger Agreement with respect to the
amount of such distribution. The ALP Stockholders Representative agrees to vote
the Escrowed Shares based on the directions or instructions of the ALP
Stockholders based on their respective ownership interests in the Escrowed
Shares reflected in the most recent Ownership Certificate.
6.2 Amendment and Termination. This Agreement may be amended
or terminated by the written agreement of the parties hereto, or shall terminate
automatically at such time as all securities and funds from the Escrow Deposit
have been paid or distributed in accordance with the terms of this Agreement and
the Escrow Agent has received all fees as described in Section 4.1 hereto.
Notwithstanding the foregoing, all provisions concerning the indemnification of
the Escrow Agent shall survive any termination of this Agreement.
6.3 Notices. All notices, requests, demands, letters, waivers
and other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, as follows:
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<PAGE> 64
FINAL
To ALP:
Automatic Liquid Packaging, Inc.
2200 Lake Shore Drive
Woodstock, Illinois 60098
Attention: Gerhard H. Weiler
Telecopy No.:________________
With a copy to:
Stuart Duhl, Esq.
Schwartz & Freeman
401 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Telecopy No.: (312) 222-0818
To Cardinal:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: General Counsel
Telecopy No.: (614) 757-6948
With a copy to:
John M. Gherlein, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Telecopy No.: (216) 696-0740
To the Escrow Agent:
Bank One Trust Company, NA
Corporate Trust Department
100 East Broad Street, OH1-0181
Columbus, Ohio 43271-0181
Attention: Michael Dockman
Telecopy No.: (614) 248-5195
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<PAGE> 65
FINAL
To the ALP Stockholders Representative:
___________________________________
___________________________________
___________________________________
Attention:_________________________
Telecopy No.:______________________
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified, registered or overnight mail.
6.4 Governing Law. This Agreement shall be construed,
performed and enforced in accordance with the laws of the State of Ohio.
6.5 Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
headings in this Agreement are for convenience of reference only and shall not
define or limit the provisions hereof. This Agreement may be executed in several
counterparts, each of which is an original but all of which together shall
constitute one instrument.
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<PAGE> 66
[Signature page to Escrow Agreement.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
CARDINAL HEALTH, INC.
By: _____________________________________
Name: _______________________________
Title: ______________________________
FLOWER MERGER CORP.
By: _____________________________________
Name: _______________________________
Title: ______________________________
AUTOMATIC LIQUID PACKAGING, INC.
By: _____________________________________
Name: _______________________________
Title: ______________________________
BANK ONE TRUST COMPANY, NA
By: _____________________________________
Name: _______________________________
Title: ______________________________
THE ALP STOCKHOLDERS
__________________________________________
Gerhard H. Weiler, as the ALP Stockholders
Representative and as Trustee of the
Gerhard H. Weiler Dec. of Trust dated
9/3/93
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<PAGE> 67
[Signature page to Escrow Agreement.]
__________________________________________
Patricia Weiler
__________________________________________
Lisa Hoffman
__________________________________________
Amy Weiler
__________________________________________
Siegfried Weiler
__________________________________________
Ruth Weiler
__________________________________________
Kurt A. Weiler, individually and as
Trustee of the Kurt A. Weiler Gift Trust
__________________________________________
Anita W. Reiche, individually and as
Trustee of the Anita W. Reiche Gift Trust
__________________________________________
Carol J. Zolp
__________________________________________
Lori Brockrogge
__________________________________________
Frank N. Leo
__________________________________________
Stanley Nowak
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<PAGE> 68
[Signature page to Escrow Agreement.]
__________________________________________
Arjun Ramrakhyan
-15-
<PAGE> 69
SCHEDULE 1
ESCROW AGENT FEES AND EXPENSES
Acceptance Fee: $1,250
Administrative Fee: $2,500 per year
Transaction Fees: $ 20 per deposit
$ 25 per wire transfer
$ 10 per check
Sub-Account: $ 250 per sub-account
(if applicable)
Tax Reporting fee: $ 250 per year (if applicable)
Extraordinary Fee: $ 150 per hour; minimum
increments of one hour.
Out-of-Pocket Expenses: Pass-through
The fees quoted in this schedule apply to services ordinarily rendered in
administering an escrow account and are subject to reasonable adjustment when
the Escrow Agent is called upon to undertake unusual duties or as changes in the
law, procedures or the cost of doing business demand. The extraordinary fee rate
in effect ($150/hour) will apply at the time services are provided.
Unless otherwise agreed upon, the Acceptance Fee and the first year
Administration Fee are payable upon the execution of the Agreement whether or
not the escrow account is funded. In the event the escrow is not funded, the
Acceptance Fee and all related expenses will not be refunded. Annual
Administration fees cover a full year in advance, or any part thereof, and thus
are nor pro-rated in the year of termination.
<PAGE> 1
Exhibit 10.03
CARDINAL HEALTH, INC.
AMENDED AND RESTATED
EQUITY INCENTIVE PLAN
SECTION 1 | PURPOSE
The purpose of the Cardinal Health, Inc. Equity Incentive Plan (the "Plan") is
to assist Cardinal Health, Inc. ("CAH") and its subsidiaries (CAH and its
subsidiaries, collectively, the "Company") in attracting and retaining capable
employees and directors. The Plan provides for long and short term incentives to
employees by encouraging and enabling them to participate in the Company's
future prosperity and growth. The Plan provides for equity ownership
opportunities and appropriate incentives to better match the interests of
employees and directors with those of shareholders.
These objectives will be promoted through the granting to employees of
equity-based awards (the "awards") in consideration for services to be rendered
after the grants. The types of awards will include (i) Incentive Stock Options
("ISOs"), which are intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) options which are not
intended to so qualify ("NQSOs") (ISOs and NQSOs are referred to together
hereinafter as "Stock Options"); (iii) Restricted Shares; (iv) Performance
Shares; (v) Performance Share Units and (vi) Incentive Compensation Restricted
Shares. Members of CAH's Board of Directors (the "Board") who do not serve as
employees of the Company ("Outside Directors") shall receive NQSOs from the Plan
only as provided herein.
SECTION 2 | ADMINISTRATION
The Plan shall be administered by the Compensation and Personnel Committee (the
"Committee") of the Board which shall have the power and authority to grant to
eligible employees Stock Options, Restricted Shares, Performance Shares,
Performance Share Units and Incentive Compensation Restricted Shares. In
particular, the Committee shall have the authority to: (i) select employees of
the Company as recipients of awards; (ii) determine the number and type of
awards to be granted; (iii) determine the terms and conditions, not inconsistent
with the terms hereof, of any award; (iv) adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; (v) interpret the terms and provisions of the
Plan and any award granted and any agreements relating thereto; and (vi) take
any other actions the Committee considers appropriate in connection with, and
otherwise supervise the administration of, the Plan. All decisions made by the
Committee pursuant to the provisions hereof shall be made in the Committee's
sole discretion and shall be final and binding on all persons.
The Committee may designate persons other than its members to carry out its
responsibilities under such conditions and limitations as it may set, except to
the extent that such delegation is prohibited by law or would cause an award
intended to be exempt
<PAGE> 2
from the limitation on deductibility under Section 162(m) of the Code, or from
the short-swing profit recovery rules of Section 16(b) of the Exchange Act, to
fail to be so exempt.
SECTION 3 | ELIGIBILITY
Employees of the Company and its subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and/or subsidiary, in each case as determined by the Committee, are
eligible to be granted awards. The participants under the Plan who are not
Outside Directors shall be selected from time to time by the Committee, in its
sole discretion, from among those eligible. In addition, Outside Directors are
eligible to receive NQSOs as set forth in Section 9 ("Outside Director
Options"), and may not receive any other awards under this Plan. Members of the
Committee are eligible to receive Outside Director Options.
SECTION 4 | SHARES SUBJECT TO PLAN
The total number of the Company's common shares, without par value ("Shares"),
reserved and available for distribution pursuant to awards (including without
limitation Outside Director Options) hereunder ("Available Shares") shall be an
amount equal to the sum of (a) 1.5% of the total outstanding Shares as of the
last day of the Company's immediately preceding fiscal year, plus (b) the number
of Shares available for grant under the Plan as of November 23, 1998, plus (c)
any Shares related to awards that, in whole or in part, expire or are
unexercised, forfeited, terminated, surrendered, canceled, settled in such a
manner that all or some of the Shares covered by an award are not issued to a
participant, or returned to the Company in payment of the exercise price or tax
withholding obligations in connection with outstanding awards, plus (d) any
unused portion of the Shares available under section (a) above for the
immediately preceding two fiscal years (but not prior to the Company's fiscal
year ending June 30, 1999) as a result of not being made subject to a grant or
award in such preceding two fiscal years. Notwithstanding the foregoing, for the
Company's fiscal year ending June 30, 1999, the number of total outstanding
Shares in section (a), above, shall be calculated as of November 23, 1998,
rather than June 30, 1998 (the last day of the immediately preceding fiscal
year). No more than fifty(50)% of the Available Shares shall be granted in the
form of Restricted Shares, Incentive Compensation Restricted Shares, Performance
Shares and Performance Share Units. The Available Shares may consist, in whole
or in part, of authorized but unissued Shares, treasury Shares, or previously
issued Shares re-acquired by the Company, including Shares purchased on the open
market. The maximum number of Shares with respect to which Stock Options,
Performance Shares and Performance Share Units may be granted to any single
participant during any single fiscal year of the Company shall be 375,000
Shares. The number of Shares with respect to which ISOs may be granted shall not
exceed 3,000,000. Any of the Shares delivered upon the assumption of or in
substitution for outstanding grants made by a company or division acquired by
the Company shall not decrease the number of Shares available for grant under
the Plan, except to the extent otherwise provided by applicable law or
regulation.
2
<PAGE> 3
In the event of any stock dividend, stock split, share combination, corporate
separation or division (including, but not limited to, split-up, spin-off,
split-off or distribution to CAH shareholders other than a normal cash
dividend), or partial or complete liquidation, or any other corporate
transaction or event having any effect similar to any of the foregoing, then the
aggregate number of Shares reserved for issuance under the Plan, the limitation
on the number of Shares available under the Plan for issuance of Restricted
Shares, Incentive Compensation Restricted Shares, Performance Shares and
Performance Share Units, the limitation on the number of Shares subject to ISOs,
the limitations on the number of Shares subject to Stock Options or Performance
Shares or Performance Share Units granted to any single participant, the number
and exercise price of Shares subject to outstanding Stock Options, the purchase
price for Restricted Shares, the financial Performance Goals, if any, of the
Shares the subject of a Performance Share or Performance Share Unit award, the
number of Shares subject to a Performance Share or Performance Share Unit award
or granted by a Restricted Share or Incentive Compensation Restricted Share
award, and any other characteristics or terms of the awards or Plan limitations
as the Committee shall deem necessary or appropriate to reflect equitably the
effects of such changes, shall be appropriately substituted for new shares or
adjusted, as determined by the Committee in its discretion. Any such adjustments
made to NQSOs shall also be made to Outside Director Options.
If any recapitalization, reorganization, reclassification, consolidation, merger
of CAH or the Company or any sale of all or substantially all of CAH's or the
Company's assets to another person or entity or other transaction which is
effected in such a way that holders of Shares are entitled to receive (either
directly or upon subsequent liquidation) stock, securities, or assets with
respect to or in exchange for Shares (each an "Organic Change") shall occur, in
lieu of the Shares issuable upon exercise of a Stock Option or Outside Director
Option or pursuant to any other award under the Plan, the Stock Option or
Outside Director Option shall thereafter be exercisable for and other awards
shall be issuable in such shares of stock, securities or assets (including cash)
as may be issued or payable with respect to or in exchange for the number of
Shares immediately theretofore acquirable pursuant to such award had such
Organic Change not taken place (whether or not such Stock Option or Outside
Director Option is then exercisable or other awards are then vested) after
giving effect to any adjustments otherwise required or permitted under this
Plan.
SECTION 5 | STOCK OPTIONS
References to Stock Options in this Section 5 shall not apply to Outside
Director Options. Stock Options may be granted alone or in addition to other
awards granted under the Plan. Any Stock Options granted under the Plan shall be
in such form as the Committee may from time to time approve and the provisions
of Stock Option awards need not be the same with respect to each optionee. Stock
Options granted under the Plan may be either ISOs or NQSOs. The Committee may
grant to any optionee ISOs, NQSOs or both types of Stock Options.
3
<PAGE> 4
Anything in the Plan to the contrary notwithstanding, without the consent of the
optionee(s) affected, no provision of this Plan relating to ISOs shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code or to disqualify any ISO under such Section 422.
Stock Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan as the Committee deems appropriate. Each
Stock Option grant shall be evidenced by an agreement executed on behalf of the
Company by an officer designated by the Committee and accepted by the optionee.
Such agreement shall describe the Stock Options and state that such Stock
Options are subject to all the terms and provisions of the Plan and shall
contain such other terms and provisions, not inconsistent with the Plan, as the
Committee may approve.
(a) Exercise Price. The exercise price per Share issuable upon exercise of a
Stock Option shall be no less than the fair market value per share on the date
the Stock Option is granted; provided, that if the optionee, at the time an ISO
is granted, owns stock possessing more than ten (10)% of the total combined
voting power of all classes of stock of CAH or any subsidiary, the exercise
price shall be at least 110% of the fair market value of the Shares subject to
the ISO on the date of grant. Fair market value on the date of grant shall be
determined by the Committee in good faith.
(b) Option Term. The term of each Stock Option shall be fixed by the Committee,
but no Stock Option shall be exercisable more than ten years after the date such
Stock Option is granted.
(c) Exercise of Stock Options. Stock Options shall become exercisable at such
time or times and subject to such terms and conditions (including, without
limitation, installment or cliff exercise provisions) as shall be determined by
the Committee. The Committee shall have the authority, in its discretion, to
accelerate the time at which a Stock Option shall be exercisable whenever it may
determine that such action is appropriate by reason of changes in applicable tax
or other law or other changes in circumstances occurring after the award of such
Stock Options.
(d) Method of Exercise. Stock Options may be exercised in whole or in part by
giving written notice of exercise to the Company specifying the number of Shares
to be purchased. Payment in full of the exercise price shall be paid in cash, or
such other instrument as may be permitted in accordance with rules or procedures
adopted by the Committee. If approved by the Committee, payment in full or in
part may also be made: (i) by delivering Shares already owned by the optionee
having a total fair market value on the date of such delivery equal to the
option exercise price; (ii) by attestation of ownership of such already-owned
Shares in such form as the Committee may prescribe; (iii) by the delivery of
cash on the extension of credit by a broker-dealer to whom the optionee has
submitted a notice of exercise or an irrevocable election to effect such
extension of credit;
4
<PAGE> 5
or (iv) by any combination of the foregoing. No Shares shall be transferred
until full payment therefor has been made.
(e) Transferability of Stock Options. Except as otherwise provided hereunder,
Stock Options shall be transferable by the optionee only with prior approval of
the Committee and only in compliance with the restrictions imposed under Section
422 of the Code, if applicable. Any attempted transfer without Committee
approval shall be null and void. Unless Committee approval of the transfer shall
have been obtained, all Stock Options shall be exercisable during the optionee's
lifetime only by the optionee or the optionee's legal representative. Without
limiting the generality of the foregoing, the Committee may, in the manner
established by the Committee, provide for the irrevocable transfer, without
payment of consideration, of any Stock Option other than any ISO by an optionee
to a member of the optionee's family or to a family entity. In such case, the
Stock Option shall be exercisable only by such transferee. For purposes of this
provision: (i) an optionee's "family" shall include the optionee's child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including through adoptive
relationships, and any person sharing the optionee's household (other than a
tenant or employee); (ii) a "family entity" shall include a trust in which the
foregoing persons have more than fifty percent of the beneficial interest, a
foundation in which the foregoing persons (or the optionee) control the
management of assets, and any other entity in which the foregoing persons (or
the optionee) own more than fifty percent of the voting interests; and (iii)
neither a transfer under a domestic relations order in settlement of marital
property rights nor a transfer to an entity in which more than fifty percent of
the voting interests are owned by family members (or the optionee) in exchange
for an interest in that entity shall be considered to be a transfer for
consideration.
(f) Termination by Death. If an optionee's employment by or service to the
Company terminates by reason of death, then, unless otherwise determined by the
Committee within sixty days of such death, each Stock Option held by such
optionee shall be exercisable in full from and after, and any unvested portion
thereof shall vest upon, the sixtieth day after such death. Each Stock Option
held by such optionee may thereafter be exercised by the legal representative of
the estate or by the legatee of the optionee under the will of the optionee, for
a period of one year (or such other period as the Committee may specify at or
after grant or death) from the date of death or until the expiration of the
stated term of such Stock Option, whichever period is shorter.
(g) Termination by Reason of Retirement. If an optionee's employment by or
service to the Company terminates by reason of retirement, then, unless
otherwise determined by the Committee within sixty days of such retirement, any
unexercised portion of the Stock Option will vest in accordance with its terms,
and may thereafter be exercised until the earlier of (the "Exercise Period") the
fifth anniversary of the date of such retirement or the expiration of the stated
term of the Stock Option; PROVIDED, that any vesting that would otherwise occur
during the sixty-day period beginning immediately after such retirement shall
not occur until the end of such sixty-day period; and PROVIDED, further, that if
the optionee has at least fifteen years of service with the Company at the time
of retirement,
5
<PAGE> 6
the Exercise Period shall last until the expiration of the stated term of the
Option. Notwithstanding the foregoing, if the optionee dies after retirement but
before the expiration of the Exercise Period, unless otherwise determined by the
Committee within 60 days of such death, any unexercised portion of the Stock
Option shall be exercisable in full, and any unvested portion thereof shall vest
upon, and the Stock Option may be exercised from and after, the sixtieth day
after such death, for a period of one year (or such other period as the
Committee may specify at or after grant or death) from the date of death or
until the expiration of the Exercise Period, whichever period is shorter. In the
event of termination of employment by reason of retirement, if an ISO is
exercised after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, such ISO shall thereafter be treated as an NQSO. For
purposes of the Plan, unless otherwise determined by the Committee within the
parameters set forth below, retirement shall mean voluntary termination of
employment by a participant from the Company after attaining age fifty-five (55)
and having (i) at least ten (10) years of service with the Company, including
service with a subsidiary of the Company prior to the time that such subsidiary
became a subsidiary of the Company, and (ii) at least five years of continuous
service with the Company, excluding service with a subsidiary of the Company
prior to the time that such subsidiary became a subsidiary of the Company. The
Committee discretion described above shall in no event result in a definition of
retirement that is more beneficial to the participant than voluntary termination
of employment from the Company after attaining age fifty-five (55) and having at
least three (3) years of service with the Company.
(h) Other Termination of Employment. If an optionee's employment by or service
to the Company terminates for any reason other than death or retirement, any
Stock Option held by such optionee which has not vested on such date of
termination will automatically terminate on the date of such termination. Unless
otherwise determined by the Committee at or after grant or termination, the
optionee (or a transferee) will have ninety(90) days (or such other period as
the Committee may specify at or after grant or termination) from the date of
termination to exercise any and all Stock Options that are then exercisable on
the date of termination; provided, however, that if the termination was for
Cause, any and all Stock Options held by that optionee may be immediately
canceled by the Committee. For purposes of the Plan, "Cause" means on account of
any act of fraud or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets of the Company or any subsidiary, or
the intentional and repeated violation of the written policies or procedures of
the Company.
(i) Effect of Termination of Optionee on Transferee. Except as otherwise
permitted by the Committee in its absolute discretion, no Stock Option held by a
transferee of an optionee pursuant to the fourth sentence of Section 5(e) shall
remain exercisable for any period of time longer than would otherwise be
permitted under Sections 5(f), 5(g) or 5(h) without specification of other
periods by the Committee as provided in those Sections.
(j) ISO Limitations. To the extent required for "incentive stock option" status
under Section 422 of the Code, the aggregate fair market value (determined as of
the time of grant) of the Shares with respect to which ISOs are exercisable for
the first time by the
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<PAGE> 7
optionee during any calendar year under the Plan and any other stock option plan
of the Company and its affiliates, shall not exceed $100,000.
SECTION 6 | RESTRICTED SHARES
Restricted Shares may be granted alone or in addition to other awards granted
under the Plan. Any Restricted Shares granted under the Plan shall be subject to
the following restrictions and conditions, and shall contain such additional
terms and conditions not inconsistent with the terms of the Plan as the
Committee deems appropriate. The provisions of Restricted Share awards need not
be the same with respect to each recipient.
(a) Price. The purchase price for Restricted Shares shall be any price set by
the Committee and may be zero. Payment in full of the purchase price, if any,
shall be made in cash, or such other instrument as may be permitted in
accordance with rules or procedures adopted by the Committee. If approved by the
Committee, payment in full or part may also be made: (i) by delivering Shares
already owned by the grantee having a total fair market value on the date of
such delivery equal to the Restricted Share price; (ii) by the delivery of cash
on the extension of credit by a broker-dealer or an irrevocable election to
effect such extension of credit; or (iii) by any combination of the foregoing.
(b) Restricted Share Award Agreement. Each Restricted Share grant shall be
evidenced by an agreement executed on behalf of the Company by an officer
designated by the Committee. Such Restricted Share Award Agreement shall
describe the Restricted Shares and state that such Restricted Shares are subject
to all the terms and provisions of the Plan and shall contain such other terms
and provisions, consistent with the Plan, as the Committee may approve. At the
time the Restricted Shares are awarded, the Committee may determine that such
Shares shall, after vesting, be further restricted as to transferability or be
subject to repurchase by the Company upon occurrence of certain events
determined by the Committee, in its sole discretion, and specified in the
Restricted Share Award Agreement. Awards of Restricted Shares must be accepted
by a grantee thereof within a period of thirty(30) days (or such other period as
the Committee may specify at grant) after the award date by executing the
Restricted Share Award Agreement and paying the price, if any, required under
Section 6(a).The prospective recipient of a Restricted Share award shall not
have any rights with respect to such award, unless and until such recipient has
executed an agreement evidencing the award and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such award.
(c) Share Restrictions. Subject to the provisions of this Plan and the
applicable Restricted Share Award Agreement, during a period set by the
Committee commencing with the date of such award and ending on such date as
determined by the Committee at grant (the "Restriction Period"), the participant
shall not be permitted to sell, transfer, pledge, assign or otherwise encumber
shares of Restricted Shares awarded under the Plan. In no event shall more than
ten(10)% of the Shares authorized for issuance under this Plan (as adjusted as
provided in Section 4) be granted in the form of Restricted Shares having a
restriction period of less than three(3) years. The Committee shall have the
authority, in its
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<PAGE> 8
absolute discretion, to accelerate the time at which any or all of the
restrictions shall lapse with respect to any Restricted Shares or to remove any
or all restrictions after the grant of such Restricted Shares, provided,
however, that such discretion shall be exercised subject to the limitations set
forth in the preceding sentence, excluding discretion exercised in connection
with a Grantee's termination of employment from the Company. Unless otherwise
determined by the Committee at or after grant or termination, if a participant's
employment by or service to the Company terminates during the Restriction
Period, all Restricted Shares held by such participant still subject to
restriction shall be forfeited by the participant.
(d) Stock Certificate and Legends. Each participant receiving a Restricted Share
award shall be issued a stock certificate in respect of such Restricted Shares.
Such certificate shall be registered in the name of such participant. The
Committee may require that the stock certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed, and
that, as a condition of any Restricted Shares award, the participant shall have
delivered a stock power, endorsed in blank, relating to the Shares covered by
such award.
(e) Shareholder Rights. Except as provided in this Section 6, the recipient
shall have, with respect to the Restricted Shares covered by any award, all of
the rights of a shareholder of the Company, including the right to vote the
Shares, and the right to receive any dividends or other distributions, with
respect to the Shares, but subject, however, to those restrictions placed on
such Shares pursuant to this Plan and as specified by the Committee in the
Restricted Share Award Agreement.
(f) Expiration of Restriction Period. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Shares subject to such
Restriction Period, unrestricted certificates for such shares shall be
delivered to the participant.
SECTION 7 | PERFORMANCE SHARES AND PERFORMANCE SHARE UNITS
Subject to the terms and conditions described herein, Performance Shares and
Performance Share Units may be granted to eligible participants at any time and
from time to time as determined by the Committee.
(a) Price. The purchase price for Performance Shares and Performance Share Units
shall be zero unless otherwise specified by the Committee.
(b) Performance Share Agreement. Subject to the provisions of this Plan, all the
terms and conditions of an award of Performance Shares or Performance Share
Units shall be determined by the Committee in its discretion. Each Performance
Share and Performance Share Unit shall be evidenced by an agreement executed by
the recipient of the Performance Share or Performance Share Unit and on behalf
of the Company by an officer designated by the Committee. Such Performance Share
or Performance Share Unit Award Agreement shall describe the Performance Share
or Performance Share Unit and state that such Performance Share or Performance
Share Unit is subject to all the terms and
<PAGE> 9
provisions of the Plan and shall contain such other terms and provisions, not
inconsistent with the Plan, as the Committee may approve. Award of Performance
Shares and Performance Share Units must be accepted by a grantee thereof within
a period of sixty(60) days (or such other period as the Committee may specify at
grant) after the award date by executing the Performance Share or Performance
Share Unit Award Agreement, and paying the price, if any, as required under
Section 7(a).
(c) Performance Periods. Any time period (the "Performance Period") relating to
a Performance Share or Performance Share Unit award shall be at least one year
in length. No more than two Performance Periods may begin in any one fiscal year
of the Company.
(d) Performance Goals. Performance Shares and Performance Share
Units shall be earned based upon the financial performance of the Company or an
operating group of the Company during a Performance Period. As to each
Performance Period, within such time as established by Section 162(m) of the
Code, the Committee will establish in writing targets for one of the following
performance measures of the Company (and/or an operating group of the Company,
if applicable) over the Performance Period ("Performance Goals"): (i) earnings,
(ii) return on capital, or (iii) any Performance Goal approved by the
shareholders of the Company in accordance with Section 162(m) of the Code. The
Performance Goals, depending on the extent to which they are satisfied, will
determine the number of Performance Shares or Performance Share Units, if any,
that will be earned by each participant. Attainment of the Performance Goals
will be calculated from the consolidated financial statements of the Company but
shall exclude (i) the effects of changes in federal income tax rates, (ii) the
effects of unusual, non-recurring and extraordinary items as defined by
Generally Accepted Accounting Principles ("GAAP"), and (iii) the cumulative
effect of changes in accounting principles in accordance with GAAP. The
Performance Goals may vary for different Performance Periods and need not be the
same for each participant receiving an award for a Performance Period. The
Committee may, in its absolute discretion, subject to the limitations of Section
11, vary the terms and conditions of any Performance Share or Performance Share
Unit award, including, without limitation, the Performance Period and
Performance Goals, without shareholder approval, as applied to any recipient who
is not a "covered employee" with respect to the Company as defined in Section
162(m) of the Code. In the event applicable tax or securities laws change to
permit the Committee discretion to alter the governing performance measures as
they pertain to covered employees without obtaining shareholder approval of such
changes, the Committee shall have sole discretion to make such changes without
obtaining shareholder approval.
(e) Earning of Performance Shares. Performance Shares shall be issued to each
recipient thereof on the later of such time as the Performance Goals are
established or the first day of the applicable Performance Period. The number of
Performance Shares awarded at such time shall be calculated based upon the
assumption that the Performance Goals for the applicable Performance Period will
be satisfied to the fullest extent. The Company, or its designated agent, shall
hold all Performance Shares issued to recipients prior to completion of the
Performance Period. Participants shall be entitled to all dividends and other
distributions earned in respect of such Performance Shares; PROVIDED,
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<PAGE> 10
that a Participant's right to any dividends paid in the form of Shares and any
extraordinary dividends shall be subject to the same Performance Goals as the
Performance Shares with respect to which they are paid or distributed.
Participants shall also be entitled to vote their Performance Shares during the
period from the initial award date to the final adjustment of the Performance
Shares. After the applicable Performance Period shall have ended, the Committee
shall certify in writing the extent to which the established Performance Goals
have been achieved. Subsequently, the number of Performance Shares, if any,
earned by the recipient over the Performance Period shall be determined as a
function of the extent to which the Performance Goals for such Performance
Period were achieved. If the Performance Goals are not satisfied to the fullest
extent, a recipient may earn less than the number of Performance Shares
originally awarded, or no Performance Shares at all. In addition, whether or not
the Performance Goals are satisfied to the fullest extent, the Committee may
exercise negative discretion to reduce the number of Performance Shares or
Performance Share Units to be issued if, in the Committee's sole judgment, such
negative discretion is appropriate in order to act in the best interest of the
Company and its shareholders. The factors to be taken into account by the
Committee when exercising negative discretion include, but are not limited to,
the achievement of measurable individual performance objectives established by
the Committee and communicated to the participant no later than the ninetieth
day of the Performance Period, and competitive pay practices. Performance Shares
shall be paid in the form of Shares. Unrestricted certificates representing such
number of Shares as equals the number of Performance Shares earned under the
award shall be delivered to the participant as soon as practicable after the end
of the applicable Performance Period.
(f) Earning of Performance Share Units. An account documenting Performance Share
Units awarded shall be established for each recipient thereof on the later of
such time as the Performance Goals are established or the first day of the
applicable Performance Period. The number of Performance Share Units credited to
a recipient's account at such time shall be calculated based upon the assumption
that the Performance Goals for the applicable Performance Period will be
satisfied to the fullest extent. After the applicable Performance Period shall
have ended, the Committee shall certify in writing the extent to which the
established Performance Goals have been achieved. Subsequently, the number of
Performance Share Units, if any, earned by the recipient over the Performance
Period shall be determined as a function of the extent to which the Performance
Goals for such Performance Period were achieved, adjusted, if applicable, in
accordance with the negative discretion of the Committee. A recipient may earn
less than the number of Performance Share Units originally awarded, or no
Performance Share Units at all. Performance Share Units shall be paid in the
form of Company check, the amount of which shall be calculated by multiplying
the fair market value per Share on the last day of the Performance Period by the
number of Performance Share Units, as adjusted pursuant to the last paragraph of
Section 4.
(g) Termination of Employment or Service Due to Death or at the Request of the
Company Without Cause. In the event the employment by or service of a
participant is terminated by reason of death, or by the Company without Cause
during a Performance Period, unless determined otherwise by the Committee, the
participant or his legal
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<PAGE> 11
representative, as applicable, shall receive a prorated payout with respect to
the Performance Shares and Performance Share Units relating to such Performance
Period. The prorated payout shall be based upon the length of time that the
participant held the Performance Shares or Performance Share Units during the
Performance Period and the progress toward achievement of the established
Performance Goals. Distribution of earned Performance Shares and Performance
Share Units, if any, shall be made at the same time payments are made to
participants who did not terminate employment during the applicable Performance
Period.
(h) Termination of Employment or Service for Other Reasons. In the event
that a participant's employment or service terminates for any reason other than
those reasons set forth in paragraph (g) of this Section 7, all Performance
Shares and Performance Share Units shall be forfeited by the participant to the
Company, except as otherwise determined by the Committee.
(i) Nontransferability. Except as otherwise provided herein, no Performance
Share or Performance Share Unit may be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated. Further, a participant's rights under the
Plan shall be exercisable during the participant's lifetime only by the
participant or the participant's legal representative.
SECTION 8 | INCENTIVE COMPENSATION RESTRICTED SHARES
Each employee participating in this Plan who also participates in the Company's
Management Incentive Plan (the "Incentive Compensation Plan") may be eligible,
in the Committee's sole discretion, to elect to receive all or a portion of the
annual incentive compensation ("Incentive Compensation") payable to the employee
under the Incentive Compensation Plan in the form of Incentive Compensation
Restricted Shares. To elect the payout of all or a portion of annual Incentive
Compensation in Incentive Compensation Restricted Shares, an employee must
complete and submit to the Committee an Incentive Compensation Restricted Shares
Election Form after the Committee has determined the factor set forth in Section
8(c)(B) and the vesting schedule of the Incentive Compensation Restricted
Shares, but in any event, prior to the date established by the Committee for
election of such deferral. The Incentive Compensation Restricted Shares shall be
evidenced by an Incentive Compensation Restricted Shares Agreement executed on
behalf of the Company by an officer designated by the Committee and accepted by
the employee. Such agreement shall describe the Incentive Compensation
Restricted Shares and state that such Incentive Compensation Restricted Shares
are subject to all terms and provisions, not inconsistent with the Plan, as the
Committee may approve. Terms and conditions of Incentive Compensation Restricted
Shares shall include the following:
(a) Deferral Election. Within such limits as the Committee may establish, any
portion of annual Incentive Compensation can be elected for payout in Incentive
Compensation Restricted Shares, in a dollar amount or as a percentage of total
Incentive Compensation, or as a percentage of total Incentive Compensation with
a stated maximum dollar amount.
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<PAGE> 12
(b) Issuance of Incentive Compensation Restricted Shares. Incentive Compensation
Restricted Shares will be issued on the same date that cash payouts are made
under the Incentive Compensation Plan, based on the fair market value of the
Shares on the date of the issuance.
(c) Number of Shares. The number of Incentive Compensation Restricted Shares
granted to an employee will equal the product of (A) that number of Shares as
have an aggregate fair market value equal to the dollar amount of the annual
Incentive Compensation to be received in the form of Incentive Compensation
Restricted Shares multiplied by (B) a factor greater than or equal to 1.00, but
less than or equal to 1.30, as determined by the Committee prior to the date
established by the Committee for the deferral election to be made.
(d) Termination of Employment Due to Death, Disability or Retirement or at the
Request of the Company Without Cause. If the employee's employment is terminated
by reason of death, disability or retirement or by the Company without Cause,
all of the restrictions applicable to unvested Incentive Compensation Restricted
Shares shall be waived and all Incentive Compensation Restricted Shares shall be
immediately vested. If the employee's employment is terminated for any other
reason, the Incentive Compensation Restricted Shares held by that employee will
be forfeited as of the date of such termination; provided, however, that the
Committee may, in its sole discretion, provide that such Incentive Compensation
Restricted Shares will not so terminate. In such event, such Incentive
Compensation Restricted Shares will vest in accordance with the vesting schedule
set forth in the Incentive Compensation Restricted Shares Agreement or on such
accelerated basis as the Committee may determine at or after grant or
termination of employment.
(e) Application of Section 6. Except to the extent inconsistent with this
Section 8, the provisions of Section 6 and all other provisions of the Plan
pertaining to Restricted Shares shall be applicable to Incentive Compensation
Restricted Shares.
SECTION 9 | OUTSIDE DIRECTOR OPTIONS
(a) Administration. Outside Directors shall be eligible to participate in the
Plan only as expressly set forth in this Section 9. The Committee shall have no
power to determine which Outside Directors will receive Outside Director
Options, the amount of such Outside Director Options, or the terms of such
Outside Director Options to the extent provided in subsections (b) through (i)
below. None of the provisions of Section 5 applicable to Stock Options shall be
applicable to Outside Director Options.
(b) Eligibility and Grant. Outside Director Options shall be NQSOs. All Outside
Director Options shall be evidenced by a written agreement, which shall be dated
as of the date on which an Outside Director Option is granted, signed by an
officer of the Company authorized by the Committee, and signed by the Outside
Director. Such agreement shall describe the Outside Director Options and state
that such Outside Director Options are subject to all terms and provisions of
the Plan.
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<PAGE> 13
(c) Vesting. All Outside Director Options shall be fully vested on the
date of grant.
(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 forty-five (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.
(e) Exercise Price. The exercise price per Share purchasable under an Outside
Director Option shall be equal to the fair market value on the day the Outside
Director Option is granted.
(f) Maximum Term. Each Outside Director Option shall be exercisable for ten
(10) years from the date of grant; provided, however, that in the event an
Outside Director's service to the Company is terminated for Cause, each Outside
Director Option held by that Outside Director on the date of termination shall
be canceled effective as of such termination date.
(g) Transferability of Outside Director Options. Except as otherwise provided
hereunder, Stock Options shall be transferable by the Outside Director only with
prior approval of the Committee. Any attempted transfer without Committee
approval shall be null and void. Unless Committee approval of the transfer shall
have been obtained, all Outside Director Options shall be exercisable during the
Outside Director's lifetime only by the Outside Director or the Outside
Director's legal representative. Without limiting the generality of the
foregoing, the Committee may, in the manner established by the Committee,
provide for the irrevocable transfer, without payment of consideration, of any
Outside Director Option by an Outside Director to a member of the Outside
Director's family or to a family entity. In such case, the Outside Director
Option shall be exercisable only by such transferee. For purposes of this
provision: (i) an Outside Director's "family" shall include the Outside
Director's child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
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<PAGE> 14
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including through
adoptive relationships, and any person sharing the Outside Director's household
(other than a tenant or employee); (ii) and a "family entity" shall include a
trust in which the foregoing persons have more than fifty percent of the
beneficial interest, a foundation in which the foregoing persons (or the Outside
Director) control the management of assets, and any other entity in which the
foregoing persons (or the Outside Director) own more than fifty percent of the
voting interests; and (iii) neither a transfer under a domestic relations order
in settlement of marital property rights nor a transfer to an entity in which
more than fifty percent of the voting interests are owned by family members (or
the Outside Director) in exchange for an interest in that entity shall be
considered to be a transfer for consideration.
(h) Method of Exercise. Outside Director Options may be exercised in whole or in
part by giving written notice of exercise to the Company specifying the number
of Shares to be purchased. No Shares shall be transferred until full payment
therefor has been made. Payment for exercise of an Outside Director Option may
be made (i) in cash, (ii) by delivery of Shares already owned by the Outside
Director, (iii) by attestation of ownership of such already-owned Shares, (iv)
by delivery of cash on the extension of credit by a broker-dealer to whom the
Outside Director has submitted a notice of exercise or an irrevocable election
to effect such extension of credit, or (v) by any combination of the foregoing.
(i) Termination of Option. Except as otherwise provided herein, if an Outside
Director ceases to be a member of the Board for any reason, then all Outside
Director Options or any unexercised portion of such Outside Director Options
which otherwise are exercisable shall remain exercisable until expiration of the
original term of such Outside Director Options.
(j) Applicability of Other Provisions to Outside Director Options. Except for
Section 5 and except to the extent inconsistent with the provisions of this
Section 9, all other terms applicable to Stock Options set forth in other
sections of this Plan are applicable to Outside Director Options.
SECTION 10 | CHANGE OF CONTROL PROVISIONS
(a) Impact of Event. In the event of a "Change of Control" as defined in Section
10(b), the following acceleration, exercisability and valuation provisions shall
apply:
(i) On the date that such Change of Control is determined to have occurred,
any or all Stock Options awarded under this Plan not previously exercisable
and vested shall become fully exercisable and vested.
(ii) In the event that the employment of an optionee is terminated within
two years after a Change of Control for any reason other than because of
the optionee's death or retirement or by the Company for Cause, then all
Options held by the optionee (or a transferee) that have vested as of
immediately before such termination shall remain exercisable until the
earlier of the third anniversary of such termination or the expiration of
their original term. In the event that the
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<PAGE> 15
employment of an optionee is terminated more than two years after a Change
of Control, or within two years after a Change of Control for any reason
other than because of the optionee's death or retirement or by the Company
for Cause, then the provisions of Section 5(f), (g) and (h) shall govern
(as applicable).
(iii) The restrictions applicable to any or all Restricted Shares,
Incentive Compensation Restricted Shares, Performance Shares and
Performance Share Units shall lapse and such shares and awards shall be
fully vested.
(b) Definition of "Change of Control". For purposes of Section 10(a), a "Change
of Control" shall mean:
(i) the acquisition by any individual, entity or group (within the meaning
of Section 13(d) (3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty-five (25)% or more of either (x) the then
outstanding common shares of CAH (the "outstanding CAH Common Shares") or
(y) the combined voting power of the then outstanding voting securities of
CAH entitled to vote generally in the election of directors (the
"Outstanding CAH Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from CAH or any corporation
controlled by CAH, (B) any acquisition by CAH or any corporation controlled
by CAH, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by CAH or any corporation controlled by CAH or (D)
any acquisition by any corporation pursuant to a transaction which complies
with clauses (x), (y) and (z) of subsection (iii) of this Section 10(b); or
(ii) individuals who, as of the Effective Date of this Plan, constitute the
Board of CAH (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of CAH; provided, however, that any
individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by CAH's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(iii) approval by the shareholders of CAH of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Company or the acquisition of assets of another
corporation (a "Business Combination"), in each case, unless, following
such Business Combination, (x) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding CAH Common Shares and Outstanding CAH
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<PAGE> 16
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty (50)% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns CAH or
all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
CAH Common Shares and Outstanding CAH Voting Securities, as the case may
be, (y) no Person (excluding any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty-five (25)%
or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination (including any ownership that existed in the Company or the
company being acquired, if any) and (z) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) approval by the shareholders of CAH of a complete liquidation or
dissolution of CAH.
SECTION 11 | AMENDMENTS AND TERMINATION
(a) The Board may amend, alter or discontinue the Plan; provided, however, no
amendment, alteration or discontinuation shall be made (i) which would impair
the rights of an optionee, participant or transferee pursuant to Section 5(e)
under any award theretofore granted, without the optionee's, participant's or
transferee's consent, except for amendments made to cause the Plan or such award
to comply with applicable law, stock exchange rules or accounting rules, or (ii)
without the approval of CAH's shareholders to the extent such approval is
required by applicable law, regulation or stock exchange rule.
The Committee may amend the terms of any award theretofore granted (except an
Outside Director Option), prospectively or retroactively; provided no such
amendment shall impair the rights of any holder without the holder's consent,
unless it is made to cause the Plan or such award to comply with applicable law,
stock exchange rules or accounting rules,; provided, further, no Stock Option
may be amended so as to decrease the exercise price of such Stock Option to
reflect a decrease in the fair market value of the underlying stock.
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<PAGE> 17
Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in applicable tax and securities laws and
accounting rules, as well as other developments.
SECTION 12 | UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments or deliveries of Shares not yet made
by the Company to a participant, optionee or transferee, nothing contained
herein shall give any such participant, optionee or transferee any rights that
are greater than those of a general creditor of the Company. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Shares or payments hereunder consistent with
the foregoing.
SECTION 13 | GENERAL PROVISIONS
(a) Share Transfer and Distribution. The Committee may require each person
purchasing Shares pursuant to a Stock Option, Outside Director Option,
Performance Share, Restricted Share or Incentive Compensation Restricted Share
award under the Plan to represent to and agree with the Company in writing that
the optionee or participant is acquiring the Shares without a view to the
distribution thereof. Any certificates for such Shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All Shares or other securities delivered under the Plan shall be subject to such
stop-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Shares are then listed
and any applicable federal or state securities law, and the Committee may cause
a legend or legends to be put on any certificates evidencing such Shares to make
appropriate reference to such restrictions.
The Company shall not be required to deliver any Shares or other securities
under the Plan prior to such registration or other qualification of such Shares
or other securities under any state or federal law, rule or regulation as the
Committee shall determine to be necessary or advisable.
(b) Additional Arrangements. Nothing contained in this Plan shall prevent the
Company from adopting other or additional compensation arrangements for its
employees, consultants or Outside Directors.
(c) No Right to Award or Employment. No person shall have any claim or right to
be granted an award under this Plan and the grant of an award shall not confer
upon any participant any right to be retained as an employee or director of CAH
or any subsidiary, nor shall it interfere in any way with the right of CAH or
any subsidiary to terminate the employment or service as a director of any of
the Plan's participants at any time.
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<PAGE> 18
(d) Tax Withholding. The Company shall have the right to require the grantee of
Restricted Shares, Incentive Compensation Restricted Shares, Performance Shares
or Performance Share Units or other person receiving such Shares to pay the
Company the amount of any taxes which the Company is required to withhold with
respect to such Shares or, in lieu thereof, to retain, or sell without notice, a
sufficient number of Shares held by it to cover the amount required to be
withheld. The Company shall have the right to deduct from all dividends paid
with respect to Restricted Shares, Incentive Compensation Restricted Shares, and
Performance Shares the amount of any taxes which the Company is required to
withhold with respect to such dividend payments.
The Company shall also have the right to require an optionee to pay to the
Company the amount of any taxes which the Company is required to withhold with
respect to the receipt by the optionee of Shares pursuant to the exercise of a
Stock Option, or, in lieu thereof, to retain, or sell without notice, a number
of Shares sufficient to cover the amount required to be withheld.
In the case of any amounts withheld for taxes pursuant to this provision in the
form of Shares, the amount withheld shall not exceed the minimum required by
applicable law and regulations.
(e) Beneficiaries. The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(f) Laws Governing. The Plan and all awards made and action taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Ohio, except to the extent superseded by federal law.
(g) Government Regulation. Notwithstanding any provisions of the Plan or any
agreement made pursuant to the Plan, the Company's obligations under the Plan
and such agreement shall be subject to all applicable laws, rules and
regulations and to such approvals as may be required by any governmental or
regulatory agencies.
SECTION 14 | EFFECTIVE DATE OF AMENDMENTS TO PLAN
The amendments incorporated into the Plan hereby shall apply to grants made
hereunder on or after August 11, 1999 (the "Effective Date").
SECTION 15 | TERM OF PLAN
No award shall be granted pursuant to the Plan on or after November 14, 2005,
but awards granted prior to such date may extend beyond that date.
SECTION 16 | INDEMNIFICATION
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award granted
under the Plan. Each
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<PAGE> 19
person who is or shall have been a member of the Committee or of the Board shall
be indemnified and held harmless by the Company against and from any loss, cost,
liability or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit or proceeding to which
he may be a party or in which he may be involved by reason of any action taken
or failure to act under or in connection with this Plan or any award granted
under this Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him, except a
judgment based upon a finding of bad faith, provided he shall give the Company
an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such person may be entitled under the Company's Articles of Incorporation
or Code of Regulations, contained in any indemnification agreements, as a matter
of law, or otherwise, or any power that the Company may have to indemnify him or
hold him harmless.
SECTION 17 | SAVINGS CLAUSE
In case any one or more of the provisions of this Plan shall be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the invalid, illegal or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law, any provision
which could be deemed null and void shall first be construed, interpreted or
revised retroactively to permit this Plan to be construed so as to foster the
intent of this Plan. This Plan is intended to comply in all respects with
applicable law and regulation, including Code Section 422. In case any one or
more of the provisions of this Plan (other than Section 10) shall be held to
violate Code Section 422, then to the extent permissible by law, any provision
which could be deemed to violate Code Section 422 shall first be construed,
interpreted, or revised retroactively to permit the Plan to be in compliance
with Code Section 422. Notwithstanding anything in this Plan to the contrary,
the Committee, in its sole and absolute discretion, may bifurcate this Plan so
as to restrict, limit or condition the use of any provision of this Plan to
participants who are subject to Section 16 of the Exchange Act, or covered
employees as defined under Code Section 162(m) without so restricting, limiting
or conditioning this Plan with respect to other participants.
SECTION 18 | AWARDS TO PARTICIPANTS OUTSIDE OF UNITED STATES
The Committee may modify the terms of any award under the Plan granted to a
participant who, at the time of grant or during the term of the award, is
resident or employed outside of the United States in any manner deemed by the
Committee to be necessary or appropriate in order to accommodate differences in
local law, regulation, tax policy or custom, or so that the value and other
benefits of the award to the participant, as affected by foreign tax laws and
other restrictions applicable as a result of the participant's residence or
employment abroad, will be comparable to the value of such an award to a
participant who is resident or employed in the United States. Moreover, the
Committee may approve such supplements to, or amendments, restatements or
alternative versions of,
19
<PAGE> 20
this Plan as it may consider necessary or appropriate for such purposes without
thereby affecting the terms of this Plan as in effect for any other purpose,
provided that no such supplements, amendments, restatements or alternative
versions shall include any provisions that are inconsistent with the terms of
this Plan, as then in effect, unless this Plan could have been amended to
eliminate such inconsistency without further approval of the shareholders of
CAH.
20
<PAGE> 1
Exhibit 10.04
FORM OF
CARDINAL HEALTH, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Grant Date:
Grant vesting date:
Grant expiration date:
Grant Price:
Cardinal Health, Inc., an Ohio corporation (the "Company"), has granted to
[employee name] ("Grantee"), an option (the "Option") to purchase [# of shares]
(the "Shares") of common stock in the Company for a total purchase price of [#
of shares *stock price], (i.e., the equivalent of [stock price] for each full
Share). The Option has been granted pursuant to the Cardinal Health, Inc.
Amended and Restated Equity Incentive Plan (the "Plan") and shall include and be
subject to all provisions of the Plan, which are hereby incorporated herein by
reference, and shall be subject to the provisions of this agreement. Capitalized
terms used herein which are not specifically defined herein shall have the
meanings ascribed to such terms in the Plan. This option shall be exercisable at
any time on or after and prior to .
CARDINAL HEALTH, INC.
By:__________________
Robert D. Walter
Chairman and CEO
1
<PAGE> 2
1. Method of Exercise. At any time when the Option is exercisable under the Plan
and this agreement, the Option shall be exercisable from time to time by written
notice to the Company which shall:
(a) state that the Option is thereby being exercised, the number of Shares with
respect to which the Option is being exercised, each person in whose name any
certificates for the Shares should be registered and his address and social
security number;
(b) be signed by the person or persons entitled to exercise the Option and, if
the Option is being exercised by anyone other than the Grantee, be accompanied
by proof satisfactory to counsel for the Company of the right of such person or
persons to exercise the Option under the Plan and all applicable laws and
regulations; and
(c) contain such representations and agreements with respect to the investment
intent of such person or persons in form and substance satisfactory to counsel
for the Company.
2. Payment of Price. The full exercise price for the Option shall be paid to the
Company as provided in the Plan.
3. Transferability. The Option shall be transferable (I) at the Grantee's death,
by the Grantee by will or pursuant to the laws of descent and distribution, and
(II) by the Grantee during the Grantee's lifetime, without payment of
consideration, to (a) the spouse, former spouse, parents, stepparents,
grandparents, parents-in-law, siblings, siblings-in-law, children, stepchildren,
children-in-law, grandchildren, nieces, or nephews of the Grantee, or any other
persons sharing the Grantee's household (other than tenants or employees)
("Family Members"), (b) a trust or trusts for the primary benefit of the Grantee
or such Family Members, (c) a foundation in which the Grantee or such Family
Members control the management of assets, or (d) a partnership in which the
Grantee or such Family Members are the majority or controlling partners,
provided that subsequent transfers of the transferred Option shall be prohibited
except (X) if the transferee is an individual, at the transferee's death by the
transferee by will or pursuant to the laws of descent and distribution and (Y)
without payment of consideration to the individuals or entities listed in
subitems II(a), (b), or (c), above, with respect to the original Grantee. The
Committee may, in its discretion, permit transfers to other persons and entities
as permitted by the Plan. Neither a transfer under a domestic relations order in
settlement of marital property rights nor a transfer to an entity in which more
than fifty percent of the voting interests are owned by the Grantee or Family
Members in exchange for an interest in that entity shall be considered to be a
transfer for consideration. Within ten days of any transfer, the Grantee shall
notify the Stock Option Administrator of the Company in writing of the transfer.
Following transfer, the Option shall continue to be subject to the same terms
and conditions as were applicable immediately prior to transfer and, except as
otherwise provided in the Plan or this agreement, references to the original
Grantee shall be deemed to refer to the transferee. The events of termination of
employment of the Grantee provided in item 4 hereof shall continue to be applied
with respect to the original Grantee, following which the Option shall be
exercisable by the transferee only to the extent, and
2
<PAGE> 3
for the periods, specified in item 4. The Company shall have no obligation to
notify any transferee of the Grantee's termination of employment with the
Company for any reason. The conduct prohibited of Grantee in items 6 and 7
hereof shall continue to be prohibited of Grantee following transfer to the same
extent as immediately prior to transfer and the Option (or its economic value,
as applicable) shall be subject to forfeiture by the transferee and recoupment
from the Grantee to the same extent as would have been the case of the Grantee
had the Option not been transferred. The Grantee shall remain subject to the
recoupment provisions of items 6 and 7 of this agreement and tax withholding
provisions of Section 13(d) of the Plan following transfer of the Option.
4. Termination of Relationship.
(a) Termination by Death. If the Grantee's employment by the Company and its
subsidiaries (collectively, the "Cardinal Group") terminates by reason of death,
then, unless otherwise determined by the Committee within sixty days of such
death, any unexercised portion of the Option shall be exercisable in full from
and after and any unvested portion thereof shall vest upon, the sixtieth day
after such death. The Option may thereafter be exercised by any transferee of
the Option, if applicable, or by the legal representative of the estate or by
the legatee of the Grantee under the will of the Grantee for a period of one
year (or such other period as the Committee may specify at or after grant or
death) from the date of death or until the expiration of the stated term of the
Option, whichever period is shorter.
(b) Termination by Reason of Retirement. If the Grantee's employment by the
Cardinal Group terminates by reason of retirement (as defined in the Plan),
then, unless otherwise determined by the Committee within sixty days of such
retirement, any unexercised portion of the Option will vest in accordance with
the terms indicated on the first page of this agreement and may thereafter be
exercised by the Grantee (or any transferee, if applicable) until the earlier of
(the "Exercise Period") the fifth anniversary of the date of such retirement or
the expiration of the stated term of the Option; provided, that any vesting that
would otherwise occur during the sixty-day period beginning immediately after
such retirement shall not occur until the end of such sixty-day period. If the
Grantee has at least fifteen years of service with the Cardinal Group at the
time of retirement, the Option may thereafter be exercised by the Grantee (or
any transferee, if applicable) until the expiration of the stated term of the
Option. Notwithstanding the foregoing, if the Grantee dies after retirement but
before the expiration of the Exercise Period, unless otherwise determined by the
Committee within 60 days of such death, any unexercised portion of the Option
shall be exercisable in full, and any unvested portion thereof shall vest upon,
and the Option may be exercised by any transferee of the Option, if applicable,
or by the legal representative of the estate or by the legatee of the Grantee
under the will of the Grantee from and after, the sixtieth day after such death
for a period of one year (or such other period as the Committee may specify at
or after grant or death) from the date of death or until the expiration of the
Exercise Period, whichever period is shorter.
3
<PAGE> 4
(c) Other Termination of Employment. If the Grantee's employment by the Cardinal
Group terminates for any reason other than death or retirement (subject to
Section 10 of the Plan regarding acceleration of the vesting of the Option upon
a Change of Control), any unexercised portion of the Option which has not vested
on such date of termination will automatically terminate on the date of such
termination. Unless otherwise determined by the Committee at or after grant or
termination, the Grantee (or any transferee, if applicable) will have ninety
days (or such other period as the Committee may specify at or after grant or
termination) from the date of termination or until the expiration of the stated
term of the Option, whichever period is shorter, to exercise any portion of the
Option that is then exercisable on the date of termination; provided, however,
that if the termination was for Cause, the Option may be immediately canceled by
the Committee (whether then held by Grantee or any transferee).
5. Restrictions on Exercise. The Option is subject to all restrictions in this
agreement or in the Plan. As a condition of any exercise of the Option, the
Company may require the Grantee or his transferee or successor to make any
representation and warranty to comply with any applicable law or regulation or
to confirm any factual matters (including Grantee's compliance with the terms of
items 6 and 7 of this agreement or any employment or severance agreement between
any member of the Cardinal Group and the Grantee) reasonably requested by the
Company.
6. Triggering Conduct/Competitor Triggering Conduct. As used in this agreement,
"Triggering Conduct" shall include disclosing or using in any capacity other
than as necessary in the performance of duties assigned by the Cardinal Group
any confidential information or material concerning the Cardinal Group;
violation of Company policies, including conduct which would constitute a breach
of the then-most recent version of the Certificate of Compliance with Company
Policies signed by the Grantee; directly or indirectly employing, contacting
concerning employment, or participating in any way in the recruitment for
employment (whether as an employee, officer, director, agent, consultant or
independent contractor) any person who was or is at any time during the previous
twelve months an employee, representative, officer, or director of the Cardinal
Group; and breaching any provision of any employment or severance agreement with
a member of the Cardinal Group. As used herein, "Competitor Triggering Conduct"
shall include accepting employment with or serving as a consultant, advisor, or
in any other capacity to an entity that is in competition with the business
conducted by any member of the Cardinal Group (a "Competitor") either during or
within one year following Grantee's termination of employment with the Cardinal
Group ("Competitor Triggering Conduct"). The Committee shall resolve in good
faith any disputes concerning whether particular conduct constitutes Triggering
Conduct or Competitor Triggering Conduct, and any such determination by the
Committee shall be conclusive and binding on all interested persons.
7. Special Forfeiture/Repayment Rules. For so long as Grantee continues as an
employee with the Cardinal Group and for three years following Grantee's
termination of employment with the Cardinal Group, Grantee agrees not to engage
in Triggering Conduct. If Grantee engages in such Triggering conduct or in
Competitor Triggering
4
<PAGE> 5
Conduct during such time, then: (a) the Option (or any part thereof that has not
been exercised) shall immediately and automatically terminate, be forfeited, and
shall cease to be exercisable at any time; and (b) the Grantee shall, within 30
days following written notice from the Company, pay to the Company an amount
equal to the gross option gain realized or obtained by the Grantee or any
transferee resulting from the exercise of such Option, measured at the date of
exercise (i.e., the difference between the market value of the Option Shares on
the exercise date and the exercise price paid for such Option Shares), with
respect to any portion of the Option that has already been exercised at any time
within three years prior to the Triggering Conduct (the "Look-Back Period"),
less $1.00. If Grantee engages only in Competitor Triggering Conduct, then the
Look-Back Period shall be shortened to exclude any period more than one year
prior to Grantee's termination of employment with the Cardinal Group. The
Grantee may be released from Grantee's obligations under this item 7 only if the
Committee (or its duly appointed agent) determines, in writing and in its sole
discretion, that such action is in the best interests of the Company. Nothing in
this item 7 constitutes a so-called "noncompete" covenant. However, this item 7
does prohibit certain conduct while Grantee is associated with the Cardinal
Group and thereafter and does provide for the forfeiture or repayment of the
benefits granted by this agreement under certain circumstances, including but
not limited to the Grantee's acceptance of employment with a Competitor. Grantee
agrees to provide the Company with at least ten days written notice prior to
directly or indirectly accepting employment with or serving as a consultant,
advisor, or in any other capacity to a Competitor, and further agrees to inform
any such new employer, before accepting employment, of the terms of this item 7
and the Grantee's continuing obligations contained herein. No provision of this
agreement shall diminish, negate, or otherwise impact any separate noncompete
agreement to which Grantee may be a party. Grantee acknowledges and agrees that
the provisions contained in this item 7 are being made for the benefit of the
Company in consideration of Grantee's receipt of the Option, in consideration of
employment, in consideration of exposing Grantee to the Company's business
operations and confidential information, and for other good and valuable
consideration, the adequacy of which consideration is hereby expressly
confirmed. Grantee further acknowledges that the receipt of the Option and
execution of this agreement are voluntary actions on the part of Grantee, and
that the Company is unwilling to provide the Option to Grantee without including
this item 7.
8. Right of Set-Off. By accepting this Option, the Grantee consents to a
deduction from and set-off against any amounts owed to the Grantee by any member
of the Cardinal Group from time to time (including but not limited to amounts
owed to the Grantee as wages, severance payments, or other fringe benefits) to
the extent of the amounts owed to the Cardinal Group by the Grantee under this
agreement.
9. Governing Law/Venue. This agreement shall be governed by the laws of the
State of Ohio, without regard to principles of conflicts of law, except to the
extent superseded by the laws of the United States of America. In addition, all
legal actions or proceedings relating to this agreement shall be brought in
state or federal courts located in Franklin County, Ohio, and the parties
executing this agreement hereby consent to the personal
5
<PAGE> 6
jurisdiction of such courts. Grantee acknowledges that the covenants contained
in items 6 and 7 of this agreement are reasonable in nature, are fundamental for
the protection of the Company's legitimate business and proprietary interests,
and do not adversely affect the Grantee's ability to earn a living in any
capacity that does not violate such covenants. The parties further agree that,
in the event of any violation by Grantee of any such covenants, the Company will
suffer immediate and irreparable injury for which there is no adequate remedy at
law. In the event of any violation or attempted violations of item 6 or 7 of
this agreement, the Company shall be entitled to specific performance and
injunctive relief or other equitable relief without any showing of irreparable
harm or damage, and Grantee hereby waives any requirement for the securing or
posting of any bond in connection with such remedy, without prejudice to the
rights and remedies afforded the Company hereunder or by law. In the event that
it becomes necessary for the Company to institute legal proceedings under this
agreement, Grantee shall be responsible to the Company for all costs and
reasonable legal fees incurred by the Company with regard to such proceedings.
Any provision of this agreement which is determined by a court of competent
jurisdiction to be invalid or unenforceable should be construed or limited in a
manner that is valid and enforceable and that comes closest to the business
objectives intended by such provision, without invalidating or rendering
unenforceable the remaining provisions of this agreement.
10. Prompt Acceptance of Agreement. The Option grant evidenced by this agreement
shall, at the discretion of the Committee, be forfeited if this agreement is not
executed by the Grantee and returned to the Company within sixty days of the
Grant Date set forth on the first page of this agreement.
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<PAGE> 7
ACCEPTANCE OF AGREEMENT
The Grantee hereby: (a) acknowledges receiving a copy of the Plan, which has
either been previously delivered or is provided with this agreement, and
represents that he is familiar with all provisions of the Plan; and (b) accepts
this agreement and the Option granted to him under this agreement subject to all
provisions of the Plan and this agreement. The Grantee further acknowledges
receiving a copy of the Company's most recent Annual Report and other
communications routinely distributed to the Company's shareholders and a copy of
the Plan Description dated August 11, 1999 pertaining to the Plan.
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Grantee's Social Security Number
--------------------------------
Date
7
<PAGE> 1
Exhibit 10.05
FORM OF
RESTRICTED SHARES AGREEMENT
Cardinal Health, Inc., an Ohio corporation (the "Company"), has
granted to _________________ (the "Grantee"), ______ Common Shares in the
Company (the "Restricted Shares"). The Restricted Shares have been granted
pursuant to the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan
(the "Plan") and shall be subject to all provisions of the Plan, which are
hereby incorporated herein by reference, and shall be subject to the provisions
of this agreement. Capitalized terms used herein which are not specifically
defined herein shall have the meanings ascribed to such terms in the Plan.
1. Vesting. The Restricted Shares shall vest in accordance with the
following schedule (which dates shall be "Vesting Date(s)"):
Vesting Date % of Restricted Shares
------------ ----------------------
%
%
%
----
Total 100%
2. Purchase Price. The purchase price of the Restricted Shares shall be
$-0-.
3. Transferability. Prior to the applicable Vesting Date(s) (the
"Restriction Period"), the Grantee shall not be permitted to sell, transfer,
pledge, assign or otherwise encumber the Restricted Shares, except as otherwise
provided in Section 4 of this agreement. The Restricted Shares will be held by
the Company; provided, however, that the Company will deliver certificates
representing these Restricted Shares which have fully vested to the Grantee
within a reasonable time after being requested in writing to do so.
4. Termination of Service. Unless otherwise determined by the Committee
at or after grant or termination, and except as set forth below, if the
Grantee's Continuous Service to the Company and its subsidiaries (collectively,
the "Cardinal Group") terminates during the Restriction Period, all of the
Restricted Shares that have not vested shall be forfeited by the Grantee. If the
Grantee's Continuous Service terminates prior to the vesting of all of the
Restricted Shares by reason of the Grantee's death or total or partial
disability, then the restrictions with respect to a ratable portion of the
Restricted Shares shall lapse and such shares shall not be forfeited. Such
ratable portion shall be determined with respect to each separate award of
Restricted Shares and shall be an amount equal to (i) the number of Restricted
Shares awarded to the Grantee multiplied by the portion of the Restriction
Period that has expired at the date of the Grantee's death or total or partial
disability, reduced by (ii) the number of Restricted Shares awarded with respect
to which the restrictions had lapsed as of the date of the death or total or
partial disability of the Grantee. For purposes of this agreement, the term
"Continuous Service" shall mean the absence of any interruption or termination
of service as an employee or director of any entity within the Cardinal Group.
5. Triggering Conduct/Competitor Triggering Conduct. As used in this
agreement, "Triggering Conduct" shall include disclosing or using in any
capacity other than as necessary in the performance of duties assigned by the
Cardinal Group any confidential information or material concerning the Cardinal
Group; violation of Company policies, including conduct which would constitute a
breach of the then-most recent version of the Certificate of Compliance with
Company Policies signed by the Grantee; directly or indirectly employing,
contacting concerning employment, or participating in any way in the recruitment
for employment (whether as an employee, officer, director, agent, consultant or
independent contractor) any
<PAGE> 2
person who was or is at any time during the previous twelve months an employee,
representative, officer, or director of the Cardinal Group; and breaching any
provision of any employment or severance agreement with a member of the Cardinal
Group. As used herein, "Competitor Triggering Conduct" shall include accepting
employment with or serving as a consultant, advisor, or in any other capacity to
an entity that is in competition with the business conducted by any member of
the Cardinal Group (a "Competitor") either during or within one year following
Grantee's termination of employment with the Cardinal Group ("Competitor
Triggering Conduct"). The Committee shall resolve in good faith any disputes
concerning whether particular conduct constitutes Triggering Conduct or
Competitor Triggering Conduct, and any such determination by the Committee shall
be conclusive and binding on all interested persons.
6. Special Forfeiture/Repayment Rules. For so long as Grantee continues
as an employee with the Cardinal Group and for three years following Grantee's
termination of employment with the Cardinal Group, Grantee agrees not to engage
in Triggering Conduct. If Grantee engages in such Triggering conduct or in
Competitor Triggering Conduct during such time, then: (a) the Restricted Shares
(or any part thereof that have not vested) shall immediately and automatically
terminate, be forfeited, and shall cease to vest at any time; and (b) the
Grantee shall, within 30 days following written notice from the Company, pay to
the Company an amount equal to the gross gain realized or obtained by the
Grantee resulting from the vesting of such Restricted Shares, measured at the
date of vesting (i.e., the market value of the Restricted Shares on the vesting
date), with respect to any portion of the Restricted Shares that has already
vested at any time within three years prior to the Triggering Conduct (the
"Look-Back Period"), less $1.00. If Grantee engages only in Competitor
Triggering Conduct, then the Look-Back Period shall be shortened to exclude any
period more than one year prior to Grantee's termination of employment with the
Cardinal Group. The Grantee may be released from Grantee's obligations under
this item 6 only if the Committee (or its duly appointed agent) determines, in
writing and in its sole discretion, that such action is in the best interests of
the Company. Nothing in this item 6 constitutes a so-called "noncompete"
covenant. However, this item 6 does prohibit certain conduct while Grantee is
associated with the Cardinal Group and thereafter and does provide for the
forfeiture or repayment of the benefits granted by this agreement under certain
circumstances, including but not limited to the Grantee's acceptance of
employment with a Competitor. Grantee agrees to provide the Company with at
least ten days written notice prior to directly or indirectly accepting
employment with or serving as a consultant, advisor, or in any other capacity to
a Competitor, and further agrees to inform any such new employer, before
accepting employment, of the terms of this item 6 and the Grantee's continuing
obligations contained herein. No provision of this agreement shall diminish,
negate, or otherwise impact any separate noncompete agreement to which Grantee
may be a party. Grantee acknowledges and agrees that the provisions contained in
this item 6 are being made for the benefit of the Company in consideration of
Grantee's receipt of the Restricted Shares, in consideration of employment, in
consideration of exposing Grantee to the Company's business operations and
confidential information, and for other good and valuable consideration, the
adequacy of which consideration is hereby expressly confirmed. Grantee further
acknowledges that the receipt of the Restricted Shares and execution of this
agreement are voluntary actions on the part of Grantee, and that the Company is
unwilling to provide the Restricted Shares to Grantee without including this
item 6.
7. Right of Set-Off. By accepting these Restricted Shares, the Grantee
consents to a deduction from and set-off against any amounts owed to the Grantee
by any member of the Cardinal Group from time to time (including but not limited
to amounts owed to the Grantee as wages, severance payments, or other fringe
benefits) to the extent of the amounts owed to the Cardinal Group by the Grantee
under this agreement.
8. Shareholder Rights and Restrictions. Except with regard to the
disposition of Restricted Shares, the Grantee shall generally have all rights of
a shareholder with respect to the Restricted Shares
2
<PAGE> 3
from the date of grant, including, without limitation, the right to receive
dividends with respect to such Restricted Shares and the right to vote such
Restricted Shares, but subject, however, to those restrictions in this agreement
or in the Plan.
9. Withholding Tax. The Company shall have the right to require the
Grantee to pay to the Company the amount of any taxes which the Company is
required to withhold with respect to the Restricted Shares (including the amount
of any taxes which the Company is required to withhold with respect to dividends
on the Restricted Shares) or, in lieu thereof, to retain, or sell without
notice, a sufficient number of Restricted Shares to cover the amount required to
be withheld. In the case of any amounts withheld for taxes pursuant to this
provision in the form of Restricted Shares, the amount withheld shall not exceed
the minimum required by applicable law and regulations.
10. Governing Law/Venue. This agreement shall be governed by the laws
of the State of Ohio, without regard to principles of conflicts of law, except
to the extent superseded by the laws of the United States of America. In
addition, all legal actions or proceedings relating to this agreement shall be
brought in state or federal courts located in Franklin County, Ohio, and the
parties executing this agreement hereby consent to the personal jurisdiction of
such courts. Grantee acknowledges that the covenants contained in items 5 and 6
of this agreement are reasonable in nature, are fundamental for the protection
of the Company's legitimate business and proprietary interests, and do not
adversely affect the Grantee's ability to earn a living in any capacity that
does not violate such covenants. The parties further agree that, in the event of
any violation by Grantee of any such covenants, the Company will suffer
immediate and irreparable injury for which there is no adequate remedy at law.
In the event of any violation or attempted violations of item 5 or 6 of this
agreement, the Company shall be entitled to specific performance and injunctive
relief or other equitable relief without any showing of irreparable harm or
damage, and Grantee hereby waives any requirement for the securing or posting of
any bond in connection with such remedy, without prejudice to the rights and
remedies afforded the Company hereunder or by law. In the event that it becomes
necessary for the Company to institute legal proceedings under this agreement,
Grantee shall be responsible to the Company for all costs and reasonable legal
fees incurred by the Company with regard to such proceedings. Any provision of
this agreement which is determined by a court of competent jurisdiction to be
invalid or unenforceable should be construed or limited in a manner that is
valid and enforceable and that comes closest to the business objectives intended
by such provision, without invalidating or rendering unenforceable the remaining
provisions of this agreement.
11. Prompt Acceptance of Agreement. The Restricted Shares grant
evidenced by this agreement shall, at the discretion of the Committee, be
forfeited if this agreement is not executed by the Grantee and returned to the
Company within sixty days of the Grant Date set forth below.
CARDINAL HEALTH, INC.
DATE OF GRANT: _________________ By:________________________________
Steven Alan Bennett
Executive Vice President
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ACCEPTANCE OF AGREEMENT
The Grantee hereby: (a) acknowledges that he has received a copy
of the Plan, a copy of the Company's most recent Annual Report and other
communications routinely distributed to the Company's shareholders, and a copy
of the Plan Description dated August 11, 1999, pertaining to the Plan; (b)
accepts this Agreement and the Restricted Shares granted to him under this
Agreement subject to all provisions of the Plan and this Agreement; (c)
represents and warrants to the Company that he is purchasing the Restricted
Shares for his own account, for investment, and not with a view to or any
present intention of selling or distributing the Restricted Shares either now or
at any specific or determinable future time or period or upon the occurrence or
nonoccurrence of any predetermined or reasonably foreseeable event; and (d)
agrees that no transfer of the Restricted Shares shall be made unless the
Restricted Shares have been duly registered under all applicable Federal and
state securities laws pursuant to a then-effective registration which
contemplates the proposed transfer or unless the Company has received a written
opinion of, or satisfactory to, its legal counsel that the proposed transfer is
exempt from such registration:
________________________________
Grantee's Signature
________________________________
Grantee's Social Security Number
________________________________
Date
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<PAGE> 1
Exhibit 10.06
DIRECTORS' STOCK OPTION AGREEMENT
Cardinal Health, Inc., an Ohio corporation (the "Company"), has
granted to [[Board_Member]] (the "Grantee"), an option (the "Option") to
purchase 1,440 Common Shares, without par value (the "Shares"), of the Company
for a total purchase price (the "Option Price") of $_______________ (i.e., the
equivalent of $__.__ for each full Share). The Option has been granted pursuant
to the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan (the
"Plan") and shall include and be subject to all provisions of the Plan, which
are hereby incorporated herein by reference, and shall be subject to the
following provisions of this agreement. Capitalized terms used herein which are
not specifically defined herein shall have the meanings ascribed to such terms
in the Plan.
Section 1. Method of Exercise. At any time when the Option is
exercisable under the Plan, the Option shall be exercisable from time to time by
written notice to the Company (the date such notice is received by the Company,
the "Exercise Date") which shall:
(a) state that the Option is thereby being exercised, the
number of Shares with respect to which the Option is
being exercised, each person in whose name any
certificates for the Shares should be registered and
his or her address and social security number;
(b) be signed by the person or persons entitled to
exercise the Option and, if the Option is being
exercised by anyone other than the Grantee, be
accompanied by proof satisfactory to counsel for the
Company of the right of such person or persons to
exercise the Option under the Plan and all applicable
laws and regulations; and
(c) contain such representations, warranties and
agreements with respect to the investment intent of
such person or persons in form and substance
satisfactory to counsel for the Company.
Section 2. Payment of Exercise Price. The full exercise price for
the Option shall be paid to the Company: (i) in cash, (ii) by delivery of Shares
with a fair market value equal to the total exercise price at the time of
exercise, (iii) by attestation of ownership of such already-owned Shares, (iv)
by delivery of cash on the extension of credit by a broker-dealer to whom the
Grantee (or other person authorized to exercise the Option) has submitted a
notice of exercise or an irrevocable election to effect such extension of
credit, or (v) by a combination of the preceding methods. Any Shares delivered
or attested to in payment of an exercise price shall be valued as of the
Exercise Date.
Section 3. Transferability. The Option shall be transferable (I)
at the Grantee's death, by the Grantee by will or pursuant to the laws of
descent and distribution, and (II) by the Grantee during the Grantee's lifetime,
without payment of consideration, to (a) the spouse, former spouse, parents,
stepparents, grandparents, parents-in-law, siblings, siblings-in-law, children,
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stepchildren, children-in-law, grandchildren, nieces, or nephews of the Grantee,
or any other persons sharing the Grantee's household (other than tenants or
employees) ("Family Members"), (b) a trust or trusts for the primary benefit of
the Grantee or such Family Members, (c) a foundation in which the Grantee or
such Family Members control the management of assets, or (d) a partnership in
which the Grantee or such Family Members are the majority or controlling
partners, provided that subsequent transfers of the transferred Option shall be
prohibited except (X) if the transferee is an individual, at the transferee's
death by the transferee by will or pursuant to the laws of descent and
distribution and (Y) without payment of consideration to the individuals or
entities listed in subitems II(a), (b), or (c), above, with respect to the
original Grantee. The Committee may, in its discretion, permit transfers to
other persons and entities as permitted by the Plan. Neither a transfer under a
domestic relations order in settlement of marital property rights nor a transfer
to an entity in which more than fifty percent of the voting interests are owned
by the Grantee or Family Members in exchange for an interest in that entity
shall be considered to be a transfer for consideration. Upon transfer, the
Grantee shall notify the Stock Option Administrator of the Company in writing of
the transfer. Following transfer, the Option shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer and,
except as otherwise provided in the Plan or this agreement, references to the
original Grantee shall be deemed to refer to the transferee. The events of
Grantee's termination from the Board of Directors of the Company (the "Board")
provided in Section 4 hereof shall continue to be applied with respect to the
original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods, specified in Section 4. The
conduct prohibited of Grantee in Section 6 hereof shall continue to be
prohibited of Grantee following transfer to the same extent as immediately prior
to transfer and the Option (or its economic value, as applicable) shall be
subject to forfeiture by the transferee and recoupment from the Grantee to the
same extent as would have been the case of the Grantee had the Option not been
transferred. The Company shall have no obligation to notify any transferee of
the Option of the Grantee's termination as a member of the Board for any reason.
The Grantee shall remain subject to the recoupment provisions of Section 6 of
this agreement and tax withholding provisions of Section 13(d) of the Plan
following transfer of the Option.
Section 4. Termination of Relationship. If a Grantee ceases to be
a member of the Board for any reason, then all Options or any unexercised
portion of such Options which otherwise are exercisable by such Grantee (or any
transferee) shall remain exercisable until expiration of the original term of
such Option.
Section 5. Termination for Cause. Notwithstanding any provision to
the contrary in the Plan or in this agreement, upon the discharge of the Grantee
as a director of the Company for Cause, (as defined in the Plan), all
unexercised Options awarded to such Grantee (whether then held by Grantee or any
transferee) shall immediately lapse and be of no further force or effect.
Section 6. Special Forfeiture/Repayment Rules. If Grantee engages
in certain "Triggering Conduct" (defined below), then: (a) the Option (or any
part thereof that has not been exercised) shall immediately terminate, be
forfeited, and shall cease to be exercisable; and (b) the Grantee shall, within
30 days following written notice from the Company, pay to the Company an amount
equal to the gross option gain realized or obtained by the Grantee or any
transferee resulting from the exercise of such Option, measured at the date of
exercise (i.e.,
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the difference between the market value of the Option Shares on the exercise
date and the exercise price paid for such Option Shares), with respect to any
portion of the Option that has already been exercised at any time within three
years prior to the Triggering Conduct (the "Look-Back Period"). If the only
Triggering Conduct is Competitor Triggering Conduct (as defined below), then the
Look-Back Period shall be shortened to exclude any period more than one year
prior to Grantee's termination of service as a Director of the Company.
As used herein, "Triggering Conduct" shall include activity in
competition with or inimical, contrary, or harmful to the interests of the
Company, including, but not limited to the following: disclosing or misusing any
confidential information or material concerning the Company; violation of
Company policies, including conduct which would constitute a breach of the
then-most recent version of the Certificate of Compliance with Company Policies
signed by the Grantee; accepting employment with or serving as a consultant,
advisor, or any other capacity to an entity that is in competition (a
"Competitor") with the business conducted by the Company or any of its
subsidiaries (collectively, the "Cardinal Group") either during or within one
year following Grantee's termination of service as a Director of the Company
("Competitor Triggering Conduct"); directly or indirectly employing, contacting
concerning employment, or participating in any way in the recruitment for
employment (whether as an employee, officer, director, agent, consultant or
independent contractor) any person who was or is at any time during the previous
twelve months an employee, representative, officer, or director of the Cardinal
Group; and breaching any provision of any benefit or severance agreement with a
member of the Cardinal Group. The Committee shall resolve in good faith any
disputes concerning whether particular conduct constitutes Triggering Conduct,
and any such determination by the Committee shall be conclusive and binding on
all interested persons. The Grantee may be released from Grantee's obligations
under this Section 6 only if the Committee (or its duly appointed agent)
determines, in its sole discretion, that such action is in the best interests of
the Company.
Nothing in this Section 6 constitutes a so-called "noncompete"
covenant. However, this Section 6 does prohibit certain conduct while Grantee is
associated with the Company and thereafter and does provide for the forfeiture
or repayment of the benefits granted by this agreement under certain
circumstances, including but not limited to the Grantee's acceptance of
employment with a Competitor. Grantee agrees to provide the Company with at
least ten days written notice prior to directly or indirectly accepting
employment with or serving as a consultant, advisor, or any other capacity to a
Competitor, and further agrees to inform any such new employer, before accepting
employment, of the terms of this Section 6 and of the Grantee's continuing
obligations contained herein.
No provision of this agreement shall diminish, negate, or
otherwise impact any separate noncompete agreement to which Grantee may be a
party. Grantee acknowledges and agrees that the provisions contained in this
Section 6 are being made for the benefit of the Company in consideration of
Grantee's receipt of the Option, the adequacy of which consideration is hereby
expressly confirmed. Grantee further acknowledges that the receipt of the Option
and execution of this agreement are voluntary actions on the part of Grantee,
and that the Company is unwilling to provide the Option to Grantee without
including this Section 6.
Section 7. Right of Set-Off. By accepting this Option, the Grantee
consents to a deduction from and set-off against any amounts owed to the Grantee
by any member of the
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Cardinal Group from time to time (including but not limited to amounts owed to
the Grantee as Director fees, severance payments, or other fringe benefits) to
the extent of the amounts owed to the Cardinal Group by the Grantee under this
agreement.
Section 8. Restrictions on Exercise. The Option is subject to all
restrictions in this agreement or in the Plan. As a condition of any exercise of
the Option, the Company may require the Grantee or his transferee or successor
to make such representation and warranties and to enter into such agreements as
are necessary to comply with any applicable law or regulation or to confirm any
factual matters reasonably requested by counsel for the Company.
Section 9. Governing Law/Venue. This agreement shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws. In addition, all legal actions or proceedings relating to this agreement
shall be brought in state or federal courts located in Franklin County, Ohio,
and the parties executing this agreement hereby consent to the personal
jurisdiction of such courts. Any provision of this agreement which is determined
by a court of competent jurisdiction to be invalid or unenforceable should be
construed or limited in a manner that is valid and enforceable and that comes
closest to the business objectives intended by such provision, without
invalidating or rendering unenforceable the remaining provisions of this
agreement.
Section 10. Prompt Acceptance of Agreement. The Option grant
evidenced by this agreement shall, at the discretion of the Committee, be
forfeited if this agreement is not executed by the Grantee and returned to the
Company within forty-five days of the Grant Date set forth below.
CARDINAL HEALTH, INC.
DATE OF GRANT:____________________ By: _________________________________
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ACCEPTANCE OF AGREEMENT
The Grantee hereby: (a) acknowledges receiving a copy of the Plan,
which has either been previously delivered or is attached to this Agreement, and
represents that he/she is familiar with all provisions of the Plan; and (b)
accepts this Agreement and the Option granted to him/her under this Agreement
subject to all provisions of the Plan and this Agreement. The Grantee further
acknowledges receiving a copy of the Company's most recent Annual Report to
Shareholders and communications routinely distributed to the Company's
shareholders and a copy of the Plan Description dated August 11, 1999,
pertaining to the Plan.
_____________________________________
Grantee
_____________________________________
Social Security Number
5
<PAGE> 1
Exhibit 10.18
RESIGNATION AND RELEASE AGREEMENT
AGREEMENT (the "Agreement"), dated as of June 30, 1999, by and
between Cardinal Health, Inc., an Ohio corporation (the "Company"), Allegiance
Corporation, a Delaware corporation ("Allegiance"), and Lester B.
Knight (the "Executive").
WHEREAS, the Executive has been employed as Vice-Chairman of
the Company and has been serving as a member of the board of directors of the
Company; and
WHEREAS, the Executive and Allegiance are parties to the
Agreement under Allegiance Change in Control Plan dated as of October 1, 1996
(the "Initial Agreement"), as amended by the Amendment to Change in Control
Severance Agreement (the "Amendment Agreement") among Executive, Allegiance and
the Company dated as of October 8, 1998 (the Initial Agreement, as amended by
the Amendment Agreement, the "Amended Severance Agreement");
WHEREAS, by mutual agreement between the Company and the
Executive, the Executive shall hereby resign, effective as of June 30, 1999, his
positions as Vice-Chairman of the Company, as a member of the board of directors
of the Company and as an officer and director of any subsidiary or affiliate of
the Company for which HE is serving in such positions.
NOW, THEREFORE, BE IT RESOLVED, that the Company and the
Executive, in consideration of the covenants herein set forth, hereby agree as
follows:
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1. DEFINITIONS
Capitalized terms not defined herein shall have the meaning
set forth in the Amended Severance Agreement.
2. RESIGNATION FROM POSITIONS; CONTINUED EMPLOYMENT AND
COMPENSATION
(a) By mutual agreement with the Company, the Executive hereby
resigns, effective as of June 30, 1999, from his positions as Vice-Chairman of
the Company and a member of the Board of Directors of the Company, and from all
other positions the Executive may currently hold as an officer or member of the
board of directors of any of the Company's subsidiaries or affiliates. The
Executive shall sign and deliver to the Company such other documents as may be
necessary to effect or reflect such resignations.
(b) The Company shall pay the Executive his current base
salary through June 30, 1999, and shall pay the Executive, on or before
September 15, 1999, a bonus of $400,000 under the terms of the Company's
Management Incentive Plan for the Company's fiscal year ended in June, 1999.
(c) From July 1, 1999 through February 2, 2000 (the
"Termination Date"), the Executive shall be employed as an Executive Vice
President of Allegiance. During such period of employment, the Executive shall
continue to advise and assist in connection with transition issues with respect
to the Company and Allegiance merger, and will perform such other duties
reasonably assigned to him by the Company's chief executive officer. The
Executive's position will not carry any executive authority or policy making
responsibility, and will not be an "executive officer" position with respect to
the Company or Allegiance. On the Termination Date, the Executive will cease to
be an employee of the Company, Allegiance or any of their subsidiaries and will
not hold any offices with any such entities. From July 1, 1999 through the
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Termination Date, the Executive's base salary shall be at the rate of $30,000
per month, payable bi-weekly and pro rated for partial months. On or before the
Termination Date, the Executive will be paid a bonus of $400,000 for the
Company's fiscal year ending in June, 2000. The Executive will not be provided
with office space subsequent to June 30, 1999, but shall be provided with
secretarial assistance during his continued employment through February 2, 2000.
During the Executive's continued employment from July 1, 1999, through February
2, 2000, the Company shall, upon reasonable notice from the Executive, make
available to the Executive for his reasonable use a corporate aircraft of the
Company (or one of its subsidiaries), or a comparable equivalent. The
Executive's use of such aircraft shall not exceed more than seventy hours in the
aggregate, and shall be subject to availability. If, prior to the Termination
Date, the Executive terminates his employment without the Company's consent or
if the Executive's employment is terminated by the Company for "Cause" (as
defined in the Amended Severance Agreement), the Executive will no longer be
entitled to receive the payments or benefits described in this Section 2(c), but
shall remain entitled to the severance benefits set forth in Section 3 of this
Agreement.
3. SEVERANCE PAYMENTS, BENEFITS AND OBLIGATIONS
(a) The Executive will not be entitled to any additional
compensation or benefits from the Company, or its subsidiaries or affiliates,
except as provided in this Agreement.
(b) In satisfaction of the severance payment obligations to
the Executive under Sections 2(c)(ii) and 2(c)(v) of the Amended Severance
Agreement, commencing upon the Company's first regular payroll date after
February 2, 2000, and upon each regular payroll date thereafter for one hundred
and fifty-six consecutive weeks, the Company shall pay the Executive a weekly
installment of $22,025.58 (the "Severance Payments"). In the event of the
Executive's
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death prior to the payment of all of the Severance Payments, the Company shall
pay to the Executive's estate (or his beneficiary, as provided in writing to the
Company), a lump sum amount equal to the remaining unpaid Severance Payments.
(c) Following the Termination Date, the Company will cause the
Executive's benefits under the Allegiance Excess Benefit Plan and the Allegiance
Retirement Savings Plan to be paid in accordance with the terms of such plans.
(d) The Executive acknowledges and agrees that
PriceWaterhouseCoopers LLP shall be the accounting firm for purposes of Sections
3 and 4 of the Amended Severance Agreement. The Company and the Executive agree
to honor the provisions of Sections 3 and 4 of the Amended Severance Agreement
with respect to the Gross-Up Payments.
(e) The Company and its subsidiaries will continue to honor,
pursuant to their terms, the director and officer indemnification provisions
maintained by such entities with respect to the Executive, with respect to
actions of the Executive as an officer or director of Allegiance or the Company
(or any of its subsidiaries) prior to the Termination Date, including but not
limited with respect to actions prior to the Cardinal Merger.
(f) The Company will reimburse the Executive for any
unreimbursed reasonable business expenses incurred by the Executive prior to the
Termination Date, pursuant to the Company's reimbursement policies, following
the Executive's presentation of an expense report to the Company.
(g) The Executive agrees that the payment of the amounts set
forth in this Section 3 is conditioned upon his satisfaction of the terms of
Section 5 of the Amended Severance Agreement and, that, without limiting any
other remedies available to the Company, the Company
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shall not be obligated to pay to the Executive any unpaid portion of such
payments or perform its obligations under this Section 3 if the Executive fails
to comply with the provisions of such Section.
(h) This Agreement is intended to clarify and satisfy the
obligations of the parties arising under the Amended Severance Agreement, and
the Amended Severance Agreement shall be deemed superseded and terminated from
and after the date of this Agreement, without any remaining obligation of any
party under such agreement, except to the extent otherwise specifically referred
to in this Agreement.
4. DISPARAGING COMMENTS
(a) In accordance with normal ethical and professional
standards, prior to and following the Termination Date, the Executive will
refrain from taking actions or making statements, written or oral, which
denigrate, disparage or defame the goodwill or reputation of the Company and any
of its subsidiaries and affiliates (the "Company Entities") and their trustees,
officers, security holders, partners, agents and former and current employees
and directors or which are intended to, or may be reasonably expected to,
adversely affect the morale of the employees of any of the Company Entities. The
Executive further agrees not to make any negative statements to third parties
relating to his employment or any aspect of the business of the Company Entities
and not to make any statements to third parties about the circumstances of the
termination of his employment, or the Company Entities and their trustees,
officers, security holders, partners, agents and former and current employees
and directors, except as permitted pursuant to Section 10 of this Agreement or
as may be required by a court or governmental body.
(b) The Company and Allegiance agree that they, in their
official capacities, shall refrain from, and will instruct their directors and
executive officers to refrain
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from, taking actions or making statements, written or oral, which denigrate,
disparage or defame the goodwill or reputation of the Executive.
5. CONFIDENTIALITY OF THIS AGREEMENT
Except as required by law or regulation, none of the parties
hereto will disclose the terms of this Agreement, provided that the Executive
may disclose such terms to his financial and legal advisors and his spouse and
the Company may disclose such terms to selected employees, advisors and
affiliates on a "need to know" basis, each of whom shall be instructed by the
Executive and the Company, as the case may be, to maintain the terms of this
Agreement in strict confidence.
6. RESTRICTIVE COVENANTS
(a) The Executive has returned or will promptly (and in any
case not more than 60 days following the date hereof without the consent of the
Company) return to the Company all Company Information (as defined below),
including client lists, files, software, records, computer access codes and
instruction manuals which he has in his possession, and agrees not to keep any
copies of Company Information. The Executive affirms his obligation to keep all
Company Information confidential and not to disclose it to any third party in
the future. The term "Company Information" means: (i) confidential information
with respect to the Company and its subsidiaries, including information received
from third parties under confidential conditions, and (ii) other technical,
marketing, business or financial information, or information relating to
personnel or former personnel of the Company and its subsidiaries, the use or
disclosure of which might reasonably be construed to be contrary to the interest
of the Company; provided, however, that the term "Company Information" shall not
include any information that is or became generally known or available to the
public other than as a direct result of a breach of this paragraph by the
Executive or any action by the Executive prior to the Termination Date which
would have been a breach of
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the Executive's obligations to the Company in effect at such time. The Executive
shall have the right to remove from the offices of the Company any of his
personal belongings which do not constitute Company Information.
(b) The Executive agrees that he will remain subject to, and
hereby agrees to abide by, the terms of Section 5 of the Amended Severance
Agreement. Accordingly, the provisions of Section 5(a) of the Amended Severance
Agreement will continue through the end of February 2001, and the provisions of
Section 5(b) of the Amended Severance Agreement will continue through February
2, 2002.
7. WAIVER OF OTHER PAYMENTS AND BENEFITS; STOCK OPTIONS;
RESTRICTED STOCK
(a) The compensation and benefits arrangements set forth in
this Agreement are in lieu of any rights or claims that the Executive may have
with respect to severance or other benefits, or any other form of remuneration
from the Company Entities, other than benefits under any tax-qualified employee
pension benefit plans subject to the Employee Retirement Income Security Act of
1974, as amended, and without limiting the generality of the foregoing, the
Executive hereby expressly waives any right or claim that he may have or could
assert to payment for salary, bonuses, medical, dental or hospitalization
benefits, payments under supplemental retirement plans and incentive plans, life
insurance benefits, expenses and attorneys' fees, except as otherwise provided
in this Agreement or as mandated under applicable law; provided, however, that
the Executive shall continue to participate in his normal employee benefits
through the Termination Date.
(b) The Executive and the Company acknowledge that (i) upon
June 30, 1999, all of the Executive's unvested stock options and unvested
restricted stock awards
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outstanding as of such date shall immediately be cancelled and forfeited; and
(ii) following the Termination Date (or the Executive's earlier termination of
employment), all of the Executive's vested options outstanding as of the
Termination Date (or such earlier termination of employment) shall remain
exercisable for three months following the Termination Date (or such earlier
termination of employment), and shall then be immediately cancelled.
8. INFORMATION REQUESTS/COOPERATION
The Executive agrees to make himself reasonably available to
the Company to respond to requests by the Company for information concerning
matters involving facts or events relating to the Company or any other Company
Entity that may be within the Executive's knowledge, and to assist the Company
and the Company Entities as reasonably requested with respect to pending and
future litigations, arbitrations or other dispute resolutions. The Company will
reimburse the Executive for his reasonable travel expenses and costs incurred as
a result of his assistance under this Section 8.
9. NO ADMISSION OF WRONGDOING
Nothing contained in this Agreement shall be construed in any
way as an admission by any of the parties of any act, practice or policy of
discrimination or breach of contract either in violation of applicable law or
otherwise.
10. WAIVER AND RELEASE.
(a) In consideration of the payments and benefits set forth in
this Agreement, the Executive, for himself, his heirs, administrators,
representatives, executors, successors and assigns (collectively "Releasors")
does hereby irrevocably and unconditionally release, acquit and forever
discharge the Company Entities and their trustees, officers, security holders,
partners, agents, and former and current employees and directors, including
without
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limitation all persons acting by, through, under or in concert with any of them
(collectively, "Releasees"), from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages,
remedies, actions, causes of action, suits, rights, demands, costs, losses,
debts and expenses (including attorneys' fees and costs) of any nature
whatsoever, known or unknown, whether in law or equity and whether arising under
federal, state or local law and in particular including any claim for
discrimination based upon race, color, ethnicity, sex, age (including the Age
Discrimination in Employment Act of 1967) (the "ADEA Release"), national origin,
religion, disability, or any other unlawful criterion or circumstance, which the
Releasors had, now have, or may have in the future, against each or any of the
Releasees from the beginning of the world until the date of the execution of
this Agreement. Notwithstanding the foregoing, the Releasors do not waive any
rights which Executive may be entitled to seek to enforce this Agreement,
including to obtain the payments and benefits expressly provided herein and any
claim based upon fraudulent and illegal activity that was not disclosed until
subsequent to the date of execution of this Agreement. The Executive
acknowledges and agrees that if he or any other Releasor should hereafter make
any claim or demand or commence or threaten to commence any action, claim or
proceeding against the Releasees with respect to any cause, matter or thing
which is the subject of the release in this Section 10(a), this Agreement may be
raised as a complete bar to any such action, claim or proceeding, and the
applicable Releasee may recover from the Executive all costs incurred in
connection with such action, claim or proceeding, including attorneys' fees.
(b) In consideration of the Executive's agreements and
covenants set forth in this Agreement, the Company and its subsidiaries (the
"Company Releasors") hereby irrevocably and unconditionally release, acquit and
forever discharge the Executive from any and
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all charges, complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, remedies, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorneys' fees and costs)
of any nature whatsoever, known or unknown, whether in law or equity and whether
arising under federal, state or local law, which the Company Releasors now have,
or may have in the future, against the Executive with respect to the Executive
from the beginning of the world until the date of the execution of this
Agreement, other than any claim arising with respect to this Agreement, any
claim based upon fraudulent or illegal activity that was not discovered by the
Company Releasors until subsequent to the date of execution of this Agreement,
or any claim that may be brought derivatively. The Company Releasors acknowledge
and agree that if they should hereafter make any claim or demand or commence or
threaten to commence any action, claim or proceeding against the Executive with
respect to any cause, matter or thing which is the subject of this Section
10(b), this Agreement may be raised as a complete bar to any such action, claim
or proceeding, and the Executive may recover from the Company Releasors all
costs incurred in connection with such action, claim or proceeding, including
attorneys' fees.
(c) The Executive affirms that prior to the execution of this
Agreement and the waiver and release in Section 10(a), the Executive was advised
by the Company to consult with an attorney of the Executive's choice concerning
the terms and conditions set forth herein, and that the Executive was given up
to 21 days to consider executing this Agreement, including the ADEA Release in
Section 10(a). The Executive has 7 days following his execution of this
Agreement (the "Revocation Period") to revoke the ADEA Release. In the event the
Executive revokes the ADEA Release, the Company may cease making the payments
set forth in Section 3 of this Agreement.
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11. PUBLIC STATEMENT
The parties agree that the Executive's termination of
employment will be announced at such time as the Company may, in its discretion,
determine by the statement attached hereto as Exhibit A, which in no case shall
be later than September 1, 1999 without the consent of the Executive, and no
subsequent comments shall be made to the media or through other public
statements by any party hereto regarding the Executive's termination of
employment that are inconsistent with such statement, except as may be required
by applicable law or regulation.
12. NO RELIANCE
The Executive represents and acknowledges that, in executing
this Agreement, he has not relied upon any representation or statement made by
the Company or Allegiance, not set forth herein.
13. GOVERNING LAW; LEGAL FEES
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without regard to the principles
of conflicts of law thereof, to the extent not superseded by applicable federal
law. THE PARTIES HERETO HEREBY AGREE THAT ANY DISPUTE CONCERNING FORMATION,
MEANING, APPLICABILITY OR INTERPRETATION OF THIS AGREEMENT SHALL BE RESOLVED BY
ARBITRATION IN FRANKLIN COUNTY, OHIO, IN ACCORDANCE WITH THE RULES OF THE
AMERICAN ARBITRATION ASSOCIATION AND JUDGMENT ON THE AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION.
(b) The Company shall pay all reasonable legal fees and
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by the
11
<PAGE> 12
Executive, as a result of contesting or disputing the Executive's termination of
employment or any provision of this Agreement, whether or not such contest or
dispute is resolved in the Executive's favor but only if the Executive was
seeking in good faith to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits.
14. WARRANTY
The parties hereto represent and warrant that there exists no
impediment or restraint, contractual or otherwise on their power, right or
ability to enter into this Agreement and to perform their duties and obligations
hereunder or as contemplated hereby.
15. TAXES
All payments made to the Executive under this Agreement will
be reduced by, or the Executive will otherwise pay, all income, employment and
Medicare taxes required to be withheld on such payments.
16. NO COERCION
The parties hereto represent and acknowledge that they have
decided to enter into this Agreement voluntarily, knowingly and without coercion
of any kind.
17. ENFORCEABILITY
The parties hereto affirmatively acknowledge that this
Agreement, and each of its provisions, is enforceable, and expressly agree not
to challenge nor raise any defense against the enforceability of this Agreement
or any of its provisions in the future. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
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<PAGE> 13
18. NOTICES
All notices, requests, demands and other communication which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted by telecopy, electronic or digital transmission method upon receipt
of telephonic or electronic confirmation; that day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight delivery service
(e.g., Federal Express) and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to:
If to the Executive, addressed to:
Lester Knight
155 Thorn Tree Lane
Winnetka, Illinois 60093
If to the Company (or Allegiance), addressed to:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: General Counsel
or to such other place and with such other copies as any party
may designate as to itself or himself by written notice to the others.
19. AMENDMENTS; WAIVERS
This Agreement may not be amended, modified or terminated,
except by a written instrument signed by the parties hereto. Any provision of
this Agreement may be waived by a written instrument signed by the party to be
charged with such waiver.
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<PAGE> 14
20. SUCCESSORS
This Agreement shall be binding on the Executive, the Company,
Allegiance and their respective heirs, successors and assigns, including without
limitation any corporation or other entity into which the Company or Allegiance
may be merged, reorganized or liquidated, or by which may be acquired. The
obligations of the Company or Allegiance may be assigned only to a wholly-owned
subsidiary of the Company; provided, that such assignment shall not relieve the
Company of liability hereunder; but, as the obligations to be performed by the
Executive hereunder are unique based upon his skills and qualifications, the
Executive's obligations under this Agreement may not be assigned.
21. ENTIRE AGREEMENT
Except as specified herein, this Agreement contains the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with respect thereto.
22. COUNTERPARTS
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement,
as of the date and year first written above.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
---------------------------------------
Robert D. Walter
Its Chairman and Chief Executive Officer
ALLEGIANCE CORPORATION
By: /s/ Robert D. Walter
---------------------------------------
Robert D. Walter
Its Chairman
/s/ Lester B. Knight
---------------------------------------
Lester B. Knight
15
<PAGE> 1
Exhibit 10.22
CARDINAL HEALTH, INC.
364-DAY CREDIT AGREEMENT
DATED AS OF MARCH 31, 1999
THE SUBSIDIARY BORROWERS PARTY HERETO,
THE LENDERS PARTY HERETO
AND
THE FIRST NATIONAL BANK OF CHICAGO, AS ADMINISTRATIVE AGENT
BANK OF AMERICA NT & SA, AS SYNDICATION AGENT
CITIBANK, N.A., AS CO-DOCUMENTATION AGENT
CREDIT SUISSE FIRST BOSTON, AS CO-DOCUMENTATION AGENT
FIRST CHICAGO CAPITAL MARKETS, INC., AS LEAD ARRANGER AND BOOK MANAGER
<PAGE> 2
364-DAY CREDIT AGREEMENT
This Agreement, dated as of March 31, 1999, is among Cardinal Health,
Inc. (the "Company"), certain Subsidiaries of the Company (the "Subsidiary
Borrowers", and together with the Company, the "Borrowers"), the lenders party
hereto from time to time (the "Lenders"), and The First National Bank of
Chicago, as Administrative Agent (the "Administrative Agent"). The parties
hereto agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Company or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"Adjusted Tangible Net Worth" means, as of any date, (i) the amount of
any capital stock, paid in capital and similar equity accounts plus (or minus in
the case of a deficit) the capital surplus and retained earnings of the Company
and its consolidated Subsidiaries, but excluding the amount of any foreign
currency translation adjustment account shown as a capital account, less (ii)
the net book value of all items of the following character which are included in
the assets of the Company and its consolidated Subsidiaries: (a) goodwill,
including, without limitation, the excess of cost over book value of any asset,
(b) organization or experimental expenses, (c) unamortized debt discount and
expense, (d) patents, trademarks, trade names and copyrights, (e) treasury
stock, (f) franchises, licenses and permits, and (g) other assets which are
deemed intangible assets under Agreement Accounting Principles.
"Administrative Agent" means The First National Bank of Chicago in its
capacity as contractual representative of the Lenders pursuant to Article X, and
not in its individual capacity as a Lender, and any successor Administrative
Agent appointed pursuant to Article X.
"Advance" means a borrowing hereunder, (i) made by the Lenders on the
same Borrowing Date, or (ii) converted or continued by the Lenders on the same
date of conversion or
<PAGE> 3
continuation, consisting, in either case, of the aggregate amount of the several
Loans of the same Type and, in the case of Eurodollar Loans, for the same
Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof. As of
the date of this Agreement, the original Aggregate Commitment was $250,000,000.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles in the United States of America in effect from time to time, applied
in a manner consistent with that used in preparing the financial statements
referred to in Section 5.4; provided, however, that if any change in Agreement
Accounting Principles from those applied in preparing such financial statements
affects the calculation of any financial covenant contained in this Agreement,
the Borrowers and the Administrative Agent hereby agree to negotiate in good
faith towards making appropriate amendments acceptable to the Required Lenders
to the provisions of this Agreement to reflect as nearly as possible the effect
of the financial covenants as in effect on the date hereof.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Fee Rate" means, at any time, the percentage rate per annum
at which Facility Fees are accruing on the Aggregate Commitment (without regard
to usage) at such time as set forth in the Pricing Schedule.
"Applicable Margin" means, with respect to any Eurodollar Loan,
Floating Rate Loan or the Facility Fee, as the case may be at any time, the
applicable percentage which is applicable at such time set forth in the Pricing
Schedule provided that upon the occurrence and during the continuation of a
Default, the Applicable Margin shall be the highest Applicable Margin set forth
in the Pricing Schedule.
"Article" means an article of this Agreement unless another document is
specifically referenced.
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<PAGE> 4
"Authorized Officer" means any of the Chairman, Chief Executive
Officer, President, Vice Chairman, Chief Financial Officer, Controller, or
Treasurer of a Borrower, or their equivalent, acting singly.
"Borrowers" means the Company and the Subsidiary Borrowers, and
"Borrower" means any of them, as the context may require.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Detroit and New York for the conduct
of substantially all of their commercial lending activities and on which
dealings in Eurodollars are carried on in the London interbank market, and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Detroit for the conduct of substantially all of their
commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Cash Equivalent Investments" means (i) short-term obligations of, or
fully guaranteed by, the United States of America, (ii) commercial paper rated
A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts
maintained in the ordinary course of business, (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000, (v) banker's acceptances,
(vi) money-market funds, provided that such funds invest solely in securities
otherwise described in this definition, (vii) variable rate demand notes, (viii)
municipal preferred stock, (ix) cash market preferred stock, and (x) short term
municipal notes; provided in each case that the same provides for payment of
both principal and interest (and not principal alone or interest alone) and is
not subject to any contingency regarding the payment of principal or interest.
"Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 30% or more of the outstanding shares of voting stock of the
Company, provided, however, that the acquisitions by or on behalf of a Plan, an
employee stock purchase plan of the Company, or by Persons who before such
acquisition were officers, directors, employees or who held in the aggregate not
less than 5% of the outstanding shares of voting stock of the Company shall not
be included in determining whether a Change in Control shall have occurred.
3
<PAGE> 5
"Closing Date" shall mean March 31, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Co-Documentation Agents" means Citibank, N.A. and Credit Suisse First
Boston.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or as
set forth in any assignment that has become effective pursuant to Section
12.3.2, as such amount may be modified from time to time pursuant to the terms
hereof.
"Company" means Cardinal Health, Inc., an Ohio corporation, and it
successors and assigns.
"Consolidated or "consolidated" means, when used with reference to any
financial term in this Agreement, the aggregate for two or more Persons of the
amounts signified by such term for all such Persons determined on a consolidated
basis in accordance with Agreement Accounting Principles.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person for
Indebtedness, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or the obligations of any such
Person as general partner of a partnership with respect to the liabilities of
the partnership, provided, however, that any assumption, guaranty, endorsement
or undertaking with respect to any liability of any of its Subsidiaries to any
other of its Subsidiaries shall not be a Contingent Obligation of the Company.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Default" means an event described in Article VII.
"Defaulting Lender" means any Lender that (a) on any Borrowing Date
fails to make available to the Administrative Agent such Lender's Loans required
to be made to a Borrower on
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<PAGE> 6
such Borrowing Date or (b) shall not have made available to the Administrative
Agent its proportionate share of the Unpaid Amount as required pursuant to
Section 2.19(b). Once a Lender becomes a Defaulting Lender, such Lender shall
continue as a Defaulting Lender until such time as such Defaulting Lender makes
available to the Administrative Agent the amount of such Defaulting Lender's
Loans together with all other amounts required to be paid to the Administrative
Agent or any other Lender pursuant to this Agreement.
"Dollars" and "$" shall mean the lawful currency of the United States
of America.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which, except as otherwise
provided in Section 2.12, bears interest at the applicable Eurodollar Rate.
"Eurodollar Payment Office" of the Administrative Agent shall mean the
office, branch, affiliate or correspondent bank of the Administrative Agent
specified as the "Eurodollar Payment Office" in Schedule 3 hereto or such other
office, branch, affiliate or correspondent bank of the Administrative Agent as
it may from time to time specify to the Borrowers and each Lender as its
Eurodollar Payment Office.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar
Reference Rate applicable to such Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Interest Period,
plus (ii) the Applicable Margin. The Eurodollar Rate shall be rounded to the
next higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Eurodollar Reference Rate" means, with respect to a Eurodollar Advance
for the relevant Interest Period the rate determined by the Administrative Agent
to be the rate at which First Chicago offers to place deposits in Dollars with
first-class banks in the London interbank market at 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period in the approximate
amount of the relevant Eurodollar Loan of First Chicago and having a maturity
equal to such Interest Period.
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Administrative Agent, taxes imposed on its overall
net income, and franchise taxes (and any interest, fees or penalties for late
payment thereof) imposed on it by (i) the jurisdiction under
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<PAGE> 7
the laws of which such Lender or the Administrative Agent is incorporated or
organized or (ii) the jurisdiction in which the Administrative Agent's or such
Lender's principal executive office or such Lender's applicable Lending
Installation is located.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Facility Termination Date" means March 29, 2000, or any earlier date
on which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the immediately preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for such day, the average of the
quotations at approximately 10:00 a.m. (Detroit time) on such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by the Administrative Agent in its sole
discretion.
"Financial Contract" of a Person means (a) any exchange-traded or over
the counter futures, forward, swap or option contract or other financial
instrument with similar characteristics or (b) any Rate Hedging Agreement.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Five Year Credit Agreement" means the Five Year Credit Agreement dated
the date hereof among the Company, the Subsidiary Borrowers party thereto, the
Lenders and the Administrative Agent, as Administrative Agent, as such agreement
may be amended, restated or extended from time to time.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day in each case changing when and as the Alternate
Base Rate changes.
"Floating Rate Advance" means an Advance which, except as otherwise
provided in Section 2.12, bears interest at the Floating Rate.
"Floating Rate Loan" means a Loan which, except as otherwise provided
in Section 2.12, bears interest at the Floating Rate.
"Guarantor" means the Company, and its successors and assigns.
"Guaranty" means that certain Guaranty dated the date hereof executed
by the Guarantor in favor of the Administrative Agent, for the ratable benefit
of the Lenders, as it may be amended or modified and in effect from time to
time.
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<PAGE> 8
"Indebtedness" of a Person means, as of any date, such Person's (i)
obligations for borrowed money or evidenced by bonds, notes, acceptances,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or bankers' acceptances, (ii) obligations
representing the deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person's business
payable on terms customary in the trade), (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (iv)obligations of
such Person to purchase securities or other Property arising out of or in
connection with the sale of the same or substantially similar securities or
Property, (v) Capitalized Lease Obligations, (vi) any other obligation for
borrowed money or other financial accommodation which in accordance with
Agreement Accounting Principles would be shown as a liability on the
consolidated balance sheet of such Person, (vii) any Rate Hedging Obligations of
such Person, and (viii) all Contingent Liabilities of such Person with respect
to or relating to the indebtedness, obligations and liabilities of others
similar in character to those described in clauses (i) through (viii) of this
definition.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three or six months (or such longer or shorter period requested by
the Borrower and acceptable to all of the Lenders), commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or six
months thereafter (or such longer or shorter period requested by the Borrower
and acceptable to all of the Lenders), provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month. If an Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall
end on the next succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any certificate of deposit owned by such Person; and structured notes,
derivative financial instruments and other similar instruments or contracts
owned by such Person.
"Lead Arranger" means First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
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<PAGE> 9
"Lending Installation" means, with respect to a Lender or the
Administrative Agent, the office, branch, subsidiary or Affiliate of such Lender
or the Administrative Agent selected by such Lender and the Administrative Agent
pursuant to Section 2.18.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement, the Notes, the Guaranty and any
other instrument or document executed in connection with any of the foregoing at
any time.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Company and its Subsidiaries taken as a whole, (ii) the
ability of the Company to perform its obligations under the Loan Documents to
which it is a party, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Administrative Agent or the Lenders
thereunder.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company is a party to
which more than one employer is obligated to make contributions.
"Net Worth" means at any time the consolidated stockholder's equity of
the Company and its Subsidiaries calculated on a consolidated basis as of such
time in accordance with Agreement Accounting Principles.
"Non-U.S. Borrower" is defined in Section 3.1(b).
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any promissory note issued at the request of a Lender
pursuant to Section 2.14 in the form of Exhibit E.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrowers to the
Lenders or to any Lender, the Administrative Agent or any indemnified party
arising under the Loan Documents.
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"Other Taxes" is defined in Section 3.5(ii).
"Overdue Rate" means a per annum rate that is equal to the sum of two
percent (2%) plus the Alternate Base Rate, changing as and when the Alternate
Base Rate changes.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each calendar quarter, commencing
June 30, 1999.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and as to which the Company or any member of the Controlled Group may have
any liability.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned
or leased by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the
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purpose of purchasing or carrying margin stocks applicable to member banks of
the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 51%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the aggregate unpaid principal
amount of the outstanding Advances.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurodollar
liabilities.
"Significant Subsidiary" means any Subsidiary of the Company that would
be a "significant subsidiary" within the meaning of Rule 1-02 of the Securities
and Exchange Commission's Regulation S-X if 5% were substituted for 10% wherever
it occurs in such Rule.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Company.
"Subsidiary Borrower" means each Subsidiary of the Company listed as a
Subsidiary Borrower on Schedule 1 as amended from time to time in accordance
with Section 5.8.
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"Substantial Portion" means, with respect to the Property of the
Company and its Subsidiaries, Property which (i) represents more than 20% of the
consolidated assets of the Company and its Subsidiaries as would be shown in the
consolidated financial statements of the Company and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 20% of the
consolidated net sales or of the consolidated net income of the Company and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.
"Syndication Agent" means Bank of America NT & SA.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications of the Company
and its Subsidiaries, and of the Company's and its Subsidiaries' material
customers, suppliers and vendors, to function on and after January 1, 2000 as
they do on the date hereof, including handling applications involving dates, as
such inability affects the business, operations and financial condition of the
Company and its Subsidiaries.
"Year 2000 Program" is defined in Section 5.18.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
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ARTICLE II.
THE CREDITS
2.1 Commitments of the Lenders; Revolving Credit Advances.
From and including the date of this Agreement and prior to the Facility
Termination Date, each Lender agrees, for itself only, subject to the terms and
conditions set forth in this Agreement, to make Loans to the Borrowers from time
to time in amounts not to exceed in the aggregate at any one time outstanding
the amount of its Commitment. Subject to the terms of this Agreement, the
Borrowers may borrow, repay and reborrow at any time prior to the Facility
Termination Date. The Commitments to lend hereunder shall expire on the Facility
Termination Date.
2.2 Termination.
Any outstanding Advances together with any other unpaid Obligations
then due and payable shall be paid in full by the Borrowers on the Facility
Termination Date.
2.3 Ratable Loans.
Each Advance hereunder shall consist of Loans made from the several
Lenders ratably in proportion to the ratio that their respective Commitments
bear to the Aggregate Commitment.
2.4 Types of Advances.
The Advances may be Floating Rate Advances or Eurodollar Advances, or a
combination thereof, selected by the relevant Borrowers in accordance with
Sections 2.8 and 2.9.
2.5 Facility Fee; Reductions in Aggregate Commitment; Utilization Fee.
The Company agrees to pay to the Administrative Agent for the account
of each Lender a facility fee, determined in accordance with the Pricing
Schedule, calculated on the Aggregate Commitment, whether used or unused,
payable quarterly in arrears for the ratable benefit of the Lenders from the
date of this Agreement until the Facility Termination Date. The Aggregate
Commitment may be reduced by the Company in multiples of $10,000,000 upon three
Business Days' prior written notice. For each day on which the aggregate
principal amount of outstanding Advances exceeds 33% of the Aggregate
Commitment, a utilization fee at the per annum rate set forth on the Pricing
Schedule will accrue on the aggregate principal amount of outstanding Advances
for the ratable benefit of the Lenders, payable in arrears on each Payment Date
until the Facility Termination Date.
2.6 Minimum Amount of Each Advance.
Each Eurodollar Advance shall be in the minimum amount of $5,000,000
(and in multiples of $1,000,000 in excess thereof, and each Floating Rate
Advance shall be in the
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minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), provided, however, that any Floating Rate Advance may be in the amount
of the unused Aggregate Commitment.
2.7 Prepayments.
The Borrowers may from time to time pay, without penalty or premium,
all outstanding Floating Rate Advances, or, in a minimum aggregate amount of
$5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion
of the outstanding Floating Rate Advances upon one Business Days' prior notice
to the Administrative Agent. The Borrowers may from time to time pay, subject to
the payment of any funding indemnification amounts required by Section 3.4 but
without penalty or premium, all outstanding Eurodollar Advances, or, in a
minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in
excess thereof, any portion of the outstanding Eurodollar Advances upon three
Business Days' prior notice to the Administrative Agent.
2.8 Method of Selecting Types and Interest Periods for New Advances.
The Company or the relevant Borrower shall select the Type of Advance
and, in the case of each Eurodollar Advance, the Interest Period applicable
thereto from time to time. The Company or the relevant Borrower shall give the
Administrative Agent irrevocable notice (a "Borrowing Notice") not later than
10:00 a.m. (Detroit time) on the Borrowing Date of each Floating Rate Advance
and not later than 11:00 a.m. (Detroit time) three Business Days before the
Borrowing Date for each Eurodollar Advance, specifying:
(i) the Borrower,
(ii) the Borrowing Date, which shall be a Business Day, of
such Advance,
(iii) the aggregate amount of such Advance,
(iv) the Type of Advance selected, and
(v) in the case of each Eurodollar Advance, the Interest
Period applicable thereto.
Not later than noon (Detroit time) on each Borrowing Date, each Lender
shall make available its Loan or Loans in funds immediately available to the
Administrative Agent at its address specified pursuant to Article XIII. The
Administrative Agent will make the funds so received from the Lenders available
to the Borrower at the Administrative Agent's aforesaid address.
2.9 Conversion and Continuation of Outstanding Advances.
Floating Rate Advances shall continue as Floating Rate Advances unless
and until such Floating Rate Advances are converted into Eurodollar Advances
pursuant to this Section 2.9 or are repaid in accordance with Section 2.7. Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of the
then applicable Interest Period therefor, at which time
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each such Eurodollar Advance shall be automatically converted into a Floating
Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance
with Section 2.7 or (y) the Borrower shall have given the Administrative Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end of
such Interest Period, such Eurodollar Advance either continue as a Eurodollar
Advance for the same or another Interest Period or be converted into a Floating
Rate Advance.
Subject to the terms of Section 2.6, the Borrower may elect from time
to time to convert all or any part of an Advance of any Type into any other Type
or Types of Advances, provided that any conversion of any Eurodollar Advance
shall be made on, and only on, the last day of the Interest Period applicable
thereto. The Borrower shall give the Administrative Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a Eurodollar Advance not later than 10:00 a.m. (Detroit time) at
least one Business Day, in the case of a conversion into a Floating Rate
Advance, three Business Days, in the case of a conversion into or continuation
of a Eurodollar Advance, prior to the date of the requested conversion or
continuation, specifying:
i. the requested date, which shall be a Business Day, of such
conversion or continuation, and
ii. the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion
into or continuation of a Eurodollar Advance, the duration of the
Interest Period applicable thereto.
2.10 Method of Borrowing.
On each Borrowing Date, each Lender shall make available its Loan or
Loans, not later than noon, Detroit time, in Federal or other funds immediately
available to the Administrative Agent, in Detroit, Michigan at its address
specified in or pursuant to Article XIII. Unless the Administrative Agent
determines that any applicable condition specified in Article IV has not been
satisfied, the Administrative Agent will make the funds so received from the
Lenders available to the relevant Borrower at the Administrative Agent's
aforesaid address. Notwithstanding the foregoing provisions of this Section
2.10, to the extent that a Loan made by a Lender matures on the Borrowing Date
of a requested Loan, such Lender shall apply the proceeds of the Loan it is then
making to the repayment of principal of the maturing Loan.
2.11 Changes in Interest Rate, etc.
Each Floating Rate Advance shall bear interest on the outstanding
principal amount thereof, for each day from and including the date such Advance
is made or is converted from a Eurodollar Advance into a Floating Rate Advance
pursuant to Section 2.9 to but excluding the date it becomes due or is converted
into a Eurodollar Advance pursuant to Section 2.9 hereof, at a rate per annum
equal to the Floating Rate for such day. Changes in the rate of interest on that
portion of any Advance maintained as a Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate. Each Eurodollar
Advance shall bear interest on the outstanding principal amount thereof from and
including the first day of the Interest Period applicable thereto to (but not
including) the last day of such Interest Period at the interest rate
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determined by the Administrative Agent as applicable to such Eurodollar Advance
based upon the Borrower's selections under Sections 2.8 and 2.9 and otherwise in
accordance with the terms hereof. No Interest Period may end after the Facility
Termination Date.
2.12 Rates Applicable After Default.
Notwithstanding anything to the contrary contained in Section 2.8 or
2.9, during the continuance of a Default or Unmatured Default the Required
Lenders may, at their option, by notice to the Borrowers (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 8.2 requiring unanimous consent of the Lenders to changes in interest
rates), declare that no Advance may be made as, converted into or continued as a
Eurodollar Advance. During the continuance of a Default the Required Lenders
may, at their option, by notice to the Borrowers (which notice may be revoked at
the option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurodollar Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear
interest at a rate per annum equal to the Floating Rate in effect from time to
time plus 2% per annum, provided that, during the continuance of a Default under
Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Advances without any election or action on the part
of the Administrative Agent or any Lender.
2.13 Method of Payment.
All payments of the Obligations hereunder shall be made, without
setoff, deduction, or counterclaim, in immediately available funds by wire
transfer to the Administrative Agent at (except as set forth in the next
sentence) the Administrative Agent's address specified pursuant to Article XIII,
or at any other Lending Installation of the Administrative Agent specified in
writing by the Administrative Agent to the Borrower, by noon (local time) on the
date when due and shall be applied ratably by the Administrative Agent among the
Lenders. Each payment delivered to the Administrative Agent for the account of
any Lender shall be delivered promptly by the Administrative Agent to such
Lender in the same type of funds that the Administrative Agent received at its
address specified pursuant to Article XIII or at any Lending Installation
specified in a notice received by the Administrative Agent from such Lender.
2.14 Noteless Agreement; Evidence of Indebtedness.
(i) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of each Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time hereunder.
(ii) The Administrative Agent shall maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Type thereof and, if
applicable, the Interest Period with respect thereto, (b) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and
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(c) the amount of any sum received by the Administrative Agent hereunder from
the Borrowers and each Lender's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Administrative Agent or any Lender to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrowers to repay
the Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a promissory
note (a "Note"). In such event, the relevant Borrower shall prepare, execute and
deliver to such Lender a Note payable to the order of such Lender in a form
supplied by the Administrative Agent and reasonably acceptable to the Company.
Thereafter, the Loans evidenced by such Note and interest thereon shall at all
times (including after any assignment pursuant to Section 12.3) be represented
by a Note payable to the order of the payee named therein or any assignee
pursuant to Section 12.3, except to the extent that any such Lender or assignee
subsequently returns any such Note for cancellation and requests that such Loans
once again be evidenced as described in paragraphs (i) and (ii) above.
2.15 Telephonic Notices.
The Borrowers hereby authorize the Lenders and the Administrative Agent
to extend, convert or continue Advances, effect selections of Types of Advances
and to transfer funds based on telephonic notices given to the Administrative
Agent by any person or persons listed on Schedule 8, as such Schedule may be
revised by the Company from time to time in accordance with Section 13.1, it
being understood that the foregoing authorization is specifically intended to
allow Borrowing Notices and Conversion/Continuation Notices to be given
telephonically. The Borrowers agree to deliver promptly to the Administrative
Agent a written confirmation, if such confirmation is requested by the
Administrative Agent or any Lender, of each telephonic notice signed by an
Authorized Officer. If the written confirmation differs in any material respect
from the action taken by the Administrative Agent and the Lenders, the records
of the Administrative Agent regarding the telephonic notice shall govern absent
manifest error.
2.16 Interest Payment Dates; Interest and Fee Basis.
Interest accrued on each Floating Rate Advance shall be payable on each
Payment Date, commencing with the first such date to occur after the date
hereof, on any date on which the Floating Rate Advance is prepaid, whether due
to acceleration or otherwise, and at maturity. Interest on Floating Rate Loans
shall be calculated for actual days elapsed on the basis of a 365 or 366-day
year, as appropriate. Interest accrued on that portion of the outstanding
principal amount of any Floating Rate Advance converted into a Eurodollar
Advance on a day other than a Payment Date shall be payable on the date of
conversion. Interest accrued on each Eurodollar Advance shall be payable in
arrears on the last day of its applicable Interest Period, on any date on which
the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at
maturity. Interest accrued on each Eurodollar Advance having an Interest Period
longer than
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three months shall also be payable on the last day of each three-month interval
during such Interest Period. Interest shall be calculated for actual days
elapsed on the basis of a 360-day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if payment
is received prior to noon (local time) at the place of payment. If any payment
of principal of or interest on an Advance shall become due on a day which is not
a Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
2.17 Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions.
Promptly after receipt thereof, the Administrative Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. The Administrative Agent will notify each Lender, the Company
and the relevant Borrower of the interest rate applicable to each Eurodollar
Advance promptly upon determination of such interest rate and will give each
Lender and the Company prompt notice of each change in the Alternate Base Rate.
2.18 Lending Installations.
Each Lender will book its Loans at the appropriate Lending Installation
listed on Schedule 4 or such other Lending Installation designated by such
Lender in accordance with the final sentence of this Section 2.18. All terms of
this Agreement shall apply to any such Lending Installation and the Loans and
any Notes issued hereunder shall be deemed held by each Lender for the benefit
of any such Lending Installation. Each Lender may, by not less than one days'
prior written notice to the Administrative Agent and the Borrowers in accordance
with Article XIII, designate replacement or additional Lending Installations
through which Loans will be made by it and for whose account Loan payments are
to be made.
2.19 Non-Receipt of Funds by the Administrative Agent.
(a) Unless the relevant Borrower or a Lender, as the case may
be, notifies the Administrative Agent prior to the date on which it is scheduled
to make payment to the Administrative Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of such Borrower, a payment of principal,
interest or fees to the Administrative Agent for the account of the Lenders,
that it does not intend to make such payment, the Administrative Agent may
assume that such payment has been made. The Administrative Agent may, but shall
not be obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Lender or the Borrower, as
the case may be, has not in fact made such payment to the Administrative Agent,
the recipient of such payment shall, on demand by the Administrative Agent,
repay to the Administrative Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the date
such amount was so made available by the Administrative Agent until the date the
Administrative Agent recovers such amount at a rate per annum equal to (x) in
the case of
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payment by a Lender, the Federal Funds Effective Rate for such day, or (y) in
the case of payment by the Borrower, the interest rate applicable to the
relevant Loan.
(b) The failure of any Lender to make the Loan to be made by
it as part of any Advance shall not relieve any other Lender of its obligation
hereunder to make its Loan on the date of such Advance, but no Lender, except as
otherwise provided in the next sentence of this Section 2.19(b), shall be
responsible for the failure of a Defaulting Lender to make the Loan to be made
by such Defaulting Lender on the date of any Advance. Notwithstanding the
foregoing sentence, but otherwise subject to the terms and conditions of this
Agreement, the Administrative Agent shall notify each Lender of the failure by a
Defaulting Lender to make a Loan required to be made by it hereunder (the
"Unpaid Amount"), and each Lender shall immediately transfer to the
Administrative Agent on such date the lesser of such Lender's proportionate
share (based on its Commitment divided by the Commitments of all Lenders that
have not so failed to fund their Loans) of the Unpaid Amount and its unused
Commitment. Any such transfer shall be deemed to be a Floating Rate Loan by such
Lender. Each Defaulting Lender shall pay on demand to each other Lender that
makes a payment under this Section 2.19(b) the amount paid by such other Lender
to cover such failure, together with interest thereon, for each day from the
date such payment was made until the date such other Lender has been paid such
amount in full, at a rate per annum equal to the Federal Funds Effective Rate
plus two percent (2%).
2.20 Judgment Currency.
If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due from any Borrower hereunder in the currency expressed to be
payable herein (the "specified currency") into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the specified currency with
such other currency at the Administrative Agent's main Chicago office on the
Business Day preceding that on which final, non-appealable judgment is given.
The obligations of the Borrowers in respect of any sum due to any Lender or the
Administrative Agent hereunder shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on the
Business Day following receipt by such Lender or the Administrative Agent (as
the case may be) of any sum adjudged to be so due in such other currency such
Lender or the Administrative Agent (as the case may be) may in accordance with
normal, reasonable banking procedures purchase the specified currency with such
other currency. If the amount of the specified currency so purchased is less
than the sum originally due to such Lender or the Administrative Agent, as the
case may be, in the specified currency, the Borrowers agree, to the fullest
extent that they may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
of the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Section 12.2, such Lender or the Administrative Agent, as the case may be,
agrees to remit such excess to the relevant Borrower.
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2.21 Replacement of Lender.
If any Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make
any additional payment to any Lender or if any Lender's obligation to make or
continue, or to convert Floating Rate Advances into, Eurodollar Advances shall
be suspended pursuant to Section 3.3, or if any Lender shall become a Defaulting
Lender (any Lender so affected an "Affected Lender"), the Company may elect, if
such amounts continue to be charged or such suspension is still effective, to
replace such Affected Lender as a Lender party to this Agreement, provided that
no Default or Unmatured Default shall have occurred and be continuing at the
time of such replacement, and provided further that, concurrently with such
replacement, (i) another bank or other entity which is reasonably satisfactory
to the Company and the Administrative Agent shall agree, as of such date, to
purchase for cash the Advances and other Obligations due to the Affected Lender
pursuant to an assignment substantially in the form of Exhibit C and to become a
Lender for all purposes under this Agreement and to assume all obligations of
the Affected Lender to be terminated as of such date and to comply with the
requirements of Section 12.3 applicable to assignments, and (ii) the Borrowers
shall pay to such Affected Lender in same day funds on the day of such
replacement all interest, fees and other amounts then accrued but unpaid to such
Affected Lender by the Borrowers hereunder to and including the date of
termination, including without limitation payments due to such Affected Lender
under Sections 3.1, 3.2 and 3.5. Nothing herein shall release any Defaulting
Lender from any obligation it may have to any Borrower, the Administrative Agent
or any other Lender.
ARTICLE III.
YIELD PROTECTION; TAXES
3.1 Yield Protection.
(a) If, on or after the date of this Agreement, the adoption
of any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any change
in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or any applicable Lending Installation to any
Taxes, or changes the basis of taxation of payments (other than with respect to
Excluded Taxes) to any Lender in respect of its Eurodollar Loans, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurodollar Advances), or
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(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of maintaining its
Commitment or making, funding or maintaining its Eurodollar Loans or reduces any
amount receivable by any Lender or any applicable Lending Installation in
connection with its Eurodollar Loans, or requires any Lender or any applicable
Lending Installation to make any payment calculated by reference to its
Commitment or the amount of Eurodollar Loans held or interest received by it, by
an amount deemed material by such Lender, and the result of any of the foregoing
is to increase the cost to such Lender or applicable Lending Installation of
making or maintaining its Eurodollar Loans or Commitment or to reduce the return
received by such Lender or applicable Lending Installation in connection with
such Eurodollar Loans or Commitment, then, within 30 days of demand by such
Lender, the relevant Borrower shall pay such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction in
amount received.
(b) Non-U.S. Reserve Costs or Fees With Respect to Loans to
Non-U.S. Borrowers. If any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive of any jurisdiction outside of the
United States of America or any subdivision thereof (whether or not having the
force of law) imposes or deems applicable any reserve requirement against or fee
with respect to assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation, and the result
of the foregoing is to increase the cost to such Lender or applicable Lending
Installation of making or maintaining its Eurodollar Loans to any Borrower that
is not incorporated under the laws of the United States of America or a state
thereof (each a "Non-U.S. Borrower") or its Commitment to any Non-U.S. Borrower
or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurodollar Loans to any Non-U.S. Borrower
or Commitment to any Non-U.S. Borrower, then, within 30 days of demand by such
Lender, such Non-U.S. Borrower shall pay such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction in
amount received, provided that such Non-U.S. Borrower shall not be required to
compensate any Lender for such non-U.S. reserve costs or fees to the extent that
an amount equal to such reserve costs or fees is received by such Lender as a
result of the calculation of the interest rate applicable to Eurodollar Advances
pursuant to clause (i)(b) of the definition of "Eurodollar Rate."
3.2 Changes in Capital Adequacy Regulations.
If a Lender determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or any
corporation controlling such Lender is increased as a result of a Change (as
defined below), then, within 15 days of demand by such Lender, the Company shall
pay such Lender the amount necessary to compensate for any shortfall in the rate
of return on the portion of such increased capital which such Lender determines
is attributable to this Agreement, its Loans or its Commitment to make Loans
hereunder (after taking into account such Lender's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law)
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after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i)
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3 Availability of Types of Advances.
If any Lender determines that maintenance of its Eurodollar Loans at a
suitable Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or if the
Required Lenders determine that (i) deposits of a type, currency and maturity
appropriate to match fund Eurodollar Advances are not available or (ii) the
interest rate applicable to Eurodollar Advances does not accurately reflect the
cost of making or maintaining Eurodollar Advances, then the Administrative Agent
shall suspend the availability of Eurodollar Advances and require any affected
Eurodollar Advances to be repaid or converted to Floating Rate Advances at the
end of the then current Interest Period for the affected Eurodollar Advance.
3.4 Funding Indemnification.
If any payment of a Eurodollar Advance occurs on a date which is not
the last day of the applicable Interest Period, whether because of acceleration,
prepayment or otherwise, or a Eurodollar Advance is not made on the date
specified by a Borrower for any reason other than default by the Lenders, the
Borrowers will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar
Advance.
3.5 Taxes.
(i) All payments by the Borrowers to or for the account of any Lender
or the Administrative Agent hereunder or under any Note shall be made free and
clear of and without deduction for any and all Taxes. If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Agent, (a) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.5) such Lender or the Administrative Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(b) the Borrower shall make such deductions, (c) the Borrower shall pay the full
amount deducted to the relevant authority in accordance with applicable law and
(d) the Borrower shall furnish to the Administrative Agent the original copy of
a receipt evidencing payment thereof within 30 days after such payment is made.
(ii) In addition, the Borrowers hereby agree to pay any present or
future stamp or documentary taxes and any other excise or property taxes,
charges or similar levies
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which arise from any payment made hereunder or under any Note or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
Note ("Other Taxes").
(iii) The Borrowers hereby agree to indemnify the Administrative Agent
and each Lender for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 3.5) paid by the Administrative Agent or such Lender and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made within 30 days of
the date the Administrative Agent or such Lender makes demand therefor pursuant
to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Lender") agrees that it
will, not less than ten Business Days after the date of this Agreement, (i)
deliver to each of the Company and the Administrative Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Lender is entitled to receive payments under this
Agreement from the Company and any other Borrower that is not a Non-U.S.
Borrower without deduction or withholding of any United States federal income
taxes, or (ii) deliver to each of the Company and the Administrative Agent a
United States Internal Revenue Form W-8 or W-9, as the case may be, and certify
that it is entitled to an exemption from United States backup withholding tax.
Each Non-U.S. Lender further undertakes to deliver to each of the Company and
the Administrative Agent (x) renewals or additional copies of such form (or any
successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the
most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Company or the Administrative
Agent. All forms or amendments described in the preceding sentence shall certify
that such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Company and the Administrative Agent
that it is not capable of receiving payments from the Company and any other
Borrower that is not a Non-U.S. Borrower without any deduction or withholding of
United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed to provide
the Company with an appropriate form pursuant to clause (iv), above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (iv), above, the Company shall take such
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steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S.
Lender to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Company (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate.
(vii) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political subdivision
thereof asserts a claim that the Administrative Agent did not properly withhold
tax from amounts paid to or for the account of any Lender (because such Lender
failed to notify the Administrative Agent of a change in circumstances which
rendered its exemption from withholding ineffective), such Lender shall
indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Administrative Agent under this
subsection, together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Administrative Agent, which
attorneys may be employees of the Administrative Agent). The obligations of the
Lenders under this Section 3.5(vii) shall survive the payment of the Obligations
and termination of this Agreement.
3.6 Lender Statements; Survival of Indemnity.
To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurodollar Loans to reduce
any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.5 or
to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as
such designation is not, in the judgment of such Lender, disadvantageous to such
Lender. Each Lender shall deliver a written statement of such Lender to the
Borrowers (with a copy to the Administrative Agent) as to the amount due, if
any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth
in reasonable detail the calculations upon which such Lender determined such
amount and shall be final, conclusive and binding on the Borrowers in the
absence of manifest error. Determination of amounts payable under such Sections
in connection with a Eurodollar Loan shall be calculated as though each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type,
currency and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that is
the case or not. Unless otherwise provided herein, the amount specified in the
written statement of any Lender shall be payable on demand after receipt by the
Borrowers of such written statement. The obligations of the Borrowers under
Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and
termination of this Agreement.
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ARTICLE IV.
CONDITIONS PRECEDENT
4.1 Initial Advance.
The Lenders shall not be required to make the initial Advance hereunder
unless the Borrowers have satisfied the following conditions:
(a) Each Borrower has furnished to the Administrative Agent
with sufficient copies for the Lenders:
(i) Copies of the articles or certificate of incorporation of such
Borrower, together with all amendments, and a certificate of good standing, each
certified by the appropriate governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of such
Borrower, of its by-laws or code of regulations and of its Board of Directors'
resolutions and of resolutions or actions of any other body authorizing the
execution of the Loan Documents to which such Borrower is a party.
(iii) An incumbency certificate, executed by the Secretary or Assistant
Secretary of such Borrower, which shall identify by name and title and bear the
signatures of the Authorized Officers and any other officers of such Borrower
authorized to sign the Loan Documents to which such Borrower is a party, upon
which certificate the Administrative Agent and the Lenders shall be entitled to
rely until informed of any change in writing by such Borrower.
(iv) A certificate, signed by the Chief Financial Officer or Treasurer
of such Borrower, stating that on the initial Borrowing Date no Default or
Unmatured Default has occurred and is continuing.
(v) A written opinion of such Borrower's counsel, addressed to the
Lenders in substantially the form of Exhibit A.
(vi) Any Notes requested by a Lender pursuant to Section 2.14 payable
to the order of each such requesting Lender.
(vii) Written money transfer instructions, in substantially the form of
Exhibit D, addressed to the Administrative Agent and signed by an Authorized
Officer, together with such other related money transfer authorizations as the
Administrative Agent may have reasonably requested.
(viii) Information reasonably satisfactory to the Administrative Agent
regarding the Company's Year 2000 Program.
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(ix) A pro forma covenant compliance certificate in form and substance
reasonably satisfactory to the Administrative Agent from the Chief Financial
Officer or Treasurer of the Company.
(x) The Guaranty, duly executed by the Company.
(xi) Such other documents as any Lender or its counsel may have
reasonably requested.
(b) The presentation of evidence satisfactory to the
Administrative Agent that the Amended and Restated Credit Agreement dated as of
March 30, 1994 among R.P. Scherer Corporation and the lenders party thereto and
the agent named therein shall have been terminated and all indebtedness,
liabilities, and obligations outstanding thereunder shall be paid in full not
later than April 9, 1999.
(c) The presentation of evidence satisfactory to the
Administrative Agent that the Credit Agreement Facility A dated September 23,
1996, as amended, among Allegiance Corporation and the lenders party thereto and
the agent named therein shall have been terminated and all indebtedness,
liabilities, and obligations outstanding thereunder shall have been paid in full
or will be paid from the proceeds of the initial Advance.
(d) The presentation of evidence satisfactory to the
Administrative Agent that revolving credits facilities of the Company totaling
not less than $95,000,000 have been terminated and all indebtedness, liabilities
and obligations outstanding thereunder shall have been paid in full or will be
paid from the proceeds of the initial Advance.
4.2 Each Advance
The Lenders shall not be required to make, continue or convert any
Advance unless on the applicable Borrowing Date or date of conversion or
continuation:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V (other
than Section 5.5, 5.7 and 5.15) are true and correct in all material respects as
of such Borrowing Date except to the extent any such representation or warranty
is stated to relate solely to an earlier date, in which case such representation
or warranty shall have been true and correct on and as of such earlier date.
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel.
(iv) Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
The Company and each of the Borrowers represents and warrants to the
Lenders that:
5.1 Existence and Standing.
Each of the Company and its Significant Subsidiaries is a corporation,
partnership (in the case of Subsidiaries only) or limited liability company duly
and properly incorporated or organized, as the case may be, validly existing and
(to the extent such concept applies to such entity) in good standing under the
laws of its jurisdiction of incorporation or organization and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted, except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
5.2 Authorization and Validity.
Each Borrower has the power and authority and legal right to execute
and deliver the Loan Documents to which it is a party and to perform its
obligations thereunder. The execution and delivery by each Borrower of the Loan
Documents to which it is a party and the performance of its obligations
thereunder have been duly authorized by proper corporate or other proceedings,
and the Loan Documents to which such Borrower is a party constitute legal, valid
and binding obligations of such Borrower enforceable against such Borrower in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
5.3 No Conflict; Government Consent.
Neither the execution and delivery by the Borrowers of the Loan
Documents to which they are a party, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
(i) any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on any Borrower or (ii) any Borrower's articles or certificate of
incorporation, partnership agreement, certificate of partnership, articles or
certificate of organization, by-laws, code or regulations, or operating or other
management agreement, as the case may be, or (iii) the provisions of any
indenture, instrument or agreement to which any Borrower is a party or is
subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in, or require, the creation or
imposition of any Lien in, of or on the Property of any Borrower pursuant to the
terms of any such indenture, instrument or agreement. No order, consent,
adjudication, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, or other action in respect of
any governmental or public body or authority, or any subdivision thereof, which
has not been obtained by a Borrower, is required to be obtained by any Borrower
in connection with the execution and delivery of the Loan Documents, the
borrowings under this Agreement, the payment and performance by such Borrower of
the Obligations or the legality, validity, binding effect or enforceability of
any of the Loan Documents.
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5.4 Financial Statements.
The following consolidated financial statements heretofore delivered to
the Lenders were prepared in accordance with Agreement Accounting Principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Company and its
Subsidiaries at such date and the consolidated results of their operations for
the period then ended, subject, in the case of such interim statements, to
routine year-end audit adjustments:
(i) June 30, 1998 audited consolidated financial statements of the
Company and its Subsidiaries; December 31, 1997 audited consolidated financial
statements of Allegiance Corporation and its consolidated subsidiaries;
(ii) December 31, 1998 unaudited interim consolidated financial
statements of the Company and its Subsidiaries; and
(iii) December 31, 1998 unaudited interim consolidated financial
statements of Allegiance Corporation and its consolidated subsidiaries.
5.5 Material Adverse Change.
Since June 30, 1998 there has been no change in the business, Property,
prospects, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect.
5.6 Taxes.
The Company and its Subsidiaries have filed all United States federal
tax returns and all other tax returns which are required to be filed and have
paid all taxes due pursuant to said returns or pursuant to any assessment
received by the Company or any of its Subsidiaries, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided in accordance with Agreement Accounting Principles and as to which no
Lien exists. No tax liens have been filed and no claims are being asserted with
respect to any such taxes which could reasonably be expected to have a Material
Adverse Effect. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of any taxes or other governmental charges are
adequate.
5.7 Litigation and Contingent Obligations.
Except as set forth on Schedule 7, there is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their officers, threatened against or affecting the Company or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which seeks to prevent, enjoin or delay the making of any Loans. As of
the date of this Agreement, other than any liability incident to any litigation,
arbitration or proceeding which (i) could not reasonably be expected to have a
Material Adverse Effect or (ii) is set forth on Schedule 7, the Company has no
material Contingent Obligations not provided for or disclosed in the financial
statements referred to in Section 5.4.
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5.8 Subsidiaries.
Schedule 1 contains an accurate list of all Subsidiaries of the Company
(other than immaterial or inactive Subsidiaries) and each Subsidiary Borrower as
of the date of this Agreement, setting forth their respective jurisdictions of
organization and the percentage of their respective capital stock or other
ownership interests owned by the Company or other Subsidiaries. All of the
issued and outstanding shares of capital stock or other ownership interests of
such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully
paid and non-assessable, except to the extent that the lack of such status could
not reasonably be expected to have a Material Adverse Effect. The Company may
amend Schedule 1 from time to time by delivering to the Administrative Agent an
updated list of Subsidiaries, and the Company may designate any Subsidiary
thereon which is directly or indirectly 80% (or, in the case of R.P. Scherer
S.A., 75%) or more owned by the Company as a Subsidiary Borrower hereunder so
long as (a) the Company guarantees the obligations of such new Subsidiary
Borrower pursuant to the terms of the Guaranty, (b) such new Subsidiary Borrower
delivers all corporate or organizational documents and authorizing resolutions
and legal opinions reasonably requested by the Administrative Agent and (c) such
new Subsidiary Borrower agrees to the terms and conditions of this Agreement and
the Borrowers and the new Subsidiary Borrower execute all agreements and take
such other action reasonably requested by Administrative Agent. Schedule 1 may
be amended to remove any Subsidiary as a Subsidiary Borrower upon (i) written
notice by the Company to the Administrative Agent to such effect and (ii)
repayment in full of all outstanding Loans of such Subsidiary Borrower.
5.9 ERISA.
The Unfunded Liabilities of all Single Employer Plans do not in the
aggregate exceed $75,000,000. Each Single Employer Plan complies in all material
respects with all applicable requirements of law and regulations where the
failure to so comply could reasonably be expected to have a Material Adverse
Effect. No Reportable Event has occurred with respect to any Plan where such
occurrence could reasonably be expected to have a Material Adverse Effect.
Neither the Company or any of its Significant Subsidiaries has withdrawn from
any Plan or initiated steps to do so, and no steps have been taken to reorganize
or terminate any Single Employer Plan where in either instance a liability in
excess of $75,000,000 could reasonably be expected to result.
5.10 Accuracy of Information.
No information, exhibit or report furnished by the Company or any of
its Subsidiaries to the Administrative Agent or to any Lender in connection with
the negotiation of, or compliance with, the Loan Documents contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not misleading; provided,
however, that to the extent any such information, exhibits or reports include or
incorporate by reference any forward-looking statement (each, a "Forward-Looking
Statement") which reflects 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, such
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Forward-Looking Statement is subject to uncertainties and other factors which
could cause actual results to differ materially from such Forward-Looking
Statement.
5.11 Regulation U.
Margin stock (as defined in Regulation U) constitutes less than 25% of
the value of those assets of the Company and its Subsidiaries which are subject
to any limitation on sale, pledge, or other restriction hereunder.
5.12 Material Agreements.
Neither the Company nor any Subsidiary is a party to any agreement or
instrument or subject to any charter or other corporate restriction which could
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any Subsidiary is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any agreement to
which it is a party, which default could reasonably be expected to have a
Material Adverse Effect.
5.13 Compliance With Laws.
The Company and its Subsidiaries have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or foreign
government or any instrumentality or agency thereof having jurisdiction over the
conduct of their respective businesses or the ownership of their respective
Property, except for any failure to comply with any of the foregoing which could
not reasonably be expected to have a Material Adverse Effect.
5.14 Plan Assets; Prohibited Transactions.
The Company is not an entity deemed to hold "plan assets" within the
meaning of 29 C.F.R. Section 2510.3-101 of an employee benefit plan (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan
(within the meaning of Section 4975 of the Code), and neither the execution of
this Agreement nor the making of Loans hereunder gives rise to a prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
5.15 Environmental Matters.
In the ordinary course of its business, the officers of the Company
consider the effect of Environmental Laws on the business of the Company and its
Subsidiaries, in the course of which they identify and evaluate potential risks
and liabilities accruing to the Company due to Environmental Laws. On the basis
of this consideration, the Company has concluded that Environmental Laws cannot
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any Subsidiary has received any notice to the effect that its operations are
not in material compliance with any of the requirements of applicable
Environmental Laws or are the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
toxic or hazardous waste or substance into the environment, which non-compliance
or remedial action could reasonably be expected to have a Material Adverse
Effect.
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5.16 Investment Company Act.
Neither the Company nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
5.17 Public Utility Holding Company Act.
Neither the Company nor any Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
5.18 Year 2000.
The Company has substantially completed an assessment of the Year 2000
Issues and has a realistic and achievable program for addressing the remediation
of Year 2000 Issues on a timely basis to avoid any impact on the Company and its
Subsidiaries which would reasonably be expected to have a Material Adverse
Effect (the "Year 2000 Program"). Based on such assessment and on the Year 2000
Program the Company does not reasonably anticipate that Year 2000 Issues will
have a Material Adverse Effect.
5.19 Default.
There exists no Default or Unmatured Default under Article VII of this
Agreement.
ARTICLE VI.
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1 Financial Reporting.
The Company will maintain, for itself and each Subsidiary, a system of
accounting established and administered in accordance with Agreement Accounting
Principles, and furnish to the Lenders:
(i) Within 120 days after the close of each of its fiscal years, an
unqualified (except for qualifications relating to changes in accounting
principles or practices reflecting changes in Agreement Accounting Principles
and required or approved by the Company's independent certified public
accountants) audit report certified by independent certified public accountants
reasonably acceptable to the Lenders, prepared in accordance with Agreement
Accounting Principles on a consolidated basis for itself and its Subsidiaries,
including balance sheets as of the end of such period, related profit and loss
statements, and a statement of cash flows, accompanied by a certificate of said
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accountants that, in the course of their examination necessary for their
certification of the foregoing, they have obtained no knowledge of any Default
or Unmatured Default, or if, in the opinion of such accountants, any Default or
Unmatured Default shall exist, stating the nature and status thereof.
(ii) Within 60 days after the close of each of the first three
quarterly periods of each fiscal year, for itself and its Subsidiaries,
consolidated unaudited balance sheets as at the close of each such period and
consolidated unaudited profit and loss statements and a consolidated unaudited
statement of cash flows for the period from the beginning of such fiscal year to
the end of such quarter, all certified by its Chief Financial Officer,
Controller, or Treasurer.
(iii) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B
signed by its Chief Financial Officer, Controller, or Treasurer and stating that
no Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(iv) As soon as possible and in any event within 10 Business Days after
the Company knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by the Chief Financial Officer, Controller, or
Treasurer of the Company, describing said Reportable Event and the action which
the Company proposes to take with respect thereto.
(v) As soon as possible and in any event within 10 Business Days after
receipt by the Company, a copy of (a) any notice or claim to the effect that the
Company or any of its Subsidiaries is or may be liable to any Person as a result
of the release by the Company, any of its Subsidiaries, or any other Person of
any toxic or hazardous waste or substance into the environment, and (b) any
notice alleging any violation of any federal, state or local environmental,
health or safety law or regulation by the Company or any of its Subsidiaries,
which, in either case, could reasonably be expected to have a Material Adverse
Effect.
(vi) Such other information (including non-financial information) as
the Administrative Agent or any Lender may from time to time reasonably request.
6.2 Use of Proceeds.
The Company will, and will cause each Subsidiary to, use the proceeds
of the Advances for general corporate purposes, including Acquisitions. The
Company will not, nor will it permit any Subsidiary to, use any of the proceeds
of the Advances to purchase or carry any "margin stock" (as defined in
Regulation U).
6.3 Notice of Default.
The Company will, and will cause each Borrower and Significant
Subsidiary to, give prompt notice in writing to the Administrative Agent of the
occurrence of any Default or Unmatured Default and of any other development,
financial or otherwise (including, without
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limitation, developments with respect to Year 2000 Issues), which could
reasonably be expected to have a Material Adverse Effect.
6.4 Conduct of Business.
The Company will, and will cause each Significant Subsidiary to, carry
on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted or
fields related thereto (except that the Company and its Significant Subsidiaries
shall have no duty to renew or extend contracts which expire by their terms) and
do all things necessary to remain duly incorporated or organized, validly
existing and (to the extent such concept applies to such entity) in good
standing as a domestic corporation, partnership or limited liability company in
its jurisdiction of incorporation or organization, as the case may be, and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted, unless the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
6.5 Taxes.
The Company will, and will cause each Significant Subsidiary to, timely
file complete and correct United States federal and applicable foreign, state
and local tax returns required by law and pay when due all taxes, assessments
and governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside in accordance
with Agreement Accounting Principles, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
6.6 Insurance.
The Company will, and will cause each Significant Subsidiary to,
maintain as part of a self-insurance program or with financially sound and
reputable insurance companies insurance on all their Property in such amounts
(with such customary deductibles, exclusions and self-insurance) and covering
such risks as is consistent with sound business practice.
6.7 Compliance with Laws.
The Company will, and will cause each Significant Subsidiary to, comply
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject including, without limitation, all
Environmental Laws, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
6.8 Inspection.
The Company will, and will cause each Significant Subsidiary to, permit
the Administrative Agent and the Lenders, by their respective representatives
and agents, to inspect any of the Property, books and financial records of the
Company and each Significant Subsidiary, to examine and make copies of the books
of accounts and other financial records of the Company and each Significant
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
each Significant Subsidiary with, and to be advised as to the same by, their
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respective officers upon reasonable prior notice at such reasonable times and
intervals as the Administrative Agent or any Lender may designate, provided that
neither the Company nor any of its Subsidiaries shall be responsible for the
costs and expenses incurred by the Administrative Agent, any Lender, or their
representatives in connection with such inspection prior to the occurrence and
continuation of a Default.
6.9 Merger.
The Company will not, nor will it permit any Significant Subsidiary to,
merge or consolidate with or into any other Person, except that, provided that
no Default or Unmatured Default shall have occurred and be continuing or would
result therefrom on a pro forma basis reasonably acceptable to the
Administrative Agent, the Company may merge or consolidate with any other U.S.
corporation and each Significant Subsidiary may merge or consolidate with any
other Person, provided, further, that (i) in the case of any such merger or
consolidation involving the Company, the Company is the surviving corporation
and (ii) in the case of any such merger or consolidation involving a Significant
Subsidiary which is a Subsidiary Borrower, the surviving corporation assumes all
of such Borrower's obligations under this Agreement and remains or becomes a
Subsidiary Borrower.
6.10 Sale of Assets.
The Company will not, nor will it permit any Significant Subsidiary to,
lease, sell or otherwise dispose of its Property, to any other Person (other
than the Company or another Subsidiary), except:
(i) Sales of inventory in the ordinary course of business.
(ii) Sales or other dispositions in the ordinary course of business of
fixed assets for the purpose of replacing such fixed assets, provided that such
fixed assets are replaced within 360 days of such sale or other disposition with
other fixed assets which have a fair market value not materially less than the
fixed assets sold or otherwise disposed of.
(iii) Sales or other dispositions outside the ordinary course of
business of accounts receivable, lease receivables, leases or equipment which
had been leased by the Company or such Significant Subsidiary, provided that any
such sale or other disposition is for reasonably equivalent value and could not
reasonably be expected to have a Material Adverse Effect.
(iv) Other leases, sales (including sale-leasebacks) or other
dispositions of its Property that, together with all other Property of the
Company and its Subsidiaries previously leased, sold or disposed of (other than
as provided in clauses (i), (ii) and (iii) above) as permitted by this Section
during the twelve-month period ending with the month prior to the month in which
any such lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the Property of the Company and its Subsidiaries, or
together with all other Property of the Company and its Subsidiaries previously
leased, sold or disposed of (other than as provided in clauses (i) and (ii)
above) as permitted by this Section during the period from the date of this
Agreement to the end of the month
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prior to the month in which any such lease, sale or other disposition occurs, do
not constitute 35% of the consolidated assets of the Company and its
Subsidiaries as would be shown in the consolidated financial statements of the
Company and its Subsidiaries as at the beginning of the fiscal year in which any
such lease, sale or other disposition occurs.
Notwithstanding anything in this Section 6.10 to the contrary, (a) no
such leases, sales or other dispositions of property may be made (other than
pursuant to clause (i) above) if any Default or Unmatured Default has occurred
and is continuing, and (b) all leases, sales and other dispositions of Property
at any time shall be for not less than the fair market value of such Property as
determined in good faith by the Company.
6.11 Investments.
The Company will not, nor will it permit any Significant Subsidiary to,
make or suffer to exist any Investments, or commitments therefor, or to create
any Subsidiary or to become or remain a partner in any partnership or joint
venture, except:
(i) Cash Equivalent Investments.
(ii) Investments in Subsidiaries.
(iii) other Investments in existence on the date hereof.
(iv) Other Investments provided that the aggregate amount of such
Investments made in any fiscal year does not exceed 25% of Adjusted Tangible Net
Worth as of the beginning of such fiscal year.
6.12 Liens.
The Company will not, nor will it permit any Significant Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the Property of the
Company or any of its Significant Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books.
(ii) Liens imposed by law, such as landlord's, carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation (other than Liens in
favor of the PGBC).
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(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Company or its Subsidiaries.
(v) Liens existing on the date hereof.
(vi) Liens on any assets which exist at the time of acquisition of such
assets by the Company or any of its Subsidiaries, or liens to secure the payment
of all of any part of the purchase price of such assets upon the acquisition of
such assets by the Company or any of its Subsidiaries or to secure any
Indebtedness incurred or guaranteed by the Company or any of its Subsidiaries
prior to, at the time, of or within 360 days after, such acquisition (or, in the
case of real property, the completion of construction (including any
improvements on an existing asset) or commencement of full operation of such
asset, whichever is later), which Indebtedness is incurred or guaranteed for the
purpose of financing all or any part of the purchase price thereof or, in the
case of real property, construction or improvements thereon, provided, however,
that in the case of any such acquisition, construction or improvement, the Lien
shall not apply to such assets theretofore owned by the Company or any of its
Subsidiaries other than, in the case of any such construction or improvement,
any real property on which the property so constructed, or the improvement, is
located, provided further, however, that the aggregate outstanding principal
amount of Indebtedness secured by Liens permitted by this Section 6.12(vi) shall
not at any time exceed $250,000,000.
(vii) Liens in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political subdivision
of the United States of America or any State thereof, or in favor of any other
country or any political subdivision thereof, to secure partial, progress,
advance or other payments pursuant to any contract or statute or to secure any
Indebtedness incurred or guaranteed for the purpose of financing all or any part
of the purchase price (or, in the case of real property, the cost of
construction), of the assets subject to such liens (including without limitation
liens incurred in connection with pollution control, industrial revenue or
similar financings).
(viii) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing clauses, provided, however, that the principal amount of Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so secured
prior to such extension, renewal or replacement and that such extension, renewal
or replacement Lien shall be limited to all or a part of the assets which
secured the Lien so extended, renewed or replaced (plus improvements and
construction on such real property).
(ix) So long as no Default under Section 7.9 would occur in connection
therewith, Liens created by or resulting from any litigation or other proceeding
which is being contested in good faith by appropriate proceedings, including
Liens arising out of judgments or awards against the Company or any of its
Subsidiaries with respect to which the Company or such Subsidiary is in good
faith prosecuting an appeal or
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proceeding for review or for which the time to make an appeal has not yet
expired; or final unappealable judgment Liens which are satisfied within 15 days
of the date of judgment; or Liens incurred by the Company or any of its
Subsidiaries for the purpose of obtaining a stay or discharge in the course of
any litigation or other proceeding to which the Company or such Subsidiary is a
party.
(x) Liens securing Indebtedness described in Section 6.17(iv) and (v).
(xi) Liens securing Indebtedness and not otherwise permitted by the
foregoing provisions of this Section 6.12, provided that the aggregate
outstanding principal amount of the Indebtedness secured by all such Liens shall
not at any time exceed 25% of Adjusted Tangible Net Worth.
6.13 Year 2000.
The Company will take and will cause each of its Subsidiaries to take
all such actions as are reasonably necessary to successfully implement the Year
2000 Program and to assure that Year 2000 Issues will not have a Material
Adverse Effect. At the request of the Administrative Agent, the Company will
provide a description of the Year 2000 Program, together with any updates or
progress reports with respect thereto.
6.14 Subsidiary Indebtedness.
The Company will not permit any Subsidiary to create, incur or suffer
to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness outstanding on the date of this Agreement or
incurred pursuant to commitments in existence on the date of this Agreement.
(iii) Indebtedness of any Subsidiary to the Company or any other
Subsidiary.
(iv) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that such Indebtedness existed at the time such Person
becomes a Subsidiary and is not created in contemplation of or in connection
with such Person becoming a Subsidiary.
(v) Any refunding or refinancing of any Indebtedness referred to in
clauses (i) through (iv) above, provided that any such refunding or refinancing
of Indebtedness referred to in clause (ii), (iii) or (iv) does not increase the
principal amount thereof.
(vi) Indebtedness arising from (a) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, or (b) the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business.
(vii) Indebtedness arising from guarantees of loans and advances by
third parties to employees and officers of a Subsidiary in the ordinary course
of business for
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bona fide business purposes, provided that the aggregate outstanding principal
amount of such Indebtedness does not at any time exceed $100,000,000.
(viii) Indebtedness of a Subsidiary arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations or from
guarantees, letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Subsidiaries incurred or assumed in
connection with the disposition of any business, property or Subsidiary.
(ix) Indebtedness arising from Rate Hedging Obligations.
(x) Contingent Obligations.
(xi) Indebtedness outstanding under investment grade commercial paper
programs.
(xii) Other Indebtedness; provided that, at the time of the creation,
incurrence or assumption of such other Indebtedness and after giving effect
thereto, the aggregate amount of all such other Indebtedness of the Subsidiaries
does not exceed an amount equal to 25% of Adjusted Tangible Net Worth at such
time.
6.15 Limitation on Restrictions on Significant Subsidiary
Distributions.
The Company will not, and will not permit any Significant Subsidiary
to, enter into or suffer to exist or become effective any consensual encumbrance
or restriction on the ability of any Significant Subsidiary of the Company to
(i) pay dividends or make any other distributions in respect of any capital
stock of such Subsidiary held by, or pay any Indebtedness owed to, the Company
or any other Subsidiary of the Company, (ii) make loans or advances to the
Company or any other Subsidiary of the Company or (iii) transfer any of its
assets to the Company or any other Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of (a) any restrictions
existing under the Loan Documents, (b) any restrictions with respect to a
Significant Subsidiary imposed pursuant to an agreement which has been entered
into in connection with the disposition of all or substantially all of the
capital stock or assets of such Subsidiary, and (c) any restrictions with
respect to assets encumbered by a Lien permitted by Section 6.12 so long as such
restriction applies only to the asset encumbered by such permitted Lien.
6.16 Contingent Obligations.
The Company will not, nor will it permit any Subsidiary to, make or
suffer to exist any Contingent Obligation (including, without limitation, any
Contingent Obligation with respect to the obligations of a Subsidiary), except
(i) by endorsement of instruments for deposit or collection in the ordinary
course of business, (ii) the Guaranty, (iii) Contingent Obligations of
special-purpose finance Subsidiaries, provided that no Person has recourse
against the Company or any Significant Subsidiary for such Contingent
Obligations, (iv) Contingent Obligations arising from the sale by Pyxis
Corporation of lease receivables, leases or equipment, provided that the
aggregate amount of such Contingent Obligations do not at any time exceed 10% of
Adjusted Tangible Net Worth, (v) Contingent Obligations arising out of operating
or synthetic
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leases entered into by Subsidiaries of the Company, provided that the aggregate
amount of such Contingent Obligations do not at any time exceed 25% of Adjusted
Tangible Net Worth, and (vi) Contingent Obligations in addition to those
described in (i)-(v) above, provided that the aggregate amount of such
additional Contingent Obligations (without duplication) do not at any time
exceed 25% of Adjusted Tangible Net Worth.
6.17 Minimum Net Worth.
The Company shall not permit its Net Worth to be less than
$2,550,000,000 at any time.
ARTICLE VII.
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on behalf
of the Company or any of its Subsidiaries to the Lenders or the Administrative
Agent under or in connection with this Agreement, any Loan, or any certificate
or information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan within one day after the same
becomes due, or nonpayment of interest upon any Loan or of any commitment fee or
other obligations under any of the Loan Documents within five days after the
same becomes due.
7.3. The breach by the Company of Sections 6.3, 6.9, 6.10, 6.14, 6.16,
or 6.17.
7.4. The breach by any Borrower (other than a breach which constitutes
a Default under another Section of this Article VII) of any of the terms or
provisions of this Agreement which is not remedied within thirty days after
written notice from the Administrative Agent or any Lender.
7.5. Failure of the Company or any of its Significant Subsidiaries to
pay when due any principal, interest or other amounts, subject to any applicable
grace period, or the default by the Company or any of its Significant
Subsidiaries in the performance beyond the applicable grace period with respect
thereto, if any, of any term, provision or condition contained in the Five Year
Credit Agreement or any agreement or agreements under which any Indebtedness in
excess of 2% of Adjusted Tangible Net Worth was created or is governed, or any
other event shall occur or condition exist, the effect of which default or event
is to cause, or to permit the holder or holders of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Company or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or the
Company or any of its Significant Subsidiaries shall not pay, or admit in
writing its inability to pay, its debts generally as they become due.
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7.6. The Company or any of its Significant Subsidiaries shall (i) have
an order for relief entered with respect to it under the Federal bankruptcy laws
as now or hereafter in effect, (ii) make an assignment for the benefit of
creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment
of a receiver, custodian, trustee, examiner, liquidator or similar official for
it or any Substantial Portion of its Property, (iv) institute any proceeding
seeking an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, (v) take any corporate or partnership action to authorize or
effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail
to contest in good faith any appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
of its Significant Subsidiaries, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any of its Significant
Subsidiaries or any Substantial Portion of its Property, or a proceeding
described in Section 7.6(iv) shall be instituted against the Company or any of
its Significant Subsidiaries and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60 consecutive
days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of the Company and its Subsidiaries which, when taken together with
all other Property of the Company and its Subsidiaries so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such action occurs, constitutes a Substantial
Portion.
7.9. The Company or any of its Significant Subsidiaries shall fail
within 60 days to pay, bond or otherwise discharge one or more (i) judgments or
orders for the payment of money (not covered by insurance)in excess of 2% of
Adjusted Tangible Net Worth (or the equivalent thereof in currencies other than
U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, which judgment(s), in either such case, is/are not
stayed on appeal or otherwise being appropriately contested in good faith.
7.10. Any member of the Controlled Group shall fail to pay when due an
amount or amounts aggregating in excess of $75,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Single Employer Plan with Unfunded Liabilities in excess of $20,000,000 (a
"Material Plan") shall be filed under Section 4041(c) of ERISA by any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or PBGC shall institute proceedings under which it is likely to
prevail under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee
to be appointed to administer any Material Plan; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any Material Plan must be terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect
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to, one or more Multiemployer Plans which causes one or more members of the
Controlled Group to incur a current payment obligation in excess of $75,000,000.
7.11. Any Change in Control shall occur.
7.12. The Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of the Guaranty, or the Company shall fail to comply with any
of the terms or provisions of the Guaranty, or the Company shall deny that it
has any further liability under the Guaranty, or shall give notice to such
effect.
ARTICLE VIII.
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration.
If any Default described in Section 7.6 or 7.7 occurs with respect to
the Company or any of its Significant Subsidiaries, the obligations of the
Lenders to make Loans hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Administrative Agent or any Lender. If any other
Default occurs and is continuing, the Required Lenders (or the Administrative
Agent with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Company hereby expressly waives.
If, within 60 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Company) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Administrative Agent shall, by notice to the Company, rescind and annul such
acceleration and/or termination.
8.2 Amendments.
Subject to the provisions of this Article VIII, the Required Lenders
(or the Administrative Agent with the consent in writing of the Required
Lenders) and the Borrowers may enter into written agreements supplemental hereto
for the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrowers hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
written agreement shall, without the consent of all of the Lenders:
(i) Extend the final maturity of any Loan or postpone any regularly
scheduled payment of principal of any Loan or forgive all or any portion of the
principal amount thereof, or reduce the rate or extend the time of payment of
interest or fees thereon.
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(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Facility Termination Date or reduce the amount or
extend the payment date for, the mandatory payments required under Section 2.2,
or increase the amount of the Aggregate Commitment or of the Commitment of any
Lender hereunder, or permit any Borrower to assign its rights under this
Agreement (other than as may be permitted pursuant to Section 6.9).
(iv) Amend this Section 8.2.
(v) Release the Company as guarantor of any Advance.
No amendment of any provision of this Agreement relating to the
Administrative Agent shall be effective without the written consent of the
Administrative Agent. The Administrative Agent may waive payment of the fee
required under Section 12.3.2 without obtaining the consent of any other party
to this Agreement.
Notwithstanding anything herein to the contrary, no Defaulting Lender
shall be entitled to vote (whether to consent or to withhold its consent) with
respect to any amendment, modification, termination or waiver requiring the
consent of the Required Lenders, and, for purposes of determining the Required
Lenders, the Commitments and the Loans of each Defaulting Lender shall be
disregarded.
8.3 Preservation of Rights.
No delay or omission of the Lenders or the Administrative Agent to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
a Borrower to satisfy the conditions precedent to such Loan shall not constitute
any waiver or acquiescence. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Administrative Agent and the Lenders until the Obligations have
been paid in full.
ARTICLE IX.
GENERAL PROVISIONS
9.1 Survival of Representations.
All representations and warranties of the Borrowers contained in this
Agreement shall survive the making of the Loans herein contemplated.
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9.2 Governmental Regulation.
Anything contained in this Agreement to the contrary notwithstanding,
no Lender shall be obligated to extend credit to the Borrowers in violation of
any limitation or prohibition provided by any applicable statute or regulation.
9.3 Headings.
Section headings in the Loan Documents are for convenience of reference
only, and shall not govern the interpretation of any of the provisions of the
Loan Documents.
9.4 Entire Agreement.
The Loan Documents embody the entire agreement and understanding among
the Borrowers, the Administrative Agent and the Lenders and supersede all prior
agreements and understandings among the Borrowers, the Administrative Agent and
the Lenders relating to the subject matter thereof other than the fee letter
described in Section 10.13.
9.5 Several Obligations; Benefits of this Agreement.
The respective obligations of the Lenders hereunder are several and not
joint and no Lender shall be the partner or agent of any other (except to the
extent to which the Administrative Agent is authorized to act as such). The
failure of any Lender to perform any of its obligations hereunder shall not
relieve any other Lender from any of its obligations hereunder. This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns, provided, however, that the parties hereto expressly agree that the
Lead Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10
and 10.11 to the extent specifically set forth therein and shall have the right
to enforce such provisions on its own behalf and in its own name to the same
extent as if it were a party to this Agreement.
9.6 Expenses; Indemnification.
(i) The Borrowers shall reimburse the Administrative Agent and the Lead
Arranger for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Administrative Agent, which attorneys may be employees of the Administrative
Agent but subject to any limitations contained in the letter from Dickinson
Wright PLLC to First Chicago dated February 19, 1999) paid or incurred by the
Administrative Agent or the Lead Arranger in connection with the preparation,
investigation, negotiation, execution, delivery, syndication, review, amendment,
modification, and administration of the Loan Documents, whether incurred prior
to or subsequent to closing. The Borrowers also agree to reimburse the
Administrative Agent, the Lead Arranger and the Lenders for any costs, internal
charges and out-of-pocket expenses (including reasonable attorneys' fees and
time charges of attorneys for the Administrative Agent, the Lead Arranger and
the Lenders, which attorneys may be employees of the Administrative Agent, the
Lead Arranger or the Lenders) paid or incurred by the Administrative Agent, the
Lead
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Arranger or any Lender in connection with the collection and enforcement of the
Loan Documents.
(ii) The Company hereby further agrees to indemnify the Administrative
Agent, the Lead Arranger and each Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all reasonable expenses of litigation
or preparation therefor whether or not the Administrative Agent, the Lead
Arranger or any Lender is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder except to the extent
that they are determined in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The obligations of the Company
under this Section 9.6 shall survive the termination of this Agreement.
9.7 Numbers of Documents.
All statements, notices, closing documents, and requests hereunder
shall be furnished to the Administrative Agent with sufficient counterparts so
that the Administrative Agent may furnish one to each of the Lenders.
9.8 Accounting.
Except as provided to the contrary herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder shall be
made in accordance with Agreement Accounting Principles except that any
calculation or determination which is to be made on a consolidated basis shall
be made for the Company and all its Subsidiaries, including those Subsidiaries,
if any, which are unconsolidated on the Company's audited financial statements.
9.9 Severability of Provisions.
Any provision in any Loan Document that is held to be inoperative,
unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the remaining
provisions in that jurisdiction or the operation, enforceability, or validity of
that provision in any other jurisdiction, and to this end the provisions of all
Loan Documents are declared to be severable.
9.10 Nonliability of Lenders.
The relationship between the Company on the one hand and the Lenders
and the Administrative Agent on the other hand shall be solely that of borrower
and lender. Neither the Administrative Agent, the Lead Arranger nor any Lender
shall have any fiduciary responsibilities to the Company solely by reason of
being a party to this Agreement. Neither the Administrative Agent, the Lead
Arranger nor any Lender undertakes any responsibility to the Company to review
or inform the Company of any matter in connection with any phase of the
Company's business or operations. The Company agrees that neither the
Administrative Agent, the Lead
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Arranger nor any Lender shall have liability to the Company (whether sounding in
tort, contract or otherwise) for losses suffered by the Company in connection
with, arising out of, or in any way related to, the transactions contemplated
and the relationship established by the Loan Documents, or any act, omission or
event occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Administrative Agent, the Lead Arranger nor any
Lender shall have any liability with respect to, and the Company hereby waives,
releases and agrees not to sue for, any special, indirect or consequential
damages suffered by the Company in connection with, arising out of, or in any
way related to the Loan Documents or the transactions contemplated thereby.
9.11 Confidentiality.
Each of the Administrative Agent and each Lender agrees to hold any
confidential information which it may receive from the Company pursuant to this
Agreement in confidence, except for disclosure (i) to its Affiliates and to
other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Lender or the
Administrative Agent or, subject to Section 12.4, to a Transferee, (iii) to
regulatory officials, (iv) to any Person as required by law, regulation, or
legal process, (v) to any Person in connection with any legal proceeding to
which such Lender is a party, (vi) to such Lender's contractual counterparties
in swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, (vii) permitted by Section 12.4, and (viii) to
rating agencies if requested or required by such agencies in connection with a
rating relating to the Advances hereunder, provided that reasonable advance
written notice is given to the Company.
9.12 Nonreliance.
Each Lender hereby represents that it is not relying on or looking to
any margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) for the repayment of the Loans provided for herein.
ARTICLE X.
THE AGENT
10.1 Appointment; Nature of Relationship.
The First National Bank of Chicago is hereby appointed by each of the
Lenders as its contractual representative (herein referred to as the
"Administrative Agent") hereunder and under each other Loan Document, and each
of the Lenders irrevocably authorizes the Administrative Agent to act as the
contractual representative of such Lender with the rights and duties expressly
set forth herein and in the other Loan Documents. The Administrative Agent
agrees to act as such contractual representative upon the express conditions
contained in this Article X. Notwithstanding the use of the defined term
"Administrative Agent," it is expressly understood and agreed that the
Administrative Agent shall not have any fiduciary responsibilities to any Lender
by reason of this Agreement or any other Loan Document and that the
Administrative
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Agent is merely acting as the contractual representative of the Lenders with
only those duties as are expressly set forth in this Agreement and the other
Loan Documents. In its capacity as the Lenders' contractual representative, the
Administrative Agent (i) does not hereby assume any fiduciary duties to any of
the Lenders, (ii) is a "representative" of the Lenders within the meaning of
Section 9-105 of the Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents. Each of the
Lenders hereby agrees to assert no claim against the Administrative Agent on any
agency theory or any other theory of liability for breach of fiduciary duty, all
of which claims each Lender hereby waives.
10.2 Powers.
The Administrative Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Administrative Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent shall have no implied duties to the
Lenders, or any obligation to the Lenders to take any action thereunder except
any action specifically provided by the Loan Documents to be taken by the
Administrative Agent.
10.3 General Immunity.
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable to the Company, the Lenders or any Lender
for any action taken or omitted to be taken by it or them hereunder or under any
other Loan Document or in connection herewith or therewith except to the extent
such action or inaction is determined in a final non-appealable judgment by a
court of competent jurisdiction to have arisen from the gross negligence or
willful misconduct of such Person.
10.4 No Responsibility for Loans, Recitals, etc.
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify (a) any statement, warranty or representation made in
connection with any Loan Document or any borrowing hereunder; (b) the
performance or observance of any of the covenants or agreements of any obligor
under any Loan Document, including, without limitation, any agreement by an
obligor to furnish information directly to each Lender; (c) the satisfaction of
any condition specified in Article IV, except receipt of items required to be
delivered solely to the Administrative Agent; (d) the existence or possible
existence of any Default or Unmatured Default; (e) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; (f) the value,
sufficiency, creation, perfection or priority of any Lien in any collateral
security; or (g) the financial condition of the Company or any guarantor of any
of the Obligations or of any of the Company's or any such guarantor's respective
Subsidiaries. The Administrative Agent shall have no duty to disclose to the
Lenders information that is not required to be furnished by the Company to the
Administrative Agent at such time, but is voluntarily furnished by the Company
to the Administrative Agent (either in its capacity as Administrative Agent or
in its individual capacity).
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10.5 Action on Instructions of Lenders.
The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and under any other Loan
Document in accordance with written instructions signed by the Required Lenders,
and such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders. The Lenders hereby acknowledge that the
Administrative Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any
other Loan Document unless it shall be requested in writing to do so by the
Required Lenders. The Administrative Agent shall be fully justified in failing
or refusing to take any action hereunder and under any other Loan Document
unless it shall first be indemnified to its satisfaction by the Lenders pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.
10.6 Employment of Agents and Counsel.
The Administrative Agent may execute any of its duties as
Administrative Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Administrative Agent shall be entitled
to advice of counsel concerning the contractual arrangement between the
Administrative Agent and the Lenders and all matters pertaining to the
Administrative Agent's duties hereunder and under any other Loan Document.
10.7 Reliance on Documents; Counsel.
The Administrative Agent shall be entitled to rely upon any Note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and, in respect to legal matters, upon the
opinion of counsel selected by the Administrative Agent, which counsel may be
employees of the Administrative Agent.
10.8 Administrative Agent's Reimbursement and Indemnification.
The Lenders agree to reimburse and indemnify the Administrative Agent
ratably in proportion to their respective Commitments (or, if the Commitments
have been terminated, in proportion to their Commitments immediately prior to
such termination) (i) for any amounts not reimbursed by the Company for which
the Administrative Agent is entitled to reimbursement by the Company under the
Loan Documents (other than the fee payable pursuant to Section 10.13), (ii) for
any other expenses incurred by the Administrative Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents (including, without limitation, for any
expenses incurred by the Administrative Agent in connection with any dispute
between the Administrative Agent and any Lender or between two or more of the
Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent
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in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby (including, without limitation, for any such amounts incurred by or
asserted against the Administrative Agent in connection with any dispute between
the Administrative Agent and any Lender or between two or more of the Lenders),
or the enforcement of any of the terms of the Loan Documents or of any such
other documents, provided that (i) no Lender shall be liable for any of the
foregoing to the extent any of the foregoing is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Administrative Agent and (ii) any
indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the
provisions of this Section 10.8, be paid by the relevant Lender in accordance
with the provisions thereof. The obligations of the Lenders under this Section
10.8 shall survive payment of the Obligations and termination of this Agreement.
10.9 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Administrative Agent has received written notice from a Lender or the
Company referring to this Agreement describing such Default or Unmatured Default
and stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders.
10.10 Rights as a Lender.
In the event the Administrative Agent is a Lender, the Administrative
Agent shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Administrative Agent, and the term
"Lender" or "Lenders" shall, at any time when the Administrative Agent is a
Lender, unless the context otherwise indicates, include the Administrative Agent
in its individual capacity. The Administrative Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Company or any of its
Subsidiaries in which the Company or such Subsidiary is not restricted hereby
from engaging with any other Person. The Administrative Agent, in its individual
capacity, is not obligated to remain a Lender.
10.11 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, the Lead Arranger or any other Lender
and based on the financial statements prepared by the Company and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon the Administrative Agent, the Lead Arranger or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
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10.12 Successor Administrative Agent.
The Administrative Agent may resign at any time by giving written
notice thereof to the Lenders and the Company, such resignation to be effective
upon the appointment of a successor Administrative Agent or, if no successor
Administrative Agent has been appointed, forty-five days after the retiring
Administrative Agent gives notice of its intention to resign. The Administrative
Agent may be removed at any time with or without cause by written notice
received by the Administrative Agent from the Required Lenders, such removal to
be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Company and the Lenders, a successor Administrative Agent, which
successor Administrative Agent shall (unless a Default shall have occurred and
be continuing) be approved by the Company (which approval shall not be
unreasonably withheld or delayed). If no successor Administrative Agent shall
have been so appointed by the Required Lenders within thirty days after the
resigning Administrative Agent's giving notice of its intention to resign, then
the resigning Administrative Agent may appoint, on behalf of the Company and the
Lenders, a successor Administrative Agent. Notwithstanding the previous
sentence, without the consent of any Lender but upon thirty days prior written
notice to the Lenders and the Company, the Administrative Agent may appoint any
of its Affiliates which is a commercial bank as a successor Administrative Agent
hereunder, which successor Administrative Agent shall (unless a Default shall
have occurred and be continuing) be approved by the Company (which approval
shall not be unreasonably withheld or delayed). If the Administrative Agent has
resigned or been removed and no successor Administrative Agent has been
appointed, the Lenders may perform all the duties of the Administrative Agent
hereunder and the Company shall make all payments in respect of the Obligations
to the applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Administrative Agent shall be deemed to be appointed
hereunder until such successor Administrative Agent has accepted the
appointment. Any such successor Administrative Agent shall be a commercial bank
having capital and retained earnings of at least $5,000,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning or removed Administrative Agent. Upon the effectiveness of the
resignation or removal of the Administrative Agent, the resigning or removed
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation or removal of an Administrative Agent, the provisions of this
Article X shall continue in effect for the benefit of such Administrative Agent
in respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent hereunder and under the other Loan Documents. In the
event that there is a successor to the Administrative Agent by merger, or the
Administrative Agent assigns its duties and obligations to an Affiliate pursuant
to this Section 10.12, then the term "Corporate Base Rate" as used in this
Agreement shall mean the prime rate, base rate or other analogous rate of the
new Administrative Agent.
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10.13 Administrative Agent's Fee.
The Company agrees to pay to the Administrative Agent, for its own
account, the fees agreed to by the Company and the Administrative Agent pursuant
to that certain letter agreement dated February 15, 1999 or as otherwise agreed
from time to time.
10.14 Delegation to Affiliates.
The Company and the Lenders agree that the Administrative Agent may
delegate any of its duties under this Agreement to any of its Affiliates. Any
such Affiliate (and such Affiliate's directors, officers, agents and employees)
which performs duties in connection with this Agreement shall be entitled to the
same benefits of the indemnification, waiver and other protective provisions to
which the Administrative Agent is entitled under Articles IX and X.
10.15 Administrative Agent, Syndication Agent, Co-Documentation Agents,
Lead Arranger, etc.
Neither the Syndication Agent, the Co-Documentation Agents nor the Lead
Arranger shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of such Lenders or the Administrative Agent
shall have or be deemed to have a fiduciary relationship with any Lender. Each
Lender hereby makes the same acknowledgments with respect to such Lenders as it
makes with respect to the Administrative Agent in Section 10.11.
ARTICLE XI.
SETOFF; RATABLE PAYMENTS
11.1 Setoff.
In addition to, and without limitation of, any rights of the Lenders
under applicable law, if any Borrower becomes insolvent, however evidenced, or
any Default occurs and is continuing, any and all deposits (including all
account balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of any Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.
11.2 Ratable Payments.
If any Lender, whether by setoff or otherwise, has payment made to it
upon its Loans (other than payments received pursuant to Section 3.1, 3.2, 3.4
or 3.5) in a greater proportion than that received by any other Lender, such
Lender agrees, promptly upon demand, to purchase a portion of the Loans held by
the other Lenders so that after such purchase each Lender will hold its ratable
proportion of Loans. If any Lender, whether in connection with setoff or amounts
which might be subject to setoff or otherwise, receives collateral or other
protection for its Obligations or such amounts which may be subject to setoff,
such Lender agrees, promptly upon
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demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
If an amount to be setoff is to be applied to Indebtedness of the
Company to a Lender other than Indebtedness comprised of Loans made by such
Lender, such amount shall be applied ratably to such other Indebtedness and to
the Indebtedness comprised of such Loans.
ARTICLE XII.
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns.
The terms and provisions of the Loan Documents shall be binding upon
and inure to the benefit of the Borrowers and the Lenders and their respective
successors and assigns, except that (i) the Borrowers shall not have the right
to assign their rights or obligations under the Loan Documents and (ii) any
assignment by any Lender must be made in compliance with Section 12.3.
Notwithstanding clause (ii) of this Section, any Lender may at any time, without
the consent of the Borrowers or the Administrative Agent, assign all or any
portion of its rights under this Agreement and any Note to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Administrative
Agent may treat the Person which made any Loan or which holds any Note as the
owner thereof for all purposes hereof unless and until such Person complies with
Section 12.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Administrative
Agent. Any assignee or transferee of the rights to any Loan or any Note agrees
by acceptance of such transfer or assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Loan (whether or not a Note has been
issued in evidence thereof), shall be conclusive and binding on any subsequent
holder, transferee or assignee of the rights to such Loan.
12.2 Participations.
12.2.1. Permitted Participants; Effect.
Any Lender may, in its sole discretion, in the ordinary course of its
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a Participant,
such Lender's obligations under the Loan Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner of its Loans
and the holder of any Note issued to it in
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evidence thereof for all purposes under the Loan Documents, all amounts payable
by the Borrowers under this Agreement shall be determined as if such Lender had
not sold such participating interests, and the Borrowers and the Administrative
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights.
Each Lender shall retain the sole right to approve, without the consent
of any Participant, any amendment, modification or waiver of any provision of
the Loan Documents other than any amendment, modification or waiver with respect
to any Loan or Commitment in which such Participant has an interest which
forgives principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, extends the Facility
Termination Date, postpones any date fixed for any regularly-scheduled payment
of principal of, or interest or fees on, any such Loan or Commitment, releases
the Company as guarantor of any such Loan or releases all or substantially all
of the collateral, if any, securing any such Loan.
12.2.3. Benefit of Setoff.
The Company agrees that each Participant shall be deemed to have the
right of setoff provided in Section 11.1 in respect of its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
the Loan Documents, provided that each Lender shall retain the right of setoff
provided in Section 11.1 with respect to the amount of participating interests
sold to each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in Section 11.1,
agrees to share with each Lender, any amount received pursuant to the exercise
of its right of setoff, such amounts to be shared in accordance with Section
11.2 as if each Participant were a Lender.
12.3 Assignments.
12.3.1. Permitted Assignments.
Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more financial
institutions, mutual funds, insurance companies or other entities engaged in the
business of extending credit for borrowed money ("Purchasers") all or any part
of its rights and obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit C or in such other form as may be agreed to
by the parties thereto. The consent of the Company and the Administrative Agent
shall be required prior to an assignment becoming effective with respect to a
Purchaser which is not a Lender or an Affiliate thereof; provided, however, that
if a Default has occurred and is continuing, the consent of the Company shall
not be required. Such consent shall not be unreasonably withheld or delayed. The
assignor shall give prompt written notice to the Company of any assignment
becoming effective without the consent of the Company. Each such assignment with
respect to a Purchaser which is not a Lender or an Affiliate thereof shall
(unless each of the Company and the Administrative Agent otherwise consents) be
in an amount not less than the lesser of (i)
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$5,000,000 and in multiples of $1,000,000 or (ii) the remaining amount of the
assigning Lender's Commitment (calculated as at the date of such assignment) or
outstanding Loans (if the applicable Commitment has been terminated).
12.3.2. Effect; Effective Date.
Upon (i) delivery to the Administrative Agent of an assignment,
together with any consents required by Section 12.3.1, and (ii) payment of a
$3,500 fee to the Administrative Agent for processing such assignment (unless
such fee is waived by the Administrative Agent), such assignment shall become
effective on the effective date specified in such assignment. The assignment
shall contain a representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and Loans under the
applicable assignment agreement constitutes "plan assets" as defined under ERISA
and that the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA. On and after the effective date
of such assignment, such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by or on behalf of the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Company, the Lenders or the Administrative
Agent shall be required to release the transferor Lender with respect to the
percentage of the Aggregate Commitment and Loans assigned to such Purchaser.
Upon the consummation of any assignment to a Purchaser pursuant to this Section
12.3.2, the transferor Lender, the Administrative Agent and the Borrowers shall,
if the transferor Lender or the Purchaser desires that its Loans be evidenced by
Notes, make appropriate arrangements so that new Notes or, as appropriate,
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted pursuant
to such assignment.
12.4 Dissemination of Information.
The Company authorizes each Lender to disclose to any Participant or
Purchaser or any other Person acquiring an interest in the Loan Documents by
operation of law (each a "Transferee") and any prospective Transferee any and
all information in such Lender's possession concerning the creditworthiness of
the Company and its Subsidiaries, provided that each Transferee and prospective
Transferee agrees in writing to be bound by Section 9.11 of this Agreement.
12.5 Tax Treatment.
If any interest in any Loan Document is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States or any State thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to comply with the
provisions of Section 3.5(iv).
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12.6 Transfer to an SPC.
Notwithstanding anything to the contrary contained herein, any Lender
(a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"),
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Company, the option to provide to the Borrowers all
or any part of any Loan (other than an Alternate Currency Loan) that such
Granting Lender would otherwise be obligated to make to the Borrower pursuant to
this Agreement; provided that (i) nothing herein shall constitute a commitment
by any SPC to make any Loan and (ii) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms hereof. The
making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for
any indemnity or similar payment obligation under this Agreement (all liability
for which shall remain with the Granting Lender). In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the payment in full of all outstanding commercial paper or other
senior indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof. In addition, notwithstanding anything to the
contrary in this Section 12.6, any SPC may (i) with notice to, but without the
prior written consent of, the Company and the Administrative Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Loans to the Granting Lender or to any financial institutions (consented to
by the Company and the Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC. As this
Section applies to any particular SPC, this section may not be amended without
the written consent of such SPC.
ARTICLE XIII.
NOTICES
13.1 Notices.
Except as otherwise permitted by Section 2.15 with respect to borrowing
notices, all notices, requests and other communications to any party hereunder
shall be in writing (including electronic transmission, facsimile transmission
or similar writing) and shall be given to such party: (x) in the case of the
Borrowers or the Administrative Agent, at its address or facsimile number set
forth on the signature pages hereof, (y) in the case of any Lender, at its
address or facsimile number set forth below its signature hereto or (z) in the
case of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Administrative Agent and the
Borrowers in accordance with the provisions of this Section 13.1.
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Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any other means,
when delivered (or, in the case of electronic transmission, received) at the
address specified in this Section; provided that notices to the Administrative
Agent under Article II shall not be effective until received.
13.2 Change of Address.
The Borrowers, the Administrative Agent and any Lender may each change
the address for service of notice upon it by 5 days' prior written notice to the
other parties hereto.
ARTICLE XIV.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrowers, the
Administrative Agent and the Lenders and each party has notified the
Administrative Agent by facsimile transmission or telephone that it has taken
such action.
ARTICLE XV.
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1 CHOICE OF LAW.
THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
(INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE
WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2 CONSENT TO JURISDICTION.
EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENTS AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY
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<PAGE> 56
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY ANY BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
15.3 WAIVER OF JURY TRIAL.
THE BORROWERS, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
55
<PAGE> 57
IN WITNESS WHEREOF, the Borrowers, the Lenders and the Administrative
Agent have executed this Agreement as of the date first above written.
CARDINAL HEALTH, INC.
By: /s/ Stephanie A. Wagoner
------------------------------
Title: Vice President & Treasurer
---------------------------
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Suzanne L. Stoddard
Telephone: (614) 717-7542
FAX: (614) 717-8542
56
<PAGE> 58
Commitment:
$21,875,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Administrative Agent
By: /s/ Daniel J. Pienta
-------------------------------------
Title: Vice President
----------------------------------
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Daniel J. Pienta
Telephone: (313) 225-1525
FAX: (313) 225-1671
57
<PAGE> 59
Commitment:
$20,625,000 BANK OF AMERICA NT & SA
By: /s/ Scott Singhoff
------------------------
Title: SVP
---------------------
700 Louisiana Street
Houston, TX 77002
Attention: Scott Singhoff
Telephone: (713) 247-6961
FAX: (713) 247-6719
58
<PAGE> 60
Commitment:
$20,625,000 CITICORP USA, INC.
By: /s/ Mark Stanfield Packard
----------------------------
Title: Vice President
-------------------------
399 Park Avenue
New York, NY 10043
Attention:_________________
Telephone:_________________
FAX:_______________________
59
<PAGE> 61
Commitment:
$20,625,000 CREDIT SUISSE FIRST BOSTON
By: /s/ Robert N. Finney
-------------------------
Title: Managing Director
----------------------
By: /s/ Todd C. Morgan
-------------------------
Title: Director
----------------------
11 Madison Avenue
New York, NY 10010
Attention:_________________
Telephone:_________________
FAX:_______________________
60
<PAGE> 62
Commitment:
$15,625,000 FIRST UNION NATIONAL BANK
By: /s/ John E. Reid
---------------------------------
Title: Vice President
------------------------------
301 South College Street, 10th Floor
Charlotte, NC 28288-0745
Attention: John Reid
Telephone: (704) 383-1385
FAX: (704) 383-7236
61
<PAGE> 63
Commitment:
$15,625,000 PNC BANK, NATIONAL ASSOCIATION
By: /s/ C. J. Richardson
---------------------------
Title: Senior Vice President
------------------------
201 East Fifth Street
Cincinnati, OH 45202
Attention: C. Joseph Richardson
Telephone: (513) 651-8984
FAX: (513) 651-8951
62
<PAGE> 64
Commitment:
$15,625,000 WACHOVIA BANK, NA
By: /s/ Bradford Watkins
---------------------------
Title: Vice President
------------------------
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: Bradford L. Watkins
Telephone: (404) 332-1093
FAX: (404) 332-6898
63
<PAGE> 65
Commitment:
$13,125,000 BARCLAYS BANK PLC
By: /s/ Matthew Tuck
------------------------
Title: Associate Director
& Vice President
---------------------
222 Broadway, 8th Floor
New York, NY 10038
Attention: Matthew Tuck
Telephone: (212) 412-1131
FAX: (212) 412-1075
64
<PAGE> 66
Commitment:
$13,125,000 FLEET BANK, NATIONAL ASSOCIATION
By /s/ Magda Hayden
-------------------------------
Title: Senior Vice President
---------------------------
300 Broad Hollow Road
Melville, NY 11747
Attention: Magda Hayden
Telephone: (516) 547-7726
FAX: (516) 447-7815
65
<PAGE> 67
Commitment:
$13,125,000 DEUTSCHE BANK AG - NEW YORK BRANCH
A/O CAYMAN ISLANDS BRANCH
By /s/ Susan L. Pearson
-------------------------------
Title: Director
---------------------------
By /s/ Stephan A. Wiedermann
-------------------------------
Title: Director
---------------------------
31 W. 52nd Street
New York, NY 10019
Attention: Sue Pearson
Telephone: (212) 469-7140
FAX: (212) 469-8701
66
<PAGE> 68
Commitment:
$8,000,000 BANCA COMMERCIALE ITALIANA -
CHICAGO BRANCH
By: /s/ By: /s/
-------------------------- --------------------------
Title: Vice President Title: Vice President
----------------------- -----------------------
150 N. Michigan Avenue
Chicago, Illinois 60601
Attention: Diana R. Lamb
Telephone: (312) 346-1112
FAX: (312) 346-5758
67
<PAGE> 69
Commitment:
$8,000,000 BANK OF MONTREAL
By: /s/ Patrice Wetzel
------------------------
Title: Director
---------------------
115 S. LaSalle Street
Chicago, Illinois 60603
Attention: Patrice Wetzel
Telephone: (312) 750-3472
FAX: (312) 750-6057
68
<PAGE> 70
Commitment:
$8,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Hisashi Miyashiro
-------------------------------
Title: Deputy General Manager
---------------------------
227 W. Monroe Street, Suite 2300
Chicago, Illinois 60606
Attention: William Murray
Telephone: (312) 696-4500
FAX: (312) 696-4535
69
<PAGE> 71
Commitment:
$8,000,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By /s/ Robert Bottamedi
-------------------------------
Title: Vice President
---------------------------
60 Wall Street, 5th Floor
New York, NY 10271
Attention: Dave Stone
-----------------------
Telephone: 212-648-1291
-----------------------
FAX: 212-648-5018
-----------------------------
70
<PAGE> 72
Commitment:
$8,000,000 NATIONAL CITY BANK
By /s/ Patricia Jackson
-------------------------------
Title: Vice President
---------------------------
155 East Broad Street
Columbus, OH 43251
Attention: Patricia Jackson
Telephone: (614) 463-8065
FAX: (614) 463-6770
71
<PAGE> 73
Commitment:
$8,000,000 THE NORTHERN TRUST COMPANY
By /s/ M. M. Teteak
-------------------------------
Title: VP
---------------------------
50 S. LaSalle Street
Chicago, Illinois 60675
Attention: Michelle M. Teteak
Telephone: (312) 444-3506
FAX: (312) 444-5055
72
<PAGE> 74
Commitment:
$8,000,000 SUNTRUST BANK, ATLANTA
By: /s/ Linda L. Dash
----------------------------------
Title: Vice President
-------------------------------
303 Peachtree Street, N.E., 3rd Floor
Mail Code 1928
Atlanta, Georgia 30308
Attention: Linda L. Dash
Telephone: (404) 658-4923
FAX: (404) 658-4905
73
<PAGE> 75
Commitment:
$8,000,000 STANDARD CHARTERED BANK
By /s/ David D. Cutting
-------------------------------
Title: Senior Vice President
---------------------------
By /s/ Kristina McDavid
-------------------------------
Title: Vice President
---------------------------
Seven World Trade Center
New York, NY 10048
Attention: David Cutting
Telephone: (212) 667-0213
FAX: (212) 667-0225
74
<PAGE> 76
Commitment:
$8,000,000 THE BANK OF NEW YORK
By /s/ Edward J. Dougherty III
-------------------------------
Title: Vice President
US Commercial Banking
---------------------------
One Wall Street
New York, NY 10286
Attention: Edward Dougherty
Telephone: (212) 635-1330
FAX: (212) 635-6434
75
<PAGE> 77
Commitment:
$8,000,000 WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: /s/ Brad Hardy
--------------------------
Title: Vice President
-----------------------
222 W. Adams Street, Suite 2180
Chicago, Illinois 60606
Attention: Karen DeSantes
Telephone: (312) 845-8602
FAX: (312) 553-2353
76
<PAGE> 78
PRICING SCHEDULE
The Applicable Margin shall be as determined by the matrix below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V Level VI
Status Status Status Status Status Status
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reference Rating A+ or A1 A or A2 A- or A3 BBB+ or BBB or (Less Than or Equal to)
(Greater Than or Equal to) Baa1 Baa2 BBB- or Baa3
- -----------------------------------------------------------------------------------------------------------------------------
Facility Fee 5.0 6.0 7.0 8.0 10.0 12.5
- -----------------------------------------------------------------------------------------------------------------------------
Eurodollar Rate
Applicable Margin 15.0 19.0 23.0 27.0 30.0 37.5
- -----------------------------------------------------------------------------------------------------------------------------
Utilization fee
(Greater Than) 33% 2.5 2.5 5.0 5.0 10.0 15.0
- -----------------------------------------------------------------------------------------------------------------------------
Utilization fee
(Greater Than) 67% 5.0 5.0 10.0 15.0 20.0 20.0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Level I Status" exists at any date if, on such date, the Company's
Moody's Rating is A1 or better or the Company's S&P Rating is A+ or better.
"Level II Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status and (ii) the Company's Moody's Rating is A2
or better or the Company's S&P Rating is A or better.
"Level III Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status or Level II Status and (ii) the Company's
Moody's Rating is A3 or better or the Company's S&P Rating is A- or better.
"Level IV Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status, Level II Status or Level III Status and
(ii) the Company's Moody's Rating is Baa1 or better or the Company's S&P rating
is BBB+ or better.
"Level V Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status, Level II Status, Level III Status or Level
IV Status and (ii) the Company's Moody's rating is Baa2 or better or the
Company's S&P rating is BBB or better.
"Level VI Status" exists at any date if, on such date, the Company has
not qualified for Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status.
77
<PAGE> 79
"Moody's Rating" means, at any time, the rating issued by Moody's
Investors Service, Inc. and then in effect with respect to the Company's senior
unsecured long-term debt securities without third-party credit enhancement.
"S&P Rating" means, at any time, the rating issued by Standard and
Poor's Rating Services, a division of The McGraw Hill Companies, Inc., and then
in effect with respect to the Company's senior unsecured long-term debt
securities without third-party credit enhancement.
"Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status, Level V Status or Level VI Status.
The Applicable Margin shall be determined in accordance with the
foregoing table based on the Company's Status as determined from its
then-current Moody's and S&P Ratings. The credit rating in effect on any date
for the purposes of this Schedule is that in effect at the close of business on
such date. If at any time the Company has no Moody's Rating or no S&P Rating,
Level VI Status shall exist.
78
<PAGE> 80
EXHIBIT A
FORM OF OPINION
462-2685
May 7, 1999
The Administrative Agent and the Lenders who are the
parties to the Credit Agreement described below.
SUBJECT: CARDINAL HEALTH, INC. - FIVE-YEAR CREDIT AGREEMENT
Gentlemen/Ladies:
We are counsel for Cardinal Health, Inc., an Ohio corporation (the
"COMPANY"), and have represented the Company in connection with its execution
and delivery of a Five-Year Credit Agreement dated as of March ___, 1999 (the
"AGREEMENT"), among the Company, the Subsidiary Borrowers, the Lenders named
therein, and The First National Bank of Chicago, as Administrative Agent,
providing for Advances in an aggregate principal amount not exceeding
$750,000,000 at any one time outstanding. All capitalized terms used in this
opinion and not otherwise defined herein shall have the meanings attributed to
them in the Agreement. This opinion is being delivered to you pursuant to
Section 4.1(a)(v) of the Agreement.
In connection with the issuance of this opinion letter, we have
examined the following documents:
(a) An executed copy of the Agreement dated as of March ___,
1999, among the Company, the Subsidiary Borrowers, the Lenders named
therein, and The First National Bank of Chicago, as Administrative
Agent;
(b) The Company's Articles of Incorporation as certified by
the Ohio Secretary of State;
(c) The Company's Code of Regulations as certified by the
Company's assistant secretary;
(d) A certificate of good standing of the Company issued by
the Ohio Secretary of State;
(e) Resolutions of the executive committee of the Company's
board of directors as certified by the Company's assistant secretary;
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<PAGE> 81
(f) [INSERT DESCRIPTION OF NOTE(S) TO BE EXECUTED AT CLOSING];
(g) An executed copy of the Guaranty of the Company dated as
of March ___, 1999;
(h) A certificate of certain officers of the Company as to
certain factual matters; and
(i) Such other documents and matters of law as we deemed
necessary or advisable in order to render the opinions set forth in
this letter.
The documents referenced in items (a), (f), and (g) are sometimes
referred to hereinafter as the "LOAN DOCUMENTS".
In our review and in rendering the opinions expressed herein, we have
assumed, without independent verification, the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, facsimile, or photostatic copies, the
completeness and correctness of any representations and certifications made to
us by officers of the Company, the completeness and correctness of any
representations and certificates of public officials and public filing records,
and that the Loan Documents have been duly and validly authorized, executed, and
delivered by all parties thereto other than the Company, and that the Loan
Documents are binding and legally enforceable against all of the parties
thereto, including without limitation the Subsidiary Borrowers, other than the
Company.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion that:
1. The Company is a corporation validly existing and in good standing
under the laws of the State of Ohio.
2. The execution and delivery by the Company of the Loan Documents to
which it is a party and the performance by the Company of its obligations
thereunder have been duly authorized by proper corporate proceedings on the part
of the Company and will not:
(a) Require any consent of the Company's shareholders;
(b) (i) Violate (A) any order, judgment, or decree of any
court or governmental agency binding on the Company and known to us,
(B) any statute of the State of Ohio or the United States, or any
written regulation thereunder, (C) the Company's articles of
incorporation or code of regulations, or (D) the provisions of any
indenture, instrument, or agreement to which the Company is a party or
is subject, or by which it, or its Property, is bound, and which is
filed or incorporated by reference as an exhibit to the Company's
periodic reports under the Securities Exchange Act of 1934, pursuant to
item 601(b)(10) of Regulation S-K of the Securities and Exchange
Commission, or (ii) conflict with or constitute a default under any
such indenture, instrument, or agreement; or
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<PAGE> 82
(c) Result in, or require, the creation or imposition of any
Lien in or on the Property of the Company pursuant to the terms of any
indenture, instrument or agreement binding upon the Company, and which
is filed or incorporated by reference as an exhibit to the Company's
periodic reports under the Securities Exchange Act of 1934, pursuant to
item 601(b)(10) of Regulation S-K of the Securities and Exchange
Commission.
3. The Loan Documents to which the Company is a party have been duly
executed and delivered by the Company and constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
4. To the best of our knowledge, there is no litigation, arbitration,
governmental investigation, proceeding, or inquiry pending or threatened against
the Company which, if adversely determined, could reasonably be expected to have
a Material Adverse Effect.
5. No authorization or approval of, or filing with, any governmental
agency of the United States or of the State of Ohio which has not been obtained
or made is necessary for the execution and delivery of, and performance of the
Company's obligations under the Agreement.
In addition to any other qualification set forth herein, our opinions
are qualified as follows:
(A) We wish to advise you that we do not express any opinion
with respect to: (1) the power or authority of the Lenders to make the
loans contemplated by the Agreement; (2) compliance by the Lenders with
any federal or state banking law, rule, regulation, or restriction; or
(3) compliance by the Lenders with any federal, state, or foreign law,
rule, regulation, or restriction which is or was required to be
complied with by the Lenders (as opposed to compliance therewith by the
Company) in order to enforce any rights or remedies of the Lenders
under the Loan Documents. Accordingly, all of the foregoing opinions
expressed by us are qualified to the extent set forth in the preceding
sentence.
(B) To the extent that the foregoing opinions are stated to be
to the best of our knowledge, or relate to matters which are known to
us, we have, with your consent, relied on one or more certificates of
officers of the Company as to factual matters, and the absence of any
contrary knowledge of those attorneys of our firm familiar with the
affairs of the Company, and we have neither independently investigated
nor attempted to verify any of such matters.
(C) We have made no examination of and express no opinion as
to: (1) the right, title, or interest of any person to any property;
(2) the accuracy or sufficiency of the description in the Loan
Documents of any real or personal property; or (3) the existence of or
freedom of any property from any liens, security interests, or other
encumbrances.
(D) Our opinions are subject to and affected by: (1) any
bankruptcy, insolvency, avoidance, fraudulent conveyance,
reorganization, moratorium, or similar
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<PAGE> 83
laws affecting the rights and remedies of creditors generally; and (2)
general principles of equity (whether considered in a proceeding in
equity or at law).
(E) We express no opinion as to whether a court would limit
the exercise or enforcement of rights or remedies by the Lenders under
the Loan Documents: (1) in the event of any default by the Company, if
it is determined that such default is not material or if such exercise
or enforcement is not reasonably necessary for the protection of the
Lenders; or (2) if the exercise or enforcement thereof under the
circumstances would violate an implied covenant of good faith and fair
dealing.
(F) Certain waivers and exculpatory clauses contained in the
Loan Documents may be limited or unenforceable.
(G) No opinion is expressed with respect to the validity or
enforceability of those provisions of the Loan Documents which purport
by their terms to relieve any party of, or to indemnify such party
against, any liability for such party's own negligence, gross
negligence, or willful misconduct, or to obligate the Company to bear
the legal and other expenses of any other party.
(H) All parties to the Loan Documents other than the Company
have received adequate consideration for their execution and delivery
of, and performance of their respective obligations under, the Loan
Documents to which each of them is a party.
(I) All conditions and other transactions contemplated by the
Agreement to have occurred at or prior to the funding of [the initial
Loans] have occurred or have been waived by the appropriate parties and
Loans in the amount of the Aggregate Commitment will be fully available
pursuant to the terms of the Agreement.
(F) [Insert reasoned choice of law opinion]
(G) We are authorized to practice law in Ohio, and no
opinion is expressed herein other than as to the laws of the State of
Ohio and federal law. With your permission, for purposes of the opinion
set forth in paragraph ___, we have assumed that the substantive laws
of the State of Ohio, except for conflicts of laws principles, would
govern the Loan Documents.
The opinions set forth herein are given as of the date hereof,
and we disclaim any obligation to notify you or any other person or entity if
any change in fact or law, or both (whether statutory, regulatory, regulatory
interpretation or judicial interpretation), should change our opinion with
respect to any matter set forth herein. This opinion may be relied upon and is
solely for the benefit of the Addressees at the beginning of this opinion, but
not any of their successors or assigns, and it is not to be made available to or
relied upon by any party or communicated or disclosed to any other person
without our prior written consent.
Very truly yours,
82
<PAGE> 84
BAKER & HOSTETLER LLP
83
<PAGE> 85
EXHIBIT B
COMPLIANCE CERTIFICATE
Date:___________________________
_______________
The First National Bank of Chicago
_______________
_______________
Dear __________:
This notice serves to confirm that, to the best of my
knowledge, Cardinal Health, Inc. (the "Company") has observed or performed in
all material respects all of the covenants, conditions and agreements contained
in the Five-Year Credit Agreement and the 364-Day Credit Agreement, each dated
March __, 1999 and each among the Company, certain subsidiaries of the Company
named therein, The First National Bank of Chicago, as Administrative Agent, and
the lenders named therein.
Detailed calculations are attached.
In addition, please find enclosed a copy of our most recently
filed Form 10-Q.
Sincerely,
______________________________________________
[Chief Financial Officer/Controller/Treasurer]
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<PAGE> 86
Section 6.17, Minimum Net Worth.
[INSERT CALCULATION]
85
<PAGE> 87
EXHIBIT C
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between (the
"Assignor") and (the "Assignee") is dated as of __________, 19__. The parties
hereto agree as follows:
1) PRELIMINARY STATEMENT. The Assignor is a party to a 364-Day Credit
Agreement dated as of March ___, 1999 (the "Agreement") among the Company,
the Subsidiary Borrowers, the Lenders named therein, and The First National
Bank of Chicago, as Administrative Agent (which, as it may be amended,
modified, renewed or extended from time to time is herein called the
"Credit Agreement") described in Item 1 of Schedule 1 attached hereto
("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2) ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under
the Credit Agreement and the other Loan Documents, such that after giving
effect to such assignment the Assignee shall have purchased pursuant to
this Assignment Agreement the percentage interest specified in Item 3 of
Schedule 1 of all outstanding rights and obligations under the Credit
Agreement and the other Loan Documents relating to the facilities listed in
Item 3 of Schedule 1. The aggregate Commitment (or Loans, if the applicable
Commitment has been terminated) purchased by the Assignee hereunder is set
forth in Item 4 of Schedule 1.
3) EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of
Schedule 1 or two Business Days (or such shorter period agreed to by the
Administrative Agent) after this Assignment Agreement, together with any
consents required under the Credit Agreement, are delivered to the
Administrative Agent. In no event will the Effective Date occur if the
payments required to be made by the Assignee to the Assignor on the
Effective Date are not made on the proposed Effective Date.
4) PAYMENT OBLIGATIONS. In consideration for the sale and assignment of
Loans hereunder, the Assignee shall pay the Assignor, on the Effective
Date, the amount agreed to by the Assignor and the Assignee. On and after
the Effective Date, the Assignee shall be entitled to receive from the
Administrative Agent all payments of principal, interest and fees with
respect to the interest assigned hereby. The Assignee will promptly remit
to the Assignor any interest on Loans and fees received from the
Administrative Agent which relate
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<PAGE> 88
to the portion of the Commitment or Loans assigned to the Assignee
hereunder for periods prior to the Effective Date and not previously paid
by the Assignee to the Assignor. In the event that either party hereto
receives any payment to which the other party hereto is entitled under this
Assignment Agreement, then the party receiving such amount shall promptly
remit it to the other party hereto. 5) RECORDATION FEE. The Assignor and
Assignee each agree to pay one-half of the recordation fee required to be
paid to the Administrative Agent in connection with this Assignment
Agreement unless otherwise specified in Item 6 of Schedule 1.
6) REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder, (ii)
such interest is free and clear of any adverse claim created by the
Assignor and (iii) the execution and delivery of this Assignment Agreement
by the Assignor is duly authorized. It is understood and agreed that the
assignment and assumption hereunder are made without recourse to the
Assignor and that the Assignor makes no other representation or warranty of
any kind to the Assignee. Neither the Assignor nor any of its officers,
directors, employees, agents or attorneys shall be responsible for (i) the
due execution, legality, validity, enforceability, genuineness, sufficiency
or collectability of any Loan Document, including without limitation,
documents granting the Assignor and the other Lenders a security interest
in assets of the Company or any guarantor, (ii) any representation,
warranty or statement made in or in connection with any of the Loan
Documents, (iii) the financial condition or creditworthiness of the Company
or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
property, books or records of the Company, (vi) the validity,
enforceability, perfection, priority, condition, value or sufficiency of
any collateral securing or purporting to secure the Loans or (vii) any
mistake, error of judgment, or action taken or omitted to be taken in
connection with the Loans or the Loan Documents.
7) REPRESENTATIONS AND UNDERTAKINGS OF THE ASSIGNEE. The Assignee (i)
confirms that it has received a copy of the Credit Agreement, together with
copies of the financial statements requested by the Assignee and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment Agreement, (ii)
agrees that it will, independently and without reliance upon the
Administrative Agent, the Assignor or any other Lender and based on such
documents and information at it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Loan Documents, (iii) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) confirms that the execution and delivery of this
Assignment Agreement by the Assignee is duly authorized, (v) agrees that it
will perform in accordance with their terms all of the obligations
87
<PAGE> 89
which by the terms of the Loan Documents are required to be performed by it
as a Lender, (vi) agrees that its payment instructions and notice
instructions are as set forth in the attachment to Schedule 1, (vii)
confirms that none of the funds, monies, assets or other consideration
being used to make the purchase and assumption hereunder are "plan assets"
as defined under ERISA and that its rights, benefits and interests in and
under the Loan Documents will not be "plan assets" under ERISA, (viii)
agrees to indemnify and hold the Assignor harmless against all losses,
costs and expenses (including, without limitation, reasonable attorneys'
fees) and liabilities incurred by the Assignor in connection with or
arising in any manner from the Assignee's non-performance of the
obligations assumed under this Assignment Agreement, and (ix) if
applicable, attaches the forms prescribed by the Internal Revenue Service
of the United States certifying that the Assignee is entitled to receive
payments under the Loan Documents without deduction or withholding of any
United States federal income taxes.
8) GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
9) NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered)
shall be the address set forth in the attachment to Schedule 1.
10) COUNTERPARTS; DELIVERY BY FACSIMILE. This Assignment Agreement may
be executed in counterparts. Transmission by facsimile of an executed
counterpart of this Assignment Agreement shall be deemed to constitute due
and sufficient delivery of such counterpart and such facsimile shall be
deemed to be an original counterpart of this Assignment Agreement.
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto
have executed this Assignment Agreement by executing Schedule 1 hereto as of the
date first above written.
88
<PAGE> 90
SCHEDULE 1
TO ASSIGNMENT AGREEMENT
1) Description and Date of Credit Agreement:
2) Date of Assignment Agreement: , 19
3) Amounts (As of Date of Item 2 above):
<TABLE>
<CAPTION>
Facility Facility Facility Facility
1* 2* 3* 4*
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
a. Assignee's ____% ____% ____% _____%
percentage of each
Facility purchased
under the Assignment
Agreement ***, ****
b. Amount of each $____ $____ $____ $
Facility purchased
under the Assignment
Agreement ***, ****
- ------------------------------------------------------------------------------------------------------------------------
4) Assignee's Commitment $_________________________________
(or Loans with respect
to terminated Commitments)
purchased hereunder:
- ------------------------------------------------------------------------------------------------------------------------
5) Proposed Effective Date: ______________________________
- ------------------------------------------------------------------------------------------------------------------------
6) Non-standard Recordation Fee Arrangement N/A
[Assignor/Assignee to pay 100% of fee]
[Fee waived by Administrative Agent]
</TABLE>
89
<PAGE> 91
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By:_________________________ By:________________________
Title:______________________ Title:_____________________
ACCEPTED AND CONSENTED TO BY ACCEPTED AND CONSENTED
TO BY
[NAME OF COMPANY] [NAME OF AGENT]
By:_________________________ By:________________________
Title:______________________ Title:_____________________
*Insert specific facility names per Credit Agreement
**Percentage taken to 10 decimal places
***If fee is split 50-50, pick N/A as option
****Assignments must be pro rata
90
<PAGE> 92
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
Attach Assignor's Administrative Information Sheet, which must include
notice addresses for the Assignor and the Assignee
(Sample form shown below)
ASSIGNOR INFORMATION
CONTACT:
Name:_________________________________ Telephone No.:__________________
Fax No.:______________________________ Telex No.:______________________
Answerback:______________________
PAYMENT INFORMATION:
Name & ABA # of Destination Bank:______________________________________
_________________________________
Account Name & Number for Wire Transfer:_______________________________
_______________________________
Other Instructions:____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address for Notices for Assignor:______________________________________
________________________________________________________________________________
________________________________________________________________________________
ASSIGNEE INFORMATION
CREDIT CONTACT:
Name:_________________________________ Telephone No.:__________________
91
<PAGE> 93
Fax No.:______________________________ Telex No.:______________________
Answerback:______________________
KEY OPERATIONS CONTACTS:
Booking Installation:______________ Booking Installation:______________
Name:______________________________ Name:______________________________
Telephone No.:_____________________ Telephone No.:_____________________
Fax No.:___________________________ Fax No.:___________________________
Telex No.:_________________________ Telex No.:_________________________
Answerback:________________________ Answerback:________________________
PAYMENT INFORMATION:
Name & ABA # of Destination Bank:______________________________________
__________________________________________
Account Name & Number for Wire Transfer:_______________________________
________________________________________________________________________________
Other Instructions:____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address for Notices for Assignee:______________________________________
________________________________________________________________________________
________________________________________________________________________________
92
<PAGE> 94
EXHIBIT D
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Administrative Agent (the "Administrative Agent") under the Credit
Agreement Described Below.
Re: Credit Agreement, dated March __, 1999 (as the same may be amended or
modified, the "Credit Agreement"), among Cardinal Health, Inc. (the
"Company"), the Lenders named therein and the Administrative Agent.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned thereto in the Credit Agreement.
The Administrative Agent is specifically authorized and directed to act
upon the following standing money transfer instructions with respect to the
proceeds of Advances or other extensions of credit from time to time until
receipt by the Administrative Agent of a specific written revocation of such
instructions by the Company, provided, however, that the Administrative Agent
may otherwise transfer funds as hereafter directed in writing by the Company in
accordance with Section 13.1 of the Credit Agreement or based on any telephonic
notice made in accordance with Section 2.14 of the Credit Agreement.
Facility Identification Number(s)______________________________________
Customer/Account Name__________________________________________________
Transfer Funds To______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
For Account No.________________________________________________________
Reference/Attention To_________________________________________________
Authorized Officer (Customer Representative) Date
____________________________________________ _______________
(Please Print) Signature
Bank Officer Name Date
____________________________________________ _______________
93
<PAGE> 95
(Please Print) Signature
EXHIBIT E
NOTE
[Date]
Cardinal Health, Inc., an Ohio corporation (the "Borrower"), promises
to pay to the order of ____________________________________ (the "Lender") the
aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to Article II of the Agreement (as hereinafter defined), in
immediately available funds at the place specified pursuant to Article II of the
Agreement together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Borrower shall pay the
principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the 364-Day Credit Agreement dated as of March 31, 1999 (which,
as it may be amended or modified and in effect from time to time, is herein
called the "Agreement"), among the Borrower, the Subsidiary Borrowers and the
lenders party thereto, including the Lender, and The First National Bank of
Chicago, as Administrative Agent, to which Agreement reference is hereby made
for a statement of the terms and conditions governing this Note, including the
terms and conditions under which this Note may be prepaid or its maturity date
accelerated. This Note is guaranteed pursuant to the Guaranty, as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein and
not otherwise defined herein are used with the meanings attributed to them in
the Agreement.
By:_________________________________________
Print Name:_________________________________
Title:______________________________________
94
<PAGE> 96
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF ______________,
DATED ______________,
<TABLE>
<CAPTION>
Date Principal Amount of Maturity of Interest Principal Amount Unpaid Balance
Loan Period Paid
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
95
<PAGE> 97
SCHEDULE 1
SUBSIDIARIES AND OTHER INVESTMENTS
(SEE SECTIONS 5.8 AND 6.12)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
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
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
96
<PAGE> 98
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
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
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
97
<PAGE> 99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
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
- ----------------------------------------------------------------- ----------------------------------------------------
Managed Pharmacy Benefits, Inc. Missouri
- ----------------------------------------------------------------- ----------------------------------------------------
Pharmacy Service Corporation Missouri
- ----------------------------------------------------------------- ----------------------------------------------------
MediQual Systems, Inc. Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
National Pharmpak Services, Inc. Ohio
- ----------------------------------------------------------------- ----------------------------------------------------
National Specialty Services, Inc. Tennessee
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
98
<PAGE> 100
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
The Heron Corporation Ohio
- ----------------------------------------------------------------- ----------------------------------------------------
Nexus Healthcare, Inc. Ohio
- ----------------------------------------------------------------- ----------------------------------------------------
Ohio Valley-Clarksburg, Inc. Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
Owen Healthcare, Inc. Texas
- ----------------------------------------------------------------- ----------------------------------------------------
MediTROL, Inc. Nevada
- ----------------------------------------------------------------- ----------------------------------------------------
MediTROL Automation Systems, Inc. Texas
- ----------------------------------------------------------------- ----------------------------------------------------
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
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
99
<PAGE> 101
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
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 Canada
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer Corporation Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
F & F Holding GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
100
<PAGE> 102
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
Allcaps Weichgelatinekapseln GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
Gelatine 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 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
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
101
<PAGE> 103
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
R.P. Scherer K.K. Japan
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer Korea Limited Korea
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer Production S.A. France
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer S.A. France
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer S.p.A. Italy
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer DDS BV Holland
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer Pharmaceutical, Inc. New Jersey
- ----------------------------------------------------------------- ----------------------------------------------------
RPS Technical Services, Inc. Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer Verwaltungs GmgH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
Allcaps Wichgelatinekapseln Verwaltungs GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer International (FSC), Ltd. Barbados
- ----------------------------------------------------------------- ----------------------------------------------------
R.P. Scherer (Spain) SA Spain
- ----------------------------------------------------------------- ----------------------------------------------------
The LVC Corporation Missouri
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
102
<PAGE> 104
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
RedKey, Inc. Ohio
- ----------------------------------------------------------------- ----------------------------------------------------
Solomons Company Georgia
- ----------------------------------------------------------------- ----------------------------------------------------
Whitmire Distribution Corporation Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
Williams Drug Distributors, Inc. Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Corporation Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Corporation Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Foreign Sales Corporation Barbados
- ----------------------------------------------------------------- ----------------------------------------------------
West Hudson, Inc. Nevada
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare International, Inc. Delaware
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Canada Inc. Canada
- ----------------------------------------------------------------- ----------------------------------------------------
Source Medical, Inc. Canada
- ----------------------------------------------------------------- ----------------------------------------------------
Cirmex de Chihuahua S.A. de C.V. Mexico
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
103
<PAGE> 105
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
Cirpro de Delicias S.A. de C.V. Mexico
- ----------------------------------------------------------------- ----------------------------------------------------
Convertors de Mexico S.A. de C.V. Mexico
- ----------------------------------------------------------------- ----------------------------------------------------
Productos Urologos de Mexico S.A. de C.V. Mexico
- ----------------------------------------------------------------- ----------------------------------------------------
Quiroproductos de Cuauhtemoc S.A. de C.V. Mexico
- ----------------------------------------------------------------- ----------------------------------------------------
Dutch American Manufacturers (D.A.M.) B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Holding B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Deutschland Holding GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Deutschland GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
International Medical Produces (Deutschland) GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
Surgi-Tech Deutschland GmbH Germany
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare GmbH Switzerland
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Limited United Kingdom
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Industries Sdn. Bhd. New Synthetics Company Malaysia
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
104
<PAGE> 106
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
Allegiance International Manufacturing B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Medica S.R.L. Italy
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance S.L. Spain
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance S.P.R.L. Belgium
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Sante S.A. France
- ----------------------------------------------------------------- ----------------------------------------------------
International Medical Products Group B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
International Medical Products Holding B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
International Medical Products, B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
Medpro Medische Produkten B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
SOHO Disposables B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
Surgical Technologies Europa B.V. Netherlands
- ----------------------------------------------------------------- ----------------------------------------------------
Surgi-Tech Europa Divisione Surgi-Tech Italia S.R.L. Italy
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
105
<PAGE> 107
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------------------
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
- ----------------------------------------------------------------- ----------------------------------------------------
<S> <C>
Allegiance Healthcare (Thailand) Ltd. Thailand
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance Healthcare Sdn. Bhd. Malaysia
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance International GmbH Austria
- ----------------------------------------------------------------- ----------------------------------------------------
Allegiance International Manufacturing (Bermuda) Ltd. Bermuda
- ----------------------------------------------------------------- ----------------------------------------------------
Bauer Branch Dominican Republic
- ----------------------------------------------------------------- ----------------------------------------------------
Converters Branch Dominican Republic
- ----------------------------------------------------------------- ----------------------------------------------------
Eurovac Limited Malta
- ----------------------------------------------------------------- ----------------------------------------------------
</TABLE>
106
<PAGE> 108
SCHEDULE 3
EURODOLLAR PAYMENT OFFICES OF THE AGENT
Eurodollar Payment Office
-------------------------
The First National Bank of Chicago
Detroit, Michigan
107
<PAGE> 109
SCHEDULE 4
LENDING INSTALLATIONS
<TABLE>
<CAPTION>
Lender Floating Rate Loans Eurodollar Loans (list all)
------ ------------------- ---------------------------
<S> <C> <C>
The First National Bank of Chicago The First National Bank of Chicago, The First National Bank of Chicago,
Detroit, Michigan London Branch
</TABLE>
108
<PAGE> 110
SCHEDULE 7
LITIGATION AND CONTINGENT OBLIGATIONS
109
<PAGE> 111
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article I. DEFINITIONS............................................................................................1
Article II. THE CREDITS..........................................................................................12
2.1 Commitments of the Lenders; Revolving Credit Advances..........................................12
2.2 Termination....................................................................................12
2.3 Ratable Loans..................................................................................12
2.4 Types of Advances..............................................................................12
2.5 Facility Fee; Reductions in Aggregate Commitment; Utilization Fee..............................12
2.6 Minimum Amount of Each Advance.................................................................12
2.7 Prepayments....................................................................................13
2.8 Method of Selecting Types and Interest Periods for New Advances................................13
2.9 Conversion and Continuation of Outstanding Advances............................................13
2.10 Method of Borrowing............................................................................14
2.11 Changes in Interest Rate, etc..................................................................14
2.12 Rates Applicable After Default.................................................................15
2.13 Method of Payment..............................................................................15
2.14 Noteless Agreement; Evidence of Indebtedness...................................................15
2.15 Telephonic Notices.............................................................................16
2.16 Interest Payment Dates; Interest and Fee Basis.................................................16
2.17 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions................17
2.18 Lending Installations..........................................................................17
2.19 Non-Receipt of Funds by the Administrative Agent...............................................17
2.20 Judgment Currency..............................................................................18
2.21 Replacement of Lender..........................................................................19
Article III. YIELD PROTECTION; TAXES.............................................................................19
3.1 Yield Protection...............................................................................19
</TABLE>
110
<PAGE> 112
<TABLE>
<S> <C> <C>
3.2 Changes in Capital Adequacy Regulations........................................................20
3.3 Availability of Types of Advances..............................................................21
3.4 Funding Indemnification........................................................................21
3.5 Taxes..........................................................................................21
3.6 Lender Statements; Survival of Indemnity.......................................................23
Article IV. CONDITIONS PRECEDENT.................................................................................24
4.1 Initial Advance................................................................................24
4.2 Each Advance...................................................................................25
Article V. REPRESENTATIONS AND WARRANTIES........................................................................26
5.1 Existence and Standing.........................................................................26
5.2 Authorization and Validity.....................................................................26
5.3 No Conflict; Government Consent................................................................26
5.4 Financial Statements...........................................................................27
5.5 Material Adverse Change........................................................................27
5.6 Taxes..........................................................................................27
5.7 Litigation and Contingent Obligations..........................................................27
5.8 Subsidiaries...................................................................................28
5.9 ERISA..........................................................................................28
5.10 Accuracy of Information........................................................................28
5.11 Regulation U...................................................................................29
5.12 Material Agreements............................................................................29
5.13 Compliance With Laws...........................................................................29
5.14 Plan Assets; Prohibited Transactions...........................................................29
5.15 Environmental Matters..........................................................................29
5.16 Investment Company Act.........................................................................30
5.17 Public Utility Holding Company Act.............................................................30
5.18 Year 2000......................................................................................30
5.19 Default........................................................................................30
Article VI. COVENANTS............................................................................................30
</TABLE>
111
<PAGE> 113
<TABLE>
<S> <C> <C>
6.1 Financial Reporting............................................................................30
6.2 Use of Proceeds................................................................................31
6.3 Notice of Default..............................................................................31
6.4 Conduct of Business............................................................................32
6.5 Taxes..........................................................................................32
6.6 Insurance......................................................................................32
6.7 Compliance with Laws...........................................................................32
6.8 Inspection.....................................................................................32
6.9 Merger.........................................................................................33
6.10 Sale of Assets.................................................................................33
6.11 Investments....................................................................................34
6.12 Liens..........................................................................................34
6.13 Year 2000......................................................................................36
6.14 Subsidiary Indebtedness. ......................................................................36
6.15 Limitation on Restrictions on Significant Subsidiary Distributions. ...........................37
6.16 Contingent Obligations.........................................................................37
6.17 Minimum Net Worth..............................................................................38
Article VII. DEFAULTS............................................................................................38
Article VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.....................................................40
8.1 Acceleration...................................................................................40
8.2 Amendments.....................................................................................40
8.3 Preservation of Rights.........................................................................41
Article IX. GENERAL PROVISIONS...................................................................................41
9.1 Survival of Representations....................................................................41
9.2 Governmental Regulation........................................................................42
9.3 Headings.......................................................................................42
9.4 Entire Agreement...............................................................................42
9.5 Several Obligations; Benefits of this Agreement................................................42
9.6 Expenses; Indemnification......................................................................42
</TABLE>
112
<PAGE> 114
<TABLE>
<S> <C> <C>
9.7 Numbers of Documents...........................................................................43
9.8 Accounting.....................................................................................43
9.9 Severability of Provisions.....................................................................43
9.10 Nonliability of Lenders........................................................................43
9.11 Confidentiality................................................................................44
9.12 Nonreliance....................................................................................44
Article X. THE AGENT.............................................................................................44
10.1 Appointment; Nature of Relationship............................................................44
10.2 Powers.........................................................................................45
10.3 General Immunity...............................................................................45
10.4 No Responsibility for Loans, Recitals, etc.....................................................45
10.5 Action on Instructions of Lenders..............................................................46
10.6 Employment of Agents and Counsel...............................................................46
10.7 Reliance on Documents; Counsel.................................................................46
10.8 Administrative Agent's Reimbursement and Indemnification.......................................46
10.9 Notice of Default..............................................................................47
10.10 Rights as a Lender.............................................................................47
10.11 Lender Credit Decision.........................................................................47
10.12 Successor Administrative Agent.................................................................48
10.13 Administrative Agent's Fee.....................................................................49
10.14 Delegation to Affiliates.......................................................................49
10.15 Administrative Agent, Syndication Agent, Co-Documentation Agents, Lead Arranger, etc...........49
Article XI. SETOFF; RATABLE PAYMENTS.............................................................................49
11.1 Setoff.........................................................................................49
11.2 Ratable Payments...............................................................................49
Article XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS...................................................50
12.1 Successors and Assigns.........................................................................50
12.2 Participations.................................................................................50
</TABLE>
113
<PAGE> 115
<TABLE>
<S> <C> <C>
12.3 Assignments....................................................................................51
12.4 Dissemination of Information...................................................................52
12.5 Tax Treatment..................................................................................52
Article XIII. NOTICES............................................................................................53
13.1 Notices........................................................................................53
13.2 Change of Address..............................................................................54
Article XIV. COUNTERPARTS........................................................................................54
Article XV. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.........................................54
15.1 CHOICE OF LAW..................................................................................54
15.2 CONSENT TO JURISDICTION........................................................................54
15.3 WAIVER OF JURY TRIAL...........................................................................55
</TABLE>
114
<PAGE> 1
Exhibit 10.23
OMNIBUS AMENDMENT
This OMNIBUS AMENDMENT, dated as of May 25, 1999 (this "AMENDMENT"), is
among CARDINAL SOUTHEAST, INC. (formerly known as Cardinal Mississippi, Inc. and
successor by merger with Cardinal Florida, Inc.), a Mississippi corporation,
WHITMIRE DISTRIBUTION CORPORATION, a Delaware corporation, RENLAR SYSTEMS, INC.,
a Kentucky corporation, and PYXIS CORPORATION, a Delaware corporation (each a
"LESSEE" and, collectively, "Lessees"), CARDINAL HEALTH INC., an Ohio
corporation ("Guarantor"), the financial institutions parties hereto as lenders
(the "LENDERS"),SUNTRUST BANKS, INC., a Georgia corporation ("LESSOR"), and
SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as agent for the Lenders
(in such capacity, the "AGENT").
BACKGROUND
1. Certain of the Lessees, Guarantor, Lessor, certain of the Lenders
and the Agent are parties to that certain Master Agreement, dated as of July 16,
1996 (as amended, the "MASTER AGREEMENT") as amended by an Amendment to MASTER
AGREEMENT, dated as of May 19, 1998 (the "1998 AMENDMENT").
2. The parties hereto desire to further amend the Master Agreement and
certain other Operative Documents (as defined below) in certain respects as set
forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. DEFINITIONS. Capitalized terms used in this Amendment and
not otherwise defined herein shall have the meanings assigned thereto in the
Master Agreement.
Section 2. AGREEMENT TO ACQUIRE LAND; AGGREGATE LIMIT ON FUNDED
AMOUNTS. (a) SECTION 2.1(b) of the Master Agreement is hereby amended by adding
the following phrase at the end of such Section: "; PROVIDED, HOWEVER, that no
Closing Date with respect to any parcel of Land that does not have a completed
Building at the time of acquisition by the Lessor shall occur after May 25,
2002".
(b) SECTION 2.2(c) of the Master Agreement is hereby amended by
deleting the number "$75,000,000" where it appears in CLAUSE (y) of the first
sentence thereof and substituting therefor the number "$160,000,000".
Section 3. COMMITMENTS. (a) SCHEDULE 2.2 to the Master Agreement is
hereby amended by deleting it in its entirety and substituting therefor SCHEDULE
2.2 to this Amendment. Each of Wachovia Bank, N.A., The Fifth Third Bank and
Firstar Bank, N.A. (the "NEW LENDERS")
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is hereby made a party to the Master Agreement and the Loan Agreement, and shall
have all the rights and obligations of a "Lender" under the Master Agreement,
the Loan Agreement and the other Operative Documents as if it were an original
signatory thereto to the extent of its Commitment. Each of the New Lenders
agrees to be bound by the terms and conditions applicable to a "Lender" set
forth in the Master Agreement, the Loan Agreement and the other Operative
Documents as if it were an original signatory thereto. Each of the New Lenders
hereby acknowledges and confirms that it has received a copy of each of the
Operative Documents and that in becoming a Lender and in making its Commitment
and Loans under the Loan Agreement, such actions have and will be made without
recourse to, or representation or warranty by, the Agent, any other Lender or
the Lessor. The Lessees and the Agent hereby consent to the addition of the New
Lenders. On the date hereof, certain of the Lenders, including the New Lenders,
shall make payments to the Agent, who shall distribute such payments to the
other Lenders, such that, after giving effect to such payment and distributions,
each Lender's outstanding Loans shall be equal to the product of (i) the
aggregate outstanding Funded Amounts on such date TIMES (ii) such Lender's
Commitment Percentage. Such payment shall be made in immediately available funds
to such account as the Agent shall specify to the Lenders.
(b) SECTION 2.3(a) is hereby amended by deleting the phrase "0.44475"
per annum" where it appears in CLAUSE (x) thereof and substituting therefor the
phrase "the Applicable Margin."
(c) SECTION 2.3(d) is hereby amended by deleting the percentage
"0.125%" where it appears in CLAUSE (x) thereof and substituting therefor the
phrase "the Applicable Fee Rate".
Section 4. PRICING SCHEDULE. The Pricing Schedule attached to this
Agreement is hereby made the Pricing Schedule to the Master Agreement.
Section 5. BASE TERM; FUNDING TERMINATION DATE; REQUIRED LENDERS;
REQUIRED FUNDING PARTIES. (a) The definition of "A Percentage" that appears in
APPENDIX A is hereby amended by deleting the percentage "84%" where it appears
therein and substituting therefore the percentage "85%".
(b) The definition of "B Percentage" that appears in APPENDIX A is
hereby amended by deleting the percentage "16%" where it appears therein and
substituting therefore the percentage "15%".
(c) The definition of "Base Term" that appears in APPENDIX A is hereby
amended by deleting the phrase "the sixth (6th) anniversary of such Closing
Date" where it appears therein and substituting therefore the date "May 25,
2004."
(d) The definition of "Funding Termination Date" that appears in
APPENDIX A is hereby amended by deleting the date "July 16, 2002" where it
appears therein and substituting therefor the date "May 25, 2004".
<PAGE> 3
(e) The definition of "Required Lenders" that appears in APPENDIX A is
hereby amended by deleting the percentage "66-2/3%" where it appears therein and
substituting therefor the percentage "51%".
(f) The definition of "Required Funding Parties" that appears in
APPENDIX A is hereby amended by deleting the percentage "66-2/3%" where it
appears therein and substituting therefor the percentage "51%".
Section 6. CERTAIN DEFINITIONS. (a) APPENDIX A is hereby amended by
deleting the definitions of "Change in Control", "Indebtedness", "Material
Adverse Effect" and "Subsidiary" as they appear therein.
(b) APPENDIX A is hereby amended by adding the following definitions
thereto in appropriate alphabetical order:
As used in this Agreement:
"364-DAY CREDIT AGREEMENT" means the 364-Day Credit Agreement dated
March 31, 1999 between the Guarantor, the Subsidiaries of the Guarantor listed
as "Subsidiary Borrowers" on Schedule 1 thereto, the lenders party thereto and
The First National Bank of Chicago, as administrative agent, as such agreement
may be amended, restated or extended from time to time.
"ADJUSTED TANGIBLE NET WORTH" means, as of any date, (i) the amount of
any capital stock, paid in capital and similar equity accounts plus (or minus in
the case of a deficit) the capital surplus and retained earnings of the
Guarantor and its consolidated Subsidiaries, but excluding the amount of any
foreign currency translation adjustment account shown as a capital account, less
(ii) the net book value of all items of the following character which are
included in the assets of the Guarantor and its consolidated Subsidiaries: (a)
goodwill, including, without limitation, the excess of cost over book value of
any asset, (b) organization or experimental expenses, (c) unamortized debt
discount and expense, (d) patents, trademarks, trade names and copyrights, (e)
treasury stock, (f) franchises, licenses and permits, and (g) other assets which
are deemed intangible assets under Agreement Accounting Principles.
"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles in the United States of America in effect from time to time, applied
in a manner consistent with that used in preparing the financial statements
referred to in SECTION 6.11 of the Guaranty; PROVIDED, HOWEVER, that if any
change in Agreement Accounting Principles from those applied in preparing such
financial statements affects the calculation of any financial covenant contained
in the Guaranty or any other Operative Document, the Guarantor, the Lessees and
the Agent hereby agree to negotiate in good faith towards making appropriate
amendments acceptable to the
<PAGE> 4
Required Lenders to the provisions of this Agreement to reflect as nearly as
possible the effect of the financial covenants as in effect on the date hereof.
"APPLICABLE FEE RATE" means, at any time, the percentage rate per annum
at which the Commitment Fee is accruing at such time as set forth in the Pricing
Schedule.
"APPLICABLE MARGIN" means, at any time, the percentage rate per annum
which is applicable at such time as set forth in the Pricing Schedule; provided
that, upon the occurrence and during the continuation of an Event of Default,
the Applicable Margin shall be the highest Applicable Margin set forth in the
Pricing Schedule.
"CAPITALIZED LEASE" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"CASH EQUIVALENT INVESTMENTS" means (i) short-term obligations of, or
fully guaranteed by, the United States of America, (ii) commercial paper rated
A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts
maintained in the ordinary course of business, (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000, (v) banker's acceptances,
(vi) money-market funds, PROVIDED that such funds invest solely in securities
otherwise described in this definition, (vii) variable rate demand notes, (viii)
municipal preferred stock, (ix) cash market preferred stock, and (x) short term
municipal notes; PROVIDED in each case that the same provides for payment of
both principal and interest (and not principal alone or interest alone) and is
not subject to any contingency regarding the payment of principal or interest.
"CHANGE IN CONTROL" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 30% or more of the outstanding shares of voting stock of the
Guarantor, provided, however, that the acquisitions by or on behalf of a Plan,
an employee stock purchase plan of the Guarantor, or by Persons who before such
acquisition were officers, directors, employees or who held in the aggregate not
less than 5% of the outstanding shares of voting stock of the Guarantor shall
not be included in determining whether a Change in Control shall have occurred.
"CONSOLIDATED OR "consolidated" means, when used with reference to any
financial term in the Master Agreement, the aggregate for two or more Persons of
the amounts signified by such term for all such Persons determined on a
consolidated basis in accordance with Agreement Accounting Principles.
<PAGE> 5
"CONSTRUCTION BUDGET" is defined in Section 2.4 of the Construction
Agency Agreement.
"CONSTRUCTION FAILURE PAYMENT" with respect to any Second Group
Property means the amount equal to the sum of (i) 89.9% of the acquisition cost
of the related Land, if the cost of the related Land is less than 25% of the
total expected cost of such Second Group Property or 100% of the acquisition
cost of the related Land, if the cost of the related Land is equal to or more
than 25% of the total expected cost of such Second Group Property, PLUS (ii)
89.9% of the Construction costs (including development and transaction costs)
related to such Second Group Property that have been incurred through the date
of payment, PLUS (iii) any amounts owed with respect to such Second Group
Property pursuant to Section 3.4 of the Construction Agency Agreement or Section
7.2 of the Master Agreement, PLUS (iv) the cost of tenant improvements not paid
by a Construction Agent that were not part of the Construction Budget for such
Second Group Property.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person for
Indebtedness, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor or
such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or the obligations of any such
Person as general partner of a partnership with respect to the liabilities of
the partnership, PROVIDED, HOWEVER, that any assumption, guaranty, endorsement
or undertaking with respect to any liability of any of its Subsidiaries to any
other of its Subsidiaries shall not be a Contingent Obligation of the Guarantor.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Guarantor or any of its Subsidiaries,
are treated as a single employer under Section 414 of the Code.
"INDEBTEDNESS" of a Person means, as of any date, such Person's (i)
obligations for borrowed money or evidenced by bonds, notes, acceptances,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or bankers' acceptances, (ii) obligations
representing the deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person's business
payable on terms customary in the trade), (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (iv) obligations of
such Person to purchase securities or other Property arising out of or in
connection with the sale of the same or substantially similar securities or
Property, (v) Capitalized Lease Obligations, (vi) any other obligation for
borrowed money or other financial accommodation which in accordance with
Agreement Accounting Principles would be shown as a liability on the
consolidated balance sheet of such Person, (vii) any Rate Hedging Obligations of
such Person,
<PAGE> 6
and (viii) all Contingent Obligations of such Person with respect to or relating
to the indebtedness, obligations and liabilities of others similar in character
to those described in CLAUSES (i) through (vii) of this definition.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations or
prospects of the Guarantor and its subsidiaries taken as a whole, (ii) the
ability of the Guarantor or any Lessee to perform in any material respect under
the Operative Documents, (iii) the value, utility or useful life of any Leased
Property, (iv) the validity, enforceability or legality of any of the Operative
Documents, or (v) the priority, perfection or status of the Funding Party's
interest in any Leased Property.
"NET WORTH" means at any time the consolidated stockholder's equity of
the Guarantor and its Subsidiaries calculated on a consolidated basis as of such
time in accordance with Agreement Accounting Principles.
"PRICING SCHEDULE" means the schedule attached to the Master Agreement
identified as such.
"PROPERTY" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned
or leased by such Person.
"RATE HEDGING AGREEMENT" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"RATE HEDGING OBLIGATIONS" of any Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, PROVIDED, HOWEVER, that a failure to
<PAGE> 7
meet the minimum funding standard of Section 412 of the Code and of Section 302
of ERISA shall be a Reportable Event regardless of the issuance of any such
waiver of the notice requirement in accordance with either Section 4043(a) of
ERISA or Section 412(d) of the Code.
"SECOND GROUP PROPERTY" means each Leased Property with respect to
which the related Land was acquired by the Lessor after May 21, 1998.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Guarantor that
would be a "significant subsidiary" within the meaning of Rule 1-02 of the
Securities and Exchange Commission's Regulation S-X if 5% were substituted for
10% wherever it occurs in such Rule.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Guarantor or any
member of the Controlled Group for employees of the Guarantor or any member of
the Controlled Group.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Guarantor.
"SUBSTANTIAL PORTION" means, with respect to the Property of the
Guarantor and its Subsidiaries, Property which (i) represents more than 20% of
the consolidated assets of the Guarantor and its Subsidiaries as would be shown
in the consolidated financial statements of the Guarantor and its Subsidiaries
as at the beginning of the twelve-month period ending with the month in which
such determination is made or (ii) is responsible for more than 20% of the
consolidated net sales or of the consolidated net income of the Guarantor and
its Subsidiaries as reflected in the financial statements referred to in CLAUSE
(i) above.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"YEAR 2000 ISSUES" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications of the Guarantor
and its Subsidiaries, and of the Guarantor's and its Subsidiaries' material
customers, suppliers and vendors, to function on and after January 1, 2000 as
they do on the date hereof, including handling of applications involving dates,
as such inability affects the business, operations and financial condition of
the Guarantor and its Subsidiaries.
"YEAR 2000 PROGRAM" is defined in SECTION 6.17 of the Guaranty.
<PAGE> 8
Section 7. FUNDINGS. SECTION 2.2(e) of the Master Agreement is hereby
amended by deleting the phrase "the Lessee reasonably believes will be due in
the 90 days following such Funding from the Lessee" where it appears in the
first sentence thereof and substituting therefor the phrase "are then due".
Section 8. APPRAISALS. (a) SECTION 3.1(a)(vii) is hereby amended by adding the
following phrase at the end of the last sentence thereof: "; PROVIDED, HOWEVER,
that no Appraisal shall be required pursuant to this SECTION 3.1(a)(vii) for any
Land or any Building if (i) the initial Funding therefor shall have occurred on
or after May 25, 1999, and (ii) such Land or such Building shall be reasonably
consistent, in the reasonable judgment of the Agent, with the Land and Buildings
for which Fundings have been made pursuant to SECTION 2.2 hereof prior to such
date".
(b) SECTION 3.5(d) is hereby amended by adding the following phrase at
the end of the first sentence thereof: "; PROVIDED, HOWEVER, that no Completion
Date Appraisal shall be required pursuant to this SECTION 3.5(d) for any Land
and any Building thereon if the first Funding with respect to such Land occurs
after May 25, 1999".
Section 9. INDEMNITY. SECTION 7.1 of the Master Agreement is hereby
amended by adding the following phrase at the end of the first sentence thereof:
"; and, PROVIDED, FURTHER, that with respect to each Construction Land Interest
that is also a Second Group Property, the Lessee's indemnity obligations with
respect to such Second Group Property shall be governed by Section 3.4 of the
Construction Agency Agreement during the Construction Term therefor." SECTION
7.2 of the Master Agreement is hereby amended by adding the phrase "or Section
3.4 of the Construction Agency Agreement" after the phrase "without limitation
of SECTION 7.1" where it appears in the second line thereof.
Section 10. THE LEASE. (a) ARTICLE XII of the Lease is hereby amended
as follows:
(i) PARAGRAPH (e) and (f) thereof are hereby amended by deleting such
paragraphs in their entirety and substituting therefor the following:
(e) (i) the occurrence of any breach under SECTION 7 of the
Guaranty (other than those Sections listed in CLAUSE (ii) below) and
the continuance thereof for a period of thirty (30) days after the
earlier of(x) written notice thereof from Lessor and (y) knowledge of
such breach by a Responsible Officer of Cardinal, or (ii) the
occurrence of any breach of SECTION 7.3, 7.9, 7.10, 7.14, 7.16 or 7.17
of the Guaranty.
(f) the failure of any Lessee, the Guarantor or any of its
Significant Subsidiaries to pay when due any principal, interest or
other amounts, subject to any applicable grace period, or the default
by any Lessee, the Guarantor or any of its Significant Subsidiaries in
the performance beyond the applicable grace period with
<PAGE> 9
respect thereto, if any of any term, provision or condition contained
in the 364-Day Credit Agreement or any agreement or agreements under
which any Indebtedness in excess of 2% of Adjusted Tangible Net Worth
was created or is governed, or any other event shall occur or condition
exist, the effect of which default or event is to cause, or to permit
the holder or holders, of such Indebtedness to cause, such Indebtedness
to become due prior to its stated maturity; or any such Indebtedness of
any Lessee, the Guarantor or any of its Significant Subsidiaries shall
be declared to be due and payable or required to be prepaid or
repurchased (other than by a regularly scheduled payment) prior to the
stated maturity thereof, or any Lessee, the Guarantor or any of its
Significant Subsidiaries shall not pay, or admit in writing its
inability to pay, it debts generally as they become due;
(ii) PARAGRAPH (g) thereof is hereby amended by inserting the phrase
"or any of its Significant Subsidiaries" after the phrase "Lessee or Guarantor"
where such phrase appears in the first line of such paragraph.
(iii) PARAGRAPH (h) thereof is hereby amended by inserting the phrase
"or any of its Significant Subsidiaries" after the phrase "Lessee or Guarantor"
where such phrase appears in the first line of such paragraph.
(iv) PARAGRAPH (j) thereof is hereby amended (i) by deleting the word
"or" where it appears in the second line thereof, and (ii) by inserting the
following at the end of such paragraph: "or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of the Guaranty."
(v) PARAGRAPHS (m) and (n) thereof are hereby amended by deleting such
paragraphs in their entirety and substituting therefor the following:
(m) Any Lessee, the Guarantor or any of its Significant
Subsidiaries shall fail within 60 days to pay, bond or otherwise
discharge one or more (i) judgements or orders for the payment of money
(not covered by insurance) in excess of 2% of Adjusted Tangible Net
Worth (or the equivalent thereof in currencies other than U.S. Dollars)
in the aggregate, or(ii) nonmonetary judgments or orders which,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect, which judgments(s), in either such case,
is/are not stayed on appeal or otherwise being appropriately contested
in good faith;
(n) Any member of the Controlled Group shall fail to pay when
due an amount or amounts aggregating in excess of $75,000,000 which it
shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Single Employer Plan with Unfunded Liabilities in
excess of $20,000,000 (a "Material Plan") shall be filed under Section
4041(c) of ERISA by any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or PBGC shall
institute proceedings under which it is likely to prevail under Title
IV of ERISA to terminate, to impose liability
<PAGE> 10
(other than for premiums under Section 4007 of ERISA) in respect of, or
to cause a trustee to be appointed to administer any Material Plan; or
a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which causes one or more
members of the Controlled Group to incur a current payment obligation
in excess of $75,000,000;
(vi) PARAGRAPH (o) is hereby amended by deleting the period at the end
of such paragraph and substituting therefor ", and".
(b) The following is inserted at the end of ARTICLE XII:
(p) Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of, all or
any portion of the Property of the Guarantor and its Subsidiaries
which, when taken together with all other Property of the Guarantor and
its Subsidiaries so condemned, seized, appropriated, or taken custody
or control of, during the twelve-month period ending with the month in
which any such action occurs, constitutes a Substantial Portion.
(c) SECTION 14.1(b) of the Lease is hereby amended by deleting the word
"two" where it appears in the fifth line thereof and substituting therefor the
word "three".
Section 11. THE GUARANTY. (a) SECTION 6 of the Guaranty is hereby
amended as follows:
(i) SECTION 6.10 is hereby amended by deleting such Section in its
entirety and substituting therefor the following:
Section 6.10 ERISA.
The Unfunded Liabilities of all Single Employer Plans do not
in the aggregate exceed $75,000,000. Each Single Employer Plan complies
in all material respects with all applicable requirements of law and
regulations where the failure to so comply could reasonably be expected
to have a Material Adverse Effect. No Reportable Event has occurred
with respect to any Plan where such occurrence could reasonably be
expected to have a Material Adverse Effect. Neither any Lessee, the
Guarantor nor any of its Significant Subsidiaries has withdrawn from
any Plan or initiated steps to do so, and no steps have been taken to
reorganize or terminate any Single Employer Plan where in either
instance a liability in excess of $75,000,000 could reasonably be
expected to result.
(ii) SECTION 6.11 is hereby amended by deleting such Section in its
entirety and substituting therefor the following:
<PAGE> 11
Section 6.11 FINANCIAL STATEMENTS.
The following consolidated financial statements heretofore
delivered to the Agent and the Lenders were prepared in accordance with
Agreement Accounting Principles in effect on the date such statements
were prepared and fairly present the consolidated financial condition
and operations of the Guarantor and its Subsidiaries at such date and
the consolidated results of their operations for the period then ended,
subject, in the case of such interim statements, to routine year-end
audit adjustments:
(i) June 30, 1998 audited consolidated financial
statements of the Guarantor and its Subsidiaries; December 31,
1997 audited consolidated financial statements of Allegiance
Corporation and its consolidated subsidiaries;
(ii) December 31, 1998 unaudited interim consolidated
financial statements of the Guarantor and its Subsidiaries;
and
(iii) December 31, 1998 unaudited interim
consolidated financial statements of Allegiance Corporation
and its consolidated subsidiaries.
(iii) The following is inserted at the end of SECTION 6:
Section 6.13 MATERIAL AGREEMENTS.
Neither the Guarantor nor any Subsidiary is a party to any
agreement or instrument or subject to any charter or other corporate
restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Guarantor nor any Subsidiary is in default
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement to
which it is a party, which default could reasonably be expected to have
a Material Adverse Effect.
Section 6.14 COMPLIANCE WITH LAWS.
The Guarantor and its Subsidiaries have complied with all
applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof
having jurisdiction over the conduct of their respective businesses or
the ownership of their respective Property, except for any failure to
comply with any of the foregoing which could not reasonably be expected
to have a Material Adverse Effect.
Section 6.15 PLAN ASSETS; PROHIBITED TRANSACTIONS.
The Guarantor is not an entity deemed to hold "plan assets"
within the meaning of 29 C.F.R. Section 2510.3-101 of an employee
benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of
<PAGE> 12
the Code), and neither the execution of this Guaranty nor the making of
Fundings under the Master Agreement gives rise to a prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975
of the Code.
Section 6.16 ENVIRONMENTAL MATTERS.
In the ordinary course of its business, the officers of the
Guarantor consider the effect of Environmental Laws on the business of
the Guarantor and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the
Guarantor due to Environmental Laws. On the basis of this
consideration, the Guarantor has concluded that Environmental Laws
cannot reasonably be expected to have a Material Adverse Effect.
Neither the Guarantor nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any of
the requirements of applicable Environmental Laws or are the subject of
any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous
waste or substance into the environment, which non-compliance or
remedial action could reasonably be expected to have a Material Adverse
Effect.
Section 6.17 YEAR 2000.
The Guarantor has substantially completed an assessment of the
Year 2000 Issues and has a realistic and achievable program for
addressing the remediation of Year 2000 Issues on a timely basis to
avoid any impact on the Guarantor and its Subsidiaries which would
reasonably be expected to have a Material Adverse Effect (the "Year
2000 Program"). Based on such assessment and on the Year 2000 Program
the Guarantor does not reasonably anticipate that Year 2000 Issues will
have a Material Adverse Effect.
(b) SECTIONS 7.1 through 7.15 are hereby amended by deleting such
sections in their entirety and substituting the following therefor:
Section 7.1 FINANCIAL REPORTING.
The Guarantor will maintain, for itself and each Subsidiary, a
system of accounting established and administrated in accordance with
Agreement Accounting Principles, and furnish to the Agent:
(i) Within 120 days after the close of each
of its fiscal years, an unqualified (except for
qualifications relating to changes in accounting
principles or practices reflecting changes in
Agreement Accounting Principles and required or
approved by the Guarantor's independent certified
public accountants) audit report certified by
independent certified public accountants reasonably
acceptable to the Agent, prepared in accordance with
Agreement Accounting Principles on a consolidated
basis
<PAGE> 13
for itself and its Subsidiaries, including balance
sheets as of the end of such period, related profit
and loss statements, and a statement of cash flows.
(ii) Within 60 days after the close of each
of the first three quarterly periods of each fiscal
year, for itself and its Subsidiaries, consolidated
unaudited balance sheets as at the close of each such
period and consolidated unaudited profit and loss
statements and a consolidated unaudited statement of
cash flows for the period from the beginning of such
fiscal year to the end of such quarter, all certified
by its Chief Financial Officer, Controller or
Treasurer.
(iii) Together with the financial statements
required under Section 7.1(i) and (ii), a compliance
certificate in substantially the form of EXHIBIT A
signed by its Chief Financial Officer, Controller, or
Treasurer and stating that no Event of Default or
Potential Event of Default exists, or if any Event of
Default or Potential Event of Default exists, stating
the nature and status thereof.
(iv) As soon as possible and in any event
within 10 Business Days after the Guarantor knows
that any Reportable Event has occurred with respect
to any Plan, a statement, signed by the Chief
Financial Officer, Controller, or Treasurer of the
Guarantor, describing said Reportable Event and the
action which the Guarantor proposes to take with
respect thereto.
(v) As soon as possible and in any event
within 10 Business Days after receipt by the
Guarantor, a copy of (a) any notice or claim to the
effect that any Lessee, the Guarantor or any of its
Subsidiaries is or may be liable to any Person as a
result of the release by any Lessee, the Guarantor,
any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the
environment, and (b) any notice alleging any
violation of any federal, state or local
environmental, health or safety law or regulation by
any Lessee, the Guarantor or any of its Subsidiaries,
which, in either case, could reasonably be expected
to have a Material Adverse Effect.
(vi) Such other information (including
non-financial information) as the Agent or any Lender
may from time to time reasonably request.
<PAGE> 14
Section 7.2 USE OF PROCEEDS.
The proceeds of the Fundings will be used to purchase
and/or construct Land and Buildings which shall constitute
Leased Property. The Guarantor will not, nor will it permit
any Subsidiary to, use any of the proceeds of the Fundings to
purchase or carry any "margin stock" (as defined in Regulation
U).
Section 7.3 NOTICE OF DEFAULT.
The Guarantor will, and will cause each Significant
Subsidiary and each Lessee to, give prompt notice in writing
to the Agent of the occurrence of (i) any Event of Default or
Potential Event of Default and (ii) any other development,
financial or otherwise (including, without limitation,
developments with respect to Year 2000 Issues) which could
reasonably be expected to have a Material Adverse Effect.
Section 7.4 CONDUCT OF BUSINESS.
The Guarantor will, and will cause each Significant
Subsidiary and each Lessee to, carry on and conduct its
business in substantially the same manner and in substantially
the same fields of enterprise as it is presently conducted or
fields related thereto (except that the Guarantor, its
Significant Subsidiaries and each Lessee shall have no duty to
renew or extend contracts which expire by their terms) and,
subject to the rights set forth in SECTION 7.9 hereof, do all
things necessary to remain duly incorporated or organized,
validly existing and (to the extent such concept applies to
such entity) in good standing as a domestic corporation,
partnership or limited liability company in its jurisdiction
of incorporation or organization, as the case may be, and
maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted, unless
the failure to do so could not reasonably be expected to have
a Material Adverse Effect.
Section 7.5 TAXES.
The Guarantor will, and will cause each Significant
Subsidiary and each Lessee to, timely file complete and
correct United States federal and applicable foreign, state
and local tax returns required by law and pay when due all
taxes, assessments and governmental charges and levies upon it
or its income, profits or Property, except those which are
being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been set aside in
accordance with Agreement Accounting Principles, except where
the failure to do so could not reasonably be expected to have
a Material Adverse Effect.
<PAGE> 15
Section 7.6 INSURANCE.
The Guarantor will, and will cause each Significant
Subsidiary and each Lessee to, maintain as part of a
self-insurance program or with financially sound and reputable
insurance companies insurance on all their Property in such
amounts (with such customary deductibles, exclusions and
self-insurance) and covering such risks as is consistent with
sound business practice.
Section 7.7 COMPLIANCE WITH LAWS.
The Guarantor will, and will cause each Significant
Subsidiary and each Lessee to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject including, without
limitation, all Environmental Laws, except where the failure
to do so could not reasonably be expected to have a Material
Adverse Effect.
Section 7.8 INSPECTION.
The Guarantor will, and will cause each Significant
Subsidiary and each Lessee to, permit the Agent and the
Lenders, by their respective representatives and agents, to
inspect any of the Property, books and financial records of
the Guarantor, each Lessee and each Significant Subsidiary, to
examine and make copies of the books of accounts and other
financial records of the Guarantor, each Lessee and each
Significant Subsidiary, and to discuss the affairs, finances
and accounts of the Guarantor, each Lessee and each
Significant Subsidiary with, and to be advised as to the same
by, their respective officers upon reasonable prior notice at
such reasonable times and intervals as the Agent or any
Funding Party may designate, PROVIDED that neither the
Guarantor, any Lessee nor any of its Significant Subsidiaries
shall be responsible for the costs and expenses incurred by
the Agent, any Funding Party, or their representatives in
connection with such inspection prior to the occurrence and
continuation of an Event of Default.
Section 7.9 MERGER.
The Guarantor will not, nor will it permit any
Significant Subsidiary or any Lessee to, merge or consolidate
with or into any other Person, except that, PROVIDED that no
Event of Default or Potential Event of Default shall have
occurred and be continuing or would result therefrom on a pro
forma basis reasonably acceptable to the Agent, the Guarantor
or any Lessee may merge or consolidate with any other U.S.
corporation and each Significant Subsidiary may merge or
consolidate with any other Person, PROVIDED, FURTHER, that (i)
in the case of any such merger or consolidation involving the
Guarantor, the Guarantor is the surviving corporation and (ii)
in the case of any such merger or consolidation
<PAGE> 16
involving a Lessee, the surviving corporation assumes all of
such Lessee's obligations under this Master Agreement and the
other Operative Documents and remains or becomes a Lessee.
Section 7.10 SALE OF ASSETS.
The Guarantor will not, nor will it permit any
Significant Subsidiary or any Lessee to, lease, sell or
otherwise dispose of its Property, to any other Person (other
than the Guarantor, any Lessee or another Subsidiary), except:
(i) Sales of inventory in the ordinary
course of business.
(ii) Sales or other dispositions in the
ordinary course of business of fixed assets for the
purpose of replacing such fixed assets, PROVIDED that
such fixed assets are replaced within 360 days of
such sale or other disposition with other fixed
assets which have a fair market value not materially
less than the fixed assets sold or otherwise disposed
of.
(iii) Sales or other dispositions outside
the ordinary course of business of accounts
receivable, lease receivables, leases or equipment
which had been leased by the Guarantor, such Lessee
or such Significant Subsidiary, PROVIDED that any
such sale or other disposition is for reasonably
equivalent value and could not reasonably be expected
to have a Material Adverse Effect.
(iv) Other leases, sales (including
sale-leasebacks) or other dispositions of its
Property that, together with all other Property of
the Guarantor and its Subsidiaries previously leased,
sold or disposed of (other than as provided in
CLAUSES (i), (ii), and (iii) above) as permitted by
this Section during the twelve-month period ending
with the month prior to the month in which any such
lease, sale or other disposition occurs, do not
constitute a Substantial Portion of the Property of
the Guarantor and its Subsidiaries, or together with
all other Property of the Guarantor and its
Subsidiaries previously leased, sold or disposed of
(other than as provided in CLAUSES (i) and (ii)
above) as permitted by this Section during the period
from the date of this Master Agreement to the end of
the month prior to the month in which any such lease,
sale or other disposition occurs, do not constitute
35% of the consolidated assets of the Guarantor and
its Subsidiaries as would be shown in the
consolidated financial statements of the Guarantor
and its Subsidiaries as at the beginning of the
fiscal year in which any such lease, sale or other
disposition occurs.
<PAGE> 17
Notwithstanding anything in this SECTION 7.10 to the
contrary, (a) no such leases, sales or other dispositions of
property may be made (other than pursuant to CLAUSE (i) above)
if any Event of Default or Potential Event of Default has
occurred and is continuing, and (b) all leases, sales and
other dispositions of Property at any time shall be for not
less than the fair market value of such Property as determined
in good faith by the Guarantor.
Section 7.11 INVESTMENTS.
The Guarantor will not, nor will it permit any
Significant Subsidiary or any Lessee to, make or suffer to
exist any Investments, or commitments therefor, or to create
any Subsidiary or to become or remain a partner in any
partnership or joint venture, except:
(i) Cash Equivalent Investments.
(ii) Investments in Subsidiaries.
(iii) Other Investments in existence on the
date hereof.
(iv) Other Investments PROVIDED that the
aggregate amount of such Investments made in any
fiscal year does not exceed 25% of the Adjusted
Tangible Net Worth as of the beginning of such fiscal
year.
Section 7.12 LIENS.
The Guarantor will not, nor will it permit any
Significant Subsidiary or any Lessee to, create, incur, or
suffer to exist any Lien in, of or on the Property of any
Lessee, the Guarantor or any of its Significant Subsidiaries,
except:
(i) Liens for taxes, assessments or
governmental charges or levies on its Property if the
same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being
contested in good faith and by appropriate
proceedings and for which adequate reserves in
accordance with Agreement Accounting Principles shall
have been set aside on its books.
(ii) Liens imposed by law, such as
landlord's, carriers', warehousemen's and mechanics'
liens and other similar liens arising in the ordinary
course of business which secure payment of
obligations not more than 60 days past due or which
are being contested in good faith by appropriate
proceedings and for which adequate reserves in
accordance
<PAGE> 18
with Agreement Accounting Principles shall have been
set aside on its books.
(iii) Liens arising out of pledges or
deposits under worker's compensation laws,
unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar
legislation (other than Liens in favor of the PBGC).
(iv) Utility easements, building
restrictions and such other encumbrances or charges
against real property as are of a nature generally
existing with respect to properties of a similar
character and which do not in a material way affect
the marketability of the same or interfere with the
use thereof in the business of the Guarantor or its
Subsidiaries.
(v) Liens existing on the date hereof.
(vi) Liens on any assets which exist at the
time of acquisition of such assets by any Lessee, the
Guarantor, or any of its Subsidiaries, or liens to
secure the payment of all of any part of the purchase
price of such assets upon the acquisition of such
assets by any Lessee, the Guarantor or any of its
Subsidiaries or to secure any Indebtedness incurred
or guaranteed by any Lessee, the Guarantor or any of
its Subsidiaries prior to, at the time, of or within
360 days after, such acquisition (or, in the case of
real property, the completion of construction
(including any improvements on an existing asset) or
commencement of full operation of such asset,
whichever is later), which Indebtedness is incurred
or guaranteed for the purpose of financing all or any
part of the purchase price thereof or, in the case of
real property, construction or improvements thereon,
PROVIDED, HOWEVER, that in the case of any such
acquisition, construction or improvement, the Lien
shall not apply to such assets theretofore owned by
any Lessee, the Guarantor or any of its Subsidiaries
other than, in the case of any such construction or
improvement, any real property on which the property
so constructed, or the improvement, is located,
PROVIDED FURTHER, however, that the aggregate
outstanding principal amount of Indebtedness secured
by Liens permitted by this SECTION 7.12(vi) shall not
at any time exceed $250,000,000.
(vii) Liens in favor of the United States of
America of any State thereof, or any department,
agency or instrumentality or political subdivision of
the United States of America or any State thereof, or
in favor of any other country or any political
subdivision thereof, to secure partial, progress,
advance or other payments pursuant to any contract or
statute or to secure any Indebtedness incurred or
guaranteed for the purpose of financing all or any
part of the purchase price (or, in the case of real
property, the cost of construction), of the assets
subject to such liens
<PAGE> 19
(including without limitation liens incurred in
connection with pollution control, industrial revenue
or similar financings).
(viii) Any extension, renewal or replacement
(or successive extensions, renewals or replacements)
in whole or in part of any Lien referred to in the
foregoing clauses, PROVIDED, HOWEVER, that the
principal amount of Indebtedness secured thereby
shall not exceed the principal amount of Indebtedness
so secured prior to such extension, renewal or
replacement and that such extension, renewal or
replacement Lien shall be limited to all or a part of
the assets which secured the Lien so extended,
renewed or replaced (plus improvements and
construction of such real property).
(ix) So long as no Event of Default under
paragraph (m) of Article XII of the Lease would occur
in connection therewith, Liens created by or
resulting from any litigation or other proceeding
which is being contested in good faith by appropriate
proceedings, including Liens arising out of judgments
or awards against any Lessee, the Guarantor or any of
its Subsidiaries with respect to which such Lessee,
the Guarantor or such Subsidiary is in good faith
prosecuting an appeal or proceeding for review or for
which the time to make an appeal has not yet expired;
or final unappealable judgment Liens which are
satisfied within 15 days of the date of judgment; or
Liens incurred by any Lessee, the Guarantor or any of
its Subsidiaries for the purpose of obtaining a stay
or discharge in the course of any litigation or other
proceeding to which such Lessee, the Guarantor or
such Subsidiary is a party.
(x) Liens securing Indebtedness described in
SECTION 7.16(iv) and (v).
(xi) Liens securing Indebtedness and not
otherwise permitted by the foregoing provisions of
this SECTION 7.12, PROVIDED that the aggregate
outstanding principal amount of the Indebtedness
secured by all such Liens shall not at any time
exceed 25% of Adjusted Tangible Net Worth.
Section 7.13 YEAR 2000.
The Guarantor will take and will cause each of its
Subsidiaries and each Lessee to take all such actions as are
reasonably necessary to successfully implement the Year 2000
Program and to assure that Year 2000 Issues will not have a
Material Adverse Effect. At the request of the Agent, the
Guarantor will
<PAGE> 20
provide a description of the Year 2000 Program, together with
any updates or progress reports with respect thereto.
Section 7.14 SUBSIDIARY INDEBTEDNESS.
The Guarantor will not permit any Subsidiary to
create, incur or suffer to exist any Indebtedness, except:
(i) The Fundings.
(ii) Indebtedness outstanding on May 25,
1999, or incurred pursuant to commitments in
existence on May 25, 1999.
(iii) Indebtedness of any Subsidiary to the
Guarantor or any other Subsidiary.
(iv) Indebtedness of any Person that becomes
a Subsidiary after the date hereof; PROVIDED that
such Indebtedness existed at the time such person
becomes a Subsidiary and is not created in
contemplation of or in connection with such Person
becoming a Subsidiary.
(v) Any refunding or refinancing of any
Indebtedness referred to in CLAUSE (i) through (iv)
above, PROVIDED that any such refunding or
refinancing of Indebtedness referred to in CLAUSE
(ii), (iii) and (iv) does not increase the principal
amount thereof.
(vi) Indebtedness arising from (a) the
endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary
course of business or (b) the honoring by a bank or
other financial institution of a check, draft or
similar instrument inadvertently (except in the case
of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business.
(vii) Indebtedness arising from guarantees
of loans and advances by third parties to employees
and officers of a Subsidiary in the ordinary course
of business for bona fide business purposes, PROVIDED
that the aggregate outstanding principal amount of
such Indebtedness does not at any time exceed
$100,000,000.
(viii) Indebtedness of a Subsidiary arising
from agreements providing for indemnification,
adjustment of purchase price or similar obligations
or from guarantees, letters of credit, surety bonds
or performance bonds securing any obligations of the
Guarantor or any of its
<PAGE> 21
Subsidiaries incurred or assumed in connection with
the disposition of any business, property or
Subsidiary.
(ix) Indebtedness arising from Rate Hedging
Obligations.
(x) Contingent Obligations.
(xi) Indebtedness outstanding under
investment grade commercial paper programs.
(xii) Other Indebtedness; PROVIDED that, at
the time of the creation, incurrence or assumption of
such other Indebtedness and after giving effect
thereto, the aggregate amount of all such other
Indebtedness of the Subsidiaries does not exceed an
amount equal to 25% of Adjusted Tangible Net Worth at
such time.
Section 7.15 LIMITATION ON RESTRICTIONS ON SIGNIFICANT
SUBSIDIARY DISTRIBUTIONS.
The Guarantor will not, and will not permit any
Significant Subsidiary to, enter into or suffer to exist or
become effective any consensual encumbrance or restriction on
the ability of any Significant Subsidiary of the Guarantor to
(i) pay dividends or make any other distributions in respect
of any capital stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Guarantor or any other Subsidiary of
the Guarantor, (ii) make loans or advances to the Guarantor or
any other Subsidiary of the Guarantor or (iii) transfer any of
its assets to the Guarantor or any other Subsidiary of the
Guarantor, except for such encumbrances or restrictions
existing under or by reason of (a) any restrictions existing
under the Operative Documents, (b) any restrictions with
respect to a Significant Subsidiary imposed pursuant to an
agreement which has been entered into in connection with the
disposition of all or substantially all of the capital stock
or assets of such Significant Subsidiary, and (c) any
restrictions with respect to assets encumbered by a Lien
permitted by SECTION 7.12 so long as such restriction applies
only to the asset encumbered by such permitted Lien.
Section 7.16 CONTINGENT OBLIGATIONS.
The Guarantor will not, nor will it permit any
Subsidiary to, make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent
Obligation with respect to the obligations of a Subsidiary),
except (i) by endorsement of instruments for deposit or
collection in the ordinary course of business, (ii) the
Guaranty, (iii) Contingent Obligations of special-purpose
finance Subsidiaries, PROVIDED that no Person has recourse
against the Guarantor or any Significant Subsidiary for such
Contingent Obligations, (iv) Contingent Obligations
<PAGE> 22
arising from the sale by Pyxis Corporation of lease
receivables, leases or equipment, PROVIDED that the aggregate
amount of such Contingent Obligations do not at any time
exceed 10% of Adjusted Tangible Net Worth, (v) Contingent
Obligations arising out of operating or synthetic leases
entered into by Subsidiaries of the Guarantor, PROVIDED that
the aggregate amount of such Contingent Obligations do not at
any time exceed 25% of Adjusted Tangible Net Worth, and (vi)
Contingent Obligations in addition to those described in
CLAUSES (i) through (v) above, PROVIDED that the aggregate
amount of such additional Contingent Obligations (without
duplication) do not at any time exceed 25% of Adjusted
Tangible Net Worth.
Section 7.17 MINIMUM NET WORTH.
The Guarantor shall not permit its Net Worth to be
less than $2,550,000,000 at any time.
(c) EXHIBIT A to this Agreement is hereby made EXHIBIT A to the
Guaranty.
Section 12. CONSTRUCTION AGENCY AGREEMENT. The Construction Agency
Agreement is hereby amended as follows:
(1) SECTION 2.4 is hereby amended by adding a new sentence at the end
thereof as follows: "On or prior to the Funding Date of the first Funding for
Construction of a Building on each parcel of Land related to a Second Group
Property, the Construction Agent shall prepare and deliver to the Lessor and the
Agent a construction budget (the "CONSTRUCTION BUDGET") for the related Second
Group Property, setting forth in reasonable detail the reasonably anticipated
budget for the Construction of the proposed Building on such Land in accordance
with the Plans and Specifications therefor, and all related costs including the
capitalized interest and Yield expected to accrue during the related
Construction Term.";
(2) SECTION 2.5 is hereby amended by (i) deleting the word "and" at the
end of clause (b) thereof, (ii) deleting the period at the end of clause (c)
thereof and substituting therefor a semicolon and (iii) adding the following at
the end hereof:
"(d) the Completion Date for such Leased Property; and
(e) the payment by the Construction Agent of the Leased
Property Balance or, if such Leased Property is a Second Group
Property, the Construction Failure Payment with respect to such Leased
Property pursuant to this Agreement.";
(3) SECTION 2.6 is hereby amended by adding the following sentence at
the end thereof: "Each construction contract for a Second Group Property with a
general contractor shall be with
<PAGE> 23
a reputable general contractor with experience in constructing projects that are
similar in scope and type to the proposed Building, and shall provide for a
guarantee maximum project cost and a commercially reasonable amount of
retainage, which shall in no case be less than 5% retainage.";
(4) SECTION 2.8(a) is hereby amended by inserting after the phrase
"Plans and Specifications for such Land" where it appears therein the phrase ",
in accordance with the Construction Budget for such Leased Property(if such
Leased Property is a Second Group Property), subject to CLAUSE (y) of SECTION
3.2,";
(5) SECTION 3.2 is hereby amended by inserting the phrase "or, in the
case of a Second Group Property increase the Construction Budget therefor by
more than 10% in the aggregate" after the phrase "then remaining Commitments"
where it appears in CLAUSE (y) of the proviso therein;
(6) A new SECTION 3.4 shall be added at the end of ARTICLE III as
follows:
3.4 INDEMNITY. During the Construction Term for each Leased
Property, the Construction Agent agrees to assume liability for, and to
indemnify, protect, defend, save and hold harmless the Lessor on an
After-Tax Basis, from and against, any and all Claims that may be
imposed on, incurred by or asserted or threatened to be asserted,
against the Lessor, whether or not the Lessor shall also be indemnified
as to any such Claim by any other Person, in any way relating to or
arising out of (i) the Construction Agent's (or any subcontractor's)
own actions or failures to act while in possession or control of any
Leased Property, (ii) fraud, misapplication of funds, illegal acts or
willful misconduct on the part of the Construction Agent, (iii) any
event described in paragraph (g) or (h) of Article XII of the Lease
with respect to the Construction Agent or (iv) the inaccuracy of any
representation or warranty made by the Construction Agent. The
foregoing indemnities are in addition to, and not in limitation of, the
indemnities with respect to environmental claims set forth in Section
7.2 of the Master Agreement. The provisions of Section 7.3 of the
Master Agreement shall apply to any amounts that the Construction Agent
is requested to pay pursuant to this SECTION 3.4.
(7) SECTION 5.1 is hereby amended by adding the phrase "PROVIDED,
HOWEVER, that this sentence shall not apply to any Second Group Property" at the
end of the last sentence in such section; and
<PAGE> 24
(8) SECTION 5.3(a) is hereby amended by adding the following at the end
thereof:
"In the event that the Construction Agent does not exercise
its option to purchase such Leased Property or Properties, if such
Leased Property is a Second Group Property, the Construction Agent
shall pay to the Lessor the Construction Failure Payment(s) therefor
within five (5) Business Days of the demand therefor by the Lessor, and
shall surrender and return such Leased Property or Properties to the
Lessor or its designee in accordance with the terms of Section 14.8 of
the Lease. In the event that the Construction Agent returns any Leased
Property to the Lessor pursuant to the previous sentence, the
Construction Agent shall take such action as the Lessor may reasonably
request in order to transfer to the Lessor (or its designee) all of the
Construction Agent's rights and claims in, to and under the related
Construction Contract(s), Architect's Agreement(s), all agreements,
security deposits, guaranties and surety bonds related thereto and all
governmental permits related to such Construction, and the Construction
Agent shall provide to the Lessor copies of all books, records and
documentation with respect to the foregoing."
SECTION 13. LOAN AGREEMENT. The Loan Agreement is hereby amended as
follows:
(1) SECTION 2.4(a) is hereby amended by deleting the phrase "0.44475%
per annum" where it appears in CLAUSE (ii) thereof and substituting therefor the
phrase "the Applicable Margin".
(2) SECTION 3.2(a) is hereby amended by adding the phrase "or the
Lessee exercise of its option to purchase such Leased Property under Section 5.3
of the Construction Agency Agreement" at the end of such paragraph;
(3) SECTION 3.3 is hereby amended by adding the following sentence at
the end thereof: "With respect to any Second Group Property, the payment by the
Construction Agent of the Construction Failure Payment with respect thereto
pursuant to the Construction Agency Agreement shall be applied by the Agent
first, to the accrued and unpaid interest on, and the outstanding principal of,
the A Loans in respect of such Second Group Property, second, to the accrued and
unpaid interest on, and outstanding principal of, the B Loans related to such
Second Group Property and third, to the accrued and unpaid Yield on, and
outstanding Lessor Invested Amount related to such Second Group Property.";
(4) SECTION 3.4 is hereby amended by inserting the phrase "or sold
after a return to the Lessor pursuant to the Construction Agency Agreement,"
after the phrase "Section 14.6 or 14.7 of the related Lease," where it appears
in the sixth line thereof;
(5) SECTION 4.2 is hereby amended by adding the phrase ", the
Construction Agency Agreement" after the phrase "received under the Leases"
where it appears in the first and third sentences thereof; and
<PAGE> 25
(6) SECTION 4 is hereby amended by adding a new Section at the end
thereof as follows:
SECTION 4.4 INDEMNITY BY LESSOR. During the Construction Term
for any Second Group Property, Lessor hereby indemnifies each Lender
and its Affiliates, successors, permitted assigns, permitted
transferees, employees, officers, directors and agents from and against
any and all Claims that may be imposed on, incurred by or asserted or
threatened to be asserted against, any such Person, arising out of or
related to such Second Group Property, or the leasing or financing
thereof; IT BEING UNDERSTOOD that the foregoing provision is subject to
SECTION 4.2.
SECTION 14. LEASE PARTICIPATION AGREEMENT. The Lease Participation
Agreement is hereby amended as follows:
(i) SECTION 2.1 is hereby amended by deleting "58.33%" where it appears
therein and substituting thereof "44.375%";
(ii) SECTION 2.2 is hereby amended by deleting "$43,750,000" where it
appears therein and substituting therefor "$71,000,000":
(iii) SECTION 3(a)(iv) is hereby amended by inserting the phrase "or
sold after a return to the Lessor pursuant to the Construction Agency
Agreement," after the phrase "Section 14.6 or 14.7 of the related Lease" where
it appears therein;
(iv) SECTION 4.2 is hereby amended by adding the phrase ",the
Construction Agency Agreement" after the phrase "received under the Leases"
where it appears in the first and third sentences thereof; and
(v) SECTION 4 is hereby amended by adding a new Section at the end
thereof as follows:
SECTION 4.4 INDEMNITY BY LESSOR. During the Construction Term
for any Second Group Property, Lessor hereby indemnifies the Lease
Participant and its Affiliates, successors, permitted assigns,
permitted transferees, employees, officers, directors and agents from
and against any and all Claims that may be imposed on, incurred by or
asserted or threatened to be asserted against, any such Person, arising
out of or related to such Second Group Property, or the leasing or
financing thereof; IT BEING UNDERSTOOD that the foregoing provision is
subject to SECTION 4.2.
SECTION 15. NOTES. The Notes issued by the Lessor in connection with
the 1998 Amendment shall be replaced with an A Note and a B Note issued by the
Lessor to the Agent, for the ratable benefit of the Lenders, in substantially
the form of EXHIBITS B and C hereto,
<PAGE> 26
respectively; upon such replacement, such original Notes shall be deemed to be
canceled. Any reference to the Notes in the Operative Documents shall be deemed
to refer to such replacement Notes.
SECTION 16. GUARANTY; REPRESENTATIONS. The Guarantor hereby affirms its
obligations under the Guaranty Agreement after giving effect to this Amendment.
Each of the Guarantor and each Lessee hereby represents and warrants that, after
giving effect to this Amendment, (i) no Event of Default or Potential Event
Default has occurred and is continuing or will result from this Amendment, (ii)
there shall not have occurred any event that could reasonably be expected to
have a Material Adverse Effect since July 16, 1996 and (iii) each representation
and warranty of each Lessee and the Guarantor contained in the Master Agreement
and the other Operative Documents as amended by this Agreement is true and
correct in all material respects on the date hereof as though made on and as of
the date hereof, except to the extent such representations or warranties relate
solely to an earlier date, in which case such representations and warranties
shall have been true and correct in all material respects on and as of such
earlier date.
SECTION 17. CONDITIONS. The effectiveness of this Amendment shall be
conditioned upon the receipt by the Agent of the following documents, each of
which shall be satisfactory in form and substance to the Agent: (i) the
replacement Notes referred to in SECTION 15 of this Amendment executed by the
Lessor; (ii) a certificate of the Secretary or an Assistant Secretary of each
Lessee and the Guarantor attaching to it and certifying as to (A) the Board of
Directors' (or appropriate committee's) resolution duly authorizing the
execution, delivery and performance by it of this Amendment,(B) the incumbency
and signatures of persons authorized to execute and deliver this Amendment on
its behalf and (C) the continued accuracy and completeness of its articles of
incorporation and bylaws previously delivered on the Initial Closing Date; and
(iii) the opinion of Baker & Hostetler, substantial in the form set forth in
EXHIBIT D hereto.
SECTION 18. FUNDING. On the date that this Amendment shall become
effective, pursuant to and in accordance with SECTION 2.2 of the Master
Agreement, each Lender shall make available to the Lessor a Loan in an amount
equal to the product of such Lender's Commitment Percentage times the
transaction costs incurred by the Lessees in connection with this Amendment,
which funds the Lessor shall use, together with Lessor funds in an amount equal
to the product of the Lessor's Commitment Percentage times the transaction costs
incurred by such Lessees in connection with this Amendment, to pay to the
related Lessee the amount of such transaction costs.
SECTION 19. MISCELLANEOUS. This Amendment shall be governed by, and
construed in accordance with, the laws of the state of Georgia. This Amendment
may be executed by the parties hereto and separate counterparts, (including by
facsimile), each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one in the same agreement.
The Operative Documents, as amended hereby, remain in full force and effect. Any
reference to any Operative Document from and after the date hereof shall be
deemed or referred to such Operative Documents and amended hereby, unless
otherwise expressly stated.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the year first above
written.
CARDINAL SOUTHEAST, INC.
By: /s/ Leonard G. Kuhr
---------------------------------------
Title: Corporate Vice President, Treasurer
WHITMIRE DISTRIBUTION CORPORATION
By: /s/ Leonard G. Kuhr
---------------------------------------
Title: Corporate Vice President, Treasurer
RENLAR SYSTEMS, INC.
By: /s/ Leonard G. Kuhr
---------------------------------------
Title: Corporate Vice President, Treasurer
PYXIS CORPORATION
By: /s/ Leonard G. Kuhr
---------------------------------------
Title: Corporate Vice President, Treasurer
CARDINAL HEALTH, INC.
By: /s/ Leonard G. Kuhr
---------------------------------------
Title: Corporate Vice President, Treasurer
<PAGE> 28
SUNTRUST BANKS, INC.
By: /s/ Linda L. Dash
---------------------------------------
Title: Vice President
SUNTRUST BANK, ATLANTA, as the Agent
By: /s/ Linda L. Dash
---------------------------------------
Title: Vice President
PNC LEASING CORP., as a Lender
By: /s/ David J. Keener
---------------------------------------
Title: Vice President
WACHOVIA BANK, N.A., as a Lender
By: /s/ Bradfor L. Watkins
---------------------------------------
Title: Vice President
THE FIFTH THIRD BANK, as a Lender
By: /s/ Ted Lape
---------------------------------------
Title: V.P.
FIRSTAR BANK, N.A., as a Lender
By: /s/ James C. Blythe
---------------------------------------
Title: Vice President
<PAGE> 29
SCHEDULE 2.2
AMOUNT OF EACH FUNDING PARTY'S COMMITMENT
Lessor Commitment Percentage: 44.375%
Lessor Commitment: $71,000,000
Lender Commitment Percentages:
PNC Leasing Corp. 18.750%
Wachovia Bank, N.A. 15.00%
The Fifth Third Bank 12.50%
Firstar Bank, N.A. 9.375%
Lender Commitments: A LOANS B LOANS
PNC Leasing Corp. $25,500,000 $4,500,000
Wachovia Bank, N.A. 20,400,000 3,600,000
The Fifth Third Bank 17,000,000 3,000,000
Firstar Bank, N.A. 12,750,000 2,250,000
Total $75,650,000 $13,350,000
----------- ===========
<PAGE> 30
PRICING SCHEDULE
The Applicable Fee Rate and the Applicable Margin shall be as
determined by the matrix below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Level 1 Level II Level III Level IV Level V Level VI
Status Status Status Status Status Status
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reference Rating greater A+ or A1 A or A2 A- or A3 BBB+ or BBB or less than or
than or equal to Baa1 Baa2 equal to BBB- or Baa3
- ------------------------------------------------------------------------------------------------------------------------------------
Applicable Margin 0.44475% 0.44475% .50% 0.60% 0.70% 0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Applicable Fee Rate 0.07% 0.08% 0.09% 0.10% 0.12% 0.15%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Level I Status" exists at any date if, on such date, the Guarantor's
Moody's Rate is A1 or better or the Guarantor's S&P is A+ or better.
"Level II Status" exists at any date if, on such date, (i) the
Guarantor has not qualified for Level I Status and (ii) the Guarantor's Moody's
Rating is A2 or better or the Guarantor's S&P Rating is A or better.
"Level III Status" exists at any date if, on such date, (i) the
Guarantor has not qualified for Level I Status or Level II Status and (ii) the
Guarantor's Moody's Rating is A3 or better or the Guarantor's S&P Rating is A-
or better.
"Level IV Status" exists at any date if, on such date, (i) the
Guarantor has not qualified for Level I Status, Level II Status, or Level III
Status and (ii) the Guarantor's Moody's Rating is Baa1 or better or the
Guarantor's S&P rating is BBB+ or better.
"Level V Status" exists at any date if, on such date, (i) the Guarantor
has not qualified for Level I Status, Level II Status, Level III Status or Level
IV Status and (ii) the Guarantor's Moody's Rating is Baa2 or better or the
Guarantor's S&P rating is BBB or better.
"Level VI Status" exists at any date if, on such date, the Guarantor
has not qualified for Level I Status, Level II Status, Level III Status, Level
IV Status or Level V Status.
"Moody's Rating" means, at any time, the rating issued by Moody's
Investors Service, Inc. and then in effect with respect to the Guarantor's
senior unsecured long-term debt securities without third-party credit
enhancement.
<PAGE> 31
"S&P Rating" means, at any time, the rating issued by Standard & Poor's
Rating Services, a division of The McGraw Hill Companies, Inc., and then in
effect with respect to the Guarantor's senior unsecured long-term debt
securities without third-party credit enhancement.
"Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status, Level V Status or Level VI Status.
The Applicable Margin shall be determined in accordance with the
foregoing table based on the Guarantor's Status as determined from its
then-current Moody's and S&P Ratings. The credit rating in effect on any date
for the purposes of this Schedule is that in effect at the close of business on
such date. If at any time the Guarantor has no Moody's Rating or no S&P Rating,
Level VI Status shall exist.
<PAGE> 1
Exhibit 10.24
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT
Dated as of October 16, 1997
(amending the Participation Agreement,
dated as of June 23, 1997)
among
CARDINAL HEALTH, INC.,
as a Lessee, as the Construction Agent and as Guarantor,
CHAPMAN DRUG COMPANY
and
WHITMIRE DISTRIBUTION CORPORATION,
as Lessees,
BMO LEASING (U.S.), INC.,
as Lessor,
BANK OF MONTREAL
and
VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED HEREIN,
as Lenders,
and
BANK OF MONTREAL,
as Administrative Agent for the Lenders
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT
<PAGE> 2
THIS AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT (this "Amendment"),
dated as of October 16, 1997, among CARDINAL HEALTH, INC., an Ohio corporation,
as the Guarantor (together with its permitted successors and assigns, the
"Company" or the "Guarantor") and as the Construction Agent (together with its
permitted successors and assigns, in its capacity as Construction Agent, the
"Construction Agent"); CHAPMAN DRUG COMPANY, a Tennessee corporation ("Chapman")
and WHITMIRE DISTRIBUTION CORPORATION, a Delaware corporation ("Whitmire")
(Chapman, Whitmire and the Company are collectively referred to herein as the
"Lessees"); BMO LEASING (U.S.), INC., a Delaware corporation, as Lessor (the
"Lessor"); BANK OF MONTREAL and the various other financial institutions as are
or may from time to time become Lenders under the Loan Agreement referred to in
the Participation Agreement (together with their respective permitted successors
and assigns, the "Lenders"); and BANK OF MONTREAL, as Administrative Agent for
the Lenders (together with its successors in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, the Lessees, the Lessor, the Lenders and the
Administrative Agent have heretofore entered into a certain Participation
Agreement, dated as of June 23, 1997 (the "Participation Agreement"); and
WHEREAS, pursuant to certain Adoption Agreements dated as of September
30, 1997 and October 10, 1997, Chapman and Whitmire, respectively, became
parties to the Participation Agreement as Lessees; and
WHEREAS, the Company, the Lessees, the Lessor, the Lenders and the
Administrative Agent now desire to amend the Participation Agreement in certain
respects, as hereinafter provided;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. The following terms (whether or not
underscored) when used in this Amendment, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agent" is defined in the preamble.
"Amendment" is defined in the preamble.
"Company" is defined in the preamble.
"Construction Agent" is defined in the preamble.
<PAGE> 3
"Effective Date" is defined in Section 5.3(b).
"Guarantor" is defined in the preamble.
"Lenders" is defined in the preamble.
"Lessees" is defined in the preamble.
"Lessor" is defined in the preamble.
"Participation Agreement" is defined in the first recital.
SECTION 1.2. Other Defined Terms; Construction. For purposes of this
Amendment, capitalized terms used but not defined herein shall have the meanings
assigned to them in Appendix A to the Participation Agreement (such definitions
to be equally applicable to both the singular and plural forms of the terms
defined). Any terms defined by reference to an agreement, instrument or other
documents shall have the meanings so assigned to it whether or not such document
is in effect. Unless otherwise indicated, references in this Amendment to
sections, paragraphs, clauses, appendices, schedules and exhibits are to the
same contained in or attached to this Amendment and the definition of any Person
herein shall include permitted successors and assigns.
ARTICLE II
AMENDMENTS
SECTION 2.1. Amendment to Section 3.1. The last paragraph of Section
3.1 of the Participation Agreement is hereby deleted in its entirety and
replaced with the following:
Notwithstanding any other provision hereof, the Lessor shall
not be obligated to make any Advance with respect to any Property, if,
after giving effect thereto, (i) the aggregate outstanding amounts of
the Loans and Equity Amounts would exceed the aggregate Loan
Commitments or the Lessor Commitment, respectively, (ii) the Land
Acquisition Costs and Existing Improvement Costs for such Property
would exceed 117.6% of the Fair Market Sales Value of such Property as
set forth in the Acquisition Date Appraisal therefor delivered pursuant
to Section 6.3(i) or (iii) the sum of the Land Acquisition Costs,
Existing Improvement Costs, and Property Improvement Costs for such
Property would exceed 117.6% of the Fair Market Sales Value of the
Property as set forth in the As-Built Appraisal of such Property
delivered pursuant to Section 6.2(c) or, if the Lessee has delivered or
caused to be delivered a subsequent Appraisal of such Property to the
Administrative Agent and the Lessor, the sum of the Land Acquisition
Costs, Existing Improvement Costs and Property Improvement Costs for
such Property would exceed 117.6% of the Fair Market Sales Value of
such Property set forth in such subsequent Appraisal. Lessor shall not
be obligated to make any Advance with respect to any Property not
meeting the requirements
<PAGE> 4
set forth under this Section 3.1 regardless of whether Lessor
previously waived such requirements with regard to any Property on any
previous occasion.
SECTION 2.2. Amendments to Article VI.
(a) Section 6.2(c) of the Participation Agreement is hereby deleted in
its entirety and replaced with the following.
(c) As-Built Appraisal. With respect to the first Construction
Advance for each Property, each of the Administrative Agent and the
Lessor shall have received, at least five (5) Business Days prior to
such Construction Advance, an As-Built Appraisal of the applicable
Property, in form and substance satisfactory to the Administrative
Agent and the Lessor, which As-Built Appraisal shall show that (i) in
the case of Property to be acquired by the Lessor in fee simple, as of
the Completion Date and as of the last day of the Basic Term, with
respect to such Property, the Fair Market Sales Value of such Property,
including all Improvements thereon and to be constructed thereon in
accordance with the Plans and Specifications for such Property
(excluding material handling equipment), shall not be less than 85% of
the sum of the Land Acquisition Cost, Existing Improvement Costs, and
Estimated Improvement Costs (excluding material handling equipment) for
such Property and (ii) in the case of Property covered by a Ground
Lease, as of the Completion Date and as of the last day of the Basic
Term with respect to such Property, the Fair Market Sales Value of the
Improvements to be constructed thereon in accordance with the Plans and
Specifications for such Property (excluding material handling
equipment) shall not be less than 85% of the Estimated Improvement
Costs (excluding material handling equipment) for such Property. With
respect to the As-Built Appraisal, it is agreed that the value of any
material handling equipment will not be included therein.
(b) Section 6.3(i) of the Participation Agreement is hereby deleted in
its entirety and replaced with the following.
(i) Acquisition Date Appraisal. At least five (5) Business
Days prior to such Acquisition Date, the Administrative Agent and the
Lessor shall have received an Acquisition Date Appraisal of the
applicable Property in form and substance satisfactory to the
Administrative Agent and the Lessor (which may be in the form of a
summary report with comparables if such Acquisition Date Appraisal is
for Land only), which Acquisition Date Appraisal shall show that, as of
such Acquisition Date, the Fair Market Sales Value of such Property is
not less than 85% of the sum of (i) the Land Acquisition Cost for such
Property and (ii) all Existing Improvement Costs.
(c) Section 6.2 of the Participation Agreement is hereby amended to
include the following Section 6.2(o) after Section 6.2(n):
(o) Subsequent Appraisal. With respect to any Advance relating
to the purchase of material handling equipment for each Property, each
of the Administrative Agent and the Lessor shall have received, at
least five (5) Business Days prior to such Advance, an Appraisal of the
applicable Property, in form and substance satisfactory to the
Administrative Agent and the Lessor, which Subsequent Appraisal shall
show that (i) in the case of Property acquired by the Lessor in fee
simple, as of the Completion Date and as of the last day of the Basic
Term, with respect to such Property, the Fair Market
<PAGE> 5
Sales Value of such Property, including all Improvements thereon and to
be constructed thereon in accordance with the Plans and Specifications
for such Property, shall not be less than 85% of the sum of the Land
Acquisition Cost, Existing Improvement Costs, and Estimated Improvement
Costs for such Property and (ii) in the case of Property covered by a
Ground Lease, as of the Completion Date and as of the last day of the
Basic Term with respect to such Property, the Fair Market Sales Value
of the Improvements to be constructed thereon in accordance with the
Plans and Specifications for such Property shall not be less than 85%
of the Estimated Improvement Costs for such Property. With respect to
the Subsequent Appraisal, it is agreed that material handling equipment
will be valued definitively at its installed cost, based upon purchase
orders, contracts or other similar documentation, as opposed to its
salvage value and such valuation shall not be based upon samples of
such Equipment.
SECTION 2.3. Amendment to Exhibit A of the Participation Agreement.
Exhibit A to the Participation Agreement is hereby amended and restated as
described on Exhibit A hereto.
SECTION 2.4. Amendment to Exhibit B of the Participation Agreement.
Section 3 of Exhibit B to the Participation Agreement is hereby deleted in its
entirety and replaced with the following:
3. With respect to each Subject Property, after giving effect
to the making of the Current Advance and the allocation thereof among
the Subject Properties, the sum of the Land Acquisition Costs, Existing
Improvement Costs and Property Improvement Costs for such Subject
Property will not exceed 117.6% of the Fair Market Sales Value of such
Property as of the Completion Date set forth in the Appraisal delivered
pursuant to Section 6.2(c) of the Participation Agreement, or, if the
Lessee has delivered or caused to be delivered a subsequent Appraisal
of such Subject Property to the Administrative Agent and the Lessor,
the sum of the Land Acquisition Costs, Existing Improvement Costs and
Property Improvement Costs for such Subject Property will not exceed
117.6% of the Fair Market Sales Value of such Property set forth in
such subsequent Appraisal.
SECTION 2.5. Amendment to Appendix A of the Participation Agreement.
(a) The definition of "Estimated Improvement Costs" in Appendix A to
the Participation Agreement is hereby deleted in its entirety and replaced with
the following:
"Estimated Improvement Costs" means, with respect to any
Property as of the date of the first Construction Advance therefor, an
amount equal to the aggregate amount which the Construction Agent for
such Property in good faith expects to be expended in order to achieve
Completion with respect to Improvements for such Property; provided,
however, that in no event shall the sum of the Land Acquisition Costs,
Existing Improvement Costs and Estimated Improvement Costs for any
Property exceed 117.6% of the Fair Market Sales Value of such Property
indicated on the As-Built Appraisal of such Property delivered pursuant
to Section 6.2(c) of the Participation Agreement or, if the Lessee has
delivered or caused to be delivered a subsequent Appraisal of such
Property to the Administrative Agent and the Lessor, the sum of the
Land Acquisition Costs, Existing Improvement Costs and Estimated
Improvement Costs for such Subject Property will not exceed 117.6% of
the Fair Market Sales Value of such Property set forth in such
subsequent Appraisal.
<PAGE> 6
(b) The definition of "As-Built Appraisal" in Appendix A to the
Participation Agreement is hereby deleted in its entirety and replaced with the
following:
"As-Built Appraisal" means, with respect to any Property, an
Appraisal of such Property appraising the Fair Market Sales Value of
such Property as built in accordance with the Plans and Specifications
therefor, as such As-Built Appraisal is described in Section 6.2(c) of
the Participation Agreement.
(c) Appendix A to the Participation Agreement shall be amended to
include therein in alphabetical order the following definition:
"Subsequent Appraisal" means, with respect to any Property, an
Appraisal of such Property appraising the Fair Market Sales Value of
such Property as built in accordance with the Plans and Specifications
therefor, as such Subsequent Appraisal is described in Section 6.2(o)
of the Participation Agreement.
SECTION 2.6. Amendment to Schedule I to the Participation Agreement.
Schedule I to the Participation Agreement is hereby amended and restated in its
entirety as set forth on Exhibit B hereto and shall be effective retroactive to
the Documentation Date.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1. Conditions to Effectiveness. The effectiveness of this
Amendment shall be subject to the prior or concurrent satisfaction of each of
the conditions precedent set forth in this Article III.
SECTION 3.1.1. The Company hereby represents and warrants that the
execution, delivery and performance of this Amendment and each other document,
if any, to be executed on behalf of the Company in connection with this
Amendment, is duly authorized, valid and binding, and the Lenders, the Lessor
and the Administrative Agent may conclusively rely on such representation and
warranty.
SECTION 3.1.2. Compliance with Warranties, No Default, etc. Both before
and after giving effect to this Amendment the following statements shall be true
and correct:
(a) to the best knowledge of a Responsible Officer of the
Company, no Default shall have occurred and be continuing as of the
date hereof;
(b) no Applicable Law shall exist that would (i) make it
illegal for the Company to (x) execute and deliver this Amendment and
each other document, if any, to be executed by it in connection with
this Amendment, (y) perform any obligation under this Amendment and
each other document, if any, to be executed by it in connection with
this Amendment or any of the other Operative Documents, or (ii) subject
the Company, the Lessees, the Lessor, the Administrative Agent or any
Lender to any penalty or to other liability under or pursuant to any
Applicable Law in connection with any of the foregoing, subject,
however, in the case of (i)(x) and (y) and (ii), to Section 11.5(b) of
the Participation Agreement;
<PAGE> 7
(c) no actions or proceedings shall have been instituted or
threatened by or before any Governmental Authority nor shall any
Applicable Law have been issued or proposed to be issued by any
Governmental Authority to set aside, restrain, enjoin or prevent the
consummation of the transactions contemplated by any of the Operative
Documents, this Amendment and each other document, if any, to be
executed by it in connection with this Amendment;
(d) each representation and warranty made by the Company in
this Amendment or any of the Operative Documents that is (i) qualified
as to materiality shall be true and correct (to the extent of such
qualification) on and as of the date hereof (unless such representation
and warranty specifically relates only to an earlier date set forth
therein, in which case such representation and warranty shall be true
and correct (to the extent of such qualification) on and as of such
earlier date) in all respects and (ii) not qualified as to materiality
shall be true and correct on and as of the date hereof (unless such
representation and warranty specifically relates only to an earlier
date set forth therein, in which case such representation and warranty
shall be true and correct on and as of such earlier date) in all
material respects; and
(e) since June 30, 1997, no material adverse change shall have
occurred with respect to the Company.
SECTION 3.1.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Company shall be satisfactory
in form and substance to the Lessor, each Lender, the Administrative Agent and
their respective counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lessor, each Lender and the Administrative Agent
to enter into this Amendment, the Company hereby reaffirms, as of the date
hereof, its representations and warranties contained in Section 7.2, 7.3 and 7.4
of the Participation Agreement and additionally represents and warrants unto the
Lessor, each Lender and the Administrative Agent as set forth in this Article
IV.
SECTION 4.1. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Company of this Amendment and each other
document, if any, executed or to be executed by it in connection with this
Amendment, are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, and do not
(a) contravene the Company's charter or bylaws;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Company; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Company's properties except as expressly
contemplated by the Operative Documents.
<PAGE> 8
SECTION 4.2. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Company of this Amendment or any other document,
if any, to be executed by it in connection with this Amendment.
SECTION 4.3. Validity, etc. This Amendment constitutes, and each other
document executed by the Company in connection with this Amendment, if any,
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Company enforceable in accordance with their
respective terms.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Ratification of and References to the Participation
Agreement. This Amendment shall be deemed to be an amendment to the
Participation Agreement, and the Participation Agreement, as amended hereby, is
hereby ratified, approved and confirmed in each and every respect. All
references to the Participation Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Participation
Agreement as amended hereby.
SECTION 5.2. Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof.
SECTION 5.3. Execution in Counterparts, Effectiveness, etc.
(a) This Amendment may be executed by the parties hereto in any number
of counterparts and on separate counterparts, each of which shall be an original
but all of which together shall constitute one and the same instrument.
(b) This Amendment shall become effective as of October 16, 1997 (the
"Effective Date") upon satisfaction of each of the conditions precedent set
forth in Article III.
SECTION 5.4. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CARDINAL HEALTH, INC.,
as Lessee, Construction Agent and
Guarantor
By /s/ Dave Bearman
--------------------------------
Name: Dave Bearman
Title: Chief Financial Officer
CHAPMAN DRUG COMPANY,
as Lessee
By /s/ Dave Bearman
--------------------------------
Name: Dave Bearman
Title: Executive Vice President - Finance
WHITMIRE DISTRIBUTION COMPANY,
as Lessee
By /s/ Dave Bearman
--------------------------------
Name: Dave Bearman
Title: Executive Vice President - Finance
BMO LEASING (U.S.), INC.,
as Lessor
By /s/
--------------------------------
Name:
Title:
BANK OF MONTREAL,
as Administrative Agent
for Lenders
By /s/
--------------------------------
Name:
Title:
BANK OF MONTREAL,
as Lender
By /s/
--------------------------------
Name:
Title:
<PAGE> 10
EXHIBIT A
---------
EXHIBIT A
TO PARTICIPATION AGREEMENT
FORM OF FUNDING REQUEST
TO: Bank of Montreal,
as Administrative Agent for the Lenders
BMO Leasing (U.S.), Inc.,
as Lessor
This Funding Request is delivered to you pursuant to Section 6.2(a) of the
Participation Agreement dated as of June 23, 1997 (the "Participation
Agreement"), entered into by and among Cardinal Health, Inc., a corporation
organized under the laws of the State of Ohio (together with its permitted
successors and assigns, the "Company"), as a Lessee, as Construction Agent and
as the Guarantor; the Subsidiaries of the Company that may from time to time
become parties thereto, as Lessees; BMO LEASING (U.S.), INC., a Delaware
corporation, as Lessor under the Master Lease (the "Lessor"); the various
financial institutions as are or may from time to time become Lenders under the
Loan Agreement (together with their respective permitted successors and assigns,
the "Lenders"); and BANK OF MONTREAL, as Administrative Agent for the Lenders.
Capitalized terms used but not otherwise defined herein have the respective
meanings specified in Appendix A to the Participation Agreement, and the rules
of interpretation set forth in Appendix A to the Participation Agreement shall
apply to this Funding Request.
[NAME OF APPLICABLE LESSEE] (the "Lessee") hereby notifies you that:
(i) The Lessee requests the making of an Advance in the amount of
$_____________ on [INSERT REQUESTED FUNDING DATE] (the "Proposed
Funding Date");
(ii) The Proposed Funding Date [will] [will not] also be an
Acquisition Date [and will relate to the first Construction Advance
for such Property];
<PAGE> 11
(iii) the Advance will be allocated among the Subject Properties
and their respective costs as set forth on Schedule A hereto (and pro
rata portions of the related Equity Amounts and Loans shall likewise
be deemed to be so allocated);
(iv) after giving effect to the Advance requested hereby, the
Property Cost for each Property in respect of which the Advance is
being drawn is set forth on Schedule A hereto;
(v) with respect to each acquisition of Property, the following
information is set forth on Schedule B hereto: (A) a description of
the Subject Property, (B) the Seller of the Subject Property (or, in
the case of the Headquarters Building, the ground lessor of such
Subject Property), (C) the Land Acquisition Cost and Existing
Improvement Costs, if any, for the Subject Property, (D) the
Transaction Expenses relating to Subject Property that are to be paid
with such Advance, and (E) the Estimated Improvement Costs for the
Subject Property;
(vi) the aggregate amount of Transaction Expenses relating to the
Subject Property that is to be paid with this Advance is set forth on
Schedule A hereto;
(vii) the Proposed Funding Date [will] [will not] relate to the
funding of material handling equipment for such Property; and
(viii) with respect to the acquisition of material handling
equipment, the following information is set forth on Schedule C
hereto: (A) a description of the Subject Property, (B) the cost of the
material handling equipment and (C) the Estimated Improvement Costs
for the Subject Property.
In connection with such requested Advance, the Lessee hereby represents and
warrants to you as follows:
(a) On the Proposed Funding Date, both immediately before and
after giving effect to the making of the requested Advance and the
application of the proceeds thereof, the statements made by the
Company and the Lessee in Section 7.4 of the Participation Agreement
are true and correct in all material respects.
(b) After giving effect to the Advance requested hereby (i) the
aggregate outstanding amounts of each of the Loans and the Equity
Amounts would not exceed the aggregate Loan Commitments or the Lessor
Commitment, respectively, (ii) the Land Acquisition Costs and Existing
Improvement Costs for such Property will not exceed 117.6% of the Fair
Market Sales Value of such Property as set forth in the Acquisition
Date Appraisal therefor delivered pursuant to Section 6.3(i) of the
Participation Agreement and (iii) the sum of the Land Acquisition
Costs, Existing Improvement Costs, and Property Improvement Costs for
such Property would not exceed 117.6% of the Fair Market Sales Value
of the Property as set forth in the As-Built Appraisal of such
Property delivered pursuant to Section 6.2(c) of the Participation
Agreement or, if the Lessee has delivered or caused to be delivered a
subsequent Appraisal of such Property to the Administrative Agent and
the Lessor, the sum of the Land Acquisition Costs, Existing
Improvement Costs and Property Improvement Costs for such Property
will not exceed 117.6% of the Fair Market Sales Value of such Property
set forth in such subsequent Appraisal.
<PAGE> 12
(c) All of the conditions precedent set forth in Article VI of
the Participation Agreement applicable to the Advance requested hereby
have been satisfied or waived.
Please wire transfer the proceeds of the Advance to the accounts specified
by the Lessee in written notice to the Administrative Agent.
The Lessee has caused this Funding Request to be executed and delivered by
its duly authorized Responsible Employee as of this _____ day of _________,
199_*/.
[Name of Lessee
By
-----------------------------
Name:
Title:
SCHEDULE A TO FUNDING REQUEST
<TABLE>
ALLOCATION OF ADVANCES
----------------------
<CAPTION>
==================================================================================================================================
Land Acquisition
Costs (excluding Property Aggregate
Transaction Improvement Cost of Property Cost Transaction
Expenses) and Costs (excluding Material (all Advances Transaction Expenses Estimated
Existing Material Handling to date, Expenses (all Advances Equipment
Property Improvement Handling Equipment) including (Current to date, Cost of
Description Lease Supp. Cost (Current (Current Advance (Current Current Advance including Property at
(City, State) No. Advance Only) Only) Advance Only) Advance) Only) Current Advance) Completion
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
2.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
3.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
4.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
5.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
*/ The Funding Request is required to be delivered not later than 12:00 noon,
New York City time, three (3) Business Days prior to the proposed Funding
Date.
<PAGE> 13
SCHEDULE B TO FUNDING REQUEST
INFORMATION REQUIRED
--------------------
FOR FUNDING ACQUISITION OF LAND
-------------------------------
1. Description of the Subject Property: ______________________.
2. The Subject Property consists of [Land only] [Land and Improvements]..
3. Seller of the Subject Property: ____________________.
4. Land Acquisition Cost and Existing Improvement Cost, if any, for the
Subject Property: Indicated on Schedule A.
5. Aggregate amount of Transaction Expenses relating to the Subject
Property that is to be paid with this Advance: $_______________.
6. Estimated Improvement Costs for the Subject Property:
$_________________.
SCHEDULE C TO FUNDING REQUEST
INFORMATION REQUIRED
--------------------
FOR FUNDING MATERIAL HANDLING EQUIPMENT
---------------------------------------
1. Description of the Subject Property: ______________________________.
2. Cost of material handling equipment: $_____________.
3. Estimated Improvement Costs for the Subject Property: $____________.
<PAGE> 14
EXHIBIT B
---------
SCHEDULE I
TO PARTICIPATION AGREEMENT
<TABLE>
COMMITMENTS
<CAPTION>
==============================================================================
PARTICIPANT COMMITMENT COMMITMENT
PERCENTAGE
<S> <C> <C>
Lenders
-------
Bank of Montreal $66,400,000 83.00%
Total Lender Commitments $66,400,000 83.00%
Lessor
------
BMO Leasing (U.S.), Inc. $13,600,000 17.00%
======
TOTAL: $80,000,000 100.00%
==============================================================================
</TABLE>
<PAGE> 15
================================================================================
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
Dated as of June ___, 1999
(amending the Participation Agreement,
dated as of June 23, 1997, as amended by
Amendment No. 1 to Participation Agreement,
dated as of October 16, 1997)
among
CARDINAL HEALTH, INC.,
as a Lessee, as the Construction Agent and as Guarantor,
CARDINAL SOUTHEAST, INC.
(successor by merger with CHAPMAN DRUG COMPANY)
and
WHITMIRE DISTRIBUTION CORPORATION,
as Lessees,
BMO GLOBAL CAPITAL SOLUTIONS, INC.
(successor in interest to BMO LEASING (U.S.), INC.),
as Lessor,
BANK OF MONTREAL
and
VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED HEREIN,
as Lenders,
and
BANK OF MONTREAL,
<PAGE> 16
as Administrative Agent for the Lenders
================================================================================
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
THIS AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT (this "AMENDMENT"),
dated as of June ___, 1999, among CARDINAL HEALTH, INC., an Ohio corporation, as
the Guarantor (together with its permitted successors and assigns, the "COMPANY"
or the "GUARANTOR") and as the Construction Agent (together with its permitted
successors and assigns, in its capacity as Construction Agent, the "CONSTRUCTION
AGENT"); CARDINAL SOUTHEAST, INC. (successor by merger with CHAPMAN DRUG
COMPANY), a Mississippi corporation ("CARDINAL SOUTHEAST") and WHITMIRE
DISTRIBUTION CORPORATION, a Delaware corporation ("WHITMIRE") (Cardinal
Southeast, Whitmire and the Company are collectively referred to herein as the
"Lessees"); BMO GLOBAL CAPITAL SOLUTIONS, INC. (successor in interest to BMO
LEASING (U.S.), INC.), a Delaware corporation, as Lessor (the "LESSOR"); BANK OF
MONTREAL and the various other financial institutions as are or may from time to
time become Lenders under the Loan Agreement referred to in the Participation
Agreement (together with their respective permitted successors and assigns, the
"LENDERS"); and BANK OF MONTREAL, as Administrative Agent for the Lenders
(together with its successors in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, the Lessees, the Lessor, the Lenders and the
Administrative Agent have heretofore entered into a certain Participation
Agreement, dated as of June 23, 1997, as amended by Amendment No. 1 to
Participation Agreement, dated as of October 16, 1997 (collectively, the
"PARTICIPATION AGREEMENT"); and
WHEREAS, pursuant to certain Adoption Agreements dated as of September
30, 1997 and October 10, 1997, Cardinal Southeast and Whitmire, respectively,
became parties to the Participation Agreement as Lessees; and
WHEREAS, the Company, the Lessees, the Lessor, the Lenders and the
Administrative Agent now desire to amend the Participation Agreement in certain
respects, as hereinafter provided;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE> 17
ARTICLE I
DEFINITIONS
SECTION I.1. CERTAIN DEFINED TERMS. The following terms (whether or not
underscored) when used in this Amendment, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"AMENDMENT" is defined in the PREAMBLE.
"COMPANY" is defined in the PREAMBLE.
"CONSTRUCTION AGENT" is defined in the PREAMBLE.
"EFFECTIVE DATE" is defined in SECTION 5.3(b).
"GUARANTOR" is defined in the PREAMBLE.
"LENDERS" is defined in the PREAMBLE.
"LESSEES" is defined in the PREAMBLE.
"LESSOR" is defined in the PREAMBLE.
"PARTICIPATION AGREEMENT" is defined in the FIRST RECITAL.
SECTION I.2. OTHER DEFINED TERMS; CONSTRUCTION. For purposes of this
Amendment, capitalized terms used but not defined herein shall have the meanings
assigned to them in Appendix A to the Participation Agreement (such definitions
to be equally applicable to both the singular and plural forms of the terms
defined). Any terms defined by reference to an agreement, instrument or other
documents shall have the meanings so assigned to it whether or not such document
is in effect. Unless otherwise indicated, references in this Amendment to
sections, paragraphs, clauses, appendices, schedules and exhibits are to the
same contained in or attached to this Amendment and the definition of any Person
herein shall include permitted successors and assigns.
-3-
<PAGE> 18
ARTICLE II
AMENDMENTS
SECTION II.1. AMENDMENT TO SECTION 3.1. The last paragraph of SECTION
3.1 of the Participation Agreement is hereby deleted in its entirety and
replaced with the following:
Notwithstanding any other provision hereof, the
Lessor shall not be obligated to make any Advance with respect
to any Property, if, after giving effect thereto, the
aggregate outstanding amounts of the Loans and Equity Amounts
would exceed the aggregate Loan Commitments or the Lessor
Commitment, respectively.
SECTION II.2. AMENDMENTS TO ARTICLE VI.
SECTION 6.2 of the Participation Agreement is hereby amended to delete
Section 6.2(o).
SECTION 2.3. AMENDMENT TO EXHIBIT A OF THE PARTICIPATION AGREEMENT.
EXHIBIT A to the Participation Agreement is hereby amended and restated as
described on EXHIBIT A hereto.
SECTION 2.4. AMENDMENT TO EXHIBIT B OF THE PARTICIPATION AGREEMENT.
SECTION 3 of EXHIBIT B to the Participation Agreement is hereby deleted in its
entirety.
SECTION 2.5. AMENDMENT TO APPENDIX A OF THE PARTICIPATION AGREEMENT.
(a) The definition of "ESTIMATED IMPROVEMENT COSTS" in APPENDIX A to
the Participation Agreement is hereby deleted in its entirety and replaced with
the following:
"ESTIMATED IMPROVEMENT COSTS" means, with respect to any
Property as of the date of the first Construction Advance therefor, an
amount equal to the aggregate amount which the Construction Agent for
such Property in good faith expects to be expended in order to achieve
Completion with respect to Improvements for such Property.
(b) The definition of "Outside Completion Date" in Appendix A to the
Participation Agreement is hereby deleted in its entirety and replaced with the
following:
<TABLE>
<CAPTION>
------------------------------------------------ -----------------------------------------------
Project Outside Completion Date
------------------------------------------------ -----------------------------------------------
<S> <C>
1. Corporate Headquarters September 30, 1999
------------------------------------------------ -----------------------------------------------
</TABLE>
-4-
<PAGE> 19
<TABLE>
<CAPTION>
------------------------------------------------ -----------------------------------------------
Project Outside Completion Date
------------------------------------------------ -----------------------------------------------
<S> <C>
2. Knoxville, Tennessee September 30, 1999
------------------------------------------------ -----------------------------------------------
3. Auburn, Washington September 30, 1999
------------------------------------------------ -----------------------------------------------
4. Hudson, Wisconsin October 30, 1999
------------------------------------------------ -----------------------------------------------
5. Greensboro, North Carolina December 26, 1999
------------------------------------------------ -----------------------------------------------
</TABLE>
(c) Appendix A to the Participation Agreement shall be amended to
delete the definition of SUBSEQUENT APPRAISAL.
SECTION 2.6. GREENSBORO FACILITY. The Lessees, the Construction Agent
and the Guarantor acknowledge and agree that there shall be no further Funding
Requests with respect to the Property located in Greensboro, North Carolina, and
that the applicable Lessee or its designee shall, in accordance with Section
18.1 of the Lease, purchase the Property located in Greensboro, North Carolina
on or before June 30, 1999. Lessor and the Administrative Agent waive the
requirement for delivery of a Purchase Notice required in Section 18.1 of the
Lease and the restriction governing the purchase of less than all of the
Properties.
SECTION 2.7. ACCURACY OF INFORMATION. The Lessee, the Construction
Agent and the Guarantor acknowledge and agree that (i) the information set forth
on Schedule 1 attached hereto provided by the Cardinal Health, Inc. Corporate
Treasury Department is true and correct in all respects, and is intended to
replace and supersede the financial information previously provided to the
Lessor and the Lenders with respect only to those specific categories delineated
on SCHEDULE 1 and (ii) the amounts referenced on SCHEDULE 1 with respect to each
Property represent, in each case, the current good faith estimate of the total
amounts required to be expended after the date hereof to achieve Completion of
each such Property. In the event that during the Construction of the Properties
on or after the date hereof, any funds in excess of the aggregate of the Loan
Commitments and Lessor Commitment shall be required to Complete the Properties,
then immediately upon becoming aware of the need for such additional funds, the
Lessees and the Guarantor shall provide such additional funds, and all
obligations of the Lessor and the Lenders to make additional Advances shall be
suspended until the Lessees and the Guarantor shall have provided such
additional funds. The Lessees shall, within twenty (20) Business Days of the
date hereof, increase the insured amount of each title policy insuring the
Lessor and Lenders for each Property (other than the Greensboro Property) to the
amounts reflected on SCHEDULE 1 as Total Estimated Cost, which increase shall
be evidenced by an
-5-
<PAGE> 20
endorsement to each title policy, satisfactory in form and substance to the
Lessor and the Lenders.
SECTION 2.8. MECHANIC'S LIENS. The Lessor and the Lenders agree that,
provided no other Event of Default shall have occurred, the Lessor and the
Lenders shall not exercise any remedies under the Operative Documents solely as
a result of the mechanic's liens described on SCHEDULE 2 (the "MECHANIC'S
LIENS") until such time as (i) a legal or other proceeding shall have been
commenced against the Lessor, any Lender or the Dublin, Ohio Property or any
interest therein in connection with or in any way arising from any such
Mechanic's Lien or (ii) in the good faith determination of the Lessor or any
Lender, any such Mechanic's Lien shall cease to be subordinate in all respects
to, or may impair, the liens of any of the Operative Documents. The Lessees and
the Guarantor agree that they shall (x) immediately upon notice from the Lessor
or any Lender of the occurrence of, and immediately upon any Lessee or the
Guarantor obtaining knowledge of, any event described in CLAUSE (i) or (ii)
above, cause all of the Mechanic's Liens to be bonded and released in a manner
satisfactory to the Lessor and the Lenders and (y) provide the Lessor and the
Lenders with copies of all notices, correspondence, proceedings and other
documents and information relating to such Mechanic's Liens within three (3)
Business Days of receipt thereof.
SECTION 2.9. FUNDING RESTRICTIONS. Any restrictions on Fundings in any
of the Operative Documents based on the Fair Market Sales Value of any Property
are hereby deleted in their entirety.
ARTICLE III
CONDITIONS PRECEDENT
SECTION III.1. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment shall be subject to the prior or concurrent satisfaction of each of
the conditions precedent set forth in this ARTICLE III.
SECTION III.1.1. The Company hereby represents and warrants that the
execution, delivery and performance of this Amendment and each other document,
if any, to be executed on behalf of the Company in connection with this
Amendment, is duly authorized, valid and binding, and the Lenders, the Lessor
and the Administrative Agent may conclusively rely on such representation and
warranty.
SECTION III.1.2. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both
before (other than with respect to statement (a)) and
-6-
<PAGE> 21
after giving effect to this Amendment the following statements shall be true and
correct:
(a) to the best knowledge of a Responsible Officer of the
Company, no Default shall have occurred and be continuing as of the
date hereof;
(b) no Applicable Law shall exist that would (i) make it
illegal for the Company to (x) execute and deliver this Amendment and
each other document, if any, to be executed by it in connection with
this Amendment, (y) perform any obligation under this Amendment and
each other document, if any, to be executed by it in connection with
this Amendment or any of the other Operative Documents, or (ii) subject
the Company, the Lessees, the Lessor, the Administrative Agent or any
Lender to any penalty or to other liability under or pursuant to any
Applicable Law in connection with any of the foregoing.
(c) no actions or proceedings shall have been instituted or
threatened by or before any Governmental Authority nor shall any
Applicable Law have been issued or proposed to be issued by any
Governmental Authority to set aside, restrain, enjoin or prevent the
consummation of the transactions contemplated by any of the Operative
Documents, this Amendment and each other document, if any, to be
executed by it in connection with this Amendment;
(d) each representation and warranty made by the Company in
this Amendment or any of the Operative Documents that is (i) qualified
as to materiality shall be true and correct (to the extent of such
qualification) on and as of the date hereof (unless such representation
and warranty specifically relates only to an earlier date set forth
therein, in which case such representation and warranty shall be true
and correct (to the extent of such qualification) on and as of such
earlier date) in all respects and (ii) not qualified as to materiality
shall be true and correct on and as of the date hereof (unless such
representation and warranty specifically relates only to an earlier
date set forth therein, in which case such representation and warranty
shall be true and correct on and as of such earlier date) in all
material respects; and
(e) since March 31, 1999, no material adverse change shall
have occurred with respect to the Company.
SECTION III.1.3. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Company shall be satisfactory
in form and substance to the
-7-
<PAGE> 22
Lessor, each Lender, the Administrative Agent and their respective counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lessor, each Lender and the Administrative Agent
to enter into this Amendment, the Company hereby reaffirms, as of the date
hereof, its representations and warranties contained in Section 7.2, 7.3 and 7.4
of the Participation Agreement and additionally represents and warrants unto the
Lessor, each Lender and the Administrative Agent as set forth in this ARTICLE
IV.
SECTION IV.1. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution,
delivery and performance by the Company of this Amendment and each other
document, if any, executed or to be executed by it in connection with this
Amendment, are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, and do not
(a) contravene the Company's charter or bylaws;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Company; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Company's properties except as expressly
contemplated by the Operative Documents.
SECTION IV.2. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Company of this Amendment or any other document,
if any, to be executed by it in connection with this Amendment.
SECTION IV.3. VALIDITY, ETC. This Amendment constitutes, and each other
document executed by the Company in connection with this Amendment, if any,
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Company enforceable in accordance with their
respective terms.
-8-
<PAGE> 23
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION V.1. RATIFICATION OF AND REFERENCES TO THE PARTICIPATION
AGREEMENT. This Amendment shall be deemed to be an amendment to the
Participation Agreement, and the Participation Agreement, as amended hereby, is
hereby ratified, approved and confirmed in each and every respect. All
references to the Participation Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Participation
Agreement as amended hereby.
SECTION V.2. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof.
SECTION V.3. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC.
(a) This Amendment may be executed by the parties hereto in any number
of counterparts and on separate counterparts, each of which shall be an original
but all of which together shall constitute one and the same instrument.
(b) This Amendment shall become effective (the "EFFECTIVE DATE") upon
satisfaction of each of the conditions precedent set forth in ARTICLE III.
SECTION V.4. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
-9-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CARDINAL HEALTH, INC.,
as Lessee, Construction Agent and Guarantor
By /s/ Leonard Kuhr
-------------------------------
Name: Leonard Kuhr
Title: Corporate Vice-President and
Treasurer
S-1
<PAGE> 25
CARDINAL SOUTHEAST, INC.
(successor by merger with
Chapman Drug Company), as Lessee
By /s/ Leonard Kuhr
-------------------------------
Name: Leonard Kuhr
Title: Corporate Vice-President and
Treasurer
S-2
<PAGE> 26
WHITMIRE DISTRIBUTION COMPANY,
as Lessee
By /s/ Leonard Kuhr
-------------------------------
Name: Leonard Kuhr
Title: Corporate Vice-President and
Treasurer
S-3
<PAGE> 27
BMO GLOBAL CAPITAL SOLUTIONS, INC.
(successor in interest to BMO LEASING
(U.S.), INC.),
as Lessor
By /s/ Joseph A. Bliss
-------------------------------
Name: Joseph A. Bliss
Title: Vice President
S-4
<PAGE> 28
BANK OF MONTREAL,
as Administrative Agent
for Lenders
By /s/ Leon H. Sinclair
-------------------------------
Name: Leon H. Sinclair
Title: Director
S-5
<PAGE> 29
BANK OF MONTREAL,
as Lender
By /s/ Leon H. Sinclair
-------------------------------
Name: Leon H. Sinclair
Title: Director
S-6
<PAGE> 30
EXHIBIT A
---------
EXHIBIT A
TO PARTICIPATION AGREEMENT
FORM OF FUNDING REQUEST
TO: Bank of Montreal,
as Administrative Agent for the Lenders
BMO Global Capital Solutions, Inc.
(successor in interest to BMO Leasing
(U.S.), Inc.),
as Lessor
This Funding Request is delivered to you pursuant to Section 6.2(a) of the
Participation Agreement dated as of June 23, 1997 (the "Participation
Agreement"), entered into by and among Cardinal Health, Inc., a corporation
organized under the laws of the State of Ohio (together with its permitted
successors and assigns, the "Company"), as a Lessee, as Construction Agent and
as the Guarantor; the Subsidiaries of the Company that may from time to time
become parties thereto, as Lessees; BMO GLOBAL CAPITAL SOLUTIONS, INC.
(successor in interest to BMO LEASING (U.S.), INC.), a Delaware corporation, as
Lessor under the Master Lease (the "Lessor"); the various financial institutions
as are or may from time to time become Lenders under the Loan Agreement
(together with their respective permitted successors and assigns, the
"Lenders"); and BANK OF MONTREAL, as Administrative Agent for the Lenders.
Capitalized terms used but not otherwise defined herein have the respective
meanings specified in Appendix A to the Participation Agreement, and the rules
of interpretation set forth in Appendix A to the Participation Agreement shall
apply to this Funding Request.
[NAME OF APPLICABLE LESSEE] (the "Lessee") hereby notifies you that:
(i) The Lessee requests the making of an Advance in the amount of
$_____________ on [INSERT REQUESTED FUNDING DATE] (the "Proposed
Funding Date");
(ii) The Proposed Funding Date [will] [will not] also be an
Acquisition Date [and will relate to the first Construction Advance
for such Property];
(iii) the Advance will be allocated among the Subject Properties
and their respective costs as set forth on Schedule A hereto (and pro
rata portions of
<PAGE> 31
the related Equity Amounts and Loans shall likewise be deemed to be so
allocated);
(iv) after giving effect to the Advance requested hereby, the
Property Cost for each Property in respect of which the Advance is
being drawn is set forth on Schedule A hereto;
(v) with respect to each acquisition of Property, the following
information is set forth on Schedule B hereto: (A) a description of
the Subject Property, (B) the Seller of the Subject Property (or, in
the case of the Headquarters Building, the ground lessor of such
Subject Property), (C) the Land Acquisition Cost and Existing
Improvement Costs, if any, for the Subject Property, (D) the
Transaction Expenses relating to Subject Property that are to be paid
with such Advance, and (E) the Estimated Improvement Costs for the
Subject Property;
(vi) the aggregate amount of Transaction Expenses relating to the
Subject Property that is to be paid with this Advance is set forth on
Schedule A hereto;
(vii) the Proposed Funding Date [will] [will not] relate to the
funding of material handling equipment for such Property; and
(viii) with respect to the acquisition of material handling
equipment, the following information is set forth on Schedule C
hereto: (A) a description of the Subject Property, (B) the cost of the
material handling equipment and (C) the Estimated Improvement Costs
for the Subject Property.
In connection with such requested Advance, the Lessee hereby represents and
warrants to you as follows:
(a) On the Proposed Funding Date, both immediately before and
after giving effect to the making of the requested Advance and the
application of the proceeds thereof, the statements made by the
Company and the Lessee in Section 7.4 of the Participation Agreement
are true and correct in all material respects.
(b) After giving effect to the Advance requested hereby the
aggregate outstanding amounts of each of the Loans and the Equity
Amounts would not exceed the aggregate Loan Commitments or the Lessor
Commitment, respectively.
(c) All of the conditions precedent set forth in Article VI of
the Participation Agreement applicable to the Advance requested hereby
have been satisfied or waived.
<PAGE> 32
Please wire transfer the proceeds of the Advance to the accounts specified
by the Lessee in written notice to the Administrative Agent.
The Lessee has caused this Funding Request to be executed and delivered by
its duly authorized Responsible Employee as of this _____ day of _________,
199_*/.
[Name of Lessee]
By
-----------------------------
Name:
Title:
SCHEDULE A TO FUNDING REQUEST
ALLOCATION OF ADVANCES
----------------------
<TABLE>
<CAPTION>
==================================================================================================================================
Current
Aggregate Advance:
Transaction Property
Aggregate Expenses Improvement Aggregate
Property (all advances Costs Current Property
Cost (all to date, (excluding Advance: Cost (all
Property advances to excluding Material Material advances to Remaining Total
Description Lease date, excluding current Handling Handling date, including Costs to Project
(City, State) Supp. No. current advance) advance) Equipment) Equipment current advance) be Funded Cost
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
2.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
3.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
4.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
- ----------------------------------------------------------------------------------------------------------------------------------
5.__________ No. __ $___________ $___________ $________ $________ $________ $________ $________
==================================================================================================================================
</TABLE>
General Transaction Expenses:
Transaction Expenses With Respect to the first two Fundings after execution of
this Amendment:
- -----------
*/ The Funding Request is required to be delivered not later than 12:00 noon,
New York City time, three (3) Business Days prior to the proposed Funding
Date.
<PAGE> 33
<TABLE>
SYNTHETIC LEASE TRANSACTIONS
BREAKDOWN OF FUNDINGS
BANK OF MONTREAL
<CAPTION>
DUBLIN, CORPORATE HQ - COMPLETION ESTIMATE OF SEPTEMBER 30, 1999
Land Prop Improv MHE Transaction General Total
----------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amount Expended 0 44,564,553 0 53,500 0 44,618,053
Estimated Costs to Complete 0 3,400,000 0 0 0 3,400,000
----------- ----------- --------- -------- -------- -----------
Total Estimated Costs 0 47,964,553 0 53,500 0 48,018,053
Amount Funded 0 (38,231,836) 0 (53,500) 0 (38,285,336)
----------- ----------- --------- -------- -------- -----------
Total Not Yet Funded 0 9,732,717 0 0 0 9,732,717
=========== =========== ========= ======== ======== ===========
<CAPTION>
KNOXVILLE - COMPLETION ESTIMATE OF SEPTEMBER 30, 1999
Land Prop Improv MHE Transaction General Total
----------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amount Expended 655,793 5,829,005 1,819,419 19,168 0 8,323,385
Estimated Costs to Complete 0 0 0 0 0 0
----------- ----------- --------- -------- -------- -----------
Total Estimated Costs 655,793 5,829,005 1,819,419 19,168 0 8,323,385
Amount Funded (655,793) (6,028,649) (712,916) (19,168) 0 (7,416,526)
----------- ----------- --------- -------- -------- -----------
Total Not Yet Funded 0 (199,644)(a) 1,106,503 (0) 0 906,859
=========== =========== ========= ======== ======== ===========
<CAPTION>
AUBURN - COMPLETION ESTIMATE OF SEPTEMBER 30, 1999
Land Prop Improv MHE Transaction General Total
----------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amount Expended 9,271,791 1,796,597 1,810,437 30,402 0 12,909,227
Estimated Costs to Complete 0 1,450,000 515,000 0 0 1,965,000
----------- ----------- --------- -------- -------- -----------
Total Estimated Costs 9,271,791 3,246,597 2,325,437 30,402 0 14,874,227
Amount Funded (9,271,791) (1,762,334) 0 (30,402) 0 (11,064,527)
----------- ----------- --------- -------- -------- -----------
Total Not Yet Funded 0 1,484,263 2,325,437 (0) 0 3,809,699
=========== =========== ========= ======== ======== ===========
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
HUDSON - COMPLETION ESTIMATE OF OCTOBER 30, 1999
Land Prop Improv MHE Transaction General Total
----------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amount Expended 500,000 5,604,342 1,625,857 43,364 0 7,773,563
Estimated Costs to Complete 0 100,000 0 0 0 100,000
----------- ----------- --------- -------- -------- -----------
Total Estimated Costs 500,000 5,704,342 1,625,857 43,364 0 7,873,563
Amount Funded (500,000) (5,578,674) (124,315) (43,364) 0 (6,246,353)
----------- ----------- --------- -------- -------- -----------
Total Not Yet Funded 0 125,668 1,501,542 0 0 1,627,210
=========== =========== ========= ======== ======== ===========
<CAPTION>
GREENSBORO - COMPLETION ESTIMATE OF DECEMBER 26, 1999
Land Prop Improv MHE Transaction General Total
----------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amount Expended 5,770,000 2,352,690 2,505,111 60,626 0 10,688,427
Estimated Costs to Complete 0 320,000 0 0 0 320,000
----------- ----------- --------- -------- -------- -----------
Total Estimated Costs 5,770,000 2,672,690 2,505,111 60,626 0 11,008,427
Amount Funded (5,770,000) (1,923,552) (1,006) (60,626) 0 (7,755,184)
----------- ----------- --------- -------- -------- -----------
Total Not Yet Funded 0 749,138 2,504,105 0 0 3,253,243
=========== =========== ========= ======== ======== ===========
<CAPTION>
GENERAL
Land Prop Improv MHE Transaction General Total
----------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amount Expended 0 0 0 0 453,263 453,263
Estimated Costs to Complete 0 0 0 0 0 0
----------- ----------- --------- -------- -------- -----------
Total Estimated Costs 0 0 0 0 453,263 453,263
Amount Funded 0 0 0 0 (453,263) (453,263)
----------- ----------- --------- -------- -------- -----------
Total Not Yet Funded 0 0 0 0 0 0
=========== =========== ========= ======== ======== ===========
<CAPTION>
GRAND TOTALS
After Removing
Land Prop Improv MHE Transaction General Total Greensboro
----------- ----------- --------- ----------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Amount Expended 16,197,584 60,147,187 7,760,824 207,060 453,263 84,765,918 74,077,491
Estimated Costs to Complete 0 5,270,000 515,000 0 0 5,785,000 5,465,000
----------- ----------- --------- -------- -------- ----------- -----------
Total Estimated Costs 16,197,584 65,417,187 8,275,824 207,060 453,263 90,550,918 79,542,491
Amount Funded (16,197,584) (53,525,045) (838,237) (207,060) (453,263) (71,221,189) (63,466,005)
----------- ----------- --------- -------- -------- ----------- -----------
Total Not Yet Funded 0 11,892,142 7,437,587 0 0 19,329,728 16,076,485
=========== =========== ========= ======== ======== =========== ===========
</TABLE>
NOTE:
(a) - Amount due to classification of expenditures for purposes of funding
request.
<PAGE> 35
SCHEDULE 2
TO AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
Description of Mechanic's Liens
-------------------------------
1. Affidavit for Mechanic's Lien in the amount of $691,000.00 filed by
Spectrum Interiors of Ohio, Inc. and recorded as Instrument Number
199904230101687 in the Recorder's Office of Franklin County, Ohio.
2. Affidavit for Mechanic's Lien in the amount of $353,916.00 filed by
Accurate Fabrication, Inc. and recorded as Instrument Number
199906030109859 in the Recorder's Office of Franklin County, Ohio.
<PAGE> 1
Exhibit 10.26
ADDENDUM NO. 1 TO
-----------------
PHARMACEUTICAL SERVICES AGREEMENT
---------------------------------
This Addendum No. 1 to Pharmaceutical Services Agreement is made as of
April __, 1999 (the "Execution Date"), between Kmart Corporation, whose
principal address is 3100 West Big Beaver Road, Troy, Michigan 48084
(hereinafter, "Kmart") and Cardinal Health* (consisting of those corporate
entities defined as such on the signature page), whose principal business
address is 7000 Cardinal Place, Dublin, Ohio 43017 (collectively, "Cardinal
Health").
BACKGROUND INFORMATION
----------------------
1. Kmart and Cardinal Health are parties to that certain Pharmaceutical
Services Agreement (the "Original Agreement") dated as of August 1, 1996.
2. Kmart and Cardinal Health each desire to amend the Original Agreement as
set forth in this addendum to the Original Agreement (this "Addendum No. 1"
and, together with the Original Agreement, the "Agreement").
STATEMENT OF AGREEMENT
----------------------
Cardinal Health and Kmart (the "Parties") acknowledge the accuracy of
the above Background Information and hereby agree as follows:
1. Subsection (b) of Section 2, Supplemental Advertising Support, and the
portions of the Section 2 Disclosure Schedule pertaining to subsection (b) of
Section 2, will be deleted in their entirety. Subsection (b) of Section 2 will
be replaced by the following:
(b) SUBSEQUENT ADVERTISING PROGRAM FUNDS. Cardinal Health will
deliver payment to Kmart in the dollar amount ("Subsequent Advertising
Program Funds") set forth in the Addendum to Section 2 Disclosure
Schedule within fifteen business days of the Execution Date of this
Agreement. The Subsequent Advertising Program Funds will be used by
Kmart for continuation of an advertising campaign to promote Kmart's
pharmacy program. If this Agreement is terminated prior to the eighth
anniversary of the Commencement Date other than (i) termination by
Kmart for cause pursuant to the procedures outlined in Section 20 or
(ii) as a result of Kmart having purchased from Cardinal Health
consigned Rx Products, Owen Brockway vials, glucose monitors, glucose
test strips, insulin, syringes, and lancets from and after August 1,
1998 having a total aggregate purchase price of $13 billion, then Kmart
will promptly refund to Cardinal Health a portion of the Subsequent
Advertising Program Funds on the terms and subject to the conditions
described in the Addendum to Section 2 Disclosure Schedule.
2. Subsection (b) of Section 5 will be deleted in its entirety and replaced by
the following:
AFTER CONSIGNMENT EFFECTIVE DATE. After the Consignment
Effective Date and prior to such time as the Parties have implemented
the Central Inventory Management Program (defined below), replenishment
orders for the Rx Products will continue to be initiated by the Stores,
consistent with the procedures described in Section 5(a) and subject to
the review of Cardinal Health. It is understood and agreed between the
Parties that the inventory of Rx Products held at the Stores will be
managed at a level designed to achieve an average number of inventory
<PAGE> 2
"turns" as set forth below (the "Inventory Turns Target") during each
of the contract years of this Agreement.
CONTRACT YEAR INVENTORY BONUS
------------- --------- -----
TURNS TARGET INVENTORY
------------ ---------
WITHOUT TURNS TARGET
------- ------------
CIMP
----
Year 1 11 N/A
Year 2 11 N/A
Year 3 9.2 10.5
Year 4 9.2 11.5
Year 5 9.2 12
Year 6 9.2 12
Year 7 9.2 12
Year 8 9.2 12
For purposes of this Agreement, inventory turns will be calculated on
an aggregate basis each contract year based upon the average weekly
consigned inventory during such year (taking into account inflation
recognition as described in Paragraph 3 of Subsection (b) of Section 8)
compared against dispensing of consigned inventory during the same
period. If for any of the contract years prior to the implementation of
the Central Inventory Management Program, the actual inventory turns
achieved is less than the Inventory Turns Target, then Kmart will pay
Cardinal Health a service charge (the "Inventory Turns Service Charge")
of 10% on such excess inventory within 5 business days of Cardinal
Health's invoice for same. In the event that the actual inventory turns
achieved for any contract year equal or exceed the Bonus Inventory
Turns Target set forth above, then Cardinal Health will pay Kmart a
bonus equal to that number of basis points as set forth in the
following chart times the sales of consigned inventory during the
contract year for which the Bonus Inventory Turns Target was achieved.
Beginning with Contract Year 5
----------------------------------------------------------
Actual inventory turns Inventory turns bonus
achieved
----------------------- --------------------------
12 0.10% (10 basis points)
--------------------------------------------------------
12.5 0.13% (13 basis points)
--------------------------------------------------------
13 0.17% (17 basis points)
--------------------------------------------------------
13.5 0.19% (19 basis points)
--------------------------------------------------------
14 0.22% (22 basis points)
--------------------------------------------------------
14.5 0.23% (23 basis points)
--------------------------------------------------------
15 0.245% (24.5 basis points)
--------------------------------------------------------
15.5 0.25% (25 basis points)
--------------------------------------------------------
16 0.26% (26 basis points)
--------------------------------------------------------
16.5 0.265% (26.5 basis points)
--------------------------------------------------------
17 0.27% (27 basis points)
--------------------------------------------------------
The inventory turns bonus for contract year 3 shall be as set
forth above, provided, however, that for contract year 3, the inventory
turns bonus shall equal 0.10% (10 basis points) for actual inventory
turns achieved of at least 10.5; 0.13% (13 basis points) for actual
inventory turns achieved of at least 11.5; and 0.17% (17 basis points)
for actual inventory turns achieved of at least 12.5.
2
<PAGE> 3
The inventory turns bonus for contract year 4 shall be as set
forth above, provided, however, that for contract year 4, the inventory
turns bonus shall equal 0.10% for actual inventory turns achieved of at
least 11.5 and 0.13% (13 basis points) for actual inventory turns
achieved of at least 12.5.
In calculating the inventory turns for purposes of this
Section, the book value of inventory will not be included for up to 100
new Stores each year for six months following the opening of each such
new Store. A newly opened Store is a "new Store" if it is opening
without previously existing Kmart pharmacy files.
The Parties acknowledge that the actual inventory turns
achieved for the second contract year was less than the Inventory Turns
Target for that contract year. The Parties agree that the book
inventory balance for the second contract year is equal to
$177,024,894, subject by both Parties to physical verification and
inclusion of the physical inventory results/adjustments through the
second contract year. However, Cardinal Health has agreed to waive the
service charge payable by Kmart in connection with the second contract
year in consideration of the agreements set forth in this Addendum. The
Parties agree that the value of such waiver is $4,489,733 (the
"Inventory Turns Relief").
Cardinal Health will develop a central inventory management
program (the "Central Inventory Management Program"), pursuant to which
Cardinal Health will assume responsibility for managing the ordering
process for the consigned Rx Product inventories for the Stores. Kmart
will reimburse Cardinal Health one half of the cost of such development
for the Central Inventory Management Program (including without
limitation costs associated with labor, consulting fees, and
development costs) up to an amount not to exceed $350,000, which amount
shall be payable to Cardinal Health one-half upon the conclusion of the
first beta test conducted in connection with the Central Inventory
Management Program and one-half upon the first installation of the
Central Inventory Management Program in a Kmart Store, within fifteen
(15) days of the date of Cardinal Health's invoice to Kmart therefor.
The Central Inventory Management Program will be designed by Cardinal
Health, which will exercise reasonable efforts to provide each Kmart
Store with an average monthly Service Level per Store as described in
Section 1 of the Original Agreement. In connection with development and
implementation of the Central Inventory Management Program, Kmart
agrees to install ScriptLINE as to third party transactions in all
Kmart Stores no later than May 1, 1999.
On or before March 1, 2000, the Parties will implement the
Central Inventory Management Program developed by Cardinal Health in
the Stores; provided, however, the Central Inventory Management Program
will only be implemented in the Stores after successful beta testing,
such that the parties agree that the Central Inventory Management
Program processes the ordering and replenishment of Rx Products for the
Stores to provide an average monthly Service Level per Store as
described in Section 1 of the Original Agreement. If the Central
Inventory Management Program is implemented in all Stores by March 1,
2000 and Kmart is operating the Central Inventory Management Program in
accordance with the Accuracy Procedures as described below, the
Inventory Turns Service Charge will be discontinued for the fourth
contract year, provided that Kmart's actual inventory turns equal or
exceed 9.2 for the period of the fourth contract year prior to
implementation of the Central Inventory Management Program. The
Inventory Turns Service Charge will be reinstated in the event that the
Accuracy Procedures cease to be complied with. If the Central Inventory
Management Program is not implemented by March 1, 2000, for any reason,
then the Inventory Turns Service Charge will apply to the fourth
contract year and will continue for each contract
3
<PAGE> 4
year thereafter as described above for each full contract year during
which the Central Inventory Management Program is not implemented for
such full year.
The Parties acknowledge that the Central Inventory Management
Program will only work effectively if the Kmart pharmacists use the
Central Inventory Management Program in a consistent and accurate
manner. Therefore, Kmart agrees that inventory control objectives will
be included as a major initiative for Kmart's Regional and District
pharmacy managers. In addition, Kmart agrees that the Kmart pharmacists
will use all reasonable efforts to use the Central Inventory Management
Program properly (based on a mutually agreeable operating plan that is
jointly developed by both Parties), including without limitation
adhering to the following "Accuracy Procedures": (1) not overriding the
system with telxon or manual orders except for customer service needs
or in the event the Central Inventory Management Program is not
functioning properly, (2) conducting annual physical inventory counts
for each Store which will include a physical inventory at each Store by
Kmart prior to the implementation of the Central Inventory Management
Program, (3) conducting quarterly cycle counts (as detailed below), (4)
submitting to Cardinal Health accurate Store transfer data, and (5)
submitting to Cardinal Health all Unmerchantable third-party returns as
they are sent from the Stores to the Designated Processor. Cardinal
Health will use all reasonable efforts to manage the inventory records
in connection with the Central Inventory Management Program and
maintain the viability of the system. In the event that the system
becomes inoperable, then the affected Stores may order via telxon units
until such time as the system becomes operable again. Upon the system
again becoming operable, then the Stores will resume ordering pursuant
to the Central Inventory Management Program.
In addition to the inventories described in Section 8(b), in
order to establish and maintain accurate on-hand inventory records for
the Central Inventory Management Program, Kmart agrees to provide
Cardinal Health on a daily basis with all dispensing activity at
Kmart's expense, including without limitation third party and cash
transactions, and to perform an annual physical inventory in all Kmart
Stores with consigned Rx Products. Inasmuch as the initial dispensing
activity information supplied by Kmart to Cardinal Health may be in
batch format and will be supplied the day following the dispensing
activity, and inasmuch as such a delay will limit but not eliminate the
auditability and control of accurate on-hand inventory quantities
information, Kmart agrees to use reasonable efforts to pursue a method
of supplying real-time dispensing activity information to Cardinal
Health. In the event that Kmart is able to provide real-time dispensing
activity information to Cardinal Health and ScriptLINE becomes the
mechanism to feed real-time cash dispensing activity information to
Cardinal Health for the Central Inventory Management Program, then for
all cash transaction claims processed through ScriptLINE, Kmart will
pay Cardinal Health an annual fee equal to the lesser of (i) $0.01 per
cash transaction claim processed (the "Cash Claim Charge") or (ii)
$250,000 per contract year. In the event that the total Cash Claim
Charges for a contract year exceed $250,000, then Cardinal Health will
not charge Kmart the amount by which the total Cash Claim Charges for
that contract year exceed $250,000. Kmart will pay Cardinal Health the
appropriate Cash Claim Charge within thirty (30) days following the end
of each contract year. Kmart shall in all events be responsible to pay
any and all switching fees and the ScriptLINE Claim Transaction Fees,
if any, associated with all cash transactions. In the event that Kmart
is unable to provide all real-time dispensing activity information to
Cardinal Health for the Central Inventory Management Program, then any
Inventory Turns Target Bonus earned by Kmart will be shared with
Cardinal on an 80/20 basis (80% Kmart/20% Cardinal Health), up to a
maximum allocation to Cardinal Health of $250,000 for each contract
year, to help support the ongoing cost of maintaining the Central
Inventory Management Program. Cardinal Health's allocation
4
<PAGE> 5
of the Inventory Turns Target Bonus will be deducted from payment of
the Inventory Turns Target Bonus to Kmart.
Each Kmart Store will perform a monthly physical inventory
cycle count ("ICC") in metric unit detail. Each ICC will be performed
for not more than 50 Rx Products randomly selected by Cardinal Health
for each ICC (the "ICC Selected Products") to track the compliance of
Kmart Stores with respect to accurate on-hand quantities. Each ICC will
be performed in metric units and submitted to Cardinal Health in a
mutually agreeable format within 5 days of the end of each designated
month. During the beta testing of the Central Inventory Management
Program, the parties will mutually develop procedures for dealing with
discrepancies in the ICC physical count as compared to the records of
the Central Inventory Management Program.
All Non Rx Products will continue to be ordered and delivered
as set forth in Section 5(a) of the Original Agreement, both before and
after the Consignment Effective Date, but nothing contained in this
Agreement will require Kmart to purchase Non Rx Products from Cardinal
Health.
3. Section 11 of the Original Agreement is hereby deleted in its entirety and
replaced by the following:
Cardinal Health will provide item catalog and pricing information to
Kmart in a mutually agreed upon electronic data interchange format.
This item catalog will serve as the source for product cost information
used to determine the payment amounts due to Cardinal Health. Kmart
will make available to Cardinal Health information necessary to
reconcile dispensing activity with the payment made to Cardinal Health.
This information will be made available in mutually agreed upon
electronic data interchange format.
During the implementation period and up to sixty (60) days following
the full implementation of the Central Inventory Management Program in
all of the Kmart Stores (the "no termination period"), in the event
that the automated ordering process of the Central Inventory Management
Program is preventing the Central Inventory Management Program from
satisfying the Service Levels set forth in Section 1 of the Original
Agreement, then the Parties reserve the right to mutually decide to
temporarily cease using the automated ordering process in order to cure
any material issues preventing the Central Inventory Management Program
from satisfying such Service Level targets. During the no termination
period, Kmart shall have the right to order product via telxon as in
effect prior to implementation of the Central Inventory Management
Program with no additional charge. In the event that the Central
Inventory Management Program is not satisfying the Service Level
targets during the no termination period and the Parties decide to
temporarily cease using the automated ordering process of the Central
Inventory Management Program for a third time, then either Party may
terminate the Cardinal Health designed Central Inventory Management
Program and Kmart can order via telxon as in effect prior to
implementation of the Central Inventory Management Program at no
additional charge. Following the no termination period, in the event
that the automated ordering process of the Central Inventory Management
Program prevents the Central Inventory Management Program from
satisfying the Service Levels set forth in Section 1 of the Original
Agreement for three (3) consecutive months, then either Party may
terminate the Cardinal Health designed Central Inventory Management
Program and Kmart can order via telxon as in effect prior to the
implementation of the Central Inventory Management Program at no
additional charge.
If the Cardinal Health designed Central Inventory Management Program is
terminated for any reason, then Kmart shall have the right to select an
alternative auto-replenishment system. In
5
<PAGE> 6
the event that Kmart selects an alternative auto replenishment system,
which system must be agreeable to Cardinal Health, then Cardinal Health
will credit up to $350,000 of the development fees paid by Kmart
towards this new system once installed. If Kmart chooses not to pursue
(it being understood that Kmart has no obligation to pursue) an
alternative auto replenishment system, then Cardinal Health reserves
the right to pursue alternative auto replenishment solutions agreeable
to Kmart at Cardinal Health's expense and will not refund any portion
of the development cost to Kmart.
4. The Section 7 Disclosure Schedule is hereby deleted in its entirety and
replaced by the Addendum to Section 7 Disclosure Schedule.
5. (a) The first paragraph in Section 8(b) is hereby deleted and replaced with
the following:
After Consignment Effective Date. From and after the date of this
Addendum No. 1, payment by Kmart for Rx Products will be made in good
and usable funds on the third banking day following the sale or
dispensing of Rx Products by the Stores based on the dispensing data
received at Kmart's Headquarters from the Stores (such third banking
day, the "Consigned Merchandise Prompt Payment Date", and, together
with the Non Consigned Merchandise Prompt Payment Date, the "Prompt
Payment Date"). In consideration for the change in Consignment
Merchandise Prompt Payment Date contained in this Addendum, Kmart will
pay Cardinal an additional day of "float" within 15 days of the
Execution Date of this Addendum No. 1. The amount of such additional
float for each contract year will be determined on the first day of
each contract year by calculating 1 day of average sales and dispensing
of Rx Products by the Stores for the immediately preceding contract
year, and subtracting the amount held by Cardinal as float as of the
date of such calculation. The average sales and dispensing of Rx
Products by the Stores for any contract year will be calculated by
dividing the aggregate dollar volume of sales and dispensing of Rx
Products for all Stores during the applicable contract year by 360. The
amount of additional float will be adjusted up or down each contract
year based upon 1 day of average sales and dispensing of Rx Products by
the Stores for the immediately preceding contract year and will be paid
or refunded by the 15th of the month immediately following the end of
the contract year. Both Parties acknowledge that Cardinal Health
withheld $3 million at the signing of the Original Agreement and that
these funds are considered "float" for purposes of this calculation.
Both Parties agree that the additional amount of float resulting from
purchases in the second contract year for the third contract year is
equal to $1,016,000 and Kmart agrees to pay Cardinal Health such amount
no later than 15 days following the Execution Date of this Addendum. In
order to facilitate proper accounting and record-keeping, the Parties
will establish procedures to document the product movement at the time
of delivery.
(b) The following language is hereby inserted after the third sentence of the
third paragraph of Section 8(b):
As the Central Inventory Management Program is implemented by both
Parties in the Kmart Stores, the inflation factor will be calculated,
based upon the perpetual inventory level for each Store, by multiplying
any change in price of any Rx Product by the number of units of
consigned inventory of that Rx Product on-hand on the day the price
changes. The total amount of the calculated daily changes for each
month will be added or subtracted from book inventory for that month
and included in the calculation of book inventory for that contract
year. Cardinal will calculate and forward the amount of such change to
Kmart by Store. The inflation factor calculation methodology utilized
prior to implementation of the Central Inventory Management Program
will be discontinued for each Store as the Central Inventory
6
<PAGE> 7
Management Program is implemented for that Store; provided, however,
that reconciliation of the inflation factor for that period prior to
each Store implementing the Central Inventory Management Program shall
be conducted based upon the inflation factor calculation methodology
prior to such implementation, notwithstanding the fact that such
reconciliation may occur after such implementation.
6. (a) As of the effective date of this Addendum No. 1, the first sentence of
the last paragraph of the Section 9 Disclosure Schedule is hereby deleted in its
entirety and replaced with the language set forth in subsection (a) of the
Addendum to Section 9 Disclosure Schedule.
(b) The fifth sentence of the last paragraph of the Section 9 Disclosure
Schedule is hereby deleted in its entirety and replaced by the language set
forth in subsection (b) of the Addendum to Section 9 Disclosure Schedule.
7. (a) The language set forth in subsection (a) of the Addendum to Section 14
Disclosure Schedule is hereby inserted in the Section 14 Disclosure Schedule
immediately prior to the introductory language for the Examples which begin with
the Calculation of Non-Alliance Chain Weighted Average Price.
(b) The language set forth in subsection (b) of the Addendum to Section 14
Disclosure Schedule is hereby inserted in the Section 14 Disclosure Schedule
immediately prior to the General Terms section.
(c) The second paragraph under the General Terms section of the Section 14
Disclosure Schedule is hereby deleted in its entirety and replaced with the
language set forth in subsection (c) of the Addendum to Section 14 Disclosure
Schedule.
(d) The language set forth in subsection (d) of the Addendum to Section 14
Disclosure Schedule is hereby inserted in the Section 14 Disclosure Schedule
immediately following the second paragraph under the General Terms section.
(e) The fourth-to-last paragraph of the Section 14 Disclosure Schedule
under the General Terms section is hereby deleted in its entirety and replaced
by the language set forth under subsection (e) of the Addendum to Section 14
Disclosure Schedule.
8. (a) Section 16 of the Original Agreement is hereby deleted in its entirety
and replaced by the following:
SECTION 16. RETURNS OF MERCHANTABLE AND UNMERCHANTABLE RX PRODUCTS AND
NON RX PRODUCTS.
(a) NON RX PRODUCTS. The Parties recognize and acknowledge
that the arrangements described in this Agreement could result in
products ordered in error, mispicks, shortages, etc., and that Non Rx
Products may need to be returned to Cardinal Health. Therefore, both
prior to and after the implementation of the Central Inventory
Management Program, Cardinal Health will accept Merchantable Non Rx
Products (defined below) for return from Kmart Stores in accordance
with the Cardinal Health Return Goods Policy for Non-Consigned
Inventory set forth in the Section 16 Disclosure Schedule.
Notwithstanding anything to the contrary contained elsewhere in this
Agreement, Cardinal Health will not be required to and will not accept
for return any Unmerchantable Non Rx Products back through its
distribution centers. Kmart will return all Unmerchantable Non Rx
Products through a third party return goods processor (the "Designated
Processor") as described in subsection 16(c) below. "Merchantable Non
Rx Products" will be determined by Cardinal Health based upon its
ability to return the item to its inventory for resale in the normal
course of its business
7
<PAGE> 8
without special preparation, testing, handling, or expense and excludes
without limitation the specific items set forth in the definition of
Unmerchantable Non Rx Products set forth below. "Unmerchantable Non Rx
Products" shall mean as to Non Rx Products items which Cardinal Health
is unable to return to its inventory for resale in the normal course of
its business without special preparation, testing, handling, or expense
and includes without limitation the following: (i) any item which has
been used or opened, is only partially complete, or is without all
original packaging, labeling, inserts, or operating manuals; (ii)
short-dated (defined as less than 180 days from expiration), outdated,
or seasonal product (including without limitation sun protection
products, back-to-school supplies, and cough and cold displays); (iii)
product that is stickered, marked, damaged, defaced, or otherwise
cannot readily be resold by Cardinal Health for any reason; (iv) any
item purchased on a "special order" basis, including non-stock orders
and drop shipments; (v) any sterile or refrigerated merchandise, unless
Cardinal Health is specially assured that such merchandise was properly
stored and protected at all times and such merchandise is returned
separately in a package marked as such and accompanied by a separate
credit request form; (vi) any low stability product or other products
which are usually sensitive to temperature and handling conditions; and
(vii) any product not intended for return to a wholesaler in accordance
with the return policies of the applicable manufacturer.
(b) RX PRODUCTS. Both prior to and after the implementation of
the Central Inventory Management Program, Cardinal Health will accept
Merchantable Rx Products (defined below) for return from Kmart Stores
in accordance with the Cardinal Health Return Goods Policy for
Consigned Inventory set forth in the Section 16 Disclosure Schedule.
Notwithstanding anything to the contrary contained elsewhere in this
Agreement, both prior to and following implementation of the Central
Inventory Management Program, Cardinal Health will not be required to
and will not accept for return any Unmerchantable Rx Products back
through its distribution centers. Kmart will return all Unmerchantable
Rx Products through the Designated Processor as described in subsection
16(c) below. "Merchantable Rx Products" will be determined by Cardinal
Health based upon its ability to return the item to its inventory for
resale in the normal course of its business without special
preparation, testing, handling, or expense and excludes without
limitation the specific items set forth in the definition of
Unmerchantable Rx Products set forth below. "Unmerchantable Rx
Products" shall mean as to Rx Products items which Cardinal Health is
unable to return to its inventory for resale in the normal course of
its business without special preparation, testing, handling, or expense
and includes without limitation the following: (i) any item which has
been used or opened, is only partially complete, or is without all
original packaging, labeling, inserts, or operating manuals; (ii)
short-dated (defined as less than 270 days from expiration), outdated,
or seasonal product (including without limitation flu vaccines); (iii)
product that is stickered, marked, damaged, defaced, or otherwise
cannot readily be resold by Cardinal Health for any reason; (iv) any
item purchased on a "special order" basis, including non-stock orders
and drop shipments; (v) any sterile or refrigerated merchandise, unless
Cardinal Health is specially assured that such merchandise was properly
stored and protected at all times and such merchandise is returned
separately in a package marked as such and accompanied by a separate
credit request form; (vi) any low stability product, including Epogen,
Eminase, or other products which are usually sensitive to temperature
and handling conditions; and (vii) any product not intended for return
to a wholesaler in accordance with the return policies of the
applicable manufacturer.
On a contract quarterly basis, Kmart Stores will inspect Rx
Products on site and remove and return to Cardinal Health those
unopened packages of Merchantable Rx Products which are not anticipated
to be used within 3 months (based on previous demand history) and have
dating greater than 270 days (9 months). Such returns will be made in
accordance with the Section 16 Disclosure Schedule.
8
<PAGE> 9
All Unmerchantable Rx Products processed through the
Designated Processor will be treated as having been sold or dispensed
by Kmart. The aggregate purchase price for all Unmerchantable Rx
Products processed through the Designated Processor will be calculated
as of the last day of the month in which the return is processed by the
Designated Processor (the "Stock Rotation Amount"), subject to
verification by both Parties. Each Party will adjust book inventory to
reflect the Stock Rotation Amount as soon as it is verified by both
Parties. The Designated Processor will establish an estimated
returnable value ("ERV") for the Unmerchantable Rx Products and Kmart
will pay Cardinal Health an amount equal to the difference between the
ERV and the Stock Rotation Amount, in good and usable funds on or
before the 10th business day immediately following completion of the
reconciliation process for each month. On a monthly basis, the Parties
will reconcile the aggregate credit received from manufacturers against
the ERV. Such reconciliation will include all applicable credit
memoranda and other credits received, as well as all other deductions
taken by Cardinal Health on behalf of Kmart or reversed by the
manufacturers. A final reconciliation of the aggregate credit received
from manufacturers against the ERV will be performed and completed
within 90 days of the termination date of this Agreement. The Party
owing the other Party as a result of the final reconciliation will pay
the non-owing Party within 15 days following completion of such final
reconciliation. Credit (evidenced by credit memoranda or otherwise) for
manufacturers who are in bankruptcy will not be credited for purposes
of calculating the Stock Rotation Amount. Cardinal Health will use all
reasonable efforts to work with any manufacturer in bankruptcy to
recognize value on behalf of Kmart from such manufacturer for returned
Rx Product.
Following termination of this Agreement, both Parties will
continue to process any Unmerchantable Rx Products for which processing
began prior to termination of the Agreement and Kmart will remit to
Cardinal Health any portion of the Stock Rotation Amount which has not
previously been recovered by Cardinal Health, including without
limitation any shortfall of the ERV compared to recovered credits
during the term of this Agreement.
(c) THIRD PARTY RETURN GOODS PROCESSOR. Kmart will
notify Cardinal Health of Kmart's choice of Designated Processor. Kmart
will forward all Unmerchantable Non Rx Products and Unmerchantable Rx
Products (collectively, "Unmerchantable Products") directly to the
Designated Processor and not to Cardinal Health. Cardinal Health will
return to Kmart any Unmerchantable Products forwarded to Cardinal
Health from Kmart.
(b) The "General Policy" section of the Non-Consigned Inventory section
of the Section 16 Disclosure Schedule is hereby deleted and replaced in its
entirety by the language set forth in Non-Consigned portion of the Addendum to
Section 16 Disclosure Schedule.
(c) A new Consigned Inventory section will be added to the end of the
Section 16 Disclosure Schedule, which will read as set forth in the Consigned
Portion of the Addendum to Section 16 Disclosure Schedule.
9. The following is hereby added as an additional paragraph at the end of
Section 17:
Neither Kmart nor Cardinal Health will distribute Rx Products from
Kmart Store locations to third parties, other than the dispensing of Rx
Products by licensed Kmart pharmacists pursuant to valid prescriptions
in accordance with its customary business practice or as otherwise
permitted by applicable laws and regulations.
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<PAGE> 10
10. Section 20 of the Original Agreement will be amended as follows:
(a) The first sentence of Section 20 will be deleted and replaced by
the following:
The term of this Agreement will commence as of August 1, 1996 (the
"Commencement Date") and will continue thereafter until the earlier of:
(a) the eighth anniversary of the Commencement Date or (b) such time as
Kmart has purchased from Cardinal Health consigned Rx Products, Owen
Brockway vials, glucose monitors, glucose test strips, insulin,
syringes, and lancets from and after August 1, 1998 having an aggregate
purchase price of $13 billion, with the option to extend the term for
successive additional periods of one year each upon the mutual written
consent of the Parties.
(b) The last paragraph of Section 20 will be deleted in its entirety
and replaced by the following:
No termination of this Agreement (including at the end of the term as
stated above) will be effective until such time as Kmart has paid all
amounts owed to Cardinal Health upon such termination, including (if
applicable) the Early Termination Fee, the reimbursement of any
unamortized portion of the Initial Advertising Program Funds and the
Subsequent Advertising Program Funds, payment of the unamortized
portion of the $1,300,000 COGS Relief, the unamortized portion of the
$4,489,733 Inventory Turns Relief, and the payment for all Merchandise
previously purchased by Kmart and the payment for, or delivery back to
Cardinal Health of, all Merchandise delivered to or held by Kmart on
consignment as described in the Purchase and Consignment Agreement,
which amounts will automatically become due and payable on or before
the effective date of the termination (unless previously due and
payable), whether with or without cause. For purposes of this Section
20, the unamortized portion of the COGS Relief for all contract
quarters prior to the 21st contract quarter shall equal $1,300,000 and
for all quarters starting with the 21st contract quarter and thereafter
shall equal $1,300,000 times a fraction (the "Fraction") the numerator
of which shall equal $13 billion minus the aggregate purchase price of
consigned Rx Products, Owen Brockway vials, glucose monitors, glucose
test strips, insulin, syringes, and lancets purchased by Kmart from
Cardinal Health from and after August 1, 1998 and the denominator of
which shall equal $13 billion. For purposes of this Section 20, the
unamortized portion of the Inventory Turns Relief for all contract
quarters prior to the 21st contract quarter shall equal $4,489,733 and
for all quarters starting with the 21st contract quarter and thereafter
shall equal $4,489,733 times the Fraction. For purposes of this Section
20, the unamortized portion of the Initial Advertising Program Funds
and the Subsequent Advertising Program Funds shall be as described in
the Addendum to Section 2 Disclosure Schedule.
11. A new Section 36 is hereby added to the Agreement which reads as follows:
After the execution of this Addendum No. 1 but before March 1, 2000,
Cardinal Health will employ an employee who will serve as the Supply
Inventory Control Supervisor (the "Inventory Control Supervisor") who
will serve as a liaison between Cardinal Health and Kmart and whose
duties will include but not be limited to assistance in managing
Kmart's inventory levels in the Stores. The Inventory Control
Supervisor's office will be located at the corporate offices of Kmart
in Troy, Michigan. Kmart agrees to give the Inventory Control
Supervisor access to Kmart records and systems pertinent to the control
of consigned inventory. Notwithstanding such fact, the Inventory
Control Supervisor's salary and benefits will be paid by Cardinal
Health and the Inventory Control Supervisor shall be an employee of
Cardinal Health and subject to Cardinal Health's employment policies.
During the term of this
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<PAGE> 11
Agreement and for a period of two years thereafter, Kmart agrees not to
directly or indirectly employ, or solicit the employment of, (whether
as an employee, officer, director, agent, consultant or independent
contractor) the Inventory Control Supervisor. The Inventory Control
Supervisor will sign a similar agreement prior to beginning duties
under this Agreement.
12. A new Section 37 is hereby added to the Agreement which reads as follows:
All Kmart Stores will subscribe to ScriptLINE for data collection and
the reporting of dispensing data. The parameters of Kmart's
participation in ScriptLINE are as set forth in the Section 37
Disclosure Schedule.
13. All capitalized terms contained in this Addendum No. 1 but not defined
herein shall have the same meaning as that set forth in the Original Agreement.
14. Except to the extent otherwise set forth in this Addendum No. 1, the terms,
conditions and provisions of the Original Agreement are unchanged and remain in
full force and effect.
Kmart Cardinal Health*
By: /s/ Andrew Giancamilli By: /s/ Michael C. Kaufmann
----------------------------- ------------------------------------
Print Name: Andrew Giancamilli Print Name: Michael C. Kaufmann
-------------------- ----------------------------
Title: President Title: SVP Retail Sales & Marketing
-------------------- ----------------------------
*The term "Cardinal Health" shall include the following affiliated companies:
RedKey, Inc., an Ohio corporation (Dublin, Ohio); Cardinal Syracuse, Inc., a New
York corporation (Syracuse, New York); Marmac Distributors, Inc., a Connecticut
corporation (Hartford, Connecticut); James W. Daly, Inc., a Massachusetts
corporation, (Peabody, Massachusetts); Ohio Valley-Clarksburg, Inc., a Delaware
corporation (Wheeling, West Virginia); Cardinal Southeast, Inc., a Mississippi
corporation (Madison, Mississippi); Whitmire Distribution Corporation, a
Delaware corporation (Folsom, California); Humiston-Keeling, Inc., an Illinois
corporation (Calumet City, Illinois); Behrens Inc., a Texas corporation (Waco,
Texas); National PharmPak Services, Inc., an Ohio corporation (Zanesville,
Ohio); Renlar Systems, Inc., a Kentucky corporation (Lexington, Kentucky);
Medical Strategies, Inc., a Massachusetts corporation (Dublin, Ohio); Cardinal
Health Systems, Inc., an Ohio corporation (Dublin, Ohio) and any other
subsidiary of Cardinal Health, Inc., an Ohio corporation ("Cardinal Health,
Inc."), as may be designated by Cardinal Health, Inc.
11
<PAGE> 1
Exhibit 10.27
FORM OF
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
BETWEEN
CARDINAL HEALTH, INC., AS ISSUER
AND
______________________________, AS DEALER
CONCERNING NOTES TO BE ISSUED PURSUANT TO AN
ISSUING AND PAYING AGENCY AGREEMENT
DATED AS OF JUNE 28, 1999
BETWEEN THE ISSUER AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS ISSUING AND PAYING AGENT
DATED AS OF
AUGUST 26, 1999
<PAGE> 2
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
This agreement (as amended, supplemented or otherwise modified and in
effect from time to time this "Agreement") sets forth the understandings between
the Issuer and the Dealer, each named on the cover page hereof, in connection
with the issuance and sale by the Issuer of its short-term promissory notes (the
"Notes") through the Dealer pursuant to the Issuing and Paying Agency Agreement
named on the cover page hereof.
Certain terms used in this Agreement are defined in Section 6 hereof.
The Addendum to this Agreement, and any Annexes or Exhibits described
in this Agreement or such Addendum, are hereby incorporated into this Agreement
and made fully a part hereof.
Section 1. OFFERS, SALES AND RESALES OF NOTES.
1.1 While (a) the Issuer has and shall have no obligation to sell the
Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for
the account of the Issuer, and (b) the Dealer has and shall have no obligation
to purchase the Notes from the Issuer or to arrange any sale of the Notes for
the account of the Issuer, the parties hereto agree that in any case where the
Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the
Issuer, such Notes will be purchased or sold by the Dealer in reliance on the
representations, warranties, covenants and agreements of the Issuer contained
herein or made pursuant hereto and on the terms and conditions and in the manner
provided herein.
1.2 So long as this Agreement shall remain in effect, and in addition
to the limitations contained in Section 1.7 hereof, the Issuer shall not,
without the consent of the Dealer, offer, solicit or accept offers to purchase,
or sell, any Notes except (a) in transactions with one or more dealers which may
from time to time after the date hereof become dealers with respect to the Notes
by executing with the Issuer one or more agreements which contain provisions
substantially identical to those contained in Section 1 of this Agreement, of
which the Issuer hereby undertakes to provide the Dealer prompt notice or (b) in
transactions with the other dealers listed on the Addendum hereto, which are
executing agreements with the Issuer which contain provisions substantially
identical to Section 1 of this Agreement contemporaneously herewith. In no event
shall the Issuer offer, solicit or accept offers to purchase, or sell, any Notes
directly on its own behalf in transactions with persons other than
broker-dealers as specifically permitted in this Section 1.2.
1.3 The Notes shall be in a minimum denomination of $250,000 or
integral multiples of $1,000 in excess thereof, will bear such interest rates,
if interest bearing, or will be sold at such discount from their face amounts,
as shall be agreed upon by the Dealer and the Issuer, shall have
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<PAGE> 3
a maturity not exceeding 270 days from the date of issuance (exclusive of days
of grace) and shall not contain any provision for extension, renewal or
automatic "rollover."
1.4 The authentication and issuance of, and payment for, the Notes
shall be effected in accordance with the Issuing and Paying Agency Agreement,
and the Notes shall be either individual physical certificates or book-entry
notes evidenced by a Master Note registered in the name of DTC or its nominee,
in the form or forms annexed to the Issuing and Paying Agency Agreement.
1.5 If the Issuer and the Dealer shall agree on the terms of the
purchase of any Note by the Dealer or the sale of any Note arranged by the
Dealer (including, but not limited to, agreement with respect to the date of
issue, purchase price, principal amount, maturity and interest rate (in the case
of interest-bearing Notes) or discount thereof (in the case of Notes issued on a
discount basis), and appropriate compensation for the Dealer's services
hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be
issued and delivered in accordance with the terms of the Issuing and Paying
Agency Agreement and payment for such Note shall be made by the purchaser
thereof, either directly or through the Dealer (pursuant to telephonic
instructions received from the Dealer), to the Issuing and Paying Agent, for the
account of the Issuer. All Notes that the Issuer causes to be issued and
delivered through the Dealer shall be accomplished in accordance with the
following procedures: (a) the Issuer shall deliver telephonic instructions to
the Dealer; (b) once the Issuer and the Dealer have agreed upon the terms, the
Dealer shall deliver telephonic instructions to the Issuing and Paying Agent;
and (c) the Dealer shall deliver written confirmation of such telephonic
instructions to the Issuing and Paying Agent (with a copy to the Issuer) within
24 hours of the time such telephonic instructions were received by the Issuing
and Paying Agent. Except as otherwise agreed, in the event that the Dealer is
acting as an agent and a purchaser shall either fail to accept delivery of or
make payment for a Note on the date fixed for settlement, the Dealer shall
promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer
for the Note, the Issuer will promptly return such funds to the Dealer against
its return of the Note to the Issuer, in the case of a certificated Note, and
upon written notice of such failure in the case of a book-entry Note. If such
failure occurred for any reason other than default by the Dealer, the Issuer
shall reimburse the Dealer on an equitable basis for the Dealer's loss of the
use of such funds for the period such funds were credited to the Issuer's
account.
1.6 The Dealer and the Issuer hereby establish and agree to observe the
following procedures in connection with offers, sales and subsequent resales or
other transfers of the Notes:
(a) Offers and sales of the Notes by or through the Dealer
shall be made only to: (i) investors reasonably believed by the Dealer
to be Qualified Institutional Buyers or Institutional Accredited
Investors and (ii) non-bank fiduciaries or agents that will be
purchasing Notes for one or more accounts, each of which is reasonably
believed by the Dealer to be an Institutional Accredited Investor.
Dealer shall utilize reasonable efforts and procedures to assure and
document that offers and sales of the Notes by or through the Dealer
are made only to purchasers of the type described in this Section
1.6(a).
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<PAGE> 4
(b) Resales and other transfers of the Notes by the holders
thereof shall be made only in accordance with the restrictions in the
legend described in clause (e) below.
(c) No general solicitation or general advertising by either
party shall be used in connection with the offering of the Notes.
Without limiting the generality of the foregoing, without the prior
written approval of the Dealer, the Issuer shall not issue any press
release or place or publish any "tombstone" or other advertisement
relating to the Notes.
(d) No sale of Notes to any one purchaser shall be for less
than $250,000 principal or face amount, and no Note shall be issued in
a smaller principal or face amount. If the purchaser is a non-bank
fiduciary acting on behalf of others, each person for whom such
purchaser is acting must purchase at least $250,000 principal or face
amount of Notes.
(e) Offers and sales of the Notes by the Issuer through the
Dealer acting as agent for the Issuer shall be made in accordance with
Rule 506 under the Securities Act, and shall be subject to the
restrictions described in the legend appearing on Exhibit A hereto. A
legend substantially to the effect of such Exhibit A shall appear as
part of the Private Placement Memorandum used in connection with offers
and sales of Notes hereunder, as well as on each individual certificate
representing a Note and each Master Note representing book-entry Notes
offered and sold pursuant to this Agreement.
(f) The Dealer shall furnish or shall have furnished to each
purchaser of Notes for which it has acted as the Dealer a copy of the
then-current Private Placement Memorandum unless such purchaser has
previously received a copy of the Private Placement Memorandum as then
in effect. The Private Placement Memorandum shall expressly state that
any person to whom Notes are offered shall have an opportunity to ask
questions of, and receive information from, the Issuer and the Dealer
and shall provide the names, addresses and telephone numbers of the
persons from whom information regarding the Issuer may be obtained.
(g) The Issuer agrees, for the benefit of the Dealer and each
of the holders and prospective purchasers from time to time of the
Notes that, if at any time the Issuer shall not be subject to Section
13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request
and at its expense, to the Dealer and to holders and prospective
purchasers of Notes information required by Rule 144A(d)(4)(i) in
compliance with Rule 144A(d).
(h) In the event that any Note offered or to be offered by the
Dealer would be ineligible for resale under Rule 144A, the Issuer shall
immediately notify the Dealer (by telephone, confirmed in writing) of
such fact and shall promptly prepare and deliver to the Dealer an
amendment or supplement to the Private Placement Memorandum describing
the Notes that are ineligible, the reason for such ineligibility and
any other relevant information relating thereto.
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<PAGE> 5
(i) The Issuer hereby agrees that, not later than 15 days
after the first sale of Notes as contemplated by this Agreement, it
will file with the SEC a notice on Form D in accordance with Rule 503
under the Securities Act and that it will thereafter file such
amendments to such notice as Rule 503 may require.
(j) The Dealer hereby agrees with the Issuer not to offer or
sell any Notes in a manner that might call into question the
availability of the private offering exemption contained in Section
4(2) of the Securities Act and Rule 506 thereunder.
1.7 The Issuer hereby represents and warrants to the Dealer, in
connection with offers, sales and resales of Notes, as follows:
(a) Except as set forth in the second paragraph of this Section 1.7(a),
Issuer hereby confirms to the Dealer that within the preceding six
months neither the Issuer nor any person other than the Dealer or the
other dealers referred to in Section 1.2 hereof acting on behalf of the
Issuer has offered or sold any Notes, or any substantially similar
security of the Issuer (including, without limitation, medium-term
notes issued by the Issuer), to, or solicited offers to buy any such
security from, any person other than the Dealer or the other dealers
referred to in Section 1.2 hereof. The Issuer also agrees that, as long
as the Notes are being offered for sale by the Dealer and the other
dealers referred to in Section 1.2 hereof as contemplated hereby and
until at least six months after the offer of Notes hereunder has been
terminated, neither the Issuer nor any person other than the Dealer or
the other dealers referred to in Section 1.2 hereof (except as
contemplated by Section 1.2 hereof) will offer the Notes or any
substantially similar security of the Issuer for sale to, or solicit
offers to buy any such security from, any person other than the Dealer
or the other dealers referred to in Section 1.2 hereof, it being
understood that such agreement is made with a view to bringing the
offer and sale of the Notes within the exemption provided by Section
4(2) of the Securities Act and Rule 506 thereunder and shall survive
any termination of this Agreement. The Issuer hereby represents and
warrants that it has not taken or omitted to take, and will not take or
omit to take, any action that would cause the offering and sale of
Notes hereunder to be integrated with any other offering of securities,
whether such offering is made by the Issuer or some other party or
parties, and that would make unavailable the private offering exemption
contained in Section 4(2) of the Securities Act and Rule 506
thereunder, with respect to the offer and sale of Notes hereunder.
Dealer acknowledges that it has been informed by the
Issuer that Allegiance Corporation, a wholly-owned subsidiary of the
Issuer and a Delaware corporation ("Allegiance") has made offers and
sales of notes (the "Allegiance Notes"), which are substantially
similar to the Notes, during the six-month period prior to the date of
this Agreement. The offer and sale of the Allegiance Notes were made
pursuant to a commercial paper program established by Allegiance on or
about June 8, 1998. The Issuer hereby represents and warrants that the
Allegiance Notes have been offered and sold in accordance with the
procedures set forth in Section 1.6 of this Agreement.
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<PAGE> 6
(b) The Issuer represents and agrees that the proceeds of the
sale of the Notes are not currently contemplated to be used for the
purpose of buying, carrying or trading securities within the meaning of
Regulation T and the interpretations thereunder by the Board of
Governors of the Federal Reserve System. In the event that the Issuer
determines to use such proceeds for the purpose of buying, carrying or
trading securities, whether in connection with an acquisition of
another company or otherwise, the Issuer shall give the Dealer at least
five business days' prior written notice to that effect. The Issuer
shall also give the Dealer prompt notice of the actual date that it
commences to purchase securities with the proceeds of the Notes.
Thereafter, in the event that the Dealer purchases Notes as principal
and does not resell such Notes on the day of such purchase, to the
extent necessary to comply with Regulation T and the interpretations
thereunder, the Dealer will sell such Notes either (i) only to offerees
it reasonably believes to be QIBs or to QIBs it reasonably believes are
acting for other QIBs, in each case in accordance with Rule 144A or
(ii) in a manner which would not cause a violation of Regulation T and
the interpretations thereunder.
Section 2. REPRESENTATIONS AND WARRANTIES OF ISSUER.
The Issuer represents and warrants that:
2.1 The Issuer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all the requisite power and authority to execute, deliver and perform its
obligations under the Notes, this Agreement and the Issuing and Paying Agency
Agreement.
2.2 This Agreement and the Issuing and Paying Agency Agreement have
been duly authorized, executed and delivered by the Issuer and constitute legal,
valid and binding obligations of the Issuer enforceable against the Issuer in
accordance with their terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law), and subject, as to
enforceability, to the qualifications set forth in the Opinion Letter referred
to in Section 3.6(a) below.
2.3 The Notes have been duly authorized, and when issued as provided in
the Issuing and Paying Agency Agreement, will be duly and validly issued and
will constitute legal, valid and binding obligations of the Issuer enforceable
against the Issuer in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law), and
subject, as to enforceability, to the qualifications set forth in the Opinion
Letter referred to in Section 3.6(a) below.
2.4 The issuance and sale of Notes under the circumstances contemplated
by this Agreement and the Issuing and Paying Agency Agreement do not require
registration of the Notes under the Securities Act, pursuant to the exemption
from registration contained in
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<PAGE> 7
Section 4(2) thereof, and do not require compliance with any provision of the
Trust Indenture Act of 1939, as amended.
2.5 The Notes will rank at least pari passu with all other unsecured
and unsubordinated indebtedness of the Issuer.
2.6 No consent or action of, or filing or registration with, any
governmental or public regulatory body or authority, including the SEC, is
required to authorize, or is otherwise required in connection with the Issuer's
execution, delivery or performance of, this Agreement, the Notes or the Issuing
and Paying Agency Agreement, except as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Notes.
2.7 The Issuer's execution and delivery of this Agreement and the
Issuing and Paying Agency Agreement, the Issuer's issuance and delivery of the
Notes, and the Issuer's fulfillment of or compliance with the terms and
provisions of such instruments and agreements, (a) will not violate or result in
an event of default under (i) the Issuer's articles of incorporation or code of
regulations, (ii) any agreement or instrument to which the Issuer is a party or
by which its property is bound and which is filed or incorporated by reference
as an exhibit to the Issuer's periodic reports under the Securities Exchange Act
of 1934, as amended pursuant to item 601(b)(10) of Regulation S-K of the SEC (or
any successor provision thereto) (the "Material Agreements"), or (iii) any
order, writ, injunction or decree of any court or government instrumentality to
which the Issuer is subject or by which it or its property is bound, and (b)
will not result in the creation or imposition of any mortgage, lien, charge, or
other encumbrance of any nature whatsoever upon any of the properties or assets
of the Issuer pursuant to a Material Agreement.
2.8 Except as described in the Company Information, there is no
litigation or governmental proceeding pending, or to the knowledge of the Issuer
threatened, against or affecting the Issuer or any of its subsidiaries which
would reasonably be expected to result in a material adverse change in the
condition (financial or otherwise), operations or business prospects of the
Issuer and its subsidiaries, taken as a whole, or the ability of the Issuer to
perform its obligations under the Agreement, the Notes, or the Issuing and
Paying Agency Agreement.
2.9 The Issuer is not required to register as an "investment company"
under the Investment Company Act of 1940, as amended.
2.10 Neither the Private Placement Memorandum (excluding the Dealer
Information) nor the Company Information contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
2.11 Each (a) issuance of Notes by the Issuer hereunder and (b)
amendment or supplement of the Private Placement Memorandum shall be deemed a
representation and warranty by the Issuer to the Dealer, as of the date thereof,
that, both before and after giving effect to such issuance and after giving
effect to such amendment or supplement, (i) the representations and
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<PAGE> 8
warranties given by the Issuer set forth above in this Section 2 remain true and
correct on and as of such date as if made on and as of such date, (ii) in the
case of an issuance of Notes, the Notes being issued on such date have been duly
and validly issued and constitute legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law) and subject, as to enforceability, to the qualifications set forth in
the Opinion Letter referred to in Section 3.6(a) below, and (iii) in the case of
an issuance of Notes, since the date of the most recent Private Placement
Memorandum, there has been no material adverse change in the condition
(financial or otherwise), operations or business prospects of the Issuer and its
subsidiaries, taken as a whole, which has not been disclosed to the Dealer in
writing.
Section 3. COVENANTS AND AGREEMENTS OF ISSUER.
The Issuer covenants and agrees that:
3.1 The Issuer will give the Dealer prompt notice (but in any event
prior to any subsequent issuance of Notes hereunder) of any amendment to,
modification of or waiver with respect to, the Notes or the Issuing and Paying
Agency Agreement, including a complete copy of any such amendment, modification
or waiver.
3.2 The Issuer shall, whenever there shall occur any change in the
condition (financial or otherwise), operations or business prospects of the
Issuer and its subsidiaries, taken as a whole, or any development or occurrence
in relation to the Issuer that would have a material adverse effect on holders
of the Notes or potential holders of the Notes (including any downgrading or
placement on CreditWatch or under review for potential negative change in the
rating accorded any of the Issuer's securities by any nationally recognized
statistical rating organization which has published a rating of the Notes (in
each case, as publicly released)), promptly, and in any event prior to any
subsequent issuance of Notes hereunder, notify the Dealer of such change,
development or occurrence.
3.3 The Issuer shall from time to time upon the reasonable request by
the Dealer furnish to the Dealer any press releases or any other publicly
available information regarding (a) the Issuer's operations and financial
condition, (b) the due authorization and execution of the Notes, and (c) the
Issuer's ability to pay the Notes as they mature.
3.4 The Issuer will take all such action as the Dealer may reasonably
request to ensure that each offer and each sale of the Notes will comply with
any applicable state Blue Sky laws; provided, however, that the Issuer shall not
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so qualified or
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
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<PAGE> 9
3.5 The Issuer will not be in default in any material respect of any of
its obligations hereunder, under the Notes or under the Issuing and Paying
Agency Agreement, at any time that any of the Notes are outstanding.
3.6 The Issuer shall not issue Notes hereunder until the Dealer shall
have received (a) an opinion of counsel to the Issuer, addressed to the Dealer,
reasonably satisfactory in form and substance to the Dealer (the "Opinion
Letter"), (b) a copy of the executed Issuing and Paying Agency Agreement as then
in effect, (c) a copy of resolutions adopted by the Executive Committee of the
Board of Directors of the Issuer, satisfactory in form and substance to the
Dealer and certified by the Secretary or similar officer of the Issuer,
authorizing execution and delivery by the Issuer of this Agreement, the Issuing
and Paying Agency Agreement and the Notes and consummation by the Issuer of the
transactions contemplated hereby and thereby, (d) prior to the issuance of any
Notes represented by a book-entry note registered in the name of DTC or its
nominee, a copy of the executed Letter of Representations among the Issuer, the
Issuing and Paying Agent and DTC, and (e) such other certificates, opinions,
letters and documents as the Dealer shall have reasonably requested.
Section 4. DISCLOSURE.
4.1 The Private Placement Memorandum and its contents (other than the
Dealer Information) shall be the sole responsibility of the Issuer. The Private
Placement Memorandum shall contain a statement expressly offering an opportunity
for each prospective purchaser to ask questions of, and receive answers from,
the Issuer concerning the offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire without unreasonable
effort or expense.
4.2 The Issuer agrees to promptly furnish the Dealer the Company
Information as it becomes available.
4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the
occurrence of any event relating to or affecting the Issuer that would cause the
Company Information then in existence to include an untrue statement of a
material fact or to omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they are
made, not misleading. The Dealer agrees that upon such notification, all
solicitations and sales of Notes shall be suspended.
(b) In the event that the Issuer gives the Dealer notice
pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it
then has Notes it is holding in inventory, the Issuer agrees promptly
to supplement or amend the Private Placement Memorandum so that the
Private Placement Memorandum, as amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,
and the Issuer shall make such supplement or amendment available to the
Dealer.
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<PAGE> 10
(c) In the event that (i) the Issuer gives the Dealer notice
pursuant to Section 4.3(a), (ii) the Dealer does not notify the Issuer
that it is then holding Notes in inventory and (iii) the Issuer chooses
not to promptly amend or supplement the Private Placement Memorandum in
the manner described in clause (b) above, then all solicitations and
sales of Notes shall be suspended until such time as the Issuer has so
amended or supplemented the Private Placement Memorandum, and made such
amendment or supplement available to the Dealer.
Section 5. INDEMNIFICATION AND CONTRIBUTION.
5.1 The Issuer will indemnify and hold harmless the Dealer, each
individual, corporation, partnership, trust, association or other entity
controlling the Dealer, any affiliate of the Dealer or any such controlling
entity and their respective directors, officers, employees, partners,
incorporators, shareholders, servants, trustees and agents (hereinafter the
"Indemnitees") against any and all liabilities, penalties, suits, causes of
action, losses, damages, claims, costs and expenses (including, without
limitation, fees and disbursements of counsel) or judgments of whatever kind or
nature (each a "Claim"), imposed upon, incurred by or asserted against the
Indemnitees arising out of or based upon (a) any allegation that the Private
Placement Memorandum, the Company Information or any written information
provided by the Issuer to the Dealer included (as of any relevant time) or
includes an untrue statement of a material fact or omitted (as of any relevant
time) or omits to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or (b) arising out of or based upon the breach by the Issuer of any
agreement, covenant or representation made in or pursuant to this Agreement
which has a material adverse effect on the Dealer or the holders of the Notes.
This indemnification shall not apply to the extent that the Claim arises out of
or is based upon Dealer Information or the gross negligence or willful
misconduct of the Dealer in the performance or failure to perform its
obligations under this Agreement.
5.2 Provisions relating to claims made for indemnification under this
Section 5 are set forth on Exhibit B to this Agreement.
5.3 In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 5 is
held to be unavailable or insufficient to hold harmless the Indemnitees,
although applicable in accordance with the terms of this Section 5, the
indemnifying party shall contribute to the aggregate costs incurred by the
indemnified party in connection with any Claim in the proportion of the
respective economic interests of the Issuer and the Dealer. The respective
economic interests shall be calculated by reference to the aggregate proceeds to
the Issuer of the Notes issued hereunder and the aggregate commissions and fees
earned by the Dealer hereunder.
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<PAGE> 11
Section 6. DEFINITIONS.
6.1 "Claim" shall have the meaning set forth in Section 5.1.
6.2 "Company Information" at any given time shall mean the Private
Placement Memorandum together with, to the extent applicable, (a) the Issuer's
most recent report on Form 10-K filed with the SEC and each report on Form 10-Q
or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (b) the
Issuer's most recent annual audited financial statements and each interim
financial statement or report prepared subsequent thereto, if not included in
item (a) above, (c) the Issuer's and its affiliates' other publicly available
recent reports, including, but not limited to, any publicly available filings or
reports provided to their respective shareholders, (d) any other information or
disclosure prepared pursuant to Section 4.3 hereof, and (e) any information
prepared or approved by the Issuer for dissemination to investors or potential
investors in the Notes.
6.3 "Dealer Information" shall mean information and other material
concerning the Dealer provided by the Dealer in writing expressly for inclusion
in the Private Placement Memorandum.
6.4 "DTC" shall mean The Depository Trust Company.
6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934,
as amended.
6.6 "Indemnitee" shall have the meaning set forth in Section 5.1.
6.7 "Institutional Accredited Investor" shall mean an institutional
investor that is an accredited investor within the meaning of Rule 501 under the
Securities Act and that has such knowledge and experience in financial and
business matters that it is capable of evaluating and bearing the economic risk
of an investment in the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and loan association or
other institution, as defined in Section 3(a)(5)(A) of the Securities Act,
whether acting in its individual or fiduciary capacity.
6.8 "Issuing and Paying Agency Agreement" shall mean the issuing and
paying agency agreement described on the cover page of this Agreement, as such
agreement may be amended or supplemented from time to time.
6.9 "Issuing and Paying Agent" shall mean the party designated as such
on the cover page of this Agreement, as issuing and paying agent under the
Issuing and Paying Agency Agreement, or any successor thereto in accordance with
the Issuing and Paying Agency Agreement.
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<PAGE> 12
6.10 "Non-bank fiduciary or agent" shall mean a fiduciary or agent
other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or
(b) a savings and loan association, as defined in Section 3(a)(5)(A) of the
Securities Act.
6.11 "Private Placement Memorandum" shall mean offering materials
prepared in accordance with Section 4 (including materials referred to therein
or incorporated by reference therein) provided to purchasers and prospective
purchasers of the Notes, and shall include amendments and supplements thereto
which may be prepared from time to time in accordance with this Agreement (other
than any amendment or supplement that has been completely superseded by a later
amendment or supplement).
6.12 "Qualified Institutional Buyer" or "QIB" shall have the meaning
assigned to that term in Rule 144A under the Securities Act.
6.13 "Regulation D" shall mean Regulation D (Rules 501 et seq.) under
the Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities Act.
6.15 "SEC" shall mean the U.S. Securities and Exchange Commission.
6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
Section 7. GENERAL
7.1 Unless otherwise expressly provided herein, all notices under this
Agreement to parties hereto shall be in writing and shall be effective when
received at the address of the respective party set forth in the Addendum to
this Agreement.
7.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
7.3 The Issuer agrees that any suit, action or proceeding brought by
the Issuer against the Dealer in connection with or arising out of this
Agreement or the Notes or the offer and sale of the Notes shall be brought
solely in the United States federal courts located in the Borough of Manhattan
or the courts of the State of New York located in the Borough of Manhattan. EACH
OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
7.4 This Agreement may be terminated, at any time, by the Issuer, upon
one business day's prior notice to such effect to the Dealer, or by the Dealer
upon one business day's prior notice to such effect to the Issuer. Any such
termination, however, shall not affect the obligations of the Issuer or the
Dealer under Sections 5 and 7.3 hereof or the respective representations,
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<PAGE> 13
warranties, agreements, covenants, rights or responsibilities of the parties
made or arising prior to the termination of this Agreement.
7.5 This Agreement is not assignable by either party hereto without the
written consent of the other party; provided, however, that the Dealer may
assign its rights and obligations under this Agreement to any affiliate of the
Dealer engaged in the business of acting as a dealer or placement agent for
commercial paper. The Dealer will notify the Issuer of any such assignment at
least 30 days before it becomes effective.
7.6 This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
7.7 This Agreement is for the exclusive benefit of the parties hereto,
and their respective permitted successors and assigns hereunder, and shall not
be deemed to give any legal or equitable right, remedy or claim to any other
person whatsoever.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
CARDINAL HEALTH, INC.,
AS ISSUER
By: /s/ Richard J. Miller
---------------------------------------------
Name: Richard J. Miller
Title: Corporate V.P. and CFO
By: /s/ Leonard G. Kuhr
---------------------------------------------
Name: Leonard G. Kuhr
Title: Corporate V.P. and Treasurer
DEALER
By: /s/ Autorized Signature of Applicable Dealer
---------------------------------------------
Name:
Title:
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<PAGE> 14
ADDENDUM
The following additional clauses shall apply to the Agreement and be
deemed a part thereof when the respective parties have placed their initials in
the left margin beside the respective paragraph number.
1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement
are Merrill Lynch Money Markets, Inc. and Credit Suisse First Boston.
2. The addresses of the respective parties for purposes of notices under Section
7.1 are as follows:
For the Issuer: Cardinal Health, Inc.
Address: 7000 Cardinal Place
Dublin, OH 43017
Attention:
Telephone number: (614) 757-5000
Fax number: (614) 757-8919
For the Dealer: Banc of America Securities LLC
Address: 1455 Market Street, 13th Floor
San Francisco, CA 94103
Attention: Money Market Finance
Telephone number: (415) 953-7881
Fax number: (415) 622-3429
<PAGE> 15
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS
AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE
PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN
OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE
NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY
DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(a) UNDER THE ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") AND THAT
EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS
DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN
ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF
THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A
FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN)
PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH
KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER
HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER
("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS
ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH
OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS
SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS
AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION
PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS
ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL ALSO BE DEEMED TO
AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A)
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO
THE ISSUER OR TO BANC OF AMERICA SECURITIES LLC OR ANOTHER PERSON
DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES
(COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY
OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN
INSTITUTIONAL ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A
TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM
AMOUNTS OF $250,000.
<PAGE> 16
EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) The Issuer agrees to reimburse each Indemnitee for all expenses
(including reasonable fees and disbursements of internal and external counsel)
as they are incurred by it in connection with investigating or defending any
Claim in respect of which indemnification may be sought under Section 5 of the
Agreement (whether or not it is a party to any such proceedings) ; provided,
however, that if it is found in any such action, proceeding or investigation
that any loss, claim, damage or liability of an Indemnitee has resulted from the
Dealer Information or the gross negligence or bad faith of the Indemnitee in
performing the services that are the subject of this Agreement, the Indemnitee
shall repay such portion of the reimbursed amounts that is attributable to
expenses incurred in relation to the act or omission of the Indemnitee which is
the subject of such finding.
(b) Promptly after receipt by an Indemnitee of notice of the existence
of a Claim, such Indemnitee will, if a claim in respect thereof is to be made
against the indemnifying party, promptly notify the indemnifying party in
writing of the existence thereof; provided that (i) the omission so to notify
the indemnifying party will not relieve the indemnifying party from any
liability which it may have hereunder unless and except to the extent it did not
otherwise learn of such Claim and such failure results in the forfeiture by the
indemnifying party of rights and defenses, and (ii) the omission so to notify
the indemnifying party will not relieve it from liability which it may have to
an Indemnitee otherwise than on account of this indemnity agreement. In case any
such Claim is made against any Indemnitee and it notifies the indemnifying party
of the existence thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory
to such Indemnitee; provided that if the defendants in any such Claim include
both the Indemnitee and the indemnifying party, and the Indemnitee shall have
concluded that there may be legal defenses available to it which are different
from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such Claim
on behalf of such Indemnitee, and the Indemnitee shall have the right to select
separate counsel to assert such legal defenses on behalf of such Indemnitee.
Upon receipt of notice from the indemnifying party to such Indemnitee of the
indemnifying party's election so to assume the defense of such Claim and
approval by the Indemnitee of counsel, the indemnifying party will not be liable
to such Indemnitee for expenses incurred thereafter by the Indemnitee in
connection with the defense thereof (other than reasonable costs of
investigation) unless (i) the Indemnitee shall have employed separate counsel in
connection with the assertion of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel in the jurisdiction in which
any Claim is brought),
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<PAGE> 17
approved by the indemnifying party, representing the Indemnitee who is party to
such Claim) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the Indemnitee. The indemnity, reimbursement and
contribution obligations of the indemnifying party hereunder shall be in
addition to any other liability the indemnifying party may otherwise have to an
Indemnitee and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the indemnifying party and any
Indemnitee.
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<PAGE> 1
Exhibit 10.29
CARDINAL HEALTH, INC.
FIVE-YEAR CREDIT AGREEMENT
DATED AS OF MARCH 31, 1999
THE SUBSIDIARY BORROWERS PARTY HERETO,
THE LENDERS PARTY HERETO
AND
THE FIRST NATIONAL BANK OF CHICAGO, AS ADMINISTRATIVE AGENT
BANK OF AMERICA NT & SA, AS SYNDICATION AGENT
CITIBANK, N.A., AS CO-DOCUMENTATION AGENT
CREDIT SUISSE FIRST BOSTON, AS CO-DOCUMENTATION AGENT
FIRST CHICAGO CAPITAL MARKETS, INC., AS LEAD ARRANGER AND BOOK MANAGER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Article I. DEFINITIONS............................................................................................2
Article II. THE CREDITS..........................................................................................19
2.1 Commitments of the Lenders and Swing Line Facility.............................................19
2.2 Determination of Dollar Amounts; Required Payments; Termination................................23
2.3 Ratable Loans..................................................................................24
2.4 Types of Advances..............................................................................24
2.5 Facility Fee; Reductions in Aggregate Commitment; Utilization Fee..............................24
2.6 Minimum Amount of Each Advance.................................................................24
2.7 Prepayments....................................................................................25
2.8 Method of Selecting Types and Interest Periods for New Advances................................25
2.9 Conversion and Continuation of Outstanding Advances............................................26
2.10 Method of Borrowing............................................................................27
2.11 Changes in Interest Rate, etc..................................................................27
2.12 Rates Applicable After Default.................................................................28
2.13 Method of Payment..............................................................................28
2.14 Noteless Agreement; Evidence of Indebtedness...................................................29
2.15 Telephonic Notices.............................................................................30
2.16 Interest Payment Dates; Interest and Fee Basis.................................................30
2.17 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions................31
2.18 Lending Installations..........................................................................31
2.19 Non-Receipt of Funds by the Administrative Agent...............................................31
2.20 Market Disruption..............................................................................32
2.21 Judgment Currency..............................................................................33
2.22 Payment Provisions Relating to the euro........................................................33
2.23 Redenomination and Alternative Currencies......................................................34
2.24 Replacement of Lender..........................................................................34
</TABLE>
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<TABLE>
<S> <C> <C>
2.25 Application of Payments with Respect to Defaulting Lenders.....................................34
Article III. YIELD PROTECTION; TAXES.............................................................................35
3.1 Yield Protection...............................................................................35
3.2 Changes in Capital Adequacy Regulations........................................................36
3.3 Availability of Types of Advances..............................................................37
3.4 Funding Indemnification........................................................................37
3.5 Taxes..........................................................................................37
3.6 Lender Statements; Survival of Indemnity.......................................................39
Article IV. CONDITIONS PRECEDENT.................................................................................40
4.1 Initial Advance................................................................................40
4.2 Each Advance...................................................................................41
Article V. REPRESENTATIONS AND WARRANTIES........................................................................42
5.1 Existence and Standing.........................................................................42
5.2 Authorization and Validity.....................................................................42
5.3 No Conflict; Government Consent................................................................42
5.4 Financial Statements...........................................................................43
5.5 Material Adverse Change........................................................................43
5.6 Taxes..........................................................................................43
5.7 Litigation and Contingent Obligations..........................................................44
5.8 Subsidiaries...................................................................................44
5.9 ERISA..........................................................................................44
5.10 Accuracy of Information........................................................................45
5.11 Regulation U...................................................................................45
5.12 Material Agreements............................................................................45
5.13 Compliance With Laws...........................................................................45
5.14 Plan Assets; Prohibited Transactions...........................................................45
5.15 Environmental Matters..........................................................................45
5.16 Investment Company Act.........................................................................46
5.17 Public Utility Holding Company Act.............................................................46
5.18 Year 2000......................................................................................46
</TABLE>
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<TABLE>
<S> <C> <C>
5.19 Default........................................................................................46
Article VI. COVENANTS............................................................................................46
6.1 Financial Reporting............................................................................46
6.2 Use of Proceeds................................................................................48
6.3 Notice of Default..............................................................................48
6.4 Conduct of Business............................................................................48
6.5 Taxes..........................................................................................48
6.6 Insurance......................................................................................48
6.7 Compliance with Laws...........................................................................48
6.8 Inspection.....................................................................................49
6.9 Merger.........................................................................................49
6.10 Sale of Assets.................................................................................49
6.11 Investments....................................................................................50
6.12 Liens..........................................................................................50
6.13 Year 2000......................................................................................52
6.14 Subsidiary Indebtedness. ......................................................................52
6.15 Limitation on Restrictions on Significant Subsidiary Distributions. ...........................53
6.16 Contingent Obligations.........................................................................54
6.17 Minimum Net Worth..............................................................................54
Article VII. DEFAULTS............................................................................................54
Article VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.....................................................56
8.1 Acceleration...................................................................................56
8.2 Amendments.....................................................................................57
8.3 Preservation of Rights.........................................................................57
Article IX. GENERAL PROVISIONS...................................................................................58
9.1 Survival of Representations....................................................................58
9.2 Governmental Regulation........................................................................58
9.3 Headings.......................................................................................58
9.4 Entire Agreement...............................................................................58
9.5 Several Obligations; Benefits of this Agreement................................................58
</TABLE>
<PAGE> 5
<TABLE>
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9.6 Expenses; Indemnification......................................................................58
9.7 Numbers of Documents...........................................................................59
9.8 Accounting.....................................................................................59
9.9 Severability of Provisions.....................................................................59
9.10 Nonliability of Lenders........................................................................60
9.11 Confidentiality................................................................................60
9.12 Nonreliance....................................................................................60
Article X. THE AGENT.............................................................................................61
10.1 Appointment; Nature of Relationship............................................................61
10.2 Powers.........................................................................................61
10.3 General Immunity...............................................................................61
10.4 No Responsibility for Loans, Recitals, etc.....................................................61
10.5 Action on Instructions of Lenders..............................................................62
10.6 Employment of Agents and Counsel...............................................................62
10.7 Reliance on Documents; Counsel.................................................................62
10.8 Administrative Agent's Reimbursement and Indemnification.......................................63
10.9 Notice of Default..............................................................................63
10.10 Rights as a Lender.............................................................................63
10.11 Lender Credit Decision.........................................................................64
10.12 Successor Administrative Agent.................................................................64
10.13 Administrative Agent's Fee.....................................................................65
10.14 Delegation to Affiliates.......................................................................65
10.15 Administrative Agent, Syndication Agent, Co-Documentation Agents, Lead Arranger, etc...........65
Article XI. SETOFF; RATABLE PAYMENTS.............................................................................65
11.1 Setoff.........................................................................................65
11.2 Ratable Payments...............................................................................66
Article XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS...................................................66
12.1 Successors and Assigns.........................................................................66
12.2 Participations.................................................................................66
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
12.3 Assignments....................................................................................67
12.4 Dissemination of Information...................................................................69
12.5 Tax Treatment..................................................................................69
12.6 Transfer to an SPC.............................................................................69
Article XIII. NOTICES............................................................................................70
13.1 Notices........................................................................................70
13.2 Change of Address..............................................................................70
Article XIV. COUNTERPARTS........................................................................................70
Article XV. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.........................................71
15.1 CHOICE OF LAW..................................................................................71
15.2 CONSENT TO JURISDICTION........................................................................71
15.3 WAIVER OF JURY TRIAL...........................................................................71
</TABLE>
<PAGE> 7
FIVE-YEAR CREDIT AGREEMENT
This Agreement, dated as of March 31, 1999, is among Cardinal Health,
Inc. (the "Company"), certain Subsidiaries of the Company (the "Subsidiary
Borrowers", and together with the Company, the "Borrowers"), the lenders party
hereto from time to time (the "Lenders"), and The First National Bank of
Chicago, as Administrative Agent (the "Administrative Agent"). The parties
hereto agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement:
"364-Day Credit Agreement" means the 364-Day Credit Agreement dated the
date hereof between the Company, the Subsidiary Borrowers party thereto, the
Lenders and the Administrative Agent, as Administrative Agent, as such agreement
may be amended, restated or extended from time to time.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Company or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"Adjusted Tangible Net Worth" means, as of any date, (i) the amount of
any capital stock, paid in capital and similar equity accounts plus (or minus in
the case of a deficit) the capital surplus and retained earnings of the Company
and its consolidated Subsidiaries, but excluding the amount of any foreign
currency translation adjustment account shown as a capital account, less (ii)
the net book value of all items of the following character which are included in
the assets of the Company and its consolidated Subsidiaries: (a) goodwill,
including, without limitation, the excess of cost over book value of any asset,
(b) organization or experimental expenses, (c) unamortized debt discount and
expense, (d) patents, trademarks, trade names and copyrights, (e) treasury
stock, (f) franchises, licenses and permits, and (g) other assets which are
deemed intangible assets under Agreement Accounting Principles.
"Administrative Agent" means The First National Bank of Chicago in its
capacity as contractual representative of the Lenders pursuant to Article X, and
not in its individual capacity as a Lender, and any successor Administrative
Agent appointed pursuant to Article X.
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<PAGE> 8
"Advance" means a borrowing hereunder, (i) made by one or more Lenders
on the same Borrowing Date, or (ii) converted or continued by the Lenders on the
same date of conversion or continuation, consisting, in either case, of the
aggregate amount of the several Loans of the same Type and, in the case of
Eurocurrency Loans, in the same Agreed Currency and for the same Interest
Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof. As of
the date of this Agreement, the original Aggregate Commitment was $750,000,000.
"Aggregate Dollar Outstandings" means as at any date of determination
with respect to any Lender, the aggregate unpaid principal amount of such
Lender's Dollar Loans on such date.
"Aggregate Multicurrency Commitments" means at any date of
determination with respect to all Multicurrency Lenders, an amount equal to the
Multicurrency Commitments of all Multicurrency Lenders on such date.
"Aggregate Multicurrency Outstandings" means as at any date of
determination with respect to any Lender, the Equivalent Amount of the aggregate
unpaid principal amount of such Lender's Multicurrency Loans and Alternate
Currency Loans on such date.
"Aggregate Outstandings" means as at any date of determination with
respect to any Lender, the sum of such Lender's Aggregate Dollar Outstandings
and Aggregate Multicurrency Outstandings on such date.
"Agreed Currencies" means (i) Dollars, (ii) so long as such currencies
remain Eligible Currencies, such freely traded currencies to be agreed upon,
including without limitation, the euro and British Pounds Sterling, and (iii)
any Alternate Currency.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles in the United States of America in effect from time to time, applied
in a manner consistent with that used in preparing the financial statements
referred to in Section 5.4; provided, however, that if any change in Agreement
Accounting Principles from those applied in preparing such financial statements
affects the calculation of any financial covenant contained in this Agreement,
the Borrowers and the Administrative Agent hereby agree to negotiate in good
faith towards making appropriate amendments acceptable to the Required Lenders
to the provisions of this Agreement to reflect as nearly as possible the effect
of the financial covenants as in effect on the date hereof.
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<PAGE> 9
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Alternate Currency" means (i) so long as such currencies remain
Eligible Currencies, the euro, Italian Lira, Canadian Dollars and Australian
Dollars, and (ii) any other Eligible Currency which the Company requests the
Administrative Agent to include as an Alternate Currency hereunder and which is
acceptable to one or more of the applicable Alternate Currency Lenders, and with
respect to which an Alternate Currency Addendum has been executed among the
Company, a Subsidiary Borrower, one or more Alternate Currency Lenders and the
Administrative Agent in connection therewith.
"Alternate Currency Addendum" means a schedule and addendum entered
into among the Company, a Subsidiary Borrower, one or more Alternate Currency
Lenders and the Administrative Agent, in form and substance satisfactory to the
Administrative Agent, the Company, such Subsidiary Borrower and such Alternate
Currency Lenders party thereto.
"Alternate Currency Commitment" means a portion of the Multicurrency
Commitment equal to, for each Alternate Currency Lender and for each Alternate
Currency, the obligation of such Alternate Currency Lender to make Alternate
Currency Loans not exceeding the Equivalent Amount set forth in Schedule 5 or
the applicable Alternate Currency Addendum, as such amount may be modified from
time to time pursuant to the terms of this Agreement and the applicable
Alternate Currency Addendum.
"Alternate Currency Lender" means any Lender (including any Lending
Installation) party to an Alternate Currency Addendum.
"Alternate Currency Loan" means any Loan denominated in an Alternate
Currency made by the Administrative Agent or one or more of the Alternate
Currency Lenders to a Borrower pursuant to this Agreement and the applicable
Alternate Currency Addendum.
"Alternate Currency Rate" means, with respect to any Alternate Currency
Loan, such publicly announced interbank rate as is customary for prime bank
deposits or loans in the currency of such Alternate Currency Loan and in the
financial center where the Alternate Currency Lenders would fund such Loan, or
such other rate as may be set forth in the applicable Alternate Currency
Addendum.
"Alternate Currency Share" means, with respect to any Alternate
Currency Lender for any particular Alternate Currency, the percentage obtained
by dividing (a) such Alternate Currency Lender's Alternate Currency Commitment
at such time as set forth in the applicable Alternate Currency Addendum by (b)
the aggregate of the Alternate Currency Commitments at such time of all
Alternate Currency Lenders with respect to such Alternate Currency as set forth
in the applicable Alternate Currency Addendum.
"Applicable Fee Rate" means, at any time, the percentage rate per annum
at which Facility Fees are accruing on the Aggregate Commitment (without regard
to usage) at such time as set forth in the Pricing Schedule.
4
<PAGE> 10
"Applicable Margin" means, with respect to any Eurocurrency Loan,
Floating Rate Loan or the Facility Fee, as the case may be at any time, the
applicable percentage which is applicable at such time set forth in the Pricing
Schedule provided that upon the occurrence and during the continuation of a
Default, the Applicable Margin shall be the highest Applicable Margin set forth
in the Pricing Schedule.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Australian Dollars" or "AUS$" shall mean the lawful currency of the
Commonwealth of Australia.
"Authorized Officer" means any of the Chairman, Chief Executive
Officer, President, Vice Chairman, Chief Financial Officer, Controller, or
Treasurer of a Borrower, or their equivalent, acting singly.
"Available Dollar Commitment" means at any date of determination with
respect to any Lender, the amount of such Lender's Dollar Commitment in effect
on such date reduced by the sum of (i) such Lender's Commitment Percentage of
the Equivalent Amount of any Swingline Loans outstanding on such date, and (ii)
the Aggregate Dollar Outstandings of such Lender on such date.
"Available Multicurrency Commitment" means at any date of determination
with respect to any Multicurrency Lender, the amount of such Multicurrency
Lender's Multicurrency Commitment in effect on such date reduced by the sum of
(i) the Equivalent Amount of any unused Alternate Currency Commitment of such
Multicurrency Lender on such date, and (ii) the Aggregate Multicurrency
Outstandings of such Multicurrency Lender on such date.
"Borrowers" means the Company and the Subsidiary Borrowers, and
"Borrower" means any of them, as the context may require.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"British Pounds Sterling" or "(pound)" means the lawful currency of the
United Kingdom of Great Britain and Northern Ireland.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurocurrency Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Detroit and New York for the conduct
of substantially all of their commercial lending activities and on which
dealings in the Agreed Currencies of the relevant Eurocurrency Advances are
carried on in the London interbank market and (and, if the Advances which are
the subject of such borrowing, payment or rate selection are denominated in
euros, a day upon which a clearing system as determined by the Administrative
Agent to be suitable for clearing or settlement of the euro is open for
business), and (ii) for all other purposes, a day (other than a Saturday or
Sunday) on which banks generally are open in Detroit for the conduct of
substantially all of their commercial lending activities.
5
<PAGE> 11
"Canadian Dollars" or "C$" shall mean the lawful currency of the
Dominion of Canada.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Cash Equivalent Investments" means (i) short-term obligations of, or
fully guaranteed by, the United States of America, (ii) commercial paper rated
A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts
maintained in the ordinary course of business, (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000, (v) banker's acceptances,
(vi) money-market funds, provided that such funds invest solely in securities
otherwise described in this definition, (vii) variable rate demand notes, (viii)
municipal preferred stock, (ix) cash market preferred stock, and (x) short term
municipal notes; provided in each case that the same provides for payment of
both principal and interest (and not principal alone or interest alone) and is
not subject to any contingency regarding the payment of principal or interest.
"Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 30% or more of the outstanding shares of voting stock of the
Company, provided, however, that the acquisitions by or on behalf of a Plan, an
employee stock purchase plan of the Company, or by Persons who before such
acquisition were officers, directors, employees or who held in the aggregate not
less than 5% of the outstanding shares of voting stock of the Company shall not
be included in determining whether a Change in Control shall have occurred.
"Closing Date" shall mean March 31, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Co-Documentation Agents" means Citibank, N.A. and Credit Suisse First
Boston.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or as
set forth in any assignment that has become effective pursuant to Section
12.3.2, as such amount may be modified from time to time pursuant to the terms
hereof.
"Commitment Percentage" means as to any Lender, the percentage which
such Lender's Commitment then constitutes of the Aggregate Commitment (or, if
the Commitments have terminated or expired, the percentage which (a) the
Aggregate Outstandings of such Lender at such time constitutes of (b) the
Aggregate Outstandings of all Lenders at such time).
6
<PAGE> 12
"Company" means Cardinal Health, Inc., an Ohio corporation, and it
successors and assigns.
"Computation Date" is defined in Section 2.2.
"Consolidated or "consolidated" means, when used with reference to any
financial term in this Agreement, the aggregate for two or more Persons of the
amounts signified by such term for all such Persons determined on a consolidated
basis in accordance with Agreement Accounting Principles.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person for
Indebtedness, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or the obligations of any such
Person as general partner of a partnership with respect to the liabilities of
the partnership, provided, however, that any assumption, guaranty, endorsement
or undertaking with respect to any liability of any of its Subsidiaries to any
other of its Subsidiaries shall not be a Contingent Obligation of the Company.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Cost Rate" means
1. The cost of compliance with existing requirements of the Bank of
England and/or the Financial Services Authority (or any authority which replaces
all or any of their functions) in respect of Advances denominated in British
Pounds Sterling will be calculated by the Administrative Agent in relation to
each Advance on the basis of rates supplied by the Administrative Agent by
reference to the circumstances existing on the first day of each Interest Period
in respect of such Advance and, if any such Interest Period exceeds three
months, at three calendar monthly intervals from the first day of such Interest
Period during its duration in accordance with the following formula:
AB +C(B-D) + E x 0.01 per cent per annum
100 - (A+C)
Where:
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<PAGE> 13
A. is the percentage of eligible liabilities (assuming these to be in
excess of any stated minimum) which the Administrative Agent is from time to
time required to maintain as an interest free cash ratio deposit with the Bank
of England to comply with cash ratio requirements.
B. is the percentage rate per annum at which British Pounds Sterling
deposits are offered by the Administrative Agent in accordance with its normal
practice, for a period equal to (a) the relevant Interest Period (or, as the
case may be, remainder of such Interest Period) in respect of the relevant
Advance of (b) three months, whichever is the shorter, to a leading bank in the
London Interbank Market at or about 11:00 a.m.
in a sum approximately equal to the amount of such Advance.
C. is the percentage of eligible liabilities which the Administrative
Agent is required from time to time to maintain as interest bearing special
deposits with the Bank of England.
D. is the percentage rate per annum payable by the Bank of England to
the Administrative Agent on interest bearing special deposits.
E. is the rate payable by the Administrative Agent to the Financial
Services Authority pursuant to the Fees Regulations (but, for this purpose, the
figure at paragraph [2.02b]/[2.03b] of the Fees Regulations shall be deemed to
be zero) and expressed in pounds per (pound)1,000,000 of the Fee Base of the
Administrative Agent.
2. For the purposes of this definition:
(a) "eligible liabilities" and "special deposits" shall bear the
meanings ascribed to them from time to time under or pursuant to the Bank of
England Act 1998 or (as appropriate) by the Bank of England;
(b) "Fees Regulations" shall mean the Banking Supervision (Fees)
Regulations 1998 or such other regulations as may be in force from time to time
in respect of the payment of fees for banking supervision; and
(c) "Fee Base" shall bear the meaning ascribed to it, and shall be
calculated in accordance with, the Fees Regulations.
3. The percentages used in A and C above shall be those required to be
maintained on the first day of the relevant period as determined in accordance
with B above.
4. In application of the above formula, A, B, C and D will be included
in the formula as figures and not as percentages e.g. if A is 0.5 per cent and B
is 12 per cent, AB will be calculated as 0.5 x 12 and not as 0.5 per cent x 12
per cent.
5. Calculations will be made on the basis of a 365 day year (or, if
market practice differs, in accordance with market practice).
6. A negative result obtained by subtracting D from B shall be taken as
zero.
8
<PAGE> 14
7. The resulting figures shall be rounded upwards, if not already such
a multiple, to the nearest whole multiple of one-thirty second of one percent
per annum.
8. Additional amounts calculated in accordance with this definition are
payable at the same time that accrued interest is payable for the Interest
Period to which they relate.
9. The determination of the Cost Rate by the Administrative Agent in
relation to any period shall, in the absence of manifest error, be conclusive
and binding on all of the parties hereto.
10. The Administrative Agent may from time to time, after consultation
with the Company and the Lenders, determine and notify to all parties any
amendments or variations which are required to be made to the formula set out
above in order to comply with any requirements from time to time imposed by the
Bank of England or the Financial Services Authority (or any other authority
which replaces all or any of their functions) in relation to Advances
denominated in British Pounds Sterling (including any requirements relating to
sterling primary liquidity) and, any such determination shall, in the absence of
manifest error, be conclusive and binding on all the parties hereto.
"Default" means an event described in Article VII.
"Defaulting Lender" means any Lender that (a) on any Borrowing Date
fails to make available to the Administrative Agent such Lender's Loans required
to be made to a Borrower on such Borrowing Date or any payment required to be
made pursuant to Section 2.1(a)(iv), (b) shall not have made a payment to the
Swingline Lender pursuant to Section 2.1(b)(iii), or (c) shall not have made
available to the Administrative Agent its proportionate share of the Unpaid
Amount as required pursuant to Section 2.19(b). Once a Lender becomes a
Defaulting Lender, such Lender shall continue as a Defaulting Lender until such
time as such Defaulting Lender makes available to the Administrative Agent the
amount of such Defaulting Lender's Loans together with all other amounts
required to be paid to the Administrative Agent, the Swingline Lender or any
other Lender pursuant to this Agreement.
"Dollar Advance" means a borrowing hereunder (or continuation or a
conversion thereof) consisting of the several Dollar Loans made on the same
Borrowing Date (or date of conversion or continuation) by the Lenders to a
Borrower of the same Type and for the same Interest Period.
"Dollar Amount" of any currency at any date shall mean (i) the amount
of such currency if such currency is Dollars or (ii) the Equivalent Amount of
Dollars if such currency is any currency other than Dollars, calculated on the
basis of the arithmetical mean of the buy and sell spot rates of exchange of the
Administrative Agent for such currency on the London market at 11:00 a.m.,
London time, on or as of the most recent Computation Date provided for in
Section 2.2.
"Dollar Commitment" means for each Lender the aggregate amount set
forth opposite its name on Schedule 6, provided, however that the Aggregate
Dollar Commitments of the Lenders shall not exceed $600,000,000.
9
<PAGE> 15
"Dollar Commitment Percentage" means as to any Lender, the percentage
which such Lender's Dollar Commitment then constitutes of the aggregate Dollar
Commitments of all Lenders (or, if the Commitments have terminated or expired,
the percentage which (a) the Aggregate Dollar Outstandings of such Lender at
such time constitutes of (b) the Aggregate Dollar Outstandings of all Lenders at
such time).
"Dollar Loans" means, with respect to a Lender, such Lender's Loans
made pursuant to Section 2.1(a)(i).
"Dollars" and "$" shall mean the lawful currency of the United States
of America.
"Eligible Currency" means any currency other than Dollars (i) that is
readily available, (ii) that is freely traded, (iii) in which deposits are
customarily offered to banks in the London interbank market, (iv) which is
convertible into Dollars in the international interbank market and (v) as to
which an Equivalent Amount may be readily calculated. If, after the designation
by the Lenders of any currency as an Agreed Currency, (x) currency control or
other exchange regulations are imposed in the country in which such currency is
issued with the result that different types of such currency are introduced, (y)
such currency is, in the determination of the Administrative Agent, no longer
readily available or freely traded or (z) in the determination of the
Administrative Agent, an Equivalent Amount of such currency is not readily
calculable, the Administrative Agent shall promptly notify the Lenders and the
Borrowers, and such currency shall no longer be an Agreed Currency until such
time as all of the Lenders agree to reinstate such currency as an Agreed
Currency and promptly, but in any event within five Business Days of receipt of
such notice from the Administrative Agent, the Borrowers shall repay all Loans
in such affected currency or convert such Loans into Loans in Dollars or another
Agreed Currency, subject to the other terms set forth in Article II.
"EMU" means Economic and Monetary Union as contemplated in the Treaty
on European Union.
"EMU Legislation" means legislative measures of the European Union for
the introduction of, changeover to or operation of the euro in one or more
member states.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"Equivalent Amount" of any currency with respect to any amount of
Dollars at any date shall mean the equivalent in such currency of such amount of
Dollars, calculated on the basis of the arithmetical mean of the buy and sell
spot rates of exchange of the Administrative Agent for such other currency at
11:00 a.m., London time, on the date on or as of which such amount is to be
determined.
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<PAGE> 16
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"euro" means the single currency of the European Union as constituted
by the Treaty on European Union and as referred to in EMU Legislation.
"euro unit" means the currency unit of the euro as defined in the EMU
Legislation.
"Eurocurrency" means any Agreed Currency.
"Eurocurrency Advance" means an Advance comprised of Eurocurrency
Loans.
"Eurocurrency Loan" means a Loan which, except as otherwise provided in
Section 2.12, bears interest at the applicable Eurocurrency Rate.
"Eurocurrency Payment Office" of the Administrative Agent shall mean,
for each of the Agreed Currencies, the office, branch, affiliate or
correspondent bank of the Administrative Agent specified as the "Eurocurrency
Payment Office" for such currency in Schedule 3 hereto or such other office,
branch, affiliate or correspondent bank of the Administrative Agent as it may
from time to time specify to the Borrowers and each Lender as its Eurocurrency
Payment Office.
"Eurocurrency Rate" means, with respect to a Eurocurrency Advance for
the relevant Interest Period, the sum of (i) the quotient of (a) the
Eurocurrency Reference Rate applicable to such Interest Period, divided by (b)
one minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (ii) the Applicable Margin. The Eurocurrency Rate shall be
expressed as a percentage rounded to four decimal places.
"Eurocurrency Reference Rate" means, with respect to each Interest
Period for a Multicurrency Advance :
(a) the rate per annum quoted at or about 11:00 a.m. (London time) on
the Quotation Date for such period on that page of the Telerate Screen, Reuters
or Bloombergs which displays British Bankers Association Interest Settlement
Rates for deposits in the relevant Agreed Currency for such period or, if such
page or service shall cease to be available, such other page or such other
service (as the case may be) for the purpose of displaying British Bankers
Association Interest Settlement Rates for such currency as the Administrative
Agent, in its discretion, shall select.
(b) If no such rate is displayed for the relevant currency and the
relevant period and there is no alternative service on which two or more such
quotations for the Agreed Currency are displayed, "Eurocurrency Reference Rate"
will be the rate at which deposits in the Agreed Currency of that amount are
offered by the Administrative Agent for that period to prime banks in the London
interbank market at or about 11:00 a.m. (London time) on the Quotation Date for
such period.
Plus, in each case, the Cost Rate; and with respect to a Dollar Advance
for the relevant Interest Period, the rate determined by the Administrative
Agent to be the rate at which First Chicago offers to place Eurodollar deposits
with first-class banks in the London interbank
11
<PAGE> 17
market at 11:00 a.m. (London time) two Business Days prior to the first day of
such Interest Period in the approximate amount of the relevant Dollar Loan of
First Chicago and having a maturity equal to such Interest Period.
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Administrative Agent, taxes imposed on its overall
net income, and franchise taxes (and any interest, fees or penalties for late
payment thereof) imposed on it by (i) the jurisdiction under the laws of which
such Lender or the Administrative Agent is incorporated or organized or (ii) the
jurisdiction in which the Administrative Agent's or such Lender's principal
executive office or such Lender's applicable Lending Installation is located.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Facility Termination Date" means March 31, 2004, or any earlier date
on which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the immediately preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for such day, the average of the
quotations at approximately 10:00 a.m. (Detroit time) on such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by the Administrative Agent in its sole
discretion.
"Financial Contract" of a Person means (a) any exchange-traded or over
the counter futures, forward, swap or option contract or other financial
instrument with similar characteristics or (b) any Rate Hedging Agreement.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day in each case changing when and as the Alternate
Base Rate changes.
"Floating Rate Advance" means an Advance comprised of Floating Rate
Loans.
"Floating Rate Loan" means a Dollar Loan which, except as otherwise
provided in Section 2.12, bears interest at the Floating Rate.
"Guarantor" means the Company, and its successors and assigns.
"Guaranty" means that certain Guaranty dated the date hereof executed
by the Guarantor in favor of the Administrative Agent, for the ratable benefit
of the Lenders, as it may be amended or modified and in effect from time to
time.
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"Indebtedness" of a Person means, as of any date, such Person's (i)
obligations for borrowed money or evidenced by bonds, notes, acceptances,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or bankers' acceptances, (ii) obligations
representing the deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person's business
payable on terms customary in the trade), (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (iv)obligations of
such Person to purchase securities or other Property arising out of or in
connection with the sale of the same or substantially similar securities or
Property, (v) Capitalized Lease Obligations, (vi) any other obligation for
borrowed money or other financial accommodation which in accordance with
Agreement Accounting Principles would be shown as a liability on the
consolidated balance sheet of such Person, (vii) any Rate Hedging Obligations of
such Person, and (viii) all Contingent Liabilities of such Person with respect
to or relating to the indebtedness, obligations and liabilities of others
similar in character to those described in clauses (i) through (vii) of this
definition.
"Interest Period" means, with respect to a Eurocurrency Advance, a
period of one, two, three or six months (or such longer or shorter period
requested by the Borrower and acceptable to all of the Lenders), commencing on a
Business Day selected by the Borrower pursuant to this Agreement. Such Interest
Period shall end on the day which corresponds numerically to such date one, two,
three or six months thereafter (or such longer or shorter period requested by
the Borrower and acceptable to all of the Lenders), provided, however, that if
there is no such numerically corresponding day in such next, second, third or
sixth succeeding month, such Interest Period shall end on the last Business Day
of such next, second, third or sixth succeeding month. If an Interest Period
would otherwise end on a day which is not a Business Day, such Interest Period
shall end on the next succeeding Business Day, provided, however, that if said
next succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any certificate of deposit owned by such Person; and structured notes,
derivative financial instruments and other similar instruments or contracts
owned by such Person.
"Lead Arranger" means First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the
Administrative Agent, the office, branch, subsidiary or Affiliate of such Lender
or the Administrative Agent with respect to each Agreed Currency listed on
Schedule 4, or otherwise selected by such Lender and the Administrative Agent
pursuant to Section 2.18.
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"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement, the Notes, the Guaranty and any
other instrument or document executed in connection with any of the foregoing at
any time.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Company and its Subsidiaries taken as a whole, (ii) the
ability of the Company to perform its obligations under the Loan Documents to
which it is a party, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Administrative Agent or the Lenders
thereunder.
"Moody's" means Moody's Investors Service, Inc.
"Multicurrency Advance" means a borrowing hereunder (or continuation or
a conversion thereof) consisting of the several Multicurrency Loans made on the
same Borrowing Date (or date of conversion or continuation) by the Lenders to a
Borrower of the same Type and for the same Interest Period.
"Multicurrency Commitment" means for each Lender the aggregate amount
set forth as its Multicurrency Commitment on Schedule 6 or as set forth in any
assignment that has become effective pursuant to Section 12.3.2, as such amount
shall be modified from time to time pursuant to the terms hereof, provided,
however that the Aggregate Multicurrency Commitments of the Lenders shall not
exceed the Equivalent Amount of $150,000,000.
"Multicurrency Commitment Percentage" means as to any Multicurrency
Lender, the percentage which such Multicurrency Lender's Multicurrency
Commitment then constitutes of the Aggregate Multicurrency Commitments (or, if
the Multicurrency Commitments have terminated or expired, the percentage which
(a) the Aggregate Multicurrency Outstandings of such Multicurrency Lender at
such time constitutes of (b) the Aggregate Multicurrency Outstandings of all
Multicurrency Lenders at such time).
"Multicurrency Lender" means each Lender having a Multicurrency
Commitment.
"Multicurrency Loans" means, with respect to a Multicurrency Lender,
such Lender's Loans made pursuant to Section 2.1(a)(ii).
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"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company is a party to
which more than one employer is obligated to make contributions.
"National Currency Unit" means the unit of currency (other than a euro
unit) of a Participating Member State.
"Net Worth" means at any time the consolidated stockholder's equity of
the Company and its Subsidiaries calculated on a consolidated basis as of such
time in accordance with Agreement Accounting Principles .
"Non-U.S. Borrower" is defined in Section 3.1(b).
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any promissory note issued at the request of a Lender
pursuant to Section 2.14 in the form of Exhibit E.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrowers to the
Lenders or to any Lender, the Administrative Agent or any indemnified party
arising under the Loan Documents.
"Other Taxes" is defined in Section 3.5(ii).
"Overdue Rate" means a per annum rate that is equal to the sum of two
percent (2%) plus the Alternate Base Rate, changing as and when the Alternate
Base Rate changes or, with respect to any Alternate Currency Loan, such other
overdue rate, if any, as specified in the applicable Alternate Currency
Addendum.
"Participants" is defined in Section 12.2.1.
"Participating Member State" means any member state of the European
Union which has the euro as its lawful currency.
"Payment Date" means the last day of each calendar quarter, commencing
June 30, 1999.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and as to which the Company or any member of the Controlled Group may have
any liability.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
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"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned
or leased by such Person.
"Purchasers" is defined in Section 12.3.1.
"Quotation Date" in relation to any period for which a Eurocurrency
Reference Rate for an Agreed Currency other than Dollars is to be determined
hereunder, means the date on which quotations would ordinarily be given by prime
lenders in the London inter-bank market for deposits in the Agreed Currency in
relation to which such rate is to be determined for delivery on the first day of
that period, provided that, if, for such period, quotations would ordinarily be
given on more than one date, the Quotation Date for that period shall be the
last of those dates.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 51%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the Aggregate Outstandings.
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"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Significant Subsidiary" means any Subsidiary of the Company that would
be a "significant subsidiary" within the meaning of Rule 1-02 of the Securities
and Exchange Commission's Regulation S-X if 5% were substituted for 10% wherever
it occurs in such Rule.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group.
"Subsequent Participant" means any member state of the European Union
that adopts the euro as its lawful currency after the date of this Agreement.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Company.
"Subsidiary Borrower" means each Subsidiary of the Company listed as a
Subsidiary Borrower on Schedule 1 as amended from time to time in accordance
with Section 5.8.
"Substantial Portion" means, with respect to the Property of the
Company and its Subsidiaries, Property which (i) represents more than 20% of the
consolidated assets of the Company and its Subsidiaries as would be shown in the
consolidated financial statements of the Company and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 20% of the
consolidated net sales or of the consolidated net income of the Company and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.
"Swingline Lender" means First Chicago.
"Swingline Loan" means any borrowing under Section 2.8 evidenced by the
Swingline Note and made by the Swingline Lender pursuant to Section 2.1(b).
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"Swingline Note" means the promissory note of the Company evidencing
the Swingline Loans, in substantially the same form as Exhibit F hereto, as
amended or modified at the time such Swingline Loan is made to the Company.
"Syndication Agent" means Bank of America NT & SA.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurocurrency Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unpaid Amount" is defined in Section 2.19(b).
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications of the Company
and its Subsidiaries, and of the Company's and its Subsidiaries' material
customers, suppliers and vendors, to function on and after January 1, 2000 as
they do on the date hereof, including handling applications involving dates, as
such inability affects the business, operations and financial condition of the
Company and its Subsidiaries.
"Year 2000 Program" is defined in Section 5.18.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
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ARTICLE II.
THE CREDITS
2.1 Commitments of the Lenders and Swing Line Facility.
(a) Revolving Credit Advances.
(i) From and including the date of this Agreement and prior to the
Facility Termination Date, each Lender agrees, for itself only, subject to the
terms and conditions set forth in this Agreement, to make Loans to the Borrowers
in Dollars from time to time in amounts not to exceed in the aggregate at any
one time outstanding the amount of its Dollar Commitment. Each Dollar Advance
shall consist of Dollar Loans made by each Lender ratably in proportion to such
Lender's respective Available Dollar Commitment divided by the aggregate
Available Dollar Commitments of all Lenders at such time.
(ii) From and including the date of this Agreement and prior to the
Facility Termination Date, each Multicurrency Lender agrees, for itself only,
subject to the terms and conditions set forth in this Agreement, to make
Multicurrency Loans to the Borrowers in Eligible Currencies from time to time
prior to the Facility Termination Date so long as after giving effect thereto
and any concurrent repayment or prepayment of Loans (x) the Available
Multicurrency Commitment of each Multicurrency Lender is greater than or equal
to zero, (y) the Equivalent Amount of the Aggregate Multicurrency Outstandings
of all Lenders does not exceed $150,000,000 and (z) the Aggregate Outstandings
of all Lenders does not exceed the Aggregate Commitment. Each Multicurrency
Advance shall consist of Multicurrency Loans made by each Multicurrency Lender
ratably in proportion to such Multicurrency Lender's respective Available
Multicurrency Commitment divided by the aggregate Available Multicurrency
Commitments of all Multicurrency Lenders at such time.
(iii) Subject to the terms of this Agreement, the Borrowers may borrow,
repay and reborrow at any time prior to the Facility Termination Date. The
Commitments to lend hereunder shall expire on the Facility Termination Date.
(iv) Immediately and automatically upon the occurrence of a Default
under Sections 7.2, 7.6 or 7.7, (A) each Lender shall be deemed to have
unconditionally and irrevocably purchased from each Multicurrency Lender,
without recourse or warranty, an undivided interest in and participation in each
Multicurrency Loan ratably in accordance with such Lender's Commitment
Percentage, (B) immediately and automatically all Multicurrency Loans shall be
converted to and redenominated in Dollars equal to the Equivalent Amount of each
such Multicurrency Loan determined as of the date of such conversion, (C) each
Multicurrency Lender shall be deemed to have unconditionally and irrevocably
purchased from each Dollar Lender, without recourse or warranty, an undivided
interest in and participation in each Dollar Loan ratably in accordance with
such Multicurrency Lender's Commitment Percentage. Each of the Lenders shall pay
to
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the applicable Multicurrency Lender not later than two (2) Business Days
following a request for payment from such Lender, in Dollars, an amount equal to
the undivided interest in and participation in the Multicurrency Loan purchased
by such Lender pursuant to this Section 2.1(a)(iv), and each of the
Multicurrency Lenders shall pay to the applicable Dollar Lender not later than
two (2) Business Days following a request for payment from such Lender, in
Dollars, an amount equal to the undivided interest in and participation in the
Dollar Loan purchased by such Multicurrency Lender pursuant to this Section
2.1(a)(iv), it being the intent of the Lenders that following such equalization
payments, each Lender shall hold its Commitment Percentage of the Aggregate
Outstandings.
(b) Swingline Loans.
(i) Subject to the terms and conditions of this Agreement, the
Swingline Lender agrees to make Swingline Loans to the Company from time to time
on any Business Day during the period from the date hereof to but excluding the
Facility Termination Date in the aggregate principal Dollar Amount not to exceed
at any date the lesser of (A) $50,000,000 (the "Swingline Amount") and (B) the
unused portion of the Aggregate Commitment as of such date. In addition, the
outstanding principal amount of Swingline Loans made in Dollars shall not exceed
$40,000,000 at any time, and the Equivalent Amount of the outstanding principal
amount of Swingline Loans made in British Pounds Sterling or the euro unit shall
not exceed $10,000,000 at any time. The obligation of the Swingline Lender to
make Swingline Loans in British Pounds Sterling or the euro unit shall be in the
Swingline Lender's sole discretion, and any such Swingline Loans shall be deemed
to utilized the Swingline Lender's Multicurrency Commitment. Each Lender's
Commitment shall be deemed utilized by an amount equal to such Lender's
Commitment Percentage of each Swingline Loan for purposes of determining the
amount of Loans required to be made by such Lender. All Swingline Loans shall
bear interest at the Alternate Base Rate or such other rate as shall be agreed
between the Company and the Swingline Lender with respect to any Swingline Loan
at the time such Swingline Loan is made. If any Swingline Loan made in Dollars
is not repaid by the Company on the date when due, each Lender will make a
Floating Rate Loan the proceeds of which will be used to repay the Swingline
Loan.
(ii) The Swingline Lender may at any time in its sole and absolute
discretion require that any Swingline Loan be refunded by a Floating Rate
Advance from the Lenders, and upon written notice thereof by the Swingline
Lender to the Administrative Agent, the Lenders and the Company, the Company
shall be deemed to have requested a Floating Rate Advance in an amount equal to
the Dollar Amount of such Swingline Loan and such Floating Rate Advance shall be
made to refund such Swingline Loan. Any Swingline Loan outstanding in an
Eligible Currency other than Dollars, shall, upon the giving of such notice by
the Swingline Lender, immediately and automatically be converted to and
redenominated in Dollars equal to the Equivalent Amount of each such Swingline
Loan determined as of the date of such conversion. Each Lender shall be
absolutely and unconditionally obligated to fund its Commitment Percentage of
such Floating Rate Advance or, if applicable, to purchase a participation
interest in the
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Swingline Loans pursuant to Section 2.1(b)(iii) and such obligation shall not be
affected by any circumstance, including, without limitation, (A) any set-off,
counterclaim, recoupment, defense or other right which such Lender has or may
have against the Administrative Agent or the Company or any of its Subsidiaries
or anyone else for any reason whatsoever (including without limitation any
failure to comply with the requirements of Section 4.2, other than the Swingline
Lender making a Swingline Loan when it had actual knowledge of the existence of
a Default); (B) the occurrence or continuance of a Default, subject to Section
2.1(b)(iii); (C) any adverse change in the condition (financial or otherwise) of
the Company or any of its Subsidiaries; (D) any breach of this Agreement by the
Company or any of its Subsidiaries or any other Lender; or (E) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing (including without limitation the Company's failure to satisfy any
conditions contained in Article IV or any other provision of this Agreement).
(iii) If, for any reason (including without limitation as a result of
the occurrence of a Default with respect to the Company pursuant to Article VII)
Floating Rate Loans may not be made by the Lenders as described in Section
2.1(b)(ii), then (A) the Company agrees that each Swingline Loan not paid
pursuant to Section 2.1(b)(ii) shall bear interest, payable on demand by the
Swingline Lender, at the Overdue Rate, (B) the Company agrees that each
Swingline Loan outstanding in an Eligible Currency other than Dollars shall be
immediately and automatically converted to and redenominated in Dollars equal to
the Equivalent Amount of each such Swingline Loan determined as of the date of
such conversion, and (C) effective on the date each such Floating Rate Loan
would otherwise have been made, each Lender severally agrees that it shall
unconditionally and irrevocably, without regard to the occurrence of any
Default, in lieu of deemed disbursement of loans, to the extent of such Lender's
Commitment, purchase a participation interest in the Swingline Loans by paying
its Commitment Percentage thereof, provided, however, that no Lender shall be
obligated to purchase such participation in a Swingline Loan made by the
Swingline Lender when it had actual knowledge of the existence of a Default.
Each Lender will immediately transfer to the Swingline Lender, in same day
funds, the amount of its participation. Each Lender shall share based on its
Commitment Percentage in any interest which accrues thereon and in all
repayments thereof. If and to the extent that any Lender shall not have so made
the amount of such participating interest available to the Swingline Lender,
such Lender and the Company severally agree to pay to the Swingline Lender
forthwith on demand such amount together with interest thereon, for each day
from the date of demand by the Swingline Lender until the date such amount is
paid to the Swingline Lender, at (x) in the case of the Company, at the interest
rate specified above and (y) in the case of such Lender, the Federal Funds
Effective Rate.
(c) Alternate Currency Loans.
(i) Subject to the terms and conditions of this Agreement and the
applicable Alternate Currency Addendum, from and including the later of the date
of this Agreement and the date of execution of the applicable Alternate Currency
Addendum and prior to the Facility Termination Date (unless an earlier
termination date shall be specified in the
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applicable Alternate Currency Addendum), the Administrative Agent and the
applicable Alternate Currency Lenders agree, on the terms and conditions set
forth in this Agreement and in the applicable Alternate Currency Addendum, to
make Alternate Currency Loans under such Alternate Currency Addendum to the
applicable Borrower party to such Alternate Currency Addendum from time to time
in the applicable Alternate Currency, in an amount not to exceed each such
Alternate Currency Lender's applicable Alternate Currency Commitment; provided,
however, (i) at no time shall the outstanding principal amount of all Alternate
Currency Loans exceed the Alternate Currency Commitment for such currency (ii)
at not time shall the Aggregate Multicurrency Outstandings exceed the Aggregate
Multicurrency Commitments and (iii) at no time shall the aggregate outstanding
principal amount of the Alternate Currency Loans for any specific Alternate
Currency exceed the amount specified as the maximum amount for such Alternate
Currency in the applicable Alternate Currency Addendum. The Equivalent Amount of
any Alternate Currency Commitment of an Alternate Currency Lender shall be
deemed to utilize such Lender's Multicurrency Commitment. Each Alternate
Currency Loan shall consist of Alternate Currency Loans made by each applicable
Alternate Currency Lender ratably in proportion to such Alternate Currency
Lender's respective Alternate Currency Share. Subject to the terms of this
Agreement and the applicable Alternate Currency Addendum, the Borrowers may
borrow, repay and reborrow Alternate Currency Loans at any time prior to the
Facility Termination Date. On the Facility Termination Date, the outstanding
principal balance of the Alternate Currency Loans shall be paid in full by the
applicable Borrower and prior to the Facility Termination Date prepayments of
the Alternate Currency Loans shall be made by the applicable Borrower if and to
the extent required by this Agreement. Subject to the applicable Alternate
Currency Addendum, each Alternate Currency Loan shall have a maturity of one,
two, three or six months and bear interest at the Alternate Currency Rate for
such period plus the Applicable Margin as if such Loan were a Eurocurrency Loan.
(ii) The Company may, by written notice to the Administrative Agent
request the establishment of additional Alternate Currency Commitments in
additional Alternate Currencies provided the Equivalent Amount of the Alternate
Currency Commitment requested together with the Aggregate Multicurrency
Outstandings does not exceed the Aggregate Multicurrency Commitments ("Request
for a New Alternate Currency Facility"). The Administrative Agent will promptly
forward to the Multicurrency Lenders any Request for a New Alternate Currency
Facility received from the Company; provided each Lender shall be deemed not to
have agreed to such request unless its written consent thereto has been received
by the Administrative Agent within ten (10) Business Days from the date of such
notification by the Administrative Agent to such Lender (or such shorter period
as shall be specified by the Company in the Request for a New Alternate Currency
Facility). In the event that one or more Multicurrency Lenders consent to such
Request for a New Alternate Currency Facility and agree to make Alternate
Currency Loans in such Alternate Currency in an amount not less than that
requested by the Company, upon execution of the applicable Alternate Currency
Addendum and the other documents, instruments and agreements required pursuant
to this Agreement and such Alternate Currency Addendum, the Alternate Currency
Loans with respect thereto may be made.
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(iii) Except as otherwise required by applicable law, in no event shall
the Administrative Agent or Alternate Currency Lenders have the right to
accelerate the Alternate Currency Loans outstanding under any Alternate Currency
Addendum or to terminate their Alternate Currency Commitments (if any)
thereunder to make Alternate Currency Loans prior to the stated termination date
in respect thereof, except that such Administrative Agent and Alternate Currency
Lenders shall, in each case, have such rights upon an acceleration of the Loans
and a termination of the Commitments pursuant to Section 8.1.
(iv) Immediately and automatically upon the occurrence of a Default
under Sections 7.2, 7.6 or 7.7, each Lender shall be deemed to have
unconditionally and irrevocably purchased from each Alternate Currency Lender,
without recourse or warranty, an undivided interest in and participation in each
Alternate Currency Loan ratably in accordance with such Lender's Commitment
Percentage, and immediately and automatically all Alternate Currency Loans shall
be converted to and redenominated in Dollars equal to the Equivalent Amount of
each such Alternate Currency Loan determined as of the date of such conversion.
Each of the Lenders shall pay to the applicable Alternate Currency Lender not
later than two (2) Business Days following a request for payment from such
Lender, in Dollars, an amount equal to the undivided interest in and
participation in the Alternate Currency Loan purchased by such Lender pursuant
to this Section 2.1(c)(iv).
2.2 Determination of Dollar Amounts; Termination.
(i) The Administrative Agent will determine the Dollar Amount of:
(a) each Advance as of the date two Business Days prior to the
Borrowing Date or, if applicable, date of conversion/continuation of such
Advance,
(b) all outstanding Advances and Alternate Currency Loans on and
as of the last day of each Interest Period (but not less frequently than
quarterly), on receipt of any notice from the Company as to the reduction of the
Aggregate Commitment, and on any other Business Day elected by the
Administrative Agent in its discretion or upon instruction by the Required
Lenders; and
(c) all outstanding Advances and Alternate Currency Loans on each
Business Day during which Aggregate Dollar Outstandings together with
outstanding Swingline Loans exceed $500,000,000 or Aggregate Multicurrency
Outstandings exceed $100,000,000.
Each day upon or as of which the Administrative Agent determines Dollar
Amounts as described in the preceding clauses (a), (b) and (c) is herein
described as a "Computation Date" with respect to each Advance for which a
Dollar Amount is determined on or as of such day.
(ii) Any outstanding Advances together with any other unpaid
Obligations then due and payable shall be paid in full by the Borrowers on the
Facility Termination Date.
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2.3 Ratable Loans.
Other than Alternate Currency Loans, each Multicurrency Advance
hereunder shall consist of Multicurrency Loans made from the several
Multicurrency Lenders ratably in proportion to such Multicurrency Lenders'
respective Available Multicurrency Commitment divided by the aggregate Available
Multicurrency Commitments of all Multicurrency Lenders at such time, and each
Dollar Advance hereunder shall consist of Dollar Loans made from the Lenders
ratably according to their Dollar Commitment Percentage.
2.4 Types of Advances.
The Advances may be Floating Rate Advances or Eurocurrency Advances, on
the one hand, and Dollar Advances or Multicurrency Advances on the other hand,
or a combination thereof, selected by the relevant Borrowers in accordance with
Sections 2.8 and 2.9, provided, however, that a Floating Rate Advance must also
be a Dollar Advance.
2.5 Facility Fee; Reductions in Aggregate Commitment; Utilization Fee.
The Company agrees to pay to the Administrative Agent for the account
of each Lender a facility fee, determined in accordance with the Pricing
Schedule, calculated on the Aggregate Commitment, whether used or unused,
payable quarterly in arrears for the ratable benefit of the Lenders from the
date of this Agreement until the Facility Termination Date. The Aggregate
Commitment may be reduced by the Company in multiples of $10,000,000 upon three
Business Days' prior written notice. Any such reduction shall be allocated
ratably between the Dollar Commitment and the Multicurrency Commitment. For each
day on which the Aggregate Outstandings exceeds 33% of the Aggregate Commitment,
a utilization fee at the per annum rate set forth on the Pricing Schedule will
accrue on the aggregate principal amount of outstanding Advances for the ratable
benefit of the Lenders, payable in arrears on each Payment Date until the
Facility Termination Date, provided, however, that irrespective of the amount of
Aggregate Outstandings, a utilization fee at the rates set forth on the Pricing
Schedule for ">67%" shall accrue on all Multicurrency Advances and Alternate
Currency Loans for the benefit of the Multicurrency Lenders, payable as
aforesaid.
2.6 Minimum Amount of Each Advance.
Each Eurocurrency Advance shall be in the minimum Equivalent Amount of
$5,000,000 (and in multiples of Equivalent Amounts of $1,000,000 in excess
thereof, or in the case of a Multicurrency Advance, such other lesser multiple
as the Administrative Agent deems appropriate), and each Floating Rate Advance
shall be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if
in excess thereof), provided, however, that any Floating Rate Advance may be in
the amount of the unused Aggregate Commitment. Each Swingline Loan shall be in
the minimum amount of $5,000,000 (and in multiples of $500,000 if in excess
thereof) or in the case of Swingline Loans in British Pounds Sterling or euro
units, such other minimum amounts and multiples as the Swingline Lender shall
determine, provided however, that any Swingline Loan may be in the amount of the
unused Swingline Commitment. Alternate Currency Loans shall be in such minimum
amounts as are set forth in the applicable Alternate Currency Addendum.
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2.7 Prepayments.
(a) The Borrowers may from time to time pay, without penalty or
premium, all outstanding Floating Rate Advances, or, in a minimum aggregate
amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof,
any portion of the outstanding Floating Rate Advances upon one Business Days'
prior notice to the Administrative Agent, who shall give prompt notice thereof
to the Lenders.
(b) The Borrowers may from time to time pay, subject to the
payment of any funding indemnification amounts required by Section 3.4 but
without penalty or premium, all outstanding Eurocurrency Advances, or, in a
minimum aggregate Equivalent Amount of $5,000,000 or any integral multiple
Equivalent Amount of $1,000,000 in excess thereof, or in the case of a
Multicurrency Advance, such other lesser multiple as the Administrative Agent
deems appropriate, any portion of the outstanding Eurocurrency Advances upon
three Business Days' prior notice to the Administrative Agent, who shall give
prompt notice thereof to the Lenders.
(c) If at any time, for any reason, the Aggregate Outstandings of
all Lenders shall exceed the Aggregate Commitment then in effect, the Borrowers
shall, without notice or demand, immediately prepay the Dollar Loans and/or
Multicurrency Loans such that the sum of the aggregate principal amount of
Dollar Loans so prepaid and the Equivalent Amount of the aggregate principal
amount of Multicurrency Loans so prepaid, at least equals the amount of such
excess.
(d) If, at any time for any reason, either (i) the Aggregate
Multicurrency Outstandings of all Multicurrency Lenders exceed the Aggregate
Multicurrency Commitments of the Multicurrency Lenders or (ii) the Aggregate
Dollar Outstandings of all Lenders exceed the aggregate Dollar Commitments of
all Lenders, the Borrowers shall, without notice or demand, immediately prepay
the Multicurrency Loans in the Equivalent Amount at least equal to the excess
referred to in (i) and the Dollar Loans in an amount at least equal to the
excess referred to in (ii).
(e) Each prepayment pursuant to this Section 2.7 shall be
accompanied by accrued and unpaid interest on the amount prepaid to the date of
prepayment and any amounts payable under Section 3.4 in connection with such
payment.
(f) Notwithstanding the foregoing, mandatory prepayments of
Multicurrency Loans that would otherwise be required pursuant to this Section
2.7 solely as a result of fluctuations in exchange rates from time to time shall
only be required to be made pursuant to this Section 2.7 on a Computation Date
on the basis of the exchange rates in effect on such Computation Date.
2.8 Method of Selecting Types and Interest Periods for New Advances.
The Company or the relevant Borrower shall select the Type of Advance
and, in the case of each Eurocurrency Advance, the Interest Period and Agreed
Currency applicable thereto from time to time. The Company or the relevant
Borrower shall give the Administrative Agent
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irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Detroit
time) on the Borrowing Date of each Floating Rate Advance (other than Swingline
Loans), not later than 11:00 a.m. (Detroit time) three Business Days before the
Borrowing Date for each Eurocurrency Advance in Dollars, and not later than
11:00 a.m. (London time) three Business Days before the Borrowing Date for each
Multicurrency Advance, specifying:
(i) the Borrower,
(ii) the Borrowing Date, which shall be a Business Day, of such
Advance,
(iii) the aggregate amount of such Advance,
(iv) the Type of Advance selected,
(v) in the case of each Eurocurrency Advance, the Interest
Period, and Agreed Currency applicable thereto, and
(vi) details relating to funds transfer for such Advance.
The Company shall give the Administrative Agent notice of its request
for each Swingline Loan not later than 2:00 p.m. Detroit time on the same
Business Day such Swingline Loan is requested to be made. Not later than noon
(Detroit time) on each Borrowing Date, each Lender shall make available its Loan
or Loans in funds immediately available to the Administrative Agent at its
address specified pursuant to Article XIII. The Administrative Agent will make
the funds so received from the Lenders available to the Borrower at the
Administrative Agent's aforesaid address.
2.9 Conversion and Continuation of Outstanding Advances.
Floating Rate Advances shall continue as Floating Rate Advances unless
and until such Floating Rate Advances are converted into Eurocurrency Advances
pursuant to this Section 2.9 or are repaid in accordance with Section 2.7. Each
Eurocurrency Advance shall continue as a Eurocurrency Advance until the end of
the then applicable Interest Period therefor, at which time:
(i) each such Eurocurrency Advance denominated in Dollars shall be
automatically converted into a Floating Rate Advance unless (x) such
Eurocurrency Advance is or was repaid in accordance with Section 2.7 or (y) the
Borrower shall have given the Administrative Agent a Conversion/Continuation
Notice (as defined below) requesting that, at the end of such Interest Period,
such Eurocurrency Advance either continue as a Eurocurrency Advance for the same
or another Interest Period or be converted into a Floating Rate Advance; and
(ii) each such Multicurrency Advance shall automatically continue as a
Multicurrency Advance in the same Agreed Currency with an Interest Period of one
month unless (x) such Multicurrency Advance is or was repaid in accordance with
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Section 2.7 or (y) the Borrower shall have given the Administrative Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end of
such Interest Period, such Multicurrency Advance continue as a Multicurrency
Advance for the same or another Interest Period.
Subject to the terms of Section 2.6, the Borrower may elect from time
to time to convert all or any part of an Advance of any Type into any other Type
or Types of Advances denominated in the same or any other Agreed Currency (other
than an Alternate Currency); provided that any conversion of any Eurocurrency
Advance shall be made on, and only on, the last day of the Interest Period
applicable thereto. The Borrower shall give the Administrative Agent irrevocable
notice (a "Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a Eurocurrency Advance not later than 10:00 a.m. (Detroit time)
at least one Business Day, in the case of a conversion into a Floating Rate
Advance, three Business Days, in the case of a conversion into or continuation
of a Eurocurrency Advance denominated in Dollars, or four Business Days, in the
case of a conversion into or continuation of a Multicurrency Advance, prior to
the date of the requested conversion or continuation, specifying:
i. the requested date, which shall be a Business Day, of such
conversion or continuation, and
ii. the Agreed Currency, amount and Type(s) of Advance(s) into which
such Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Eurocurrency Advance, the
duration of the Interest Period applicable thereto.
2.10 Method of Borrowing.
On each Borrowing Date, each Lender shall make available its Loan or
Loans, if any, (i) if such Loan is a Dollar Loan, not later than noon, Detroit
time, in Federal or other funds immediately available to the Administrative
Agent, in Detroit, Michigan at its address specified in or pursuant to Article
XIII and, (ii) if such Loan is a Multicurrency Loan, and subject to any
applicable Alternate Currency Addendum, not later than noon, local time, in the
city of the Administrative Agent's Eurocurrency Payment Office for such
currency, in such funds as may then be customary for the settlement of
international transactions in such currency in the city of and at the address of
the Administrative Agent's Eurocurrency Payment Office for such currency. Unless
the Administrative Agent determines that any applicable condition specified in
Article IV has not been satisfied, the Administrative Agent will make the funds
so received from the Lenders available to the relevant Borrower at the
Administrative Agent's aforesaid address. Notwithstanding the foregoing
provisions of this Section 2.10, to the extent that a Loan made by a Lender
matures on the Borrowing Date of a requested Loan in the same currency, such
Lender shall apply the proceeds of the Loan it is then making to the repayment
of principal of the maturing Loan.
2.11 Changes in Interest Rate, etc.
Each Floating Rate Advance shall bear interest on the outstanding
principal amount thereof, for each day from and including the date such Advance
is made or is converted from a Eurocurrency Advance into a Floating Rate Advance
pursuant to Section 2.9 to but excluding the date it becomes due or is converted
into a Eurocurrency Advance pursuant to Section 2.9 hereof, at a rate per annum
equal to the Floating Rate for such day. Changes in the rate of interest on
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that portion of any Advance maintained as a Floating Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each
Eurocurrency Advance shall bear interest on the outstanding principal amount
thereof from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined by the Administrative Agent as applicable to such
Eurocurrency Advance based upon the Borrower's selections under Sections 2.8 and
2.9 and otherwise in accordance with the terms hereof. No Interest Period may
end after the Facility Termination Date.
2.12 Rates Applicable After Default.
Notwithstanding anything to the contrary contained in Section 2.8 or
2.9, during the continuance of a Default or Unmatured Default the Required
Lenders may, at their option, by notice to the Borrowers (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 8.2 requiring unanimous consent of the Lenders to changes in interest
rates), declare that no Advance may be made as, converted into or continued as a
Eurocurrency Advance. During the continuance of a Default the Required Lenders
may, at their option, by notice to the Borrowers (which notice may be revoked at
the option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurocurrency Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear
interest at a rate per annum equal to the Floating Rate in effect from time to
time plus 2% per annum, provided that, during the continuance of a Default under
Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Advances without any election or action on the part
of the Administrative Agent or any Lender.
2.13 Method of Payment.
(i) Each Advance shall be repaid and each payment of interest thereon
shall be paid in the currency in which such Advance was made or converted into.
All payments of the Obligations hereunder shall be made, without setoff,
deduction, or counterclaim, in immediately available funds by wire transfer to
the Administrative Agent at (except as set forth in the next sentence) the
Administrative Agent's address specified pursuant to Article XIII, or at any
other Lending Installation of the Administrative Agent specified in writing by
the Administrative Agent to the Borrower, by noon (local time) on the date when
due and, except for payments on Swingline Loans and Alternate Currency Loans,
shall be applied ratably by the Administrative Agent among the Lenders. All
payments to be made by the Borrowers hereunder in any currency other than
Dollars shall be made in such currency on the date due in such funds as may then
be customary for the settlement of international transactions in such currency
for the account of the Administrative Agent, at its Eurocurrency Payment Office
for such currency and, except for payments of Alternate Currency Loans, shall be
applied ratably by the Administrative Agent among the Lenders. Each payment
delivered to the Administrative Agent for the account of any Lender shall be
delivered promptly by the Administrative Agent to such Lender in the same type
of funds that the Administrative Agent received at, (a) with respect to Floating
Rate Loans and Eurocurrency Loans denominated in Dollars, its address specified
pursuant to Article XIII or at any Lending
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Installation specified in a notice received by the Administrative Agent from
such Lender and (b) with respect to Eurocurrency Loans denominated in an Agreed
Currency other than Dollars, in the funds received from the Borrower at the
address of the Administrative Agent's Eurocurrency Payment Office for such
currency. In relation to the payment of any amount of euro, such amount shall be
made available to the Administrative Agent in immediately available, freely
transferable, cleared funds to such account with such bank in London (or such
other principal financial center in such Participating Member State as the
Administrative Agent may from time to time nominate for this purpose) as the
Administrative Agent shall from time to time nominate for this purpose.
(ii) Notwithstanding the foregoing provisions of this Section, if,
after the making of any Advance in any currency other than Dollars, currency
control or exchange regulations are imposed in the country which issues such
currency with the result that the type of currency in which the Advance was made
(the "Original Currency") no longer exists or the relevant Borrower is not able
to make payment to the Administrative Agent for the account of the Lenders in
such Original Currency, then all payments to be made by the Borrowers hereunder
in such currency shall instead be made when due in Dollars in an amount equal to
the Dollar Amount (as of the date of repayment) of such payment due, it being
the intention of the parties hereto that the Borrowers take all risks of the
imposition of any such currency control or exchange regulations. For purposes of
this Section 2.13(ii), the commencement of the third stage of European Economic
and Monetary Union shall not constitute the imposition of currency control or
exchange regulations.
2.14 Noteless Agreement; Evidence of Indebtedness.
(i) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of each Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time hereunder.
(ii) The Administrative Agent shall maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Agreed Currency and Type
thereof and, if applicable, the Interest Period with respect thereto, (b) the
amount of any principal or interest due and payable or to become due and payable
from each Borrower to each Lender hereunder and (c) the amount of any sum
received by the Administrative Agent hereunder from the Borrowers and each
Lender's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Administrative Agent or any Lender to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrowers to repay
the Obligations in accordance with their terms.
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(iv) Any Lender may request that its Loans be evidenced by a promissory
note (a "Note"). In such event, the relevant Borrower shall prepare, execute and
deliver to such Lender a Note payable to the order of such Lender in a form
supplied by the Administrative Agent and reasonably acceptable to the Company.
Thereafter, the Loans evidenced by such Note and interest thereon shall at all
times (including after any assignment pursuant to Section 12.3) be represented
by one or more Notes (but not more than one Note for each Agreed Currency)
payable to the order of the payee named therein or any assignee pursuant to
Section 12.3, except to the extent that any such Lender or assignee subsequently
returns any such Note for cancellation and requests that such Loans once again
be evidenced as described in paragraphs (i) and (ii) above.
2.15 Telephonic Notices.
The Borrowers hereby authorize the Lenders and the Administrative Agent
to extend, convert or continue Advances, effect selections of Agreed Currencies
and Types of Advances and to transfer funds based on telephonic notices given to
the Administrative Agent by any person or persons listed on Schedule 8, as such
Schedule may be revised by the Company from time to time in accordance with
Section 13.1, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically. The Borrowers agree to deliver promptly to
the Administrative Agent a written confirmation, if such confirmation is
requested by the Administrative Agent or any Lender, of each telephonic notice
signed by an Authorized Officer. If the written confirmation differs in any
material respect from the action taken by the Administrative Agent and the
Lenders, the records of the Administrative Agent regarding the telephonic notice
shall govern absent manifest error.
2.16 Interest Payment Dates; Interest and Fee Basis.
Interest accrued on each Floating Rate Advance shall be payable on each
Payment Date, commencing with the first such date to occur after the date
hereof, on any date on which the Floating Rate Advance is prepaid, whether due
to acceleration or otherwise, and at maturity. Interest on Floating Rate Loans
shall be calculated for actual days elapsed on the basis of a 365 or 366-day
year, as appropriate. Interest accrued on that portion of the outstanding
principal amount of any Floating Rate Advance converted into a Eurocurrency
Advance on a day other than a Payment Date shall be payable on the date of
conversion. Interest accrued on each Eurocurrency Advance shall be payable in
arrears on the last day of its applicable Interest Period, on any date on which
the Eurocurrency Advance is prepaid, whether by acceleration or otherwise, and
at maturity, and with respect to any Alternate Currency Loan, the date specified
as the date on which interest is payable in the applicable Alternate Currency
Addendum. Interest accrued on each Eurocurrency Advance having an Interest
Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest shall be calculated
for actual days elapsed on the basis of a 360-day year, except for interest on
Loans denominated in British Pounds Sterling which shall be calculated for
actual days elapsed on the basis of a 365-day year. Interest shall be payable
for the day an Advance is made but not for the day of any payment on the amount
paid if payment is received prior to noon (local time) at the place of payment.
If any payment of principal of or interest on an Advance shall become due on a
day which is not a Business Day, such payment shall be made on the next
succeeding
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Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.17 Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions.
Promptly after receipt thereof, the Administrative Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. The Administrative Agent will notify each Lender, the Company
and the relevant Borrower of the interest rate applicable to each Eurocurrency
Advance promptly upon determination of such interest rate and will give each
Lender and the Company prompt notice of each change in the Alternate Base Rate.
2.18 Lending Installations.
Each Lender will book its Loans at the appropriate Lending Installation
listed on Schedule 4 or such other Lending Installation designated by such
Lender in accordance with the final sentence of this Section 2.18. All terms of
this Agreement shall apply to any such Lending Installation and the Loans and
any Notes issued hereunder shall be deemed held by each Lender for the benefit
of any such Lending Installation. Each Lender may, by not less than one days'
prior written notice to the Administrative Agent and the Borrowers in accordance
with Article XIII, designate replacement or additional Lending Installations
through which Loans will be made by it and for whose account Loan payments are
to be made.
2.19 Non-Receipt of Funds by the Administrative Agent.
(a) Unless the relevant Borrower or a Lender, as the case may be,
notifies the Administrative Agent prior to the date on which it is scheduled to
make payment to the Administrative Agent of (i) in the case of a Lender, the
proceeds of a Loan or any payment by such Lender pursuant to Sections
2.1(a)(iv), 2.1(b)(iii) or 2.1(c)(iv), or (ii) in the case of such Borrower, a
payment of principal, interest or fees to the Administrative Agent for the
account of the Lenders, that it does not intend to make such payment, the
Administrative Agent may assume that such payment has been made. The
Administrative Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Administrative Agent, the recipient of such payment shall, on
demand by the Administrative Agent, repay to the Administrative Agent the amount
so made available together with interest thereon in respect of each day during
the period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or such other rate which is customary
for the settlement of overnight interbank transactions in the currency of such
payment, or (y) in the case of payment by the Borrower, the interest rate
applicable to the relevant Loan. With respect to Multicurrency Advances, a
payment shall be deemed to have been made by the Administrative Agent on the
date on which it is required to be made under this Agreement if the
Administrative Agent has, on or before that date, taken all relevant steps to
make that payment. With respect to the payment of any amount denominated in
euro, the Administrative Agent shall not be liable to any Borrower or any of the
Lenders in any way whatsoever for any delay, or the consequences of
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any delay, in the crediting to any account of any amount required by this
Agreement to be paid by the Administrative Agent if the Administrative Agent
shall have taken all relevant steps to achieve, on the date required by this
Agreement, the payment of such amount in immediately available, freely
transferable, cleared funds in the euro unit to the account with the bank in the
principal financial center in the Participating Member State which the relevant
Borrower or, as the case may be, any Lender shall have specified for such
purpose. In this Section 2.19, "all relevant steps" means all such steps as may
be prescribed from time to time by the regulations or operating procedures of
such clearing or settlement system as the Administrative Agent may from time to
time determine for the purpose of clearing or settling payments of euro.
(b) The failure of any Lender to make the Loan to be made by it as
part of any Advance shall not relieve any other Lender of its obligation
hereunder to make its Loan on the date of such Advance, but no Lender, except as
otherwise provided in the next sentence of this Section 2.19(b), shall be
responsible for the failure of a Defaulting Lender to make the Loan to be made
by such Defaulting Lender on the date of any Advance. Notwithstanding the
foregoing sentence, but otherwise subject to the terms and conditions of this
Agreement, the Administrative Agent shall notify each Lender of the failure by a
Defaulting Lender to make a Dollar Loan required to be made by it hereunder (the
amount not made available being the "Unpaid Amount"), and each Lender shall
immediately transfer to the Administrative Agent on such date the lesser of such
Lender's proportionate share (based on its Dollar Commitment divided by the
Dollar Commitments of all Lenders that have not so failed to fund their Loans)
of the Unpaid Amount and its unused Commitment. Any such transfer shall be
deemed to be a Floating Rate Loan by such Lender. Each Defaulting Lender shall
pay on demand to each other Lender that makes a payment under this Section
2.19(b) the amount paid by such other Lender to cover such failure, together
with interest thereon, for each day from the date such payment was made until
the date such other Lender has been paid such amount in full, at a rate per
annum equal to the Federal Funds Effective Rate plus two percent (2%).
2.20 Market Disruption.
Notwithstanding the satisfaction of all conditions referred to in
Article II and Article IV with respect to any Advance in any Agreed Currency
other than Dollars, if there shall occur on or prior to the date of such Advance
any change in national or international financial, political or economic
conditions or currency exchange rates or exchange controls which would in the
reasonable opinion of the Administrative Agent or the Required Lenders make it
impracticable for the Eurocurrency Loans comprising such Advance to be
denominated in the Agreed Currency specified by the relevant Borrower, then the
Administrative Agent shall forthwith give notice thereof to the Borrowers and
the Lenders, and such Loans shall not be denominated in such Agreed Currency but
shall be made on such Borrowing Date in Dollars, in an aggregate principal
amount equal to the Dollar Amount of the aggregate principal amount specified in
the related Borrowing Notice or Conversion/Continuation Notice, as the case may
be, as Floating Rate Loans, unless the relevant Borrower notifies the
Administrative Agent at least two Business Days before such date that (i) it
elects not to borrow on such date or (ii) it elects to borrow on such date in a
different Agreed Currency, as the case may be, in which the denomination of such
Loans would in the opinion of the Administrative Agent and the Required Lenders
be practicable and in an aggregate principal amount equal to the Dollar Amount
of the aggregate principal
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amount specified in the related Borrowing Notice or Conversion/Continuation
Notice, as the case may be.
2.21 Judgment Currency.
If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due from any Borrower hereunder in the currency expressed to be
payable herein (the "specified currency") into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the specified currency with
such other currency at the Administrative Agent's main Chicago office on the
Business Day preceding that on which final, non-appealable judgment is given.
The obligations of the Borrowers in respect of any sum due to any Lender or the
Administrative Agent hereunder shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on the
Business Day following receipt by such Lender or the Administrative Agent (as
the case may be) of any sum adjudged to be so due in such other currency such
Lender or the Administrative Agent (as the case may be) may in accordance with
normal, reasonable banking procedures purchase the specified currency with such
other currency. If the amount of the specified currency so purchased is less
than the sum originally due to such Lender or the Administrative Agent, as the
case may be, in the specified currency, the Borrowers agree, to the fullest
extent that they may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
of the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Section 12.2, such Lender or the Administrative Agent, as the case may be,
agrees to remit such excess to the relevant Borrower.
2.22 Payment Provisions Relating to the euro.
(a) Any amount payable by the Administrative Agent to the Lenders
under this Agreement in the currency of a Participating Member State shall be
paid in the euro unit.
(b) If, in relation to the currency of any Subsequent Participant,
the basis of accrual of interest or fees expressed in this Agreement with
respect to such currency shall be inconsistent with any convention or practice
in the London Interbank Market or, as the case may be, the Paris Interbank
Market for the basis of accrual of interest or fees in respect of the euro, such
convention or practice shall replace such expressed basis effective as of and
from the date on which such Subsequent Participant becomes a Participating
Member State; provided, that if any Loan in the currency of such Subsequent
Participant is outstanding immediately prior to such date, such replacement
shall take effect, with respect to such Loan, at the end of the then current
Interest Period.
(c) Without prejudice and in addition to any method of conversion
or rounding prescribed by any EMU legislation and (i) without prejudice to the
respective liabilities for indebtedness of the Borrowers to the Lenders and the
Lenders to the Borrowers under or
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pursuant to this Agreement and (ii) without increasing the Multicurrency
Commitment of any Lender:
(y) each reference in this Agreement to a minimum amount (or
an integral multiple thereof) in a national currency denomination of a
Subsequent Participant to be paid to or by the Administrative Agent
shall, immediately upon such Subsequent Participant becoming a
Participating Member State, be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Administrative Agent may from time to
time specify; and
(z) except as expressly provided in this Section 2.22, each
provision of this Agreement shall be subject to such reasonable changes
of construction as the Administrative Agent may from time to time
specify to be necessary or appropriate.
2.23 Redenomination and Alternative Currencies.
Each obligation under this Agreement of a party to this Agreement which
has been denominated in the national currency unit of a Subsequent Participant
state shall be redenominated into the euro unit in accordance with EMU
legislation immediately upon such Subsequent Participant becoming a
Participating Member State (but otherwise in accordance with EMU Legislation).
2.24 Replacement of Lender.
If any Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make
any additional payment to any Lender or if any Lender's obligation to make or
continue, or to convert Floating Rate Advances into, Eurocurrency Advances shall
be suspended pursuant to Section 3.3, or if any Lender shall become a Defaulting
Lender (any Lender so affected an "Affected Lender"), the Company may elect, if
such amounts continue to be charged or such suspension is still effective, to
replace such Affected Lender as a Lender party to this Agreement, provided that
no Default or Unmatured Default shall have occurred and be continuing at the
time of such replacement, and provided further that, concurrently with such
replacement, (i) another bank or other entity which is reasonably satisfactory
to the Company and the Administrative Agent shall agree, as of such date, to
purchase for cash the Advances and other Obligations due to the Affected Lender
pursuant to an assignment substantially in the form of Exhibit C and to become a
Lender for all purposes under this Agreement and to assume all obligations of
the Affected Lender to be terminated as of such date and to comply with the
requirements of Section 12.3 applicable to assignments, and (ii) the Borrowers
shall pay to such Affected Lender in same day funds on the day of such
replacement all interest, fees and other amounts then accrued but unpaid to such
Affected Lender by the Borrowers hereunder to and including the date of
termination, including without limitation payments due to such Affected Lender
under Sections 3.1, 3.2 and 3.5. Nothing herein shall release any Defaulting
Lender from any obligation it may have to any Borrower, the Administrative Agent
or any other Lender.
2.25 Application of Payments with Respect to Defaulting Lenders.
No payments of principal, interest or fees delivered to the
Administrative Agent for the account of any Defaulting Lender shall be delivered
by the Administrative Agent to such Defaulting Lender. Instead, such payments
shall, for so long as such Defaulting Lender shall be
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a Defaulting Lender, be held by the Administrative Agent, and the Administrative
Agent is hereby authorized and directed by all parties hereto to hold such funds
in escrow and apply such funds as follows:
(a) First, if applicable to any payments due to the Swingline
Lender under Section 2.1(b)(iii); and
(b) Second, to Loans required to be made by such Defaulting
Lender on any Borrowing Date to the extent such Defaulting Lender fails
to make such Loans.
Notwithstanding the foregoing, upon the termination of the Commitments
and the payment and performance of all of the Obligations (other than those
owing to a Defaulting Lender), any funds then held in escrow by the
Administrative Agent pursuant to the preceding sentence shall be distributed to
each Defaulting Lender, pro rata in proportion to amounts that would be due to
each Defaulting Lender but for the fact that it is a Defaulting Lender
ARTICLE III.
YIELD PROTECTION; TAXES
3.1 Yield Protection.
(a) If, on or after the date of this Agreement, the adoption of
any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any change
in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or any applicable Lending Installation to any
Taxes, or changes the basis of taxation of payments (other than with respect to
Excluded Taxes) to any Lender in respect of its Eurocurrency Loans, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurocurrency Advances),
or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of maintaining its
Commitment or making, funding or maintaining its Eurocurrency Loans (including,
without limitation, any conversion of any Loan denominated in an Agreed Currency
other than euro into a Loan denominated in euro) or reduces any amount
receivable by any Lender or any applicable Lending Installation in connection
with its Eurocurrency Loans, or requires any Lender or any applicable Lending
Installation to make any payment calculated by
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reference to its Commitment or the amount of Eurocurrency Loans held or interest
received by it, by an amount deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Eurocurrency Loans
(including, without limitation, any conversion of any Loan denominated in an
Agreed Currency other than euro into a Loan denominated in euro) or Commitment
or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurocurrency Loans or Commitment, then,
within 30 days of demand by such Lender, the relevant Borrower shall pay such
Lender such additional amount or amounts as will compensate such Lender for such
increased cost or reduction in amount received.
(b) Non-U.S. Reserve Costs or Fees With Respect to Loans to
Non-U.S. Borrowers. If any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive of any jurisdiction outside of the
United States of America or any subdivision thereof (whether or not having the
force of law) imposes or deems applicable any reserve requirement against or fee
with respect to assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation, and the result
of the foregoing is to increase the cost to such Lender or applicable Lending
Installation of making or maintaining its Eurocurrency Loans to any Borrower
that is not incorporated under the laws of the United States of America or a
state thereof (each a "Non-U.S. Borrower") or its Commitment to any Non-U.S.
Borrower or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurocurrency Loans to any Non-U.S. Borrower
or Commitment to any Non-U.S. Borrower, then, within 30 days of demand by such
Lender, such Non-U.S. Borrower shall pay such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction in
amount received, provided that such Non-U.S. Borrower shall not be required to
compensate any Lender for such non-U.S. reserve costs or fees to the extent that
an amount equal to such reserve costs or fees is received by such Lender as a
result of the calculation of the interest rate applicable to Eurocurrency
Advances pursuant to clause (i)(b) of the definition of "Eurocurrency Rate."
3.2 Changes in Capital Adequacy Regulations.
If a Lender determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or any
corporation controlling such Lender is increased as a result of a Change (as
defined below), then, within 15 days of demand by such Lender, the Company shall
pay such Lender the amount necessary to compensate for any shortfall in the rate
of return on the portion of such increased capital which such Lender determines
is attributable to this Agreement, its Loans or its Commitment to make Loans
hereunder (after taking into account such Lender's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based
capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding
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capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3 Availability of Types of Advances.
If any Lender determines that maintenance of its Eurocurrency Loans at
a suitable Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or if the
Required Lenders determine that (i) deposits of a type, currency and maturity
appropriate to match fund Eurocurrency Advances are not available or (ii) the
interest rate applicable to Eurocurrency Advances does not accurately reflect
the cost of making or maintaining Eurocurrency Advances, then the Administrative
Agent shall suspend the availability of Eurocurrency Advances and require any
affected Eurocurrency Advances to be repaid or converted to Floating Rate
Advances at the end of the then current Interest Period for the affected
Eurocurrency Advance.
3.4 Funding Indemnification.
If any payment of a Eurocurrency Advance occurs on a date which is not
the last day of the applicable Interest Period, whether because of acceleration,
prepayment or otherwise, or a Eurocurrency Advance is not made on the date
specified by a Borrower for any reason other than default by the Lenders, the
Borrowers will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurocurrency
Advance.
3.5 Taxes.
(i) All payments by the Borrowers to or for the account of any Lender
or the Administrative Agent hereunder or under any Note shall be made free and
clear of and without deduction for any and all Taxes. If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Agent, (a) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.5) such Lender or the Administrative Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(b) the Borrower shall make such deductions, (c) the Borrower shall pay the full
amount deducted to the relevant authority in accordance with applicable law and
(d) the Borrower shall furnish to the Administrative Agent the original copy of
a receipt evidencing payment thereof within 30 days after such payment is made.
(ii) In addition, the Borrowers hereby agree to pay any present or
future stamp or documentary taxes and any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or under
any Note or from the execution or delivery of, or otherwise with respect to,
this Agreement or any Note ("Other Taxes").
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(iii) The Borrowers hereby agree to indemnify the Administrative Agent
and each Lender for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 3.5) paid by the Administrative Agent or such Lender and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made within 30 days of
the date the Administrative Agent or such Lender makes demand therefor pursuant
to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Lender") agrees that it
will, not less than ten Business Days after the date of this Agreement, (i)
deliver to each of the Company and the Administrative Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Lender is entitled to receive payments under this
Agreement from the Company and any other Borrower that is not a Non-U.S.
Borrower without deduction or withholding of any United States federal income
taxes, or (ii) deliver to each of the Company and the Administrative Agent a
United States Internal Revenue Form W-8 or W-9, as the case may be, and certify
that it is entitled to an exemption from United States backup withholding tax.
Each Non-U.S. Lender further undertakes to deliver to each of the Company and
the Administrative Agent (x) renewals or additional copies of such form (or any
successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the
most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Company or the Administrative
Agent. All forms or amendments described in the preceding sentence shall certify
that such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Company and the Administrative Agent
that it is not capable of receiving payments from the Company and any other
Borrower other than a Non-U.S. Borrower without any deduction or withholding of
United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed to provide
the Company with an appropriate form pursuant to clause (iv), above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (iv), above, the Company shall take such
steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S.
Lender to recover such Taxes.
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(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Company (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate. Each Multicurrency Lender which is neither a
resident of the United Kingdom nor a bank carrying on a bona fide banking
business in the United Kingdom agrees to furnish, on or before the date such
Lender makes a Loan to a Borrower in the United Kingdom or denominated in
British Pounds Sterling, to the Administrative Agent, the Company and any
relevant Subsidiary Borrower evidence satisfactory to the Administrative Agent
and the Company that such Lender has filed with the United Kingdom Inland
Revenue a "Claim on Behalf of a United States Domestic Corporation to Relief
from United Kingdom Income Tax on Interest and Royalties Arising in the United
Kingdom" or other appropriate form or forms of exemption from withholding tax
and received from the Inland Revenue authority that payments to such Lender by
the relevant Borrower hereunder may be made gross; provided that such Lender's
failure to furnish such evidence shall not relieve the Company or any Subsidiary
Borrower of any of their respective obligations under this Agreement, except as
otherwise provided in this Section 3.5.
(vii) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political subdivision
thereof asserts a claim that the Administrative Agent did not properly withhold
tax from amounts paid to or for the account of any Lender (because such Lender
failed to notify the Administrative Agent of a change in circumstances which
rendered its exemption from withholding ineffective), such Lender shall
indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Administrative Agent under this
subsection, together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Administrative Agent, which
attorneys may be employees of the Administrative Agent). The obligations of the
Lenders under this Section 3.5(vii) shall survive the payment of the Obligations
and termination of this Agreement.
3.6 Lender Statements; Survival of Indemnity.
To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurocurrency Loans to reduce
any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.5 or
to avoid the unavailability of Eurocurrency Advances under Section 3.3, so long
as such designation is not, in the judgment of such Lender, disadvantageous to
such Lender. Each Lender shall deliver a written statement of such Lender to the
Borrowers (with a copy to the Administrative Agent) as to the amount due, if
any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth
in reasonable detail the calculations upon which such Lender determined such
amount and shall be final, conclusive and binding on the Borrowers in the
absence of manifest error. Determination of amounts payable
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under such Sections in connection with a Eurocurrency Loan shall be calculated
as though each Lender funded its Eurocurrency Loan through the purchase of a
deposit of the type, currency and maturity corresponding to the deposit used as
a reference in determining the Eurocurrency Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrowers of such written statement. The obligations
of the Borrowers under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of
the Obligations and termination of this Agreement.
ARTICLE IV.
CONDITIONS PRECEDENT
4.1 Initial Advance.
The Lenders shall not be required to make the initial Advance hereunder
unless the Borrowers have satisfied the following conditions:
(a) Each Borrower has furnished to the Administrative Agent with
sufficient copies for the Lenders:
(i) Copies of the articles or certificate of incorporation of such
Borrower, together with all amendments, and a certificate of good standing, each
certified by the appropriate governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of such
Borrower, of its by-laws or code of regulations and of its Board of Directors'
resolutions and of resolutions or actions of any other body authorizing the
execution of the Loan Documents to which such Borrower is a party.
(iii) An incumbency certificate, executed by the Secretary or Assistant
Secretary of such Borrower, which shall identify by name and title and bear the
signatures of the Authorized Officers and any other officers of such Borrower
authorized to sign the Loan Documents to which such Borrower is a party, upon
which certificate the Administrative Agent and the Lenders shall be entitled to
rely until informed of any change in writing by such Borrower.
(iv) A certificate, signed by the Chief Financial Officer or Treasurer
of such Borrower, stating that on the initial Borrowing Date no Default or
Unmatured Default has occurred and is continuing.
(v) A written opinion of such Borrower's counsel, addressed to the
Lenders in substantially the form of Exhibit A.
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(vi) Any Notes requested by a Lender pursuant to Section 2.14 payable
to the order of each such requesting Lender.
(vii) Written money transfer instructions, in substantially the form of
Exhibit D, addressed to the Administrative Agent and signed by an Authorized
Officer, together with such other related money transfer authorizations as the
Administrative Agent may have reasonably requested.
(viii) Information reasonably satisfactory to the Administrative Agent
regarding the Company's Year 2000 Program.
(ix) A pro forma covenant compliance certificate in form and substance
reasonably satisfactory to the Administrative Agent from the Chief Financial
Officer or Treasurer of the Company.
(x) The Guaranty, duly executed by the Company.
(xi) Such other documents as any Lender or its counsel may have
reasonably requested.
(b) The presentation of evidence satisfactory to the
Administrative Agent that the Amended and Restated Credit Agreement dated as of
March 30, 1994 among R.P. Scherer Corporation and the lenders party thereto and
the agent named therein shall terminate and all indebtedness, liabilities, and
obligations outstanding thereunder shall be paid in full not later than April 9,
1999.
(c) The presentation of evidence satisfactory to the
Administrative Agent that the Credit Agreement Facility A dated September 23,
1996, as amended, among Allegiance Corporation and the lenders party thereto and
the agent named therein shall have been terminated and all indebtedness,
liabilities, and obligations outstanding thereunder shall have been paid in full
or will be paid from the proceeds of the initial Advance.
(d) The presentation of evidence satisfactory to the
Administrative Agent that revolving credits facilities of the Company totaling
not less than $95,000,000 have been terminated and all indebtedness, liabilities
and obligations outstanding thereunder shall have been paid in full or will be
paid from the proceeds of the initial Advance.
4.2 Each Advance
The Lenders shall not be required to make, continue or convert any
Advance, and the Swingline Lender shall not be required to make any Swingline
Loan, unless on the applicable Borrowing Date or date of conversion or
continuation:
(i) There exists no Default or Unmatured Default.
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(ii) The representations and warranties contained in Article V (other
than Section 5.5, 5.7 and 5.15) are true and correct in all material respects as
of such Borrowing Date except to the extent any such representation or warranty
is stated to relate solely to an earlier date, in which case such representation
or warranty shall have been true and correct on and as of such earlier date.
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel.
(iv) Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
The Company and each of the Borrowers represents and warrants to the
Lenders that:
5.1 Existence and Standing.
Each of the Company and its Significant Subsidiaries is a corporation,
partnership (in the case of Subsidiaries only) or limited liability company duly
and properly incorporated or organized, as the case may be, validly existing and
(to the extent such concept applies to such entity) in good standing under the
laws of its jurisdiction of incorporation or organization and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted, except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
5.2 Authorization and Validity.
Each Borrower has the power and authority and legal right to execute
and deliver the Loan Documents to which it is a party and to perform its
obligations thereunder. The execution and delivery by each Borrower of the Loan
Documents to which it is a party and the performance of its obligations
thereunder have been duly authorized by proper corporate or other proceedings,
and the Loan Documents to which such Borrower is a party constitute legal, valid
and binding obligations of such Borrower enforceable against such Borrower in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
5.3 No Conflict; Government Consent.
Neither the execution and delivery by the Borrowers of the Loan
Documents to which they are a party, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
(i) any law, rule, regulation, order, writ, judgment,
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injunction, decree or award binding on any Borrower or (ii) any Borrower's
articles or certificate of incorporation, partnership agreement, certificate of
partnership, articles or certificate of organization, by-laws, code or
regulations, or operating or other management agreement, as the case may be, or
(iii) the provisions of any indenture, instrument or agreement to which any
Borrower is a party or is subject, or by which it, or its Property, is bound, or
conflict with or constitute a default thereunder, or result in, or require, the
creation or imposition of any Lien in, of or on the Property of any Borrower
pursuant to the terms of any such indenture, instrument or agreement. No order,
consent, adjudication, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, or other action in
respect of any governmental or public body or authority, or any subdivision
thereof, which has not been obtained by a Borrower, is required to be obtained
by any Borrower in connection with the execution and delivery of the Loan
Documents, the borrowings under this Agreement, the payment and performance by
such Borrower of the Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
5.4 Financial Statements.
The following consolidated financial statements heretofore delivered to
the Lenders were prepared in accordance with Agreement Accounting Principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Company and its
Subsidiaries at such date and the consolidated results of their operations for
the period then ended, subject, in the case of such interim statements, to
routine year-end audit adjustments:
(i) June 30, 1998 audited consolidated financial statements of the
Company and its Subsidiaries; December 31, 1997 audited consolidated financial
statements of Allegiance Corporation and its consolidated subsidiaries;
(ii) December 31, 1998 unaudited interim consolidated financial
statements of the Company and its Subsidiaries; and
(iii) December 31, 1998 unaudited interim consolidated financial
statements of Allegiance Corporation and its consolidated subsidiaries.
5.5 Material Adverse Change.
Since June 30, 1998 there has been no change in the business, Property,
prospects, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect.
5.6 Taxes.
The Company and its Subsidiaries have filed all United States federal
tax returns and all other tax returns which are required to be filed and have
paid all taxes due pursuant to said returns or pursuant to any assessment
received by the Company or any of its Subsidiaries, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided in accordance with Agreement Accounting Principles and as to which no
Lien exists. No tax liens have been filed and no claims are being asserted with
respect to any such
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taxes which could reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of any taxes or other governmental charges are adequate.
5.7 Litigation and Contingent Obligations.
Except as set forth on Schedule 7, there is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their officers, threatened against or affecting the Company or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which seeks to prevent, enjoin or delay the making of any Loans. As of
the date of this Agreement, other than any liability incident to any litigation,
arbitration or proceeding which (i) could not reasonably be expected to have a
Material Adverse Effect or (ii) is set forth on Schedule 7, the Company has no
material Contingent Obligations not provided for or disclosed in the financial
statements referred to in Section 5.4.
5.8 Subsidiaries.
Schedule 1 contains an accurate list of all Subsidiaries of the Company
(other than immaterial or inactive Subsidiaries) and each Subsidiary Borrower as
of the date of this Agreement, setting forth their respective jurisdictions of
organization and the percentage of their respective capital stock or other
ownership interests owned by the Company or other Subsidiaries. All of the
issued and outstanding shares of capital stock or other ownership interests of
such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully
paid and non-assessable, except to the extent that the lack of such status could
not reasonably be expected to have a Material Adverse Effect. The Company may
amend Schedule 1 from time to time by delivering to the Administrative Agent an
updated list of Subsidiaries, and the Company may designate any Subsidiary
thereon which is directly or indirectly 80% (or, in the case of R.P. Scherer
S.A., 75%) or more owned by the Company as a Subsidiary Borrower hereunder so
long as (a) the Company guarantees the obligations of such new Subsidiary
Borrower pursuant to the terms of the Guaranty, (b) such new Subsidiary Borrower
delivers all corporate or organizational documents and authorizing resolutions
and legal opinions reasonably requested by the Administrative Agent and (c) such
new Subsidiary Borrower agrees to the terms and conditions of this Agreement and
the Borrowers and the new Subsidiary Borrower execute all agreements and take
such other action reasonably requested by Administrative Agent. Schedule 1 may
be amended to remove any Subsidiary as a Subsidiary Borrower upon (i) written
notice by the Company to the Administrative Agent to such effect and (ii)
repayment in full of all outstanding Loans of such Subsidiary Borrower.
5.9 ERISA.
The Unfunded Liabilities of all Single Employer Plans do not in the
aggregate exceed $75,000,000. Each Single Employer Plan complies in all material
respects with all applicable requirements of law and regulations where the
failure to so comply could reasonably be expected to have a Material Adverse
Effect. No Reportable Event has occurred with respect to any Plan where such
occurrence could reasonably be expected to have a Material Adverse Effect.
Neither the Company or any of its Significant Subsidiaries has withdrawn from
any Plan or initiated steps to do so, and no steps have been taken to reorganize
or terminate any Single Employer Plan
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where in either instance a liability in excess of $75,000,000 could reasonably
be expected to result.
5.10 Accuracy of Information.
No information, exhibit or report furnished by the Company or any of
its Subsidiaries to the Administrative Agent or to any Lender in connection with
the negotiation of, or compliance with, the Loan Documents contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not misleading; provided,
however, that to the extent any such information, exhibits or reports include or
incorporate by reference any forward-looking statement (each, a "Forward-Looking
Statement") which reflects 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, such Forward-Looking Statement is subject
to uncertainties and other factors which could cause actual results to differ
materially from such Forward-Looking Statement.
5.11 Regulation U.
Margin stock (as defined in Regulation U) constitutes less than 25% of
the value of those assets of the Company and its Subsidiaries which are subject
to any limitation on sale, pledge, or other restriction hereunder.
5.12 Material Agreements.
Neither the Company nor any Subsidiary is a party to any agreement or
instrument or subject to any charter or other corporate restriction which could
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any Subsidiary is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any agreement to
which it is a party, which default could reasonably be expected to have a
Material Adverse Effect.
5.13 Compliance With Laws.
The Company and its Subsidiaries have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or foreign
government or any instrumentality or agency thereof having jurisdiction over the
conduct of their respective businesses or the ownership of their respective
Property, except for any failure to comply with any of the foregoing which could
not reasonably be expected to have a Material Adverse Effect.
5.14 Plan Assets; Prohibited Transactions.
The Company is not an entity deemed to hold "plan assets" within the
meaning of 29 C.F.R. Section 2510.3-101 of an employee benefit plan (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan
(within the meaning of Section 4975 of the Code), and neither the execution of
this Agreement nor the making of Loans hereunder gives rise to a prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
5.15 Environmental Matters.
In the ordinary course of its business, the officers of the Company
consider the effect of Environmental Laws on the business of the Company and its
Subsidiaries, in the course of which
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they identify and evaluate potential risks and liabilities accruing to the
Company due to Environmental Laws. On the basis of this consideration, the
Company has concluded that Environmental Laws cannot reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any Subsidiary has
received any notice to the effect that its operations are not in material
compliance with any of the requirements of applicable Environmental Laws or are
the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any toxic or hazardous
waste or substance into the environment, which non-compliance or remedial action
could reasonably be expected to have a Material Adverse Effect.
5.16 Investment Company Act.
Neither the Company nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
5.17 Public Utility Holding Company Act.
Neither the Company nor any Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
5.18 Year 2000.
The Company has substantially completed an assessment of the Year 2000
Issues and has a realistic and achievable program for addressing the remediation
of Year 2000 Issues on a timely basis to avoid any impact on the Company and its
Subsidiaries which would reasonably be expected to have a Material Adverse
Effect (the "Year 2000 Program"). Based on such assessment and on the Year 2000
Program the Company does not reasonably anticipate that Year 2000 Issues will
have a Material Adverse Effect.
5.19 Default.
There exists no Default or Unmatured Default under Article VII of this
Agreement.
ARTICLE VI.
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1 Financial Reporting.
The Company will maintain, for itself and each Subsidiary, a system of
accounting established and administered in accordance with Agreement Accounting
Principles, and furnish to the Lenders:
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(i) Within 120 days after the close of each of its fiscal years, an
unqualified (except for qualifications relating to changes in accounting
principles or practices reflecting changes in Agreement Accounting Principles
and required or approved by the Company's independent certified public
accountants) audit report certified by independent certified public accountants
reasonably acceptable to the Lenders, prepared in accordance with Agreement
Accounting Principles on a consolidated basis for itself and its Subsidiaries,
including balance sheets as of the end of such period, related profit and loss
statements, and a statement of cash flows, accompanied by a certificate of said
accountants that, in the course of their examination necessary for their
certification of the foregoing, they have obtained no knowledge of any Default
or Unmatured Default, or if, in the opinion of such accountants, any Default or
Unmatured Default shall exist, stating the nature and status thereof.
(ii) Within 60 days after the close of each of the first three
quarterly periods of each fiscal year, for itself and its Subsidiaries,
consolidated unaudited balance sheets as at the close of each such period and
consolidated unaudited profit and loss statements and a consolidated unaudited
statement of cash flows for the period from the beginning of such fiscal year to
the end of such quarter, all certified by its Chief Financial Officer,
Controller, or Treasurer.
(iii) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B
signed by its Chief Financial Officer, Controller, or Treasurer and stating that
no Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(iv) As soon as possible and in any event within 10 Business Days after
the Company knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by the Chief Financial Officer, Controller, or
Treasurer of the Company, describing said Reportable Event and the action which
the Company proposes to take with respect thereto.
(v) As soon as possible and in any event within 10 Business Days after
receipt by the Company, a copy of (a) any notice or claim to the effect that the
Company or any of its Subsidiaries is or may be liable to any Person as a result
of the release by the Company, any of its Subsidiaries, or any other Person of
any toxic or hazardous waste or substance into the environment, and (b) any
notice alleging any violation of any federal, state or local environmental,
health or safety law or regulation by the Company or any of its Subsidiaries,
which, in either case, could reasonably be expected to have a Material Adverse
Effect.
(vi) Such other information (including non-financial information) as
the Administrative Agent or any Lender may from time to time reasonably request.
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6.2 Use of Proceeds.
The Company will, and will cause each Subsidiary to, use the proceeds
of the Advances for general corporate purposes, including Acquisitions. The
Company will not, nor will it permit any Subsidiary to, use any of the proceeds
of the Advances to purchase or carry any "margin stock" (as defined in
Regulation U).
6.3 Notice of Default.
The Company will, and will cause each Borrower and Significant
Subsidiary to, give prompt notice in writing to the Administrative Agent of the
occurrence of any Default or Unmatured Default and of any other development,
financial or otherwise (including, without limitation, developments with respect
to Year 2000 Issues), which could reasonably be expected to have a Material
Adverse Effect.
6.4 Conduct of Business.
The Company will, and will cause each Significant Subsidiary to, carry
on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted or
fields related thereto (except that the Company and its Significant Subsidiaries
shall have no duty to renew or extend contracts which expire by their terms) and
do all things necessary to remain duly incorporated or organized, validly
existing and (to the extent such concept applies to such entity) in good
standing as a domestic corporation, partnership or limited liability company in
its jurisdiction of incorporation or organization, as the case may be, and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted, unless the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
6.5 Taxes.
The Company will, and will cause each Significant Subsidiary to, timely
file complete and correct United States federal and applicable foreign, state
and local tax returns required by law and pay when due all taxes, assessments
and governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside in accordance
with Agreement Accounting Principles, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
6.6 Insurance.
The Company will, and will cause each Significant Subsidiary to,
maintain as part of a self-insurance program or with financially sound and
reputable insurance companies insurance on all their Property in such amounts
(with such customary deductibles, exclusions and self-insurance) and covering
such risks as is consistent with sound business practice.
6.7 Compliance with Laws.
The Company will, and will cause each Significant Subsidiary to, comply
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be
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subject including, without limitation, all Environmental Laws, except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.8 Inspection.
The Company will, and will cause each Significant Subsidiary to, permit
the Administrative Agent and the Lenders, by their respective representatives
and agents, to inspect any of the Property, books and financial records of the
Company and each Significant Subsidiary, to examine and make copies of the books
of accounts and other financial records of the Company and each Significant
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
each Significant Subsidiary with, and to be advised as to the same by, their
respective officers upon reasonable prior notice at such reasonable times and
intervals as the Administrative Agent or any Lender may designate, provided that
neither the Company nor any of its Subsidiaries shall be responsible for the
costs and expenses incurred by the Administrative Agent, any Lender, or their
representatives in connection with such inspection prior to the occurrence and
continuation of a Default.
6.9 Merger.
The Company will not, nor will it permit any Significant Subsidiary to,
merge or consolidate with or into any other Person, except that, provided that
no Default or Unmatured Default shall have occurred and be continuing or would
result therefrom on a pro forma basis reasonably acceptable to the
Administrative Agent, the Company may merge or consolidate with any other U.S.
corporation and each Significant Subsidiary may merge or consolidate with any
other Person, provided, further, that (i) in the case of any such merger or
consolidation involving the Company, the Company is the surviving corporation
and (ii) in the case of any such merger or consolidation involving a Significant
Subsidiary which is a Subsidiary Borrower, the surviving corporation assumes all
of such Borrower's obligations under this Agreement and remains or becomes a
Subsidiary Borrower.
6.10 Sale of Assets.
The Company will not, nor will it permit any Significant Subsidiary to,
lease, sell or otherwise dispose of its Property, to any other Person (other
than the Company or another Subsidiary), except:
(i) Sales of inventory in the ordinary course of business.
(ii) Sales or other dispositions in the ordinary course of business of
fixed assets for the purpose of replacing such fixed assets, provided that such
fixed assets are replaced within 360 days of such sale or other disposition with
other fixed assets which have a fair market value not materially less than the
fixed assets sold or otherwise disposed of.
(iii) Sales or other dispositions outside the ordinary course of
business of accounts receivable, lease receivables, leases or equipment which
had been leased by the Company or such Significant Subsidiary, provided that any
such sale or other disposition is for reasonably equivalent value and could not
reasonably be expected to have a Material Adverse Effect.
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(iv) Other leases, sales (including sale-leasebacks) or other
dispositions of its Property that, together with all other Property of the
Company and its Subsidiaries previously leased, sold or disposed of (other than
as provided in clauses (i), (ii) and (iii) above) as permitted by this Section
during the twelve-month period ending with the month prior to the month in which
any such lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the Property of the Company and its Subsidiaries, or
together with all other Property of the Company and its Subsidiaries previously
leased, sold or disposed of (other than as provided in clauses (i) and (ii)
above) as permitted by this Section during the period from the date of this
Agreement to the end of the month prior to the month in which any such lease,
sale or other disposition occurs, do not constitute 35% of the consolidated
assets of the Company and its Subsidiaries as would be shown in the consolidated
financial statements of the Company and its Subsidiaries as at the beginning of
the fiscal year in which any such lease, sale or other disposition occurs.
Notwithstanding anything in this Section 6.10 to the contrary, (a) no
such leases, sales or other dispositions of property may be made (other than
pursuant to clause (i) above) if any Default or Unmatured Default has occurred
and is continuing, and (b) all leases, sales and other dispositions of Property
at any time shall be for not less than the fair market value of such Property as
determined in good faith by the Company.
6.11 Investments.
The Company will not, nor will it permit any Significant Subsidiary to,
make or suffer to exist any Investments, or commitments therefor, or to create
any Subsidiary or to become or remain a partner in any partnership or joint
venture, except:
(i) Cash Equivalent Investments.
(ii) Investments in Subsidiaries.
(iii) other Investments in existence on the date hereof.
(iv) Other Investments provided that the aggregate amount of such
Investments made in any fiscal year does not exceed 25% of Adjusted Tangible Net
Worth as of the beginning of such fiscal year.
6.12 Liens.
The Company will not, nor will it permit any Significant Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the Property of the
Company or any of its Significant Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by appropriate
proceedings and for
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which adequate reserves in accordance with Agreement Accounting Principles shall
have been set aside on its books.
(ii) Liens imposed by law, such as landlord's, carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation (other than Liens in
favor of the PGBC).
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Company or its Subsidiaries.
(v) Liens existing on the date hereof.
(vi) Liens on any assets which exist at the time of acquisition of such
assets by the Company or any of its Subsidiaries, or liens to secure the payment
of all of any part of the purchase price of such assets upon the acquisition of
such assets by the Company or any of its Subsidiaries or to secure any
Indebtedness incurred or guaranteed by the Company or any of its Subsidiaries
prior to, at the time, of or within 360 days after, such acquisition (or, in the
case of real property, the completion of construction (including any
improvements on an existing asset) or commencement of full operation of such
asset, whichever is later), which Indebtedness is incurred or guaranteed for the
purpose of financing all or any part of the purchase price thereof or, in the
case of real property, construction or improvements thereon, provided, however,
that in the case of any such acquisition, construction or improvement, the Lien
shall not apply to such assets theretofore owned by the Company or any of its
Subsidiaries other than, in the case of any such construction or improvement,
any real property on which the property so constructed, or the improvement, is
located, provided further, however, that the aggregate outstanding principal
amount of Indebtedness secured by Liens permitted by this Section 6.12(vi) shall
not at any time exceed $250,000,000.
(vii) Liens in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political subdivision
of the United States of America or any State thereof, or in favor of any other
country or any political subdivision thereof, to secure partial, progress,
advance or other payments pursuant to any contract or statute or to secure any
Indebtedness incurred or guaranteed for the purpose of financing all or any part
of the purchase price (or, in the case of real property, the cost of
construction), of the assets subject to such liens (including without limitation
liens incurred in connection with pollution control, industrial revenue or
similar financings).
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(viii) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing clauses, provided, however, that the principal amount of Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so secured
prior to such extension, renewal or replacement and that such extension, renewal
or replacement Lien shall be limited to all or a part of the assets which
secured the Lien so extended, renewed or replaced (plus improvements and
construction on such real property).
(ix) So long as no Default under Section 7.9 would occur in connection
therewith, Liens created by or resulting from any litigation or other proceeding
which is being contested in good faith by appropriate proceedings, including
Liens arising out of judgments or awards against the Company or any of its
Subsidiaries with respect to which the Company or such Subsidiary is in good
faith prosecuting an appeal or proceeding for review or for which the time to
make an appeal has not yet expired; or final unappealable judgment Liens which
are satisfied within 15 days of the date of judgment; or Liens incurred by the
Company or any of its Subsidiaries for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding to which the
Company or such Subsidiary is a party.
(x) Liens securing Indebtedness described in Section 6.16(iv) and (v).
(xi) Liens securing Indebtedness and not otherwise permitted by the
foregoing provisions of this Section 6.12, provided that the aggregate
outstanding principal amount of the Indebtedness secured by all such Liens shall
not at any time exceed 25% of Adjusted Tangible Net Worth.
6.13 Year 2000.
The Company will take and will cause each of its Subsidiaries to take
all such actions as are reasonably necessary to successfully implement the Year
2000 Program and to assure that Year 2000 Issues will not have a Material
Adverse Effect. At the request of the Administrative Agent, the Company will
provide a description of the Year 2000 Program, together with any updates or
progress reports with respect thereto.
6.14 Subsidiary Indebtedness.
The Company will not permit any Subsidiary to create, incur or suffer
to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness outstanding on the date of this Agreement or incurred
pursuant to commitments in existence on the date of this Agreement.
(iii) Indebtedness of any Subsidiary to the Company or any other
Subsidiary.
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(iv) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that such Indebtedness existed at the time such Person
becomes a Subsidiary and is not created in contemplation of or in connection
with such Person becoming a Subsidiary.
(v) Any refunding or refinancing of any Indebtedness referred to in
clauses (i) through (iv) above, provided that any such refunding or refinancing
of Indebtedness referred to in clause (ii), (iii) or (iv) does not increase the
principal amount thereof.
(vi) Indebtedness arising from (a) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, or (b) the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business.
(vii) Indebtedness arising from guarantees of loans and advances by
third parties to employees and officers of a Subsidiary in the ordinary course
of business for bona fide business purposes, provided that the aggregate
outstanding principal amount of such Indebtedness does not at any time exceed
$100,000,000 .
(viii) Indebtedness of a Subsidiary arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations or from
guarantees, letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Subsidiaries incurred or assumed in
connection with the disposition of any business, property or Subsidiary.
(ix) Indebtedness arising from Rate Hedging Obligations.
(x) Contingent Obligations.
(xi) Indebtedness outstanding under investment grade commercial paper
programs.
(xii) Other Indebtedness; provided that, at the time of the creation,
incurrence or assumption of such other Indebtedness and after giving effect
thereto, the aggregate amount of all such other Indebtedness of the Subsidiaries
does not exceed an amount equal to 25% of Adjusted Tangible Net Worth at such
time.
6.15 Limitation on Restrictions on Significant Subsidiary
Distributions.
The Company will not, and will not permit any Significant Subsidiary
to, enter into or suffer to exist or become effective any consensual encumbrance
or restriction on the ability of any Significant Subsidiary of the Company to
(i) pay dividends or make any other distributions in respect of any capital
stock of such Subsidiary held by, or pay any Indebtedness owed to, the Company
or any other Subsidiary of the Company, (ii) make loans or advances to the
Company or any other Subsidiary of the Company
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or (iii) transfer any of its assets to the Company or any other Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of (a) any restrictions existing under the Loan Documents, (b) any
restrictions with respect to a Significant Subsidiary imposed pursuant to an
agreement which has been entered into in connection with the disposition of all
or substantially all of the capital stock or assets of such Subsidiary, and (c)
any restrictions with respect to assets encumbered by a Lien permitted by
Section 6.12 so long as such restriction applies only to the asset encumbered by
such permitted Lien.
6.16 Contingent Obligations.
The Company will not, nor will it permit any Subsidiary to, make or
suffer to exist any Contingent Obligation (including, without limitation, any
Contingent Obligation with respect to the obligations of a Subsidiary), except
(i) by endorsement of instruments for deposit or collection in the ordinary
course of business, (ii) the Guaranty, (iii) Contingent Obligations of
special-purpose finance Subsidiaries, provided that no Person has recourse
against the Company or any Significant Subsidiary for such Contingent
Obligations, (iv) Contingent Obligations arising from the sale by Pyxis
Corporation of lease receivables, leases or equipment, provided that the
aggregate amount of such Contingent Obligations do not at any time exceed 10% of
Adjusted Tangible Net Worth, (v) Contingent Obligations arising out of operating
or synthetic leases entered into by Subsidiaries of the Company, provided that
the aggregate amount of such Contingent Obligations do not at any time exceed
25% of Adjusted Tangible Net Worth, and (vi) Contingent Obligations in addition
to those described in (i)-(v) above, provided that the aggregate amount of such
additional Contingent Obligations (without duplication) do not at any time
exceed 25% of Adjusted Tangible Net Worth.
6.17 Minimum Net Worth.
The Company shall not permit its Net Worth to be less than
$2,550,000,000 at any time.
ARTICLE VII.
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on behalf
of the Company or any of its Subsidiaries to the Lenders or the Administrative
Agent under or in connection with this Agreement, any Loan, or any certificate
or information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan within one day after the same
becomes due, or nonpayment of interest upon any Loan or of any commitment fee or
other obligations under any of the Loan Documents within five days after the
same becomes due.
7.3. The breach by the Company of Sections 6.3, 6.9, 6.10, 6.14, 6.16,
or 6.17.
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7.4. The breach by any Borrower (other than a breach which constitutes
a Default under another Section of this Article VII) of any of the terms or
provisions of this Agreement which is not remedied within thirty days after
written notice from the Administrative Agent or any Lender.
7.5. Failure of the Company or any of its Significant Subsidiaries to
pay when due any principal, interest or other amounts, subject to any applicable
grace period, or the default by the Company or any of its Significant
Subsidiaries in the performance beyond the applicable grace period with respect
thereto, if any, of any term, provision or condition contained in the 364-Day
Credit Agreement or any agreement or agreements under which any Indebtedness in
excess of 2% of Adjusted Tangible Net Worth was created or is governed, or any
other event shall occur or condition exist, the effect of which default or event
is to cause, or to permit the holder or holders of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Company or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or the
Company or any of its Significant Subsidiaries shall not pay, or admit in
writing its inability to pay, its debts generally as they become due.
7.6. The Company or any of its Significant Subsidiaries shall (i) have
an order for relief entered with respect to it under the Federal bankruptcy laws
as now or hereafter in effect, (ii) make an assignment for the benefit of
creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment
of a receiver, custodian, trustee, examiner, liquidator or similar official for
it or any Substantial Portion of its Property, (iv) institute any proceeding
seeking an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, (v) take any corporate or partnership action to authorize or
effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail
to contest in good faith any appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
of its Significant Subsidiaries, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any of its Significant
Subsidiaries or any Substantial Portion of its Property, or a proceeding
described in Section 7.6(iv) shall be instituted against the Company or any of
its Significant Subsidiaries and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60 consecutive
days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of the Company and its Subsidiaries which, when taken together with
all other Property of the Company and its Subsidiaries so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such action occurs, constitutes a Substantial
Portion.
7.9. The Company or any of its Significant Subsidiaries shall fail
within 60 days to pay, bond or otherwise discharge one or more (i) judgments or
orders for the payment of money (not covered by insurance)in excess of 2% of
Adjusted Tangible Net Worth (or the equivalent thereof in currencies other than
U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or
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orders which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, which judgment(s), in either such case, is/are
not stayed on appeal or otherwise being appropriately contested in good faith.
7.10. Any member of the Controlled Group shall fail to pay when due an
amount or amounts aggregating in excess of $75,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Single Employer Plan with Unfunded Liabilities in excess of $20,000,000 (a
"Material Plan") shall be filed under Section 4041(c) of ERISA by any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or PBGC shall institute proceedings under which it is likely to
prevail under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee
to be appointed to administer any Material Plan; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any Material Plan must be terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which causes one or more
members of the Controlled Group to incur a current payment obligation in excess
of $75,000,000.
7.11. Any Change in Control shall occur.
7.12. The Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of the Guaranty, or the Company shall fail to comply with any
of the terms or provisions of the Guaranty, or the Company shall deny that it
has any further liability under the Guaranty, or shall give notice to such
effect.
ARTICLE VIII.
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration.
If any Default described in Section 7.6 or 7.7 occurs with respect to
the Company or any of its Significant Subsidiaries, the obligations of the
Lenders to make Loans hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Administrative Agent or any Lender. If any other
Default occurs and is continuing, the Required Lenders (or the Administrative
Agent with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Company hereby expressly waives.
If, within 60 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Company) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Administrative Agent shall, by notice to the Company, rescind and annul such
acceleration and/or termination.
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8.2 Amendments.
Subject to the provisions of this Article VIII, the Required Lenders
(or the Administrative Agent with the consent in writing of the Required
Lenders) and the Borrowers may enter into written agreements supplemental hereto
for the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrowers hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
written agreement shall, without the consent of all of the Lenders:
(i) Extend the final maturity of any Loan or postpone any regularly
scheduled payment of principal of any Loan or forgive all or any portion of the
principal amount thereof, or reduce the rate or extend the time of payment of
interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Facility Termination Date or reduce the amount or
extend the payment date for, the mandatory payments required under Section 2.2,
or increase the amount of the Aggregate Commitment or of the Commitment of any
Lender hereunder, or permit any Borrower to assign its rights under this
Agreement (other than as may be permitted pursuant to Section 6.9).
(iv) Amend this Section 8.2.
(v) Release the Company as guarantor of any Advance.
No amendment of any provision of this Agreement relating to the
Administrative Agent shall be effective without the written consent of the
Administrative Agent, and no amendment of any provision of this Agreement
relating to the Swingline Loans shall be effective without the written consent
of the Swingline Lender. The Administrative Agent may waive payment of the fee
required under Section 12.3.2 without obtaining the consent of any other party
to this Agreement.
Notwithstanding anything herein to the contrary, no Defaulting Lender
shall be entitled to vote (whether to consent or to withhold its consent) with
respect to any amendment, modification, termination or waiver requiring the
consent of the Required Lenders, and, for purposes of determining the Required
Lenders, the Commitments and the Loans of each Defaulting Lender shall be
disregarded.
8.3 Preservation of Rights
No delay or omission of the Lenders or the Administrative Agent to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
a Borrower to satisfy the conditions precedent to such Loan shall not constitute
any waiver or acquiescence. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be
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valid unless in writing signed by the Lenders required pursuant to Section 8.2,
and then only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Administrative Agent and the Lenders until the
Obligations have been paid in full.
ARTICLE IX.
GENERAL PROVISIONS
9.1 Survival of Representations.
All representations and warranties of the Borrowers contained in this
Agreement shall survive the making of the Loans herein contemplated.
9.2 Governmental Regulation.
Anything contained in this Agreement to the contrary notwithstanding,
no Lender shall be obligated to extend credit to the Borrowers in violation of
any limitation or prohibition provided by any applicable statute or regulation.
9.3 Headings.
Section headings in the Loan Documents are for convenience of reference
only, and shall not govern the interpretation of any of the provisions of the
Loan Documents.
9.4 Entire Agreement.
The Loan Documents embody the entire agreement and understanding among
the Borrowers, the Administrative Agent and the Lenders and supersede all prior
agreements and understandings among the Borrowers, the Administrative Agent and
the Lenders relating to the subject matter thereof other than the fee letter
described in Section 10.13.
9.5 Several Obligations; Benefits of this Agreement.
The respective obligations of the Lenders hereunder are several and not
joint and no Lender shall be the partner or agent of any other (except to the
extent to which the Administrative Agent is authorized to act as such). The
failure of any Lender to perform any of its obligations hereunder shall not
relieve any other Lender from any of its obligations hereunder. This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns, provided, however, that the parties hereto expressly agree that the
Lead Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10
and 10.11 to the extent specifically set forth therein and shall have the right
to enforce such provisions on its own behalf and in its own name to the same
extent as if it were a party to this Agreement.
9.6 Expenses; Indemnification.
(i) The Borrowers shall reimburse the Administrative Agent and the Lead
Arranger for any reasonable costs, internal charges and out-of-pocket expenses
(including
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reasonable attorneys' fees and time charges of attorneys for the Administrative
Agent, which attorneys may be employees of the Administrative Agent, but subject
to any limitations contained in the letter from Dickinson Wright PLLC to First
Chicago dated February 19, 1999) paid or incurred by the Administrative Agent or
the Lead Arranger in connection with the preparation, investigation,
negotiation, execution, delivery, syndication, review, amendment, modification,
and administration of the Loan Documents, whether incurred prior to or
subsequent to closing. The Borrowers also agree to reimburse the Administrative
Agent, the Lead Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Administrative Agent, the Lead Arranger and the Lenders, which
attorneys may be employees of the Administrative Agent, the Lead Arranger or the
Lenders) paid or incurred by the Administrative Agent, the Lead Arranger or any
Lender in connection with the collection and enforcement of the Loan Documents.
(ii) The Company hereby further agrees to indemnify the Administrative
Agent, the Lead Arranger and each Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all reasonable expenses of litigation
or preparation therefor whether or not the Administrative Agent, the Lead
Arranger or any Lender is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder except to the extent
that they are determined in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The obligations of the Company
under this Section 9.6 shall survive the termination of this Agreement.
9.7 Numbers of Documents.
All statements, notices, closing documents, and requests hereunder
shall be furnished to the Administrative Agent with sufficient counterparts so
that the Administrative Agent may furnish one to each of the Lenders.
9.8 Accounting.
Except as provided to the contrary herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder shall be
made in accordance with Agreement Accounting Principles except that any
calculation or determination which is to be made on a consolidated basis shall
be made for the Company and all its Subsidiaries, including those Subsidiaries,
if any, which are unconsolidated on the Company's audited financial statements.
9.9 Severability of Provisions.
Any provision in any Loan Document that is held to be inoperative,
unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the remaining
provisions in that jurisdiction or the operation, enforceability, or
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validity of that provision in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
9.10 Nonliability of Lenders.
The relationship between the Company on the one hand and the Lenders
and the Administrative Agent on the other hand shall be solely that of borrower
and lender. Neither the Administrative Agent, the Lead Arranger nor any Lender
shall have any fiduciary responsibilities to the Company solely by reason of
being a party to this Agreement. Neither the Administrative Agent, the Lead
Arranger nor any Lender undertakes any responsibility to the Company to review
or inform the Company of any matter in connection with any phase of the
Company's business or operations. The Company agrees that neither the
Administrative Agent, the Lead Arranger nor any Lender shall have liability to
the Company (whether sounding in tort, contract or otherwise) for losses
suffered by the Company in connection with, arising out of, or in any way
related to, the transactions contemplated and the relationship established by
the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a court
of competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the
Administrative Agent, the Lead Arranger nor any Lender shall have any liability
with respect to, and the Company hereby waives, releases and agrees not to sue
for, any special, indirect or consequential damages suffered by the Company in
connection with, arising out of, or in any way related to the Loan Documents or
the transactions contemplated thereby.
9.11 Confidentiality.
Each of the Administrative Agent and each Lender agrees to hold any
confidential information which it may receive from the Company pursuant to this
Agreement in confidence, except for disclosure (i) to its Affiliates and to
other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Lender or the
Administrative Agent or, subject to Section 12.4, to a Transferee, (iii) to
regulatory officials, (iv) to any Person as required by law, regulation, or
legal process, (v) to any Person in connection with any legal proceeding to
which such Lender is a party, (vi) to such Lender's contractual counterparties
in swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, (vii) permitted by Section 12.4, and (viii) to
rating agencies if requested or required by such agencies in connection with a
rating relating to the Advances hereunder, provided that reasonable advance
written notice is given to the Company.
9.12 Nonreliance.
Each Lender hereby represents that it is not relying on or looking to
any margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) for the repayment of the Loans provided for herein.
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ARTICLE X.
THE AGENT
10.1 Appointment; Nature of Relationship.
The First National Bank of Chicago is hereby appointed by each of the
Lenders as its contractual representative (herein referred to as the
"Administrative Agent") hereunder and under each other Loan Document, and each
of the Lenders irrevocably authorizes the Administrative Agent to act as the
contractual representative of such Lender with the rights and duties expressly
set forth herein and in the other Loan Documents. The Administrative Agent
agrees to act as such contractual representative upon the express conditions
contained in this Article X. Notwithstanding the use of the defined term
"Administrative Agent," it is expressly understood and agreed that the
Administrative Agent shall not have any fiduciary responsibilities to any Lender
by reason of this Agreement or any other Loan Document and that the
Administrative Agent is merely acting as the contractual representative of the
Lenders with only those duties as are expressly set forth in this Agreement and
the other Loan Documents. In its capacity as the Lenders' contractual
representative, the Administrative Agent (i) does not hereby assume any
fiduciary duties to any of the Lenders, (ii) is a "representative" of the
Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and
(iii) is acting as an independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement and the other Loan
Documents. Each of the Lenders hereby agrees to assert no claim against the
Administrative Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby waives.
10.2 Powers.
The Administrative Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Administrative Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent shall have no implied duties to the
Lenders, or any obligation to the Lenders to take any action thereunder except
any action specifically provided by the Loan Documents to be taken by the
Administrative Agent.
10.3 General Immunity.
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable to the Company, the Lenders or any Lender
for any action taken or omitted to be taken by it or them hereunder or under any
other Loan Document or in connection herewith or therewith except to the extent
such action or inaction is determined in a final non-appealable judgment by a
court of competent jurisdiction to have arisen from the gross negligence or
willful misconduct of such Person.
10.4 No Responsibility for Loans, Recitals, etc.
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify (a) any statement, warranty or representation made in
connection with any Loan Document or any borrowing
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hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Administrative Agent;
(d) the existence or possible existence of any Default or Unmatured Default; (e)
the validity, enforceability, effectiveness, sufficiency or genuineness of any
Loan Document or any other instrument or writing furnished in connection
therewith; (f) the value, sufficiency, creation, perfection or priority of any
Lien in any collateral security; or (g) the financial condition of the Company
or any guarantor of any of the Obligations or of any of the Company's or any
such guarantor's respective Subsidiaries. The Administrative Agent shall have no
duty to disclose to the Lenders information that is not required to be furnished
by the Company to the Administrative Agent at such time, but is voluntarily
furnished by the Company to the Administrative Agent (either in its capacity as
Administrative Agent or in its individual capacity).
10.5 Action on Instructions of Lenders.
The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and under any other Loan
Document in accordance with written instructions signed by the Required Lenders,
and such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders. The Lenders hereby acknowledge that the
Administrative Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any
other Loan Document unless it shall be requested in writing to do so by the
Required Lenders. The Administrative Agent shall be fully justified in failing
or refusing to take any action hereunder and under any other Loan Document
unless it shall first be indemnified to its satisfaction by the Lenders pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.
10.6 Employment of Agents and Counsel.
The Administrative Agent may execute any of its duties as
Administrative Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Administrative Agent shall be entitled
to advice of counsel concerning the contractual arrangement between the
Administrative Agent and the Lenders and all matters pertaining to the
Administrative Agent's duties hereunder and under any other Loan Document.
10.7 Reliance on Documents; Counsel.
The Administrative Agent shall be entitled to rely upon any Note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and, in respect to legal matters, upon the
opinion of counsel selected by the Administrative Agent, which counsel may be
employees of the Administrative Agent.
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10.8 Administrative Agent's Reimbursement and Indemnification.
The Lenders agree to reimburse and indemnify the Administrative Agent
ratably in proportion to their respective Commitments (or, if the Commitments
have been terminated, in proportion to their Commitments immediately prior to
such termination) (i) for any amounts not reimbursed by the Company for which
the Administrative Agent is entitled to reimbursement by the Company under the
Loan Documents (other than the fee payable pursuant to Section 10.13), (ii) for
any other expenses incurred by the Administrative Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents (including, without limitation, for any
expenses incurred by the Administrative Agent in connection with any dispute
between the Administrative Agent and any Lender or between two or more of the
Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of the Loan Documents
or any other document delivered in connection therewith or the transactions
contemplated thereby (including, without limitation, for any such amounts
incurred by or asserted against the Administrative Agent in connection with any
dispute between the Administrative Agent and any Lender or between two or more
of the Lenders), or the enforcement of any of the terms of the Loan Documents or
of any such other documents, provided that (i) no Lender shall be liable for any
of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Administrative Agent and
(ii) any indemnification required pursuant to Section 3.5(vii) shall,
notwithstanding the provisions of this Section 10.8, be paid by the relevant
Lender in accordance with the provisions thereof. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and termination
of this Agreement.
10.9 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Administrative Agent has received written notice from a Lender or the
Company referring to this Agreement describing such Default or Unmatured Default
and stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders.
10.10 Rights as a Lender.
In the event the Administrative Agent is a Lender, the Administrative
Agent shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Administrative Agent, and the term
"Lender" or "Lenders" shall, at any time when the Administrative Agent is a
Lender, unless the context otherwise indicates, include the Administrative Agent
in its individual capacity. The Administrative Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Company or any of its
Subsidiaries in which the Company or such
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Subsidiary is not restricted hereby from engaging with any other Person. The
Administrative Agent, in its individual capacity, is not obligated to remain a
Lender.
10.11 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, the Lead Arranger or any other Lender
and based on the financial statements prepared by the Company and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon the Administrative Agent, the Lead Arranger or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
10.12 Successor Administrative Agent.
The Administrative Agent may resign at any time by giving written
notice thereof to the Lenders and the Company, such resignation to be effective
upon the appointment of a successor Administrative Agent or, if no successor
Administrative Agent has been appointed, forty-five days after the retiring
Administrative Agent gives notice of its intention to resign. The Administrative
Agent may be removed at any time with or without cause by written notice
received by the Administrative Agent from the Required Lenders, such removal to
be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Company and the Lenders, a successor Administrative Agent, which
successor Administrative Agent shall (unless a Default shall have occurred and
be continuing) be approved by the Company (which approval shall not be
unreasonably withheld or delayed). If no successor Administrative Agent shall
have been so appointed by the Required Lenders within thirty days after the
resigning Administrative Agent's giving notice of its intention to resign, then
the resigning Administrative Agent may appoint, on behalf of the Company and the
Lenders, a successor Administrative Agent. Notwithstanding the previous
sentence, without the consent of any Lender but upon thirty days prior written
notice to the Lenders and the Company, the Administrative Agent may appoint any
of its Affiliates which is a commercial bank as a successor Administrative Agent
hereunder, which successor Administrative Agent shall (unless a Default shall
have occurred and be continuing) be approved by the Company (which approval
shall not be unreasonably withheld or delayed). If the Administrative Agent has
resigned or been removed and no successor Administrative Agent has been
appointed, the Lenders may perform all the duties of the Administrative Agent
hereunder and the Company shall make all payments in respect of the Obligations
to the applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Administrative Agent shall be deemed to be appointed
hereunder until such successor Administrative Agent has accepted the
appointment. Any such successor Administrative Agent shall be a commercial bank
having capital and retained earnings of at least $5,000,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning or removed Administrative Agent. Upon the effectiveness of the
resignation or removal of the Administrative Agent, the resigning or removed
Administrative Agent shall be discharged from its duties and obligations
hereunder and
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under the Loan Documents. After the effectiveness of the resignation or removal
of an Administrative Agent, the provisions of this Article X shall continue in
effect for the benefit of such Administrative Agent in respect of any actions
taken or omitted to be taken by it while it was acting as the Administrative
Agent hereunder and under the other Loan Documents. In the event that there is a
successor to the Administrative Agent by merger, or the Administrative Agent
assigns its duties and obligations to an Affiliate pursuant to this Section
10.12, then the term "Corporate Base Rate" as used in this Agreement shall mean
the prime rate, base rate or other analogous rate of the new Administrative
Agent.
10.13 Administrative Agent's Fee.
The Company agrees to pay to the Administrative Agent, for its own
account, the fees agreed to by the Company and the Administrative Agent pursuant
to that certain letter agreement dated February 15, 1999 or as otherwise agreed
from time to time.
10.14 Delegation to Affiliates.
The Company and the Lenders agree that the Administrative Agent may
delegate any of its duties under this Agreement to any of its Affiliates. Any
such Affiliate (and such Affiliate's directors, officers, agents and employees)
which performs duties in connection with this Agreement shall be entitled to the
same benefits of the indemnification, waiver and other protective provisions to
which the Administrative Agent is entitled under Articles IX and X.
10.15 Administrative Agent, Syndication Agent, Co-Documentation Agents,
Lead Arranger, etc.
Neither the Syndication Agent, the Co-Documentation Agents nor the Lead
Arranger shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of such Lenders or the Administrative Agent
shall have or be deemed to have a fiduciary relationship with any Lender. Each
Lender hereby makes the same acknowledgments with respect to such Lenders as it
makes with respect to the Administrative Agent in Section 10.11.
ARTICLE XI.
SETOFF; RATABLE PAYMENTS
11.1 Setoff.
In addition to, and without limitation of, any rights of the Lenders
under applicable law, if any Borrower becomes insolvent, however evidenced, or
any Default occurs and is continuing, any and all deposits (including all
account balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of any Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.
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11.2 Ratable Payments.
If any Lender, whether by setoff or otherwise, has payment made to it
upon its Loans (other than payments received pursuant to Section 3.1, 3.2, 3.4
or 3.5 or payments of Alternate Currency Loans) in a greater proportion than
that received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that after such
purchase each Lender will hold its ratable proportion of Loans. If any Lender,
whether in connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
If an amount to be setoff is to be applied to Indebtedness of the
Company to a Lender other than Indebtedness comprised of Loans made by such
Lender, such amount shall be applied ratably to such other Indebtedness and to
the Indebtedness comprised of such Loans.
ARTICLE XII.
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns.
The terms and provisions of the Loan Documents shall be binding upon
and inure to the benefit of the Borrowers and the Lenders and their respective
successors and assigns, except that (i) the Borrowers shall not have the right
to assign their rights or obligations under the Loan Documents and (ii) any
assignment by any Lender must be made in compliance with Section 12.3.
Notwithstanding clause (ii) of this Section, any Lender may at any time, without
the consent of the Borrowers or the Administrative Agent, assign all or any
portion of its rights under this Agreement and any Note to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Administrative
Agent may treat the Person which made any Loan or which holds any Note as the
owner thereof for all purposes hereof unless and until such Person complies with
Section 12.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Administrative
Agent. Any assignee or transferee of the rights to any Loan or any Note agrees
by acceptance of such transfer or assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Loan (whether or not a Note has been
issued in evidence thereof), shall be conclusive and binding on any subsequent
holder, transferee or assignee of the rights to such Loan.
12.2 Participations.
12.2.1. Permitted Participants; Effect.
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<PAGE> 72
Any Lender may, in its sole discretion, in the ordinary course of its
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a Participant,
such Lender's obligations under the Loan Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner of its Loans
and the holder of any Note issued to it in evidence thereof for all purposes
under the Loan Documents, all amounts payable by the Borrowers under this
Agreement shall be determined as if such Lender had not sold such participating
interests, and the Borrowers and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
12.2.2. Voting Rights.
Each Lender shall retain the sole right to approve, without the consent
of any Participant, any amendment, modification or waiver of any provision of
the Loan Documents other than any amendment, modification or waiver with respect
to any Loan or Commitment in which such Participant has an interest which
forgives principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, extends the Facility
Termination Date, postpones any date fixed for any regularly-scheduled payment
of principal of, or interest or fees on, any such Loan or Commitment, releases
the Company as guarantor of any such Loan or releases all or substantially all
of the collateral, if any, securing any such Loan.
12.2.3. Benefit of Setoff.
The Company agrees that each Participant shall be deemed to have the
right of setoff provided in Section 11.1 in respect of its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
the Loan Documents, provided that each Lender shall retain the right of setoff
provided in Section 11.1 with respect to the amount of participating interests
sold to each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in Section 11.1,
agrees to share with each Lender, any amount received pursuant to the exercise
of its right of setoff, such amounts to be shared in accordance with Section
11.2 as if each Participant were a Lender.
12.3 Assignments.
12.3.1. Permitted Assignments.
Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more financial
institutions, mutual funds, insurance companies or other entities engaged in the
business of extending credit for borrowed money ("Purchasers") all or any part
of its rights and obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit C or in such other form as may be agreed to
by the parties thereto. The consent of the Company and the Administrative Agent
shall be required prior to an
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<PAGE> 73
assignment becoming effective with respect to a Purchaser which is not a Lender
or an Affiliate thereof; provided, however, that if a Default has occurred and
is continuing, the consent of the Company shall not be required. Such consent
shall not be unreasonably withheld or delayed. The assignor shall give prompt
written notice to the Company of any assignment becoming effective without the
consent of the Company. The Administrative Agent shall give written notice to
each Lender of any assignment becoming effective to an assignor other than a
Lender or an Affiliate thereof. Each such assignment with respect to a Purchaser
which is not a Lender or an Affiliate thereof shall (unless each of the Company
and the Administrative Agent otherwise consents) be in an amount not less than
the lesser of (i) $5,000,000 and in multiples of $1,000,000 or (ii) the
remaining amount of the assigning Lender's Commitment (calculated as at the date
of such assignment) or outstanding Loans (if the applicable Commitment has been
terminated). If any Lender assigns a part of its rights and obligations in
respect of its Dollar Loans and/or its Dollar Commitment under this Agreement to
a Purchaser other than a Lender or an Affiliate thereof, such Lender shall
assign proportionate interests in its respective Multicurrency Loans and
Multicurrency Commitment and other related rights and obligations hereunder to
such Purchaser, and if any Lender assigns a part of its rights and obligations
under this Agreement in respect of its Multicurrency Loans and/or Multicurrency
Commitments to a Purchaser other than a Lender or an Affiliate thereof, such
Lender shall assign proportionate interests in its Dollar Loans and Dollar
Commitments to such Purchaser. Any assignment of an Alternate Currency Loan
shall be for the entire amount of such Alternate Currency Loan of such Lender.
12.3.2. Effect; Effective Date.
Upon (i) delivery to the Administrative Agent of an assignment,
together with any consents required by Section 12.3.1, and (ii) payment of a
$3,500 fee to the Administrative Agent for processing such assignment (unless
such fee is waived by the Administrative Agent), such assignment shall become
effective on the effective date specified in such assignment. The assignment
shall contain a representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and Loans under the
applicable assignment agreement constitutes "plan assets" as defined under ERISA
and that the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA. On and after the effective date
of such assignment, such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by or on behalf of the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Company, the Lenders or the Administrative
Agent shall be required to release the transferor Lender with respect to the
percentage of the Aggregate Commitment and Loans assigned to such Purchaser.
Upon the consummation of any assignment to a Purchaser pursuant to this Section
12.3.2, the transferor Lender, the Administrative Agent and the Borrowers shall,
if the transferor Lender or the Purchaser desires that its Loans be evidenced by
Notes, make appropriate arrangements so that new Notes or, as appropriate,
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted pursuant
to such assignment.
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<PAGE> 74
12.4 Dissemination of Information.
The Company authorizes each Lender to disclose to any Participant or
Purchaser or any other Person acquiring an interest in the Loan Documents by
operation of law (each a "Transferee") and any prospective Transferee any and
all information in such Lender's possession concerning the creditworthiness of
the Company and its Subsidiaries, provided that each Transferee and prospective
Transferee agrees in writing to be bound by Section 9.11 of this Agreement.
12.5 Tax Treatment.
If any interest in any Loan Document is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States or any State thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to comply with the
provisions of Section 3.5(iv).
12.6 Transfer to an SPC.
Notwithstanding anything to the contrary contained herein, any Lender
(a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"),
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Company, the option to provide to the Borrowers all
or any part of any Loan (other than an Alternate Currency Loan) that such
Granting Lender would otherwise be obligated to make to the Borrower pursuant to
this Agreement; provided that (i) nothing herein shall constitute a commitment
by any SPC to make any Loan and (ii) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms hereof. The
making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for
any indemnity or similar payment obligation under this Agreement (all liability
for which shall remain with the Granting Lender). In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the payment in full of all outstanding commercial paper or other
senior indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof. In addition, notwithstanding anything to the
contrary in this Section 12.6, any SPC may (i) with notice to, but without the
prior written consent of, the Company and the Administrative Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Loans to the Granting Lender or to any financial institutions (consented to
by the Company and the Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC. As this
Section applies to any particular SPC, this section may not be amended without
the written consent of such SPC.
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<PAGE> 75
ARTICLE XIII.
NOTICES
13.1 Notices.
Except as otherwise permitted by Section 2.15 with respect to borrowing
notices, all notices, requests and other communications to any party hereunder
shall be in writing (including electronic transmission, facsimile transmission
or similar writing) and shall be given to such party: (x) in the case of the
Borrowers or the Administrative Agent, at its address or facsimile number set
forth on the signature pages hereof, (y) in the case of any Lender, at its
address or facsimile number set forth below its signature hereto or (z) in the
case of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Administrative Agent and the
Borrowers in accordance with the provisions of this Section 13.1. Each such
notice, request or other communication shall be effective (i) if given by
facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any other means,
when delivered (or, in the case of electronic transmission, received) at the
address specified in this Section; provided that notices to the Administrative
Agent under Article II shall not be effective until received.
13.2 Change of Address.
The Borrowers, the Administrative Agent and any Lender may each change
the address for service of notice upon it by 5 days' prior written notice to the
other parties hereto.
ARTICLE XIV.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrowers, the
Administrative Agent and the Lenders and each party has notified the
Administrative Agent by facsimile transmission or telephone that it has taken
such action.
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<PAGE> 76
ARTICLE XV.
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1 CHOICE OF LAW.
THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
(INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE
WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2 CONSENT TO JURISDICTION.
EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENTS AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
15.3 WAIVER OF JURY TRIAL.
THE BORROWERS, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
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IN WITNESS WHEREOF, the Borrowers, the Lenders and the Administrative Agent have
executed this Agreement as of the date first above written.
CARDINAL HEALTH, INC.
By: /s/ Stephanie A. Wagoner
-------------------------------------
Title: Vice President & Treasurer
----------------------------------
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Suzanne L. Stoddard
Telephone: (614) 717-7542
FAX: (614) 717-8542
72
<PAGE> 78
Commitment:
$65,625,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Administrative Agent
By: /s/ D. J. Pienta
-------------------------------------
Title: Vice President
----------------------------------
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Daniel J. Pienta
Telephone: (313) 225-1525
FAX: (313) 225-1671
73
<PAGE> 79
Commitment:
$61,875,000 BANK OF AMERICA NT & SA
By: /s/ Scott Singhoff
-------------------------------------
Title: Senior Vice President
----------------------------------
700 Louisiana Street
Houston, TX 77002
Attention: Scott Singhoff
Telephone: (713) 247-6961
FAX: (713) 247-6719
74
<PAGE> 80
Commitment:
$61,875,000 CITICORP USA, INC.
By: /s/ Mark Packard
-------------------------------------
Title: Vice President
----------------------------------
399 Park Avenue
New York, NY 10043
Attention:
------------------------------
Telephone:
------------------------------
FAX:
------------------------------------
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<PAGE> 81
Commitment:
$61,875,000 CREDIT SUISSE FIRST BOSTON
By: /s/ Robert N. Finney
-------------------------------------
Title: Managing Director
----------------------------------
By: /s/ Todd C. Morgan
-------------------------------------
Title: Director
----------------------------------
11 Madison Avenue
New York, NY 10010
Attention:
------------------------------
Telephone:
------------------------------
FAX:
------------------------------------
76
<PAGE> 82
Commitment:
$46,875,000 FIRST UNION NATIONAL BANK
By: /s/ John E. Reid
-------------------------------------
Title: Vice President
----------------------------------
301 South College Street, 10th Floor
Charlotte, NC 28288-0745
Attention: John Reid
Telephone: (704) 383-1385
FAX: (704) 383-7236
77
<PAGE> 83
Commitment:
$46,875,000 PNC BANK, NATIONAL ASSOCIATION
By: /s/ C. J. Richardson
-------------------------------------
Title: Senior Vice President
----------------------------------
201 East Fifth Street
Cincinnati, OH 45202
Attention: C. Joseph Richardson
Telephone: (513) 651-8984
FAX: (513) 651-8951
78
<PAGE> 84
Commitment:
$46,875,000 WACHOVIA BANK, NA
By: /s/ Brad Watkins
-------------------------------------
Title: Vice President
----------------------------------
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: Bradford L. Watkins
Telephone: (404) 332-1093
FAX: (404) 332-6898
79
<PAGE> 85
Commitment:
$39,375,000 BARCLAYS BANK PLC
By: /s/ Matthew Tuck
---------------------------------------
Title: Associate Director & Vice President
------------------------------------
222 Broadway, 8th Floor
New York, NY 10038
Attention: Matthew Tuck
Telephone: (212) 412-1131
FAX: (212) 412-1075
80
<PAGE> 86
Commitment:
$39,375,000 FLEET BANK, NATIONAL ASSOCIATION
By: /s/ Magda Hayden
-------------------------------------
Title: Senior Vice President
----------------------------------
300 Broad Hollow Road
Melville, NY 11747
Attention: Magda Hayden
Telephone: (516) 547-7726
FAX: (516) 447-7815
81
<PAGE> 87
Commitment:
$39,375,000 DEUTSCHE BANK AG - NEW YORK BRANCH
A/O CAYMAN ISLANDS BRANCH
By: /s/ Susan L. Pearson
-------------------------------------
Title: Director
----------------------------------
By: /s/ Stephan A. Wiedemann
-------------------------------------
Title: Director
----------------------------------
31 W. 52nd Street
New York, NY 10019
Attention: Sue Pearson
Telephone: (212) 469-7140
FAX: (212) 469-8701
82
<PAGE> 88
Commitment:
$24,000,000 BANCA COMMERCIALE ITALIANA -
CHICAGO BRANCH
By: /s/
-------------------------------------
Title: Vice President
----------------------------------
150 N. Michigan Avenue
Chicago, Illinois 60601
Attention: Diana R. Lamb
Telephone: (312) 346-1112
FAX: (312) 346-5758
83
<PAGE> 89
Commitment:
$24,000,000 BANK OF MONTREAL
By: /s/ Patrice Wetzel
-------------------------------------
Title: Director
----------------------------------
115 S. LaSalle Street
Chicago, Illinois 60603
Attention: Patrice Wetzel
Telephone: (312) 750-3472
FAX: (312) 750-6057
84
<PAGE> 90
Commitment:
$24,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Hisashi Miyashiro
-------------------------------------
Title: Deputy General Manager
----------------------------------
227 W. Monroe Street, Suite 2300
Chicago, Illinois 60606
Attention: William Murray
Telephone: (312) 696-4500
FAX: (312) 696-4535
85
<PAGE> 91
Commitment:
$24,000,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Robert Bottamedi
-------------------------------------
Title: Vice President
----------------------------------
60 Wall Street, 32nd Floor
New York, NY 10271
Attention:
------------------------------
Telephone:
------------------------------
FAX:
------------------------------------
86
<PAGE> 92
Commitment:
$24,000,000 NATIONAL CITY BANK
By: /s/ Patricia Jackson
-------------------------------------
Title: Vice President
----------------------------------
155 East Broad Street
Columbus, OH 43251
Attention: Patricia Jackson
Telephone: (614) 463-8065
FAX: (614) 463-6770
87
<PAGE> 93
Commitment:
$24,000,000 THE NORTHERN TRUST COMPANY
By: /s/ M. M. Teteak
-------------------------------------
Title: Vice President
----------------------------------
50 S. LaSalle Street
Chicago, Illinois 60675
Attention: Michelle M. Teteak
Telephone: (312) 444-3506
FAX: (312) 444-5055
88
<PAGE> 94
Commitment:
$24,000,000 SUNTRUST BANK, ATLANTA
By: /s/ Linda L. Dash
-------------------------------------
Title: Vice President
----------------------------------
303 Peachtree Street, N.E., 3rd Floor
Mail Code 1928
Atlanta, Georgia 30308
Attention: Linda L. Dash
Telephone: (404) 658-4923
FAX: (404) 658-4905
89
<PAGE> 95
Commitment:
$24,000,000 STANDARD CHARTERED BANK
By: /s/ D. D. Cutting Kristina McDavid
------------------------------------------
Title: Senior Vice President Vice President
---------------------------------------
Seven World Trade Center
New York, NY 10048
Attention: David Cutting
Telephone: (212) 667-0213
FAX: (212) 667-0225
90
<PAGE> 96
Commitment:
$24,000,000 THE BANK OF NEW YORK
By: /s/ Ed Dougherty
-------------------------------------
Title: Vice President
----------------------------------
One Wall Street
New York, NY 10286
Attention: Edward Dougherty
Telephone: (212) 635-1330
FAX: (212) 635-6434
91
<PAGE> 97
Commitment:
$24,000,000 WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Brad Hardy
-------------------------------------
Title: Vice President
----------------------------------
222 W. Adams Street, Suite 2180
Chicago, Illinois 60606
Attention: Karen DeSantes
Telephone: (312) 845-8602
FAX: (312) 553-2353
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<PAGE> 98
PRICING SCHEDULE
The Applicable Margin shall be as determined by the matrix below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V Level VI
Status Status Status Status Status Status
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Less than
Reference Rating BBB+ or BBB or or Equal to)
(Greater than or Equal to) A+ or A1 A or A2 A- or A3 Baa1 Baa2 BBB- or Baa3
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Fee 7.0 8.0 9.0 10.0 12.0 15.0
- ------------------------------------------------------------------------------------------------------------------------------------
Eurocurrency Rate
Applicable Margin 13.0 17.0 21.0 25.0 28.0 35.0
- ------------------------------------------------------------------------------------------------------------------------------------
Utilization fee (Greater than) 33% 2.5 2.5 5.0 5.0 10.0 15.0
- ------------------------------------------------------------------------------------------------------------------------------------
Utilization fee (Greater than) 67% 5.0 5.0 10.0 15.0 20.0 20.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Level I Status" exists at any date if, on such date, the Company's
Moody's Rating is A1 or better or the Company's S&P Rating is A+ or better.
"Level II Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status and (ii) the Company's Moody's Rating is A2
or better or the Company's S&P Rating is A or better.
"Level III Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status or Level II Status and (ii) the Company's
Moody's Rating is A3 or better or the Company's S&P Rating is A- or better.
"Level IV Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status, Level II Status or Level III Status and
(ii) the Company's Moody's Rating is Baa1 or better or the Company's S&P rating
is BBB+ or better.
"Level V Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status, Level II Status, Level III Status or Level
IV Status and (ii) the Company's Moody's rating is Baa2 or better or the
Company's S&P rating is BBB or better.
"Level VI Status" exists at any date if, on such date, the Company has
not qualified for Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status.
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<PAGE> 99
"Moody's Rating" means, at any time, the rating issued by Moody's
Investors Service, Inc. and then in effect with respect to the Company's senior
unsecured long-term debt securities without third-party credit enhancement.
"S&P Rating" means, at any time, the rating issued by Standard and
Poor's Rating Services, a division of The McGraw Hill Companies, Inc., and then
in effect with respect to the Company's senior unsecured long-term debt
securities without third-party credit enhancement.
"Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status, Level V Status or Level VI Status.
The Applicable Margin shall be determined in accordance with the
foregoing table based on the Company's Status as determined from its
then-current Moody's and S&P Ratings. The credit rating in effect on any date
for the purposes of this Schedule is that in effect at the close of business on
such date. If at any time the Company has no Moody's Rating or no S&P Rating,
Level VI Status shall exist.
94
<PAGE> 100
EXHIBIT A
FORM OF OPINION
March 31, 1999
The Administrative Agent and the Lenders who are
parties to the Credit Agreement described below.
SUBJECT: CARDINAL HEALTH, INC. - FIVE-YEAR CREDIT AGREEMENT
Gentlemen/Ladies:
We are counsel for Cardinal Health, Inc., an Ohio corporation (the
"COMPANY"), and have represented the Company in connection with its execution
and delivery of a Five-Year Credit Agreement dated as of March 31,1999 (the
"AGREEMENT"), among the Company, the Subsidiary Borrowers, the Lenders named
therein, and The First National Bank of Chicago, as Administrative Agent,
providing for Advances in an aggregate principal amount not exceeding
$750,000,000 at any one time outstanding. All capitalized terms used in this
opinion and not otherwise defined herein shall have the meanings attributed to
them in the Agreement. This opinion is being delivered to you pursuant to
Section 4.1(a)(v) of the Agreement.
In connection with the issuance of this opinion letter, we have
examined the following documents:
(a) A copy of the Agreement executed by the Company;
(b) The Company's Articles of Incorporation as
certified by the Ohio Secretary of State;
(c) The Company's Code of Regulations as certified by
the Company's assistant secretary;
(d) A certificate of good standing of the Company
issued by the Ohio Secretary of State;
(e) Resolutions of the executive committee of the
Company's board of directors as certified by the Company's assistant
secretary;
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<PAGE> 101
(f) [INSERT DESCRIPTION OF NOTE(S) TO BE EXECUTED AT
CLOSING];
(g) An executed copy of the Guaranty of the Company
dated as of March 31, 1999;
(h) Certificates of certain officers of the Company
as to certain factual matters; and
(i) Such other documents and matters of law as we
deemed necessary or advisable in order to render the opinions set forth
in this letter.
The documents referenced in items (a), (f), and (g) are
sometimes referred to hereinafter as the "LOAN DOCUMENTS".
In our review and in rendering the opinions expressed herein,
we have assumed, without independent verification, the following: (I) the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, facsimile, or
photostatic copies, the completeness and correctness of any representations and
certifications made to us by officers of the Company, and the completeness and
correctness of any representations and certificates of public officials and
public filing records; (II) that the Loan Documents have been duly and validly
authorized, executed, and delivered by all parties thereto other than the
Company, and that the Loan Documents are binding and legally enforceable against
all of the parties thereto, including without limitation the Subsidiary
Borrowers, other than the Company; (III) all parties to the Loan Documents other
than the Company have received adequate consideration for their execution and
delivery of, and performance of their respective obligations under, the Loan
Documents to which each of them is a party; and (IV) all conditions and other
transactions contemplated by the Agreement to have occurred at or prior to the
funding of the initial Loans have occurred or have been waived by the
appropriate parties and Loans in the amount of the Aggregate Commitment will be
fully available pursuant to the terms of the Agreement.
Based upon the foregoing, and subject to the qualifications
set forth below, we are of the opinion that:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Ohio.
2. The execution and delivery by the Company of the Loan
Documents to which it is a party and the performance by the Company of its
obligations thereunder have been duly authorized by proper corporate proceedings
on the part of the Company and will not:
(a) Require any consent of the Company's
shareholders;
(b) (i) Violate (A) any order, judgment, or decree of
any court or governmental agency binding on the Company and known to
us, (B) any statute of the State of Ohio or the United States, or any
written regulation thereunder, (C) the Company's articles of
incorporation or code of regulations, or (D) the provisions of any
indenture, instrument, or agreement to which the Company is a party or
is subject, or by which it, or its Property, is bound, and which is
filed or incorporated by reference as an exhibit to the Company's
periodic reports under the Securities Exchange Act of 1934,
96
<PAGE> 102
pursuant to item 601(b)(10) of Regulation S-K of the Securities and
Exchange Commission, or (ii) conflict with or constitute a default
under any such indenture, instrument, or agreement, provided that no
opinion is expressed with respect to any violation, conflict, or
default of any financial covenants set forth in any such indenture,
instrument, or agreement that may, among other things, limit or
otherwise restrict the amount of Indebtedness the Company may incur or
restrict the amount of interest or other expenses the Company may
incur; or
(c) Result in, or require, the creation or imposition
of any Lien in or on the Property of the Company pursuant to the terms
of any indenture, instrument or agreement binding upon the Company, and
which is filed or incorporated by reference as an exhibit to the
Company's periodic reports under the Securities Exchange Act of 1934,
pursuant to item 601(b)(10) of Regulation S-K of the Securities and
Exchange Commission.
3. The Loan Documents to which the Company is a party have
been duly executed and delivered by the Company and, except for the "choice of
law" provisions of the Loan Documents, constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms. Set forth later in this opinion letter is an opinion regarding the
enforceability of the "choice of law" provisions of the Loan Documents.
4. To the best of our knowledge and except as set forth in
Schedule 8 of the Agreement, there is no litigation, arbitration, governmental
investigation, proceeding, or inquiry pending or threatened against the Company
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect.
5. No authorization or approval of, or filing with, any
governmental agency of the United States or of the State of Ohio which has not
been obtained or made is necessary for the execution and delivery of, and
performance of the Company's obligations under the Loan Documents.
In addition to any other qualification set forth herein, our
opinions are qualified as follows:
(A) We wish to advise you that we do not express any
opinion with respect to: (1) the power or authority of the Lenders to
make the loans contemplated by the Agreement; (2) compliance by the
Lenders with any federal or state banking law, rule, regulation, or
restriction; or (3) compliance by the Lenders with any federal, state,
or foreign law, rule, regulation, or restriction which is or was
required to be complied with by the Lenders (as opposed to compliance
therewith by the Company) in order to enforce any rights or remedies of
the Lenders under the Loan Documents. Accordingly, all of the foregoing
opinions expressed by us are qualified to the extent set forth in the
preceding sentence.
(B) To the extent that the foregoing opinions are
stated to be to the best of our knowledge, or relate to matters which
are known to us, we have, with your consent, relied on one or more
certificates of officers of the Company as to factual matters, and the
absence of any contrary knowledge of those attorneys of our firm
97
<PAGE> 103
familiar with the affairs of the Company, and we have neither
independently investigated nor attempted to verify any of such matters.
(C) We have made no examination of and express no
opinion as to: (1) the right, title, or interest of any person to any
property; (2) the accuracy or sufficiency of the description in the
Loan Documents of any real or personal property; or (3) the existence
of or freedom of any property from any liens, security interests, or
other encumbrances.
(D) Our opinions are subject to and affected by: (1)
any bankruptcy, insolvency, avoidance, fraudulent conveyance,
reorganization, moratorium, or similar laws affecting the rights and
remedies of creditors generally; and (2) general principles of equity
(whether considered in a proceeding in equity or at law).
(E) We express no opinion as to whether a court would
limit the exercise or enforcement of rights or remedies by the Lenders
under the Loan Documents: (1) in the event of any default by the
Company, if it is determined that such default is not material or if
such exercise or enforcement is not reasonably necessary for the
protection of the Lenders; or (2) if the exercise or enforcement
thereof under the circumstances would violate an implied covenant of
good faith and fair dealing.
(F) Certain waivers and exculpatory clauses contained
in the Loan Documents may be limited or unenforceable.
(G) No opinion is expressed with respect to the
validity or enforceability of those provisions of the Loan Documents
which purport by their terms to relieve any party of, or to indemnify
such party against, any liability for such party's own negligence,
gross negligence, or willful misconduct, or to obligate the Company to
bear the legal and other expenses of any other party.
(H) We are authorized to practice law in Ohio, and no
opinion is expressed herein other than as to the laws of the State of
Ohio and federal law. With your permission, for purposes of the opinion
set forth in paragraph 3, we have assumed that the substantive laws of
the State of Ohio, except for conflict of laws principles, would govern
the Loan Documents.
In addition to the foregoing opinions, you have also requested
our opinion regarding whether an Ohio court would enforce the "choice of law"
provisions of the Loan Documents (the "CHOICE OF LAW PROVISIONS") against the
Company.
In Schulke Radio Prod. v. Midwestern Broadcast, 453 N.E. 2d
683 (Ohio 1983), the Ohio Supreme Court held that the rule set forth in the
Restatement of Law 2d (1971) 561, Conflict of Laws, Section 187, is to be
applied in determining whether or not a contractual choice of law provision will
be enforced by an Ohio court. The relevant part of Section 187 is set forth
below:
(2) The law of the state chosen by the parties to
govern their contractual rights and duties will be applied, even if the
particular issue is one which the parties could not have resolved by an
explicit provision in their agreement directed to that issue, unless
either
98
<PAGE> 104
(a) the chosen state has no substantial
relationship to the parties or the transaction and there is no other
reasonable basis for the parties' choice, or
(b) application of the law of the chosen
state would be contrary to a fundamental policy of a state which has a
materially greater interest than the chosen state in the determination
of the particular issue and which, under the rule of Section 188, would
be the state of the applicable law in the absence of an effective
choice of law by the parties.
In Schulke, the agreement at issue included a term providing
that it was to be governed by New York law. One of the parties to the agreement
was located in New York and executed the agreement in New York. In addition,
performance under the agreement also took place in New York. Based upon the
foregoing, the Ohio Supreme Court concluded that New York did bear a substantial
relationship to the parties and the agreement. Schulke, 453 N.E. 2d 686.
Similarly, Comment (f) to Section 187 of the Restatement states that a
substantial relationship exists when the state of choice is where performance by
one of the parties is to take place or where one of the parties has its
principal place of business.
In rendering the following opinion, we have assumed, with your
approval and without independent verification, that the following facts and
statements are true and accurate in all respects:
(i) The Administrative Agent's principal office is
located in Illinois;
(ii) The terms of the Loan Documents were negotiated
by certain representatives of the Administrative Agent from Illinois;
(iii) The Loan Documents are being executed by
certain of the Lenders in Illinois and are being delivered to Illinois;
(iv) In selecting the laws of the State of Illinois
to govern the Loan Documents, the parties acted in good faith and
without an intent to evade the law; and
(v) The application of the laws of the State of
Illinois to the Loan Documents will not be contrary to any fundamental
policy of any state which has a materially greater interest than the
State of Illinois in the determination of any particular right, duty,
or obligation of any party under the Loan Documents.
Based upon the foregoing, and subject to the qualifications
and assumptions set forth herein, we our of the opinion that it would be more
likely than not that an Ohio court would enforce the Choice of Law Provisions
based upon a determination by such court that the Loan Documents and the parties
thereto have a substantial relationship with the State of Illinois.
99
<PAGE> 105
The opinions set forth herein are given as of the date hereof,
and we disclaim any obligation to notify you or any other person or entity if
any change in fact or law, or both (whether statutory, regulatory, regulatory
interpretation or judicial interpretation), should change our opinion with
respect to any matter set forth herein. This opinion may be relied upon and is
solely for the benefit of the Addressees at the beginning of this opinion (and
also any Purchasers, but not any Participants), and it is not to be made
available to or relied upon by any other party or communicated or disclosed to
any other person without our prior written consent.
Very truly yours,
BAKER & HOSTETLER LLP
By______________________________
Boyd Moehring, Partner
100
<PAGE> 106
EXHIBIT B
COMPLIANCE CERTIFICATE
Date:_______________________________
_______________
The First National Bank of Chicago
_______________
_______________
Dear __________:
This notice serves to confirm that, to the best of my
knowledge, Cardinal Health, Inc. (the "Company") has observed or performed in
all material respects all of the covenants, conditions and agreements contained
in the Five-Year Credit Agreement and the 364-Day Credit Agreement, each dated
March __, 1999 and each among the Company, certain subsidiaries of the Company
named therein, The First National Bank of Chicago, as Administrative Agent, and
the lenders named therein.
Detailed calculations are attached.
In addition, please find enclosed a copy of our most recently
filed Form 10-Q.
Sincerely,
_____________________________________________
[Chief Financial Officer/Controller/Treasurer]
101
<PAGE> 107
Section 6.17, Minimum Net Worth.
[INSERT CALCULATION]
102
<PAGE> 108
EXHIBIT C
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between (the
"Assignor") and (the "Assignee") is dated as of , 19. The parties hereto agree
as follows:
1) PRELIMINARY STATEMENT. The Assignor is a party to a Five-Year Credit
Agreement dated as of March ___, 1999 (the "Agreement") among the Company,
the Subsidiary Borrowers, the Lenders named therein, and The First National
Bank of Chicago, as Administrative Agent (which, as it may be amended,
modified, renewed or extended from time to time is herein called the
"Credit Agreement") described in Item 1 of Schedule 1 attached hereto
("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2) ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under
the Credit Agreement and the other Loan Documents, such that after giving
effect to such assignment the Assignee shall have purchased pursuant to
this Assignment Agreement the percentage interest specified in Item 3 of
Schedule 1 of all outstanding rights and obligations under the Credit
Agreement and the other Loan Documents relating to the facilities listed in
Item 3 of Schedule 1. The aggregate Commitment (or Loans, if the applicable
Commitment has been terminated) purchased by the Assignee hereunder is set
forth in Item 4 of Schedule 1.
3) EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of
Schedule 1 or two Business Days (or such shorter period agreed to by the
Administrative Agent) after this Assignment Agreement, together with any
consents required under the Credit Agreement, are delivered to the
Administrative Agent. In no event will the Effective Date occur if the
payments required to be made by the Assignee to the Assignor on the
Effective Date are not made on the proposed Effective Date.
4) PAYMENT OBLIGATIONS. In consideration for the sale and assignment of
Loans hereunder, the Assignee shall pay the Assignor, on the Effective
Date, the amount agreed to by the Assignor and the Assignee. On and after
the Effective Date, the Assignee shall be entitled to receive from the
Administrative Agent all payments of principal, interest and fees with
respect to the interest assigned hereby. The Assignee will promptly remit
to the Assignor any interest on Loans and fees received from the
Administrative Agent which
103
<PAGE> 109
relate to the portion of the Commitment or Loans assigned to the Assignee
hereunder for periods prior to the Effective Date and not previously paid
by the Assignee to the Assignor. In the event that either party hereto
receives any payment to which the other party hereto is entitled under this
Assignment Agreement, then the party receiving such amount shall promptly
remit it to the other party hereto.
5) RECORDATION FEE. The Assignor and Assignee each agree to pay
one-half of the recordation fee required to be paid to the Administrative
Agent in connection with this Assignment Agreement unless otherwise
specified in Item 6 of Schedule 1.
6) REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder, (ii)
such interest is free and clear of any adverse claim created by the
Assignor and (iii) the execution and delivery of this Assignment Agreement
by the Assignor is duly authorized. It is understood and agreed that the
assignment and assumption hereunder are made without recourse to the
Assignor and that the Assignor makes no other representation or warranty of
any kind to the Assignee. Neither the Assignor nor any of its officers,
directors, employees, agents or attorneys shall be responsible for (i) the
due execution, legality, validity, enforceability, genuineness, sufficiency
or collectability of any Loan Document, including without limitation,
documents granting the Assignor and the other Lenders a security interest
in assets of the Company or any guarantor, (ii) any representation,
warranty or statement made in or in connection with any of the Loan
Documents, (iii) the financial condition or creditworthiness of the Company
or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
property, books or records of the Company, (vi) the validity,
enforceability, perfection, priority, condition, value or sufficiency of
any collateral securing or purporting to secure the Loans or (vii) any
mistake, error of judgment, or action taken or omitted to be taken in
connection with the Loans or the Loan Documents.
7) REPRESENTATIONS AND UNDERTAKINGS OF THE ASSIGNEE. The Assignee (i)
confirms that it has received a copy of the Credit Agreement, together with
copies of the financial statements requested by the Assignee and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment Agreement, (ii)
agrees that it will, independently and without reliance upon the
Administrative Agent, the Assignor or any other Lender and based on such
documents and information at it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Loan Documents, (iii) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) confirms that the execution and delivery of this
Assignment Agreement by the Assignee is duly authorized, (v) agrees that it
will perform in accordance with their terms all of the obligations which by
the terms of the Loan Documents are required to be performed by it as a
Lender, (vi) agrees that its payment instructions and notice instructions
are as set forth in the
104
<PAGE> 110
attachment to Schedule 1, (vii) confirms that none of the funds, monies,
assets or other consideration being used to make the purchase and
assumption hereunder are "plan assets" as defined under ERISA and that its
rights, benefits and interests in and under the Loan Documents will not be
"plan assets" under ERISA, (viii) agrees to indemnify and hold the Assignor
harmless against all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement,
and (ix) if applicable, attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that the Assignee is
entitled to receive payments under the Loan Documents without deduction or
withholding of any United States federal income taxes.
8) GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
9) NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered)
shall be the address set forth in the attachment to Schedule 1.
10) COUNTERPARTS; DELIVERY BY FACSIMILE. This Assignment Agreement may
be executed in counterparts. Transmission by facsimile of an executed
counterpart of this Assignment Agreement shall be deemed to constitute due
and sufficient delivery of such counterpart and such facsimile shall be
deemed to be an original counterpart of this Assignment Agreement.
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto
have executed this Assignment Agreement by executing Schedule 1 hereto as of the
date first above written.
105
<PAGE> 111
SCHEDULE 1
TO ASSIGNMENT AGREEMENT
1) Description and Date of Credit Agreement:
2) Date of Assignment Agreement: , 19
3) Amounts (As of Date of Item 2 above):
<TABLE>
<CAPTION>
Facility Facility Facility Facility
1* 2* 3* 4*
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
a. Assignee's percentage
of each Facility
purchased under the
Assignment
Agreement ***, **** ____% ____% ____% ____%
b. Amount of each Facility
purchased under the
Assignment Agreement ***,
****t $____ $____ $____ $____
--------------------------------------------------------------------------------
</TABLE>
4) Assignee's Commitment (or Loans with respect to terminated Commitments)
purchased hereunder: $_________________________________
5) Proposed Effective Date: ___________________________
N/A
6) Non-standard Recordation Fee
Arrangement [Assignor/Assignee to pay 100% of fee]
[Fee waived by Administrative Agent]
Accepted and Agreed:
106
<PAGE> 112
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By:__________________________ By:________________________
Title:_______________________ Title:_____________________
ACCEPTED AND CONSENTED TO BY: ACCEPTED AND CONSENTED TO BY
[NAME OF COMPANY] [NAME OF AGENT]
By:__________________________ By:________________________
Title:_______________________ Title:_____________________
* Insert specific facility names per Credit Agreement
** Percentage taken to 10 decimal places
*** If fee is split 50-50, pick N/A as option
**** Assignments must be pro rata
107
<PAGE> 113
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
Attach Assignor's Administrative Information Sheet, which must include
notice addresses for the Assignor and the Assignee
(Sample form shown below)
ASSIGNOR INFORMATION
CONTACT:
Name:_________________________________ Telephone No.:________________
Fax No.:______________________________ Telex No.:____________________
Answerback:___________________
PAYMENT INFORMATION:
Name & ABA # of Destination Bank:______________________________________
________________________________________________________________________________
Account Name & Number for Wire Transfer:_______________________________
________________________________________________________________________________
Other Instructions:____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address for Notices for Assignor:______________________________________
________________________________________________________________________________
________________________________________________________________________________
ASSIGNEE INFORMATION
CREDIT CONTACT:
Name:_________________________________ Telephone No.:________________
108
<PAGE> 114
Fax No.:______________________________ Telex No.:____________________
Answerback:___________________
KEY OPERATIONS CONTACTS:
Booking Booking
Installation:_________________________ Installation:_________________
Name:_________________________________ Name:_________________________
Telephone No.:________________________ Telephone No.:________________
Fax No.:______________________________ Fax No.:______________________
Telex No.:____________________________ Telex No.:____________________
Answerback:___________________________ Answerback:___________________
PAYMENT INFORMATION:
Name & ABA # of Destination Bank:______________________________________
________________________________________________________________________________
Account Name & Number for Wire Transfer:_______________________________
________________________________________________________________________________
Other Instructions:____________________________________________________
________________________________________________________________________________
Address for Notices for Assignee:______________________________________
________________________________________________________________________________
109
<PAGE> 115
EXHIBIT D
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Administrative Agent (the "Administrative Agent") under the Credit
Agreement Described Below.
Re: Credit Agreement, dated March __, 1999 (as the same may be amended or
modified, the "Credit Agreement"), among Cardinal Health, Inc. (the
"Company"), the Lenders named therein and the Administrative Agent.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned thereto in the Credit Agreement.
The Administrative Agent is specifically authorized and directed to act
upon the following standing money transfer instructions with respect to the
proceeds of Advances or other extensions of credit from time to time until
receipt by the Administrative Agent of a specific written revocation of such
instructions by the Company, provided, however, that the Administrative Agent
may otherwise transfer funds as hereafter directed in writing by the Company in
accordance with Section 13.1 of the Credit Agreement or based on any telephonic
notice made in accordance with Section 2.14 of the Credit Agreement.
Facility Identification Number(s)______________________________________
Customer/Account Name__________________________________________________
Transfer Funds To______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
For Account No.________________________________________________________
Reference/Attention To_________________________________________________
Authorized Officer
(Customer Representative) Date
__________________________________ _______________________
(Please Print) Signature
Bank Officer Name Date
__________________________________ _______________________
(Please Print) Signature
110
<PAGE> 116
EXHIBIT E
NOTE
[Date]
Cardinal Health, Inc., an Ohio corporation (the "Borrower"), promises
to pay to the order of ____________________________________ (the "Lender") the
aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to Article II of the Agreement (as hereinafter defined), in
immediately available funds at the place specified pursuant to Article II of the
Agreement together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Borrower shall pay the
principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Five-Year Credit Agreement dated as of March 31, 1999
(which, as it may be amended or modified and in effect from time to time, is
herein called the "Agreement"), among the Borrower, the lenders party thereto,
including the Lender, and The First National Bank of Chicago, as Administrative
Agent, to which Agreement reference is hereby made for a statement of the terms
and conditions governing this Note, including the terms and conditions under
which this Note may be prepaid or its maturity date accelerated. This Note is
guaranteed pursuant to the Guaranty, as more specifically described in the
Agreement, and reference is made thereto for a statement of the terms and
provisions thereof. Capitalized terms used herein and not otherwise defined
herein are used with the meanings attributed to them in the Agreement.
By:___________________________
Print Name:___________________
Title:________________________
111
<PAGE> 117
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF ______________,
DATED ______________,
<TABLE>
<CAPTION>
Date Principal Maturity of Principal Unpaid
Amount of Loan Interest Period Amount Paid Balance
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
112
<PAGE> 118
SCHEDULE 1
SUBSIDIARIES AND OTHER INVESTMENTS
(SEE SECTIONS 5.8 AND 6.12)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
113
<PAGE> 119
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
114
<PAGE> 120
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
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
- ---------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
115
<PAGE> 121
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
116
<PAGE> 122
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
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 Canada
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer Corporation Delaware
- ---------------------------------------------------------------------------------------------------------------------
F & F Holding GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
Allcaps Weichgelatinekapseln GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
Gelatine Products International Delaware
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
117
<PAGE> 123
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
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 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 K.K. Japan
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer Korea Limited Korea
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer Production S.A. France
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
118
<PAGE> 124
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
R.P. Scherer S.A. France
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer S.p.A. Italy
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer DDS BV Holland
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer Pharmaceutical, Inc. New Jersey
- ---------------------------------------------------------------------------------------------------------------------
RPS Technical Services, Inc. Delaware
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer Verwaltungs GmgH Germany
- ---------------------------------------------------------------------------------------------------------------------
Allcaps Wichgelatinekapseln Verwaltungs GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer International (FSC), Ltd. Barbados
- ---------------------------------------------------------------------------------------------------------------------
R.P. Scherer (Spain) SA Spain
- ---------------------------------------------------------------------------------------------------------------------
The LVC Corporation Missouri
- ---------------------------------------------------------------------------------------------------------------------
RedKey, Inc. Ohio
- ---------------------------------------------------------------------------------------------------------------------
Solomons Company Georgia
- ---------------------------------------------------------------------------------------------------------------------
Whitmire Distribution Corporation Delaware
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
119
<PAGE> 125
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Williams Drug Distributors, Inc. Delaware
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Corporation Delaware
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Corporation Delaware
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Foreign Sales Corporation Barbados
- ---------------------------------------------------------------------------------------------------------------------
West Hudson, Inc. Nevada
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare International, Inc. Delaware
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Canada Inc. Canada
- ---------------------------------------------------------------------------------------------------------------------
Source Medical, Inc. Canada
- ---------------------------------------------------------------------------------------------------------------------
Cirmex de Chihuahua S.A. de C.V. Mexico
- ---------------------------------------------------------------------------------------------------------------------
Cirpro de Delicias S.A. de C.V. Mexico
- ---------------------------------------------------------------------------------------------------------------------
Convertors de Mexico S.A. de C.V. Mexico
- ---------------------------------------------------------------------------------------------------------------------
Productos Urologos de Mexico S.A. de C.V. Mexico
- ---------------------------------------------------------------------------------------------------------------------
Quiroproductos de Cuauhtemoc S.A. de C.V. Mexico
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
120
<PAGE> 126
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Dutch American Manufacturers (D.A.M.) B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Holding B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Deutschland Holding GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Deutschland GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
International Medical Produces (Deutschland) GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
Surgi-Tech Deutschland GmbH Germany
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare GmbH Switzerland
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Limited United Kingdom
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Industries Sdn. Bhd. New Synthetics Company Malaysia
- ---------------------------------------------------------------------------------------------------------------------
Allegiance International Manufacturing B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Medica S.R.L. Italy
- ---------------------------------------------------------------------------------------------------------------------
Allegiance S.L. Spain
- ---------------------------------------------------------------------------------------------------------------------
Allegiance S.P.R.L. Belgium
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
121
<PAGE> 127
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Allegiance Sante S.A. France
- ---------------------------------------------------------------------------------------------------------------------
International Medical Products Group B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
International Medical Products Holding B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
International Medical Products, B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
Medpro Medische Produkten B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
SOHO Disposables B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
Surgical Technologies Europa B.V. Netherlands
- ---------------------------------------------------------------------------------------------------------------------
Surgi-Tech Europa Divisione Surgi-Tech Italia S.R.L. Italy
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare (Thailand) Ltd. Thailand
- ---------------------------------------------------------------------------------------------------------------------
Allegiance Healthcare Sdn. Bhd. Malaysia
- ---------------------------------------------------------------------------------------------------------------------
Allegiance International GmbH Austria
- ---------------------------------------------------------------------------------------------------------------------
Allegiance International Manufacturing (Bermuda) Ltd. Bermuda
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
122
<PAGE> 128
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME JURISDICTION OF INCORPORATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Bauer Branch Dominican Republic
- ---------------------------------------------------------------------------------------------------------------------
Converters Branch Dominican Republic
- ---------------------------------------------------------------------------------------------------------------------
Eurovac Limited Malta
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
123
<PAGE> 129
SCHEDULE 3
EUROCURRENCY PAYMENT OFFICES OF THE AGENT
Currency Eurocurrency Payment Office
-------- ---------------------------
Dollars The First National Bank of Chicago
Detroit, Michigan
British Pounds Sterling The First National Bank of Chicago
London Branch
Euros The First National Bank of Chicago
London Branch
----------------------- ----------------------------------
124
<PAGE> 130
SCHEDULE 4
LENDING INSTALLATIONS
<TABLE>
<CAPTION>
Lender Floating Rate Loans Eurocurrency Loans (list all)
- ------ ------------------- -----------------------------
<S> <C> <C>
The First National Bank of Chicago The First National Bank of Chicago, The First National Bank of Chicago,
Detroit, Michigan Detroit, Michigan
The First National Bank of Chicago,
London Branch (for Multicurrency Loans)
Bank of America NT & SA Bank of America London (for Pounds Sterling)
Citicorp USA Inc. Citibank London (for Euro)
Citibank Frankfurt (for German Marks)
Citibank London (for Pounds Sterling)
Citibank New York (for Canadian Dollars)
Citibank Sydney (for Australian Dollars)
Citibank Paris (for French Francs)
Citibank Milan (for Italian Lira)
Barclays Bank PLC Barclays Bank PLC London (for Pounds Sterling)
Deutsche Bank AG - New York Branch a/o Deutsche Bank AG - London (for Pounds Sterling)
Cayman Islands Branch
Bank of Montreal Bank of Montreal - London (for Pounds Sterling)
Banca Commerciale Italiana - Chicago Banca Commerciale Italiana - London
Branch (for Pounds Sterling)
</TABLE>
125
<PAGE> 131
SCHEDULE 5
ALTERNATE CURRENCY COMMITMENT
126
<PAGE> 132
SCHEDULE 6
MULTICURRENCY COMMITMENT
<TABLE>
<CAPTION>
Commitments
Lender Multi Currency Dollar
------ -------------- ------
<S> <C> <C>
The First National Bank of Chicago $25,000,000 $40,625,000
Bank of America NT & SA $25,000,000 $36,875,000
CITICORP USA, INC. $25,000,000 $36,875,000
Barclays Bank PLC $25,000,000 $14,375,000
Deutsche Bank AG $25,000,000 $14,375,000
Bank of Montreal $15,000,000 $ 9,000,000
Banca Commerciale Italiana $10,000,000 $14,000,000
</TABLE>
127
<PAGE> 133
SCHEDULE 7
LITIGATION AND CONTINGENT OBLIGATIONS
128
<PAGE> 134
EXHIBIT F
SWINGLINE NOTE
March __, 1999
---------, ------------
FOR VALUE RECEIVED, CARDINAL HEALTH INC., an Ohio corporation (the
"Borrower"), hereby unconditionally promises to pay to the order of The First
National Bank of Chicago (the "Lender"), at the principal banking office of the
Administrative Agent in lawful money of the United States of America and in
immediately available funds, the unpaid principal amount of the Swingline Loans
as evidenced by the books and records of the Lender, on the Facility Termination
Date or such earlier date as the Lender may require under the Credit Agreement
referred to below, when the entire outstanding principal amount of the Swingline
Loans evidenced hereby, and all accrued interest thereon, shall be due and
payable; and to pay interest on the unpaid principal balance hereof from time to
time outstanding, in like money and funds, for the period from the date hereof
until the Swingline Loans evidenced hereby shall be paid in full, at the rates
per annum on and the dates provided in the Credit Agreement referred to below.
The Lender is hereby authorized by the Borrower to record on its books
and records the date, currency and the amount of each Swingline Loan, the
applicable interest rate, the amount of each payment or prepayment of principal
thereon, and the other information provided for in such books and records, which
books and records shall constitute prime facie evidence of the information so
recorded, provided, however, that any failure by the Lender to record any such
notation shall not relieve the Borrower of its obligation to repay the
outstanding principal amount of this Swingline Note, all accrued interest hereon
and any amount payable with respect hereto in accordance with the terms of this
Swingline Note and the Credit Agreement.
The Borrower waives presentment, protest, notice of dishonor and any
other formality in connection with this Swingline Note. Should the indebtedness
evidenced by this Swingline Note or any part thereof be collected in any
proceeding or be placed in the hands of attorneys for collection, the Borrower
agrees to pay, in addition to the principal, interest and other sums due and
payable hereon, all costs of collecting this Swingline Note, including
reasonable attorneys' fees and expenses.
This Swingline Note evidences Swingline Loans made under a Five-Year
Credit Agreement, dated as of March 31, 1999 (as amended or modified from time
to time, the "Credit Agreement"), by and among the Borrower, the Lenders
(including the Lender) named therein and The First National Bank of Chicago, as
Administrative Agent for the Lenders, to which reference is hereby made for a
statement of the circumstances under which this Swingline Note is subject to
prepayment and under which its due date may be accelerated. Capitalized terms
used but not defined in this Swingline Note shall have the respective meanings
assigned to them in the Credit Agreement.
This Swingline Note is made under, and shall be governed by and
construed in accordance with, the Laws of the State of Illinois in the same
manner applicable to contracts
129
<PAGE> 135
made and to be performed entirely within such State and without giving effect to
choice of law principles of such State.
CARDINAL HEALTH INC.
By:___________________________
Its:
130
<PAGE> 1
Exhibit 16.01
Securities and Exchange Commission
Mail Stop 11-3
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sir/Madams:
We have read and agree with the comments in Item 9 of this Annual Report on
Form 10-K of Cardinal Health, Inc. for the year ended June 30, 1999.
Yours Truly,
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
September 2, 1999
<PAGE> 1
Exhibit 16.02
September 1, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We have read the statements made by Cardinal Health, Inc. which we understand
will be filed with Commission, pursuant to Item 304 of Regulation S-K, as part
of the Company's Form 10-K report dated June 30, 1999. We agree with the
statements concerning our Firm in such Form 10-K.
Yours truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
Allegiance Corporation Delaware
Allegiance Healthcare Corporation Delaware
Pacific Surgical Innovations, Inc. California
Surgical Enterprises Corp. California
Surgical Instrument Repair Service, LLC Michigan
Procedure-Based Instrument Services, LLC(1) Michigan
Surgical CaRepair, LLC(2) Michigan
West Hudson, Inc. Nevada
Allegiance Healthcare International, Inc. Delaware
Allegiance Healthcare Foreign Sales Corporation Barbados
Allegiance Healthcare Canada Inc. Canada
Source Medical, Inc.(3) Canada
Cardinal Health International Ventures, Limited Barbados
Cirmex de Chihuahua S.A. de C.V. Mexico
Cirpro de Delicias S.A. de C.V. Mexico
Convertors de Mexico S.A. de C.V. Mexico
Dutch American Manufacturers (D.A.M.) B.V. Netherlands
Allegiance Healthcare Holding B.V. Netherlands
Allegiance Healthcare Deutschland GmbH Germany
</TABLE>
- --------------------------------------------------------------------------------
1 25% owned by Allegiance Healthcare Corporation; 75% owned by Surgical
Instrument Repair Service, LLC.
2 The company is owned 7.25% by Allegiance Healthcare Corporation and 63.75% by
Surgical Instrument Repair Service, LLC.
3 Source Medical, Inc. is controlled by Allegiance Healthcare Canada Inc. with
50% of the common shares and 100% of preferred shares (1 share).
<PAGE> 2
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
Allegiance Healthcare GmbH Switzerland
Allegiance International Manufacturing B.V. Netherlands
Allegiance S.L. Spain
Allegiance Sante S.A. France
International Medical Products Group B.V. Netherlands
Allegiance Healthcare International GmbH Austria
Allegiance Healthcare Sdn. Bhd. Malaysia
Eurovac Limited Malta
Productos Urologos de Mexico S.A. de C.V. Mexico
Quiroproductos de Cuauhtemoc S.A. de C.V. Mexico
C. International, Inc. Ohio
C.H. InnoSol, Inc. Ohio
The Enright Group, Inc. Virginia
Cardal, Inc. Ohio
Cardinal Health Capital Corporation Ohio
Cardinal Health Holding International, Inc. New Jersey
CAH Holdings I B.V. Netherlands
Pharmaceutical Packaging Specialties, Inc. Puerto Rico
Cardinal Health Systems, Inc. Ohio
Cardinal Southeast, Inc. Mississippi
Renlar Systems, Inc. Kentucky
Cardinal Syracuse, Inc. New York
CORD Logistics, Inc. Ohio
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
Comprehensive Reimbursement Consultants, Inc. Minnesota
James W. Daly, Inc. Massachusetts
Leader Drugstores, Inc. Delaware
Marmac Distributors, Inc.(4) Connecticut
Medical Strategies, Inc. Massachusetts
Medicine Shoppe International, Inc. Delaware
Medicine Shoppe Capital Corporation Nevada
Pharmacy Operations of New York, Inc. New York
Pharmacy Operations, Inc. Delaware
Medicine Shoppe Internet, Inc. Missouri
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.(5) Delaware
Owen Healthcare, Inc.(6) Texas
PCI Services, Inc. Delaware
Packaging Coordinators, Inc. Pennsylvania
Packaging Coordinators Incorporated, Caribe Delaware
</TABLE>
- --------------------------------------------------------------------------------
4 84.50% owned by Cardinal Health, Inc.; 15.50% owned by James W. Daly, Inc.
5 88.59% owned by Cardinal Health, Inc.; 11.41% owned by Williams Drug
Distributors, Inc.
6 98.42% owned by Cardinal Health, Inc.; 1.58% owned by Allied Healthcare
Services, Inc.
<PAGE> 4
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
PCI/Delvco, Inc. Delaware
PCI/Tri-Line (USA), Inc. Delaware
The Tri-Line Co., Inc. Delaware
PCI/Allpack Holdings, Inc. Delaware
PCI Acquisition I, Inc. Delaware
PCI Acquisition II, Inc. Delaware
Phillipi Holdings, Inc. Ohio
Pyxis Corporation Delaware
Pyxis Capital Corporation Nevada
Pyxis Healthcare Systems, Inc. Canada
R.P. Scherer Corporation Delaware
Cardinal Health Holding Ltd.(7) United Kingdom
Allegiance Healthcare Ltd. United Kingdom
PCI Holdings (UK) Co. United Kingdom
Unipack, Ltd. United Kingdom
R.P. Scherer Holdings Limited United Kingdom
R. P. Scherer Limited United Kingdom
Scherer DDS Limited United Kingdom
Cardinal Health GbR(8) Germany
Cardinal Health Holdings GmbH Germany
F&F Holding GmbH Germany
R.P. Scherer GmbH & Co. KG(9) Germany
</TABLE>
- --------------------------------------------------------------------------------
7 14.5% owned by PCI Acquisition I, Inc. and PCI Acquisition II, Inc. each; 71%
by R. P. Scherer Corporation
8 89.5% owned by R. P. Scherer Corporation; 10% owned by PCI Services, Inc.;
0.5% owned by the Griffin Group.
9 50.094% owned by F & F Holdings GmbH; 0.11% owned by R. P. Scherer
Verwaltungs GmbH.
<PAGE> 5
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
Allcaps Weichgelatinkapseln GmbH & Co. KG(10) Germany
Allcaps Weichgelatinkapseln Verwaltungs GmbH Germany
R.P. Scherer Betieligungs GmbH Germany
R.P. Scherer (Spain) S.A. Spain
R.P. Scherer Verwaltungs GmbH(11) Germany
PCI allpack GmbH(12) Germany
Gelatin Products International, Inc. Delaware
R.P. Scherer Argentina S.A.I.C.(13) Argentina
Vivax Interamericana S.A.(14) Argentina
R.P. Scherer Canada Inc. Canada
R.P. Scherer do Brasil Encapsulacoes, Ltda. Brazil
R.P. Scherer Egypt(15) Egypt
R.P. Scherer (Europe) AG(16) Switzerland
R.P. Scherer Hardcapsule (West) Utah
R.P. Scherer Holdings Pty. Ltd. Australia
R.P. Scherer Pty. Limited Australia
R.P. Scherer International (FSC) Limited Barbados
R.P. Scherer K.K. Limited(17) Japan
R.P. Scherer Korea Limited(18) Korea
</TABLE>
- --------------------------------------------------------------------------------
10 99.9% owned by R. P. Scherer GmbH & Co. KG; 0.1% owned by Allcaps
Weichgelatinkapseln Verwaltungs GmbH.
11 51% owned by F&F Holdings GmbH.
12 90% owned by Cardinal Health Holdings GmbH; 10% owned by PCI Services, Inc.
13 99.91% owned by R.P. Scherer Corporation.
14 98.125% owned by R.P. Scherer Argentina S.A.I.C.; 1.875% owned by R.P.
Scherer Corporation.
15 R.P. Scherer Corporation has a 10% ownership interest.
16 75% owned by R. P. Scherer Corporation; 25% owned by F & F Holdings GmbH.
17 R.P. Scherer Corporation has a 60% ownership interest.
<PAGE> 6
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
R.P. Scherer Inc. New Jersey
R.P. Scherer S.A.(19) France
R.P. Scherer S.p.A.(20) Italy
RPS Technical Services, Inc.(21) Delaware
R.P. Scherer DDS B.V. Netherlands
Scherer Production S.A. France
The LVC Corporation Missouri
RedKey, Inc. Ohio
The Griffin Group, Inc. Nevada
Allied Healthcare Services, Inc. Nevada
American Medical Insurance Billing Services, Inc. Georgia
Axiom Healthcare Services Pty. Ltd.(22) Australia
Brighton Capital, Inc. Nevada
Redwing Data Corporation Nevada
Cardinal West, Inc. Nevada
Cascade Development, Inc. Nevada
CDI Investments, Inc. Delaware
Griffin Capital Corporation Nevada
Meditrol, Inc. Nevada
Meditrol Automation Systems, Inc. Texas
</TABLE>
- --------------------------------------------------------------------------------
18 R.P. Scherer Corporation has a 50% ownership interest.
19 50% owned by R. P. Scherer Corporation; 40% owned by R. P. Scherer GmbH; 5%
owned by F & F Holdings GmbH; 5% owned by individuals.
20 90% owned by R. P. Scherer Corporation; 10% owned by R. P. Scherer GmbH.
21 60% owned by R. P. Scherer Corporation; 40% owned by R. P. Scherer Canada
Inc.
22 An Australian joint venture in which The Griffin Group, Inc. has a 50%
ownership interest.
<PAGE> 7
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE/JURISDICTION OF INCORPORATION
- --------------- -----------------------------------
<S> <C>
Cardinal Health International Ventures, Limited Bermuda
Pinnacle Intellectual Property Services, Inc. Nevada
Pinnacle Intellectual Property Services International, Inc. Nevada
ScriptLINE, Inc. Nevada
Whitmire Distribution Corporation Delaware
Williams Drug Distributors, Inc. Delaware
</TABLE>
<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, Registration Statement No.
333-74761 of Cardinal Health, Inc. on Form S-4 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, No. 333-56655-01, No.
333-72727, No. 333-71727 and No. 333-68819-01 of Cardinal Health, Inc. on Form
S-8 of our report dated August 10, 1999, appearing in this Annual Report on Form
10-K of Cardinal Health, Inc. for the year ended June 30, 1999.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 31, 1999
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
with respect to R.P. Scherer Corporation dated August 9, 1999 included in this
Form 10-K and to the incorporation by reference in Registration Statement No.
333-24483 of Cardinal Health, Inc. on Form S-3, Registration Statement No.
333-74761 of Cardinal Health, Inc. on Form S-4 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, No. 333-56655-01, No.
333-72727, No. 333-71727 and No. 333-68819-01 of Cardinal Health, Inc. on Form
S-8 and to all references to our Firm included in this Form 10-K.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Detroit, Michigan
August 30, 1999.
<PAGE> 1
Exhibit 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in Registration Statement
No. 333-24483 of Cardinal Health, Inc. on Form S-3, Registration Statement No.
333-74761 of Cardinal Health, Inc. on form S-4 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, No.
333-56655-01, No. 333-72727, No. 333-71727 and No. 333-68819-01 of Cardinal
Health, Inc. on Form S-8 of our report dated July 29, 1999, relating to the
Allegiance Corporation consolidated financial statements, which appears in the
Cardinal Health, Inc. Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated July 29, 1999 relating to the
financial statement schedules, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
August 31, 1999
<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, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 165
<SECURITIES> 0
<RECEIVABLES> 1,590
<ALLOWANCES> (54)
<INVENTORY> 2,931
<CURRENT-ASSETS> 5,147
<PP&E> 2,748
<DEPRECIATION> (1,208)
<TOTAL-ASSETS> 8,289
<CURRENT-LIABILITIES> 2,959
<BONDS> 1,224
0
0
<COMMON> 1,090
<OTHER-SE> 2,373
<TOTAL-LIABILITY-AND-EQUITY> 8,289
<SALES> 25,034
<TOTAL-REVENUES> 25,034
<CGS> 22,449
<TOTAL-COSTS> 22,449
<OTHER-EXPENSES> 1,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (99)
<INCOME-PRETAX> 759
<INCOME-TAX> 303
<INCOME-CONTINUING> 456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 456
<EPS-BASIC> 1.68
<EPS-DILUTED> 1.64
</TABLE>
<PAGE> 1
EXHIBIT 99.01
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for "forward-looking statements" (as defined in the Act). The
Company's Form 10-K, the Company's Annual Report to Shareholders, any Form 10-Q
or any Form 8-K of the Company, the Company's press releases, 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 first 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, such as
pharmaceutical and medical/surgical manufacturers for which alternative
supplies may not be available;
- - the malfunction or failure of our information systems or those of third
parties with whom we do business, such as malfunctions or failures
associated with Year 2000 readiness problems or otherwise;
- - the costs and difficulties related to the integration of recently acquired
businesses;
- - changes to the presentation of financial results and position resulting
from adoption of new accounting principles or upon the advice of our
independent auditors or the staff of the SEC;
- - changes in the distribution or outsourcing pattern for pharmaceutical and
medical/surgical products and services, including an increase in direct
distribution or a decrease in contract packaging by pharmaceutical
manufacturers;
- - changes in government regulations or our failure to comply with those
regulations;
- - the costs and other effects of legal and administrative proceedings;
- - injury to person or property resulting from our manufacturing, packaging,
repackaging, drug delivery system development and manufacturing, or
pharmacy management services;
- - competitive factors in our healthcare service businesses, including pricing
pressures;
- - unforeseen changes in our existing agency and distribution arrangements;
- - the continued financial viability and success of our customers, suppliers,
and franchisees;
- - difficulties encountered by our competitors, whether or not we face the
same or similar issues;
- - technological developments and products offered by competitors;
- - failure to retain or continue to attract senior management or key
personnel;
- - risks associated with international operations, including fluctuations in
currency exchange ratios and implementation of the Euro currency;
- - successful challenges to the validity of our patents, copyrights or
trademarks;
- - difficulties or delays in the development, production, manufacturing, and
marketing of new products and services;
- - strikes or other labor disruptions;
- - labor and employee benefit costs;
- - pharmaceutical and medical/surgical manufacturers' pricing policies and
overall drug price inflation;
- - changes in hospital buying groups or hospital buying practices; and
- - other factors described in this Form 10-K or the documents we file with the
SEC.
The words "believe", "expect", "anticipate", "project", and similar expressions
identify "forward-looking statements", which speak only as of the date the
statement was made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
